Income and Corporation Taxes Act 1988
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Income tax shall be charged in accordance with the provisions of the Income Tax Acts in respect of all property, profits or gains respectively described or comprised in the Schedules, A, B, C, D, E and F, set out in sections 15 to 20 or which in accordance with the Income Tax Acts are to be brought into charge to tax under any of those Schedules or otherwise.
Where any Act enacts that income tax shall be charged for any year, income tax shall be charged for that year— but this subsection has effect subject to any provision of the Income Tax Acts providing for income tax to be charged at a different rate in certain cases.
in respect of any income which does not fall within paragraph (b) below, at such rate as Parliament may determine to be the basic rate for that year;
in respect of so much of an individual’s total income as exceeds £17,900, at such higher rates respectively as Parliament may determine in relation to the first £2,500, the next £5,000, the next £7,900, the next £7,900 and the remainder;
The amount up to which an individual’s income is by virtue of subsection (2) above chargeable for any year at the basic rate shall be known as the basic rate limit; and the parts of income in excess of the basic rate limit which are specified in paragraph (b) of that subsection shall be known respectively as the first, second, third, fourth and fifth higher rate bands.
If the retail prices index for the month of December preceding a year of assessment is higher than it was for the previous December, then, unless Parliament otherwise determines, subsection (2) above shall apply for that year as if for each of the amounts specified in that subsection as it applied for the previous year (whether by virtue of this subsection or otherwise) there were substituted an amount arrived at by increasing the amount for the previous year by the same percentage as the percentage increase in the retail prices index and, if the result is not a multiple of £100, rounding it up to the nearest amount which is such a multiple.
Subsection (4) above shall not require any change to be made in the amounts deductible or repayable under section 203 between the beginning of a year of assessment and 5th May in that year.
The Treasury shall before each year of assessment make an order specifying the amounts which by virtue of subsection (4) above will be treated as specified for that year in subsection (2) above.
Part VII contains general provisions relating to the taxation of income of individuals.
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The due proportion of income tax shall be charged for every fractional part of one pound.
Every assessment and charge to income tax shall be made for a year commencing on the 6th April and ending on the following 5th April.
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any annuity or other annual payment (not being interest); or
any royalty or other sum in respect of the user of a patent; or
any rent, royalty or other payment which is declared by section 119 or 120 to be subject to deduction of tax under section 348 or 349 as if it were a royalty or other sum paid in respect of a patent;
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Any provision of the Income Tax Acts requiring, permitting or assuming the deduction of income tax from any amount (otherwise than in pursuance of section 203) or treating income tax as having been deducted from or paid on any amount, shall, subject to any provision to the contrary, be construed as referring to deduction or payment of income tax at the basic rate in force for the relevant year of assessment.
For the purposes of subsection (1) above, the relevant year of assessment shall be taken to be (except where otherwise provided)—
if the amount is an amount payable wholly out of profits or gains brought into charge to tax, the year in which the amount becomes due;
in any other case, the year in which the amount is paid.
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Subject to the provisions of the Income Tax Acts and in particular to subsection (2) below and section 203, income tax contained in an assessment for any year shall be payable on or before the 1st January in that year, or at the expiration of a period of 30 days beginning with the date of the issue of the notice of assessment, whichever is the later.
Subject to subsection (3) below, income tax under Schedule D charged for any year on any individual or firm in respect of the profits or gains of any trade, profession or vocation and contained in an assessment for that year shall, instead of being payable in accordance with subsection (1) above, be payable in two equal instalments, the first on or before the 1st January in that year or at the expiration of the period referred to in subsection (1) above, and the second on or before the following 1st July; and the provisions of the Income Tax Acts as to the recovery of income tax shall apply to each instalment of the tax in the same manner as they apply to the whole amount of the tax.
Where the date of the issue of the notice of assessment is later than the 1st June following the end of the year of assessment, subsection (2) above shall not have effect, and the tax shall be due and payable as provided in subsection (1) above.
Except as otherwise provided by the Income Tax Acts, any income tax charged at a rate other than the basic rate on— shall be due and payable on or before 1st December following the end of the year for which it is assessed, or at the expiration of a period of 30 days beginning with the date of the issue of the notice of assessment, whichever is the later.
income from which income tax has been deducted (otherwise than under section 203); or
income from or on which income tax is treated as having been deducted or paid; or
income chargeable under Schedule F;
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the company is resident in the United Kingdom, or
the income is, in the case of a company not so resident, within the chargeable profits of the company as defined for the purposes of corporation tax by section 11(2).
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“profits” means income and chargeable gains; and
“trade” includes “vocation”, and also includes an office or employment or the occupation of woodlands in any context in which the expression is applied to that in the Income Tax Acts.
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No payment made by a company resident in the United Kingdom shall be treated for any purpose of the Income Tax Acts as paid out of profits or gains brought into charge to income tax; nor shall any right or obligation under the Income Tax Acts to deduct income tax from any payment be affected by the fact that the recipient is a company not chargeable to income tax in respect of the payment.
Subject to the provisions of the Corporation Tax Acts, where a company resident in the United Kingdom receives any payment on which it bears income tax by deduction, the income tax thereon shall be set off against any corporation tax assessable on the company by an assessment made for the accounting period in which that payment falls to be taken into account for corporation tax (or would fall to be taken into account but for any exemption from corporation tax); and accordingly in respect of that payment the company, unless wholly exempt from corporation tax, shall not be entitled to a repayment of income tax before the assessment for that accounting period is finally determined and it appears that a repayment is due.
Subsection (2) above does not apply to a payment of relevant loan interest to which section 369 applies.
References in this section to payments received by a company apply to any received by another person on behalf of or in trust for the company, but not to any received by the company on behalf of or in trust for another person.
Effect shall be given to section 6(2), to that section as modified by subsection (2) above and by section 11(3) and, so far as exemptions from income tax conferred by the Corporation Tax Acts call for repayment of tax, to those exemptions by means of a claim.
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Subject to any exceptions provided for by the Corporation Tax Acts, a company shall be chargeable to corporation tax on all its profits wherever arising.
A company shall be chargeable to corporation tax on profits accruing for its benefit under any trust, or arising under any partnership, in any case in which it would be so chargeable if the profits accrued to it directly; and a company shall be chargeable to corporation tax on profits arising in the winding up of the company, but shall not otherwise be chargeable to corporation tax on profits accruing to it in a fiduciary or representative capacity except as respects its own beneficial interest (if any) in those profits.
Corporation tax for any financial year shall be charged on profits arising in that year; but assessments to corporation tax shall be made on a company by reference to accounting periods, and the amount chargeable (after making all proper deductions) of the profits arising in an accounting period shall, where necessary, be apportioned between the financial years in which the accounting period falls. In relation to accounting periods ending after such day, not being earlier than 31st March 1992, as the Treasury may by order appoint for the purposes of this subsection, this subsection shall have effect with the substitution for “assessments to corporation tax shall be made on a company” of “corporation tax shall be computed and chargeable (and any assessments shall accordingly be made)”.
In any financial year assessments for accounting periods falling wholly or partly in that year or (subject to subsection (5) below) in the preceding year may, notwithstanding that corporation tax has not at the time been charged for the year in question, charge tax for so much of the period as falls within that year according to the rate of tax and the other rates and the fractions last fixed, but any such charge shall be subject to later adjustment, if need be, by discharge or repayment of tax or by a further assessment if for that year corporation tax is not charged by an Act of Parliament passed not later than 5th August next after the end of the year or is charged otherwise than as it has been assessed.
Where the House of Commons passes a resolution for fixing the rate of corporation tax for any financial year or for altering the tax for any financial year, then any assessment to tax afterwards made by virtue of subsection (4) above may be made in accordance with the resolution; but no assessment made by virtue of that subsection later than 5th May next after the end of any financial year shall charge tax for that year, unless a resolution for charging corporation tax for that year has been so passed, nor shall any assessment be made by virtue of any such resolution later than the prescribed period from the date on which the resolution is passed.
In subsection (5) above “the prescribed period” means—
as respects a resolution passed in March or April in any year, a period beginning with the passing of the resolution and ending with 5th August in the same calendar year,
as respects any other resolution, four months after the date on which the resolution is passed.
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Where . . . any enactment applies both to income tax and to corporation tax—
it shall not be affected in its operation by the fact that they are distinct taxes but, so far as is consistent with the Corporation Tax Acts, shall apply in relation to income tax and corporation tax as if they were one tax, so that, in particular, a matter which in a case involving two individuals is relevant for both of them in relation to income tax shall in a like case involving an individual and a company be relevant for him in relation to that tax and for it in relation to corporation tax; and
for that purpose references in any such enactment to a relief from or charge to income tax, or to a specified provision of the Income Tax Acts shall, in the absence of or subject to any express adaptation, be construed as being or including a reference to any corresponding relief from or charge to corporation tax, or to any corresponding provision of the Corporation Tax Acts.
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Except as provided by section 478—
corporation tax for an accounting period ending after such day or days (not being earlier than 31st March 1992) as the Treasury may by order appoint for the purposes of this section shall be due and payable on the day following the expiry of nine months from the end of that period; and
corporation tax assessed for any other accounting period shall be paid within nine months from the end of that period or, if it is later, within 30 days from the date of the issue of the notice of assessment.
Notwithstanding that, by virtue of subsection (1)(a) above or section 419(1), any corporation tax (or any amount payable as if it were corporation tax) is due without the making of an assessment, no proceedings for collecting that tax (or other amount) shall be instituted— and the reference in this subsection to proceedings for collecting tax or any other amount includes a reference to proceedings by way of distraint or poinding for that tax or other amount.
unless it has been assessed; and
until the expiry of the period of 30 days beginning on the date on which the notice of assessment is issued;
If, with respect to any accounting period— the company may, by notice given to the inspector on or after the date which, under section 826, is the material date in relation to that tax, make a claim for the repayment to the company of the amount of that excess; and a notice under this subsection shall state the amount which the company considers should be repaid and the grounds referred to in paragraph (b) above.
a company has paid an amount of corporation tax without the making of an assessment; and
at any time before an assessment to corporation tax for the period becomes final, the company has grounds for believing that, by reason of a change in the circumstances of the case since the tax was paid, the amount paid exceeds the company’s probable liability for corporation tax,
If, apart from this subsection, a claim would fall to be made under subsection (3) above at a time when the company concerned has appealed against such an assessment as is referred to in paragraph (b) of that subsection but that appeal has not been finally determined, that subsection shall have effect as if, for the words from “make a claim” to “excess”, there were substituted “apply to the Commissioners to whom the appeal stands referred for a determination of the amount which should be repaid to the company pending a determination of the company’s liability for the accounting period in question”; and such an application shall be determined in the same way as the appeal.
Where on an appeal against an assessment to corporation tax a company makes an application under section 55(3) or (4) of the Management Act (postponement of tax charged but not paid etc.), that application may be combined with an application under subsections (3) and (4) above (relating to tax which was paid prior to the assessment).
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any trading income arising directly or indirectly through or from the branch or agency, and any income from property or rights used by, or held by or for, the branch or agency (but so that this paragraph shall not include distributions received from companies resident in the United Kingdom); and
such chargeable gains accruing on the disposal of assets situated in the United Kingdom as are by section 12 of the 1979 Act made chargeable to capital gains tax in the case of an individual not resident or ordinarily resident in the United Kingdom.
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the company, not then being within the charge to corporation tax, comes within it, whether by the company becoming resident in the United Kingdom or acquiring a source of income, or otherwise; or
an accounting period of the company ends without the company then ceasing to be within the charge to corporation tax.
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the expiration of 12 months from the beginning of the accounting period;
an accounting date of the company or, if there is a period for which the company does not make up accounts, the end of that period;
the company beginning or ceasing to trade or to be, in respect of the trade or (if more than one) of all the trades carried on by it, within the charge to corporation tax;
the company beginning or ceasing to be resident in the United Kingdom;
the company ceasing to be within the charge to corporation tax.
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Where it appears to the inspector that the beginning or end of any accounting period of a company is uncertain, he may make an assessment on the company for such period, not exceeding 12 months, as appears to him appropriate, and that period shall be treated for all purposes as an accounting period of the company unless either— and if on an appeal against an assessment made by virtue of this subsection the company shows the true accounting periods, the assessment appealed against shall, as regards the period to which it relates, have effect as an assessment or assessments for the true accounting periods, and there may be made such other assessments for any such periods or any of them as might have been made at the time when the assessment appealed against was made.
the inspector on further facts coming to his knowledge sees fit to revise it; or
on an appeal against the assessment in respect of some other matter the company shows the true accounting periods;
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Where in any accounting period the profits of a company resident in the United Kingdom do not exceed the lower relevant maximum amount, the company may claim that the corporation tax charged on its basic profits for that period shall be calculated as if the rate of corporation tax (instead of being the rate fixed for companies generally) were such lower rate (to be known as the “small companies' rate”) as Parliament may from time to time determine.
Where in any accounting period the profits of any such company exceed the lower relevant maximum amount but do not exceed the upper relevant maximum amount, the company may claim that the corporation tax charged on its basic profits for that period shall be reduced by a sum equal to such fraction as Parliament may from time to time determine of the following amount— where— M is the upper relevant maximum amount; P is the amount of the profits; and I is the amount of the basic profits.
The lower and upper relevant maximum amounts mentioned above shall be determined as follows—
where the company has no associated company in the accounting period, those amounts are £100,000 and £500,000 respectively;
where the company has one or more associated companies in the accounting period, the lower relevant maximum amount is £100,000 divided by one plus the number of those associated companies, and the upper relevant maximum amount is £500,000 divided by one plus the number of those associated companies.
In applying subsection (3) above to any accounting period of a company, an associated company which has not carried on any trade or business at any time in that accounting period (or, if an associated company during part only of that accounting period, at any time in that part of that accounting period) shall be disregarded and for the purposes of this section a company is to be treated as an “associated company” of another at a given time if at that time one of the two has control of the other or both are under the control of the same person or persons. In this subsection “control” shall be construed in accordance with section 416.
In determining how many associated companies a company has got in an accounting period or whether a company has an associated company in an accounting period, an associated company shall be counted even if it was an associated company for part only of the accounting period, and two or more associated companies shall be counted even if they were associated companies for different parts of the accounting period.
For an accounting period of less than 12 months the relevant maximum amounts determined in accordance with subsection (3) above shall be proportionately reduced.
For the purposes of this section the profits (but not the basic profits) of a company for an accounting period shall be taken to be the amount of its profits for that period on which corporation tax falls finally to be borne, with the addition of franked investment income other than franked investment income which the company (if a member of a group) receives from companies within the group; and for this purpose distributions received by the company from another are to be treated as coming from within the company’s group if, but only if, dividends so received are group income or would be group income if the companies so elected.
For the purposes of this section the basic profits of a company for an accounting period shall be taken to be the amount of its profits for that period on which corporation tax falls finally to be borne.
Any power which the inspector may exercise under paragraph 17 of Schedule 19 may be exercised by him for the purposes of this section.
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Subject to section 247, where a company resident in the United Kingdom makes a qualifying distribution it shall be liable to pay an amount of corporation tax (“advance corporation tax”) in accordance with subsection (3) below.
In this Act “qualifying distribution” means any distribution other than—
a distribution which, in relation to the company making it, is a distribution by virtue only of section 209(2)(c); or
a distribution consisting of any share capital or security which the company making the distribution has directly or indirectly received from the company by which the share capital or security was issued and which, in relation to the latter company, is a distribution by virtue only of section 209(2)(c).
Subject to section 241, for the financial year 1988 and any subsequent financial year advance corporation tax shall be payable on an amount equal to the amount or value of the distribution, and shall be so payable at a rate which shall be fixed by the fraction— where I is the percentage at which income tax at the basic rate is charged for the year of assessment which begins on 6th April in that financial year.
The provisions of this Act as to the charge, calculation and payment of corporation tax (including provisions conferring any exemption) shall not be construed as affecting the charge, calculation or payment of advance corporation tax, and the Corporation Tax Acts shall apply for the purposes of advance corporation tax whether or not they are for the time being applicable for the purposes of corporation tax other than advance corporation tax.
Part VI contains further provisions relating to advance corporation tax and company distributions.
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The Schedule referred to as Schedule A is as follows:—
An election that paragraph 4 of Schedule A shall not apply shall be made by notice to the inspector given within two years after the end of the chargeable period; and where such notice is given, any adjustment of the liability to tax of the person giving it which is required in consequence thereof may be made by an assessment or by repayment or otherwise as the case may require.
Profits or gains arising in any chargeable period from payments for any easement over or right to use any land made to the person who occupies the land shall not be excluded from the charge to tax under Schedule A by reason only that he is chargeable with respect to the land under Schedule B, but shall be treated for the purposes of Schedule A as limited to the amount (if any) by which they exceed the assessable value for the purposes of Schedule B of his occupation of the land in that period.
Part II contains further provisions relating to the charge to tax under Schedule A.
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The Schedule referred to as Schedule B is as follows:—
Tax under Schedule B shall be charged on the occupier of the woodlands on the assessable value of his occupation in the chargeable period, and the amount on which he is chargeable shall be deemed for all tax purposes to be income arising from that occupation.
For the purposes of tax under Schedule B—
the assessable value of a person’s occupation of woodlands is an amount equal to one-third of the woodlands' annual value, or a proportionate part of that amount if the period in respect of which he is chargeable is less than one year, and
the annual value of any woodlands shall be determined in accordance with section 837, but as if the land, instead of being woodlands, were let in its natural and unimproved state.
For the purposes of Schedule B and subsections (2) and (3) above, every person having the use of lands shall be deemed to be the occupier thereof, and references to occupation shall be construed accordingly.
A person who, in connection with any trade carried on by him, has the use of any woodlands wholly or mainly for the purpose of— shall not be treated as an occupier of the lands for the purposes of Schedule B and subsections (2) and (3) above.
felling, processing or removing timber; or
clearing or otherwise preparing the lands, or any part of them, for replanting;
Subsection (5) above shall not apply where the use in question began before 14th March 1984.
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The Schedule referred to as Schedule C is as follows:—
Part III contains further provisions relating to the charge to tax under Schedule C and to government securities; and section 45 shall apply for the interpretation of Schedule C.
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The Schedule referred to as Schedule D is as follows:—
Tax under Schedule D shall be charged under the Cases set out in subsection (3) below, and subject to and in accordance with the provisions of the Tax Acts applicable to those Cases respectively.
The Cases are— Case I: tax in respect of any trade carried on in the United Kingdom or elsewhere; Case II: tax in respect of any profession or vocation not contained in any other Schedule; Case III: tax in respect of— any interest of money, whether yearly or otherwise, or any annuity or other annual payment, whether such payment is payable within or out of the United Kingdom, either as a charge on any property of the person paying the same by virtue of any deed or will or otherwise, or as a reservation out of it, or as a personal debt or obligation by virtue of any contract, or whether the same is received and payable half-yearly or at any shorter or more distant periods, but not including any payment chargeable under Schedule A, and all discounts, and income, except income charged under Schedule C, from securities bearing interest payable out of the public revenue; Case IV: tax in respect of income arising from securities out of the United Kingdom except such income as is charged under Schedule C; Case V: tax in respect of income arising from possessions out of the United Kingdom not being income consisting of emoluments of any office or employment; Case VI: tax in respect of any annual profits or gains not falling under any other Case of Schedule D and not charged by virtue of Schedule A, B, C or E.
The provisions of Schedule D and of subsection (2) above are without prejudice to any other provision of the Tax Acts directing tax to be charged under Schedule D or under one or other of the Cases set out in subsection (3) above, and tax directed to be so charged shall be charged accordingly.
Part IV contains further provisions relating to the charge to tax under Schedule D.
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and in this paragraph “relevant service” means the service of the Crown or service under the government of a territory to which this paragraph applies.
References in the Tax Acts to Cases I, II and III of Schedule E shall be taken as referring to the Cases under which tax is chargeable under paragraph 1 of that Schedule.
Part V contains further provisions relating to the charge to tax under Schedule E.
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The Schedule referred to as Schedule F is as follows:—
No distribution which is chargeable under Schedule F shall be chargeable under any other provision of the Income Tax Acts.
Part VI contains further provisions relating to company distributions and tax credits.
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Income tax under Schedule A shall be charged on and paid by the persons receiving or entitled to the profits or gains in respect of which tax under that Schedule is directed by the Income Tax Acts to be charged.
Subsection (1) above does not apply for the purposes of the Corporation Tax Acts.
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The profits or gains arising to a person for any chargeable period which are assessable to tax under Schedule A may, if they arise from more than one source, be assessed in one or more assessments, and in the latter case, each assessment may relate to profits or gains from one or more sources.
Subject to subsection (3) below, where an assessment to income tax under Schedule A for any year of assessment is made in that year—
it shall be made on the basis that all sources of income and all amounts relevant in computing profits or gains are the same as for the last preceding year of assessment, and
tax shall be leviable accordingly, but any necessary adjustments shall be made after the end of the year, whether by way of assessment, repayment of tax or otherwise, to secure that tax is charged by reference to the rents or receipts to which the person assessed becomes entitled in the year of assessment.
If before the 1st January in any year a person delivers a statement in writing to the inspector— then, if the inspector is satisfied as to the correctness of the statement, an assessment made on that person in the current year shall be made on an amount which bears to the amount arrived at under subsection (2)(a) above the same proportion as the current aggregate bears to the previous aggregate, and subsection (2)(b) above shall apply accordingly.
showing that since the beginning of the last preceding year of assessment he has ceased to possess one or more sources of income chargeable under Schedule A, and
giving the aggregate of the rents and receipts relevant for the purposes of Schedule A to which he has become or is likely to become entitled in the current year (“the current aggregate”), and
showing that the current aggregate is less than the aggregate of such rents and receipts to which he became entitled in the last preceding year (“the previous aggregate”), and that it would not have been less if he had not ceased to possess the said source or sources,
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In any case where— the tax may be recovered in accordance with the following provisions of this section.
any tax under Schedule A is charged in respect of profits or gains arising from any land to a person who is not the occupier of the land, and
the tax is not paid by that person (“the person in default”),
Subject to subsection (3) below, the collector may from time to time, by notice in such form as may be prescribed by the Board, require any lessee of the land or any part thereof whose interest is derived, directly or indirectly, from that held by the person in default, (a “derivative lessee”), to pay to him, on the date or dates specified in the notice, such sum or sums as may be required to satisfy the tax.
The sum demanded from a derivative lessee to be paid during any period shall not exceed the amount of the rent or other payments arising out of the land which becomes due from him at the end of the period and payable to the person in default or to another derivative lessee.
In default of payment by a derivative lessee of any amount duly demanded of him under subsection (2) above, that amount may be recovered from him in like manner as if he had been charged with tax of that amount.
Where any sum on account of tax has been collected from a derivative lessee in pursuance of this section, he may deduct that sum from any subsequent payment arising and payable as mentioned in subsection (3) above, and shall be acquitted and discharged of the amount so deducted.
Where under subsection (5) above, or under that subsection as applied by this subsection, a sum is deducted from an amount payable to another derivative lessee—
that subsection shall apply as if the sum had been collected from him under a demand made under subsection (2) above by the collector; and
where the amounts from which he is entitled, under subsection (5) above, to make deductions during the following 12 months are less than that sum, he shall be entitled to recover from the Board an amount equal to the difference, which shall be treated as reducing the tax recovered under the preceding provisions of this section.
In any case where— the collector may by notice, in such form as may be prescribed by the Board, require the agent to pay to the collector in or towards the satisfaction of the tax any sums from time to time received by the agent on behalf of the principal on account of rents or receipts from any land (including any sums so received which are in his hands when the notice is given) until the liability in respect of the tax has been satisfied; and the agent shall pay all such sums over to the collector accordingly, and the payment shall acquit and discharge him as against the person on whose behalf he received them.
rents or receipts from land are received by any person (“the agent”) on behalf of another (“the principal”), and
any tax under Schedule A charged on the principal has not been paid,
If the agent fails to comply with the requirements of a notice duly served on him, he shall be liable to a penalty not exceeding £50 for each failure, and non-compliance as respects sums in his hands when the notice is given, or as respects any one payment subsequently received by him, shall be treated as a separate failure.
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In this Part, except where the context otherwise requires—
“group” has the meaning given by paragraph 14 (and references to a group company and membership of a group have a corresponding meaning);
has been a member of the community for a period of at least six months, and
represent a discount, rebate, dividend or bonus granted by the company to members or other persons in respect of amounts paid or payable by or to them on account of their transactions with the company, being transactions which are taken into account in the tax computation; and
are calculated by reference to those amounts or to the magnitude of those transactions and not by reference to the amount of any share or interest in the capital of the company.
In . . . Schedule 14, “friendly society” means the same as in the Friendly Societies Act 1992 (and includes any society that by virtue of section 96(2) of that Act is to be treated as a registered friendly society within the meaning of that Act).
In subsection (2)(a)—
one party to the contract is a sub-contractor; and
on account of any payments of relevant loan interest which become due in that year and to which section 369 applies, or
“locked-in value”, in relation to any shares, shall be construed in accordance with section 186(5);
agrees to buy back or re-acquire the securities, or
acquires an option, which he subsequently exercises, to buy back or re-acquire the securities,
another party to the contract (“the contractor”) either is a sub-contractor under another such contract relating to all or any of the construction operations or is a person to whom section 560(2) applies,
under section 289 or
“qualifying office” means an office mentioned in section 2(2)(b), (c) or (d) of the Parliamentary and other Pensions Act 1987;
where the seller and purchaser are husband and wife and either sells to the other, or
For the purposes of subsection (4) above the average of any liabilities for an accounting period shall be taken as one half of the aggregate of the liabilities at the beginning and end of the valuation period which coincides with that accounting period or in which that accounting period falls.
by the Secretary of State in the case of a housing association in Great Britain;
where the purchaser, or the wife or husband of the purchaser, has since 15th April 1969 disposed of an estate or interest in the land, or the property in the caravan or house-boat, in question, and it appears that the main purpose of the disposal and purchase was to obtain relief in respect of interest on the loan, or
For the purposes of this section the liabilities of an insurance company attributable to any business at any time shall be ascertained by reference to the net liabilities of the company as valued by an actuary for the purposes of the relevant periodical return.
by the Head of the Department of the Environment for Northern Ireland in the case of a housing association in Northern Ireland;
where the purchasers are the trustees of a settlement, and the seller is the settlor, or the wife or husband of the settlor, and it appears that the main purpose of the purchase is to obtain relief in respect of interest on the loan, or
Section 73 shall not apply to tax in respect of income to which subsection (1) above applies.
where the purchaser is directly or indirectly purchasing from a person who is connected with him, and the price substantially exceeds the value of what is acquired;
In the case of an overseas life insurance company—
in computing for the purposes of this section the income from the investments of the life assurance fund of the company, any interest, dividends and other payments whatsoever to which section 48 or 123(4) extends shall be included notwithstanding the exemption from tax conferred by those sections respectively; and
where in computing that income any interest on any securities issued by the Treasury is excluded by virtue of a condition of the issue of those securities regulating the treatment of the interest on them for tax purposes, the relief under section 76 shall be reduced so as to bear to the amount of relief which would be granted but for the provisions of this paragraph the same proportion as the amount of that income, excluding that interest, bears to the amount of that income including that interest.
on account of any payments to which section 593(2) or 639(3) applies,or
on account of any payments to which section 54(5) of the Finance Act 1989 applies.
“certified contractual savings scheme” has the meaning given by section 326;
the imposition of a liability to pay, and the recovery of, the tax, with or without interest; and
that the association is, or is deemed to be, duly registered under the Industrial and Provident Societies Act 1965 or the Industrial and Provident Societies Act (Northern Ireland) 1969, and is a housing association within the meaning of the Housing Associations Act 1985 or Article 114 of the Housing (Northern Ireland) Order 1981;
the interest so payable shall, whether it would or would not have been chargeable to tax apart from the provisions of this section, be deemed for all the purposes of the Tax Acts to be the income of the owner and not to be the income of any other person; and
priority for the tax in bankruptcy, or in the administration of the estate of a deceased person; and
that the rules of the association restrict membership to persons who are tenants or prospective tenants of the association, and preclude the granting or assignment (or, in Scotland, the granting or assignation) of tenancies to persons other than members; and
if the securities are of such a character that the interest payable in respect thereof may be paid without deduction of tax, the owner shall be chargeable to tax under Case VI of Schedule D in respect of the interest which is so deemed to be his income, but shall be entitled to credit for any tax which that income is shown to have borne.
appeals to the General or Special Commissioners, and the stating of cases for the opinion of the High Court; and
that the association satisfies such other requirements as may be prescribed by the approving authority, and will comply with such conditions as may for the time being be so prescribed.
the ultimate incidence of the liability imposed,
“long term assets”, in relation to an insurance company, means assets representing the fund or funds maintained by the company in respect of its long term business; and
by the General Commissioners for the division in which the objector ordinarily resides or,
in a case where an appeal has been made against an assessment in respect of income including the amount in question, the General Commissioners or the Special Commissioners having jurisdiction in that appeal.
“CTA 2010” means the Corporation Tax Act 2010;
interest received without deduction of income tax in respect of government securities (“the original securities”) which have been exchanged for any other government securities (“substituted securities”), and
the excess referred to in paragraph (b) above; and
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“TIOPA 2010” means the Taxation (International and Other Provisions) Act 2010;
on a claim made under this section for any accounting period relief is given in respect of the whole or part of any loss incurred in a trade, or of any amount which could be treated as a loss under section 393(9); and
an assessment to income tax (“the original assessment”) is made on a man, or on a man’s trustee, guardian, curator, receiver or committee, or on a man’s executors or administrators; and
the reference to the amount paid by the surrendering company by way of charges on income were a reference to so much of that amount as is allowable only against the company’s non-oil profits; and
in a later accounting period the franked payments made by the company exceed its franked investment income;
the Board are of opinion that, if an application for separate assessment under section 283(1) had been in force with respect to the year for which the assessment is made, an assessment (“the potential assessment”) in respect of, or of part of, the same income would have fallen to be made on, or on the trustee, guardian, curator, receiver or committee of, or on the executors or administrators of, a woman who is that man’s wife, or was his wife in that year of assessment; and
the reference to the surrendering company’s profits were a reference to its non-oil profits alone.
the whole or part of the amount payable under the original assessment has remained unpaid at the expiration of 28 days from the time when it became due;
interest taxed by deduction in respect of such substituted securities,
the amount in respect of which relief was given as mentioned in paragraph (a) above or so much of that amount as remains after deduction of any part of it dealt with under this subsection in relation to an earlier accounting period.
“closure notice” means a notice under—
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“non-corporate distribution” has the meaning given by paragraph 2;
For the purposes of this Part, any sum (other than rent) paid on or in connection with the granting of a tenancy shall be presumed to have been paid by way of premium except in so far as other sufficient consideration for the payment is shown to have been given.
Where paragraph (c) of section 38(1) applies, the premium, or an appropriate part of the premium, payable for or in connection with either lease mentioned in that paragraph may be treated as having been required under the other.
References in this section to a sum shall be construed as including the value of any consideration, and references to a sum paid or payable or to the payment of a sum shall be construed accordingly.
In the application of this Part to Scotland—
“purchase and resale arrangements” means arrangements to which section 564C of ITA 2007 applies.
“euro” means the single currency adopted or proposed to be adopted as its currency by a member State in accordance with the Treaty establishing the European Community;
giving particulars of the original assessment, and of the amount remaining unpaid thereunder, and
such of the charges on income which are paid by a company and allowable under section 338 as, by virtue of subsections (2) and (3) above, are not allowable against the company’s ring fence profits exceed the remaining part of its profits (the company’s (“non-oil profits”), and
giving particulars, to the best of their judgment, of the potential assessment,
the amount of that excess is greater than the amount (if any) by which the total of the charges on income which are allowable to the company under that section exceeds the total of the company’s profits,
In Schedule A and in sections 25 to 31—
references to a lease extend only to a lease conferring a right, as against the person whose interest is subject to the lease, to the possession of the premises;
“rent” includes a payment by the tenant to defray the cost of work of maintenance of, or repairs to, the demised premises, not being work required by the lease to be carried out by the tenant; and
“tenant’s repairing lease” means a lease where the tenant is under an obligation to maintain and repair the whole or substantially the whole of the premises comprised in the lease.
For the purposes of Schedule A and sections 25 to 31, a lease shall be taken to be at a full rent if the rent reserved under the lease (including an appropriate sum in respect of any premium under the lease) is sufficient, taking one year with another, to defray the cost to the lessor of fulfilling his obligations under the lease and of meeting any expenses of maintenance, repairs, insurance and management of the premises subject to the lease which fall to be borne by him.
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In computing for the purposes of Schedule A the profits or gains arising to a person (the “person chargeable”) in any chargeable period, the amounts of any permitted deductions shall be deducted from rent to which he becomes entitled under a lease in that period.
In this section—
There may be deducted from rent to which the person chargeable becomes entitled in a chargeable period the amount of any permitted deduction which became due in that period, or at an earlier time falling within the currency of the lease, in so far as the payment—
was made in respect of the premises comprised in the lease, and
in the case of a payment for maintenance or repairs, was incurred by reason of dilapidation attributable to a period falling within the currency of the lease or, in the case of any other payment, was incurred in respect of such a period.
Where the person chargeable became the landlord after the lease began, references in subsection (3) above to the currency of the lease shall not include any time before he became the landlord.
In the case of a lease at a full rent, subsection (3) above shall have effect as if references to the currency of the lease included any period (“a previous qualifying period”)— but a period shall not be a previous qualifying period if it preceded a period ending before the beginning of the lease which was not itself a previous qualifying period.
during which the person chargeable was the landlord in relation to a previous lease of the premises, being a lease at a full rent; or
which was a void period beginning either with the termination of an earlier lease at a full rent of the premises or with the acquisition by the person chargeable of the interest in the premises giving him the right to possession thereof;
Where during any period the conditions necessary for the period to be a previous qualifying period were fulfilled as respects part of the premises, but not the whole, the period shall be treated as a previous qualifying period as respects that part of the premises only, and subsection (5) above shall have effect accordingly, any necessary apportionment being made of rent, payments or other matters.
In the case of a lease at a full rent, not being a tenant’s repairing lease, there may also be deducted the amount of any payment made in respect of other premises by the person chargeable—
in so far as that amount could be deducted under subsections (3) and (5) above from rent to which he became entitled in the chargeable period under a lease of those other premises, being a lease at a full rent, or could be so deducted if that rent were not insufficient, or
if any part of the chargeable period is, in respect of those other premises, a void period beginning with the termination of a lease at a full rent, in so far as the amount could be so deducted if the lease had continued until the end of the period.
Where by reason of any change of circumstances a lease ceases to be, or becomes, a tenant’s repairing lease, or ceases to be, or becomes, a lease at a full rent, subsections (5) and (7) above shall apply in relation to the lease as it subsists after the change of circumstances as if it were a new lease granted when the change occurred.
Where the person chargeable retains possession of a part of the premises and that part is used in common by persons respectively occupying other parts of the premises, this section shall apply as if a payment made in respect of the part used in common had been made in respect of those other parts.
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Where this section applies to an estate for a chargeable period, the owner shall be treated— and section 25 shall apply accordingly.
in relation to a part of the estate which for any portion of that period is not comprised in a lease under which he is the landlord, as if he were entitled under a lease of that part at a full rent (not being a tenant’s repairing lease) to rent for that portion, becoming due from day to day, at a rate per annum equal to the relevant annual value, and
in relation to a part of the estate which for any portion of that period is comprised in a lease under which he is the landlord, not being a lease at a full rent, as if the lease were at a full rent, and as if the rent so far as it relates to that part were at a rate per annum not less than the relevant annual value;
In any case where subsection (1) above applies—
a payment relating to premises comprised in the estate shall not be deductible from rent in respect of premises not so comprised; and
paragraph (a) of that subsection shall not apply to premises occupied by the owner wholly and exclusively for purposes connected with the management of the estate or for the purposes of a trade, profession or vocation.
This section shall apply to an estate if, at the end of the year 1962-63, the land comprised in the estate was managed as one estate and the owner for the time being of the estate by notice to the inspector so elects; but such an election—
must be made within 12 months after the end of the first chargeable period for which the person making it became entitled to make it or such further time as the Board may allow;
except in the case of the first election that can be made under this subsection or the first election made under section 73(2) of the 1970 Act, shall not have effect unless an election under this section has had effect as respects the immediately preceding ownership;
shall apply in relation to the estate throughout the ownership of the person making it.
Where in any chargeable period the estate comprises premises not included in it at the end of the year 1962-63, subsection (1) above (but not subsection (2)) shall apply in relation to the chargeable period as if the premises were not included in the estate in that period.
Subsection (4) above shall not have effect in relation to any premises if—
at the end of the year 1962-63 the owner of the remainder of the estate as then subsisting was entitled under trusts arising under a settlement or on an intestacy, or in Scotland, under a disposition by way of liferent and fee, to an interest such that, on the occurrence of some future event or events, he might become the owner of the premises in question, and
before the end of that year, the premises and the remainder of the estate, as then subsisting, were together managed as one estate.
In this section—
“tax month” means the period beginning with the 6th day of any calendar month and ending with the 5th day of the following calendar month;
on account of any payments to which section 32(4) of the Finance Act 1991 applies.
“the material date” in relation to a payment to which this section applies, means the last date on which corporation tax on any of the profits of the company in question arising in the relevant accounting period could have been paid—
the period beginning with that date and ending with the day before the first date after the purchase by the first buyer on which the securities are quoted in that List at a price excluding the value of the interest receivable by the first buyer.
the amount of the dividends so referable which are paid to it in the year by companies resident in that territory and in respect of which credit may, apart from subsection (1) above, be allowed to it for underlying tax.
The provisions of this section and sections 813 to 815 shall come into force on such date as the Treasury may by order appoint and the Treasury may in the order prescribe that those provisions shall apply in relation to distributions made, in accounting periods ending after 5th April 1988, before the date on which the order is made.
No order shall be made under this section unless a draft of it has been laid before and approved by a resolution of the House of Commons.
the bringing into account of any debit for the purposes of Part 5 of CTA 2009 (loan relationships);
In any case where— then, notwithstanding anything to the contrary in the arrangements, the company shall not be entitled to claim under section 231(3) to have that tax credit set against the income tax chargeable on its income for the year of assessment in which the distribution is made or, where the credit exceeds that income tax, to have the excess paid to it.
a company has, or is an associated company of a company which has, a qualifying presence in a unitary state, and
at any time when it or its associated company has such a qualifying presence, the company is entitled by virtue of arrangements having effect under section 788(1) to a tax credit in respect of qualifying distributions made to it by companies which are resident in the United Kingdom which is equal to one half of the tax credit to which an individual resident in the United Kingdom would be entitled in respect of such distributions,
In this section and sections 813 and 814, “unitary state” means a province, state or other part of a territory outside the United Kingdom with the government of which the arrangements referred to in subsection (1) above have been made which, in taxing the income or profits of companies from sources within that province, state or other part, takes into account, or is entitled to take into account, income, receipts, deductions, outgoings or assets of such companies, or associated companies of such companies, arising, expended or situated, as the case may be, outside that territory and which has been prescribed under subsection (6) below as a unitary state for the purposes of this subsection.
A company shall be treated as having a qualifying presence in a unitary state if it is a member of a group and, in any period for which members of the group make up their accounts ending after the relevant date, 7½ per cent. or more in value of the property, payroll or sales of such members situated in, attributable to or derived from the territory outside the United Kingdom, of which that state is a province, state or other part, are situated in, attributable to or derived from that state.
For the purposes of subsection (3) above—
7½ per cent. or more in value of such property, payroll or sales as are referred to in that subsection shall be treated as being situated in, attributable to or derived from the state there referred to, unless, on making any claim under section 231(3), the claimant proves otherwise to the satisfaction of the Board; and
the value of the property, payroll or sales of a company shall be taken to be the value as shown in its accounts for the period in question and for this purpose the value of any property consisting of an interest in another member of the group or of any sales made to another such member shall be disregarded.
Except where the context otherwise requires, in this section and sections 813 to 815—
“arrangements” means the arrangements referred to in subsection (1) above;
“group” and “member of a group” shall be construed in accordance with section 272(1) of the 1970 Act with the omission of the restriction in paragraph (a) of that subsection and the substitution of the words “51 per cent.” for the words “75 per cent.” wherever they occur;
section 839 applies;
section 416 applies with the substitution of the words “six years” for “one year” in subsection (1); and
“the relevant date” means the earliest of the following dates—
the date on which this section comes into force;
the earliest date on which a distribution could have been made in relation to which the provisions of this section and sections 813 and 814 are applied by an order under this section;
the earliest date on which a distribution could have been made in relation to which the provisions of section 54 of the Finance Act 1985 were applied by an order under that section.
The Treasury may by order prescribe those provinces, states or other parts of a territory outside the United Kingdom which are to be treated as unitary states for the purposes of subsection (2) above, but no province, state or other part of such a territory shall be so prescribed which only takes into account such income, receipts, deductions, outgoings or assets as are mentioned in that subsection—
if the associated company was incorporated under the law of the territory; or
for the purpose of granting relief in taxing dividends received by companies.
The Treasury may by order prescribe that for subsections (3) and (4) above (or for those subsections as they have effect at any time) there shall be substituted either the following provisions—;
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Where a building or land which is qualifying property for the purposes of paragraph 3(1) of Schedule 4 to the Inheritance Tax Act 1984 (maintenance funds for historic buildings) forms part of an estate in relation to which an election has effect under section 26—
the election shall not cease to have effect by reason only of another part of the estate becoming comprised in, and managed by the trustees of, a settlement in relation to which the Treasury give a direction under paragraph 1 of that Schedule, and
while such a direction has effect that other part shall be treated as continuing to form part of the estate to which the election relates.
In any case where— any other part of that estate which continues to be or becomes comprised in a settlement of the kind mentioned in subsection (1) above shall, while such a direction as is mentioned in that subsection has effect, be treated as part of the estate in relation to which an election under section 26 may be made by him.
a person becomes the owner of any such building or land as is mentioned in subsection (1) above, and
that building or land, in the immediately preceding ownership, formed part of an estate in relation to which an election under section 26 had effect,
Where by virtue of this section an election has effect in relation to an estate part of which is comprised in a settlement—
there may be treated as deductible from the rents arising from that part—
any payments which are made in respect of the other part of the estate by the trustees of the settlement and which would be so deductible under section 25 if that part were also comprised in the settlement; and
any payments made in respect of the other part of the estate by its owner to the extent to which they cannot be deducted by him under that section in the chargeable period in which they become due because of an insufficiency of the rents arising in that period from that part; and
any relief available to the trustees under section 33 in respect of the part of the estate comprised in the settlement shall instead be available to the owner of the other part of the estate.
Where by virtue of this section an election has effect in relation to an estate part of which is comprised in a settlement, the election shall not cease to have effect in relation to any of that part by reason of its ceasing to be comprised in that settlement if either—
it becomes comprised in another settlement in circumstances such that by virtue of paragraph 9(1) of Schedule 4 to the Inheritance Tax Act 1984 there is (or would but for paragraph 9(4) be) no charge to inheritance tax in respect of the property so ceasing; or
both immediately before and immediately after its so ceasing it is property in respect of which a direction has effect under paragraph 1 of that Schedule.
The inclusion by virtue of this section in an estate of property comprised in a settlement shall not be construed as requiring it to be treated as the property of the person who owns the remainder of the estate or as affecting any question as to the person entitled to the income arising from that property.
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so much of any payment made by that person as was made in respect of maintenance, repairs, insurance or management of premises to which the sum relates and constituted an expense of the transaction under which he became entitled to that sum;
so much of any rent, rentcharge, ground annual, feuduty or other periodical payment made by that person as was reserved in respect of, or was charged upon or issued out of, premises to which the sum relates and constituted an expense of that transaction;
so much of any other payment made by that person as constituted an expense of that transaction, not being an expense of a capital nature; and
where, in or before the chargeable period, that person entered into any like transaction, any amount which, under paragraphs (a) to (c) above, is deductible from a sum to which he is entitled under that like transaction in the period, or was deductible from a sum to which he was so entitled in a previous chargeable period but has not been deducted.
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Subject to subsection (2) below, in any case where the person entitled to possession of any land (“the person chargeable”)— the aggregate of any amounts paid by him which, if such rights had been granted in that year (the “relevant year”), would have been deductible under section 28 from payments receivable by him in respect of the grant shall be treated for the purposes of section 25(7) as a deduction which, by virtue of section 25(3), might have been made by him from rent to which he was entitled for that year under a lease of the land, being a lease at a full rent.
is in the practice of granting sporting rights over the land for payment, but
in any year of assessment, such rights are for any reason not granted by him,
If in the relevant year sporting rights over the land are exercised— the aggregate referred to in subsection (1) above shall be treated as reduced by an amount equal to the price which might reasonably be expected to have been paid for that exercise of the rights if the person exercising them had had to give full consideration therefor.
by the person chargeable, or
by any other person at his invitation, or
where the person chargeable is a close company, by a person who is, within the meaning of Part XI, a director of, or a participator in, that company,
For the purposes of subsection (2) above, an exercise of sporting rights shall be disregarded if it gives rise to a charge to tax under Schedule E by virtue of section 154.
Where the person chargeable is a company, section 9(1) shall not have effect so as to require references in that subsection to a year of assessment to be read as references to an accounting period, but any deduction thereby authorised shall be apportioned between the accounting periods (if more than one) comprising the year of assessment.
In this section, “sporting rights” means rights of fowling, shooting or fishing, or of taking or killing game, deer or rabbits.
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Where in any year of assessment the owner or tenant of any premises incurs any expenditure in the making of any sea wall or other embankment necessary for the preservation or protection of the premises against the encroachment or overflowing of the sea or any tidal river, he shall be treated for the purposes of sections 25, 28 and 31 as making in that year of assessment and in each of the succeeding 20 years of assessment a payment in relation to the premises preserved or protected by the embankment of an amount equal to a twenty-first part of the expenditure and incurred in respect of dilapidation attributable to the year.
Where the whole of that person’s interest in the premises or any part thereof is transferred (whether by operation of law or otherwise) to some other person—
the amount of the payment which he would be so treated as making for the year of assessment in which the transfer takes place shall be treated as being made partly by the transferor and partly by the transferee, as may be just; and
the transferee shall, to the exclusion of the transferor, be treated in any subsequent year—
where the interest transferred is in the whole of the premises, as having made the whole of the payment for that year, and
where the interest transferred is in part only of the premises, as having made so much of the payment as is properly referable to that part of the premises.
For the purposes of subsection (2) above, where an interest in any premises is a lease and that lease comes to an end, that interest shall be deemed to have been transferred—
if an incoming lessee makes any payment to the outgoing lessee in respect of the embankment in question, to the incoming lessee, and
in any other case, to the owner of the interest in immediate reversion on the lease and, in relation to Scotland, the expression “the owner of the interest in immediate reversion on the lease” shall be construed as a reference to the landlord.
In relation to a company, section 9(1) shall not have effect so as to require references in this section to a year of assessment to be read as references to an accounting period, but any deduction authorised by this section shall be apportioned between the accounting periods (if more than one) comprising the year of assessment, other than any such period ended before the expenditure is incurred, or transfer takes place, by virtue of which the company is entitled to the deduction.
This section shall not apply in relation to any expenditure in respect of which a capital allowance has been made.
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Schedule 1, which makes provision in relation to certain expenditure incurred before the beginning of the year 1963-64, shall have effect (and the preceding provisions of this Part shall have effect subject to that Schedule).
Any reference in this section to a deduction is a reference to a sum which is deductible under any of the provisions of sections 25 to 30 and Schedule 1, and any reference to a sum which can be deducted or which is deductible shall be construed accordingly.
Subject to subsections (4) to (7) below, where a sum or part of a sum can be deducted for the chargeable period in which it is paid, it shall be so deducted, and, where it cannot, it shall be deducted for the earliest chargeable period for which it can be deducted.
Where for any chargeable period the amount from which deductions can be made is sufficient to allow the deduction from that amount of some, but not all, of different sums or parts of sums which are deductible, the sum or parts to be deducted for that period shall in the aggregate be equal to that amount, and, subject to that requirement, shall be such as the person whose liability to tax is in question may choose.
No deduction shall be made in respect of—
a payment made by any person to the extent that the payment has been or will be—
balanced by the receipt of insurance moneys, or
recovered from, or in any other manner borne by, some other person, otherwise than by means of an amount on the profits or gains arising from which the first-mentioned person would be chargeable under Schedule A, or
a payment made by a person other than a company, if payable under deduction of income tax.
An amount, or part of an amount, shall not be deducted more than once from any sum, or from more than one sum, and shall not in any case be deducted if it has otherwise been allowed as a deduction in computing the income of any person for tax purposes.
Where, on account of a payment made in any chargeable period, a deduction falls to be made from any rents or receipts to which the person making the payment became entitled in a previous period, all such adjustments of liability to tax shall be made, by repayment or otherwise, as may be necessary to give effect to the deduction.
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Subject to the provisions of this section, Chapter II of Part I of the 1968 Act and Chapter I of Part III of the Finance Act 1971, and such other provisions of the Tax Acts as relate to allowances or charges under those Chapters, shall apply with any necessary adaptations in relation to machinery or plant provided for use or used by a person entitled to rents or receipts falling within Schedule A for the maintenance, repair or management of premises in respect of which those rents or receipts arise as they apply in relation to machinery or plant provided for use or used for the purposes of a trade.
Except as provided by subsection (3) below, the Tax Acts shall apply in relation to any allowances or balancing charges which fall to be made by virtue of this section as if they were to be made in taxing a trade.
Allowances and balancing charges which by virtue of this section fall to be made to or on a person for any chargeable period shall be made by— and sections 46 of the 1968 Act and 48 of the Finance Act 1971 (manner of making allowances or charges) shall not apply.
adding the amount of any such allowances to the expenditure on maintenance, repair or management of the premises which is deductible under sections 25 or 28 in computing his profits or gains for the purposes of Schedule A; and
deducting the amount on which any such charge is to be made from that expenditure (or from the sum of that expenditure and any addition made to it under this subsection);
Any charge falling to be made under this section shall, in so far as a deduction cannot be made for it under subsection (3)(b) above, be made under Case VI of Schedule D.
No allowance or balancing charge shall be made by virtue of this section for any chargeable period in respect of expenditure incurred by any person on machinery or plant, except in pursuance of an election made by him for that period; but an election for any chargeable period shall have effect as an election for that and all subsequent chargeable periods.
Any such election shall be made by notice to the inspector either for all machinery or plant provided for use or used for the maintenance, repair or management of the relevant premises or for any class of machinery or plant so provided or used; but an election for machinery or plant of any class shall not be made for any chargeable period after payments made in that or a subsequent chargeable period for the maintenance, repair or management of the relevant premises have been taken into account in an assessment or claim for repayment of tax which has been finally determined.
Corresponding allowances or charges in the case of the same machinery or plant shall not be made under Chapter II of Part I of the 1968 Act or Chapter I of Part III of the Finance Act 1971 (whether for the same or different chargeable periods) both in computing profits or gains for the purposes of Schedule A and in some other way; and, on any assessment to tax, expenditure to which an election under this section applies shall not be taken into account otherwise than under those Chapters.
The Tax Acts shall have effect as if this section were contained in Chapter II of Part I of the 1968 Act or Chapter I of Part III of the Finance Act 1971, as the case may require.
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Where in the case of an estate which consists of or includes agricultural land— then, subject to subsection (2) below, the sum in question shall be treated as if it were the amount of an allowance falling to be made under the 1968 Act by way of discharge or repayment of tax, and available primarily against agricultural income as defined in section 69 of that Act.
provision is made in sections 25 to 32 for the deduction of a sum in respect of payments in a chargeable period for maintenance, repairs, insurance or management of the estate, or in respect of allowances for machinery or plant provided for use or used on the estate, and
owing to the insufficiency of rents and receipts to which the owner of the estate becomes entitled in that period, whether from the estate or from other property, the sum in question cannot be deducted (other amounts deductible under Schedule A being treated as deductible in priority thereto),
The sum in question shall not exceed the sum which would have fallen to be so treated if—
the estate had not included such parts thereof as were used wholly for purposes other than purposes of husbandry, and
payments or allowances in respect of parts thereof which were used partly for purposes of husbandry and partly for other purposes were reduced to an extent corresponding to the extent to which those parts were used for other purposes.
In this section—
“financial year”, in relation to any person, means the period (not exceeding 12 months) for which that person makes up accounts.
“chargeable event” means an event which is a chargeable event within the meaning of . . . Chapter 9 of Part 4 of ITTOIA 2005;
any registered industrial and provident society which does not sell to persons not members thereof; or
the period beginning with the date on which the securities were first listed in The Stock Exchange Daily Official List at a price excluding the value of the interest payment last payable before the interest receivable by the first buyer, and ending with the day before the day on which the first buyer bought the securities,
land, or any property deriving its value from land, is acquired with the sole or main object of realising a gain from disposing of the land; or
any registered industrial and provident society the number of the shares in which is not limited by its rules or practice;
land is held as trading stock; or
For the purposes of subsection (1) above an individual is an eligible individual if the individual—
is resident in the United Kingdom, or
meets the conditions in section 56(3) of ITA 2007.
land is developed with the sole or main object of realising a gain from disposing of the land when developed;
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Sections 71 and 74 of the 1968 Act shall apply as if this section were contained in Part I of that Act.
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Where the payment of any premium is required under a lease, or otherwise under the terms subject to which a lease is granted, and the duration of the lease does not exceed 50 years, the landlord shall be treated for the purposes of the Tax Acts as becoming entitled when the lease is granted to an amount by way of rent (in addition to any actual rent) equal to— where P is the premium and Y is the number of complete periods of 12 months (other than the first) comprised in the duration of the lease.
Where the terms subject to which a lease is granted impose on the tenant an obligation to carry out any work on the premises, the lease shall be deemed for the purposes of this section to have required the payment of a premium to the landlord (in addition to any other premium) of an amount equal to the amount by which the value of the landlord’s estate or interest immediately after the commencement of the lease exceeds what its then value would have been if those terms did not impose that obligation on the tenant.
Subsection (2) above shall not apply in so far as the obligation requires the carrying out of work the payment for which would, if the landlord and not the tenant were obliged to carry it out, be deductible from the rent under sections 25 to 30.
Where, under the terms subject to which a lease is granted, a sum becomes payable by the tenant in lieu of the whole or a part of the rent for any period, or as consideration for the surrender of the lease, the lease shall be deemed for the purposes of this section to have required the payment of a premium to the landlord (in addition to any other premium) of the amount of that sum; but—
in computing tax chargeable by virtue of this subsection in respect of a sum payable in lieu of rent, the duration of the lease shall be treated as not including any period other than that in relation to which the sum is payable; and
notwithstanding anything in subsection (1) above, rent treated as arising by virtue of this subsection shall be deemed to become due when the sum in question becomes payable by the tenant.
Where, as consideration for the variation or waiver of any of the terms of a lease, a sum becomes payable by the tenant otherwise than by way of rent, the lease shall be deemed for the purposes of this section to have required the payment of a premium to the landlord (in addition to any other premium) of the amount of that sum; but—
in computing tax chargeable by virtue of this subsection, the duration of the lease shall be treated as not including any period which precedes the time at which the variation or waiver takes effect, or falls after the time at which it ceases to have effect; and
notwithstanding anything in subsection (1) above, rent treated as arising by virtue of this subsection shall be deemed to become due when the contract providing for the variation or waiver is entered into.
Where a payment falling within subsection (1), (4) or (5) above is due to a person other than the landlord, no charge to tax shall arise under that subsection, but any amount which would otherwise fall to be treated as rent shall be treated as profits or gains of that other person chargeable under Case VI of Schedule D.
Subsection (6) above shall not apply in relation to any payment falling within subsection (5) above unless it is due to a person who is, within the meaning of section 839, connected with the landlord.
Where an amount by reference to which a person is chargeable to tax by virtue of this section is payable by instalments (“the tax instalments”), the tax chargeable by reference to that amount may, if that person satisfies the Board that he would otherwise suffer undue hardship, be paid at his option by such instalments as the Board may allow over a period not exceeding eight years and ending not later than the time at which the last of the tax instalments is payable.
Section 22(2) and (3) shall not apply in relation to amounts which, in computing profits or gains for the purposes of Schedule A, are relevant only by virtue of this section.
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This section applies to any lease of a duration not exceeding 50 years where the terms subject to which it was granted are such that the grantor, having regard to values prevailing at the time it was granted and on the assumption that the negotiations for the lease were at arm’s length, could have required the payment of an additional sum by way of premium, or additional premium, for the grant of the lease; and in this section any such additional sum is referred to as the “amount foregone”.
On any assignment of a lease to which this section applies for a consideration— the amount of the excess, in so far as it is not greater than the amount foregone reduced by the amount of any such excess arising on a previous assignment of the lease, shall in the same proportion as the amount foregone would, under section 34(1), have fallen to be treated as rent if it had been a premium under the lease, be treated as profits or gains of the assignor chargeable to tax under Case VI of Schedule D.
where the lease has not previously been assigned, exceeding the premium, if any, for which it was granted, or
where the lease has been previously assigned, exceeding the consideration for which it was last assigned,
If there is submitted to the inspector, by the grantor or any assignor or assignee of the lease, a statement showing whether or not a charge to tax arises or may arise under this section and, if so, the amount on which the charge arises or may arise, then, if the inspector is satisfied as to the accuracy of the statement, he shall certify the accuracy thereof.
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Where the terms subject to which an estate or interest in land is sold provide that it shall be, or may be required to be, reconveyed at a future date to the vendor or a person connected with him, the vendor shall be chargeable to tax under Case VI of Schedule D on any amount by which the price at which the estate or interest is sold exceeds the price at which it is to be reconveyed or, if the earliest date at which in accordance with those terms it would fall to be reconveyed is a date two years or more after the sale, on that excess reduced by one-fiftieth thereof for each complete year (other than the first) in the period between the sale and that date.
Where, under the terms of the sale, the date of the reconveyance is not fixed, then—
if the price on reconveyance varies with the date, the price shall be taken, for the purposes of this section, to be the lowest possible under the terms of the sale, and
there shall be repaid to the vendor, on a claim made before the expiry of six years after the reconveyance takes place, any amount by which tax assessed on him by virtue of this section exceeded the amount which would have been so assessed if that date had been treated for the purposes of this section as the date fixed by the terms of the sale.
Where the terms of the sale provide for the grant of a lease directly or indirectly out of the estate or interest to the vendor or a person connected with him, this section shall, subject to subsection (4) below, apply as if the grant of the lease were a reconveyance of the estate or interest at a price equal to the sum of the amount of the premium (if any) for the lease and the value at the date of the sale of the right to receive a conveyance of the reversion immediately after the lease begins to run.
Subsection (3) above shall not apply in any case where the lease is granted and begins to run within one month after the sale.
In this section references to a person connected with another shall be construed in accordance with section 839.
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This section applies in any case where in respect of a lease of any premises— and the amount of that tax is in this section referred to as “the amount chargeable on the superior interest” and any such lease is referred to as “the head lease”.
tax has become chargeable under the provisions of section 34 or 35 on any amount (disregarding any reduction in that amount under subsection (2) below); or
tax would have become so chargeable on that amount but for the operation of this subsection, or but for any exemption from tax;
Where— then the amount on which he is so chargeable shall, subject to subsection (3) below, be the excess (if any) of the later chargeable amount over the appropriate fraction of the amount chargeable on the superior interest.
a lease is granted out of, or there is a disposition of, the head lease, and
in respect of that grant or disposition a person would, apart from this subsection, be chargeable under section 34 or 35 on any amount (“the later chargeable amount”),
Where a person would, apart from subsection (2) above, be chargeable under section 34 or 35 in respect of a lease or disposition which extends to a part only of the premises subject to the head lease, the amount on which he is so chargeable shall be the excess (if any) of the later chargeable amount over the appropriate fraction of the amount chargeable on the superior interest as, on a just apportionment, is attributable to that part of the premises.
Subject to subsection (5) below, the person for the time being entitled to the head lease shall be treated for the purposes of deductions under sections 25 and 26 from rent receivable by him in respect of those or other premises as paying rent for those premises (in addition to any actual rent), becoming due from day to day, during any part of the period in respect of which the amount chargeable on the superior interest arose for which he was entitled to the head lease, and, in all, bearing to that amount the same proportion as that part of the period bears to the whole.
Where subsection (2) above applies, subsection (4) above shall apply for the period in respect of which the later chargeable amount arose only if the appropriate fraction of the amount chargeable on the superior interest exceeds the later chargeable amount, and shall then apply as if the amount chargeable on the superior interest were reduced in the proportion which that excess bears to that appropriate fraction.
Where subsection (3) above applies, subsections (4) and (5) above shall be applied separately to the part of the premises referred to in subsection (3) above and to the remainder of the premises, but as if for any reference to the amount chargeable on the superior interest there were substituted a reference to that amount proportionately adjusted.
For the purposes of this section—
the appropriate fraction of the amount chargeable on the superior interest is the fraction— where— A is the period in respect of which the later chargeable amount arose; and B is the period in respect of which the amount chargeable on the superior interest arose; and
the period in respect of which an amount arose—
where it arose under section 34, shall be the period treated in computing the amount as being the duration of the lease;
where it arose under section 35, shall be the period treated in computing the amount as being the duration of the lease remaining at the date of the assignment.
Where the amount chargeable on the superior interest arose under section 34(2) by reason of an obligation which included the carrying out of work in respect of which any capital allowance has fallen or will fall to be made, subsections (1) to (6) above shall apply as if the obligation had not included the carrying out of that work and that amount had been calculated accordingly.
An amount or part of an amount shall not be deducted under this section more than once from any sum, or from more than one sum, and shall not in any case be so deducted if it has been otherwise allowed as a deduction in computing the income of any person for tax purposes.
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In ascertaining the duration of a lease for the purposes of sections 34 to 36—
in any case where— the lease shall not be treated as having been granted for a term longer than one ending on that date;
any of the terms of the lease (whether relating to forfeiture or any other matter) or any other circumstances render it unlikely that the lease will continue beyond a date falling before the expiry of the term of the lease, and
the premium was not substantially greater than it would have been, on the assumptions required by subsections (3) and (4) below, had the term been one expiring on that date,
where the terms of the lease include provision for the extension of the lease beyond a given date by notice given by the tenant, account may be taken of any circumstances making it likely that the lease will be so extended; and
where the tenant or a person connected with him (within the meaning of section 839) is or may become entitled to a further lease or the grant of a further lease (whenever commencing) of the same premises or of premises including the whole or part of the same premises, the term of the lease may be treated as not expiring before the term of the further lease.
Subsection (1) above shall be applied by reference to the facts which were known or ascertainable at the time of the grant of the lease, or in relation to tax under section 34(5), at a time when the contract providing for the variation or waiver is entered into.
It shall be assumed in applying subsection (1) above that all parties concerned, whatever their relationship, act as they would act if they were at arm’s length.
In any case where— it shall also be assumed, unless it is shown that the benefits were not conferred or the payments made for the purpose of securing a tax advantage in the application of this Part, that the benefits would not have been conferred nor the payments made had the lease been for a term ending on the date mentioned in subsection (1)(a) above.
by the lease or in connection with the granting of it benefits were conferred other than—
vacant possession and beneficial occupation of the premises, or
the right to receive rent at a reasonable commercial rate in respect of the premises, or
payments were made which would not be expected to be made by parties acting at arm’s length if no other benefits had been so conferred,
Where an inspector has reason to believe that a person has information relevant to the ascertainment of the duration of a lease in accordance with subsections (1) to (4) above, the inspector may by notice require him to give, within a time specified in the notice, such information on the matters so specified as is in his possession; but a solicitor shall not be so required to do more, in relation to anything done by him on behalf of a client, than state that he is or was so acting and give the name and address of his client.
In this section in relation to Scotland, the expression “term”, where referring to the duration of a lease, means period.
This section has effect subject to paragraphs 2 and 3 of Schedule 30.
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Subject to subsection (2) below, sections 34 to 36 shall not apply in relation to a lease granted, or an estate or interest in land sold, before the beginning of the year 1963-64 or in pursuance of a contract entered into before 4th April 1963.
Section 34(5) shall apply to the variation or waiver of any terms of a lease (not being a variation or waiver made in pursuance of a contract entered into before 4th April 1963) notwithstanding that the lease was granted before the beginning of the year 1963-64.
Schedule 2 shall have effect for giving relief on a claim being made by him in that behalf from any increase in an individual’s liability to income tax which is attributable to amounts being treated by virtue of section 34, 35 or 36 as receipts for a single year of assessment rather than as receipts for the period in relation to which they are chargeable.
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Where— the purchaser shall be treated for the purposes of tax under Schedule A as if that part had become receivable or payable on his behalf immediately after the time to which the apportionment falls to be made.
by virtue of a contract for the sale of an estate or interest in land there falls to be apportioned between the parties a receipt or outgoing in respect of the estate or interest which becomes due after the making of the contract but before the time to which the apportionment falls to be made, and
a part of the receipt is therefore receivable by the vendor in trust for the purchaser or, as the case may be, a part of the outgoing is paid by the vendor as trustee for the purchaser,
Where by virtue of such a contract there falls to be apportioned between the parties a receipt or outgoing in respect of the estate or interest which became due before the making of the contract, the parties shall be treated for the purposes of tax under Schedule A as if the contract had been entered into before the receipt or outgoing became due, and subsection (1) above shall apply accordingly.
Where on the sale of an estate or interest in land there is apportioned to the vendor a part of a receipt or outgoing in respect of the estate or interest which is to become receivable or be paid by the purchaser after the making of the apportionment, then for the purposes of tax under Schedule A—
when the receipt becomes due or, as the case may be, the outgoing is paid, the amount of it shall be treated as reduced by so much thereof as was apportioned to the vendor, and
the part apportioned to the vendor shall be treated as if it were of the same nature as the receipt or outgoing and had become receivable, or had been paid, directly by him immediately before the time to which the apportionment is made and, where it is part of an outgoing, had become due immediately before that time.
Any reference in subsection (1) or (2) above to a party to a contract shall include a person to whom the rights and obligations of that party under the contract have passed by assignment or otherwise.
This section shall apply as respects tax under Case VI of Schedule D in a case falling within paragraph 4 of Schedule A as it applies as respects tax under Schedule A in other cases.
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Where on a claim in that behalf a person proves— then subject to subsection (2) below, the claimant shall be treated for tax purposes for all relevant chargeable periods as if he had not been entitled to that amount, and such adjustments shall be made, by repayment or otherwise, as the case may require.
that he has not received an amount which he was entitled to receive in respect of any rents or receipts on the profits or gains arising from which he would be chargeable under Schedule A; and
if the non-receipt of that amount was attributable to the default of another person by whom it was payable, that the claimant has taken any reasonable steps available to him to enforce payment; or
if the claimant waived payment of that amount, that the waiver was made without consideration, and was reasonably made in order to avoid hardship;
If all or any part of that amount is subsequently received, the claimant or, if he is dead, his executors or administrators shall not later than six months thereafter give notice to the inspector, and such readjustment of liability to tax (for all relevant chargeable periods) shall be made as may be necessary, and may be made at any time at which it could be made if it related only to tax for the chargeable period in which the amount, or that part of the amount, is received.
Subsection (1) above shall apply in relation to sums chargeable to tax under Case VI of Schedule D by virtue of any provision of sections 34 to 36 as it applies to profits or gains chargeable to tax under Schedule A.
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Where it appears to the inspector that the determination of any amount on which a person may be chargeable to tax by virtue of section 34, 35 or 36 may affect the liability to income tax, corporation tax or capital gains tax of other persons he may give notice to those persons as well as to the first-mentioned person of the determination he proposes to make and of the rights conferred on them by this section.
Any person to whom such a notice is given may, within 30 days after the date on which it is given, object to the proposed determination by notice given to the inspector.
Where notices have been given under subsection (1) above and no notice of objection is duly given under subsection (2) above the inspector shall make the determination as proposed in his notices and the determination shall not be called in question in any proceedings.
Where a notice of objection is duly given the amount mentioned in subsection (1) above shall be determined in like manner as an appeal and shall be so determined by the Special Commissioners or such body of General Commissioners as may be agreed on by the person to be charged and all persons who have given notice of objection.
All persons to whom notices have been given under subsection (1) above may take part in any proceedings under subsection (4) above and in any appeal arising out of those proceedings and shall be bound by the determination made in the proceedings or on appeal, whether or not they have taken part in the proceedings; and their successors in title shall also be so bound.
A notice under subsection (1) above may, notwithstanding any obligation as to secrecy or other restriction on the disclosure of information, include a statement of the grounds on which the inspector proposes to make the determination.
An inspector may by notice require any person to give within the time specified in the notice such information as appears to the inspector to be required for deciding whether to give a notice under subsection (1) above to any person.
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Section 78 of the Management Act (taxation of non-residents in name of agent) shall not apply to tax on profits or gains chargeable to tax under Schedule A, or on any of the profits or gains chargeable under Case VI of Schedule D— where payment is made (whether in the United Kingdom or elsewhere) directly to a person whose usual place of abode is outside the United Kingdom, but sections 349(1) and 350 shall apply in relation to the payment as they apply to annual payments charged with tax under Case III or IV of Schedule D and not payable out of profits or gains brought into charge to income tax.
in a case falling within paragraph 4 of Schedule A; or
which arise under the terms of a lease, but to a person other than the landlord, or otherwise arise out of any disposition or contract such that if they arose to the person making it they would be chargeable under Schedule A,
Subsection (1) above shall apply in relation to sums chargeable to tax under Case VI of Schedule D by virtue of any provision of sections 34 to 36 as it applies to profits or gains chargeable to tax under Schedule A.
Where by virtue of subsection (1) above the income tax chargeable for any year of assessment on a person’s profits or gains chargeable to tax under Schedule A or Case VI of Schedule D or both would, apart from this subsection, be greater than the tax which would be chargeable thereon apart from section 22(2) and (3), then, on a claim in that behalf being made, relief shall be given from the excess, whether by way of repayment or otherwise.
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Income tax under Schedule C shall be charged by the Board, and shall be paid on behalf of the persons entitled to the profits, dividends or proceeds which are the subject of the tax—
in the case of tax charged under paragraph 1 of that Schedule, by the persons and bodies of persons respectively entrusted with payment;
in the case of tax charged under paragraph 2 of that Schedule, by the Bank of England;
in the case of tax charged under paragraph 3 or 4 of that Schedule, by the banker or other person, or by the banker or dealer in coupons, as the case may be.
Schedule 3 shall have effect in relation to the assessment, charge and payment of income tax under Schedule C.
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“tax representative” means a tax representative under this section.
the excess shall not be taken into account in ascertaining his total income for that year for the purposes of income tax, but
by the person acquiring, holding or developing the land, or by any connected person, or
The provisions of this Schedule apply for the purposes of sections 197AD to 197AG (Schedule E exemption for mileage allowance payments and passenger payments and mileage allowance relief). Expressions defined in this Schedule for those purposes have the same meaning for the purposes of this Schedule. In this Schedule “mileage allowance payments” has the meaning given by section 197AD(2) and “passenger payments” has the meaning given by section 197AE(2).
the excess shall nevertheless be chargeable to income tax for that year at such rate or rates, and subject to such reliefs, if any, as would be applicable if it constituted the highest part of an income equal, subject to section 833(3), to the amount of his total income exclusive of the excess.
where any arrangement or scheme is effected as respects the land which enables a gain to be realised by any indirect method, or by any series of transactions, by any person who is a party to, or concerned in, the arrangement or scheme;
“Business travel” means travelling the expenses of which, if incurred and defrayed by the employee in question out of the emoluments of his employment, would (in the absence of sections 197AD to 197AF) be deductible under section 198(1) (general relief for necessary expenses).
“Qualifying vehicle” means a car, van, motor cycle or cycle. “Car” means a mechanically propelled road vehicle which is not— “Van” means a mechanically propelled road vehicle which— and which is not a motor cycle. “Motor cycle” has the meaning given by section 185(1) of the Road Traffic Act 1988. “Cycle” has the meaning given by section 192(1) of that Act. In this paragraph—
The approved amount for mileage allowance payments that is applicable to a kind of vehicle is— where— M is the number of miles of business travel by the employee (other than as a passenger), using that kind of vehicle, in the tax year in question; and R is the rate applicable for that kind of vehicle. The rates applicable are as follows— Kind of vehicle Rate Car or van 40p per mile for the first 10,000 miles; 25p per mile after that Motor cycle 24p per mile. Cycle 20p per mile. Note: The reference above to “the first 10,000 miles” is to the total number of miles of business travel in relation to the employment or any associated employment, by car or van, in the tax year in question.
“market value”, in relation to any property, means the price which that property might reasonably be expected to fetch on a sale in the open market with vacant possession, no reduction being made, in estimating the market value, on account of any option in respect of the property held by the employee, or a person connected with him, or by any of the persons mentioned in subsection (7) above; and
“the principal accounting period” means that accounting period.
the redemption, repayment or purchase is made wholly or mainly for the purpose of benefiting a trade carried on by the company or by any of its 75 per cent. subsidiaries, and does not form part of a scheme or arrangement the main purpose or one of the main purposes of which is— the conditions specified in sections 220 to 224, so far as applicable, are satisfied in relation to the owner of the shares; or
to enable the owner of the shares to participate in the profits of the company without receiving a dividend, or
the avoidance of tax; and
was made on the day of the service of the notice, and
the fraction of the apportioned income in respect of which he was charged to tax; or
Except as provided by sub-paragraphs (2) and (3) below, no payment shall be deductible under sections 25 and 26 if made before the beginning of the year 1964-65. Where, by virtue of paragraph 1(2) of Schedule 2 to the 1970 Act, any amount fell to be treated as a payment in relation to premises made by a person in the year 1964-65 in respect of dilapidation attributable to that year, the amount shall be similarly treated for the purposes of sections 25 and 26. If the amount of any loss was treated, by virtue of paragraph 1(3) of that Schedule, as if it were a payment such as is mentioned in section 72(1) of the 1970 Act made by any person in respect of any premises in and in respect of any year, it shall be treated for the purposes of sections 25 and 26 as if it were a payment such as is mentioned in section 25(1) made by that person in respect of those premises in and in respect of that year. A deduction falling to be made by virtue of sub-paragraph (3) above shall be made notwithstanding anything in sections 392(3) and 396(1); and relief shall not be given under either of those sections in respect of the loss in so far as a deduction in respect of it is given under this paragraph.
Subject to sub-paragraph (2) below, no payment shall be deductible under section 28 if made before the beginning of the year 1964-65. Sub-paragraph (1) above shall not prevent the deduction of a payment in so far as a loss in respect thereof was carried forward to the year 1964-65 by virtue of section 346 of the Income Tax Act 1952 (Case VI losses). Paragraph 1(4) above shall apply in the case of a deduction falling to made by virtue of sub-paragraph (2) above as it applies in the case of one falling to be made by virtue of paragraph 1(3) above.
Section 30 shall not apply in relation to expenditure incurred before the beginning of the year 1964-65 except in accordance with sub-paragraphs (2) and (3) below. Subject to sub-paragraph (3) below, section 30 shall apply in relation to expenditure which, by virtue of paragraph 3(1) of Schedule 2 to the 1970 Act, was treated as if— as if it had been incurred in that year and in making that embankment. If, by virtue of the proviso to paragraph 3(1) of Schedule 2 to the 1970 Act, any expenditure fell to be treated for the purposes of sections 71 to 77 of that Act as if it were an amount paid by any person in and in respect of the year 1964-65 in respect of the maintenance of premises preserved or protected by an embankment, it shall be similarly treated for the purposes of sections 25 to 31.
the whole or substantially the whole of the payment (apart from any sum applied in paying capital gains tax charged on the redemption, repayment or purchase) is applied by the person to whom it is made in discharging a liability of his for inheritance tax charged on a death and is so applied within the period of two years after the death;
charged the same amount of income tax as is required to be paid by the notice, and
the fraction to which he is entitled of the subsequent distribution of that income,
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A claim for relief under this Schedule shall be made to the Board if the claimant is not resident in the United Kingdom.
The relief shall be computed in accordance with paragraphs 3 to 6 below, and in those paragraphs—
There shall be computed— and the relief shall consist of a reduction or repayment of tax equal to the difference between those amounts.
the amount of the tax which, in respect of the chargeable sum or the aggregate of the chargeable sums, as the case may be, would be chargeable if—
the relief were not given, and
that sum or aggregate were treated as the highest part of the claimant’s total income, and
amounts deductible in computing the tax were so far as possible deducted from other sums from which they are deductible in the year rather than from that sum or aggregate, and
the amount of the tax which, in respect of that sum or aggregate, would be chargeable if calculated in accordance with paragraph 4 below by reference to the yearly equivalent of that sum or, as the case may be, of each sum comprised in that aggregate,
Where the relief is to be given in respect of one chargeable sum only, the tax shall be calculated for the purposes of paragraph 3(b) above as follows— and, whether or not any such balance remains, the tax shall be arrived at by applying that rate, or those rates, to so much of the chargeable sum as remains after deducting such amounts as, following the principle set out in paragraph 3(a)(iii) above, are deductible from that sum. Where the relief is to be given in respect of two or more chargeable sums, the tax for each shall be calculated for the purposes of paragraph 3(b) above as provided by sub-paragraph (1) above, but so that— Where two or more chargeable sums arise in respect of relevant periods of equal duration they shall be treated for the purposes of this paragraph as a single chargeable sum of an amount equal to the aggregate of those sums and arising in respect of a relevant period of like duration.
A provision of paragraph 3 or 4 above requiring tax to be calculated as if an amount were treated as the highest part of the claimant’s total income shall apply notwithstanding any provision of the Income Tax Acts directing other income to be treated as the highest part of his total income, but for the purposes of those paragraphs his total income shall be deemed—
not to include any amount in respect of which he is chargeable to tax under section 148, and
to include, in respect of any amount which would otherwise be included therein by virtue of section 547(1)(a), no greater amount than the appropriate fraction thereof within the meaning of section 550.
A provision of paragraph 3 or 4 above shall apply in relation to any part of the claimant’s total income (as computed for the purposes of that provision) as respects which he would be entitled under Chapter I of Part VII to a deduction equal to that part as if that part were subject to a nil rate of tax.
fell to be made, and was made, by the authority who made the original assessment, and
The Bank of England and the Bank of Ireland as respects the dividends and the profits attached thereto payable to them out of the public revenue of the United Kingdom, or payable out of any public revenue and entrusted to them for payment and distribution, and the National Debt Commissioners, as respects the dividends payable by them or of which they have the distribution, shall, when any payment becomes due, deliver to the Board true accounts, in books provided for the purpose, of—
the amounts of the dividends and profits attached thereto payable to the Bank, and
all dividends entrusted to the Bank or the National Debt Commissioners for payment to the persons entitled thereto, and
the amount of income tax chargeable thereon at the lower rate in force at the time of payment, without any other deduction than is allowed by the Income Tax Acts.
In the case of dividends and profits attached thereto payable to the Bank of England out of the public revenue of the United Kingdom, the Bank of England shall set apart the income tax in respect of the amount payable to them. In the case of dividends and profits attached thereto entrusted to the Bank of England for payment and distribution, dividends payable by the Bank of Ireland at its principal office in Belfast, and dividends payable by the National Debt Commissioners or of which the National Debt Commissioners have the distribution— In relation to dividends payable to the Bank of Ireland out of the public revenue of the United Kingdom, and public revenue dividends which are entrusted to the Bank of Ireland for payment and distribution and are not payable by that Bank out of its principal office in Belfast, the following provisions shall have effect—
Money set apart or retained under paragraph 2 above, and the amount of any tax charged on the trading profits of the Bank of England or the Bank of Ireland, shall be paid into the general account of the Board at the Bank of England or the Bank of Ireland.
No deduction of income tax under this Part of this Schedule shall be made from any dividends payable in respect of stock, securities or annuities standing in the name of the official custodian for charities, nor from any dividends in respect of which there is given to the Bank of England a certificate from the Charity Commissioners that the dividends are subject only to charitable trusts and are exempt from tax.
Where any payment is made of public revenue dividends payable by any public office or department of the Crown, the appropriate officer shall retain the income tax charged and pay the same into the general account of the Board at the Bank of England or the Bank of Ireland.
The following persons are chargeable persons for the purposes of this Part of this Schedule— . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
On the fourteenth day following the month in which a transaction such as is mentioned in paragraph 6 above is effected, income tax (at the lower rate in force at the time of payment) shall become due in respect of the relevant dividends or proceeds. The tax shall be payable by the chargeable person on behalf of the persons entitled to the dividends or proceeds. Payments of tax made on any person’s behalf under this paragraph shall be treated as made for the purpose only of being applied in the discharge of that person’s liability to tax charged (otherwise than by virtue of this paragraph) on the dividends or proceeds to which the payments relate. The tax shall be payable without the making of any assessment. For the purposes of sub-paragraph (1) above the applicable rate shall be—
Any tax due under paragraph 6A above shall carry interest, at the rate applicable under section 178 of the Finance Act 1989, from the date on which it becomes due until it is paid.
For each quarter in which a person effects a transaction in respect of which he is a chargeable person, he shall make a return to the Board. The return shall specify the chargeable person’s name and address and give, in respect of each such transaction effected by him in the quarter, correct and complete particulars of— The return shall be made within 30 days from the end of the quarter. In this paragraph and paragraphs 6D to 6F below, “quarter” means any period of three months ending with 31st March, 30th June, 30th September or 31st December.
Any income tax which has become due under paragraph 6A above and particulars of which are included in a return may be assessed on the chargeable person (whether or not it has been paid when the assessment is made) if it, or any part of it, was not paid on or before the date on which it became due. If it appears to the Board that there are any dividends or proceeds particulars of which ought to have been and have not been included in a return, or if the Board are not satisfied with any return, the Board may make an assessment on the chargeable person of the amount, or further amount, of income tax for which he is in their opinion accountable. Where the Board make an assessment under sub-paragraph (2) above they shall specify— Any income tax assessed under sub-paragraph (2) above shall be due within 14 days after the issue of the notice of assessment; but for the purposes of paragraph 6B above—
Nothing in paragraphs 6 to 6F above shall impose on any banker the obligation to disclose any particulars relating to the affairs of any person on whose behalf he may be acting.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . For the purposes of sections 34 and 36(1) of the Management Act (time limits for making assessments), an assessment under paragraph 6D above shall be taken to relate to the year of assessment in which the quarter to which the assessment relates ends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Where income tax in respect of the proceeds of the sale or realisation of any coupon has been accounted for under this Part of this Schedule by any banker or dealer, and the coupon has been subsequently paid in such manner that income tax has been deducted from the payment under any of the provisions of this Schedule, the tax so deducted shall be repaid. A claim under this paragraph shall be made to the Board.
If a person has made a payment purporting to be a payment of tax due under paragraph 6A above but it appears to the Board that— the Board shall make or allow to be made such repayments, adjustments or set-offs against unpaid tax as they think appropriate.
he was not liable to make any payment under that paragraph, or
the sum paid exceeded his liability under that paragraph,
. . . ,the Board may, by notice served on any chargeable person, require that person within such time as may be specified in the notice to make available at his premises for inspection by an officer authorised by the Board all such books and other documents in the possession or control of that person as the officer may reasonably require for the purpose of determining whether any return made by that person under paragraph 6C above is correct and complete. The Board may grant a certificate exempting any chargeable person from the provisions of sub-paragraph (1) above, and while the certificate is in force the powers conferred by that sub-paragraph shall not be exercisable in relation to that person; and any such certificate may be revoked at any time by the Board, and may contain such terms and conditions as they think proper.
In this Part of this Schedule—
Any person who is entrusted with the payment of any interest, dividends or other annual payments which are payable to any persons in the United Kingdom out of the public revenue of the Republic of Ireland, or out of or in respect of the stocks, funds, shares or securities of any Republic of Ireland company, society, adventure or concern, shall be relieved from the obligation imposed on him under the preceding provisions of this Schedule to pay income tax thereon on behalf of the persons entitled thereto as regards any such interest, dividends or other annual payments in respect of which he furnishes to the Board, in such form and subject to such conditions as they may prescribe, a list containing— . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Any interest, dividends or other annual payments in respect of which the person entrusted with payment is relieved from the obligation to pay income tax by virtue of sub-paragraph (1) above, shall be assessable and chargeable under Case IV or V of Schedule D, as the case may be. The Board may make such regulations as may be necessary for the purposes of this paragraph. This paragraph shall apply to— as it applies to any person entrusted with the payment of any such interest, dividends or other annual payments, with the substitution in a case falling within paragraph (b) above, of references to the proceeds of the sale or other realisation for references to such interest, dividends or other annual payments. In this sub-paragraph “coupon” has the same meaning as in section 123.
was made by that authority to the best of their judgment,
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Subject to the provisions of this Schedule, in computing profitschargeable to corporation tax under Case I of Schedule D, animals kept by a farmer for the purposes of its farming shall be treated as trading stock. Animals forming part of production herds with respect to which an election under paragraph 2 below has effect shall not be so treated, but shall be treated instead in accordance with the rules set out in paragraph 3 below. An election under paragraph 2 below is referred to in this Schedule as “an election for the herd basis”.
An election for the herd basis shall apply to all production herds of a particular class kept by the farmer making the election, including herds which the farmer has ceased to keep before, or first begins to keep after, the making of the election. An election for the herd basis must be made in writing to the inspector, and must specify the class of herds to which it relates. Subject to paragraphs 6 and 12 below, an election for the herd basis made by any farmer shall be valid only if it is made — An election for the herd basis made by any farmer shall be irrevocable and, subject to paragraph 6 below, shall have effect— . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . In this paragraph— . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . “qualifying accounting period”, in relation to a person chargeable to corporation tax, means the first accounting period during the whole or part of which it kept a production herd of the class in question; “qualifying period of account”, in relation to persons in partnership, means the first period of account during the whole or part of which those persons kept such a herd; . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Where an election for the herd basis has effect, the consequences for the purposes of computing profitschargeable to corporation tax under Case I of Schedule D shall be as provided by this paragraph. The initial cost of the herd and, subject to the provisions of this paragraph as to replacements, the cost of any animal added to the herd shall not be deducted as an expense and the value of the herd shall not be brought into account. Where an animal which has theretofore been treated as part of the farmer’s trading stock is added to the herd otherwise than by way of replacement, there shall be included as a trading receipt— Where an animal (the “first animal”) forming part of the herd dies, or ceases to form part of the herd, and is replaced in the herd by another animal (the “second animal”)— Where the second animal is of better quality than the first animal, the amount deducted shall not exceed the amount which it would have been necessary to expend in order to acquire an animal of the same quality as the first animal. Where the first animal was slaughtered by the order of any Ministry, government department or local or public authority under the law relating to diseases of animals, and the second animal is of worse quality, the amount included as a trading receipt shall not exceed the amount allowable as a deduction. Where the herd is sold as a whole, and another production herd of the same class is acquired, sub-paragraphs (1) to (6) above shall apply as though there had been sold from, and replaced in, the original herd a number of animals equal to the number in the original herd or in the newly acquired herd, whichever is the less. Subject to sub-paragraph (9) below, if (either all at once or over a period not exceeding 12 months) either— any profit or loss arising from the transaction shall not be taken into account. Where within five years of the sale the seller acquires or begins to acquire another production herd of the class in question or, as the case may be, acquires or begins to acquire animals to replace the part of the herd in question— If an animal forming part of the herd is sold, and none of sub-paragraphs (4) to (9) above applies, any profit or loss arising from the transaction shall be included or deducted, as the case may be; and for the purposes of this sub-paragraph, that profit or loss shall be computed by comparing with the proceeds of sale— Where the herd is sold as a whole, and another production herd of the same class is acquired, and the number of animals in the newly acquired herd is less than the number in the original herd, then, if the difference is not substantial, sub-paragraphs (8) and (9) above shall not apply, and sub-paragraph (10) above shall apply to a number of animals in the original herd equal to the difference. The preceding provisions of this paragraph shall apply in relation to the death or destruction of animals as they apply in relation to their sale, as if any insurance or compensation moneys received by reason of the death or destruction were proceeds of sale, and any reference in this paragraph to the proceeds of sale of an animal includes a reference to any proceeds of sale of its carcase or any part of its carcase.
A farmer who, having kept a production herd of a particular class, ceases altogether to keep herds of that class for a period of at least five years shall, as respects production herds kept by the farmer after the end of that period, be treated as if the farmer had never kept any production herds of that class before the end of that period.
Where a farmer transfers to another person all or any of the animals which form part of a production herd otherwise than by way of sale or by way of sale but for a price other than that which they would have fetched if sold in the open market, and either— In this paragraph “body of persons” includes a partnership, and “control” has the meaning given by section 840.
Where the whole or a substantial part of a production herd kept by a farmer for the purposes of its farming is slaughtered by the order of any Ministry, government department or local or public authority under the law relating to the diseases of animals in such circumstances that compensation is payable in respect of it, an election for the herd basis thereupon made by the farmer in relation to that herd and any other production herds of the same class so kept by the farmer shall, subject to sub-paragraph (2) below, be valid notwithstanding that it is not made within the time required by paragraph 2(3) above. An election for the herd basis made by virtue of sub-paragraph (1) above shall only be valid if made— An election for the herd basis made by virtue of sub-paragraph (1) above shall, notwithstanding paragraph 2(4) above, have effect— In this paragraph— . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . “qualifying accounting period”, in relation to a person chargeable to corporation tax, means the first accounting period in which the compensation is relevant; “qualifying period of account”, in relation to persons in partnership, means the first period of account in which the compensation is relevant; . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . For the purposes of this paragraph, compensation shall be deemed to be relevant in any period if, but only if, it falls (or would but for an election under this paragraph fall) to be taken into account as a trading receipt in computing the profits or losses of that or an earlier period.
Nothing in this Schedule applies to any animals kept wholly or mainly for the work they do in connection with the carrying on of the farming.
In this Schedule “herd” includes a flock, and any other collection of animals however named. For the purposes of this Schedule, immature animals kept in a herd shall not be treated as forming part of the herd unless— and references in this Schedule to herds shall be construed accordingly. References in this Schedule to an animal being added to a herd include references to an immature animal which is kept in the herd becoming a mature animal except that not more immature animals shall be treated as forming part of a herd than are required to prevent a fall in the numbers of the herd. Female animals shall be treated for the purposes of this Schedule as becoming mature when they produce their first young. In this Schedule “a production herd” means, in relation to a farmer, a herd of animals of the same species (irrespective of breed) kept by the farmer wholly or mainly for the sake of the products which they produce for the farmer to sell, being products obtainable from the living animal. For the purposes of this Schedule, production herds kept by a farmer shall be deemed to be of the same class if, and only if, all the animals kept in the herds are of the same species (irrespective of breed) and the products produced for the farmer to sell for the sake of which (either wholly or mainly) the herds are kept by the farmer are of the same kinds in the case of all the herds; and elections for the herd basis shall be framed accordingly. Any reference in this Schedule to profits chargeable to corporation tax under Schedule D includes a reference to profits which would be so chargeable if there were any such profits for the accounting period in question.
The preceding provisions of this Schedule shall, with the necessary adaptations, apply in relation to trades other than farming, and trades consisting only in part of farming as they apply in relation to farming, and references to farmers shall be construed accordingly. Those provisions shall (both in relation to farming and in relation to other trades) apply in relation to living creatures other than animals as they apply in relation to animals. Laying birds shall be treated for the purposes of this Schedule as becoming mature when they first lay. The provisions of this Schedule shall (both in relation to farming and in relation to other trades) apply, with the necessary adaptations — Nothing in this Schedule shall apply in relation to any animal or other creature kept wholly or mainly for public exhibition or for racing or other competitive purposes.
Where an election for the herd basis is made, every person carrying on any farming or other trade affected by the election shall, if required to do so by notice from the inspector, make and deliver to the inspector, within the time specified in the notice, such returns as to, and as to the products of, the animals or other creatures kept by him for the purposes of the trade as may be required by the notice.
Where an election for the herd basis has effect for any accounting period after an assessment for that period has become final and conclusive, any such assessment or, on a claim therefor, repayment of tax shall be made as may be necessary to give effect to the election.
The validity of an election for the herd basis in force immediately before the commencement of this Schedule and made in pursuance of— shall not be affected by the repeal of those sections by this Act.
section 35 of the Finance Act 1973 on or after 25th July 1973 and before 6th April 1976, or
section 48(6) to (9) of the Finance Act 1984,
Cylinder capacity of car in cubic centimetres Age of car at end of relevant year of assessment Under 4 years 4 years or more 1,400 or less £2,310 £1,580 More than 1,400 but not more than 2,000 £2,990 £2,030 More than 2,000 £4,800 £3,220 Original market value of car Age of car at end of relevant year of assessment Under 4 years 4 years or more Less than £6,000 £2,310 £1,580 £6,000 or more but less than £8,500 £2,990 £2,030 £8,500 or more but not more than £19,250 £4,800 £3,220 Original market value of car Age of car at end of relevant year of assessment Under 4 years 4 years or more More than £19,250 but not more than £29,000 £6,210 £4,180 More than £29,000 £10,040 £6,660
The cash equivalent of the benefit is the appropriate percentage for the year of the price of the car as regards the year. This is subject to paragraphs 6 and 7 below (reductions for periods when car unavailable and payments for use of car).
The appropriate percentage for the year is determined in accordance with paragraphs 3 to 5G below.
This paragraph applies where— In this paragraph references to “the applicable CO2 emissions figure” are— Where the applicable CO2 emissions figure does not exceed the lower threshold for the year the appropriate percentage for the year is 15% (“the basic percentage”). Where the applicable CO2 emissions figure exceeds the lower threshold for the year, the appropriate percentage for the year is whichever is the smaller of— This paragraph is subject to paragraph 5D (diesel car supplement) and any regulations under paragraph 5E (power to provide for discounts).
For the purposes of paragraph 3 above the lower threshold is ascertained from the following Table— Year of assessment Lower threshold (in g/km) 2002-03 165 2003-04 155 2004-05 and subsequent years of assessment 145 The Treasury may by order provide for a lower threshold different from that provided for in the Table in sub-paragraph (1) above to apply for years of assessment beginning on or after 6th April 2005 or such later date as may be specified in the order. For the purposes of paragraph 3 above the applicable CO2 emissions figure (if it is not a multiple of five) is rounded down to the nearest multiple of five.
is to be reduced (or, if already reduced under the foregoing paragraphs, further reduced) by the amount so paid by the employee in or in respect of the year; or
if that amount exceeds the equivalent shown in the applicable Table in Part I of this Schedule, is nil.
Where the car— then, for the purposes of paragraph 3 above, “the applicable CO2 emissions figure” is the lowest figure specified or, if there is more than one figure specified in relation to each fuel, the lowest CO2 emissions (combined) figure specified.
is first registered on or after 1st January 2000, and
is so registered on the basis of an EC certificate of conformity, or UK approval certificate, that specifies separate CO2 emissions figures in terms of grams per kilometre driven for different fuels,
Sub-paragraph (2) below applies where— If the applicable CO2 figure for the car (“the relevant car”) is more than it would have been if the car had been an equivalent manual car, paragraph 3 above shall have effect as if the applicable CO2 emissions figure in relation to the relevant car were the same as that in relation to an equivalent manual car. For this purpose “an equivalent manual car” means a car that— For the purposes of this paragraph a car has automatic transmission if— In this paragraph—
In this Schedule—
This paragraph applies where— If the car has an internal combustion engine with one or more reciprocating pistons, the appropriate percentage for the year is ascertained from the following Table— Cylinder capacity of car in cubic centimetres Appropriate percentage 1,400 or less 15% More than 1,400 but not more than 2,000 25% More than 2,000 35% For this purpose a car’s cylinder capacity is the capacity of its engine calculated as for the purposes of the Vehicle Excise and Registration Act 1994. If sub-paragraph (2) above does not apply the appropriate percentage for the year is— This paragraph is subject to paragraph 5D (diesel car supplement) and any regulations under paragraph 5E (power to provide for discounts) below.
This paragraph applies where the car— The appropriate percentage for the year is whichever is the smaller of— In sub-paragraph (1) “diesel” means any diesel fuel within the definition in Article 2 of Directive 98/70/EC of the European Parliament and of the Council. This paragraph is subject to any regulations under paragraph 5E below (power to provide for discounts).
The Treasury may by regulations provide for the value of the appropriate percentage as determined in accordance with paragraphs 2 to 5D above to be reduced by such amount as may be prescribed in the regulations, in such circumstances and subject to such conditions as may be so prescribed.
This paragraph applies where the car was first registered before 1st January 1998. Where the car has an internal combustion engine with one or more reciprocating pistons, the appropriate percentage for the year is ascertained from the following Table— Table Cylinder capacity of car in cubic centimetres Appropriate percentage 1,400 or less 15% More than 1,400 but not more than 2,000 22% More than 2,000 32% For this purpose a car’s cylinder capacity is the capacity of its engine calculated as for the purposes of the Vehicle Excise and Registration Act 1994. Where sub-paragraph (2) above does not apply, the appropriate percentage for the year is—
For the purposes of this Schedule, a vehicle is not an electrically propelled vehicle unless—
it is propelled solely by electrical power, and
that power is derived from—
a source external to the vehicle, or
an electrical storage battery which is not connected to any source of power when the vehicle is in motion.
Subject to paragraph 7 below, where for any part of the year concerned the car is unavailable, the cash equivalent of the benefit is the amount ascertained under the preceding provisions of this Schedule multiplied by the fraction— where— A is the number of days in the year on which the car is available; and B is the number of days in the year.
Where in the year concerned the employee is required, as a condition of the car being available for his private use, to pay any amount of money (whether by way of deduction from his emoluments or otherwise) for that use, then— In sub-paragraph (1) above—
The Treasury may by regulations provide that where— this Schedule shall have effect in relation to the cars concerned subject to such modifications as are prescribed by the regulations.
a car is normally available to the employee but for a period of less than 30 days it is not available to him,
another car is made available to the employee in order to replace the car mentioned in paragraph (a) above for the whole or part of the period, and
such other conditions as may be prescribed by the regulations are fulfilled,
For the purposes of this Schedule a car is to be treated as being unavailable on any day if—
the day falls before the first day on which the car is available to the employee,
the day falls after the last day on which the car is available to the employee, or
the day falls within a period, of 30 days or more, throughout which the car is not available to the employee.
For the purposes of this Schedule a car is available to an employee at a particular time if it is then made available, by reason of his employment and without any transfer of the property in it, either to him or to others being members of his family or household. This is subject to paragraph 5A(1) above.
Subject to sub-paragraph (5) below, the benefit of a loan is obtained by reason of a person’s employment if, in relation to that person, it is of a class described in sub-paragraphs (2), (3) or (4) below. A loan made by his employer. A loan made by a company— A loan made in any case where— Sub-paragraphs (2) and (4) above do not apply to a loan made by . . . an individual . . . in the normal course of his domestic, family or personal relationships.
In paragraph 1 above—
references to a loan being made by any person include references to his assuming the rights and liabilities of the person who originally made the loan and to his arranging, guaranteeing or in any way facilitating the continuation of a loan already in existence;
“employer” includes a prospective employer; and
“company”, except in the expression “close company”, includes a partnership.
The cash equivalent for any year of the benefit obtained from a loan is— and, in a case where there are two or more loans, the aggregate of the cash equivalents (if any) of the benefit of each of those loans shall be treated for the purposes of section 160 as the cash equivalent of the benefit of all of them. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
In the absence of a requirement or election that paragraph 5 below should apply, the amount of interest at the official rate payable on a loan for any year (“the relevant year”) shall be ascertained as follows— For the purposes of this paragraph, months begin on the sixth day of the calendar month. Where an employment-related loan is replaced, directly or indirectly— sub-paragraph (1) above applies as if the replacement loan or, as the case may be, each of the replacement loans were the same loan as the first-mentioned employment-related loan. For the purposes of sub-paragraph (2) above “employment-related loan” means a loan the benefit of which is obtained by reason of a person’s employment (and “non-employment-related loan” shall be construed accordingly). The references in sub-paragraph (2) above to a further employment-related loan are to an employment-related loan the benefit of which is obtained by reason of—
take half the aggregate of—
the maximum amount of the loan outstanding on 5th April preceding the relevant year or, if it was made in that year, on the date on which it was made, and
the maximum amount of the loan outstanding on 5th April in the relevant year or, if the loan was discharged in that year, the date of discharge;
multiply that figure by the number of whole months during which the loan was outstanding in that year, and divide by 12;
multiply the result by the official rate of interest in force during the period when the loan was outstanding in that year or, if the official rate changed during that period, the average rate during that period ascertained by reference to the number of days in the period and the number of days for which each rate was in force. For the purposes of this paragraph, months begin on the sixth day of the calendar month.
For any year of assessment (“the relevant year”) the alternative method of calculation set out in this paragraph applies if— A notice containing a requirement or election for the purposes of sub-paragraph (1) above is allowed to be given at any time before the end of the period of 12 months beginning with the 31st January next following the relevant year. The alternative method of calculating the amount of interest at the official rate payable on a loan for the relevant year is as follows—
Where in any year there are two or more employees chargeable to tax in respect of the same loan— For the purposes of determining the cash equivalent in such a case, the references in paragraph 5 above to the employee shall be construed as references to all the chargeable employees.
Section 160(1) does not apply to a loan in any year—
for which interest is paid on the loan and the whole of that interest is eligible for relief, or
for which no interest is paid on the loan but had interest been paid on it at the official rate the whole of that interest would have been eligible for relief.
Where for any year interest is paid on a loan and part of that interest is eligible for relief, the calculation of the cash equivalent under Part II of this Schedule is modified as follows—
where paragraph 4 applies, the maximum amounts referred to in sub-paragraph (a)(i) and (ii) of that paragraph shall be proportionately reduced by reference to the proportion which so much of that interest paid for that year as is not eligible for relief bears to the whole of the interest so paid;
where paragraph 5 applies, the maximum amounts referred to in sub-paragraph (3)(b) of that paragraph shall be proportionately reduced by reference to the proportion which so much of the interest paid on each such amount for the day in question as is not eligible for relief bears to the whole of the interest so paid; and
the amount of interest eligible for relief shall be left out of account in ascertaining for the purposes of paragraph 3(1)(b) above the amount of interest paid for that year.
Where for any year— then the calculation of the cash equivalent under Part II of this Schedule shall be modified as provided by paragraph 8(a) or (b) above with the substitution for the references to the amounts of interest paid or not eligible for relief of references to the amounts (ascertained in accordance with the following provisions of this paragraph) which would have been paid or would not have been eligible for relief. For the purposes of paragraph 8(a) above as applied by this paragraph, the whole amount of interest at the official rate which would have been paid for any year shall be taken to be the amount payable for that year calculated in accordance with paragraph 4 above (disregarding paragraph 8); and the amount of that interest which would not have been eligible for relief shall be ascertained— For the purposes of paragraph 8(b) above as applied by this paragraph, the amount of interest which would have been paid and the amount of it which would not have been eligible for relief shall be ascertained on the assumption that interest at the official rate was paid daily throughout the year on the maximum amount outstanding on each day.
If— then, for the purposes of determining whether, had interest been paid on the employer’s loan at the official rate, the whole or any part of that interest would have been eligible for relief, sections . . . 355(1) to (4), 356 to 358 and 360 to 365 shall have effect as if the employer’s loan were made after any other loan which falls within paragraph (b) above and which, in the context of the application of sections 354(1) to (4) and 355(5), relates to the same land, caravan or house boat as does the employer’s loan. Where such a loan is made as is mentioned in paragraph (b) of sub-paragraph (1) above, sections . . . 355(1) to (4), 356 to 358 and 360 to 365 have effect in accordance with that sub-paragraph with respect to so much of the interest referred to therein as would be paid on and after the day on which the loan is made; and paragraph 9(3) above shall have effect for the purpose of determining how much of that interest would have been eligible for relief.
Where in any year a person has, alone or together with his wife or her husband, two or more loans— then, for the purpose of determining whether, had interest been paid on any of those loans, it would, in whole or in part, have been eligible for relief, it shall be assumed in the first instance that those loans constitute a single loan (equal in amount to the aggregate of the actual loans) and to the extent that, had interest been paid on that single loan, it would have been eligible for relief, the relief shall then be attributed first to the earliest of the actual loans and, if all the relief is not thereby attributed, the balance shall be attributed to the next in time and so on with any of the balance remaining until the relief is wholly attributed. Nothing in sub-paragraph (1) above affects the operation of paragraph 10 above in relation to the priority which it gives to a loan falling within sub-paragraph (1)(b) of that paragraph, but any question which of two or more loans falling within sub-paragraph (1) above is the earlier shall be determined without regard to that paragraph.
References in paragraphs 10 and 11 above to a husband or wife do not include references to a separated husband or wife.
This Part of this Schedule is subject to the provisions of Part IV below.
This Part of this Schedule applies in relation to the employee for any year for which he is, or, apart from paragraph 7, 8 or 9 above as they apply in relation to home loans, would be, liable to income tax at a rate higher than basic rate or to tax chargeable in respect of excess liability.
Where this Part of this Schedule applies in relation to the employee for any year, none of paragraphs 7, 8 and 9 above shall apply in his case in relation to any home loan in that year, except as provided by paragraph 17 below.
Where, by virtue only of paragraph 15 above, paragraph 7, 8 or 9 above does not apply in the case of the employee in relation to a home loan in any year, there shall be treated as interest eligible for relief under section 353 by virtue of section 355(1)(a) in that year— but subject to the following provisions of this paragraph. In the application of section 353 by virtue of this paragraph—
Paragraph 15 above shall not prevent paragraph 7, 8 or 9 applying in the case of the employee in any year if, apart from paragraph 15—
he would not have been charged for that year to income tax at any rate higher than basic rate in respect of any of his total income or to tax in respect of excess liability; and
the aggregate of the following amounts, that is to say— does not exceed the basic rate limit by more than the amount specified in section 161(1) for that year.
the amount of income in respect of which, apart from any home loans, he would have been charged to income tax for that year at the basic rate,
any income which is treated by virtue of section 683(1) or 684(1) as his income for that year for the purposes of excess liability, notwithstanding that he would not have been charged to tax otherwise than at the basic rate,
the cash equivalents, apart from paragraphs 7, 8 and 9 above, of the benefit of any home loans in that year, and
his nominal element (if any) for that year, reduced by an amount equal to the cash equivalents, apart from paragraph 15 above, of the benefit of any home loans in that year,
If, in the case of the employee, there is a home loan in any year and that is a year for which— then, in computing his liability to income tax for that year, the amount which falls to be treated as emoluments under section 160(1) in consequence of the operation of paragraph 15 above (or, if more than one, the aggregate of those amounts) shall be taken to be the highest part of the income charged to tax, and an amount equal to the nominal element shall be taken to be the lowest portion of that part.
he is liable to income tax at a rate higher than basic rate or to tax chargeable in respect of excess liability (whether or not by virtue of this Part of this Schedule), but
he would not have been so liable apart from any home loans, and
there is in his case a nominal element,
Interest is “eligible for relief” for the purposes of this Schedule if it is eligible for relief under section 353 or would be eligible for such relief apart from subsection (2) of that section. In the definitions of “eligible loan” and “home loan” in sub-paragraph (1) above, “loan” means any such loan as is mentioned in section 160(1), and for this purpose sub-paragraphs (4) and (5) below shall be disregarded. Where by virtue of sub-paragraph (1) above part of a loan constitutes a home loan or an eligible loan, the loan shall be treated for the purposes of this Schedule, apart from Part I, as if it were two or more separate loans, consisting respectively— and, subject to sub-paragraph (5) below, references in this Schedule, apart from Part I, to loans, home loans and eligible loans shall be construed accordingly. Except for home loans and eligible loans, all the loans between the same lender and borrower for which a cash equivalent falls to be ascertained and which are outstanding at any time, as to any amount, in any year are to be treated for the purposes of this Schedule, apart from Part I, as a single loan.
The terms of the scheme must be set out in writing.
The scheme must identify the scheme employer.
If the scheme employer does not pay the emoluments of all the employees to whom the scheme relates, the scheme must identify each of the persons who pays the emoluments of any of those employees.
The scheme must identify the undertaking to which the scheme relates and that undertaking must be one which is carried on with a view to profit. The references in sub-paragraph (1) above to an undertaking include references to part of an undertaking; and the provisions of a scheme identifying part of an undertaking must do so in such a way as to distinguish it, otherwise than by name only, from other parts of the undertaking.
The scheme must contain provisions by reference to which the employees to whom the scheme relates may be identified.
The scheme must contain provisions ensuring that no payments are made under it by reference to a profit period if the employees to whom the scheme relates constitute less than 80 per cent. of all the employees in the employment unit at the beginning of that profit period, but for this purpose any person who is at that time within paragraph 7 or 8 below shall not be counted.
The persons within this paragraph are any of the following employees who are excluded by the scheme from receiving any payment of profit-related pay— and for this purpose “relevant employer” means the scheme employer or any person who pays the emoluments of any of the employees to whom the scheme relates.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
those who have not been employed by a relevant employer for a minimum period (of not more than three years) specified in the scheme;
The scheme must identify the accounting period or periods by reference to which any profit-related pay is to be calculated.
Subject to sub-paragraphs (2) and (3) below, any such accounting period must be a period of 12 months. If the scheme is a replacement scheme, the first of two profit periods may be a period of less than 12 months, but the scheme may not provide for more than two profit periods. The scheme may make provision for a profit period to be abbreviated where registration of the scheme is cancelled with effect from a day after the beginning of the period; and a scheme making such provision may exclude the operation of all or any of the provisions of paragraph 13(4) and (5) or (as the case may be) paragraph 14(3)(b), (4) and (5) below in relation to the determination of the distributable pool for an abbreviated period. For the purposes of this paragraph, a scheme is a replacement scheme if—
The scheme must contain provisions by reference to which the aggregate sum that may be paid to employees in respect of a profit period (“the distributable pool”) may be determined.
Except where the scheme is a replacement scheme (within the meaning of paragraph 10 above), the provisions for the determination of the distributable pool must employ either the method specified in paragraph 13 below (“method A”) or the method specified in paragraph 14 below (“method B”).
Method A is that the distributable pool is equal to a,fixed percentage of the profits of the employment unit in the profit period. That percentage must be a fixed percentage specified in the scheme and, if the scheme relates to more than one period, must be the same for each period. That percentage must be such that, on the assumption as to profits mentioned in sub-paragraph (3)below, it will produce a distributable pool equal to not less than 5per cent. of the standard pay of the employment unit. The assumption referred to in sub-paragraph (2)above is that the profits in the profit period are the same as those in a base year specified in the scheme; and that base year must be a period of 12months ending at a time within the period of two years immediately preceding the profit period, or the first of the profit periods, to which the scheme relates. Notwithstanding sub-paragraph (1) above, a scheme employing method A may include provision for disregarding profits in the profit period so far as they exceed 160 per cent. (or such greater percentage as may be specified in the scheme) of— Notwithstanding sub-paragraph (1) above, a scheme employing method A may include provision to the effect that there shall be no distributable pool if the profits in the profit period are less than an amount specified in, or ascertainable by reference to, the scheme; but that amount must not exceed the profits for a base year specified in the scheme. The base year referred to in sub-paragraph (4)(a) and sub-paragraph (5) above must be a period of 12 months ending at a time within the period of two years immediately preceding the profit period, or the first of the profit period, to which the scheme relates Any provision included in a scheme by virtue of sub-paragraph (4) or (5) above may take effect either from the scheme’s first profit period or from any later profit determined in accordance with the scheme.
Method B is that the distributable pool is— The amount of the notional pool referred to in sub-paragraph (1)above must not be less than 5per cent. of the standard pay of the employment unit. The percentage referred to in sub-paragraph (1) above must be either— and the reference in paragraph (b) above to a specified fraction is a reference to a fraction of not more than one half specified in the scheme. Notwithstanding sub-paragraph (1) above, a scheme employing method B may include provision for disregarding profits in the profit period so far as they exceed 160 per cent. (or such greater percentage as may be specified in the scheme) of the profits in the preceding period of 12 months. Notwithstanding sub-paragraph (1) above, a scheme employing method B may include provision to the effect that there shall be no distributable pool if the profits in the profit period are less than an amountspecified in, or ascertainable by reference to, the scheme; but that amount must not exceed the profits in the period of 12 months immediately preceding the first or only profit period to which the scheme relates. Where by virtue of a provision of the kind described in sub-paragraph (5) above there is no distributable pool for a profit period, any comparison required in accordance with sub-paragraph (1)(b) to be made with the distributable pool for that period shall be made with what would have been the pool but for sub-paragraph (5). In this paragraph “standard pay of the employment unit” has the same meaning as it has in paragraph 13above. Any provision included in a scheme by virtue of sub-paragraph (3)(b), (4) or (5) above may take effect either from the scheme’s first profit period or from any later profit period determined in accordance with the scheme.
Where a scheme includes provision by virtue of paragraph 13(4) or (5) above the scheme must be so framed that in arriving at the profits for the base year or for the previous profit period any profit-related pay and any secondary Class I contributions in respect of it are accorded the same accountancy treatment as is accorded to any profit-related pay and any secondary Class I contributions in respect of it in arriving at the profits in the profit period. In sub-paragraph (1) above— Sub-paragraph (1) above shall apply notwithstanding anything in paragraph 19 below. Where a scheme includes provision by virtue of paragraph 13(4) above the scheme must also include provision that if the pay for the profit period is less than the pay for the base year or for the previous profit period (as the case may be) the percentage to be applied for the purposes of the provision included by virtue of paragraph 13(4) above shall be the increased percentage (instead of any other percentage). The increased percentage must be one arrived at by— For the purposes of this paragraph— and any profit-related pay shall be ignored in applying paragraph (a) above.
If the scheme is a replacement scheme (within the meaning of paragraph 10 above), it must provide for the distributable pool for a profit period to be equal to a specified percentage of the profits for the period.
Where a scheme includes provision to give effect to paragraph 14(3) above or provision by virtue of paragraph 14(4) above the scheme must be so framed that in arriving at the profits in the preceding period of 12 months any profit-related pay and any secondary Class I contributions in respect of it are accorded the same accountancy treatment as is accorded to any profit-related pay and any secondary Class I contributions in respect of it in arriving at the profits in the profit period. Where a scheme includes provision by virtue of paragraph 14(5) above the scheme must be so framed that in arriving at the profits in the relevant period of 12 months any profit-related pay and any secondary Class I contributions in respect of it are accorded the same accountancy treatment as is accorded to any profit-related pay and any secondary Class I contributions in respect of it in arriving at the profits in the profit period; and for this purpose the relevant period of 12 months is the period of 12 months immediately preceding the first or only profit period to which the scheme relates. In sub-paragraphs (1) and (2) above— Sub-paragraphs (1) and (2) above shall apply notwithstanding anything in paragraph 19 below. Where a scheme includes provision by virtue of paragraph 14(4) above the scheme must also include provision that if the pay for the profit period is less than the pay for the preceding period of 12 months the percentage to be applied for the purposes of the provision included by virtue of paragraph 14(4) above shall be the increased percentage (instead of any other percentage). The increased percentage must be one arrived at by— For the purposes of this paragraph— and any profit-related pay shall be ignored in applying paragraph (a) above.
The scheme must provide for the whole of the distributable pool to be paid to employees in the employment unit.
The scheme must make provision as to when payments will be made to employees.
The provisions of the scheme must be such that employees participate in the scheme on similar terms. For the purposes of sub-paragraph (1) above, the fact that the payments to employees vary according to the levels of their remuneration, the length of their service or similar factors shall not be regarded as meaning that they do not participate on similar terms.
The scheme must provide for the preparation of a profit and loss account in respect of— The profit and loss account must give a true and fair view of the profit or loss of the employment unit for the period to which it relates. Subject to sub-paragraph (2) above, the requirements of Schedule 4 to the Companies Act 1985 shall apply (with any necessary modifications) to a profit and loss account prepared for the purposes of the scheme as they apply to a profit and loss account of a company for a financial year. Notwithstanding the preceding provisions of this paragraph, a profit and loss account prepared for the purposes of the scheme must not make any deduction, in arriving at the profits or losses of the employment unit, for the remuneration of any person excluded from the scheme by virtue of paragraph 7 above. In sub-paragraph (4) above “remuneration”, in relation to a person, includes fees and percentages, any sums paid by way of expenses allowance (insofar as those sums are charged to income tax), any contributions paid in respect of him under any pension scheme and the estimated value of any other benefits received by him otherwise than in cash. Notwithstanding the preceding provisions of this paragraph, if the scheme so provides in relation to any of the items listed in sub-paragraph (6) below, a profit and loss account prepared for the purposes of the scheme may, in arriving at the profits or losses of the employment unit— The items referred to in sub-paragraph (5) above are— The items are— References in this paragraph to Schedule 4 to the Companies Act 1985 shall be construed, in relation to Northern Ireland, as references to Schedule 4 to the Companies (Northern Ireland) Order 1986.
The scheme must provide that, in preparing a profit and loss account for the purposes of this Schedule, no changes may be made from the accounting policies used in preparing accounts for any earlier period relevant for those purposes, or in the methods of applying those policies, if the effect of the changes (either singly or taken together) would be that the amount of profits (or losses) differed by more than 5 per cent. from what would be that amount if no changes were made. Sub-paragraph (1) above has effect subject to paragraph 19(2) above.
The Treasury may by order amend paragraph 19 above so as to add to, delete or vary any of the items mentioned in sub-paragraph (6) of that paragraph. In this paragraph references to an order are references to an order under sub-paragraph (1) above. Subject to sub-paragraphs (4) to (8) below, any amendment or amendments made by virtue of an order shall have effect in relation to the preparation, for the purposes of a scheme, of a profit and loss account in respect of a period beginning on or after the day on which the order comes into force. Any amendment or amendments made by virtue of an order shall not have effect in relation to an existing scheme unless, before the end of the period of 6 months beginning with the day on which the order comes into force, the scheme is altered to take account of the amendment or amendments. Sub-paragraphs (6) to (8) below apply where, before the end of the period mentioned in sub-paragraph (4) above, an existing scheme is altered as mentioned in that sub-paragraph. The provision made by the scheme in compliance with paragraph 20(1) below shall not prevent a profit and loss account being prepared in accordance with the alteration. Where the distributable pool would but for this sub-paragraph be determined by reference— then, for the purposes of the determination of the pool, the amount shown in the earlier account shall be recalculated using the same method as that used to calculate the amount mentioned in paragraph (a) above. The alteration of the existing scheme shall be treated as being within subsection (8) of section 177B. An order may include such supplementary, incidental or consequential provisions as appear to the Treasury to be necessary or expedient. In this paragraph “an existing scheme”, in relation to an order, means a scheme which, immediately before the day on which the order comes into force, is a registered scheme.
This paragraph shall apply to a scheme if the employment unit is a part of an undertaking, and the scheme states that the profits or losses of the unit are for the purposes of the scheme to be taken to be equivalent to those of the whole undertaking (which must be identified by the scheme). Where this paragraph applies to a scheme, this Schedule shall have effect as if any reference to the profits or losses of the employment unit were a reference to the profits or losses of the undertakings of which it forms part.
Where paragraph 21 above applies to a scheme, the scheme must contain provisions ensuring that no payments are made under it by reference to a profit period unless, at the beginning of that profit period,— Another registered scheme shall be disregarded for the purposes of sub-paragraph (1) above— Where paragraph 21 above applies to two or more schemes relating to employment units which are parts of the same undertaking, an employee to whom another scheme relates shall not be counted for the purposes of sub-paragraph (1)(b) above in connection with more than one of those schemes.
In a case where— the scheme must contain provisions which comply with this paragraph and which apply as regards each profit period to which the scheme relates. The scheme must ensure that no payments are made under it by reference to a given profit period if the percentage mentioned in paragraph 13(1) above exceeds the permitted percentage. The scheme must ensure that the permitted percentage is a percentage found by— The scheme must ensure that the relevant year is a period of 12 months identified in the scheme and ending at a time within the period of two years immediately preceding the given profit period.
In a case where— the scheme must contain provisions which comply with this paragraph and which apply as regards each profit period to which the scheme relates. The scheme must ensure that no payments are made under it by reference to the first or only profit period to which the scheme relates if the notional pool mentioned in paragraph 14(1)(a) above exceeds the permitted limit. The scheme must also ensure that no payments are made under it by reference to a given profit period other than the first if the distributable pool for the previous profit period (mentioned in paragraph 14(1)(b) above) exceeds the permitted limit. The scheme must ensure that the permitted limit is a limit found by— The scheme must ensure that the relevant year is—
Sections 185, 186, 187.
Subject to the provisions of this Schedule, on the application of a body corporate (“the grantor”) which has established a share option scheme or a profit sharing scheme, the Board shall approve the scheme if they are satisfied that it fulfils such requirements of Part II and this Part as apply in relation to the scheme in question, and the requirements of Part III, IV or V of this Schedule; and in this Schedule— An application under sub-paragraph (1) above shall be made in writing and contain such particulars and be supported by such evidence as the Board may require. Where the grantor has control of another company or companies, the scheme may be expressed to extend to all or any of the companies of which it has control and in this Schedule a scheme which is expressed so to extend is referred to as a “group scheme”. In relation to a group scheme the expression “participating company” means the grantor or any other company to which for the time being the scheme is expressed to extend.
The Board shall not approve a scheme under this Schedule if it appears to them that it contains features which are neither essential nor reasonably incidental to the purpose of providing for employees and directors benefits in the nature of rights to acquire shares or, in the case of a profit sharing scheme, in the nature of interests in shares. A profit sharing scheme shall not be approved under paragraph 1 above unless the Board are satisfied that, whether under the terms of the scheme or otherwise, every participant in the scheme is bound in contract with the grantor— The Board shall not approve a profit sharing scheme unless they are satisfied— For the purposes of sub-paragraph (2A) above “arrangements” includes any scheme, agreement or understanding, whether or not legally enforceable. The Board must be satisfied in the case of a savings-related share option scheme or a profit sharing scheme— For the purposes of sub-paragraph (3) above “a group of companies” means a company and any other companies of which it has control.
If, at any time after the Board have approved a share option scheme, any of the relevant requirements ceases to be satisfied or the grantor fails to provide information requested by the Board under paragraph 6 below, the Board may withdraw the approval with effect from that time or such later time as the Board may specify; but where rights obtained under a savings-related share option scheme before the withdrawal of approval from the scheme under this paragraph are exercised after the withdrawal, section 185(3) shall apply in respect of the exercise as if the scheme were still approved. If at any time after the Board have approved a profit sharing scheme— the Board may, subject to sub-paragraph (3) below, withdraw the approval with effect from that time or from such later time as the Board may specify. It shall not be a ground for withdrawal of approval of a profit sharing scheme that shares which have been newly issued receive, in respect of dividends payable with respect to a period beginning before the date on which the shares were issued, treatment which is less favourable than that accorded to shares issued before that date. For the purposes of sub-paragraph (2)(f) above the reference to persons having had free shares appropriated to them includes persons who would have had free shares appropriated to them but for their failure to obtain a performance allowance (within the meaning of paragraph 25 of Schedule 8 to the Finance Act 2000). In sub-paragraph (2)(f) and (4) above— For the purposes of sub-paragraph (5) above “connected company” means—
If an alteration is made in the scheme at any time after the Board have approved the scheme, the approval shall not have effect after the date of the alteration unless the Board have approved the alteration.
If aggrieved— the grantor may, by notice given to the Board within 30 days from the date on which it is notified of the Board’s decision, require the matter to be determined by the Special Commissioners, and the Special Commissioners shall hear and determine the matter in like manner as an appeal.
in any case, by the failure of the Board to approve the scheme or to approve an alteration in the scheme or by the withdrawal of approval; or
in the case of a savings-related share option scheme, by the failure of the Board to decide that a condition subject to which the approval has been given is satisfied; or
in the case of a profit sharing scheme, by the failure of the Board to approve an alteration in the terms of the trust referred to in paragraph 30(1)(c) below;
The Board may by notice require any person to furnish them, within such time as the Board may direct (not being less than 30 days), with such information as the Board think necessary for the performance of their functions under the relevant provisions and as the person to whom the notice is addressed has or can reasonably obtain, including in particular information—
to enable the Board to determine—
whether to approve a scheme or withdraw an approval already given; or
the liability to tax, including capital gains tax, of any person who has participated in a scheme; and
in relation to the administration of a scheme and any alteration of the terms of a scheme.
The provisions of this Part apply in relation to all schemes unless otherwise stated.
The scheme must not provide for any person to be eligible to participate in it, that is to say, to obtain and exercise rights under it, or in the case of a profit sharing scheme to have shares appropriated to him, at any time when he has, or has within the preceding 12 months had, a material interest in a close company which is— In determining whether a company is a close company for the purposes of this paragraph, sections 414(1)(a) and 415 shall be disregarded.
a company shares in which, in the case of a profit sharing scheme, are to be appropriated or, in the case of a share option scheme, may be acquired pursuant to the exercise of rights obtained under the scheme; or
a company which has control of such a company or is a member of a consortium which owns such a company.
A share option scheme must provide for directors and employees to obtain rights to acquire shares (“scheme shares”) which satisfy the requirements of paragraphs 10 to 14 below (disregarding paragraph 11A). In the case of a profit sharing scheme, the shares to be acquired by the trustees as mentioned in paragraph 30 below (“scheme shares”) must satisfy the requirements of paragraphs 10 to 12 and 14 below.
In the case of a savings-related share option scheme or a profit sharing scheme, the scheme must specify what age is to be the specified age for the purposes of the scheme. The age specified—
Scheme shares must form part of the ordinary share capital of—
the grantor; or
a company which has control of the grantor; or
a company which either is, or has control of, a company which—
is a member of a consortium owning either the grantor or a company having control of the grantor; . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Scheme shares must be—
shares of a class listed on a recognised stock exchange; or
shares in a company which is not under the control of another company; or
shares in a company which is under the control of a company (other than a company which is, or would if resident in the United Kingdom be, a close company), whose shares are listed on a recognised stock exchange.
Scheme shares must be— Sub-paragraph (b) above does not apply, in the case of a profit sharing scheme, in relation to shares in a workers’ cooperative. Subject to sub-paragraph (1B) below, scheme shares may be subject to— In the case of a profit sharing scheme, scheme shares must not be subject to any restrictions affecting the rights attaching to those shares which relate to— other than restrictions which attach to all other ordinary shares in the same company. Except as provided below, the shares may be subject to a restriction imposed by the company’s articles of association— A restriction is not authorised by sub-paragraph (2) above unless— In the case of a profit sharing scheme, except in relation to redeemable shares in a workers’ cooperative, nothing in sub-paragraph (2) above authorises a restriction which would require a person, before the release date, to dispose of his beneficial interest in shares the ownership of which has not been transferred to him.
In determining, in the case of a share option scheme, for the purposes of paragraph 12(1)(c) above whether scheme shares which are or are to be acquired by any person are subject to any restrictions, there shall be regarded as a restriction attaching to the shares any contract, agreement, arrangement or condition by which his freedom to dispose of the shares or of any interest in them or of the proceeds of their sale or to exercise any right conferred by them is restricted or by which such a disposal or exercise may result in any disadvantage to him or to a person connected with him. Sub-paragraph (1) does not apply to so much of any contract, agreement, arrangement or condition as contains provisions similar in purpose and effect to any of the provisions of the Model Rules set out in the Model Code for Securities Transactions by Directors of Listed Companies issued by the Stock Exchange in November 1984. In the case of schemes other than savings-related share option schemes, sub-paragraph (1) above does not apply in relation to any terms of a loan making provision about how it is to be repaid or the security to be given for it.
In the case of a profit sharing scheme, scheme shares must not be shares— For the purposes of this paragraph a company is “an employer company” if— For the purposes of sub-paragraph (2)(b)(ii) above a company shall be treated as associated with another company if both companies are under the control of the same person or persons. For the purposes of sub-paragraphs (1) to (3) above— For the purposes of this paragraph the question whether a person controls a company shall be determined in accordance with section 416(2) to (6).
Except where scheme shares are shares in a company the ordinary share capital of which consists of shares of one class only, the majority of the issued shares of the same class either must be employee-control shares or must be held by persons other than— In its application to a profit sharing scheme, sub-paragraph (1) above shall have effect with the addition after the words “ordinary share capital of which” of the words “ at the time of the acquisition of the shares by the trustees ”. For the purposes of this paragraph, shares in a company are employee-control shares if—
Except in the case of a profit sharing scheme, the scheme may provide that if any company (“the acquiring company”)— any participant in the scheme may at any time within the appropriate period, by agreement with the acquiring company, release his rights under the scheme (in this paragraph referred to as “the old rights”) in consideration of the grant to him of rights (in this paragraph referred to as “the new rights”) which are equivalent to the old rights but relate to shares in a different company (whether the acquiring company itself or some other company falling within paragraph 10(b) or (c) above). In sub-paragraph (1) above “the appropriate period” means— The new rights shall not be regarded for the purposes of this paragraph as equivalent to the old rights unless— Where any new rights are granted pursuant to a provision included in a scheme by virtue of this paragraph they shall be regarded— as having been granted at the time when the corresponding old rights were granted. Where a scheme which was approved before 1st August 1987 is altered before 1st August 1989 so as to include such a provision as is mentioned above (“an exchange provision”), the scheme as altered may by virtue of this and the following sub-paragraphs apply that provision to rights obtained under the scheme before the date on which the alteration takes effect. If an exchange provision is applied as mentioned in sub-paragraph (5) above in a case where, on or after 17th March 1987 but before the date on which the alteration takes effect, an event has occurred by reason of which a person holding rights under the scheme would be able to take advantage of the exchange provision— The application of an exchange provision as mentioned in sub-paragraph (5) or (6) above shall not itself be regarded for the purposes of this Schedule as the acquisition of a right. Sub-paragraphs (5) and (6) above have effect subject to paragraph 4 above.
The scheme must provide for the scheme shares to be paid for with moneys not exceeding the amount of repayments made and any interest paid to them under a certified contractual savings scheme which has been approved by the Board for the purposes of this Schedule. Where the Board are satisfied that— then, repayments and interest paid under the certified contractual savings scheme shall be treated as repayments and interest paid, under a scheme approved by the Board for the purposes of this Schedule under sub-paragraph (1) above, and, accordingly, may be used for the purchase of shares under a savings-related share option scheme approved under this Schedule. The repayments and interest to which sub-paragraph (2) above applies shall not exceed the repayments and interest to which the participant would have been entitled if the terms of the scheme had corresponded to those of a certified contractual savings scheme approved by the Board under sub-paragraph (1) above.
Subject to paragraphs 18 to 21 below, the rights obtained under the scheme must not be capable of being exercised before the bonus date, that is to say, the date on which repayments under the certified contractual savings scheme are due; and for the purposes of this paragraph and paragraph 16 above—
repayments under a certified contractual savings scheme may be taken as including or as not including a bonus;
the time when repayments are due shall be, where repayments are taken as including the maximum bonus, the earliest date on which the maximum bonus is payable and, in any other case, the earliest date on which a bonus is payable under the scheme; and
the question what is to be taken as so included must be required to be determined at the time when rights under the scheme are obtained.
The scheme must provide that if a person who has obtained rights under the scheme dies before the bonus date the rights must be exercised, if at all, within 12 months after the date of his death and if he dies within six months after the bonus date the rights may be exercised within 12 months after the bonus date.
The scheme must provide that if a person who has obtained rights under it ceases to hold the office or employment by virtue of which he is eligible to participate in the scheme by reason of— then the rights must be exercised, if at all, within six months of his so ceasing and, if he so ceases for any other reason within three years of obtaining the rights, they may not be exercised at all except pursuant to such a provision of the scheme as is mentioned in paragraph 21(1)(e) below; and in relation to the case where he so ceases for any other reason more than three years after obtaining the rights the scheme must either provide that the rights may not be exercised or that they must be exercised, if at all, within six months of his so ceasing.
injury or disability or redundancy within the meaning of the Employment Rights Act 1996; or
retirement on reaching the specified age or any other age at which he is bound to retire in accordance with the terms of his contract of employment,
The scheme must provide that where a person who has obtained rights under it continues to hold the office or employment by virtue of which he is eligible to participate in the scheme after the date on which he reaches the specified age, he may exercise the rights within six months of that date.
Except as provided in paragraph 18 above, rights obtained by a person under the scheme must not be capable—
of being transferred by him, or
of being exercised later than six months after the bonus date.
No person shall be treated for the purposes of paragraph 19 or 21(1)(e) above as ceasing to hold an office or employment by virtue of which he is eligible to participate in the scheme until he ceases to hold an office or employment in the grantor or in any associated company or company of which the grantor has control.
The scheme must provide for a person’s contributions under the certified contractual savings scheme to be of such amount as to secure as nearly as may be repayment of an amount equal to that for which shares may be acquired in pursuance of rights obtained under the scheme; and for this purpose the amount of repayment under the certified contractual savings scheme shall be determined as mentioned in paragraph 17 above. The scheme must not— The Treasury may by order amend sub-paragraph (2) above by substituting for any amount for the time being specified in that sub-paragraph such amount as may be specified in the order.
The price at which scheme shares may be acquired by the exercise of a right obtained under the scheme— but the scheme may provide for such variation of the price as may be necessary to take account of any variation in the share capital of which the scheme shares form part.
must be stated at the time the right is obtained, and
must not be manifestly less than 80%. of the market value of shares of the same class at that time or, if the Board and the grantor agree in writing, at such earlier time or times as may be provided in the agreement,
Subject to paragraph 8 above, every person who— must be eligible to participate in the scheme, that is to say, to obtain and exercise rights under it, on similar terms, and those who do participate in the scheme must actually do so on similar terms. For the purposes of sub-paragraph (1) above, the fact that the rights to be obtained by the persons participating in a scheme vary according to the levels of their remuneration, the length of their service or similar factors shall not be regarded as meaning that they are not eligible to participate in the scheme on similar terms or do not actually do so. Except as provided by paragraph 19 above or pursuant to such a provision as is referred to in paragraph 21(1)(e) or (f) above, a person must not be eligible to participate in the scheme at any time unless he is at that time a director or employee of the grantor or, in the case of a group scheme, of a participating company.
A person must not be eligible to obtain rights under the scheme at any time unless he is at that time a full-time director or qualifying employee of the grantor or, in the case of a group scheme, of a participating company, but the scheme may provide that a person may exercise rights under it after he has ceased to be a full-time director or qualifying employee. The scheme must not permit any person obtaining rights under it to transfer any of them but may provide that, if a person who has obtained rights under it dies before exercising them, they may be exercised after, but not more than one year after, the date of his death. Where the scheme contains the provision permitted by sub-paragraph (2) above and any rights are exercised— subsection (3) of section 185 shall apply with the omission of the reference to subsection (5) of that section. In sub-paragraph (1) above “qualifying employee”, in relation to a company, means an employee of the company (other than one who is a director of the company or, in the case of a group scheme, of a participating company) . . . .
The scheme must provide that no person shall obtain rights under it which would, at the time they are obtained, cause the aggregate market value of the shares which he may acquire in pursuance of rights obtained under the scheme or under any other share option scheme, not being a savings-related share option scheme, approved under this Schedule and established by the grantor or by any associated company of the grantor (and not exercised) to exceed or further exceed £30,000. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . For the purposes of sub-paragraph (1) above, the market value of shares shall be calculated as at the time when the rights in relation to those shares were obtained or, in a case where an agreement relating to them has been made under paragraph 29 below, such earlier time or times as may be provided in the agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The price at which scheme shares may be acquired by the exercise of a right obtained under the scheme— The scheme may provide for such variation of the price at which scheme shares may be acquired as may be necessary to take account of any variation in the share capital of which the scheme shares form part. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
must be stated at the time the right is obtained, and
must not be manifestly less than the market value of shares of the same class at that time or, if the Board and the grantor agree in writing, at such earlier time or times as may be provided in the agreement, but the scheme may provide for such variation of the price as may be necessary to take account of any variation in the share capital of which the scheme shares form part.
The scheme must provide for the establishment of a body of persons resident in the United Kingdom (“the trustees”)— If at any time after the Board have approved the scheme, an alteration is made in the terms of the trust referred to in sub-paragraph (1)(c) above, the approval shall not have effect after the date of the alteration unless the Board have approved the alteration. The scheme must provide that the total of the initial market values of the shares appropriated to any one participant in a year of assessment will not exceed the relevant amount. In this Part of this Schedule “initial market value”, in relation to a participant’s shares, means the market value of those shares determined—
The trust instrument shall provide that, as soon as practicable after any shares have been appropriated to a participant, the trustees will give him notice of the appropriation—
specifying the number and description of those shares; and
stating their initial market value.
The trust instrument must contain a provision prohibiting the trustees from disposing of any shares, except as mentioned in paragraph 1(1)(a), (b) , (c) or (cc) of Schedule 10, during the period of retention (whether by transfer to the participant or otherwise). The trust instrument must contain a provision prohibiting the trustees from disposing of any shares after the end of the period of retention and before the release date except—
The trust instrument must contain a provision requiring the trustees—
subject to their obligations under paragraph 7 of Schedule 10 and to any such direction as is mentioned in paragraph 4(2) of that Schedule to pay over to the participant any money or money’s worth received by them in respect of or by reference to any of his shares other than money’s worth consisting of new shares within the meaning of paragraph 5 of that Schedule; and
to deal only pursuant to a direction given by or on behalf of the participant or any person in whom the beneficial interest in his shares is for the time being vested with any right conferred in respect of any of his shares to be allotted other shares, securities or rights of any description.
The trust instrument must impose an obligation on the trustees—
to maintain such records as may be necessary to enable the trustees to carry out their obligations under paragraph 7 of Schedule 10; and
where the participant becomes liable to income tax under Schedule E by reason of the occurrence of any event, to inform him of any facts relevant to determining that liability.
An individual shall not be eligible to have shares appropriated to him under the scheme at any time unless he is at that time or was within the preceding 18 months a director or employee of the grantor or, in the case of a group scheme, of a participating company. An individual shall not be eligible to have shares appropriated to him under the scheme at any time if in that year of assessment shares have been appropriated to him under another approved scheme established by the grantor or by—
Subject to paragraphs 8 and 35 above, every person who at any time— must then be eligible (subject to paragraphs 8 and 35 of this Schedule) to participate in the scheme on similar terms and those who do participate must actually do so on similar terms. For the purposes of sub-paragraph (1) above, the fact that the number of shares to be appropriated to the participants in a scheme varies by reference to the levels of their remuneration, the length of their service or similar factors shall not be regarded as meaning that they are not eligible to participate in the scheme on similar terms or do not actually do so.
This paragraph applies in a case where— If neither the beneficiary nor any relevant associate of his had received any benefit under the discretionary trust before 14th November 1986, then, as respects any time before that date, the trustees of the settlement concerned shall not be regarded, by reason only of the matters referred to in sub-paragraph (1) above, as having been associates (as defined in section 417(3) and (4)) of the beneficiary. If, on or after 14th November 1986— the beneficiary shall not be regarded, by reason only of the matters referred to in sub-paragraph (1) above, as having been interested in the shares or obligations of the company as mentioned in section 417(3)(c) at any time during the period of 12 months referred to in paragraph (c) above. In sub-paragraphs (2) and (3) above “relevant associate” has the meaning given to “associate” by subsection (3) of section 417 but with the omission of paragraph (c) of that subsection. Sub-paragraph (3)(a)(i) above, in its application to Scotland, shall be construed as if the words “under seal” were omitted.
For the purposes of section 187(3)(a) a right to acquire shares (however arising) shall be taken to be a right to control them. Any reference in sub-paragraph (3) below to the shares attributed to an individual is a reference to the shares which, in accordance with section 187(3)(a), fall to be brought into account in his case to determine whether their number exceeds a particular percentage of the company’s ordinary share capital. In any case where— then, in determining at any time prior to the exercise of that right whether the number of shares attributed to the individual exceeds a particular percentage of the ordinary share capital of the company, that ordinary share capital shall be taken to be increased by the number of unissued shares referred to in paragraph (b) above. This paragraph has effect as respects any time after 5th April 1987.
In applying section 187(3), as respects any time before or after the passing of this Act, there shall be disregarded—
the interest of the trustees of an approved profit sharing scheme in any shares which are held by them in accordance with the scheme and have not yet been appropriated to an individual; and
any rights exercisable by those trustees by virtue of that interest.
Where an individual has an interest in shares or obligations of the company as a beneficiary of an employee benefit trust, the trustees shall not be regarded as associates of his by reason only of that interest unless sub-paragraph (3) below applies in relation to him. In this paragraph “employee benefit trust” has the same meaning as in paragraph 7 of Schedule 8. This sub-paragraph applies in relation to an individual if at any time on or after 14th March 1989— has been the beneficial owner of, or able (directly or through the medium of other companies or by any other indirect means) to control, more than 25 per cent., or in the case of a share option scheme which is not a savings-related share option scheme more than 10 per cent., of the ordinary share capital of the company. Sub-paragraphs (9) to (12) of paragraph 7 of Schedule 8 shall apply for the purposes of this paragraph in relation to an individual as they apply for the purposes of that paragraph in relation to an employee.
Any obligation placed on the participant by virtue of paragraph 2(2) of Schedule 9 shall not prevent the participant from— No obligation placed on the participant by virtue of paragraph 2(2)(c) of Schedule 9 shall be construed as binding his personal representatives to pay any sum to the trustees. If, in breach of his obligation under paragraph 2(2)(b) of Schedule 9 a participant assigns, charges or otherwise disposes of the beneficial interest in any of his shares, then, as respects those shares, he shall be treated for the purposes of the relevant provisions as if at the time they were appropriated to him he was ineligible to participate in the scheme; and paragraph 6 below shall apply accordingly. In sub-paragraph (1)(cc) above “qualifying corporate bond” shall be construed in accordance with section 117 of the 1992 Act.
For the purposes of any of the relevant provisions, “the period of retention”, in relation to any of a participant’s shares, means the period beginning on the date on which they are appropriated to him and ending on the second anniversary of that date or, if it is earlier— For the purposes of sub-paragraph (a) above, in the case of a group scheme, the participant shall not be treated as ceasing to be a director or employee of a participating company until such time as he is no longer a director or employee of any of the participating companies. In this paragraph, the reference to the relevant age is a reference, in the case of a scheme approved before the day on which the Finance Act 1991 was passed, in the case of a man, to the age of 65, and in the case of a woman, to the age of 60 and, in the case of a scheme approved on or after that day, to the specified age.
the date on which the participant ceases to be a director or employee of the grantor or, in the case of a group scheme, a participating company by reason of injury or disability or on account of his being dismissed by reason of redundancy, within the meaning of the Employment Rights Act 1996 or the Employment Rights (Northern Ireland) Order 1996; or
the date on which the participant reaches the relevant age; or
the date of the participant’s death; or
in a case where the participant’s shares are redeemable shares in a workers’ cooperative, the date on which the participant ceases to be employed by, or by a subsidiary of, the cooperative.
For the purposes of any of the relevant provisions under which an amount counts as employment income of an individual by reason of the occurrence of an event relating to any of his shares, the “appropriate percentage” in relation to those shares is 100 per cent., unless sub-paragraph (2) below applies. Where the individual— before the event occurs, the “appropriate percentage” is 50 per cent., unless paragraph 6(4) below applies.
if the event occurs before the fourth anniversary of the date on which the shares were appropriated to the participant and paragraph (c) below does not apply, the appropriate percentage is 100 per cent.;
if the event occurs on or after the fourth anniversary and before the fifth anniversary of the date on which the shares were appropriated to the participant and paragraph (c) below does not apply, the appropriate percentage is 75 per cent.;
if the participant— and the event occurs before the fifth anniversary of the date on which the shares were appropriated to him, the appropriate percentage is 50 per cent.
ceases to be a director or employee of the grantor or, in the case of a group scheme, a participating company as mentioned in paragraph 2(a) above, or
reaches pensionable age,
In paragraph 3 above the reference to the relevant age shall be construed as follows. Where the scheme is approved before 25th July 1991 and the event occurs before 30th November 1993, the relevant age is Where— the relevant age is 60. Where— the relevant age is in the case of a man, 65, and in the case of a woman, 60. Where the scheme is approved on or after 25th July 1991, the relevant age is the specified age.
Money or money’s worth is not a capital receipt for the purposes of section 186(3) if or, as the case may be, to the extent that— If, pursuant to a direction given by or on behalf of the participant or any person in whom the beneficial interest in the participant’s shares is for the time being vested, the trustees— the money or money’s worth which constitutes the proceeds of that disposal is not a capital receipt for the purposes of section 186(3). If, apart from this sub-paragraph, the amount or value of a capital receipt would exceed the sum which, immediately before the entitlement to the receipt arose, was the locked-in value of the shares to which the receipt is referable, section 186(3) shall have effect as if the amount or value of the receipt were equal to that locked-in value. Section 186(3) does not apply in relation to a capital receipt if the entitlement to it arises after the death of the participant to whose shares it is referable.
This paragraph applies where there occurs in relation to any of a participant’s shares (“the original holding”) a transaction which results in a new holding being equated with the original holding for the purposes of capital gains tax; and any such transaction is referred to below as a “company reconstruction”. Where an issue of shares of any of the following descriptions (in respect of which a charge to income tax arises) is made as part of a company reconstruction, those shares shall be treated for the purposes of this paragraph as not forming part of the new holding, that is to say— In this paragraph— Subject to the following provisions of this paragraph, in relation to a profit sharing scheme, references in the relevant provisions to a participant’s shares shall be construed, after the time of the company reconstruction, as being or, as the case may be, as including references to any new shares, and for the purposes of the relevant provisions— In relation to shares comprised in the new holding, section 186(5) shall apply as if the references in that subsection to the initial market value of the shares were references to their locked-in value immediately after the company reconstruction, which shall be determined as follows— For the purposes of the relevant provisions if, as part of a company reconstruction, trustees become entitled to a capital receipt, their entitlement to the capital receipt shall be taken to arise before the new holding comes into being and, for the purposes of sub-paragraph (5) above, before the date on which the locked-in value of any shares comprised in the original holding falls to be ascertained. In the context of a new holding, any reference in this paragraph to shares includes securities and rights of any description which form part of the new holding for the purposes of Chapter II of Part IV of the 1992 Act.
Paragraph 5(2) to (6) above apply where there occurs in relation to any of a participant’s shares (“the original holding”) a relevant transaction which would result in a new holding being equated with the original holding for the purposes of capital gains tax, were it not for the fact that what would be the new holding consists of or includes a qualifying corporate bond; and “relevant transaction” here means a transaction mentioned in Chapter II of Part IV of the 1992 Act. In paragraph 5(2) to (6) above as applied by this paragraph— In sub-paragraph (1) above “qualifying corporate bond” shall be construed in accordance with section 117 of the 1992 Act.
This paragraph applies in any case where— In this paragraph— For the purposes of sub-paragraph (1)(a) above, if a number of shares is appropriated to an individual at the same time under two or more approved profit sharing schemes, the same proportion of the shares appropriated at that time under each scheme shall be regarded as being appropriated before the relevant amount is exceeded. For the purposes of any of the relevant provisions under which an amount counts as employment income of an individual by reason of the occurrence of an event relating to any of his shares— Excess or unauthorised shares which have not been disposed of before the release date or, if it is earlier, the date of the death of the participant whose shares they are, shall be treated for the purposes of the relevant provisions as having been disposed of by the trustees immediately before the release date or, as the case may require, the date of the participant’s death, for a consideration equal to their market value at that time. The locked-in value at any time of any excess or unauthorised shares shall be their market value at that time. Where there has been a company reconstruction to which paragraph 5 above applies, a new share (within the meaning of that paragraph) shall be treated as an excess or unauthorised share if the corresponding share (within the meaning of that paragraph) or, if there was more than one corresponding share, each of them was an excess or unauthorised share.
Subject to sub-paragraphs (4) and (5) below, where the trustees of an approved profit sharing scheme receive a sum of money which constitutes (or forms part of)— in respect of which an amount counts as employment income of the participant in accordance with section 186, the trustees shall pay out of that sum of money to the company specified in sub-paragraph (3) below an amount equal to that on which income tax is so payable; and the company shall then pay over that amount to the participant but in so doing shall make a P.A.Y.E. deduction. Where a participant disposes of his beneficial interest in any of his shares to the trustees of the scheme and the trustees are deemed by virtue of section 186(9) to have disposed of the shares in question, this paragraph shall apply as if the consideration payable by the trustees to the participant on the disposal had been received by the trustees as the proceeds of disposal of shares falling within section 186(4). The company to which the payment mentioned in sub-paragraph (1) above is to be made is the company— and if there is more than one company which falls within paragraphs (a) and (b) above, such one of those companies as the Board may direct. Where the trustees of an approved profit sharing scheme receive a sum of money to which sub-paragraph (1) above applies but— then, in paying over to the participant the proceeds of the disposal or the capital receipt, the trustees shall make a P.A.Y.E. deduction in respect of an amount equal to that on which income tax is payable as mentioned in sub-paragraph (1) above as if the participant were a former employee of the trustees. Where the trustees of an approved profit sharing scheme receive a sum of money to which sub-paragraph (1) above applies and the Board direct that this sub-paragraph shall apply— but no such direction shall be given except with the consent of the trustees, the company or companies (if any) specified in sub-paragraph (3) above and the company specified in the direction. Where, in accordance with this paragraph any person is required to make a P.A.Y.E. deduction in respect of any amount, that amount shall be treated for the purposes of section 684 of ITEPA 2003 (PAYE regulations) and PAYE regulations as PAYE income payable to the recipient, and, accordingly, such deduction shall be made as is required by those regulations. Where, in connection with a transfer of a participant’s shares to which sub-paragraph (c) of paragraph 2(2) of Schedule 9 applies, the trustees receive such a sum as is referred to in that sub-paragraph, that sum shall be treated for the purposes of the Income Tax Acts— Unless the Board otherwise direct, in the application of this paragraph to a sum of money which constitutes or forms part of the proceeds of a disposal of, or a capital receipt referable to, excess or unauthorised shares (within the meaning of paragraph 6 above), the trustees shall determine the amount of the payment mentioned in sub-paragraph (1) above or, as the case may be, the amount of the P.A.Y.E. deduction to be made under sub-paragraph (4) above as if the shares were not excess or unauthorised shares.
The provisions of this Schedule supplement the provisions of section 148 with respect to the taxation of payments and other benefits received in connection with—
the termination of a person’s employment, or
any change in the duties of or emoluments from a person’s employment.
Section 148 applies to all payments and other benefits received directly or indirectly in consideration or in consequence of, or otherwise in connection with, the termination or change— For the purposes of section 148 a payment or other benefit which is provided on behalf of, or to the order of, the employee or former employee is treated as received by the employee or former employee.
Tax is not charged under section 148 on a payment or other benefit provided—
in connection with the termination of the employment by the death of the employee, or
on account of injury to or disability of the employee.
Tax is not charged under section 148 on a payment or other benefit provided in pursuance of any such scheme or fund as was described in section 221(1) and (2) of the 1970 Act or as is described in section 596(1) (approved retirement benefits schemes, etc) in the following cases. The first case is where the payment or other benefit is by way of compensation for loss of employment, or for loss or diminution of emoluments, and the loss or diminution is due to ill-health. The second case is where the payment or other benefit is properly regarded as earned by past service.
Tax is not charged under section 148 on a payment or other benefit provided—
under a Royal Warrant, Queen’s Order or Order in Council relating to members of Her Majesty’s forces, or
by way of payment in commutation of annual or other periodical payments authorised by any such Warrant or Order.
Tax is not charged under section 148 on— In sub-paragraph (1) references to an overseas territory, to the government of such a territory, and to employment in the public service of such a territory have the same meaning as in section 615.
This pargraph specifies how the £30,000 threshold in section 148(1) applies. Tax is charged only on the excess over £30,000, but the threshold applies to the aggregate amount of payments and other benefits provided in respect of the same person— If payments and other benefits are received in different tax years, the £30,000 is set against the amount of payments and other benefits received in earlier years before those of later years. If more than one payment or other benefit is received in a tax year in which the threshold is exceeded—
For the purposes of paragraph 7(2)(b) employers are associated if on the date which is the relevant date in relation to any of the payments or other benefits— In sub-paragraph (1)—
there shall be included any balancing charge to which the holder of the office or employment is liable under section 33 of the 1968 Act or under Chapter I of Part III of the Finance Act 1971 (“the 1971 Act”), and
there shall be deducted any allowances under Chapter II of Part I of the 1968 Act or Chapter I of Part III of the 1971 Act, and any allowances for expenses under section 198 or 201, to which he is entitled,
If the employee’s service in the employment in respect of which the payment or other benefit is received included foreign service, then— “Foreign service" for this purpose means—
Tax is not charged under section 148 if foreign service comprises—
three-quarters or more of the whole period of service down to the relevant date, or
in the case of the year 1956-57 or any subsequent chargeable period, under Case I of Schedule E;
in the case of any preceding year of assessment, under Schedule E; or
if the period of service down to the relevant date exceeded ten years, the whole of the last ten years, or
if the period of service down to the relevant date exceeded 20 years, one-half or more of that period, including any ten of the last 20 years.
Where there is foreign service and paragraph 10 does not apply, the person chargeable to tax under section 148 may claim relief in the form of a proportionate reduction of the amount charged to tax. The amount charged to tax means the amount after any reduction under paragraph 7 (application of £30,000 threshold). The proportion is that which the length of the foreign service bears to the whole length of service in the employment before the relevant date. A person is not entitled to relief under this paragraph in so far as the relief, together with any personal relief allowed to him, would reduce the amount of income on which he is chargeable below the amount of income tax which he is entitled— For the purposes of sub-paragraph (3)—
For the purposes of section 148, the amount of a payment or other benefit is taken to be— The cash equivalent of a non-cash benefit is whichever is the greater of—
This paragraph applies where a person is chargeable to tax under section 148 in any tax year on an amount which consists of or includes an amount representing the cash equivalent of the benefit of a loan determined in accordance with Part II of Schedule 7. Where this paragraph applies, the person chargeable is treated as having paid interest on the loan of the same amount as the cash equivalent so determined. This is subject to application of the £30,000 threshold: see sub-paragraph (5) below. The interest is treated as paid for all the purposes of the Tax Acts (other than section 148 and this Schedule), but not so as to make it— The interest is treated as accruing during and paid at the end of the tax year or, if different, the period in the tax year during which the loan is outstanding. No amount of interest is treated as paid under this paragraph in a tax year in which, after applying the £30,000 threshold in section 148(1), no amount falls to be charged to tax. If in any tax year the effect of the £30,000 threshold is that some but not all of the amount otherwise chargeable is charged to tax, the amount of interest treated as paid is limited to the amount charged to tax.
Tax under section 148 is charged on the employee or former employee, whether or not he is the recipient of the payment or other benefit. After the death of the employee or former employee, any amount chargeable to tax under section 148 shall be assessed and charged upon his personal representatives and is a debt due from and payable out of the estate.
Provision may be made by regulations under section 203(2) requiring an employer or former employer to provide such information as may be prescribed by the regulations, within such time as may be so prescribed, as to payments or other benefits provided or to be provided in connection with the termination of a person’s employment or a change in the duties of or emoluments from a person’s employment.
In this Schedule—
Provided that, where the appropriate fraction and the appropriate multiple are not the same for each of the payments, the calculations of relief under paragraph 4 above shall be made separately in relation to each payment or payments having a different appropriate fraction and multiple, and in any such calculation— and the relief to be allowed shall be the sum of the reliefs so calculated in respect of the payments respectively.
and as if any emoluments of any of those offices or employments were emoluments of the same office or employment.
The following paragraph shall be inserted after paragraph 8—
This Schedule shall have effect for the purpose of supplementing the provisions of section 192A.
This paragraph has effect where a deduction falls to be allowed under section 192A in respect of the emoluments from an employment (“the relevant employment”) for a year of assessment in which the duties of— are not performed wholly outside the United Kingdom. The amount of the emoluments for the year of assessment from the relevant employment in respect of which such a deduction is allowed shall not exceed such proportion of the emoluments for that year from the relevant employment and the other employment or employments (if any) as is . . . reasonable having regard to the nature of and time devoted to the duties performed outside and in the United Kingdom respectively and to all other relevant circumstances. For the purposes of this paragraph an employment is associated with another if they are with the same person or with persons associated with each other and— but paragraph (b) above shall not be construed as requiring an individual to be treated in any circumstances as under the control of another person.
For the purposes of section 192A and this Schedule the amount of the emoluments for a year of assessment from any employment shall be taken to be the amount remaining after any capital allowance and after any deductions under section 192(3), 193(4), 194(1), 195(7), 197AG, 198, 199, 201, 332, 592 or 594.
For the purposes of section 192A a qualifying period is a period of consecutive days which either— Where, in the case of any person, a period consisting entirely of days of absence from the United Kingdom (“the relevant period”) comes to an end and there have previously been one or more qualifying periods, the relevant period and the (or, if more than one, the last) qualifying period together with the intervening days between those periods shall be treated as a single qualifying period provided that— . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . For the purposes of section 192A the emoluments from an employment attributable to a qualifying period include any emoluments from that employment for a period of leave immediately following that period but not so as to make any emoluments for one year of assessment emoluments for another.
For the purposes of this Schedule a person shall not be regarded as absent from the United Kingdom on any day unless he is so absent at the end of it.
Notwithstanding section 132(4)(b), there shall be treated for the purposes of section 192A and this Schedule as performed outside the United Kingdom any duties which a person performs on a ship (within the meaning of section 192A) engaged on— and for the purposes of this paragraph any area designated under section 1(7) of the Continental Shelf Act 1964 shall be treated as part of the United Kingdom.
a voyage beginning or ending outside the United Kingdom (but exclusive of any part of it which begins and ends in the United Kingdom); or
any part beginning or ending outside the United Kingdom of a voyage which begins and ends in the United Kingdom;
Where an employment is in substance one the duties of which fall in the year of assessment to be performed in the United Kingdom, then, for the purposes of section 192A, there shall be treated as so performed any duties performed outside the United Kingdom the performance of which is merely incidental to the performance of other duties in the United Kingdom.
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A company shall for each of its accounting periods make, in accordance with this Schedule, returns to the collector of— . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A return shall be made for— A return for any period for which a return is required to be made under this paragraph (“a return period”) shall be made within 14 days from the end of that period. Subject to paragraphs 4(2), . . . and 7(3) below, no return need be made under this Schedule by a company for any period in which it has—
Subject to paragraph 7(2) below, the return made by a company for any return period shall show— The return shall specify— For the purposes of paragraph (b) of sub-paragraph (1) above the amount of franked investment income received by a company in a return period shall be treated as including the excess, if any, of— over the amount of any franked payments made by the company in that accounting period but before the beginning of the return period. For the purposes of paragraph (c) of sub-paragraph (1) above advance corporation tax shall be payable in respect of franked payments made in a return period if— and the amount of that tax shall be calculated in accordance with sub-paragraph (4A) below. The tax mentioned in sub-paragraph (4) above shall be calculated at a rate equal to nine-tenths of the rate of advance corporation tax in force for the financial year in which the return period ends— . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subject to paragraph 7(2) below, advance corporation tax in respect of franked payments . . . required to be included in a return under this Schedule shall be due at the time by which the return for that period is to be made, and advance corporation tax so due shall be payable without the making of any assessment. Advance corporation tax which has become so due may be assessed on the company (whether or not it has been paid when the assessment is made) if that tax, or any part of it, is not paid on or before the due date. If it appears to an officer of the Board that there is a franked payment . . . which ought to have been and has not been included in a return, or if an officer of the Board is of the opinion that a return is incorrect, any such officer may make an assessment on the company to the best of his judgment; and any advance corporation tax due under an assessment made by virtue of this sub-paragraph shall be treated for the purposes of interest on unpaid tax as having been payable at the time when it would have been payable if a correct return had been made.
This paragraph shall have effect where— The company shall make a return under paragraph 1 above for the return period in which the franked investment income is received whether or not it has made any franked payments . . . in that period, and, subject to sub-paragraph (3) below, shall be entitled to repayment of any advance corporation tax paid (and not repaid) in respect of franked payments made in the accounting period in question. The amount of the repayment—
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Where under paragraph 2 or 4 above franked investment income received by a company falls to be taken into account in determining— the inclusion of that franked investment income in the appropriate return shall be treated as a claim by the company to have it so taken into account, and any such claim shall be supported by such evidence as an officer of the Board may reasonably require.
whether advance corporation tax is payable or repayable; or
the amount of such tax which is payable or repayable,
Where a claim has been made under paragraph 5 above no proceedings for collecting tax which would fall to be discharged if the claim were allowed shall be instituted pending the final determination of the claim, but this sub-paragraph shall not affect the date when the tax is due. When the claim is finally determined any tax underpaid in consequence of sub-paragraph (1) above shall be paid. Where proceedings are instituted for collecting tax assessed, or interest on tax assessed, under any provision of this Schedule, effect shall not be given to any claim made after the institution of the proceedings so as to affect or delay the collection or recovery of the tax charged by the assessment or of interest thereon, until the claim has been finally determined. When the claim is finally determined any tax overpaid in consequence of sub-paragraph (3) above shall be repaid. References in this paragraph to proceedings for the collection of tax include references to proceedings by way of distraint or poinding for tax.
This paragraph applies to— No amount is required to be shown under paragraph 2(1)(a) or (c) above in respect of the qualifying distribution or payment and, unless estimated amounts are shown by virtue of paragraph (a) below, paragraph 3(1) above shall not apply in relation to advance corporation tax in respect thereof; but— Whether or not estimated amounts are also included under paragraph 2(1)(a) or (c) above in respect of the qualifying distribution or payment, particulars of the qualifying distribution or payment shall be given separately in the return for the return period in which it is made and if in that period no franked payment (apart from that distribution or payment) is made . . . , a return containing those particulars shall be made for that period under paragraph 1 above. Sub-paragraph (4) below applies— Where this sub-paragraph applies, any advance corporation tax payable in respect of the qualifying distribution or payment shall be assessed on the company and shall be so assessed without regard to any franked investment income received by the company, but— Where sub-paragraph (4) above applies by virtue of sub-paragraph (3A)(a) above, relief shall be given from the tax assessed (by discharge thereof) to the extent, if any, to which that tax exceeds the tax that would have been payable if the amount of the franked payment comprising the qualifying distribution or payment, calculated on the amount or value thereof shown in the assessment, had been included in the return under sub-paragraph (1)(a) of paragraph 2 above and the tax had been calculated in accordance with sub-paragraph (4) of that paragraph. Where sub-paragraph (4) above applies by virtue of sub-paragraph (3A)(b) above, relief shall be given from the tax assessed (by discharge thereof) to the extent, if any, to which that tax exceeds the tax that would have been payable if the excess (if any) of— had been included in the return under sub-paragraph (1)(a) of paragraph 2 above and the tax had been calculated in accordance with sub-paragraph (4) of that paragraph.
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Where any item has been included in a return under this Schedule as a franked payment made or as franked investment income received by a company but that item should have been included in a return or claim under Schedule 16, an officer of the Board may make any such assessments, adjustments or set-offs as may be required for securing that the resulting liabilities to tax (including interest on unpaid tax) whether of the company or of any other person are the same as they would have been if the item had been included in the right return or claim.
Where a company makes a qualifying distribution on a date which does not fall within an accounting period the company shall make a return of that distribution within 14 days from that date, and the advance corporation tax in respect thereof shall be due at the time by which the return is to be made, except where the distribution is not a payment in which case the advance corporation tax shall be assessed on the company.
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All the provisions of the Corporation Tax Acts as to the time within which an assessment may be made, so far as they refer or relate to the accounting period for which an assessment is made, or the accounting period to which an assessment relates, shall apply in relation to an assessment under this Schedule notwithstanding that, under this Schedule, the assessment may be said to relate to a quarter or other period which is not an accounting period; and the provisions of section 36 of the Management Act as to the circumstances in which an assessment may be made out of time shall apply accordingly on the footing that any such assessment relates to the accounting period in which the quarter or other period ends or, in the case of an assessment under paragraph 9 above, to an accounting period ending on the date on which the distribution is made. Advance corporation tax assessed on a company under this Schedule shall be due within 14 days after the issue of the notice of assessment (unless due earlier under paragraph 3(1) or 9 above). Sub-paragraph (2) above has effect subject to any appeal against the assessment, but no such appeal shall affect the date when tax is due under paragraph 3(1) or 9 above. On the determination of an appeal against an assessment under this Schedule any tax overpaid shall be repaid. Any tax assessable under any one or more of the provisions of this Schedule may be included in one assessment if the tax so included is all due on the same date.
If a company becomes aware— it shall forthwith supply to the collector an amended return for that return period. The duty imposed by sub-paragraph (1) above is without prejudice to any duty that may also arise under paragraph 7A of Schedule 16. Where an amended return is supplied under this paragraph, all such assessments, adjustments, set-offs or payments or repayments of tax shall be made as may be required for securing that the resulting liabilities to tax (including interest on unpaid or overpaid tax) whether of the company or any other person are the same as they would have been if a correct return had been made.
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Section 266(12).
In section 266— But an individual is entitled to relief by virtue of sub-paragraph (1)(a)(ii) or (b)(ii) only in respect of premiums payable after the date on which the person in question became that individual's spouse or civil partner. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
This paragraph applies to— In sub-paragraph (1)(a) “industrial assurance business” means any industrial assurance business within the meaning given by— which was carried on before 1 December 2001. Subject to paragraph 3(2) below, if a policy to which this paragraph applies was issued before the passing of the Finance Act 1976 (29th July 1976), section 266 shall have effect in relation to it as if subsections (2)(b), (3)(a), (b) and (d) were omitted; and if a policy to which this paragraph applies was issued after the passing of that Act, subsection (2)(b) of that section shall have effect in relation to it as if it permitted the insurance to be on the life of the individual’s parent or grandparent or, subject to sub-paragraph (3) below, on the life of the individual’s child or grandchild. Relief may be given in respect of premiums under a policy of insurance on the life of an individual’s child or grandchild which was or is issued after the passing of the Finance Act 1976 (29th July 1976), as if subsection (3)(d) of section 266 were omitted, but may be given only if the annual amount of the premiums, together with that of any relevant premiums, does not exceed £52 if the policy was issued in respect of an insurance made before 25th March 1982 or £64 in any other case. For the purposes of sub-paragraph (3) above, a relevant premium, in relation to an insurance made at any time on the life of an individual’s child or grandchild, is any premium under a policy of insurance on the same life, where the insurance is made at the same time or earlier, whether it is made by the individual or any other person. In this paragraph “child” includes a step-child and an illegitimate child whose parents have married each other after his birth, and “grandchild”, “parent” and “grandparent” have corresponding meanings.
Where a policy is issued or a contract is made by a friendly society or a policy to which paragraph 2 above applies is issued by an industrial assurance company, section 266(4), (5) and (8) shall apply in relation to premiums payable under the policy or contract subject to the following provisions of this paragraph. References to the deductions authorised under section 266(5) shall be construed as including references to any amount retained by or refunded to the person paying the premium under any scheme made by the society or company in accordance with regulations made under this paragraph. The appropriate authority may make regulations authorising— Increases treated as made in pursuance of regulations under this paragraph shall not be treated as variations of a policy or contract and shall be disregarded for the purposes of paragraph 2(3) above, sections 268(6), 460, 461(1) and 464 of, and paragraph 7 of Schedule 15 to, this Act . . . . The regulations may include such adaptations and modifications of the enactments relating to friendly societies or industrial assurance companies and such other incidental and supplementary provisions as appear to the appropriate authority necessary or expedient for the purpose of enabling such societies or companies to adopt the schemes authorised by the regulations. Subsections (4), (5) and (7) to (11) of section 6 of the Decimal Currency Act 1969 shall, with the necessary modifications, apply in relation to regulations made under this paragraph.
Where it appears to the Board that the relief (if any) to which a person is entitled under section 266 has been exceeded or might be exceeded unless the premiums payable by him under any policy or contract were paid in full, they may, by notice to that person and to the person to whom the payments are made, exclude the application of subsection (5) of that section in relation to any payments due or made after such date as may be specified in the notice and before such date as may be specified in a further notice to those persons. Where the application of section 266(5) is so excluded in relation to any payments, the relief (if any) to which the person by whom the payments are made is entitled under section 266 shall be given to him under paragraph 6 below.
Where a person is entitled to relief under section 266 in respect of a payment to which section 386 of ITEPA 2003 (payments to non-approved retirement benefits schemes) applies, section 266(5) shall not apply but the like relief shall be given to him under paragraph 6 below.
Where in any year of assessment the relief to which a person is entitled under section 266 . . . has not been fully given in accordance with that section and the preceding provisions of this Schedule, he may claim relief for the difference, and relief for the difference shall then be given by a payment made by the Board or by discharge or repayment of tax or partly in one such manner and partly in another; and where relief so given to any person exceeds that to which he is entitled under section 266, he shall be liable to make good the excess and an inspector may make such assessments as may in his judgment be required for recovering the excess. The Management Act shall apply to any assessment under this paragraph as if it were an assessment to tax for the year of assessment in which the relief was given . . . .
The Board may make regulations for carrying into effect section 266(4), (5), (8) and (9) and the preceding provisions of this Schedule and paragraphs 9 and 10 of Schedule 15 (“the relevant provisions”). Regulations under this paragraph may, without prejudice to the generality of sub-paragraph (1) above, provide— The following provisions of the Management Act, that is to say— shall apply in relation to an amount which is paid to any person by the Board as an amount recoverable by virtue of section 266(5)(b) but to which that person is not entitled as if it were income tax which ought not to have been repaid and, where that amount was claimed by that person, as if it had been repaid as respects a chargeable period as a relief which was not due. In the application of section 86 of the Management Act by virtue of sub-paragraph (3) above in relation to sums due and payable by virtue of an assessment made for the whole or part of a year of assessment (“the relevant year of assessment”) under section 29(1)(c) or 30 of that Act, as applied by that sub-paragraph, the relevant date— In this paragraph—
A policy of life insurance issued in respect of an insurance made on or before 19th March 1968 shall be treated for the purposes of section 266(3)(b) as issued in respect of one made after that date if varied after that date so as to increase the benefits secured or to extend the term of the insurance. A variation effected before the end of the year 1968 shall be disregarded for the purposes of sub-paragraph (1) above if its only effect was to bring into conformity with paragraph 2 of Schedule 9 to the Finance Act 1968 (qualifying conditions for endowment policies, and now re-enacted as paragraph 2 of Schedule 15 to this Act) a policy previously conforming therewith except as respects the amount guaranteed on death, and no increase was made in the premiums payable under the policy. A policy which was issued in the course of industrial assurance business in respect of an insurance made after 13th March 1984 shall be treated for the purposes of section 266(3)(c) and this paragraph as issued in respect of an insurance made on or before that date if— In sub-paragraph (3) “industrial assurance business” means any industrial assurance business within the meaning given by— which was carried on before 1 December 2001. Subject to sub-paragraph (8) below, for the purposes of section 266(3)(c) a policy of life insurance which was issued in respect of an insurance made on or before 13th March 1984 shall be treated as issued in respect of an insurance made after that date if the policy is varied after that date so as to increase the benefits secured or to extend the term of the insurance. If a policy of life insurance which was issued as mentioned in sub-paragraph (4) above confers on the person to whom it was issued an option to have another policy substituted for it or to have any of its terms changed, then, for the purposes of that sub-paragraph and section 266(3)(c), any change in the terms of the policy which is made in pursuance of the option shall be deemed to be a variation of the policy. In any case where— then, for the purposes of section 266(3)(c), the insurance in respect of which the later policy is issued shall be deemed to have been made before 13th March 1984; and in this sub-paragraph “the earlier policy” and “the later policy” have the same meaning as in paragraph 20 of Schedule 15. In any case where— then, for the purposes of section 266(3)(c), the insurance in respect of which the new policy is issued shall be deemed to have been made before 13th March 1984; and in this sub-paragraph “the old policy” and “the new policy” have the same meaning as in paragraph 17 of Schedule 15. Sub-paragraph (4) above does not apply in the case of a variation so as to increase the benefits secured, if the variation is made—
Section 267.
Subject to the following provisions of this Part of this Schedule, if a policy secures a capital sum which is payable only on death, or one payable either on death or on earlier disability, it is a qualifying policy if— If the capital sum referred to in sub-paragraph (1) above is payable whenever the event in question happens, or if it happens at any time during the life of a specified person— the total premiums payable in any period of 12 months must not exceed— If the capital sum referred to in sub-paragraph (1) above is payable only if the event in question happens before the expiry of a specified term ending more than ten years after the making of the insurance, or only if it happens both before the expiry of such a term and during the life of a specified person— If the capital sum referred to in sub-paragraph (1) above is payable only if the event in question happens before the expiry of a specified term ending not more than ten years after the making of the insurance, or only if it happens both before the expiry of such a term and during the life of a specified person, the policy must provide that any payment made by reason of its surrender during the period is not to exceed the total premiums previously paid under the policy. Except where— the capital sum, so far as payable on death, must not be less than 75 per cent. of the total premiums that would be payable if the death occurred at the age of 75 years, the age being, if the sum is payable on the death of the first to die of two persons, that of the older of them, if on the death of the survivor of them, that of the younger of them, and in any other case, that of the person on whose death it is payable; and if the policy does not secure a capital sum in the event of death occurring before the age of 16 or some lower age, it must not provide for the payment in that event of an amount exceeding the total premiums previously paid under it. In determining for the purposes of sub-paragraph (5) above whether a capital sum is less than 75 per cent. of the total premiums, any amount included in the premiums by reason of their being payable otherwise than annually shall be disregarded, and if the policy provides for payment otherwise than annually without providing for the amount of the premiums if they are paid annually, 10 per cent. of the premiums payable under the policy shall be treated as so included. Notwithstanding sub-paragraph (1)(b) above, if a policy secures a capital sum payable only on death, it may also secure benefits (including benefits of a capital nature) to be provided in the event of a person’s disability; and no policy is to be regarded for the purposes of that provision as securing other benefits by reason only of the fact that— In applying sub-paragraph (2) or (3) above to any policy— References in this paragraph to a capital sum payable on any event include references to any capital sum, or series of capital sums, payable by reason of that event but where what is so payable is either an amount consisting of one sum or an amount made up of two or more sums, the 75 per cent. mentioned in sub-paragraph (5) above shall be compared with the smaller or smallest amount so payable; and a policy secures a capital sum payable either on death or on disability notwithstanding that the amount payable may vary with the event. In relation to any policy issued in respect of an insurance made before 1st April 1976 this paragraph shall have effect—
Sub-paragraph (2) applies in relation to a policy issued in respect of an insurance made on or after 6 April 2013. In order for the policy to be a qualifying policy, when it is issued all the rights under it must be beneficially owned by (and only by)— (This is the case notwithstanding any other provision of this Schedule.) Sub-paragraph (2) does not apply if the policy is protected. A policy is “protected” if it is a new policy (as defined in paragraph 17 below) in relation to—
Sub-paragraph (2) applies if any rights under a qualifying policy are, or any share in any rights under a qualifying policy is, assigned on or after 6 April 2013. The policy is not to be a qualifying policy after the assignment (notwithstanding any other provision of this Schedule). Sub-paragraph (2) does not apply if— Section 465(6) of ITTOIA 2005 applies for the purposes of sub-paragraph (3)(f). The Commissioners for Her Majesty's Revenue and Customs may by regulations provide that sub-paragraph (2) does not apply if prescribed conditions are met in relation to the assignment. “Prescribed” means prescribed by the regulations. Regulations under sub-paragraph (5) may— See paragraphs A1 and A2 above which may apply in consequence of an assignment falling within sub-paragraph (3) or (5).
Sub-paragraph (2) applies if any of the following events occurs— Each individual who is a beneficiary under the policy must, before the end of the statement period, make to the issuer of the policy a statement dealing with the prescribed matters. If an individual does not comply with sub-paragraph (2) the policy is not to be a qualifying policy after the event (notwithstanding any other provision of this Schedule). In sub-paragraph (1)(b)(ii) “relevant period” means any period of 12 months beginning at or after the time of the variation. Sub-paragraph (2)— “Pure protection policy” has the meaning given by paragraph A6(1)(c) above. Sub-paragraph (2) does not apply in the case of an event mentioned in sub-paragraph (1)(e) where the assignment falls within paragraph B2(3)(e) above and is a mortgage endowment assignment. “Mortgage endowment assignment” is to be read in accordance with paragraph A6(3) above. The Commissioners for Her Majesty's Revenue and Customs may by regulations provide that an individual is not required to comply with sub-paragraph (2) if prescribed conditions are met. “Prescribed” means prescribed by the regulations. Accordingly, if by virtue of regulations under sub-paragraph (7) an individual is not required to comply with sub-paragraph (2), sub-paragraph (3) does not apply because that individual does not comply with sub-paragraph (2). In sub-paragraph (2)— An officer of Revenue and Customs may allow a longer period for the purposes of sub-paragraph (9)(b) only if— Sub-paragraph (12) applies in relation to a policy if the obligations under the policy of its issuer are at any time the obligations of another person (“the transferee”) to whom there has been a transfer of the whole or any part of a business previously carried on by the issuer. In relation to that time, in sub-paragraph (2) the reference to the issuer of the policy is to be read as a reference to the transferee. Regulations under sub-paragraph (7) or (9)(c) may—
Subject to the following provisions of this Part of this Schedule, a policy which secures a capital sum payable either on survival for a specified term or on earlier death, or earlier death or disability, including a policy securing the sum on death only if occurring after the attainment of a specified age not exceeding 16, is a qualifying policy if it satisfies the following conditions— For the purposes of sub-paragraph (1)(d)(i) above, 10 per cent. of the premiums payable under any policy that provides for the payment of premiums otherwise than annually without providing for the amount of the premiums if they are paid annually, shall be treated as attributable to the fact that they are not paid annually. Sub-paragraphs (8) and (9) of paragraph 1 above shall, with any necessary modifications, have effect for the purposes of this paragraph as they have effect for the purposes of that paragraph. In relation to any policy issued in respect of an insurance made before 1st April 1976 this paragraph shall have effect with the omission in sub-paragraph (1)(d)(i) of the words from “except that if” to the end, and in sub-paragraph (1)(e) of the words “in whole or in part of the rights conferred by the policy”.
The provisions of this paragraph have effect notwithstanding anything in paragraph 3 above. In determining whether a policy— is a qualifying policy, the conditions referred to in paragraph 3(1)(b) above shall be deemed to be fulfilled with respect to it. A policy shall cease to be a qualifying policy—
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A policy which was issued by any registered friendly society . . . , or branch of such a society, in the course of exempt BLAGAB or eligible PHI business. . . in respect of insurances made before 19th March 1985 and which has not been varied on or after that date is a qualifying policy notwithstanding that it does not comply with the conditions specified in paragraph 1 or 2 above. Notwithstanding paragraphs 3 to 5 or sub-paragraph (1) above, if, on or after 19th March 1985, a person becomes in breach of the limits in section 160 of the Finance Act 2012, the policy effected by that contract which causes those limits to be exceeded shall not be a qualifying policy; and in any case where— only those policies effected by contracts made after that time shall be treated as causing the limits to be exceeded.
A policy issued in the course of an industrial assurance business, and not constituting a qualifying policy by virtue of paragraph 1 or 2 above, is nevertheless a qualifying policy if— For the purposes of this paragraph, the sums guaranteed by a policy do not include any bonuses, or in the case of a policy providing for a series of payments during its term, any of those payments except the first, or any sum payable on death during the term by reference to one or more of those payments except so far as that sum is referable to the first such payment.
Where a policy issued in respect of an insurance made after 1st April 1976 in the course of an industrial assurance business is not a qualifying policy by virtue of paragraph 1 or 2 above but is a policy with respect to which the conditions in paragraph 7(1)(b) and (c) above are satisfied, it shall be a qualifying policy whether or not the condition in paragraph 7(1)(a) above is satisfied with respect to it; but where that condition is not satisfied, relief under section 266 in respect of premiums paid under the policy shall be given only on such amount (if any) as would have been the amount of those premiums had that condition been satisfied.
The following provisions apply to any policy which is not a qualifying policy apart from those provisions, and the benefits secured by which consist of or include the payment on or after a person’s death of— A policy falling within sub-paragraph (1)(a) above is a qualifying policy if— A policy falling within sub-paragraph (1)(b) above is a qualifying policy if—
A policy which secures a capital sum payable only on death or payable either on death or on earlier disability shall not be a qualifying policy if the capital sum is payable only if the event in question happens before the expiry of a specified term ending less than one year after the making of the insurance.
A policy which evidences a contract of insurance to which sub-paragraph (3) below applies shall not be a qualifying policy unless it also evidences — A policy which evidences a contract of insurance to which sub-paragraph (4) below applies shall not be a qualifying policy unless it also evidences a contract falling within section 83(2)(a) of the Insurance Companies Act 1974. This sub-paragraph applies to contracts of insurance issued in respect of insurances made on or after 25th March 1982 against risks of persons dying as a result of an accident or an accident of a specified class, not being contracts which— This sub-paragraph applies to contracts of insurance issued in respect of insurances made before 25th March 1982 against risks of persons dying as a result of an accident or an accident of a specified class, not being contracts falling within section 83(2)(b) of the Insurance Companies Act 1974.
For the purpose of determining whether any policy is a qualifying policy, there shall be disregarded—
so much of any premium thereunder as is charged on the grounds that an exceptional risk of death or disability is involved; and
any provision under which, on those grounds, any sum may become chargeable as a debt against the capital sum guaranteed by the policy on death or disability.
Subject to paragraph 14 below, where the terms of any policy provide that it is to continue in force only so long as another policy does so, neither policy is a qualifying policy unless, if they had constituted together a single policy issued in respect of an insurance made at the time of the insurance in respect of which the first-mentioned policy was issued, that single policy would have been a qualifying policy.
A policy shall not be a qualifying policy if the policy is connected with another policy and the terms of either policy provide benefits which are greater than would reasonably be expected if any policy connected with it were disregarded. For the purposes of this paragraph a policy is connected with another policy if they are at any time simultaneously in force and either of them is issued with reference to the other, or with a view to enabling the other to be issued on particular terms or facilitating its being issued on those terms. In this paragraph “policy” means a policy evidencing a contract of long-term insurance, and includes any such policy issued outside the United Kingdom. In sub-paragraph (3) “contract of long-term insurance” means a contract which falls within Part II of Schedule 1 to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001. Where any person issues a policy— he shall within three months of issuing the policy give notice of that fact to the Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . This paragraph shall apply to policies issued in respect of insurances made before 23rd August 1983 in accordance with sub-paragraphs (7) and (8) below. Where— sub-paragraphs (1) to (6) above shall apply to the policy issued in respect of an insurance made before that date. Sub-paragraphs (1) to (7) above shall apply to policies issued in respect of insurances made before 23rd August 1983 (other than policies which, disregarding this paragraph, fall within sub-paragraph (7)) with the substitution— In any case where payments made— exceed £5 in any period of 12 months, the policy shall be treated for the purposes of this paragraph as if it were issued in respect of an insurance made after 22nd August 1983; but nothing in this paragraph shall apply with respect to any premium paid in respect of it before that date. Sub-paragraphs (8) and (9) above do not apply in relation to policies issued in the course of industrial assurance business.
Where, in the case of a policy under which a single premium only is payable, liability for the payment of that premium is discharged in accordance with sub-paragraph (2) below, the policy is a qualifying policy notwithstanding anything in paragraph 1(2) or (3) or paragraph 2(1)(b) or (c) above; and where, in the case of any other policy, liability for the payment of the first premium thereunder, or of any part of that premium, is so discharged, the premium or part shall be disregarded for the purposes of paragraphs 1(2)(b) and (3)(b) and 2(1)(c) above. Liability for the payment of a premium is discharged in accordance with this sub-paragraph if it is discharged by the retention by the company with which the insurance is made of the whole or a part of any sum which has become payable on the maturity of, or on the surrender more than ten years after its issue of the rights conferred by, a policy— being, unless it is a policy falling within paragraph (b) above and the premium in question is a first premium only, a policy which was itself a qualifying policy, or which would have been a qualifying policy had it been issued in respect of an insurance made after 19th March 1968.
In determining whether a policy is a qualifying policy, no account shall be taken of any amount recovered, as if it were an additional premium, in pursuance of section 72(9) of the Finance Act 1984.
Subject to paragraph 19 below, where one policy (“the new policy”) is issued in substitution for, or on the maturity of and in consequence of an option conferred by, another policy (“the old policy”), the question whether the new policy is a qualifying policy shall, to the extent provided by the rules in sub-paragraph (2) below, be determined by reference to both policies. The rules (for the purposes of which, the question whether the old policy was a qualifying policy shall be determined in accordance with this Part of this Schedule, whatever the date of the insurance in respect of which it was issued), are as follows— The circumstances are— Where the new policy is one issued on or after 1st April 1976 then, in determining under sub-paragraph (2)(a) to (c) above whether that policy would or would not (apart from sub-paragraphs (1) to (3) above) be a qualifying policy, there shall be left out of account so much of the first premium payable thereunder as is accounted for by the value of the old policy. In determining under sub-paragraph (2)(a) to (c) above whether the new policy would apart from this paragraph be a qualifying policy, paragraph A1 above is not to be applied in relation to the issue of the new policy; but this does not stop that paragraph being applied in relation to the issue of the new policy after this paragraph has been applied.
Subject to paragraph 19 below and to the provisions of this paragraph, where the terms of a policy are varied, the question whether the policy after the variation is a qualifying policy shall be determined in accordance with the rules in paragraph 17 above, with references in those rules to the new policy and the old policy construed for that purpose as references respectively to the policy after the variation and the policy before the variation, and with any other necessary modifications. In applying any of those rules by virtue of this paragraph, the question whether a policy after a variation would be a qualifying policy apart from the rule shall be determined as if any reference in paragraphs 1, 2, 3(5) to (11), 4 to 9, 12 and 13 above to the making of an insurance, or to a policy’s term, were a reference to the taking effect of the variation or, as the case may be, to the term of the policy as from the variation. This paragraph does not apply by reason of— For the purposes of this paragraph there is no variation in the terms of a policy where—
The following provisions of this paragraph shall have effect for determining for the purposes of this Schedule whether a policy has been varied or whether a policy which confers on the person to whom it is issued an option to have another policy substituted for it or to have any of its terms changed is a qualifying policy. If the policy is one issued in respect of an insurance made before 1st April 1976— If the policy is one issued in respect of an insurance made on or after 1st April 1976, the policy shall not be a qualifying policy unless it satisfies the conditions applicable to it under this Schedule before any such option is exercised and— and it shall not be treated as being varied by reason only of any change made in pursuance of such an option.
Where, as a result of a variation in the life or lives for the time being assured, a qualifying policy (“the earlier policy”) is replaced by a new policy (“the later policy”) which in accordance with the rules in paragraph 17 above is also a qualifying policy, then, subject to sub-paragraph (2) below, for the purposes of— the later policy and the earlier policy shall be treated as a single policy issued in respect of an insurance made at the time of the making of the insurance in respect of which the earlier policy was issued; and, accordingly, so long as the later policy continues to be a qualifying policy, the single policy shall also be treated as a qualifying policy for those purposes. Sub-paragraph (1) above does not apply unless— Any sum which is applied as mentioned in sub-paragraph (2)(a) above— This paragraph applies where the later policy comes into existence on or after 25th March 1982.
Any expression— has the same meaning in that provision as it has in that Part.
which is used in any provision made by any of paragraphs 3 to 6, and
which is used in Part 3 of the Finance Act 2012,
Paragraphs 7 and 8 above shall have effect in relation to any policy issued on or after the appointed day as if the references to the issue of a policy in the course of an industrial assurance business were references to the issue of a policy by any company in a case in which— In this paragraph “the appointed day” means such day as the Board may by order appoint.
In this Part of this Schedule “industrial assurance business” means any industrial assurance business within the meaning given by— which was carried on before 1 December 2001.
section 1(2) of the Industrial Assurance Act 1923, or
Article 3(1) of the Industrial Assurance (Northern Ireland) Order 1979,
Sub-paragraph (2) applies if— That policy is not to be a qualifying policy after the event. The events falling within this sub-paragraph are— An event does not fall within sub-paragraph (3) if— In sub-paragraph (3)(b)(ii) “relevant period” means any period of 12 months beginning at or after the time of the variation. A variation is to be ignored for the purposes of sub-paragraph (3)(b) if its effect is nullified before the end of the period of 3 months after the day on which the variation occurs. Sub-paragraph (4)(a)(i) does not apply in the case of an event mentioned in sub-paragraph (3)(e). Sub-paragraph (4)(a)(ii) does not apply in the case of— In the case of an event mentioned in sub-paragraph (3)(b), sub-paragraph (4)(a)(iii) applies only if the policy is a pure protection policy both before and after the variation. This paragraph is to be applied after all other provisions of this Schedule relevant to the question of whether a policy is a qualifying policy after an event have been applied.
Sub-paragraph (2) applies if— That policy is to be a restricted relief qualifying policy after the event. The events falling within this sub-paragraph are— An event does not fall within sub-paragraph (3) if— In sub-paragraph (3)(f)(ii) “relevant period” means any period of 12 months beginning at or after the time of the variation. A premium limit event or a variation is to be ignored for the purposes of sub-paragraph (3)(a) or (f) if its effect is nullified before 6 July 2013. In the case of a premium limit event which occurs on or after 6 April 2013, in sub-paragraph (6) the reference to 6 July 2013 is to be read as a reference to the end of the period of 3 months after the day on which the premium limit event occurs. In the case of an event mentioned in sub-paragraph (3)(a) or (f), sub-paragraph (4)(a) applies only if the policy is a pure protection policy both before and after the premium limit event or variation. A “premium limit event” occurs in relation to a protected policy if— A “premium limit event” also occurs in relation to a protected policy if on or after 6 April 2013— In sub-paragraphs (9)(b)(ii) and (10)(b)(ii) “relevant period” means any period of 12 months beginning at or after the time of the variation or exercise of the relevant option. The variation of, or exercise of a relevant option under, a protected policy is not a premium limit event in relation to the policy if— In sub-paragraph (3)(g) references to paragraph 24 below are to that paragraph as it has effect before the appointed date for the purposes of section 55 of the Finance Act 1995. A qualifying policy which is a new policy in relation to an earlier policy is a restricted relief qualifying policy if the earlier policy is a restricted relief qualifying policy. A policy which is a restricted relief qualifying policy remains a restricted relief qualifying policy so long as it is a qualifying policy. Paragraph A1 above is to be ignored in determining for the purposes of sub-paragraph (14) or (15) if a policy is a qualifying policy. This is subject to paragraph A1(8). For further provision about restricted relief qualifying policies, see sections 463A to 463D of ITTOIA 2005.
For the purposes of paragraphs A1(1)(c) and A2(1)(c) above an individual is in breach of the premium limit for qualifying policies if the total amount of the premiums payable under relevant policies in any relevant period— For the purposes of sub-paragraph (1)— The maximum amount that may be left out of account under sub-paragraph (2)(b) in the case of a relevant policy is— where N is the number of complete years for which ran— the other policy involved, or if there is more than one other policy involved, the policy which ran for the most number of complete years. For the purposes of this paragraph the following are “relevant policies”— But neither a protected policy nor a pure protection policy is to be a relevant policy by virtue of sub-paragraph (4)(b). Sub-paragraph (7) applies if this paragraph is to be applied in the case of an individual in consequence of two or more events occurring at the same time (including where one or more of the events falls within paragraph A1(3) above and one or more of the events falls within paragraph A2(3) above). For the purpose of applying this paragraph in the case of the individual in consequence of any of the events, sub-paragraph (4)(a) has effect as if the reference to the policy to which the relevant event relates were a reference to all the policies to which the events, taken together, relate. But sub-paragraph (7) does not apply, and sub-paragraph (9) applies instead, if— For the purpose of applying this paragraph in the case of the individual in consequence of any of the events, an event relating to a policy (“policy A”) is treated as occurring before an event relating to another policy (“policy B”) if, in the issuer's series of unique identifiers, policy A's unique identifier comes before policy B's unique identifier.
This paragraph applies for the purposes of this Part of this Schedule. A policy is “protected” if— A policy which is protected ceases to be protected if it becomes a restricted relief qualifying policy. A policy issued as mentioned in sub-paragraph (2)(b) is not protected if—
This paragraph applies for the purposes of this Part of this Schedule in determining if an individual is a beneficiary under a policy. An individual is a beneficiary under a policy if the individual beneficially owns— An individual is a beneficiary under a policy if— The following provisions of ITTOIA 2005 apply for the purposes of sub-paragraph (3)(a)— An individual is a beneficiary under a policy if—
In this Part of this Schedule— For the purposes of this Part of this Schedule a “deceased beneficiary event” occurs if, in connection with the death of an individual (“D”) who was a beneficiary under a policy, an individual (“B”) becomes a beneficiary under that policy by reference (wholly or partly) to any rights, or to any share in any rights, by reference to which D was a beneficiary (wholly or partly). For this purpose, it does not matter if B is already a beneficiary under the policy. For the purposes of this Part of this Schedule an assignment is a “mortgage endowment assignment” if—
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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In this Part—
any reference to a paragraph is a reference to that paragraph of this Schedule; and
“the old policy” and “the new policy” have the same meanings as in paragraph 17.
This paragraph applies to a policy of life insurance— and in the following provisions of this paragraph such a policy is referred to as “a new non-resident policy” and the company by which it is issued is referred to as “the issuing company”. Subject to section 55(3) of the Finance Act 1995 (transitional provision for the certification of certain policies), a new non-resident policy that falls outside sub-paragraph (2A) below shall not be a qualifying policy until such time as the conditions in sub-paragraph (3) are fulfilled with respect to it. A policy falls outside this sub-paragraph unless, at the time immediately before the appointed date for the purposes of section 55 of the Finance Act 1995 (removal of certification requirements), it was a qualifying policy by virtue of sub-paragraphs (2)(b) and (4) of this paragraph, as they had effect in relation to that time. The conditions . . . referred to in sub-paragraph (2) above are— . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
In the application of paragraph 17 in any case where— the rules for the determination of the question whether the new policy is a qualifying policy shall apply with the modifications in sub-paragraph (2) below. The modifications are the following— and references in this sub-paragraph to being a qualifying policy shall have effect, in relation to any time before the appointed date for the purposes of section 55 of the Finance Act 1995 (removal of certification requirements), as including a reference to being capable of being certified as such a policy. In determining for the purposes of sub-paragraph (2)(a) above whether a policy would, apart from paragraph 24, have been a qualifying policy, paragraphs A1 and B1 to B3 above are to be ignored. (But this does not affect the application of any of those paragraphs in relation to the new policy.) In the application of paragraph 17 in any case where— the rules for the determination of the question whether the new policy is a qualifying policy shall apply with the modification in sub-paragraph (2)(c) above.
If, in the case of a substitution of policies falling within paragraph 25(1) or (3), the new policy confers such an option as results in the application to it of paragraph 19(3), the new policy shall be treated for the purposes of paragraph 19(3) as having been issued in respect of an insurance made on the same day as that on which was made the insurance in respect of which the old policy was issued.
For the purposes of Part I and paragraph 24, a policy of life insurance which was issued— shall be treated as issued in respect of an insurance made after that date if the policy is varied after that date so as to increase the benefits secured or to extend the term of the insurance. If a policy of life insurance which was issued as mentioned in sub-paragraph (1)(a) and (b) above confers on the person to whom it is issued an option to have another policy substituted for it or to have any of its terms changed, then for the purposes of that sub-paragraph any change in the terms of the policy which is made in pursuance of the option shall be deemed to be a variation of the policy.
In this Schedule “relevant payment” means any payment to which section 350(4)(a) applies.
A company shall for each of its accounting periods make, in accordance with this Schedule, returns to the collector of the relevant payments made by it in that period and of the income tax for which it is accountable in respect of those payments. A return shall be made for— A return for any period for which a return is required to be made under this paragraph shall be made within 14 days from the end of that period.
The return made by a company for any period shall show—
the amount of any relevant payments made by the company in that period; and
the income tax in respect of those payments for which the company is accountable.
. . . Income tax in respect of any payment required to be included in a return under this Schedule shall be due at the time by which the return is to be made, and income tax so due— If it appears to an officer of the Board that there is a relevant payment which ought to have been and has not been included in a return, or if an officer of the Board is of the opinion that a return is incorrect, any such officer may make an assessment on the company to the best of his judgment; and any income tax due under an assessment made by virtue of this sub-paragraph shall be treated for the purposes of interest on unpaid tax as having been payable at the time when it would have been payable if a correct return had been made. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Where in any accounting period a company receives any payment on which it bears income tax by deduction the company may claim to have the income tax thereon set against any income tax which it is liable to pay under this Schedule in respect of payments made by it in that period. Any such claim shall be included in a return made under paragraph 2 above for the accounting period in question and (where necessary) income tax paid by the company under this Schedule for that accounting period and before the claim is allowed shall be repaid accordingly.
Where a claim has been made under paragraph 5 above no proceedings for collecting tax which would fall to be discharged if the claim were allowed shall be instituted pending the final determination of the claim, but this sub-paragraph shall not affect the date when the tax is due. When the claim is finally determined any tax underpaid in consequence of sub-paragraph (1) above shall be paid. Where proceedings are instituted for collecting tax assessed, or interest on tax assessed, under any provision of paragraph 4 above, effect shall not be given to any claim made after the institution of the proceedings so as to affect or delay the collection or recovery of the tax charged by the assessment or of interest thereon, until the claim has been finally determined. When the claim is finally determined any tax overpaid in consequence of sub-paragraph (3) above shall be repaid. References in this paragraph to proceedings for the collection of tax include references to proceedings by way of distraint or attachment.
Income tax set against other tax under paragraph 5 above shall be treated as paid or repaid, as the case may be, and the same tax shall not be taken into account both under this Schedule and under section 7(2).
Where any item has been included in a return or claim under this Schedule as a relevant payment but should not have been so included, an officer of the Board may make such assessments, adjustments or set-offs as may be required for securing that the resulting liabilities to tax (including interest on unpaid tax) whether of the company or of any other person are the same as they would have been if the item had not been included in the return or claim in question.
If a company becomes aware— it shall forthwith supply to the collector an amended return for that period. The duty imposed by sub-paragraph (1) above is without prejudice to any duty that may also arise under paragraph 7A of Schedule 13. Where an amended return is supplied under this paragraph, all such assessments, adjustments, set-offs or payments or repayments of tax shall be made as may be required for securing that the resulting liabilities to tax (including interest on unpaid or overpaid tax) whether of the company or any other person are the same as they would have been if a correct return had been made.
Where a company makes a relevant payment on a date which does not fall within an accounting period the company shall make a return of that payment within 14 days from that date, and the income tax for which the company is accountable in respect of that payment shall be due at the time by which the return is to be made.
All the provisions of the Income Tax Acts as to the time within which an assessment may be made, so far as they refer or relate to the year of assessment for which an assessment is made, or the year to which an assessment relates, shall apply in relation to any assessment under this Schedule notwithstanding that, under this Schedule, the assessment may be said to relate to a quarter or other period which is not a year of assessment, and the provisions of section 36 of the Management Act as to the circumstances in which an assessment may be made out of time shall apply accordingly on the footing that any such assessment relates to the year of assessment in which the quarter or other period ends. Income tax assessed on a company under this Schedule shall be due within 14 days after the issue of the notice of assessment (unless due earlier under paragraph 4(1) or 9 above). Sub-paragraph (2) above has effect subject to any appeal against the assessment, but no such appeal shall affect the date when tax is due under paragraph 4(1) or 9 above. On the determination of an appeal against an assessment under this Schedule any tax overpaid shall be repaid. Any tax assessable under any one or more of the provisions of this Schedule may be included in one assessment if the tax so included is all due on the same date.
Nothing in paragraphs 1 to 10 above shall be taken to prejudice any powers conferred by the Income Tax Acts for the recovery of income tax by means of an assessment or otherwise; and any assessment in respect of tax payable under paragraph 9 above shall be treated for the purposes of the provisions mentioned in paragraph 10(1) above as relating to the year of assessment in which the payment is made.
This Part of this Schedule has effect in the circumstances set out in section 404(3)(a). In this Part of this Schedule— It shall be assumed for the purposes of this Chapter (except section 404(3) to (6)) and Part II of this Schedule— In this Part of this Schedule “the component accounting periods” means the two accounting periods referred to in sub-paragraph (3) above.
Subject to paragraph 5 below, for the purposes referred to in paragraph 1(3) above, the losses and other amounts of the straddling period of a dual resident investing company, excluding any such excess of charges on income as is referred to in section 403(7), shall be apportioned to the component accounting periods on a time basis according to their lengths.
If, in the straddling period of a dual resident investing company, the company has paid any amount by way of charges on income, then, for the purposes referred to in paragraph 1(3) above, the excess of that amount referred to in section 403(7) shall be apportioned to the component accounting periods—
according to the dates on which, subject to paragraph 6 below, the interest or other payments giving rise to those charges were paid (or were treated as paid for the purposes of section 338); and
in proportion to the amounts of interest or other payments paid (or treated as paid) on those dates.
In this Part of this Schedule—
a “1986 accounting period” means an accounting period which begins or ends (or begins and ends) in the financial year 1986;
a “post-1986 accounting period” means an accounting period which begins on or after 1st April 1987; and
“dual resident investing company” has the same meaning as in section 404.
If the conditions in sub-paragraph (2) or (3) below are fulfilled and if the Board so direct, this paragraph applies in relation to a 1986 accounting period of a dual resident investing company. The conditions in this sub-paragraph are applicable only if the company is carrying on a trade in the 1986 accounting period, and those conditions are— The conditions in this sub-paragraph are applicable only if the company is an investment company in the 1986 accounting period, and those conditions are— The Board shall not give a direction under this paragraph with respect to a 1986 accounting period of a dual resident investing company unless it appears to the Board that the sole or main benefit that might be expected to accrue from the early payment or, as the case may be, from the arrangements was that (apart from this paragraph) the company would, for that period, have an amount or, as the case may be, a larger amount available for surrender by way of group relief. If this paragraph applies in relation to a 1986 accounting period of a dual resident investing company which is carrying on a trade then, for the purposes of this Chapter and, where appropriate, any apportionment under paragraph 2 above— If this paragraph applies in relation to a 1986 accounting period of a dual resident investing company which is an investment company, then, for the purposes referred to in sub-paragraph (5) above—
If, in the case of a dual resident investing company, either of the following conditions is fulfilled— the interest or other payment shall, if the Board so direct, be treated for the purposes of this Chapter and, where appropriate, paragraph 3 above as paid in the post-1986 accounting period referred to in paragraph (a) or, as the case may be, paragraph (b) above. The Board shall not give a direction under this paragraph unless it appears to them that the sole or main benefit that might be expected to accrue from the early payment or, as the case may be, from the arrangements was that (apart from the direction) the interest or other payment would be attributed or apportioned to a 1986 accounting period rather than a post-1986 accounting period, so that, for the 1986 accounting period, the dual resident investing company would have an amount or, as the case may be, a larger amount available for surrender by way of group relief.
Notice of the giving of a direction under paragraph 5 or 6 above shall be given to the dual resident investing company concerned; and any company to which such a notice is given may, by giving notice of appeal to the Board within 60 days of the date of the notice given to the company, appeal . . . against the direction on either or both of the following grounds—
that the conditions applicable to the company under paragraph 5(2) or (3) above are not fulfilled or, as the case may be, that neither of the conditions in paragraph 6(1) above is fulfilled;
that the sole or main benefit that might be expected to accrue from the early payment or, as the case may be, the arrangements was not that stated in paragraph 5(4) or, as the case may be, paragraph 6(2) above.
Parts I and II of this Schedule have effect in priority to section 409 and, accordingly, each of the component accounting periods resulting from the operation of Part I of this Schedule shall be regarded as a true accounting period for the purposes of that section. References in this Schedule to this Chapter do not include any provision of this Schedule.
For the purposes of sections 403C and 413(7) and this Schedule, an equity holder of a company is any person who— and any reference in that section to profits or assets available for distribution to a company’s equity holders does not include a reference to any profits or assets available for distribution to any equity holder otherwise than as an equity holder. For the purposes of sub-paragraph (1)(a) above “ordinary shares” means all shares other than relevant preference shares. In this Schedule “ relevant preference shares” means shares which— Subsection (7) of section 417 shall apply for the purposes of sub-paragraph (1)(b) above as it applies for the purposes of Part XI, but with the omission of the reference to subsection (9) of that section. In sub-paragraph (1)(b) above “normal commercial loan” means a loan of or including new consideration and— This sub-paragraph applies to any shares which— This sub-paragraph applies to any securities representing a loan of or including new consideration and— For the purposes of sub-paragraphs (3) and (5) to (5B) above a company (“the parent company”) is another company’s “quoted parent company” if and only if— and in this sub-paragraph “ordinary shares” means shares forming part of ordinary share capital. In the application of sub-paragraphs (3) and (5) to (5B) above in determining for the purposes of sub-paragraph (5C)(a) above who are the equity holders of the other company (and, accordingly, whether section 413(7) prevents the other company from being treated as a 75 per cent. subsidiary of the parent company for the purposes of sub-paragraph (5C)(a)), it shall be assumed that the parent company is for the purposes of sub-paragraphs (3) and (5) to (5B) above the other company’s quoted parent company. For the purposes of sub-paragraph (5)(b) above, the amount to which the loan creditor is entitled by way of interest— Sub-paragraph (5H) below applies where— The basis referred to above is that— For the purposes of sub-paragraph (5)(b) above, the amount to which the loan creditor is entitled by way of interest shall not be treated as depending to any extent on the value of any of the company’s assets by reason only of the fact that the terms of the loan are such that the only way the loan creditor can enforce payment of an amount due is by exercising rights granted by way of security over the land which the loan is used to acquire. In sub-paragraph (5G)(a) above the reference to the incidental costs of obtaining the loan is to any expenditure on fees, commissions, advertising, printing or other incidental matters wholly and exclusively incurred for the purpose of obtaining the loan or of providing security for it. Notwithstanding anything in sub-paragraphs (1) to (5) above but subject to sub-paragraph (7) below, where— In any case where sub-paragraph (6) above applies in relation to a bank in such circumstances that— references in sub-paragraph (6) above, other than the reference in paragraph (a), to shares or securities in the company shall be construed as references to so much only of the loan referred to paragraph (a) above as is equal to the cost referred to in paragraph (b) above. In this paragraph “new consideration” has the same meaning as in section 254 and any question whether one person is connected with another shall be determined in accordance with section 839 .
Subject to the following provisions of this Schedule, for the purposes of sections 403C and 413(7) the percentage to which one company is beneficially entitled of any profits available for distribution to the equity holders of another company means the percentage to which the first company would be so entitled in the relevant accounting period on a distribution in money to those equity holders of— and in the following provisions of this Schedule that distribution is referred to as “the profit distribution”. The total profits of a non-resident company arising in an accounting period shall be determined for the purposes of sub-paragraph (1)(a) above as if it were resident in the United Kingdom in that accounting period. For the purposes of the profit distribution, it shall be assumed that no payment is made by way of repayment of share capital or of the principal secured by any loan unless that payment is a distribution. Subject to sub-paragraph (2) above, where an equity holder is entitled as such to a payment of any description which, apart from this sub-paragraph, would not be treated as a distribution, it shall nevertheless be treated as an amount to which he is entitled on the profit distribution.
This paragraph applies to a right to dividends carried by shares in a company if— Condition A is that— Condition B is that— Condition C is that condition A or B would be met but for sub-paragraph (2)(b) or (3)(b), and— For the purposes of sub-paragraph (4) a company reduces the amount of, or does not pay, dividends “in relevant circumstances” if— The Treasury may by order specify circumstances in which a company is to be treated as in severe financial difficulties for the purposes of sub-paragraph (5)(a). In sub-paragraph (5)(b) “relevant regulatory body” means— In this paragraph “new consideration” has the same meaning as in section 254.
Subject to the following provisions of this Schedule, for the purposes of sections 403C and 413(7) the percentage to which one company would be beneficially entitled of any assets of another company available for distribution to its equity holders on a winding-up means the percentage to which the first company would be so entitled if the other company were to be wound up and on that winding-up the value of the assets available for distribution to its equity holders (that is to say, after deducting any liabilities to other persons) were equal to— In the following provisions of this Schedule a winding-up on the basis specified in sub-paragraph (1) above is referred to as “the notional winding-up”. If, on the notional winding-up, an equity holder would be entitled as such to an amount of assets of any description which, apart from this sub-paragraph, would not be treated as a distribution of assets, it shall nevertheless be treated, subject to sub-paragraph (4) below, as an amount to which the equity holder is entitled on the distribution of assets on the notional winding up. If an amount (“the returned amount”) which corresponds to the whole or any part of the new consideration provided by an equity holder of a company for any shares or securities in respect of which he is an equity holder is applied by the company, directly or indirectly, in the making of a loan to, or in the acquisition of any shares or securities in, the equity holder or any person connected with him, then, for the purposes of this Schedule— In sub-paragraph (4) above “new consideration” has the same meaning as in section 254 and any question whether one person is connected with another shall be determined in accordance with section 839 .
This paragraph applies if any of the equity holders— holds, as such an equity holder, any shares or securities which carry rights in respect of dividend or interest or assets on a winding-up which are wholly or partly limited by reference to a specified amount or amounts (whether the limitation takes the form of the capital by reference to which a distribution is calculated or operates by reference to an amount of profits or otherwise). Where this paragraph applies there shall be determined— if, to the extent that they are limited as mentioned in sub-paragraph (1) above, the rights of every equity holder falling within that sub-paragraph (including the first company concerned if it is such an equity holder) had been waived. If, on the profit distribution, the percentage of profits determined as mentioned in sub-paragraph (2)(a) above is less than the percentage of profits determined under paragraph 2(1) above without regard to that sub-paragraph, the lesser percentage shall be taken for the purposes of sections 403C and 413(7) to be the percentage of profits to which, on the profit distribution, the first company referred to in paragraph 2(1) above would be entitled as mentioned in that paragraph. If, on the notional winding-up, the percentage of assets determined as mentioned in sub-paragraph (2)(b) above is less than the percentage of assets determined under paragraph 3(1) above without regard to that sub-paragraph, the lesser percentage shall be taken for the purposes of sections 403C and 413(7) to be the percentage to which, on the notional winding-up, the first company mentioned in paragraph 3(1) above would be entitled of any assets of the other company available for distribution to its equity holders on a winding-up. In determining in a case in which paragraph 5F below applies whether any rights in respect of dividend or interest or assets on a winding-up are limited as mentioned in sub-paragraph (1) above, the limitations so mentioned shall be treated as not including so much of any limitation as has effect as mentioned in sub-paragraph (2) of that paragraph.
This paragraph applies if, at any time in the relevant accounting period, any of the equity holders— holds, as such an equity holder, any shares or securities which carry rights in respect of dividend or interest or assets on a winding-up which are of such a nature (as, for example, if any shares will cease to carry a right to a dividend at a future time) that if the profit distribution or the notional winding-up were to take place in a different accounting period the percentage to which, in accordance with paragraphs 1 to 4 above, that equity holder would be entitled of profits on the profit distribution or of assets on the notional winding-up would be different from the percentage determined in the relevant accounting period. Where this paragraph applies, there shall be determined— if the rights of the equity holders in the relevant accounting period were the same as they would be in the different accounting period referred to in sub-paragraph (1) above. If in the relevant accounting period an equity holder holds, as such, any shares or securities in respect of which arrangements exist by virtue of which, in that or any subsequent accounting period, the equity holder’s entitlement to profits on the profit distribution or to assets on the notional winding-up could be different as compared with his entitlement if effect were not given to the arrangements, then for the purposes of this paragraph— Sub-paragraph (3) and (4) of paragraph 4 above shall apply for the purposes of this paragraph as they apply for the purposes of that paragraph and, accordingly, references therein to sub-paragraphs (2)(a) and (2)(b) of that paragraph shall be construed as references to sub-paragraphs (2)(a) and (2)(b) of this paragraph.
For the purposes of sections 403C and 413(7) and paragraphs 2 to 5F above— means the percentage to which the first company is, or would be, so entitled either directly or through another body corporate or other bodies corporate or partly directly and partly through another body corporate or other bodies corporate.
the percentage to which one company is beneficially entitled of any profits available for distribution to the equity holders of another company, and
the percentage to which one company would be beneficially entitled of any assets of another company on a winding-up,
In this Schedule “the relevant accounting period” means (subject to sub-paragraphs (1A) to (1C) below)— In this Schedule “the relevant accounting period” means, in the case of a non-resident company which is not within the charge to corporation tax, the accounting period which the company would have on the following assumption. The assumption is that the company became resident in the United Kingdom (and, accordingly, within the charge to corporation tax) at the time when it became a 75 per cent. subsidiary as mentioned in section 402(2A). For the purposes of sub-paragraph (1B) above the reference to the company's being a 75 per cent. subsidiary is to its being such a subsidiary disregarding section 413(7). For the purposes of this Schedule, a loan to a company shall be treated as a security, whether or not it is a secured loan, and, if it is a secured loan, regardless of the nature of the security.
In a case where paragraphs 4 and 5 above apply, each of the following percentages, namely— shall be determined on each of the different bases set out in sub-paragraph (2) below. The bases are— The lowest of the four percentages of profits so determined shall be taken for the purposes of sections 403C and 413(7) to be the percentage of profits to which, on the profit distribution, the first company referred to in paragraph 2(1) above would be entitled as mentioned in that paragraph. The lowest of the four percentages of assets so determined shall be taken for the purposes of sections 403C and 413(7) to be the percentage to which, on the notional winding-up, the first company mentioned in paragraph 3(1) above would be entitled of any assets of the other company available for distribution to its equity holders on a winding-up.
This paragraph applies if, at any time in the relevant accounting period, option arrangements exist; and option arrangements are arrangements of any kind (whether in writing or not) as regards which the two conditions set out below are fulfilled. The first condition is that the arrangements are ones by virtue of which there could be a variation in— The second condition is that, under the arrangements, the variation could result from the exercise of any of the following rights (option rights)— For the purposes of sub-paragraph (3) above— In sub-paragraph (4)(d) above— As regards each point in time when option arrangements exist in the relevant accounting period— The following rules shall have effect— The determination mentioned in sub-paragraph (8) below shall be made as regards each point in time when option arrangements exist in the relevant accounting period; and for each such point in time a separate determination shall be made for each of the possible states of affairs mentioned in sub-paragraph (5) above. The determination is a determination of— if the rights and duties of the equity holders in the relevant accounting period were found as mentioned in sub-paragraph (5) above. Where different determinations yield different percentages of profits and different percentages of assets, only one determination of each percentage (yielding the lowest figure) shall be treated as having been made. Sub-paragraphs (3) and (4) of paragraph 4 above shall apply for the purposes of this paragraph as they apply for the purposes of that paragraph and, accordingly, references there to sub-paragraphs (2)(a) and (2)(b) of that paragraph shall be construed as references to sub-paragraphs (8)(a) and (8)(b) of this paragraph.
In a case where paragraphs 4 and 5B above apply, each of the following percentages, namely— shall be determined on each of the different bases set out in sub-paragraph (2) below. The bases are— The lowest of the four percentages of profits so determined shall be taken for the purposes of sections 403C and 413(7) to be the percentage of profits to which, on the profit distribution, the first company referred to in paragraph 2(1) above would be entitled as mentioned in that paragraph. The lowest of the four percentages of assets so determined shall be taken for the purposes of sections 403C and 413(7) to be the percentage to which, on the notional winding-up, the first company mentioned in paragraph 3(1) above would be entitled of any assets of the other company available for distribution to its equity holders on a winding-up. For the purposes of this paragraph the basis specified in paragraph 5B(8) above is such basis as gives the percentage of profits arrived at by virtue of paragraph 5B(9) above or (as the case may be) such basis as gives the percentage of assets arrived at by virtue of paragraph 5B(9) above.
In a case where paragraphs 5 and 5B above apply, each of the following percentages, namely— shall be determined on each of the different bases set out in sub-paragraph (2) below. The bases are— The lowest of the four percentages of profits so determined shall be taken for the purposes of sections 403C and 413(7) to be the percentage of profits to which, on the profit distribution, the first company referred to in paragraph 2(1) above would be entitled as mentioned in that paragraph. The lowest of the four percentages of assets so determined shall be taken for the purposes of sections 403C and 413(7) to be the percentage to which, on the notional winding-up, the first company mentioned in paragraph 3(1) above would be entitled of any assets of the other company available for distribution to its equity holders on a winding-up. For the purposes of this paragraph the basis specified in paragraph 5B(8) above is such basis as gives the percentage of profits arrived at by virtue of paragraph 5B(9) above or (as the case may be) such basis as gives the percentage of assets arrived at by virtue of paragraph 5B(9) above.
In a case where paragraphs 4 and 5 and 5B above apply, each of the following percentages, namely— shall be determined on each of the different bases set out in sub-paragraph (2) below. The bases are— The lowest of the eight percentages of profits so determined shall be taken for the purposes of sections 403C and 413(7) to be the percentage of profits to which, on the profit distribution, the first company referred to in paragraph 2(1) above would be entitled as mentioned in that paragraph. The lowest of the eight percentages of assets so determined shall be taken for the purposes of sections 403C and 413(7) to be the percentage to which, on the notional winding-up, the first company mentioned in paragraph 3(1) above would be entitled of any assets of the other company available for distribution to its equity holders on a winding-up. For the purposes of this paragraph the basis specified in paragraph 5B(8) above is such basis as gives the percentage of profits arrived at by virtue of paragraph 5B(9) above or (as the case may be) such basis as gives the percentage of assets arrived at by virtue of paragraph 5B(9) above.
This paragraph has effect, in the cases specified in sub-paragraphs (2) and (3) below, for the following purposes (“the relevant purposes”)— The first case in which this paragraph applies is where any of the equity holders— holds, as such an equity holder of the non-resident company, any shares or securities which carry rights in respect of dividend or interest or assets on a winding-up which have effect wholly or partly by reference to whether or not, or to what extent, the profits or assets distributed are referable to the non-resident company’s UK trade. The second case in which this paragraph applies is where— If the percentage of profits to which, on the profit distribution, a particular equity holder would be taken for the relevant purposes to be entitled would be less if the determination under paragraph 2(1) above were made on the basis specified in sub-paragraph (7) below, then that shall be the basis used for the relevant purposes in the case of that equity holder. If the percentage of assets to which, on the notional winding-up, a particular equity holder would be taken for the relevant purposes to be entitled would be less if the determination under paragraph 3(1) above were made on the basis specified in sub-paragraph (7) below, then that shall be the basis used for the relevant purposes in the case of that equity holder. If the percentage that falls to be taken for any of the purposes of section 403C or section 413(7) would, under any of paragraphs 4 to 5E above, be the lower or lowest of a number of percentages determined on different bases— That basis is the assumption— In sub-paragraph (7) above— In sub-paragraph (8) above “relevant balance sheet”, in relation to a company, means any balance sheet relating to its affairs as at the end of the relevant accounting period. For the purposes of this paragraph profits, assets or liabilities of a non-resident company shall be taken to be referable to its UK trade to the extent only that they—
Subject to the provisions of this Part of this Schedule, the relevant income of a company for an accounting period is— In arriving at the relevant income for any accounting period— In arriving at the relevant income for any accounting period of a company which is a trading company or a member of a trading group, regard shall be had not only to the current requirements of the company’s business and to such requirements as may be necessary or advisable for the maintenance and development of that business as fall within sub-paragraph (2)(a)above, but also to any other requirements necessary or advisable for the acquisition of a trade or of a controlling interest in a trading company or in a company which is a member of a trading group by virtue of paragraph 7(2)(a)below; but, for this purpose, paragraph 9below shall apply. For the purposes of sub-paragraph (3)above, the acquisition of a controlling interest in a company means the acquisition, whether on a single occasion or otherwise, of such ordinary share capital of that company as enables the acquiring company to exercise the greater part of the voting power in that company. For the purposes of sub-paragraph (3)above, the requirements of a company’s business which are necessary or advisable for such an acquisition as is mentioned in that sub-paragraph include such requirements as are necessary or advisable for— so far as any sum so expended or applied, or intended to be expended or applied, does not fall to be treated for the purposes of this Chapter as a distribution by the company.
Subject to paragraphs 10and 12below, the relevant income of a company shall in no case be taken to exceed the company’s distributable investment income for the accounting period plus 50per cent. of the estate or trading income for the period. In the application of sub-paragraph (1)above to a company which is a trading company or a member of a trading group, the trading income shall be disregarded; and in the application of that sub-paragraph to a trading company, the estate income— and in this sub-paragraph the appropriate fraction is— where— Ais the amount of the estate income, and Bis the amount of the trading income. The relevant maximum and minimum amounts referred to above shall be determined as follows— In applying sub-paragraphs (2)and (3)above to any accounting period of a trading company, an associated company shall be disregarded if— and for the purposes of this paragraph a company is to be treated as an associated company of another at a given time if at that time one of the two has control of the other or both are under the control of the same person or persons. In determining how many associated companies a trading company has in an accounting period or whether a trading company has an associated company in an accounting period, an associated company shall be counted even if it was an associated company for part only of the accounting period, and two or more associated companies shall be counted even if they were associated companies for different parts of the accounting period. For an accounting period of less than 12months the relevant maximum and minimum amounts determined in accordance with sub-paragraphs (1)to (5)above shall be proportionately reduced.
For the purposes of this Chapter the distributions of a company for an accounting period shall, subject to sub-paragraphs (2)to (4)and paragraph 12below, be taken to consist of— Where a period of account is not an accounting period, dividends which, if it were an accounting period, would be treated under sub-paragraph (1)(a)above as distributions for that accounting period shall be apportioned to any accounting period or part of an accounting period falling within the period of account in proportion to the distributable income of each such period or part. For the purposes of determining whether there is any such excess as is referred to in section 424(1),no account shall be taken of a distribution which, in relation to the company making it, is a bonus distribution unless— Where a bonus distribution has occurred and, by virtue of paragraph (a)or paragraph (b)of sub-paragraph (3)above, it falls to be taken into account for the purpose of determining whether there is any such excess as is referred to in section 424(1),no account shall be taken for that purpose of a qualifying distribution which consists of the repayment of the share capital or, as the case may be, the principal of the security, which constituted the bonus distribution. In sub-paragraphs (3)and (4)above “bonus distribution” means a distribution which in relation to the company making it is a distribution by virtue only of paragraph (c)of section 209(2).
For the purposes of this Chapter, the distributable income of a company for an accounting period shall be the amount of its distributable profits for the period exclusive of the part attributable to chargeable gains; and for the purposes of this sub-paragraph— and for the purposes of sub-paragraph (a)(ii)above relief under section 242or 243shall be treated as having been given first against franked investment income which is not trading income and secondly, so far as it cannot be so given, against franked investment income which is trading income. For the purposes of this Chapter, the distributable investment income of a company for an accounting period shall be the amount of the distributable income, exclusive of the part attributable to estate or trading income, and less whichever is the smaller of—
For the purposes of this Chapter, “estate or trading income” means estate income and trading income. For those purposes “estate income” means income which is chargeable to tax under Schedule A or Schedule B, and income (other than yearly or other interest)which is chargeable to tax under Schedule D, and which arises from the ownership or occupation of land (including any interest in or right over land)or from the letting furnished of any building or part of a building, but does not include trading income. For those purposes “trading income” means income which is not investment income for the purposes of paragraph 7(1)below; and, where the following conditions are satisfied with respect to a close company, that is to say— its income incidental to that trade shall also be trading income. For the purposes of sub-paragraph (3)above income of a company is incidental to its trade if, and only if—
The amount for part of an accounting period of any description of income referred to in paragraph 4or 5above shall be a proportionate part of the amount for the whole period. In determining the amount for any period of any description of income referred to in paragraph 4or 5above, any deduction from the company’s profits for charges on income, expenses of management or other amounts which can be deducted from or set against or treated as reducing profits of more than one description shall be treated as made— In the application of sub-paragraph (2)above to a company which is a trading company or a member of a trading group there shall be substituted for paragraph (b)the following paragraphs—and in paragraph (c)for “thirdly” there shall be substituted“ fourthly ”, and for “(a) or (b)” there shall be substituted“ (a), (b) or (bb) ”.
For the purposes of this Chapter, a “trading company” is any company which exists wholly or mainly for the purpose of carrying on a trade, and any other company whose income does not consist wholly or mainly of investment income, that is to say, income which, if the company were an individual, would not be earned income ;but for this purpose any amount which is apportioned to a company under section 423(1)shall be deemed to be income of the company and to be investment income. Subject to sub-paragraph (3)below, for the purposes of this Chapter, a company is to be treated as a member of a trading group if, but only if— A company shall not be treated as a member of a trading group by reason only of any company having the control of another if that control is exercised through a company which is not resident in the United Kingdom or through a company whose control depends on a holding a profit on the sale of which would be treated as a trading receipt of the company.
Paragraph 1(3)above shall not apply to— and, where the trade, asset or interest was, or is, in part owned as mentioned above, paragraph 1(3)above shall not apply with respect to that part. Paragraph 1(3)above shall not apply to— and where shares were, or are, in part owned as mentioned above, paragraph 1(3)above shall not apply with respect to that part. Paragraph 1(3)above shall not apply to— Section 416(1)— For the purposes of paragraph (a)of sub-paragraphs (1), (2)and (3)above, another company is an associated company of the acquiring company if— In ascertaining for the purposes of sub-paragraphs (2)and (5)above or for the purposes of section 416(1)as it applies for the purposes of paragraph (b)of sub-paragraphs (1), (2)and (3)above, whether any person has control of a company— For the purposes of this paragraph the time of acquisition of a trade, asset or interest, or shares, acquired under a contract shall be— and not, if different, the time at which the trade, asset, interest or shares is or are conveyed or transferred. For the purposes of paragraph 1(3)above there shall be regarded as income available for distribution and not as having been applied, or as being applicable, to such requirements of a company’s business as may be necessary or advisable for such an acquisition as is mentioned in paragraph 1(3)above any sum expended or applied, or intended to be expended or applied, as mentioned in paragraph 8(1)(a)(iv)or (b)above; and paragraph 8(2)and (5)above shall apply for the purposes of this sub-paragraph as they apply for the purposes of paragraph 8.
Where a close company ceases to carry on the trade, or the business of holding investments, in which its activities wholly or mainly consisted, the relevant income of the company for any accounting period in which that event occurs, or which ends in or within the 12months ending with that event, shall be calculated as if— Where sub-paragraph (1)above applies for an accounting period and the company could not make distributions without prejudice to the claims of creditors (excluding those mentioned in sub-paragraph (3)below),the excess mentioned in section 424(1)shall be disregarded to the extent to which the company could not make distributions up to the amount of its relevant income without prejudice to those claims. Subject to sub-paragraph (4)below, the creditors to be excluded for the purposes of sub-paragraph (2)above are all participators and associates of participators, and all creditors in respect of debts originally created in favour of or due to a person who was then a participator or associate of a participator. A creditor is not to be excluded in respect of any debt which either— Where sub-paragraph (1)above applies for any accounting period, there shall be disregarded for the purposes of any apportionment made by virtue of section 424(2)so much of the relevant income of the company for that period as is equal to the amount which would be disregarded under sub-paragraph (2)above. Where a resolution is passed or an order is made for the winding up of a close company, or where any other act is done for a like purpose in the case of a winding up otherwise than under the Insolvency Act 1986,sub-paragraphs (1)to (5)above shall apply for any accounting period ending in or with the 12months ending with the passing of the resolution or other event, or for any later accounting period, as they apply, in a case falling within sub-paragraph (1)above, for an accounting period in which a close company ceases to carry on a trade.
Subject to paragraph 12below, where a company is subject to any restriction imposed by law as regards the making of distributions, the excess mentioned in section 424(1)shall be disregarded to the extent to which the company could not make distributions up to the amount of its relevant income without contravening that restriction. Except where paragraph 10(1)above applies, there shall be disregarded for the purposes of any apportionment made by virtue of section 424(2)so much of the relevant income of the company as is equal to any amount which would be disregarded under sub-paragraph (1)above.
Where a company issues to a close company any relevant share capital, sub-paragraphs (2)and (3)below shall apply as regards that share capital, and in this paragraph— “the relevant accounting period” means the accounting period of the close company in which the due date of issue falls; “relevant share capital” means share capital to which section 249applies; and “appropriate amount in cash” has the meaning given by section 251(2). The relevant income of the close company for the relevant accounting period, as determined under paragraph 1above, and the amount which, under paragraph 2above (read, where appropriate, with paragraph 10above)the relevant income of the close company for that period cannot exceed, shall each be increased by an amount equal to the appropriate amount in cash (or, if it would otherwise be nil, be treated as equal to the appropriate amount in cash). The amount, if any, which would otherwise be disregarded under paragraph 11(1)above shall be reduced by an amount equal to the appropriate amount in cash. Where a close company issues any relevant share capital in a case falling within section 249(4), (5)or (6)or sub-paragraph (1)above (read in each case with section 249(3)),the company shall be treated for the purposes of paragraph 3(1)and (2)above—
Where in the case of any company the inspector proposes to apportion an amount under section 423he shall serve on the company a notice showing the amount to be apportioned and, subject to any appeal under this paragraph and to paragraph 15below, that notice shall be treated as conclusively establishing, both in relation to the company and for the purposes of any assessment under section 426,that an apportionment can be made in respect of that amount. After a notice under sub-paragraph (1)above has been served on the company it shall not be altered except on appeal or in accordance with paragraph 15below. The company may by giving notice of appeal to the inspector within 30days of the date of any notice under sub-paragraph (1)above appeal against that notice; and any notice under that sub-paragraph shall state the time within which notice of appeal may be given under this sub-paragraph. Subject to paragraph 18(2)below, any appeal under this paragraph shall be to the General Commissioners except that the company may elect (in accordance with section 46(1)of the Management Act)to bring the appeal before the Special Commissioners instead of the General Commissioners. The notice of appeal shall specify the grounds of appeal, but on the hearing of the appeal the Commissioners may allow the appellant to put forward any ground not specified in the notice, and take it into consideration if satisfied that the omission was not wilful or unreasonable. If a company fails or refuses, on being required to do so under paragraph 17below, to furnish a statement of any amount which in the case of that company could be apportioned under section 423,or renders a statement with which the inspector is not satisfied, the inspector may make an estimate of that amount to the best of his judgment, and any relevant decision taken by the inspector under this sub-paragraph may be reviewed on appeal under this paragraph. Sections 113(1B)and (3)and 114(2)of the Management Act (supplementary provisions as to assessments and notices of assessment)shall apply to any notice under sub-paragraph (1)above as if the determination of the amount to be shown therein were the making of an assessment and the notice were a notice of assessment.
Where notice has been served on a company under paragraph 13above showing an amount to be apportioned, the inspector shall serve on the company a notice showing the manner in which that amount is apportioned, (that is to say, the sum apportioned or sub-apportioned to each participator or, if the inspector thinks fit, to each class of share)and, subject to any appeal under this paragraph and to paragraph 15below, that notice shall be treated, in relation to the company, as conclusively establishing the manner of apportionment. Paragraph 13(2)to (5)and (7)above shall apply also to a notice under this paragraph, but any appeal against such a notice by virtue of this sub-paragraph shall be to the Special Commissioners. The manner of apportionment shown in a notice under this paragraph may also be questioned on an appeal against any assessment made under section 426;and any relevant decision taken by the inspector under section 425(2)or (3)may be reviewed on an appeal under this paragraph or on an appeal against any such assessment.
If the inspector discovers that the amount apportioned in the case of any company is or has become insufficient, he shall serve on the company a further notice under paragraph 13(1)above showing the further amount which ought in his opinion to be apportioned, and a further notice relating to that amount shall then be served under paragraph 14above. Where the amount shown in a notice under sub-paragraph (1)of paragraph 13above is excessive because the company’s distributable income is smaller than it was taken to be for the purposes of that notice or because the company’s distributions were greater than they were taken to be for those purposes, the inspector shall serve on the company a further notice under that sub-paragraph showing a reduced amount; and where such a notice is served—
A close company may, at any time after the general meeting at which the accounts for any period of account are adopted, forward to the inspector a copy of those accounts, together with a copy of the report (if any)of the directors for that period and such further information (if any)as it may think fit, and may request the inspector to proceed under this paragraph in relation to any accounting period comprised in that period of account. Sub-paragraph (1)above shall not apply if the company is neither a trading company nor a member of a trading group and has no estate or trading income. Where the inspector receives a request made in accordance with sub-paragraph (1)above in relation to any accounting period, then, subject to sub-paragraph (4)below, he shall, within three months after receipt of the request, intimate to the company whether or not he proposes to make an apportionment in respect of the company for the accounting period under section 423. On receiving a request made in accordance with sub-paragraph (1)above the inspector may, not later than three months after the receipt of the request, call on the company to furnish him with such further particulars as he may reasonably require; and, if the inspector does so, the time for giving the intimation required by sub-paragraph (3)above shall not expire before three months after he has been furnished with those particulars. Where the inspector receives a request made in accordance with sub-paragraph (1)above in relation to any accounting period, and does not within the time limited by sub-paragraphs (3)and (4)above intimate his intention to make an apportionment in respect of the period, no such apportionment shall be made unless either—
Any functions conferred by this Chapter on the inspector may also be exercised by the Board; and references in this Chapter to the inspector shall be construed accordingly. Where by virtue of this paragraph a notice is served by the Board under paragraph 13(1)above any appeal under that paragraph shall be to the Special Commissioners.
Investments specified in any of the following paragraphs of this Part of this Schedule are qualifying investments for the purposes of section 506.
Any investment falling within Part I, Part II, apart from paragraph 13 (mortgages etc.) or Part III of Schedule 1 to the Trustee Investments Act 1961.
Any investment in a common investment fund established under section 22 of the Charities Act 1960 , section 24 of the Charities Act 1993 or section 25 of the Charities Act (Northern Ireland) 1964 or in any similar fund established for the exclusive benefit of charities by or under any enactment relating to any particular charities or class of charities.
Any interest in land, other than an interest held as security for a debt of any description.
Any investment in a common deposit fund established under section 22A of the Charities Act 1960 or section 25 of the Charities Act 1993 or in any similar fund established for the exclusive benefit of charities by or under any enactment relating to any particular charities or class of charities.
Shares in, or securities of, a company which are listed on a recognised stock exchange . . . .
Units, or other shares of the investments subject to the trusts, of a unit trust scheme within the meaning given by section 237(1) of the Financial Services and Markets Act 2000.
Deposits with a bank in respect of which interest is payable at a commercial rate. A deposit mentioned in sub-paragraph (1) above is not a qualifying investment if it is made as part of an arrangement under which a loan is made by the authorised institution to some other person. In this paragraph “bank” has the meaning given by section 840A.
Certificates of deposit as defined in section 56(5).
Shares in an open-ended investment company.
Any loan or other investment as to which the Board are satisfied, on a claim made to them in that behalf, that the loan or other investment is made for the benefit of the charitable company and not for the avoidance of tax (whether by the charitable company or any other person). The reference in sub-paragraph (1) above to a loan includes a loan which is secured by a mortgage or charge of any kind over land.
Uncertificated eligible debt security units as defined in section 552(2) of ITTOIA 2005.
For the purposes of section 506, a loan which is not made by way of investment is a qualifying loan if it consists of— In this paragraph “bank” has the meaning given by section 840A.
a loan made to another charity for charitable purposes only; or
a loan to a beneficiary of the charity which is made in the course of carrying out the purposes of the charity; or
money placed on current account with an institution authorised under the Banking Act 1987 otherwise than as part of such an arrangement as is mentioned in paragraph 7(2) above; or
any other loan as to which the Board are satisfied, on a claim made to them in that behalf, that the loan is made for the benefit of the charity and not for the avoidance of tax (whether by the charity or by some other person).
This Part of this Schedule applies in the circumstances specified in subsection (6) of section 506 and in this Part—
“the primary period” means the chargeable period of the charity concerned in which there is such an excess as is mentioned in that subsection;
“unapplied non-qualifying expenditure” means so much of the excess referred to in that subsection as does not exceed the non-qualifying expenditure of the primary period; and
“earlier period”, in relation to an amount of unapplied non-qualifying expenditure, means any chargeable period of the charity concerned which ended not more than six years before the end of the primary period.
So much of the unapplied non-qualifying expenditure as is not shown by the charity to be the expenditure of non-taxable sums received by the charity in the primary period shall be treated in accordance with paragraph 13 below as non-qualifying expenditure of earlier periods. In sub-paragraph (1) above “non-taxable sums” means donations, legacies and other sums of a similar nature which, apart from section 505(1) of this Act and section 256 of the 1992 Act, are not within the charge to tax.
Where, in accordance with paragraph 12 above, an amount of unapplied non-qualifying expenditure (“the excess expenditure”) falls to be treated as non-qualifying expenditure of earlier periods— Where there is more than one earlier period to which the excess expenditure can be attributed in accordance with sub-paragraph (1) above, it shall be attributed to later periods in priority to earlier periods. In so far as any of the excess expenditure cannot be attributed to earlier periods in accordance with this paragraph, it shall be disregarded for the purposes of section 506(6) (and this Part of this Schedule).
All such adjustments shall be made, whether by way of the making of assessments or otherwise, as may be required in consequence of the provisions of this Part of this Schedule.
Sections 570 and 572.
In this Schedule— For the purposes of this Schedule, a sum received by any person by way of repayment of contributions shall be deemed to be by way of repayment of the last contribution paid by him, and, if the sum exceeds the amount of that contribution, by way of repayment of the penultimate contribution so paid, and so on.
The question whether any, and if so, what, relief is to be given shall be determined separately in relation to each payment made under the scheme in respect of the trade, but for the purpose of determining that question regard shall be had, as provided by the following provisions of this Part of this Schedule, to the sum (“the total payment”) produced by adding the amount of the payment to the amount of any payments previously so made.
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the amount of the damage in respect of which the total payment has been made; and
how much of that amount is referable to damage in respect of which no relief may be given under the Tax Acts.
No relief shall be given in respect of the payment unless the total payment, or the amount of the damage in respect of which the total payment has been made, whichever is the smaller, exceeds the aggregate amount of the deductible contributions which have been paid in furtherance of the scheme in respect of the trade in question before the payment is made, exclusive of any contributions which have been repaid before the payment is made.
The amount of the reduction to be made in respect of the payment shall be arrived at by—
ascertaining the sum which bears to the excess mentioned in paragraph 4 above the same proportion that the amount mentioned in paragraph 3(b) above bears to the amount mentioned in paragraph 3(a); and
deducting from that sum the total amount of any reductions which have been or fall to be made under this Schedule in respect of payments previously made under the scheme in respect of the trade.
For the purposes of this Schedule, and subject to sub-paragraph (2) below, damage shall be deemed to be damage in respect of which relief may be given under the Tax Acts if and only if— . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Where any event occurs which would give rise to an allowance under the Tax Acts in respect of any asset in taxing, or computing the profits of, a trade but for any of the following matters, that is to say— Where any damage is attributable to a permanent change in the purposes for which an asset is used, or the temporary or permanent putting out of use of an asset, the question whether the damage is damage in respect of which relief may be given under the Tax Acts shall be determined as if the damage had been attributable to a sale of the asset on the date upon which the change or putting out of use took place.
The provisions of this Part of this Schedule shall have effect where—
a contribution is paid under a scheme in respect of a trade; and
before the contribution is paid, payments have been made under the scheme to the person carrying on the trade; and
reductions have been made, under Part II of this Schedule, in the amounts which, by reason of those payments, are to be treated as trading receipts of the trade.
There shall be ascertained—
the total amount of those reductions; and
the sum by which that total would have been decreased if the contribution, and any previous contributions to which this Part of this Schedule applies, had been paid before any of the payments were made.
For the purpose of determining what deduction is to be made in respect of the contribution under section 568, the contribution shall be deemed to be reduced by the sum specified in paragraph 8(b) above, but—
for the purpose of the application of paragraph 8 above in relation to contributions subsequently paid under the scheme in respect of the trade, the total amount of the reductions referred to in that paragraph shall be treated as decreased by that sum; and
for the purpose of the application of paragraph 5 above in relation to payments subsequently made under the scheme in respect of the trade, the total amount of the reductions referred to in that paragraph shall be treated as decreased by that sum.
When two or more contributions are paid at the same time, the provisions of this Part of this Schedule shall have effect as if they were a single contribution.
The Board may make regulations providing for this Schedule to apply, as from a prescribed date, in relation to any exempt approved scheme which is of a prescribed kind. The Board may make regulations providing for prescribed provisions of this Schedule to apply, as from a prescribed date, in prescribed circumstances, and subject to any prescribed omissions or modifications, in relation to any exempt approved scheme of another prescribed kind. In this Schedule “prescribed” means prescribed by regulations made by the Board.
The administrator of a scheme in relation to which this Schedule applies shall, in prescribed circumstances and at a prescribed time, either produce to the Board a written valuation such as is mentioned in sub-paragraph (2) below or give to the Board a certificate such as is mentioned in sub-paragraph (3) below. The valuation must be a valuation of the assets held for the purposes of the scheme and the liabilities of the scheme, must be determined in accordance with prescribed principles and fulfil prescribed requirements, and must be signed by a person with qualifications of a prescribed kind. The certificate must state whether or not the value of the assets (as determined in accordance with prescribed principles) exceeds the value of the liabilities (as so determined) by a percentage which is more than a prescribed maximum, must be in a prescribed form, and must be signed by a person with qualifications of a prescribed kind.
Subject to paragraph 4(4) below, where a valuation produced under paragraph 2 shows, or a certificate given under that paragraph states, that the value of the assets exceeds the value of the liabilities by a percentage which is more than the prescribed maximum, the administrator of the scheme shall within a prescribed period submit to the Board for their approval proposals which comply with sub-paragraph (2) below. The proposals must be proposals for reducing (or, subject to paragraph (b) below, eliminating) the excess in a way or ways set out in the proposals and falling within sub-paragraph (3) below; and they must be such as to secure that— Subject to sub-paragraph (4) below, the permitted ways of reducing or eliminating the excess are— In prescribed circumstances sub-paragraph (3) above shall apply subject to such omissions or modifications as may be prescribed. Subject to paragraph 4(4) below, if the administrator of the scheme fails to submit proposals to the Board within the period mentioned in subparagraph (1) above, or if the proposals submitted to them within that period are not approved by the Board within a further prescribed period, paragraph 7 below shall apply.
Where a valuation has been produced under paragraph 2 above, the Board may serve on the administrator of the scheme a notice requiring him to furnish the Board, within a prescribed period, with such particulars relating to the valuation as may be specified in the notice. Where a certificate has been given under paragraph 2 above, the Board may serve on the administrator of the scheme a notice requiring him to produce to the Board, within a prescribed period, a written valuation such as is mentioned in paragraph 2(2) above. Where a valuation has been produced in compliance with a notice served under sub-paragraph (2) above, the Board may serve on the administrator of the scheme a further notice requiring him to furnish the Board, within a prescribed period, with such particulars relating to the valuation as may be specified in the notice. Where a notice is served on the administrator of a scheme under sub-paragraph (1) or (2) above, paragraph 3(1) and (5) above shall cease to apply.
Where particulars have been furnished under paragraph 4 above, or a valuation has been produced under that paragraph, the Board shall, within a prescribed period, serve on the administrator of the scheme a notice— For the purposes of sub-paragraph (1)(b) above, the relevant time is the time specified in the valuation produced under paragraph 2 or 4 above as the time by reference to which the values of the assets and liabilities are determined. Where— the administrator of the scheme shall within a prescribed period submit to the Board for their approval proposals which comply with paragraph 3(2) to (4) above. If the administrator of the scheme fails to submit proposals to the Board within the period mentioned in sub-paragraph (3) above, or if proposals submitted to them within that period are not approved by the Board within a further prescribed period, paragraph 7 below shall apply.
Where proposals are submitted to the Board under paragraph 3(1) or 5(3) above and they approve them within the further prescribed period mentioned in paragraph 3(5) or 5(4) above, the administrator of the scheme shall carry out the proposals within the period mentioned in paragraph 3(2) above. If the administrator fails to carry out the proposals within that period, paragraph 7 below shall apply.
Where this paragraph applies the Board may specify a percentage equivalent to the fraction— where— A represents their estimate of the value of the liabilities of the scheme at the relevant time increased by a prescribed percentage; and B represents their estimate of the value of the assets held for the purposes of the scheme at that time. For the purposes of this paragraph the relevant time is the time specified— as the time by reference to which the values of the assets and liabilities are determined. Where a percentage has been so specified— Sub-paragraphs (5) to (8) below shall apply where a percentage has been so specified, securities are transferred in the relevant period, and the transferor or transferee is such that, if he became entitled to any interest on them, exemption could be allowed under section 592(2). Section 715(1)(k) shall not apply. Where, in consequence of sub-paragraph (5) above, section 713(2)(a) or (3)(b) applies, the sum concerned shall be treated as reduced by an amount equal to the specified percentage of itself. Where, in consequence of sub-paragraph (5) above, section 713(2)(b) or (3)(a) applies, the relief concerned shall be treated as reduced by an amount equal to the specified percentage of itself. For the purposes of section 714(5), the amount of interest falling to be reduced by the amount of the allowance shall be treated as the amount found after applying section 592(2). In sub-paragraphs (4) to (8) above expressions which also appear in sections 710 to 728 have the same meanings as in those sections. In this paragraph “the relevant period” means the period begining at the relevant time and ending when it is proved to the satisfaction of the Board that the value of the assets (as determined in accordance with prescribed principles) exceeds the value of the liabilities (as so determined) by a percentage which is no more than the prescribed maximum.
The Board may make regulations providing that an appeal may be brought against a notice under paragraph 5(1)(b) above as if it were notice of the decision of the Board on a claim made by the administrator of the scheme concerned. Regulations under this paragraph may include—
This paragraph applies if a calculation falls to be made under paragraph 7 above in a case where— That relief is to be given before the calculation under paragraph 7 above is made. Then the amount of income to which the specified percentage is applied by virtue of sub-paragraph (3)(a) of that paragraph is reduced by the amount of that relief. In this paragraph “disposal” has the same meaning as in Chapter 8 of Part 4 of ITTOIA 2005.
This Schedule shall be deemed to have come into force on 17th March 1987 and, subject to sub-paragraphs (2) and (3) below, applies in relation to any retirement benefits scheme approved by the Board before the passing of the Finance (No.2) Act 1987 (23rd July 1987). The Board may by regulations provide that, in circumstances prescribed in the regulations, this Schedule or any provision of it shall not apply or shall apply with such modifications as may be so prescribed. Regulations under sub-paragraph (2) above— This Schedule shall not apply to a retirement benefits scheme if, before the end of 1987, the administrator of the scheme gave notice to the Board that it is not to apply. Where a notice is given to the Board under sub-paragraph (3) above, the scheme shall, with effect from 17th March 1987 or (if later) the date with effect from which it was approved, cease to be approved.
This paragraph applies where an employee becomes a member of the scheme on or after 17th March 1987. Notwithstanding anything to the contrary in the rules of the scheme, they shall have effect as if they did not allow the provision for the employee of a pension exceeding one-thirtieth of his relevant annual remuneration for each year of service up to a maximum of 20.
This paragraph applies where an employee becomes a member of the scheme on or after 17th March 1987 and the scheme allows him to commute his pension or part of it for a lump sum or sums. If the employee’s full pension (that is, the pension before any commutation) is equal to or less than a basic rate commutable pension, the rules of the scheme shall have effect (notwithstanding anything in them to the contrary) as if they did not allow him to obtain by way of commutation a lump sum or sums exceeding in all a basic rate lump sum. If the employee’s full pension is greater than a basic rate commutable pension but less than a maximum rate commutable pension, the rules of the scheme shall have effect (notwithstanding anything in them to the contrary) as if they did not allow him to obtain by way of commutation a lump sum or sums exceeding in all the aggregate of— In this paragraph, as it applies in relation to an employee—
This paragraph applies where an employee becomes a member of the scheme on or after 17th March 1987 and the scheme provides a lump sum or sums for him otherwise than by commutation of his pension or part of it. If the employee’s pension is equal to or less than a basic rate non-commutable pension, the rules of the scheme shall have effect (notwithstanding anything in them to the contrary) as if they did not allow the payment to him, otherwise than by way of commutation, of a lump sum or sums exceeding in all a basic rate lump sum. If the employee’s pension is greater than a basic rate non-commutable pension but less than a maximum rate non-commutable pension the rules of the scheme shall have effect (notwithstanding anything in them to the contrary) as if they did not allow the payment to him, otherwise than by way of commutation, of a lump sum or sums exceeding in all the aggregate of— In this paragraph, as it applies in relation to an employee—
his paragraph applies where an employee who is a member of the scheme retires on or after 17th March 1987. The rules of the scheme shall have effect as if they provided that in determining the employee’s relevant annual remuneration for the purpose of calculating benefits, no account should be taken of anything excluded from the definition of “remuneration” in section 612(1). In the case of an employee— the rules of the scheme shall have effect as if they provided that his relevant annual remuneration must not exceed his highest average annual remuneration for any period of three or more years ending within the period of ten years which ends with the date on which his service ends. In the case of an employee within paragraph (b) of sub-paragraph (3) above who retires before 6th April 1991, the rules of the scheme shall have effect as if they provided that his relevant annual remuneration must not exceed the higher of— For the purposes of this paragraph a person is a controlling director of a company if— in relation to the company.
This paragraph applies where an employee becomes a member of the scheme on or after 17th March 1987. If the rules of the scheme allow the employee to obtain, (by commutation of his pension or otherwise), a lump sum or sums calculated by reference to his relevant annual remuneration, they shall have effect as if they included a rule that in calculating a lump sum any excess of that remuneration over the permitted maximum should be disregarded.
This paragraph applies where— Notwithstanding anything in the rules of the scheme, they shall have effect as if they did not allow the payment to the employee of a lump sum in commutation of a pension if or to the extent that the pension is secured by the voluntary contributions.
This paragraph applies where an employee who is a member of the scheme (“the main scheme”)is also a member of an approved scheme (“the voluntary scheme”)which provides additional benefits to supplement those provided by the main scheme and to which no contributions are made by any employer of his. Any rules of the main scheme imposing a limit on the amount of a benefit provided for the employee shall have effect (notwithstanding anything in them to the contrary)as if they provided for the limit to be reduced by the amount of any like benefit provided for the employee by the voluntary scheme.
In this Schedule “relevant annual remuneration” means final remuneration or, if the scheme provides for benefits to be calculated by reference to some other annual remuneration, that other annual remuneration.
Section 747(6).
The company shall be assumed to be resident in the United Kingdom. Nothing in sub-paragraph (1) above requires it to be assumed that there is any change in the place or places at which the company carries on its activities. For the avoidance of doubt, it is hereby declared that, if any sums forming part of the company’s profits for an accounting period have been received by the company without any deduction of or charge to tax and have been so received by virtue of section 1279 of CTA 2009 the effect of the assumption in sub-paragraph (1) above is that those sums are to be brought within the charge to tax for the purposes of calculating the company’s chargeable profits or corresponding United Kingdom tax. In any case where— in determining the chargeable profits of the company for the accounting period mentioned in paragraph (a) above, it shall be assumed, for the purposes of those provisions of paragraphs 2 and 10 below which refer to the first accounting period in respect of which an apportionment under section 747(3) falls to be made . . . , that that period (but not any earlier period) is an accounting period in respect of which such an apportionment falls to be made . . . . In any case where— in determining the chargeable profits of the company for the accounting period mentioned in paragraph (a) above, it shall be assumed, for the purposes of those provisions of paragraph 9 below which refer to the first accounting period in respect of which an apportionment under section 747(3) falls to be made, that such an apportionment falls to be made in respect of that period (but not in respect of any earlier period). Nothing in this Schedule affects any liability for, or the computation of, corporation tax in respect of a trade which is carried on by a company resident outside the United Kingdom through a permanent establishment in the United Kingdom. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The company shall be assumed to have become resident in the United Kingdom (and, accordingly, within the charge to corporation tax) at the beginning of the first accounting period— and that United Kingdom residence shall be assumed to continue throughout subsequent accounting periods of the company (whether or not an apportionment falls to be made in respect of all or any of them) until the company ceases to be controlled by persons resident in the United Kingdom. Except in so far as the following provisions of this Schedule otherwise provide, for the purposes of calculating a company’s chargeable profits or corresponding United Kingdom tax for any accounting period which is not the first such period referred to in sub-paragraph (1) above (and, in particular, for the purpose of applying any relief which is relevant to two or more accounting periods), it shall be assumed that a calculation of chargeable profits or, as the case may be, corresponding United Kingdom tax has been made for every previous accounting period throughout which the company was, by virtue of sub-paragraph (1) above, assumed to have been resident in the United Kingdom.
The company shall be assumed not to be a close company.
Subject to sub-paragraph (2) below, where any relief under the Corporation Tax Acts is dependent upon the making of a claim or election, the company shall be assumed to have made that claim or election which would give the maximum amount of relief and to have made that claim or election within any time limit applicable to it , except that the company shall be assumed not to have made an election under section 18A of CTA 2009. Sub-paragraph (2) below applies to any accounting period of the company— Where this sub-paragraph applies to an accounting period of the company, then if, by notice given to an officer of the Board at any time not later than the expiry of the period of twenty months following the end of the accounting period or within such longer period as the Board may in any particular case allow, the United Kingdom resident company which has or, as the case may be, any two or more United Kingdom resident companies which together have, a majority interest in the company so request, the company shall be assumed— . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . For the purposes of sub-paragraph (1) an election under section 9A of CTA 2010 (designated currency of a UK resident investment company) is not to be regarded as an election upon which relief under the Corporation Tax Acts is dependent, and sub-paragraph (2)(b) does not apply in relation to such an election. But if, by notice given to an officer of the Board, the United Kingdom resident company which has or, as the case may be, any two or more United Kingdom resident companies which together have, a majority interest in the company so request, the company shall be assumed (subject to section 9A(2) of CTA 2010) to have made an election under section 9A of that Act in the form specified in the notice (and accordingly that section and section 9B of that Act apply to determine the effect (if any) of that election). For the purposes of this paragraph, a United Kingdom resident company has, or two or more United Kingdom resident companies together have, a majority interest in the company if on the apportionment of the company’s chargeable profits for the relevant accounting period under section 747(3) more than half of the amount of those profits— are apportioned to the United Kingdom resident company or companies concerned. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . In sub-paragraph (3) above “the relevant accounting period” means the accounting period or, as the case may be, the first accounting period in which the relief in question is or would be available in accordance with sub-paragraph (1) above.
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The company shall be assumed to be neither a member of a group of companies nor a member of a consortium for the purposes of any provision of the Tax Acts. Where, under Part 5 of CTA 2010, any relief is in fact surrendered by the company and allowed to another company by way of group relief, it shall be assumed that the chargeable profits of the company, apart from this paragraph, are to be increased by an amount of additional profits equal to the amount of the relief so surrendered and allowed.
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Without prejudice to the operation of Chapter 1 of Part 22 of CTA 2010 in a case where the company is the predecessor, within the meaning of that Chapter, and a company resident in the United Kingdom is the successor, within the meaning of that Chapter—
the assumption that the company is resident in the United Kingdom shall not be regarded as requiring it also to be assumed that the company is within the charge to tax in respect of a trade for the purposes of that Chapter, and
except in so far as the company is actually within that charge (by carrying on the trade through a permanent establishment in the United Kingdom), it shall accordingly be assumed that the company can never be the successor, within the meaning of that Chapter, to another company (whether resident in the United Kingdom or not).
. . . This paragraph applies in any case where the company incurred a loss in a trade in an accounting period— and in this paragraph any such accounting period is referred to as a “ pre-apportionment period”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . If a claim is made for the purpose by the United Kingdom resident company or companies referred to in paragraph 4(2) above, the chargeable profits (if any) of the company for accounting periods beginning with that pre-apportionment period which is specified in the claim and in which a loss is incurred as mentioned in sub-paragraph (1) above shall be determined (in accordance with the provisions of this Schedule other than this paragraph) on the assumption that that pre-apportionment period was the first accounting period in respect of which an apportionment under section 747(3) fell to be made. A claim under sub-paragraph (3) above shall be made by notice given to an officer of the Board within the period of twenty months following the end of the starting period or within such longer period as the Board may in any particular case allow. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Nothing in— shall apply, whether by virtue of section 754 or otherwise, to a claim under sub-paragraph (3) above.
Subject to paragraph 12 below, if, in an accounting period falling before the beginning of the first accounting period— the company incurred any capital expenditure on the provision of plant or machinery for the purposes of its trade, that plant or machinery shall be assumed, for the purposes of Part 2 of the Capital Allowances Act, to have been provided for purposes wholly other than those of the trade and not to have been brought into use for the purposes of that trade until the beginning of that first accounting period, and section 13 of that Act (use for qualifying activity of plant or machinery provided for other purposes) shall apply accordingly. This paragraph shall be construed as one with Part 2 of the Capital Allowances Act.
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For the purposes of the application of Part 18 of CTA 2009 to the company’s income it shall be assumed—
that any reference in section 1274(3) or (4) of that Act to the United Kingdom is a reference to both the United Kingdom and the territory in which the company is in fact resident; and
that a claim under section 1275 of that Act (claim for relief for unremittable income) may be made on behalf of the company by the United Kingdom resident company or companies referred to in paragraph 4(2) above.
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Section 748.
The provisions of this Part of this Schedule have effect for the purposes of paragraph (a) of subsection (1) of section 748 and the other provisions of Chapter IV of Part XVII which refer to a company pursuing an acceptable distribution policy.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Subject to sub-paragraph (5) below, for the purposes of this Part of this Schedule, the net chargeable profits of a controlled foreign company for any accounting period are— and for the purposes of this sub-paragraph “unrestricted creditable tax” in relation to a company’s accounting period means the amount which would be its creditable tax for that period if the reference in section 751(6)(a) to Part XVIII did not include section 797. In any case where— so much of those specified profits as is equal to the dividend referred to in paragraph (a) above shall be left out of account in determining, for the purposes of this Part of this Schedule,. . . the chargeable profits of the controlled foreign company referred to in that paragraph for any accounting period.
Paragraph 2 above shall have effect in accordance with this paragraph to determine whether a controlled foreign company . . . pursues an acceptable distribution policy in respect of a particular accounting period (“the relevant accounting period”). Subject to sub-paragraphs (4) and (4A) below, where the distribution condition is satisfied in relation to the relevant accounting period, then, in addition to any dividend which falls within paragraph 2(1)(a) above apart from this paragraph— and so on; and in this sub-paragraph “dividend” means a dividend not paid out of specified profits. For the purposes of this paragraph, the distribution condition is satisfied in relation to any accounting period if— or if there are no relevant profits for the period. Where, by reason only of the fact that a company pursued an acceptable distribution policy in respect of any accounting period (“the earlier period”) earlier than the relevant accounting period, no apportionment under section 747(3) fell to be made in respect of the earlier period, sub-paragraph (2) above shall apply to any dividend required to be taken into account for the purpose of showing that the company pursued an acceptable distribution policy in respect of the earlier period only to the extent (if any) to which that dividend was not required to be taken into account for that purpose. Sub-paragraph (2) does not apply where the distribution condition is satisfied in relation to the relevant accounting period, but— The income within this sub-paragraph is— Where there is more than one settlor or beneficiary in relation to the settlement mentioned in sub-paragraph (4B)(a), the income is to be apportioned between the company and the other settlors or beneficiaries on a just and reasonable basis. In sub-paragraph (4B)(b) “partnership” includes an entity established under the law of a country or territory outside the United Kingdom of a similar character to a partnership; and “partner” is to be read accordingly. The modifications of paragraph 2 above referred to in sub-paragraph (3)(b) above are that— . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . For the purposes of this paragraph—
For the purposes of this Part of this Schedule, where— so much of the initial dividend as is represented by the subsequent dividend shall be regarded as paid to the United Kingdom resident and shall be taken to satisfy the conditions in paragraph 2(1A) above. A payment to a company shall not be a subsequent dividend within the meaning of sub-paragraph (1)(b) above unless it is taken into account in computing the company’s income for corporation tax and— and paragraph 4A below has effect for the purposes of paragraph (b) above. For the purposes of this paragraph, one company is related to another if neither is resident in the United Kingdom and the other— at least 10 per cent. of the voting power in the first-mentioned company; and where one company is so related to another and that other is so related to a third company, the first company is for the purposes of this paragraph related to the third, and so on where there is a chain of companies, each of which is related to the next.
This paragraph has effect for the purposes of paragraph 2(1A)(b) above. No payment of dividend by a controlled foreign company for an accounting period shall be regarded as involved in a UK tax avoidance scheme by reason only that there is no charge to tax under section 747(4)(a) if the controlled foreign company pursues an acceptable distribution policy for that accounting period. “UK tax avoidance scheme” means a scheme or arrangement the purpose, or one of the main purposes, of which is to achieve a reduction in United Kingdom tax. A scheme or arrangement achieves a reduction in United Kingdom tax if, apart from the scheme or arrangement, any company— In this paragraph—
This paragraph has effect for the purposes of paragraph 4(1A)(b) above. No payment to a company resident in the United Kingdom which represents the whole or part of a dividend paid by a controlled foreign company for an accounting period shall be regarded as involved in a UK tax avoidance scheme by reason only that— “UK tax avoidance scheme” means a scheme or arrangement the purpose, or one of the main purposes, of which is to achieve a reduction in United Kingdom tax. A scheme or arrangement achieves a reduction in United Kingdom tax if, apart from the scheme or arrangement, any company— In this paragraph—
The provisions of this Part of this Schedule have effect for the purposes of paragraph (b) of subsection (1) of section 748. Except as provided in paragraph 8 below, the provisions of this Part of this Schedule apply in relation to a company which is resident in an EEA territory in the same way as they apply in relation to a company which is resident elsewhere. In the case of a controlled foreign company— references in the following provisions of this Part of this Schedule to the territory in which that company is resident shall be construed as references to the territory falling within paragraph (b) above, or, if there is more than one, to that one of them which may be notified to the Board by the United Kingdom resident company or companies referred to in paragraph 4(2) of Schedule 24. In the case of a controlled foreign company— references in the following provisions of this Part of this Schedule to the territory in which that company is resident shall be construed as references to that region. In sub-paragraph (3) above “special administrative region” means the Hong Kong or the Macao Special Administrative Region of the People’s Republic of China. Where sub-paragraph (3) above applies, it applies in place of sub-paragraph (2).
Throughout an accounting period a controlled foreign company is engaged in exempt activities if, and only if, each of the following conditions is fulfilled— This sub-paragraph applies to a company if— Those persons are— but where the company is a controlled foreign company falling within sub-paragraph (2B) below, paragraphs (d) to (f) above shall be disregarded. A controlled foreign company falls within this sub-paragraph if either— Paragraph 11A below has effect for the interpretation of this sub-paragraph. For the purposes of sub-paragraph (2)(b) above, a company’s gross trading receipts from a business shall be regarded as directly or indirectly derived from a person falling within sub-paragraph (2A)(e) above only to the extent that they are derived directly or indirectly from contracts or other arrangements relating to that person’s permanent establishment in the United Kingdom. This sub-paragraph applies to a company which is a holding company if at least 90 per cent. of its gross income during the accounting period in question is received by it in the territory in which it is resident and is derived directly from companies which it controls and which, throughout that period— and a holding company to which this sub-paragraph applies is in this Part of this Schedule referred to as a “local holding company”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . For the purposes of sub-paragraph (2A)(b) above, a person has a 25 per cent. assessable interest in a controlled foreign company in the case of an accounting period of the company if, on an apportionment of the chargeable profits and creditable tax (if any) of the company for that accounting period under section 747(3), at least 25 per cent. of the controlled foreign company’s chargeable profits for the accounting period would be apportioned to that person. Any reference in sub-paragraph (3) above to a company which a holding company . . . controls includes a reference to a trading company to which sub-paragraph (5ZA) or (5ZB) below applies. This sub-paragraph applies to a trading company in which the holding company . . . holds the maximum amount of ordinary share capital which is permitted under the law of the territory— This sub-paragraph applies to a trading company if— For the purposes of sub-paragraph (3) above, a company is an exempt trading company throughout any period if— . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . For the purposes of this paragraph, the gross income of a holding company . . . during an accounting period includes— Where there is more than one settlor or beneficiary in relation to the settlement mentioned in sub-paragraph (5C)(a), the income is to be apportioned between the company and the other settlors or beneficiaries on a just and reasonable basis. In sub-paragraph (5C)(b) “partnership” includes an entity established under the law of a country or territory outside the United Kingdom of a similar character to a partnership; and “partner” is to be read accordingly. The following provisions of this Part of this Schedule have effect in relation to this paragraph.
For the purposes of paragraph 6(1)(a) above, a “business establishment”, in relation to a controlled foreign company, means premises— For the purposes of sub-paragraph (1) above the following shall be regarded as premises— but such a site as is referred to in paragraph (c) above shall not be regarded as premises unless the building work or the project, as the case may be, has a duration of at least twelve months.
Subject to sub-paragraph (4) below, the condition in paragraph 6(1)(b) above shall not be regarded as fulfilled in relation to a company which is not resident in an EEA territory unless— For the purposes of sub-paragraph (1)(a) above, persons who are engaged wholly or mainly in the business of the company and whose remuneration is paid by a person connected with, and resident in the same territory as, the company shall be treated as employed by the company. In the case of a holding company . . . , sub-paragraph (2) above shall apply with the omission of the words “wholly or mainly”. For the purposes of sub-paragraph (1)(b) above, no account shall be taken of services— The condition in paragraph 6(1)(b) above shall not be regarded as fulfilled in relation to a company which is resident in an EEA territory unless there are sufficient individuals working for the company in the territory who have the competence and authority to undertake all, or substantially all, of the company's business. For the purposes of sub-paragraph (5) above, individuals are not to be regarded as working for a company in any territory unless—
Subject to sub-paragraph (3) below, for the purposes of paragraph 6(2)(a)(i) above, each of the following activities constitutes investment business— In sub-paragraph (1)(a) above “intellectual property” includes (in particular)— In sub-paragraph (1)(b) above “broker” includes any person offering to sell securities to, or purchase securities from, members of the public generally. For the purposes of paragraph 6(2) above, in the case of a company which is mainly engaged in business falling within paragraph 11(1)(c) below, nothing in sub-paragraph (1) above shall require the main business of the company to be regarded as investment business.
Goods which are actually delivered into the territory in which the controlled foreign company is resident shall not be taken into account for the purposes of paragraph 6(2)(a)(ii) above.
For the purposes of paragraph 6(2)(b) above, each of the following activities constitutes wholesale, distributive financial or service business— For the purposes of sub-paragraph (1)(g) above “contract of insurance” has the meaning given by Article 3(1) of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001. In a case where the gross trading receipts of a company include an amount in respect of the proceeds of sale of any description of property or rights, the cost to the company of the purchase of that property or those rights shall be a deduction in calculating the company’s gross trading receipts for the purposes of paragraph 6(2)(b) above. In the case of a controlled foreign company engaged in a business falling within sub-paragraph (1)(c) above— For the purposes of this paragraph, in relation to a controlled foreign company— For the purposes of sub-paragraph (4) above— and in this sub-paragraph “securities” includes stocks and shares. In the application of paragraph 6(2)(b) above in the case of a controlled foreign company engaged in insurance business of any kind— In determining, in relation to a controlled foreign company to which sub-paragraph (6) above applies, the gross trading receipts referred to in paragraph (a) of that sub-paragraph, there shall be left out of account any receipts under a local reinsurance contract which are attributable to liabilities which— and in paragraph (a) above “insurance contract” does not include a reinsurance contract. In sub-paragraph (7) above “local reinsurance contract” means a reinsurance contract— For the purposes of sub-paragraphs (7) and (8) above, any question as to the territory in which a company is resident shall be determined in accordance with section 749 and, where appropriate, paragraph 5(2) above; and, for the purpose of the application of those provisions in accordance with this sub-paragraph, the company shall be assumed to be a controlled foreign company.
Subject to sub-paragraph (2) below, in paragraphs 6 and 8(3) above and in sub-paragraphs (4) and (5) below “holding company” means— In determining whether a company is a holding company for the purposes of paragraph 6(3) above (and, accordingly, whether the company is or may be a local holding company), sub-paragraph (1) above shall have effect with the omission from paragraph (a) thereof of the words “either local holding companies and its 90 per cent. subsidiaries or”. In its application for the purposes of this paragraph, section 1154 of CTA 2010 has effect with the omission of the following— For the purposes of sub-paragraph (3) . . . of paragraph 6 above, as it applies in relation to a holding company part of whose business consists of activities other than the holding of shares or securities or the holding of property or rights as mentioned in paragraph (a) or (b) of sub-paragraph (1) above, the company’s gross income during any accounting period shall be determined as follows— For the purposes of sub-paragraph (3) of paragraph 6 above, so much of the income of a holding company as— shall be treated, in relation to the holding company, as if it were not derived directly from companies which it controls. The reference in sub-paragraph (5) above to the non-trading income of a company is a reference to so much of its income as, if the company were carrying on its trade in the United Kingdom, would not be within the charge to corporation tax under section 35 of CTA 2009.
This paragraph has effect for the interpretation of paragraph 6(2B) above. “Contract of long-term insurance” means any contract falling within Part II of Schedule 1 to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001. “Protection business” means contracts of long-term insurance where— and references to protection business include a reference to reinsurance of protection business. “Insurance group” shall be construed in accordance with section 1165(5) of the Companies Act 2006, but does not include such an insurance group if it falls within sub-paragraph (5) below. Such an insurance group falls within this sub-paragraph if . . . the parent company is a subsidiary undertaking of a parent company which is neither— A controlled foreign company is, in accordance with sub-paragraphs (4) and (5) above, a “member of an insurance group” if (within the meaning of that Part as so read) it is the parent company, or a subsidiary undertaking of the parent company, of an insurance group which is by virtue of sub-paragraph (4) above an insurance group for the purposes of paragraph 6(2B) above. A company’s main business is “insuring or reinsuring large risks” if (and only if)— In this paragraph—
In paragraph 11A above “large risks” means— The condition referred to in sub-paragraph (1)(c) above is that, in the case of that business of the policy holder, at least two of the three following criteria were exceeded in the most recent financial year beginning on or after 1st January 1999 for which the information is available— For the purposes of sub-paragraph (2) above as it applies where the policy holder is a company, within the meaning of section 1 of the Companies Act 2006. . . ,— and for a financial year which is a company’s financial year but not in fact a year, the net turnover of the company shall be proportionately reduced. Where the policy holder is a member of a group for which consolidated accounts (within the meaning of Directive 83/349/EEC) are drawn up, the question whether the condition in sub-paragraph (2) above is met shall be determined by reference to those accounts. For the purposes of sub-paragraph (1)(c) above as it applies where the policy holder is a professional association, joint venture or temporary grouping, the question whether the condition in sub-paragraph (2) above is met shall be determined by reference to the aggregate of the figures of the description in question for all the members of the professional association, joint venture or temporary grouping. In sub-paragraphs (1) to (5) above “business” includes a trade or profession and, for the purposes of sub-paragraph (1)(c) above, any activity of a professional association, joint venture or temporary grouping. For the purposes of this paragraph, where an amount is denominated in any accounts in a currency other than the euro, it shall be converted into its equivalent in euros using the London closing exchange rate for that currency and the euro for the last day of the period to which the accounts relate. In this paragraph—
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The provisions of this Part of this Schedule have effect for the purposes of section 748(1)(c). Subject to paragraph 14 below, a controlled foreign company fulfils the public quotation condition with respect to a particular accounting period if—
The condition in paragraph 13(2) above is not fulfilled with respect to an accounting period of a controlled foreign company if at any time in that period the total percentage of the voting power in the company possessed by all of the company’s principal members exceeds 85 per cent. For the purposes of paragraph 13(2) above shares in a controlled foreign company shall be deemed to be beneficially held by the public if they are held by any person other than— and a corresponding construction shall be given to the reference to shares which have been allotted unconditionally to, or acquired unconditionally by, the public.
References in this Part of this Schedule to shares held by any person include references to any shares the rights or powers attached to which could, for the purposes of section 416, be attributed to that person under subsection (5) of that section. For the purposes of this Part of this Schedule— In arriving at the voting power which a person possesses, there shall be attributed to him any voting power which, for the purposes of section 416, would be attributed to him under subsection (5) or (6) of that section. In this Part of this Schedule “shares” include “stock”.
For the purposes of section 748(1)(ba), a controlled foreign company (“C”) is exempt for an accounting period if the requirements of this Part of this Schedule are satisfied. The requirements are those imposed as to C's—
The requirement of this paragraph is that throughout the accounting period C has a business establishment in the territory in which it is resident. For the purposes of sub-paragraph (1)—
The requirement of this paragraph is that— For this purpose— For the purposes of sub-paragraph (2)(f), a person is “related” to C if— In sub-paragraph (2)—
The requirement of this paragraph is that C does not have a significant connection with the United Kingdom during the accounting period. C has a significant connection with the United Kingdom during the accounting period if Condition A or B is met. Condition A is that— This sub-paragraph applies if— Condition B is that— For the purposes of sub-paragraph (4)(a), individuals are not to be regarded as working for C in any territory unless— In this paragraph— and paragraph 12D(3) (persons “related” to C) applies for the purposes of this paragraph as it applies for the purposes of paragraph 12D(2)(f). In the case of a company which is within the charge to United Kingdom tax only because it carries on a trade in the United Kingdom through a permanent establishment there, for the purposes of sub-paragraph (7)—
The requirement of this paragraph is that not more than 5% of C's gross income for the accounting period falls within sub-paragraph (2). Gross income falls within this sub-paragraph to the extent that it is— “Finance income” means— “Relevant IP income” means royalties and receipts of a similar nature arising from intellectual property. For the purposes of sub-paragraph (3)(b), the amount of a return is the amount which by virtue of the return would, in calculating C's chargeable profits, be treated under section 486B of CTA 2009 (disguised interest to be regarded as profit from loan relationship) as a profit arising to C from a loan relationship. But, in calculating that profit for the purposes of sub-paragraph (5), sections 486B(7) and 486C to 486E of CTA 2009 are to be ignored. In this paragraph—
References in this Part of this Schedule to C's gross income are to be construed in accordance with this paragraph. C's gross income for an accounting period does not include— C's gross income for an accounting period includes— Where there is more than one settlor or beneficiary in relation to the settlement mentioned in sub-paragraph (3)(a), the income is to be apportioned between C and the other settlors or beneficiaries on a just and reasonable basis. In this paragraph—
The provisions of this Part of this Schedule have effect for the purposes of section 748(3). Any reference in paragraphs 17 and 18 below to a transaction—
A transaction achieves a reduction in United Kingdom tax if, had the transaction not been effected, any person— In this Part of this Schedule and section 748(3) “United Kingdom tax” means income tax, corporation tax or capital gains tax.
It is the main purpose or one of the main purposes of a transaction to achieve a reduction in United Kingdom tax if this is the purpose or one of the main purposes—
of the controlled foreign company concerned; or
of a person who has an interest in that company at any time during the accounting period concerned.
The existence of a controlled foreign company achieves a reduction in United Kingdom tax by a diversion of profits from the United Kingdom in an accounting period if it is reasonable to suppose that, had neither the company nor any company related to it been in existence— For the purposes of sub-paragraph (1) above, a company is related to a controlled foreign company if— Any reference in sub-paragraph (1) above to a company resident in the United Kingdom includes a reference to such a company which, if the controlled foreign company in question were not in existence, it is reasonable to suppose would have been established.
For the purposes of section 748(1)(bb), a company (“C”) is exempt for an accounting period if the requirements of this Part of this Schedule are satisfied. The requirements are those imposed as to C's—
The requirement of this paragraph is that throughout the accounting period C has a business establishment in the territory in which it is resident. For the purposes of sub-paragraph (1)—
The requirement of this paragraph is that C's main business, throughout the accounting period, consists of the exploitation of intellectual property which does not have a relevant UK connection. For the purposes of sub-paragraph (1), if any part of C's main business consists of the exploitation of intellectual property which has a relevant UK connection, that part is to be ignored if it is an insignificant part of C's main business. Intellectual property has a relevant UK connection if—
The requirement of this paragraph is that— The secondary activities condition is that either—
The requirement of this paragraph is that C does not have a significant connection with the United Kingdom during the accounting period. C has a significant connection with the United Kingdom during the accounting period if— In this paragraph—
The requirement of this paragraph is that not more than 5% of C's gross income for the accounting period consists of finance income (within the meaning of paragraph 12F(3)).
For the purpose of this Part of this Schedule— and paragraph 12G (meaning of “gross income”) applies as it applies for the purposes of Part 2A of this Schedule. For the purposes of this Part of this Schedule a person is “related” to C at a particular time if at that time— In the case of a company which is within the charge to United Kingdom tax only because it carries on a trade in the United Kingdom through a permanent establishment there—
The provisions of this Part of this Schedule have effect for the purposes of section 748(1)(f).
An exempt period begins in relation to a company (“X”) at a time (“the relevant time”) when— There is a “relevant UK corporate investor in X” at a particular time if, at that time, there is a company which— The assumptions are— “The relevant accounting period” means the accounting period of X in which the time mentioned in sub-paragraph (2) falls.
The requirements of this paragraph are that— Condition A is that, immediately before the relevant time, X— Condition B is that— Condition C is that— Condition D is that X— In this paragraph “controlling UK person” means a person resident in the United Kingdom who alone, or together with other such persons, controls X.
The requirements of this paragraph are that— In determining for the purposes of sub-paragraph (1)(e)(ii) whether a company is under the control of two or more bodies corporate taken together, a body corporate which holds less than 10% of the issued ordinary shares of that company is to be disregarded. For the purposes of sub-paragraph (2), a body corporate is treated as holding any shares held by persons who are connected or associated with the body corporate.
This paragraph applies for the purposes of paragraph 15C and 15D. A disqualifying relevant transaction occurs if— “Relevant transaction” means— This sub-paragraph applies to a transaction if— A transaction achieves, or two or more transactions together achieve, a reduction in United Kingdom tax if, had the transaction or transactions not been effected, any person— In this paragraph—
An exempt period ends on the expiry of the period of 24 months which begins immediately after the first accounting period of X to end after the relevant time, unless sub-paragraph (2) applies. If an early termination event occurs after the relevant time but before the time the exempt period would end under sub-paragraph (1), the exempt period ends immediately before that event. An early termination event occurs if and when—
In this Part of this Schedule— For the purposes of this Part of this Schedule a person is “related” to X at a particular time if—
Section 754(5).
In any case where— then, on the making of a claim, a sum equal to corporation tax at the appropriate rate on so much of the relevant allowance . . . as is specified in the claim shall be set off against the company’s liability to tax under section 747(4)(a) in respect of the chargeable profits apportioned to it. In this paragraph— In this paragraph “relevant allowance” means— . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Where, by virtue of sub-paragraph (1) above, a sum is set off against a liability to tax, so much of the relevant allowance as gives rise to the amount set off shall be regarded for the purposes of the Tax Acts as having been allowed as a deduction against the company’s profits in accordance with the appropriate provisions of those Acts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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This paragraph applies in any case where— and in this paragraph the disposal mentioned in paragraph (c) above is referred to as “the relevant disposal”. Subject to the following provisions of this paragraph, in the computation under Chapter III of Part II of the 1992 Act of the gain accruing on the relevant disposal, the appropriate fraction of the sum referred to in sub-paragraph (1)(d) above shall be allowable as a deduction; but to the extent that any sum has been allowed as a deduction under this sub-paragraph it shall not again be allowed as a deduction on any claim under this paragraph (whether made by the claimant company or another company). In relation to the relevant disposal, the appropriate fraction is— where— A is the average market value in the apportionment period of the shares disposed of, and B is the average market value in that period of the interest in the controlled foreign company which, in the case of the claimant company, was taken into account in the apportionment referred to in sub-paragraph (1)(b) above. Where, before the relevant disposal— this paragraph does not apply in relation to a sum chargeable under section 747(4)(a) in respect of so much of the chargeable profits as corresponds to the profits which the dividend represents. The conditions referred to in sub-paragraph (4) above are— A claim for relief under this paragraph shall be made before the expiry of the period of three months beginning— Nothing in— shall apply, whether by virtue of section 754 or otherwise, to a claim under sub-paragraph (6) above. In identifying for the purposes of this paragraph shares in a company with shares of the same class which are disposed of by the relevant disposal, shares acquired at an earlier time shall be deemed to be disposed of before shares acquired at a later time.
This paragraph applies in any case where— Subject to paragraphs 5 and 6 below, where this paragraph applies, the aggregate of the sums chargeable on companies resident in the United Kingdom in accordance with section 747(4)(a) in respect of the chargeable profits referred to in sub-paragraph (1)(b) above shall be treated for the purposes of Part 2 of TIOPA 2010 (double taxation relief) as if it were an amount of tax paid in respect of the profits concerned under the law of the territory in which the controlled foreign company was resident and, accordingly, as underlying tax for the purposes of Chapter II of that Part. In the following provisions of this paragraph and in paragraphs 5 and 6 below, the aggregate of the sums which, under sub-paragraph (2) above, fall to be treated as underlying tax is referred to as the “gross attributed tax”. If, in the case of a person who receives the dividend, section 36, 40, 41 or 42 of TIOPA 2010 has the effect of reducing the amount which (apart from that section) would have been the amount of the credit for foreign tax which is to be allowed to that person, then, for the purposes of sub-paragraph (5) below, the amount of that reduction shall be determined and so much of it as does not exceed the amount of the foreign tax, exclusive of underlying tax, for which credit is to be allowed in respect of the dividend is in that sub-paragraph referred to as “the wasted relief”. Except for the purpose of determining the amount of the wasted relief, the gross attributed tax shall be treated as reduced by the aggregate of the wasted relief arising in the case of all the persons falling within sub-paragraph (4) above and, on the making of a claim by any of the companies referred to in sub-paragraph (2) above—
In so far as any provision of— makes relief which is related to foreign dividends received by a company resident in the United Kingdom conditional upon that company either having a particular degree of control of the company paying the dividend or being a subsidiary of another company which has that degree of control, that condition shall be treated as fulfilled in considering whether any such company is by virtue of paragraph 4(2) above entitled to relief under Part 2 of TIOPA 2010 in respect of any of the gross attributed tax. Notwithstanding anything in paragraph 4(2) above, in section 31(2)(b) and (3) of TIOPA 2010 the expression “underlying tax” does not include gross attributed tax. In a case where the controlled foreign company pays a dividend otherwise than out of specified profits and, on the apportionment referred to in paragraph 4(1) above, less than the whole of the chargeable profits of the controlled foreign company concerned is apportioned to companies which are resident in the United Kingdom and liable for tax thereon as mentioned in section 747(4)(a)— The reference in sub-paragraph (3)(b) above to a successor in title of a company resident in the United Kingdom is a reference to a person who is such a successor in respect of the whole or any part of that interest in the controlled foreign company by virtue of which an amount of its chargeable profits was apportioned to that company.
In any case where— the amount which, apart from this paragraph, would be available by way of any such relief to the person referred to in paragraph (c) above shall be reduced or, as the case may be, extinguished by deducting therefrom the amount allowed by way of relief as mentioned in paragraph (a) above. For the purposes of sub-paragraph (1)(c) above, in relation to the primary dividend, another dividend is a relevant dividend if—
For the purposes of this Chapter, an offshore fund pursues a full distribution policy with respect to an account period if— and any reference in this sub-paragraph to a distribution made for an account period includes a reference to any two or more distributions so made or, in the case of paragraph (b), the aggregate of them. Subject to sub-paragraph (3) below, with respect to any account period for which— the fund shall be treated as pursuing a full distribution policy notwithstanding that no distribution is made as mentioned in sub-paragraph (1) above. For the purposes of this Chapter, an offshore fund shall be regarded as not pursuing a full distribution policy with respect to an account period for which the fund does not make up accounts. For the purposes of this paragraph— If, apart from this sub-paragraph, the amount of a distribution made, or treated by virtue of sub-paragraph (4) above as made, for an account period would exceed the income of that period, then, for the purposes of this paragraph— In any case where— then in determining for the purposes of the preceding provisions of this paragraph the amount of the fund’s income for that account period, there shall be allowed as a deduction any amount which, apart from this sub-paragraph, would form part of the income of the fund for that account period and which cannot be distributed by virtue of the restriction.
In the case of an offshore fund which throughout any account period operates equalisation arrangements, on any occasion in that period when there is a disposal to which this sub-paragraph applies, the fund shall be treated for the purposes of this Part of this Schedule as making a distribution of an amount equal to so much of the consideration for the disposal as, in accordance with this paragraph, represents income accrued to the date of the disposal. Sub-paragraph (1) above applies to a disposal— On a disposal to which sub-paragraph (1) above applies, the part of the consideration which represents income accrued to the date of the disposal is, subject to sub-paragraph (4) and paragraph 4(4) below, the amount which would be credited to the equalisation account of the offshore fund concerned in respect of accrued income if, on the date of the disposal, the material interest which is disposed of were acquired by another person by way of initial purchase. If, after the beginning of the period by reference to which the accrued income referred to in sub-paragraph (3) above is calculated, the material interest disposed of by a disposal to which sub-paragraph (1) above applies was acquired by way of initial purchase (whether or not by the person making the disposal)— Where, by virtue of this paragraph, an offshore fund is treated for the purposes of this Part of this Schedule as making a distribution on the occasion of a disposal, the distribution shall be treated for those purposes— In any case where— the distribution shall not be taken into account for the purposes of paragraph 1(1) above except to the extent that the distribution is properly referable to that part of the period for which the distribution is made during which that interest has been held by the managers of the fund in their capacity as such. Subsection (2) of section 758 applies for the purposes of this paragraph as it applies for the purposes of that section.
Sub-paragraph (2) below applies if any sums which form part of the income of an offshore fund falling within section 756A(1)(b) or (c) are of such a nature that— To the extent that sums falling within sub-paragraph (1) above do not actually form part of a distribution complying with paragraphs 1(1)(c) and (d) above, they shall be treated for the purposes of this Part of this Schedule—
To the extent that the income of an offshore fund for any account period includes profits from dealing in commodities, one half of those profits shall be left out of account in determining for the purposes of paragraphs 1(1)(b) and 5 below— but in any account period in which an offshore fund incurs a loss in dealing in commodities the amount of that loss shall not be varied by virtue of this paragraph. In this paragraph “dealing in commodities” shall be construed as follows— Where the income of an offshore fund for any account period consists of profits from dealing in commodities and other income, then— Where there is a disposal to which paragraph 2(1) above applies, then, to the extent that any amount which was or would be credited to the equalisation account in respect of accrued income, as mentioned in sub-paragraph (3) or (4) of that paragraph, represents profits from dealing in commodities, one half of that accrued income shall be left out of account in determining under those sub-paragraphs the part of the consideration for the disposal which represents income accrued to the date of the disposal.
Any reference in this Schedule to the United Kingdom equivalent profits of an offshore fund for an account period is a reference to the amount which, on the assumptions in sub-paragraph (3) below, would be the total profits of the fund for that period on which, after allowing for any deductions available against those profits, corporation tax would be chargeable. In this paragraph the expression “profits” does not include chargeable gains. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The assumptions referred to in sub-paragraph (1) above are— Without prejudice to any deductions available apart from this sub-paragraph, the deductions referred to in sub-paragraph (1) above include— For the avoidance of doubt it is hereby declared that, if any sums forming part of the offshore fund’s income for any period have been received by the fund without any deduction of or charge to tax and have been so received by virtue of section 1279 of CTA 2009or section 714 or 715 of ITTOIA 2005, the effect of the assumption in sub-paragraph (3)(a) above is that those sums are to be brought into account in determining the total profits referred to in sub-paragraph (1) above.
In any case where— then, in determining whether anything in section 760(3)(a) prevents the primary fund being certified as mentioned in paragraph (b) above, the interests of the primary fund in that other fund shall be left out of account except for the purposes of determining the total value of the assets of the primary fund. In this Part of this Schedule an offshore fund falling within sub-paragraph (1)(c) above is referred to as a “qualifying fund”. In a case falling within sub-paragraph (1) above—
The modification referred to in paragraph 6(3)(a) above is that, in any case where— for the purposes of the application in relation to the primary fund of section 760(3)(a), at any time when the assets of the qualifying fund include the interest referred to in paragraph (c) above, the primary fund’s share of that interest shall be treated as an additional asset of the primary fund.
at any time in the account period referred to in paragraph 6(1) above, the assets of the primary fund include an interest in an offshore fund or in any company (whether an offshore fund or not); and
that interest falls to be taken into account in determining whether anything in section 760(3)(a) prevents the primary fund being certified as a distributing fund in respect of that account period; and
at any time in that account period the assets of the qualifying fund include an interest in the offshore fund or company referred to in paragraph (a) above;
The modification referred to in paragraph 6(3)(b) above is that, in determining whether the condition in paragraph 1(1)(b)(ii) above is fulfilled with respect to the account period of the primary fund referred to in paragraph 6(1) above, the United Kingdom equivalent profits of the primary fund for that period shall be treated as increased by the primary fund’s share of the excess income (if any) of the qualifying fund which is attributable to that period. For the purposes of this paragraph, the excess income of the qualifying fund for any account period of that fund is the amount (if any) by which its United Kingdom equivalent profits for that account period exceed the amount of the distributions made for that period, as determined for the purposes of the application of paragraph 1(1) above to the qualifying fund. If an account period of the qualifying fund coincides with an account period of the primary fund, then the excess income (if any) of the qualifying fund for that period is the excess income which is attributable to that period of the primary fund. In a case where sub-paragraph (3) above does not apply, the excess income of the qualifying fund which is attributable to an account period of the primary fund is the appropriate fraction of the excess income (if any) of the qualifying fund for any of its account periods which comprises the whole or any part of the account period of the primary fund and, if there is more than one such account period of the qualifying fund, the aggregate of the excess income (if any) of each of them. For the purposes of sub-paragraph (4) above, the appropriate fraction is— where— A is the number of days in the account period of the primary fund which are also days in an account period of the qualifying fund; and B is the number of days in that account period of the qualifying fund or, as the case may be, in each of those account periods of that fund which comprises the whole or any part of the account period of the primary fund.
The references in paragraphs 7 and 8(1) above to the primary fund’s share of— shall be construed as references to the fraction specified in sub-paragraph (2) below of that interest or excess income. In relation to any account period of the primary fund, the fraction referred to in sub-paragraph (1) above is— where— C is the average value of the primary fund’s holding of interests in the qualifying fund during that period; and D is the average value of all the interests in the qualifying fund held by any persons during that period.
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In relation to an offshore fund which has a wholly-owned subsidiary which is a company the provisions of . . . Part I of this Schedule shall have effect subject to the modifications in sub-paragraph (4) below. Subject to sub-paragraph (3) below, for the purposes of this paragraph, a company is a wholly-owned subsidiary of an offshore fund if and so long as the whole of the issued share capital of the company is— In the case of a company which has only one class of issued share capital, the reference in sub-paragraph (2) above to the whole of the issued share capital shall be construed as a reference to at least 95 per cent. of that share capital. The modifications referred to in sub-paragraph (1) above are that, for the purposes of . . . Part I of this Schedule—
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If, in the case of any account period of an offshore fund ending after the passing of the Finance (No. 2) Act 1987 (23rd July 1987), it appears to the Board that there has been a failure to comply with the condition in section 760(3)(a) (as modified, where appropriate, by the preceding provisions of this Part of this Schedule) but the Board are satisfied— the Board may disregard the failure in determining whether to certify the fund as a distributing fund in respect of that account period.
that the failure occurred inadvertently; and
that the failure was remedied without unreasonable delay,
The Board shall, in such manner as they think appropriate, certify an offshore fund as a distributing fund in respect of an account period if— An application under this paragraph shall be made to the Board by the fund or by a trustee or officer thereof on behalf of the fund and may be so made— In any case where, on an application under this paragraph, the Board determine that the offshore fund concerned should not be certified as a distributing fund in respect of the account period to which the application relates, they shall give notice of that fact to the fund. If at any time it appears to the Board that the accounts accompanying an application under this paragraph in respect of any account period of an offshore fund or any information furnished to the Board in connection with such an application is or are not such as to make full and accurate disclosure of all facts and considerations relevant to the application, they shall give notice to the fund accordingly, specifying the period concerned. Where a notice is given by the Board under sub-paragraph (4) above, any certification by them in respect of the account period in question shall be void.
An appeal . . . — may be made by the offshore fund or . . . on behalf of the fund, and shall be so made by notice specifying the grounds of appeal and given to the Board within 90 days of the date of the notice under paragraph 15(3) or (4), as the case may be. The jurisdiction of the tribunal on an appeal under this paragraph shall include jurisdiction to review any decision of the Board which is relevant to a ground of the appeal.
No appeal may be brought against an assessment to tax on the ground that an offshore fund should have been certified as a distributing fund in respect of an account period of the fund.
Without prejudice to paragraph 17 above, in any case where no application has been made under paragraph 15 above in respect of an account period of an offshore fund, any person who is assessed to tax for which he would not be liable if the offshore fund were certified as a distributing fund in respect of that period may by notice in writing require the Board to take action under this paragraph with a view to determining whether the fund should be so certified. Subject to sub-paragraphs (3) and (5) below, if the Board receive a notice under sub-paragraph (1) above, they shall by notice invite the offshore fund concerned to make an application under paragraph 15 above in respect of the period in question. Where sub-paragraph (2) above applies, the Board shall not be required to give notice under that sub-paragraph before the expiry of the account period to which the notice is to relate nor if an application under paragraph 15 above has already been made; but where notice is given under that sub-paragraph, an application under paragraph 15 above shall not be out of time under paragraph 15(2)(a) above if it is made within 90 days of the date of that notice. If an offshore fund to which notice is given under sub-paragraph (2) above does not, within the time allowed by sub-paragraph (3) above or, as the case may be, paragraph 15(2)(a) above, make an application under paragraph 15 above in respect of the account period in question, the Board shall proceed to determine the question of certification in respect of that period as if such an application had been made. Where the Board receive more than one notice under sub-paragraph (1) above with respect to the same account period of the same offshore fund, their obligations under sub-paragraphs (2) and (4) above shall be taken to be fulfilled with respect to each of those notices if they are fulfilled with respect to any one of them. Notwithstanding anything in sub-paragraph (5) above, for the purpose of a determination under sub-paragraph (4) above with respect to an account period of an offshore fund, the Board shall have regard to accounts and other information furnished by all persons who have given notice under sub-paragraph (1) above with respect to that account period; and paragraph 15 above shall apply as if accounts and information so furnished had been furnished in compliance with sub-paragraph (1) of that paragraph. Without prejudice to sub-paragraph (5) above, in any case where— the Board shall reconsider their previous determination in the light of the new accounts or information and, if they consider it appropriate, may determine to certify the fund accordingly. Where any person has given notice to the Board under sub-paragraph (1) above with respect to an account period of an offshore fund and no application has been made under paragraph 15 above with respect to that period—
This paragraph applies where— Any person who has been assessed to tax and considers that, if the offshore fund were to be certified as a distributing fund in respect of the accounting period in question, he would be overcharged to tax by the assessment may— An application under sub-paragraph (1A) above shall state the amount in which the applicant believes that he is over-charged to tax and his grounds for that belief. Subsections (3A) onwards of section 55 of the Management Act (recovery of tax not postponed) shall apply with any necessary modifications in relation to an application under sub-paragraph (1) above as if it were an application under subsection (3) of that section and as if the determination of the question as to certification (whether by the Board or on appeal) were the determination of an appeal.
No obligation as to secrecy imposed by statute or otherwise shall preclude the Board or an inspector from disclosing to any person appearing to have an interest in the matter—
any determination of the Board or (on appeal) the tribunal whether an offshore fund should or should not be certified as a distributing fund in respect of any account period; or
the content and effect of any notice given by the Board under paragraph 15(4) above.
The Treasury may make provision by regulations as to the application of the provisions of this Schedule in relation to— Regulations under this paragraph may—
In this Part of this Schedule “material disposal” means a disposal to which this Chapter applies, otherwise than by virtue of section 758.
Where there is a material disposal, there shall first be determined for the purposes of this Part of this Schedule the amount (if any) which, in accordance with the provisions of this paragraph, is the unindexed gain accruing to the person making the disposal. Subject to section 757(3) to (6) and paragraph 3 below, the unindexed gain accruing on a material disposal is the amount which would be the gain on that disposal for the purposes of the 1992 Act if it were computed—
If the amount of any chargeable gain or allowable loss which (apart from section 763) would accrue on the material disposal would fall to be determined in a way which, in whole or in part, would take account of the indexation allowance on an earlier disposal to which section 56(2) of the 1992 Act (disposals on a no gain/no loss basis) applies, the unindexed gain on the material disposal shall be computed as if— If the material disposal forms part of a transfer to which section 162 of the 1992 Act (roll-over relief on transfer of business) applies, the unindexed gain accruing on the disposal shall be computed without regard to any deduction which falls to be made under that section in computing a chargeable gain. If the material disposal is made otherwise than under a bargain at arm’s length and a claim for relief is made in respect of that disposal under section 165 or 260 of the 1992 Act (relief for gifts) the claim shall not affect the computation of the unindexed gain accruing on the disposal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Notwithstanding section 16 of the 1992 Act (losses determined in like manner as gains) if, apart from this sub-paragraph, the effect of any computation under the preceding provisions of this Part of this Schedule would be to produce a loss, the unindexed gain on the material disposal shall be treated as nil; and accordingly for the purposes of this Part of this Schedule no loss shall be treated as accruing on a material disposal. Section 431 has effect in relation to sub-paragraph (4) above as if it were included in Chapter I of Part XII.
This paragraph applies where— Where this paragraph applies, there shall be determined for the purposes of this Part of this Schedule the amount which would have been the gain on the material disposal— and that amount is in paragraph 5 below referred to as the “post-1983 gain” on the material disposal. Where the person making the material disposal acquired the interest disposed of— the previous owner’s acquisition of the interest shall be treated as his acquisition of it. If the previous owner acquired the interest disposed of on or after 1st January 1984 and in circumstances similar to those referred to in sub-paragraph (3) above, his predecessor’s acquisition of the interest shall be treated for the purposes of this paragraph as the previous owner’s acquisition, and so on back through previous acquisitions in similar circumstances until the first such acquisition before 1st January 1984 or, as the case may be, until an acquisition on a material disposal on or after that date.
Subject to sub-paragraph (2) below, a material disposal gives rise to an offshore income gain of an amount equal to the unindexed gain on that disposal. In any case where— the offshore income gain to which the disposal gives rise is an amount equal to the post-1983 gain.
Subject to paragraph 7 below, a disposal to which this Chapter applies by virtue of section 758(3) gives rise to an offshore income gain of an amount equal to the equalisation element relevant to the asset disposed of. Subject to sub-paragraphs (4) to (6) below, the equalisation element relevant to the asset disposed of by a disposal falling within sub-paragraph (1) above is the amount which would be credited to the equalisation account of the offshore fund concerned in respect of accrued income if, on the date of the disposal, the asset which is disposed of were acquired by another person by way of initial purchase. In the following provisions of this Part of this Schedule, a disposal falling within sub-paragraph (1) above is referred to as a “disposal involving an equalisation element”. Where the asset disposed of by a disposal involving an equalisation element was acquired by the person making the disposal after the beginning of the period by reference to which the accrued income referred to in sub-paragraph (2) above is calculated, the amount which, apart from this sub-paragraph, would be the equalisation element relevant to that asset shall be reduced by the following amount, that is to say— In any case where— the amount which, apart from this sub-paragraph, would be the equalisation element relevant to that asset shall be reduced by the amount which would have been credited to the equalisation account of the offshore fund concerned in respect of accrued income if the acquisition referred to in paragraph (a) above had been an acquisition by way of initial purchase taking place on 1st January 1984. Where there is a disposal involving an equalisation element, then, to the extent that any amount which was or would be credited to the equalisation account of the offshore fund in respect of accrued income, as mentioned in any of sub-paragraphs (2) to (5) above, represents profits from dealing in commodities, within the meaning of paragraph 4 of Schedule 27, one half of that accrued income shall be left out of account in determining under those sub-paragraphs the equalisation element relevant to the asset disposed of by that disposal.
For the purposes of this Part of this Schedule, there shall be determined, in accordance with paragraph 8 below, the Part I gain (if any) on any disposal involving an equalisation element. Notwithstanding anything in paragraph 6 above—
On a disposal involving an equalisation element, the Part I gain is the amount (if any) which, by virtue of Part I of this Schedule (as modified by sub-paragraphs (2) to (5) below), would be the offshore income gain on that disposal if it were a material disposal within the meaning of that Part. For the purposes only of the application of Part I of this Schedule to determine the Part I gain (if any) on a disposal involving an equalisation element, subsections (5) and (6) of section 758 shall have effect as if, in subsection (5), the words “by virtue of subsection (3) above” were omitted. If a disposal involving an equalisation element is one which, by virtue of any enactment other than section 56, 57, 131 or 145 of the 1992 Act, is treated for the purposes of the 1992 Act as one on which neither a gain nor a loss accrues to the person making the disposal, then, for the purpose only of determining the Part I gain (if any) on the disposal, that enactment shall be deemed not to apply to it (but without prejudice to the application of that enactment to any earlier disposal). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Treasury may make provision by regulations as to the application of the provisions of this Schedule in relation to— Regulations under this paragraph may—
s.844
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No allowance shall be made under Chapter I of Part III of the Finance Act 1971 in respect of any expenditure incurred by a Member of the House of Commons in or in connection with the provision or use of residential or overnight accommodation to enable him to perform his duties as such a Member in or about the Palace of Westminster or his constituency.
The Taxes Management Act 1970 shall have effect subject to the amendments made by paragraphs 4 to 10 below.
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In subsection (1) of section 55 (recovery of tax not postponed) the following paragraph shall be substituted for paragraph (g)—[for text see Taxes Management Act 1970 (c. 9), s. 55(1)(g) ]. The following subsection shall be inserted in that section after subsection (6)—[for text see Taxes Management Act 1970 (c. 9), s. 55(6A)].
The following Table shall be substituted for the Table in section 98—[for text see Taxes Management Act 1970 (c. 9), s. 98].
The Taxes Management Act 1970, as amended by the Finance (No.2) Act 1987, shall have effect, after the day appointed under section 95 of the 1987 Act for the purposes of the provision in question, subject to the following amendments. In section 11(8) for “286” there shall be substituted “ 419 ”. In section 30(2A) . . . for “87 of the Finance (No.2) Act 1987” there shall be substituted “ 826 of the principal Act ”. In section 87A— In section 89 for “87 of the Finance (No.2) Act 1987” there shall be substituted “ 826 of the principal Act ”. In section 91(2A) for “90 of the Finance (No.2) Act 1987” there shall be substituted “ 10 of the principal Act ”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . In section 109—
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but nothing in this subsection shall apply with respect to—
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for “the Taxes Act”, in each place where it occurs except sections 1, 31 and 34(4)(a), the definition of “the Taxes Act” in section 155(1) and paragraph 6(8) of Schedule 1 and any provision mentioned in paragraph (b) below, there shall be substituted “the Taxes Act 1988”;
in sections 16, 26, 29A, 32, 35, 75, 84, 87, 98, 107 and 136(10), paragraphs 4 and 5 of Schedule 5 and paragraphs 12 and 21 of Schedule 6 for “the Taxes Act” there shall be substituted “the Taxes Act 1970”;
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In section 134(1) after second “Act” there shall be inserted “or in Chapter V of Part XII of the Taxes Act 1988”.
In paragraph 36(3) of Schedule 2 to the Administration of Justice Act 1985 for all the words preceding “any reference” there shall be substituted the words “ (3) In sections 745(3) and 778(3) of, and paragraph 14(5) of Schedule 15 to, the Income and Corporation Taxes Act 1988 ”.
In Schedule 1 to the Law Reform (Miscellaneous Provisions) (Scotland) Act 1985 for the heading preceding paragraph 41 there shall be substituted the following—and in paragragh 41 for “30(5)” there shall be substituted the words “ (3) and 778(3) of, and paragraph 14(5) of Schedule 15 to, the Income and Corporation Taxes Act 1988 ”.
In the enactments specified in Column 1 of the following Table for the words set out or referred to in Column 2 there shall be substituted the words set out in the corresponding entry in Column 3. Enactment amended Words to be omitted Words to be substituted In the Provisional Collection of Taxes Act 1968 c. 2 Section 1(1A)(a) 343 of the Income and Corporation Taxes Act 1970 476 of the Income and Corporation Taxes Act 1988 1(1A)(b) 27 of the Finance Act 1984 479 of that Act 5(1)(c) from “243(6)” to “1972” 8(5) of the Income and Corporation Taxes Act 1988 5(2) from “the said” to “1972” sections 8(5) and 822 of the 1988 Act (over-deductions from preference dividends before passing of annual Act) In the Capital Allowances Act 1968 c.3 . . . . . . . . . In the Finance Act 1969 c. 32 Section 58(1)(a) 204 of the Income and Corporation Taxes Act 1970 203 of the Income and Corporation Taxes Act 1988 In the Taxes Management Act 1970 c. 9 Section 6(1)(c) 463 706 . . . . . . . . . . . . . . . . . . . . . . . . . . . 11(6) 85(4) of the Finance Act 1972 239(4) of the principal Act . . . . . . . . . 15(7)(a) from “section 196” to “1977” sections 141, 142, 143, 145 or 154 to 165 of the principal Act 15(11)(b) Part II of the Finance Act 1976 Part V of the principal Act 80 to 82 34 to 36 . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 47 or 48 (twice) 824 or 825 of the principal Act or section 47 31 all of subsection (3) (3) The appeal shall be to the Special Commissioners if the assessment is made— (a) by the Board; or (b) under section 350, 426, 445, 740, 743(1) or 747(4)(a) of the principal Act; or (c) under section 38 of the Finance Act 1973 or section 830 of the principal Act and is not an assessment to tax under Schedule E; or if the appeal involves any question as to the application of Part XV or XVI of the principal Act. 35(2)(b) 187 148 42(3)(a) 27 278 42(3)(c) section 218 subsection (5) of section 614 42(3)(c) that section section 615(3) of that Act 47B Schedule 5 to the Finance Act 1983 Chapter III of Part VII of the principal Act 47B paragraph 5A(5) of that Schedule section 294(5) of that Act 55(1)(b) 204 203 55(1)(c) Schedule 20 to the Finance Act 1972 Schedule 16 to the principal Act 55(1)(e) Schedule 14 to the Finance Act 1972 Schedule 13 to the principal Act . . . . . . . . . . . . . . . . . . . . . . . . . . . 63(3) (as substituted by Schedule 4 to the Debtors (Scotland) Act 1987 c.18) 204 203 71(1) Part XI sections 6 to 12 and Parts VIII and XI 78(1) 89 43 . . . . . . . . . 78(5) 533 839 86(2)(b) 204 203 86(2)(d) 14 to the Finance Act 1972 13 to the principal Act 86(4) 5 (three times) 3 86(4) 4(3) 5(4) 86(4) 14 to the Finance Act 1972 13 to the principal Act 86(4) 243(4) 10(1) 86(4) 344 478 87 14 (four times) 13 87 20 (four times) 16 87 the Finance Act 1972 the principal Act . . . . . . . . . . . . . . . . . . . . . . . . . . . 91(3)(c) 204 203 . . . . . . . . . 93(3) 204 203 94(2) 240(5) or 246(3) 7(2) or 11(3) . . . . . . . . . 109(4) 286(5) 419(4) 109(1)-(3),(5) section 286 sections 419 and 420 118(1) 526(5) 832(1) 118(1) 354 468 118(1) 1970 1988 Schedule 2, para.2(2), in column 1 of the Table II of Part I I of Part VII 65(4) 351(5) 3 2 para.2(2), in column 2 of the Table 158(1) 121(1), (2) 315(3) 441(3) 331 459 332 460 338 467 339 484 384 527 389 534 391 536 392 538 3, para.3,5 204 (three times) 203 para.5B 65 of the Finance Act 1976 159 of the principal Act para.8 section 286 sections 419 and 420 para.8 15 of Schedule 16 to the Finance Act 1972 13 of Schedule 19 to the principal Act last para. from “11” to “to the principal Act” 102, 113(5), 263(5) and (6), 343(10) and 783(9) of the principal Act, to paragraph 22 of Schedule 7 to the Income and Corporation Taxes Act 1970 . . . . . . In the Friendly Societies Act (Northern Ireland) 1970 c. 31 (N.I.) Section 1(5) (2) and (3) respectively of section 337 of the Income and Corporation Taxes Act 1970 (1) and (2) respectively of section 466 of the Income and Corporation Taxes Act 1988 82(4) 226(13) of the Income and Corporation Taxes Act 1970 620(9) of the Income and Corporation Taxes Act 1988 In the Finance Act 1971 c. 68 Section 21 the whole of subsection (6) (6) Part II of Schedule 3 to this Act shall have effect. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69(2) 1970 1988 Schedule 3, para.8(1), (5) the Taxes Act the Income and Corporation Taxes Act 1970 para.8(3) the words from “sub-paragraphs” to “this Schedule)” section 598(2) to (4) of the Taxes Act para.8(4) 1970 1970 or Chapter I of Part XIV of the Taxes Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . In the Finance Act 1972 c. 41 . . . . . . . . . . . . . . . . . . . . . . . . . . . 134(2) 1970 1988 In the Finance Act 1973 c. 51 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38(2)(d) 237(5) of the Taxes Act 254(1) of the Taxes Act 1988 38(3) from beginning to “such rights” Any gains accruing on the disposal of exploration or exploitation rights 38(3B) 533 of the Taxes Act 839 of the Taxes Act 1988 38(5) the Taxes Act the Taxes Act 1970 59 all of subsection (2) (2) In this Act— (a) “the Taxes Act 1970” means the Income and Corporation Taxes Act 1970; and (b) “the Taxes Act 1988” means the Income and Corporation Taxes Act 1988. . . . . . . . . . . . . . . . . . . In the Friendly Societies Act 1974 c. 46 Section 7(5) (2) and (3) respectively of section 337 of the Income and Corporation Taxes Act 1970 (1) and (2) respectively of section 466 of the Income and Corporation Taxes Act 1988 93(4) 226(13) of the Income and Corporation Taxes Act 1970 620(9) of the Income and Corporation Taxes Act 1988 . . . . . . . . . . . . . . . . . . In the Finance Act 1976 c. 40 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131(2) from beginning to “such a security” A security issued by the Inter-American Development Bank In the Finance Act 1978 c. 42 . . . . . . . . . . . . . . . . . . . . . . . . . . . In the European Parliament (Pay and Pensions) Act 1979 c. 50 Section 8(1) subsections (1A) and (1B) of section 229 of the Income and Corporation Taxes Act 1970 section 629(2) and (3) of the Income and Corporation Taxes Act 1988 In the Finance Act 1980 c.48 Section . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118 the whole of subsection (3) (3) The trustees of the National Heritage Memorial Fund shall be treated for the purposes of section 49(2) of the Finance Act 1974 and section 99 above as a body of persons established for charitable purposes only. 122(2) 1970 1970 and “the Taxes Act 1988” means the Income and Corporation Taxes Act 1988 Schedule . . . . . . . . . In the Finance Act 1981 c. 35 . . . . . . . . . 139(2) 1970 1988 In the Housing (Northern Ireland) Order 1981 (S.I. No.156 N.I.3) Article 146(3) 341 (three times) 488 146(3) 1970 (three times) 1988 In the Iron and Steel Act 1982 c. 25 Section 13(3) 252(3) of the Income and Corporation Taxes Act 1970 343(3) of the Income and Corporation Taxes Act 1988 13(4) 265(1) of the Income and Corporation Taxes Act 1970 345(1) of the Income and Corporation Taxes Act 1988 In the Finance Act 1982 c. 39 Section 27 this Act (three times) this Act or the Taxes Act 1988 . . . . . . . . . . . . . . . . . . . . . . . . . . . 88(9)(a) Chapter IV of Part II of the Finance Act 1985 section 710 of the Taxes Act 1988 88(9)(b) section 36 of the Finance Act 1984 Schedule 4 to that Act 88(9)(c) VII of Part II of that Act V of Part XVII of the Taxes Act 1988 147(1) 532(1)(b) of the Taxes Act 838 of the Taxes Act 1988 147(2), (3) the Taxes Act the Taxes Act 1970 157 the whole of subsection (2) (2) In this Act— (a) “the Taxes Act 1970” means the Income and Corporation Taxes Act 1970; and (b) “the Taxes Act 1988” means the Income and Corporation Taxes Act 1988. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13, para.3(3)(a) 463 of the Taxes Act 706 of the Taxes Act 1988 21, para.3(2) In the Finance Act 1983 c. 28 Section 46(3) Commission Historic Buildings and Monuments Commission . . . . . . . . . (ab) deep discount securities (within the meaning of Schedule 4 to the Income and Corporation Taxes Act 1988); nor In the Telecommunications Act 1984 c. 12 . . . . . . . . . 72(3)(b) paragraph (a) of the proviso to section 21(3) of the Finance Act 1970 section 592(5) of the Income and Corporation Taxes Act 1988 72(3) II of Part II of the said Act of 1970 I of Part XIV of that Act . . . . . . . . . In the Finance Act 1984 c. 43 . . . . . . . . . . . . . . . . . . 128 1970 1970; and “the Taxes Act 1988” means the Income and Corporation Taxes Act 1988 Schedule 14, para.1(1) VII of Part II of this Act V of Part XVII of the Taxes Act 1988 para.7(6)(b) 45 of the Finance Act 1981 740 of the Taxes Act 1988 para.8(6) 45 of the Finance Act 1981 740 of the Taxes Act 1988 para.12(7) 45 of the Finance Act 1981 740 of the Taxes Act 1988 para.15(2) (5) of section 481 of the Taxes Act (6) of section 745 of the Taxes Act 1988 In the Inheritance Tax Act 1984 c. 51 . . . . . . . . . In the Finance Act 1985 c. 54 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98(2) 1970 1988 . . . . . . . . . . . . . . . . . . In the Companies Act 1985 c. 6 Section 209(3)(b) 444 of the Income and Corporation Taxes Act 1970 670 of the Income and Corporation Taxes Act 1988 . . . . . . . . . . . . . . . . . . In the Trustee Savings Bank Act 1985 c. 58 Schedule 2 para.4(2) Taxes Act (twice) the Income and Corporation Taxes Act 1970 6(1) 137 100 (4) 177 393 (8) 29 of the Finance Act 1973 410(1) to (6) of the Taxes Act 7(2) 26 of the Finance Act 1982 369 of the Taxes Act 9(1) 1970 1988 In the Bankruptcy (Scotland) Act 1985 c. 66 Schedule 3 Part I para.1(1) 204 of the Income and Corporation Taxes Act 1970 203 of the Income and Corporation Taxes Act 1988 para.1(2) 69 of the Finance (No.2) Act 1975 559 of the Income and Corporation Taxes Act 1988 In the Housing Associations Act 1985 c. 69 Section 62(2) 341 488 62(2) 1970 1988 In the Airports Act 1986 c. 31 Section 77(2) 1970 Act Income and Corporation Taxes Act 1970 77(4) 48(10) of the Finance Act 1981 400(9) of the 1988 Act 77(5) 261(2) of the 1970 Act 408(2) of the 1988 Act 77(5) 262(1) of the 1970 Act 409(1) of that Act 77(5) 262(2) 409(2) 77(6) 1970 (twice) 1988 77(6) 258 to 264 Chapter IV of Part X In the Finance Act 1986 c. 41 Section 24(4) Finance Act 1978 Taxes Act 1988 . . . . . . . . . 114(2) 1970 1970 and “the Taxes Act 1988” means the Income and Corporation Taxes Act 1988. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . In the Gas Act 1986 c. 44 Section 63(9) 533 of the Income and Corporation Tax Act 1970 839 of the Income and Corporation Taxes Act 1988 In the Insolvency Act 1986 c. 45 . . . . . . . . . . . . . . . . . . . . . . . . . . . In the Building Societies Act 1986 c. 53 Schedule 8, para.7 Schedule 8 to the Finance Act 1986 section 333 of the Income and Corporation Taxes Act 1988 In the Financial Services Act 1986 c. 60 Schedule 15, para.14(5) 332 460(1) or 461(1) para.14(5) 1970 1988 In the Companies (Northern Ireland) Order 1986 (S.I.No.1032 N.I.6) Article 217(3)(b) 444of the Income and Corporation Taxes Act 1970 670of the Income and Corporation Taxes Act 1988 . . . . . . . . . . . . . . . . . . . . . . . . . . . In the Finance Act 1987 c. 16 Section 72 1970 1988 In the Debtors (Scotland) Act 1987 c. 18 Section 53(6) 65(1A) 351(2) 53(6) 1970 1988 63(9) 65(1A) 351(2) 63(9) 1970 1988 In the Abolition of Domestic Rates Etc. (Scotland) Act 1987 c. 47 Section 3(5) the whole of paragraph (b) (b) “retail prices index” has the meaning given by section 833 of the Income and Corporation Taxes Act 1988 In the Finance (No.2) Act 1987 c. 51 Section 84(1) 247 of the Taxes Act 12 of the Income and Corporation Taxes Act 1988
Section 844.
In this paragraph, an “old company” means a company to which section 244 of the 1970 Act applied in respect of the last accounting period ending before 17th March 1987. In relation to an old company — Subject to sub-paragraph (6) below, with respect to the first accounting period of an old company beginning on or after 17th March 1987, section 243(4) of the 1970 Act and section 10(1) of this Act (time for payment of corporation tax) shall have effect as if for the reference to nine months there were substituted a reference to a period which is equal to the company⿿s section 244 interval less the period of reduction. Subject to sub-paragraph (6) below, with respect to any accounting period of an old company which begins — section 10(1) of this Act shall have effect as if for the reference to nine months there were substituted a reference to a period equal to the previous payment interval less the period of reduction. In relation to any accounting period of an old company falling within sub-paragraph (4) above, “the previous payment interval”means the interval after the end of the immediately preceding accounting period within which corporation tax for that preceding period is required to be paid by virtue of section 243(4) of the 1970 Act or section 10(1) of this Act, as modified by this paragraph. If the accounting period referred to in sub-paragraph (3) above or any accounting period falling within sub-paragraph (4) above is less than 12 months, the sub-paragraph in question shall have effect in relation to that accounting period as if for the reference in that sub-paragraph to the period of reduction there were substituted a reference to the number of whole days comprised in a period which bears to the period of reduction the same proportion as that accounting period bears to 12 months. With respect to any accounting period of an old company which falls within sub-paragraph (3) or (4) above, section 86(4) of the Management Act (interest on overdue tax) shall have effect as if, in paragraph 5(a) of the Table (the reckonable date in relation to corporation tax), the reference to the nine months mentioned in section 243(4) of the 1970 Act or section 10(1) of this Act were a reference to the period which, under sub-paragraphs (3) to (6) above, is substituted for those nine months. In section 88(5)(e) of the Management Act (the date when corporation tax ought to have been paid) for the words from “where section 244(1)” to “the interval” there shall be substituted “ in the case of an accounting period in respect of which section 10(1) of the principal Act applies as modified by sub-paragraph 1(3) or (4) of Schedule 30 to that Act, at the end of the period which, under that sub-paragraph, is substituted for the period of nine months ”. With respect to any accounting period of an old company which falls within sub-paragraph (3) or (4) above, section 825 shall have effect as if, in subsection (8) in paragraph (a) of the definition of “the material date”, the reference to the nine months mentioned in section 10(1) were a reference to the period which, under sub-paragraphs (1) to (8) above is substituted for those nine months.
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The substitution of this Act for the corresponding enactments repealed by this Act shall not alter the effect of any provision enacted before this Act (whether or not there is a corresponding provision in this Act) so far as it determines whether and to what extent — Without prejudice to sub-paragraph (1) above, the repeals made by this Act shall not affect the following enactments (which are not re-enacted) — in so far as those enactments may be relevant to tax for any chargeable period to which this Act applies.
section 27(4) of the Finance Act 1952 (restrictions on removal of six year time limit on carry forward of trading losses);
section 29(3) of the Finance Act 1953 (Isles of Scilly);
section 17 of, and Schedule 3 to, the Finance Act 1954 (company reconstructions before corporation tax) so far as in force by virtue of the saving in Part IV of Schedule 22 to the Finance Act 1965, and section 80(8) of the Finance Act 1965 (which amends Schedule 3 to the Finance Act 1954);
section 82(4) of the Finance Act 1965 (losses allowable against chargeable gains);
section 85 of the Finance Act 1965 (carry forward of surplus of franked investment income: dividends paid out of pre-1966-67 profits) and the enactments amending that section;
paragraph 25 of Schedule 15 to the Finance Act 1965 (continuity of elections for purposes of corporation tax);
paragraph 7 of Schedule 16 to the Finance Act 1965 (overseas trade corporations);
This paragraph shall apply with respect to claims for group relief in respect of any amount which is attributable — where the expenditure is incurred under a contract entered into by the surrendering company before 6th March 1973. Notwithstanding anything in section 410(1) to (6) or 413(7) to (10) or in Schedule 18 but subject to sub-paragraph (5) below, group relief may be claimed in respect of any such amount as is referred to in sub-paragraph (1) above if — For the purposes of sub-paragraph (2)(a) above, “the parent company” means the company of which another member of the group referred to in that sub-paragraph was, immediately before 6th March 1973, a 75 per cent subsidiary, and the rights of the parent company referred to in that paragraph are — For the purposes of this paragraph an amount which the claimant company claims by way of group relief shall be treated as attributable to an allowance falling within any of paragraphs (a) to (c) of sub-paragraph (1) above to the extent that that amount would not have been available for surrender by the surrendering company if no such allowance had been available to the surrendering company in respect of the expenditure concerned. Sub-paragraph (2) above shall not apply if, during the period referred to in that sub-paragraph — In sub-paragraph (5) above —“a major change in the nature or conduct of a trade or business” has the same meaning as in section 245(1); and “the relevant company” means, if the machinery or plant to which the allowance relates was brought into use on or before 6th March 1978, the company claiming group relief and in any other case either that company or the company which if sub-paragraph (5) did not apply would be the surrendering company. This paragraph shall be construed as if it were contained in Chapter IV of Part X.
Without prejudice to paragraphs 6 and 7 above, where a person is, immediately before the commencement of this Act, entitled to a capital allowance by virtue of any enactment repealed by this Act, he shall not cease to be so entitled by reason only of that repeal, notwithstanding that the enactment in question is not re-enacted by this Act; and accordingly the provisions of this Act shall apply, with any necessary modifications, so far as may be necessary to give effect to any such entitlement.
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no power by reason of which it would fall to be so treated has been exercised after 8th July 1958, or is or can become exercisable after 5th April 1959, or such later date as the Board may in any particular case allow; and
neither the settlor nor the wife or husband of the settlor has received or is entitled to any consideration or benefit in connection with the fulfilment of the condition set out in paragraph (a) above.
Where under any Act passed before this Act and relating to a country or territory outside the United Kingdom there is a power to affect Acts passed or in force before a particular time, or instruments made or having effect under such Acts, and the power would but for the passing of this Act have included power to change the law which is reproduced in, or is made or has effect under, this Act, then that power shall include power to make such provision as will secure the like change in the law reproduced in, or made or having effect under, this Act notwithstanding that it is not an Act passed or in force before that time.
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Any enactment relating to building societies contained in this Act which re-enacts an enactment which was an existing enactment for the purposes of section 121 of the Building Societies Act 1986 shall continue to be an existing enactment for those purposes.
Any reference to pension business in any enactment (other than an enactment repealed by this Act) which immediately before the commencement of this Act was such a reference by virtue of paragraph 11(3) of Part III of Schedule 5 to the Finance Act 1970 shall not be affected by the repeal by this Act of that paragraph and accordingly the business in question shall continue to be known as pension business.
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The continuity of the operation of the Tax Acts and of the law relating to chargeable gains shall not be affected by the substitution of this Act for the enactments repealed by this Act and earlier enactments repealed by and corresponding to any of those enactments (“the repealed enactments”). Any reference, whether express or implied, in any enactment, instrument or document (including this Act and any Act amended by this Act) to, or to things done or falling to be done under or for the purposes of, any provision of this Act shall, if and so far as the nature of the reference permits, be construed as including, in relation to the times, years or periods, circumstances or purposes in relation to which the corresponding provision in the repealed enactments has or had effect, a reference to, or as the case may be to things done or falling to be done under or for the purposes of, that corresponding provision. Any reference, whether express or implied, in any enactment, instrument or document (including the repealed enactments and enactments, instruments and documents passed or made after the passing of this Act) to, or to things done or falling to be done under or for the purposes of, any of the repealed enactments shall, if and so far as the nature of the reference permits, be construed as including, in relation to the times, years or periods, circumstances or purposes in relation to which the corresponding provision in this Act has effect, a reference to, or as the case may be to things done or falling to be done under or for the purposes of, that corresponding provision. Any reference to Case VIII of Schedule D, whether a specific reference or one imported by more general words, in any enactment, instrument or document shall, in relation to the chargeable periods to which section 843(1) applies, be construed as a reference to Schedule A, and for the purposes of sub-paragraph (2) above, Schedule A in this Act shall be treated as corresponding to Case VIII of Schedule D in the repealed enactments, and any provision of this Act or of any Act passed after 12th March 1970 and before this Act referring to Schedule A shall be construed accordingly.
Section 844.
“recipient company” has the meaning given by paragraph 6(3);
makes or revives a small maintenance order, or
the relevant fraction of the company’s total income in that year from investments (including franked investment income and group income) so far as referable to the business referred to in subsection (1) above;
varies or revives an order so that it becomes, or ceases to be, a small maintenance order, or
changes the persons who are entitled to small maintenance payments,
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Subject to subsections (3) to (6) below, income arising from savings certificates shall not be liable to tax.
Tax shall not be chargeable in respect of the interest on tax reserve certificates issued by the Treasury.
Subsection (1) above does not apply to any savings certificates which are purchased by or on behalf of a person in excess of the amount which a person is for the time being authorised to purchase under regulations made by the Treasury or, as respects Ulster Savings Certificates, by the Department of Finance and Personnel.
Subsection (1) above does not apply to Ulster Savings Certificates unless—
the holder is resident and ordinarily resident in Northern Ireland when the certificates are repaid; or
the certificates were purchased by him and he was so resident and ordinarily resident when they were purchased.
A claim under this section in respect of Ulster Savings Certificates shall be made to the Board.
In this section “savings certificates” means savings certificates issued under section 12 of the National Loans Act 1968 or section 7 of the National Debt Act 1958 or section 59 of the Finance Act 1920 and any war savings certificates as defined in section 9(3) of the National Debt Act 1972, together with any savings certificates issued under any corresponding enactment forming part of the law of Northern Ireland.
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The interest on securities which— shall, subject to subsection (3) below, be exempt from tax accordingly.
the Treasury have power to issue for the purpose of raising any money or any loan with a condition that the interest thereon shall not be liable to income tax so long as it is shown that the securities are in the beneficial ownership of persons who are not ordinarily resident in the United Kingdom, and
have been issued with such a condition,
A claim under this section shall be made to the Board.
Where any income of any person is, by virtue of any provision of the Tax Acts (and, in particular, but without prejudice to the generality of the preceding words, by virtue of Chapter III of Part XVII) to be deemed to be income of any other person, that income is not exempt from tax as being derived from a security issued by the Treasury with any condition regulating the treatment of the interest thereon for tax purposes by reason of the first-mentioned person not being ordinarily resident, or being neither domiciled nor ordinarily resident, in the United Kingdom.
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Subject to subsection (3) below, no tax shall be chargeable in respect of— if it is proved, on a claim in that behalf made to the Board, that the person owning the securities and entitled to the dividends or proceeds is not resident in the United Kingdom.
dividends payable in the United Kingdom on the securities of any state or territory outside the United Kingdom, or
any dividends or proceeds chargeable apart from this subsection under paragraph 3 or 4 of Schedule C,
Where— that person shall for the purposes of subsection (1) above be deemed to be the person owning the securities.
securities are held under a trust, and
the person who is the beneficiary in possession is the sole beneficiary in possession and can, by means either of revocation of the trust or of the exercise of any powers under the trust, call upon the trustees at any time to transfer the securities to him absolutely free from any trust,
Where any income of any person is, by virtue of any provision of the Tax Acts (and in particular, but without prejudice to the generality of the preceding words, by virtue of Chapter III of Part XVII) to be deemed to be income of any other person, that income is not exempt from tax by virtue of this section by reason of the first-mentioned person not being resident in the United Kingdom.
Paragraph 1 of Schedule C shall not apply, in the case of dividends payable out of any public revenue other than the public revenue of the United Kingdom, if the securities in respect of which the dividends are payable are held in a recognised clearing system.
No tax shall be chargeable in respect of the stock or dividends— but the Bank of England and the Registrar of Government Stock shall each transmit to the Board an account of the total amount thereof in those books or registers as the case may be.
transferred, in pursuance of any Act of Parliament, to accounts in the books of the Bank of England in the name of the Treasury or the National Debt Commissioners, or
transferred, in pursuance of any Act of Parliament, to the Treasury or the National Debt Commissioners and in respect of which the Treasury or those Commissioners are entered as holder in the registers kept by the Registrar of Government Stock,
No tax shall be chargeable in respect of the stock or dividends belonging to the Crown, in whatever name they may stand in the books of the Bank of England or in the registers kept by the Registrar of Government Stock.
In this section “dividends” means any interest, public annuities, dividends or shares of annuities.
In this section “Registrar of Government Stock” means the person or persons appointed in accordance with regulations under section 47(1)(b) of the Finance Act 1942 (see regulation 3 of the Government Stock Regulations 2004).
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The Treasury may direct that any of the following securities, that is to say— shall be issued, or shall be deemed to have been issued, subject to the condition that the interest thereon shall be paid without deduction of income tax; and subject to the provisions of this section the interest shall be so paid accordingly, but shall be chargeable under Case III of Schedule D.
any securities issued under the War Loan Acts 1914 to 1919 or under section 60 of the Finance Act 1916;
any securities issued or deemed to be issued under the National Loans Act 1939 or issued under the National Loans Act 1968;
any government stock issued under section 1 of the Bank of England Act 1946, section 1 of the Cable and Wireless Act 1946, section 65(1) of the Town and Country Planning Act 1947 or section 62(1) of the Town and Country Planning (Scotland) Act 1947; and
any such stock as is mentioned in section 33(1) of the Coal Industry Nationalisation Act 1946 or section 26(1) of the Iron and Steel Act 1967;
The holder of any registered securities the interest on which is by virtue of directions given under subsection (1) above payable without deduction of tax may make an application to the Bank under this subsection requesting that income tax shall be deducted from the interest on those securities before payment thereof.
Where any such application is made, income tax in respect of the interest on those securities shall, so long as they remain registered in the name of the applicant and subject to the withdrawal of the application under subsection (5) below, be deducted and charged in the same manner as if they were not securities to which subsection (1) above applied.
An application under subsection (2) above shall be made in such form as the Bank with the approval of the Treasury may prescribe, and any application made less than two months before the date on which a payment of interest falls due shall only have effect as regards any payment of interest subsequent to that payment.
An application made under subsection (2) above may at any time be withdrawn by notice to the Bank in such form as the Bank may with the approval of the Treasury prescribe, but an application so withdrawn shall, notwithstanding the withdrawal, continue to have effect as regards any interest payable less than two months after the date the notice is received at the Bank.
Where any securities to which subsection (2) above applies are held on trust, the holders of the securities may make an application under that subsection in respect thereof without the consent of any other person, notwithstanding anything in the instrument creating the trust.
In this section—
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The Treasury may, on the application of the Department of Finance and Personnel, as respects any securities to which this section applies, direct that the securities specified in the direction shall be issued, or shall be deemed to have been issued, subject to the condition that the interest thereon shall be paid without deduction of income tax; and in relation to any securities so specified and the interest thereon, section 50 shall have effect as if—
the securities were securities in respect of which a direction had been given by the Treasury under subsection (1) of that section;
references in that section to “the Bank” were (notwithstanding subsection (7) of that section) references to the bank in the books of which the securities are registered or inscribed; and
the references in subsections (4) and (5) of that section to the Treasury were references to the Department of Finance and Personnel.
The securities to which this section applies are securities issued under section 11(1)(c) of the Exchequer and Financial Provisions Act (Northern Ireland) 1950 for money borrowed by the Department of Finance and Personnel for the purposes of making issues from the Consolidated Fund of Northern Ireland.
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Where an application is made under section 50(2) with respect to any securities, subsection (1) above shall have effect as if—
during the period in which the interest on those securities was paid without deduction of income tax, those securities were original securities, and
during any later period, they were substituted securities.
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All farming and market gardening in the United Kingdom shall be treated as the carrying on of a trade or, as the case may be, of a part of a trade, and the profits and gains thereof shall be charged to tax under Case I of Schedule D accordingly.
All the farming carried on by any particular person or partnership or body of persons shall be treated as one trade.
Subject to subsection (4) below, the occupation of land in the United Kingdom for any purpose other than farming or market gardening shall, if the land is managed on a commercial basis and with a view to the realisation of profits, be treated as the carrying on of a trade or, as the case may be, of a part of a trade, and the profits or gains thereof shall be charged to tax under Case I of Schedule D accordingly.
Subsection (3) above shall not affect the taxation of woodlands which are managed on a commercial basis and with a view to the realisation of profits.
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Any person occupying woodlands which are managed by him on a commercial basis and with a view to the realisation of profits may elect to be assessed and charged to tax in respect of those woodlands under Schedule D instead of under Schedule B.
The election of any such person shall be signified by notice to the inspector not later than two years after the end of the chargeable period; and from and after the receipt of the notice—
the charge upon him for that period shall be under Schedule D; and
the profits or gains arising to him from the occupation of the woodlands shall for all purposes be deemed to be profits or gains of a trade chargeable under that Schedule.
Any such election shall extend to all woodlands so managed on the same estate; and, for the purposes of this subsection, woodlands shall be treated as being on a separate estate if the person occupying them gives notice to the inspector within ten years after the time when they are planted or replanted.
An election under this section shall have effect not only as respects the chargeable period, but also as respects all future chargeable periods so long as the woodlands are occupied by the person making the election.
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Profits or gains arising out of land in the case of any concern specified in subsection (2) below shall be charged to tax under Case I of Schedule D.
The concerns are—
mines and quarries (including gravel pits, sand pits and brickfields);
ironworks, gasworks, salt springs or works, alum mines or works (not being mines falling within the preceding paragraph) and waterworks and streams of water;
canals, inland navigation, docks and drains or levels;
fishings;
rights of markets and fairs, tolls, bridges and ferries;
railways and other ways;
other concerns of the like nature as any of the concerns specified in paragraphs (b) to (e) above.
Subsection (2) below applies to the following rights—
the right to receive the amount, with or without interest, stated in a certificate of deposit;
the right to receive an amount payable with interest— and the right to receive that interest.
in a transaction in which no certificate of deposit or security is issued, and
which is payable by a bank or similar institution or a person regularly engaging in similar transactions;
Profits or gains arising to a company from the disposal of a right to which this subsection applies or, except so far as it is a right to receive interest, from the exercise of any such right (whether by the person to whom the certificate was issued or by some other person, or, as the case may be, by the person who acquired the right in the transaction referred to in subsection (1) above or by some person acquiring it directly or indirectly from that person), shall, if not falling to be taken into account as a trading receipt, be treated as an amount to which the charge to corporation tax on income applies.
Subsection (2) above and section 551 of ITTOIA 2005 (charge to income tax on profits from disposal of deposit rights) do not apply in the case of the disposal or exercise of a right to receive an amount stated in a certificate of deposit or interest on such an amount—
if the company disposing of the right acquired it before 7th March 1973;
to any profits or gains arising to a fund or scheme in the case of which provision is made by section 613(4) or 614(2) or (3) or section 186 of the Finance Act 2004 for exempting the whole or part of its income from income tax;
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In this section—
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This section and section 56A shall not apply for the purposes of corporation tax except in relation to rights in existence before 1st April 1996.
For the purposes of corporation tax, where any profits or gains arising from the disposal or exercise of a right in existence before 1st April 1996 are, or (if there were any) would be, chargeable under this section, nothing in Part 5 of CTA 2009 (loan relationships) shall require any amount relating to that disposal, or to the exercise of that right, to be brought into account for the purposes of that Part.
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This section applies where there is an arrangement under which—
there is a right to receive an amount (with or without interest) in pursuance of a deposit of money,
when the right comes into existence there is no certificate of deposit in respect of the right, and
the person for the time being entitled to the right is entitled to call for the issue of a certificate of deposit in respect of the right.
In such a case—
the right shall be treated as not falling within section 56(1)(b), and
if there is a disposal or exercise of the right before such time (if any) as a certificate of deposit is issued in respect of it, section 56(2) shall apply to it by virtue of this paragraph.
In the application of section 56 by virtue of this section—
subsection (2) shall have effect as if the words from “(whether” to “person)” read “(whether by the person originally entitled to the right or by some other person)”, and
subsection (3) shall have effect as if the words “stated in a certificate of deposit” read “under an arrangement”.
In this section “certificate of deposit” has the meaning given by section 56(5).
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A pension which— shall be charged to tax under Case V of Schedule D.
is paid by or on behalf of a person outside the United Kingdom, and
is not charged under paragraph 4 of Schedule E,
Where— then, notwithstanding that the pension or payment is paid voluntarily, or is capable of being discontinued, it shall be deemed to be income for the purposes of assessment to tax and shall be assessed and charged to tax under Case V of Schedule D as income from a pension.
a person has ceased to hold any office or employment, and
a pension or annual payment is paid to him, or to his widow or child or to any relative or dependant of his, by the person under whom he held the office or by whom he was employed, or by the successors of that person, and
that pension or annual payment is paid by or on behalf of a person outside the United Kingdom,
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Subject to the provisions of this section and sections 61 to 63, income tax shall be charged under Cases I and II of Schedule D on the full amount of the profits or gains of the year preceding the year of assessment.
Subsection (3) or (4) below shall apply where, in the case of a trade, profession or vocation, an account has, or accounts have, been made up to a date or dates within the period of three years immediately preceding the year of assessment.
If—
an account was made up to a date within the year preceding the year of assessment, and
that account was the only account made up to a date in that year, and
it was for a period of one year beginning either— the profits or gains of the year ending on that date shall be taken to be the profits or gains of the year preceding the year of assessment.
at the commencement of the trade, profession or vocation, or
at the end of the period on the profits or gains of which the assessment for the last preceding year of assessment was to be computed,
If subsection (3) does not apply, the Board shall decide what period of 12 months ending on a date within the year preceding the year of assessment shall be deemed to be the year the profits or gains of which are to be taken to be the profits or gains of the year preceding the year of assessment.
Where— they may give a direction to that effect, and an assessment or, on a claim therefor, repayment of tax shall be made accordingly.
the Board have given a decision under subsection (4) above, and
it appears to them that, in consequence of that decision, income tax for the last preceding year of assessment in respect of the profits or gains from the same source should be computed on the profits or gains of a corresponding period,
The decision whether or not to give a direction under subsection (5) above shall be subject to an appeal which shall lie to the General Commissioners unless the appellant elects (in accordance with section 46(1) of the Management Act) to bring it before the Special Commissioners, and the Commissioners hearing the appeal shall grant such relief, if any, as is just.
An appeal under subsection (6) above shall be brought within 30 days of receipt of notice of the decision, save that, if the decision is to give a direction and an assessment is made in accordance with the direction, the appeal against the decision shall be by way of an appeal against the assessment.
In the case of the death of a person who, if he had not died, would under subsections (2) to (5) above have become chargeable to income tax for any year, the tax which would have been so chargeable shall be assessed and charged on his executors or administrators, and shall be a debt due from and payable out of his estate.
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Subject to subsection (4) below, where the trade, profession or vocation has been set up and commenced within the year of assessment, the computation of the profits or gains chargeable to income tax under Case I or Case II of Schedule D shall be made either on the full amount of the profits or gains arising in the year of assessment or according to the average of such period, not being greater than one year, as the case may require and as may be directed by the inspector.
On an appeal to the General or Special Commissioners, the Commissioners shall have jurisdiction to review the inspector’s decision under subsection (1) above.
Where the trade, profession or vocation has been set up and commenced within the year preceding the year of assessment, the computation of the profits or gains chargeable to income tax under Case I or Case II of Schedule D shall be made on the profits or gains for one year from its first being set up.
Subsections (1) to (3) above shall not apply in any case where section 113(1) and (2) apply but no election is made under section 113(2), but in such a case the computation of the profits or gains chargeable to income tax under Case I or II of Schedule D for the year of assessment in which the new trade, profession or vocation is treated as having been set up and commenced, and for each of the three years following that year of assessment, shall be made on the full amount of the profits or gains arising in the year of assessment in question.
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In this section —
“charged” means charged to income tax in respect of the profits or gains of a trade, profession or vocation;
For the purposes of paragraph (a) above, if the term begins on a date earlier than the making of the insurance, any premium paid in respect of a period before the making of the insurance, or in respect of that period and a subsequent period, shall be treated as having been payable on that date. Notwithstanding sub-paragraph (2)(b) above, the policy— For the purposes of sub-paragraphs (2) and (4) above— Where the policy secures a capital sum which is payable only on death or only on death occurring after the attainment of a specified age not exceeding 16, that capital sum must be not less than 75 per cent. of the total premiums which would be payable if the death of the relevant beneficiary occurred at the age of 75. Where the policy secures a capital sum which is payable only on survival for a specified term, that capital sum must be not less than 75 per cent. of the total premiums which would be payable if the policy were to run for that term. Where the policy secures a capital sum which is payable on survival for a specified term or on earlier death, or on earlier death or disability (including a policy securing the sum on death only if occurring after the attainment of a specified age not exceeding 16), the capital sum payable on death, whenever that event occurs, must be not less than 75 per cent. of the total premiums which would be payable if the policy were to run for that term, except that if, at the beginning of that term, the age of the relevant beneficiary exceeds 55, that capital sum may, for each year of the excess, be less by 2 per cent. of that total than 75 per cent. thereof. For the purposes of sub-paragraphs (5) to (7) above— If the policy does not secure a capital sum in the event of death occurring before the age of 16 or some lower age, it must not provide for the payment in that event of an amount exceeding the total premiums previously paid under it. References in this paragraph to a capital sum payable on any event include references to a capital sum or series of capital sums payable by reason of that event, but where what is so payable is either an amount consisting of one sum or an amount made up of two or more sums, any reference in sub-paragraphs (5) to (7) above to 75 per cent. of the total premiums payable in any circumstances shall be compared with the smaller or smallest amount so payable; and for the purposes of those sub-paragraphs a policy secures a capital sum payable either on death or on disability notwithstanding that the amount may vary with the event. For the purposes of sub-paragraphs (5) to (7) and (10) above, in the case of a policy which provides for any such payments as are referred to in sub-paragraph (3) above (“interim payments”), the amount of the capital sum which is payable on any event shall be taken to be increased—
references to a husband and wife are references to a husband and his wife living with him; and
one person is connected with another if he is so connected within the terms of section 839.
“purchased life annuity” means a life annuity granted for consideration in money or money’s worth in the ordinary course of a business of granting annuities on human life.
Subject to subsection (4) below, the person charged, or liable to be charged, shall be entitled, on giving notice to the inspector within seven years after the end of the second year of assessment, to require that tax shall be charged for both the second year of assessment and the third year of assessment (but not for one or other only of those years) on the amount of the profits or gains for each such year respectively.
A notice under subsection (2) above may be revoked by the person who gave it by notice given to the inspector within six years after the end of the third year of assessment and, where it is so revoked, tax shall be charged for both the second year of assessment and the third year of assessment as if the first notice had never been given.
Subsections (2) and (3) above shall not apply in any case where— but in such a case the person charged, or liable to be charged, shall be entitled, on giving notice to the inspector within seven years after the end of the fifth year of assessment, to require that tax shall be charged for both the fifth year of assessment and the sixth year of assessment (but not for one or other only of those years) on the amount of the profits or gains for each such year respectively.
section 113(1) and (2) apply and the change in the persons engaged in carrying on the trade, profession or vocation in partnership occurs after 19th March 1985; but
no election is made under section 113(2);
A notice under subsection (4) above may be revoked by the person who gave it by notice given to the inspector within six years after the end of the sixth year of assessment and, where it is so revoked, tax shall be charged for both the fifth year of assessment and the sixth year of assessment as if the first notice had never been given.
If at any time during the second or third year of assessment— a notice given for the purposes of subsection (2) above must, if given after the occurrence of the change and after notice has been given as respects the change under section 113(2), comply with the requirements of subsection (7) or (8) below, as the case may require.
a change occurs, by reason of retirement or death, in a partnership of persons engaged in the trade, profession or vocation, or the dissolution of the partnership as to one or more of the partners, or the admission of a new partner, in such circumstances that one or more of the persons who until that time were engaged in the trade, profession or vocation continue to be engaged in it; or
a change occurs such that a person who until that time was engaged in the trade, profession or vocation on his own account continues to be engaged in it but as a partner in a partnership;
A notice given within 12 months after the end of the second year of assessment must be signed by—
each of the individuals who were engaged in the trade, profession or vocation at any time between the commencement of that year and the giving of the notice; or
in the case of a deceased person, his personal representatives.
A notice given after the end of the third year of assessment must be signed by—
each of the individuals who were engaged in the trade, profession or vocation at any time during the second or third year of assessment; or
in the case of a deceased person, his personal representatives.
In the case of the death of a person who, if he had not died, would under the provisions of this section have become chargeable to income tax for any year, the tax which would have been so chargeable shall be assessed and charged on his personal representatives, and shall be a debt due from and payable out of his estate.
There shall be made such assessments, reductions of assessments or, on a claim in that behalf, repayments of tax as may in any case be required in order to give effect to the preceding provisions of this section.
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Where in any year of assessment a trade, profession or vocation is permanently discontinued, then notwithstanding anything in sections 60 to 62—
the person charged or chargeable with income tax in respect thereof shall be charged for that year on the amount of the profits or gains of the period beginning on the 6th April in that year and ending on the date of the discontinuance, but subject to any deduction or set-off to which he may be entitled under section 385 in respect of any loss; and
if the aggregate of the profits or gains (if any) of the years ending on the 5th April in each of the two years preceding the year of assessment in which the discontinuance occurs exceeds— he may be charged instead, for each of those two years, but subject to any such deduction or set-off, on the amount of the profits or gains of the year ending on the 5th April in that year.
the aggregate of the amounts on which that person has been charged for each of those two years; or
the aggregate of the amounts on which he would have been so charged if no deduction or set-off under section 385 had been allowed;
Where a person has been charged with income tax otherwise than in accordance with subsection (1) above, any such assessment to tax, reduction or discharge of an assessment to tax, or on a claim therefor, repayment of tax shall be made as may be necessary to give effect to that subsection.
In the case of the death of a person who, if he had not died, would under the provisions of this section have become chargeable to income tax for any year, the tax which would have been so chargeable shall be assessed and charged on his executors or administrators, and shall be a debt due from and payable out of his estate.
Subsection (1)(b) above shall not apply where a trade is permanently discontinued in consequence of the nationalisation of any property constituting the assets of the trade. For the purposes of this subsection “nationalisation” means, in relation to any property, a transfer of the property for which provision is made by any Act passed after the beginning of August 1945 and embodying a scheme for the carrying on of any industry or part of an industry, or of any undertaking, under national ownership or control, being a transfer, as part of the initial putting into force of the scheme, either to the Crown or to a body corporate constituted for the purposes of the scheme or of some previous scheme for such national ownership or control.
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Subject to the provisions of this section and sections 66 and 67, income tax chargeable under Case IV or Case V of Schedule D shall be computed on the full amount of the income arising in the year preceding the year of assessment, whether the income has been or will be received in the United Kingdom or not, subject in the case of income not received in the United Kingdom—
to the same deductions and allowances as if it had been so received, and
to a deduction on account of any annuity or other annual payment (not being interest) payable out of the income to a person not resident in the United Kingdom.
Subject to section 330, income tax chargeable under Case IV or V of Schedule D on income arising from any pension shall be computed on the amount of that income subject to a deduction of one-tenth of the amount of the income.
Income tax chargeable under Case IV or V of Schedule D on income which is immediately derived by a person from the carrying on by him of any trade, profession or vocation either solely or in partnership shall be computed in accordance with the rules applicable to Cases I and II of Schedule D; and subsection (1)(a) above shall not apply. Nothing in this subsection shall be taken to apply sections 60 to 63 or 113 in relation to income chargeable under Case V of Schedule D but computed in accordance with this subsection.
Subsections (1), (2) and (3) above shall not apply to any person who, on a claim made to the Board, satisfies the Board that he is not domiciled in the United Kingdom, or that, being a Commonwealth citizen or a citizen of the Republic of Ireland, he is not ordinarily resident in the United Kingdom.
Where subsection (4) above applies the tax shall, subject to sections 66 and 67, be computed—
in the case of tax chargeable under Case IV, on the full amount, so far as the same can be computed, of the sums received in the United Kingdom in the year preceding the year of assessment, without any deduction or abatement; and
in the case of tax chargeable under Case V, on the full amount of the actual sums received in the United Kingdom in the year preceding the year of assessment from remittances payable in the United Kingdom, or from property imported, or from money or value arising from property not imported, or from money or value so received on credit or on account in respect of any such remittances, property, money or value brought or to be brought into the United Kingdom, without any deduction or abatement other than is allowed under the provisions of the Income Tax Acts in respect of profits or gains charged under Case I of Schedule D.
For the purposes of subsection (5) above, any income arising from securities or possessions out of the United Kingdom which is applied outside the United Kingdom by a person ordinarily resident in the United Kingdom in or towards satisfaction of— shall be treated as received by him in the United Kingdom (and, for the purposes of subsection (5)(b) above, as so received from remittances payable in the United Kingdom).
any debt for money lent to him in the United Kingdom or for interest on money so lent, or
any debt for money lent to him outside the United Kingdom and received in or brought to the United Kingdom, or
any debt incurred for satisfying in whole or in part a debt falling within paragraph (a) or (b) above,
Where a person ordinarily resident in the United Kingdom receives in or brings to the United Kingdom money lent to him outside the United Kingdom, but the debt for that money is wholly or partly satisfied before he does so, subsection (6) above shall apply as if the money had been received in or brought to the United Kingdom before the debt was so satisfied, except that any sums treated by virtue of that subsection as received in the United Kingdom shall be treated as so received at the time when the money so lent is actually received in or brought to the United Kingdom.
Where— that income shall be treated as applied by the borrower in or towards satisfaction of the debt if, under any arrangement between the borrower and the lender, the amount for the time being of the borrower’s indebtedness to the lender, or the time at which the debt is to be repaid in whole or in part, depends in any respect directly or indirectly on the amount or value so held by the lender.
a person (“the borrower”) is indebted for money lent to him, and
income is applied by him in such a way that the money or property representing it is held by the lender on behalf of or to the account of the borrower in such circumstances as to be available to the lender for the purpose of satisfying or reducing the debt by set-off or otherwise,
For the purposes of subsections (6) to (8) above—
a debt for money lent shall, to the extent to which that money is applied in or towards satisfying another debt, be deemed to be a debt incurred for satisying that other debt, and a debt incurred for satisfying in whole or in part a debt falling within paragraph (c) of subsection (6) above shall itself be treated as falling within that paragraph; and
“lender” includes, in relation to any money lent, any person for the time being entitled to repayment.
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Income tax under Case III, IV or V of Schedule D shall, in the following cases, be computed on the following amounts, and, where the tax is charged under Case III, paid on those actual amounts without any deduction—
as respects the year of assessment in which the income first arises, on the full amount of the income arising within that year;
where the income first arose on some day in the year preceding the year of assessment other than 6th April, on the amount of the income of the year of assessment; and
where the income first arose on 6th April in the year preceding the year of assessment, or on some day in the year next before the year preceding the year of assessment other than 6th April, and the person charged so requires by notice given to the inspector at any time within six years after the end of the year of assessment, on the amount of the income of that year.
Where subsection (1)(c) above applies, and income tax charged otherwise than in accordance with that provision has been paid, any amount overpaid shall be repaid.
If at any time a person acquires a new source of any income in respect of which he is chargeable under Case III, IV or V of Schedule D, or an addition to any source of any such income, then, for the year of assessment in which income first arises from the source or addition and the two following years of assessment, income tax in respect of the income from the source or addition shall, notwithstanding section 73, be computed separately and subsection (1) above shall apply.
For the purposes of the charge under Case III, if at any time interest on a debt ceases to be payable subject to deduction of income tax, subsection (3) above shall apply as if the debt were a new source of income acquired by the creditor at that time.
Where income arising to any person from any security or possession in any place out of the United Kingdom ceases at any time to be chargeable to income tax by deduction under the provisions of section 123, subsection (3) above shall apply as if that security or possession were a new source of income acquired by that person at that time.
In any case where tax is to be charged under Case IV or V by reference to the amount of income received in the United Kingdom, references in this section to income which arises or arose shall have effect as references to income which is or was so received.
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Subject to the provisions of this section, if in any year of assessment a person charged or chargeable to income tax in respect of any income chargeable under Case III, IV or V of Schedule D ceases to possess any particular source of any such income or any part of any such source, the following provisions shall apply to the tax in respect of the income from that source or part—
notwithstanding section 73, the tax shall for that year, and (if necessary) for the preceding year, be computed separately;
subject to paragraph (c) below, the tax shall for that year be computed on the amount of the income arising within the year (instead of the income arising within the preceding year), and shall for that preceding year also be computed on the amount of the income arising within it if greater than the amount on which tax is to be computed for that preceding year apart from this provision; and
if no income arose within those two years and the person charged or chargeable makes a claim under this section not later than two years after the end of them, then, subject to subsection (4) below—
paragraphs (a) and (b) above shall apply to the year of assessment in which income did last arise and the year preceding it as, apart from this paragraph, they would apply to the year in which he ceases to possess the source or part and the year preceding it, and
tax for the year of assessment following that in which income did last arise shall not be chargeable on the amount of the income so arising.
For the purposes of the charge under Case III, if at any time interest on a debt begins to be payable subject to deduction of income tax, subsection (1) above shall apply as if the debt were a source of income which the creditor ceased to possess at that time.
Where income in respect of which a person has previously been charged or chargeable to income tax under Case IV or V of Schedule D becomes at any time chargeable to income tax by deduction under the provisions of section 123, subsection (1) above shall apply as if the security or possession in question were a source of income which he ceased to possess at that time.
Without prejudice to subsection (5) below, a person shall not be entitled by virtue of subsection (1)(c) above to make a claim under this section in respect of any source of income or any part of such a source more than eight years after the end of the year of assessment in which income last arose from that source.
A person possessing a source of income chargeable to income tax under Case III, IV or V of Schedule D and having possessed it for six consecutive years of assessment without any income arising from it, shall be entitled, if income did arise from it in the year preceding those six years, to make a claim under this section not later than two years after the end of those six years; and if he does so—
subsection (1) above shall apply as if he had ceased to possess the source of income immediately before the end of those six years; and
section 66(3) shall apply in relation to later years of assessment as if he had acquired the source as a new source immediately after the end of those six years.
References in this section to income arising shall, in cases where tax under Case IV or V is to be computed by reference to the amount of income received in the United Kingdom, be construed as references to income being so received.
There shall be made all such adjustments, whether by way of repayment of tax, assessment or otherwise, as may be necessary to give effect to this section.
A person’s executors or administrators may make any claim under this section which he might have made, if he had not died, in respect of any source of income, or part of such a source, which he ceased to possess before his death, and may also make a claim under this section in respect of sources of income which he ceased to possess by dying; and after a person’s death—
any tax paid by him and repayable by virtue of a claim under this section (whether made by him or by his executors or administrators) shall be repaid to his executors or administrators, and
any additional tax chargeable by virtue of such a claim shall be assessed and charged on his executors or administrators, and shall be a debt due from and payable out of his estate.
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Notwithstanding anything in sections 65 or 66, but subject to the provisions of this section, income tax chargeable under Case IV or V of Schedule D shall, in the case of property situated and profits or gains arising in the Republic of Ireland, be computed on the full amount of the income arising in the year of assessment, whether the income has been or will be received in the United Kingdom or not, subject in the case of income not received in the United Kingdom—
to the same deductions and allowances as if it had been so received; and
to a deduction on account of any annuity or other annual payment (not being interest) payable out of the income to a person not resident in the United Kingdom.
Subsection (1) above shall not apply—
to any income which is immediately derived by a person from the carrying on by him of any trade, profession or vocation, either solely or in partnership; or
to any income which arises from any pension.
The tax in respect of any such income as is mentioned in subsection (2) above arising in the Republic of Ireland shall be computed either— so that, according to the nature of the income, the tax may be computed on the same basis as that on which it would have been computed if the income had arisen in the United Kingdom, and subject in either case to a deduction on account of any annuity or other annual payment (not being interest) payable out of the income to a person not resident in the United Kingdom; and the person chargeable and assessable shall be entitled to the same allowances, deductions and reliefs as if the income had arisen in the United Kingdom. The jurisdiction of the General or Special Commissioners on any appeal shall include jurisdiction to review the inspector’s decision under this subsection.
on the full amount thereof arising in the year of assessment; or
on the full amount thereof on an average of such period as the case may require and as may be directed by the inspector;
In charging any income which is excluded from subsection (1) above by subsection (2)(a) above there shall be the same limitation on reliefs as under section 391(2) in the case of income computed by virtue of section 65(3) in accordance with the rules applicable to Cases I and II of Schedule D.
In charging income arising from a pension under subsection (3) above, a deduction of one-tenth shall be allowed unless it is the income of a person falling within section 65(4).
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Income tax under Case VI of Schedule D shall be computed either on the full amount of the profits or gains arising in the year of assessment or according to an average of such period, not being greater than one year, as the case may require and as may be directed by the inspector.
On an appeal to the General or Special Commissioners, the Commissioners shall have jurisdiction to review the inspector’s decision under this section.
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In accordance with sections 6 to 12 and 337 to 344, for the purposes of corporation tax for any accounting period income shall be computed under Cases I to VI of Schedule D on the full amount of the profits or gains or income arising in the period (whether or not received in or transmitted to the United Kingdom), without any other deduction than is authorised by the Corporation Tax Acts.
Where a company is chargeable to corporation tax in respect of a trade or vocation under Case V of Schedule D, the income from the trade or vocation shall be computed in accordance with the rules applicable to Case I of Schedule D.
Cases IV and V of Schedule D shall for the purposes of corporation tax extend to companies not resident in the United Kingdom, so far as those companies are chargeable to tax on income of descriptions which, in the case of companies resident in the United Kingdom, fall within those Cases (but without prejudice to any provision of the Tax Acts specially exempting non-residents from tax on any particular description of income).
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Where in the case of any profits or gains chargeable under Case I, II or VI of Schedule D it is necessary in order to arrive for the purposes of income tax or corporation tax at the profits or gains or losses of any year of assessment, accounting period or other period, to divide and apportion to specific periods the profits or gains or losses for any period for which the accounts have been made up, or to aggregate any such profits, gains or losses or any apportioned parts thereof, it shall be lawful to make such a division and apportionment or aggregation.
Any apportionment under this section shall be made in proportion to the number of months, or fractions of months, in the respective periods.
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any disbursements or expenses, not being money wholly and exclusively laid out or expended for the purposes of the trade, profession or vocation;
any disbursements or expenses of maintenance of the parties, their families or establishments, or any sums expended for any other domestic or private purposes distinct from the purposes of the trade, profession or vocation;
the rent of the whole or any part of any dwelling-house or domestic offices, except any such part as is used for the purposes of the trade, profession or vocation, and where any such part is so used, the sum so deducted shall not, unless in any particular case it appears that having regard to all the circumstances some greater sum ought to be deducted, exceed two-thirds of the rent bona fide paid for that dwelling-house or those offices;
any sum expended for repairs of premises occupied, or for the supply, repairs or alterations of any implements, utensils or articles employed, for the purposes of the trade, profession or vocation, beyond the sum actually expended for those purposes;
any loss not connected with or arising out of the trade, profession or vocation;
any capital withdrawn from, or any sum employed or intended to be employed as capital in, the trade, profession or vocation, but so that this paragraph shall not be treated as disallowing the deduction of any interest;
any capital employed in improvements of premises occupied for the purposes of the trade, profession or vocation;
any interest which might have been made if any such sums as aforesaid had been laid out at interest;
any debts, except bad debts proved to be such, and doubtful debts to the extent that they are respectively estimated to be bad, and in the case of the bankruptcy or insolvency of a debtor the amount which may reasonably be expected to be received on any such debt shall be deemed to be the value thereof;
any average loss beyond the actual amount of loss after adjustment;
any sum recoverable under an insurance or contract of indemnity;
any annuity or other annual payment (other than interest) payable out of the profits or gains;
any interest paid to a person not resident in the United Kingdom if and so far as it is interest at more than a reasonable commercial rate;
any relevant loan interest within the meaning of section 369, other than interest to which section 375(2) applies;
any royalty or other sum paid in respect of the user of a patent;
any rent, royalty or other payment which is by section 119 or 120 declared to be subject to deduction of tax under section 348 or 349 as if it were a royalty or other sum paid in respect of the user of a patent.
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In computing for the purposes of corporation tax the total profits for any accounting period of an investment company resident in the United Kingdom there shall be deducted any sums disbursed as expenses of management (including commissions) for that period, except any such expenses as are deductible in computing profits apart from this section.
For the purposes of subsection (1) above there shall be deducted from the amount treated as expenses of management the amount of any income derived from sources not charged to tax, other than franked investment income, group income and any regional development grant. In this subsection “regional development grant” means a payment by way of grant under Part II of the Industrial Development Act 1982.
Where in any accounting period of an investment company the expenses of management deductible under subsection (1) above, together with any charges on income paid in the accounting period wholly and exclusively for purposes of the company’s business, exceed the amount of the profits from which they are deductible—
the excess shall be carried forward to the succeeding accounting period; and
the amount so carried forward to the succeeding accounting period shall be treated for the purposes of this section, including any further application of this subsection, as if it had been disbursed as expenses of management for that accounting period.
For the purposes of this section there shall be added to a company’s expenses of management in any accounting period the amount of any allowances falling to be made to the company for that period by virtue of section 306 of the 1970 Act (capital allowances for machinery and plant) in so far as effect cannot be given to them under subsection (2) of that section.
Where an appeal against an assessment to corporation tax or against a decision on a claim under section 242 relates exclusively to the relief to be given under subsection (1) above, the appeal shall lie to the Special Commissioners, and if and so far as the question in dispute on any such appeal which does not lie to the Special Commissioners relates to that relief, that question shall, instead of being determined on the appeal, be referred to and determined by the Special Commissioners, and the Management Act shall apply as if that reference were an appeal.
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Subject to the provisions of this section and of section 432, section 75 shall apply for computing the profits of a company carrying on life assurance business, whether mutual or proprietary, (and not charged to corporation tax in respect of it under Case I of Schedule D), whether or not the company is resident in the United Kingdom, as that section applies in relation to an investment company except that—
there shall be deducted from the amount treated as the expenses of management for any accounting period the amount of any fines, fees or profits arising from reversions, and
no deduction shall be made under section 75(2).
Relief in respect of management expenses shall not be given to any such company, whether under section 242 or subsection (1) above, so far as it would, if given in addition to all other reliefs to which the company is entitled, reduce the corporation tax borne by the company on the income and gains of its life assurance business for any accounting period to less than would have been paid if the company had been charged to tax in respect of that business under Case I of Schedule D. In this subsection the references to reliefs do not include references to any set-off under section 239.
For the purposes of subsection (2) above—
any tax credit to which the company is entitled in respect of a distribution received by it shall be treated as an equivalent amount of corporation tax borne or paid in respect of that distribution; and
any payment in respect of that credit under section 242 shall be treated as reducing the tax so treated as borne or paid.
In applying subsection (2) above to an accounting period in which a company— the tax that would have been paid if the company had been charged under Case I of Schedule D in respect of its life assurance business, or its life assurance business of either of those classes, shall be calculated as if any advance corporation tax set against the company’s liability to corporation tax for that accounting period were apportioned to the corporation tax attributable to each business in proportion to the profits of that business charged to corporation tax for that accounting period.
carries on any business in addition to life assurance business, or
carries on both ordinary life assurance business and industrial life assurance business,
Where relief has been withheld in respect of any accounting period by virtue of subsection (2) above, the excess to be carried forward by virtue of section 75(3) shall be increased accordingly.
The relief under this section available to an overseas life insurance company (within the meaning of section 431) in respect of its expenses of management shall be limited to expenses attributable to the life assurance business carried on by the company at or through its branch or agency in the United Kingdom.
For the purposes of this section any sums paid by a company under a long term business levy imposed by virtue of the Policyholders Protection Act 1975 shall be treated as part of its expenses of management.
In subsections (2) and (6) above “life assurance business” includes the business of granting annuities on human life.
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Subject to subsection (5) below, in computing the profits or gains to be charged under Case I or II of Schedule D there may be deducted the incidental costs of obtaining finance by means of a qualifying loan or the issue of qualifying loan stock or a qualifying security; and the incidental costs of obtaining finance by those means shall be treated for the purposes of section 75 as expenses of management.
Subject to subsections (3) and (4) below, in this section—
“a qualifying loan” and “qualifying loan stock” mean a loan or loan stock the interest on which is deductible—
in computing for tax purposes the profits or gains of the person by whom the incidental costs in question are incurred; or
under section 338 against his total profits; and
“qualifying security” means any deep discount security, as defined by paragraph 1 of Schedule 4, in respect of which the income elements, as defined by paragraph 4 of that Schedule, are deductible under paragraph 5(1) of that Schedule in computing the total profits of the company by which the incidental costs in question are incurred.
Except as provided by subsection (4) below, a loan or loan stock which carries the right of conversion into or to the acquisition of— is not a qualifying loan or qualifying loan stock if that right is exercisable before the expiry of the period of three years from the date when the loan was obtained or the stock issued.
shares, or
other securities not being a qualifying loan or qualifying loan stock,
A loan or loan stock— shall nevertheless be regarded as a qualifying loan or qualifying loan stock, as the case may be, if the right is not, or is not wholly, exercised before the expiry of the period of three years from the date when the loan was obtained or the stock was issued.
which carries such a right as is referred to in subsection (3) above, and
which by virtue of that subsection is not a qualifying loan or qualifying loan stock,
For the purposes of the application of subsection (1) above in relation to a loan or loan stock which is a qualifying loan or qualifying loan stock by virtue of subsection (4) above—
if the right referred to in subsection (4)(a) above is exercised as to part of the loan or stock within the period referred to in that subsection, only that proportion of the incidental costs of obtaining finance which corresponds to the proportion of the stock in respect of which the right is not exercised within that period shall be taken into account; and
in so far as any of the incidental costs of obtaining finance are incurred before the expiry of the period referred to in subsection (4) above they shall be treated as incurred immediately after that period expires.
In this section “the incidental costs of obtaining finance” means expenditure on fees, commissions, advertising, printing and other incidental matters (but not including stamp duty), being expenditure wholly and exclusively incurred for the purpose of obtaining the finance (whether or not it is in fact obtained), or of providing security for it or of repaying it.
This section shall not be construed as affording relief—
for any sums paid in consequence of, or for obtaining protection against, losses resulting from changes in the rate of exchange between different currencies; or
for the cost of repaying a loan or loan stock or a qualifying security so far as attributable to its being repayable at a premium or to its having been obtained or issued at a discount.
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This section applies in any case where—
a bill of exchange drawn by a company is or was accepted by a bank and discounted by that or any other bank or by a discount house; and
the bill becomes or became payable on or after 1st April 1983; and
the discount suffered by the company is not (apart from this section) deductible in computing the company’s profits or any description of those profits for purposes of corporation tax.
Subject to subsection (3) below, in computing, in a case where this section applies, the corporation tax chargeable for the accounting period of the company in which the bill of exchange is paid, an amount equal to the discount referred to in subsection (1)(c) above shall be allowed as a deduction against the total profits for the period as reduced by any relief other than group relief and, except for the purposes of an allowance under section 338(1), that amount shall be treated for the purposes of the Corporation Tax Acts as a charge on income.
Subsection (2) above shall not apply if the discount is not ultimately suffered by the company and shall not apply unless—
the company exists wholly or mainly for the purposes of carrying on a trade; or
the bill is drawn to obtain funds which are wholly and exclusively expended for the purposes of a trade carried on by the company; or
the company is an investment company.
Where an amount falls to be allowed as mentioned in subsection (2) above, there may be deducted, in computing the profits or gains of the company to be charged under Case I of Schedule D, the incidental costs incurred on or after 1st April 1983 in securing the acceptance of the bill by the bank; and those incidental costs shall be treated for the purposes of section 75 as expenses of management.
For the purposes of subsection (4) above “incidental costs” means fees, commission and any other expenditure wholly and exclusively incurred for the purpose of securing the acceptance of the bill.
In this section “bank” means a bank carrying on a bona fide banking business in the United Kingdom and “discount house” means a person bona fide carrying on the business of a discount house in the United Kingdom.
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Notwithstanding anything in section 74, but subject to the provisions of this section, where a person carrying on a trade, profession or vocation makes any contribution (whether in cash or in kind) to an approved local enterprise agency, any expenditure incurred by him in making the contribution may be deducted as an expense in computing the profits or gains of the trade, profession or vocation for the purposes of tax if it would not otherwise be so deductible.
Where any such contribution is made by an investment company any expenditure allowable as a deduction under subsection (1) above shall for the purposes of section 75 be treated as expenses of management.
Subsection (1) above does not apply in relation to a contribution made by any person if either he or any person connected with him receives or is entitled to receive a benefit of any kind whatsoever for or in connection with the making of that contribution, whether from the agency concerned or from any other person.
In this section “approved local enterprise agency” means a body approved by the Secretary of State for the purposes of this section; but he shall not so approve a body unless he is satisfied that— and where the Secretary of State approves a body by virtue of paragraph (b) above, the approval shall specify the fund concerned and, in relation to a body so approved, any reference in this section to a contribution is a reference to a contribution which is made wholly to or for the purposes of that fund.
its sole objective is the promotion or encouragement of industrial and commercial activity or enterprise in a particular area in the United Kingdom with particular reference to encouraging the formation and development of small businesses; or
one of its principal objectives is that set out in paragraph (a) above and it maintains or is about to maintain a fund separate from its other funds which is or is to be applied solely in pursuance of that objective;
A body may be approved under subsection (4) above whether or not it is a body corporate or a body of trustees or any other association or organisation and whether or not it is described as a local enterprise agency.
A body may not be approved under subsection (4) above unless it is precluded, by virtue of any enactment, contractual obligation, memorandum or otherwise, from making any direct or indirect payment or transfer to any of its members, or to any person charged with the control and direction of its affairs, of any of its income or profit by way of dividend, gift, division, bonus or otherwise howsoever by way of profit.
For the purposes of subsection (6) above, the payment— does not constitute a payment or transfer which is required to be so precluded.
of reasonable remuneration for goods, labour or power supplied or for services rendered, or
of reasonable interest for money lent, or
of reasonable rent for any premises,
Any approval given by the Secretary of State may be made conditional upon compliance with such requirements as to accounts, provision of information and other matters as he considers appropriate; and if it appears to the Secretary of State that— he shall by notice withdraw his approval from the body concerned with effect from such date as he may specify in the notice (which may be a date earlier than the date on which the notice is given).
an approved local enterprise agency is not complying with any such requirement, or
one or other of the conditions for his approval contained in subsection (4) above or the precondition for his approval in subsection (6) above has ceased to be fulfilled with respect to an approved local enterprise agency,
In any case where— the contributor shall in respect of that chargeable period be charged to tax under Case I or Case II of Schedule D or, if he is not chargeable to tax under either of those Cases for that period, under Case VI of Schedule D on an amount equal to the value of that benefit.
a contribution has been made to an approved local enterprise agency in respect of which relief has been given under subsection (1) above, and
any benefit received in any chargeable period by the contributor or any person connected with him is in any way attributable to that contribution,
Section 839 applies for the purposes of subsections (3) and (9) above.
This section applies to contributions made on or after 1st April 1982 and before 1st April 1992.
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This section applies in the case of a trade, profession or vocation carried on wholly outside the United Kingdom by an individual (“the taxpayer”) who does not satisfy the Board as mentioned in section 65(4); and it is immaterial in the case of a trade or profession whether the taxpayer carries it on solely or in partnership.
Expenses of the taxpayer— shall, subject to subsections (3) and (4) below, be treated for the purposes of section 74(a) as having been wholly and exclusively expended for the purposes of the trade, profession or vocation.
in travelling from any place in the United Kingdom to any place where the trade, profession or vocation is carried on;
in travelling to any place in the United Kingdom from any place where the trade, profession or vocation is carried on; or
on board and lodging for the taxpayer at any place where the trade, profession or vocation is carried on;
Subsection (2) above does not apply unless the taxpayer’s absence from the United Kingdom is occasioned wholly and exclusively for the purpose of performing the functions of the trade, profession or vocation or of performing those functions and the functions of any other trade, profession or vocation (whether or not one in the case of which this section applies).
Where subsection (2) above applies and more than one trade, profession or vocation in the case of which this section applies is carried on at the place in question, the expenses shall be apportioned on such basis as is reasonable between those trades, professions or vocations; and the expenses so apportioned to a particular trade, profession or vocation shall be treated for the purposes of section 74(a) as having been wholly and exclusively expended for the purposes of that trade, profession or vocation.
Where the taxpayer is absent from the United Kingdom for a continuous period of 60 days or more wholly and exclusively for the purpose of performing the functions of one or more trades, professions or vocations in the case of which this section applies, expenses to which subsection (6) below applies shall be treated in accordance with subsection (7) or (8) below (as the case may be).
This subsection applies to the expenses of any journey by the taxpayer’s spouse, or any child of his, between any place in the United Kingdom and the place of performance of any of those functions outside the United Kingdom, if the journey— but this subsection does not apply to more than two outward and two return journeys by the same person in any year of assessment.
is made in order to accompany him at the beginning of the period of absence or to visit him during that period; or
is a return journey following a journey falling within paragraph (a) above;
The expenses shall be treated for the purposes of section 74(a) as having been wholly and exclusively expended for the purposes of the trade, profession or vocation concerned (if there is only one).
The expenses shall be apportioned on such basis as is reasonable between the trades, professions or vocations concerned (if there is more than one) and the expenses so apportioned to a particular trade, profession or vocation shall be treated for the purposes of section 74(a) as having been wholly and exclusively expended for the purposes of that trade, profession or vocation.
In subsection (6) above “child” includes a stepchild and an illegitimate child but does not include a person who is aged 18 or over at the beginning of the outward journey.
Nothing in this section shall permit the same sum to be deducted for more than one trade, profession or vocation in respect of expenses in computing profits or gains.
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Where a taxpayer (within the meaning of section 80) travels between a place where he carries on a trade, profession or vocation in the case of which section 80 applies and a place outside the United Kingdom where he carries on another trade, profession or vocation (whether or not one in the case of which that section applies) expenses of the taxpayer on such travel shall, subject to subsections (3) to (5) below, be treated for the purposes of section 74(a) as having been wholly and exclusively expended for the purposes of the trade, profession or vocation mentioned in subsection (2) below.
The trade, profession or vocation is—
the one carried on at the place of the taxpayer’s destination; or
if that trade, profession or vocation is not one in the case of which section 80 applies, the one carried on at the place of his departure.
This section does not apply unless the journey was made—
after performing functions of the trade, profession or vocation carried on at the place of departure; and
for the purpose of performing functions of the trade, profession or vocation carried on at the place of destination.
This section does not apply unless the taxpayer’s absence from the United Kingdom is occasioned wholly and exclusively for the purpose of performing the functions of both the trades, professions or vocations concerned or of performing those functions and the functions of any other trade, profession or vocation.
Where this section applies and more than one trade, profession or vocation in the case of which section 80 applies is carried on at the place of the taxpayer’s destination or (in a case falling within subsection (2)(b) above) at the place of his departure, the expenses shall be apportioned on such basis as is reasonable between those trades, professions or vocations; and the expenses so apportioned to a particular trade, profession or vocation shall be treated for the purposes of section 74(a) as having been wholly and exclusively expended for the purposes of that trade, profession or vocation.
Nothing in this section shall permit the same sum to be deducted for more than one trade, profession or vocation in respect of expenses in computing profits or gains.
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In computing the profits or gains arising from a trade, profession or vocation, no sum shall be deducted in respect of any annual interest paid to a person not resident in the United Kingdom unless—
the person making the payment has deducted income tax from the payment in accordance with section 349(2) and accounts for the tax so deducted, or
the conditions set out in subsection (2) below are satisfied.
The conditions referred to in subsection (1)(b) above are as follows—
that the trade, profession or vocation is carried on by a person residing in the United Kingdom, and
that the liability to pay the interest was incurred exclusively for the purposes of the trade, profession or vocation, and
that either—
the liability to pay the interest was incurred wholly or mainly for the purposes of activities of the trade, profession or vocation carried on outside the United Kingdom, or
the interest is payable in a currency other than sterling, and
that, under the terms of the contract under which the interest is payable, the interest is to be paid, or may be required to be paid, outside the United Kingdom, and
that the interest is in fact paid outside the United Kingdom.
Where the trade, profession or vocation is carried on by a partnership, subsection (1)(b) above shall not apply to any interest which is payable to any of the partners, or is payable in respect of the share of any partner in the partnership capital.
Subsection (1)(b) above shall not apply where—
the trade, profession or vocation is carried on by a body of persons over whom the person entitled to the interest has control; or
the person entitled to the interest is a body of persons over whom the person carrying on the trade, profession or vocation has control; or
the person carrying on the trade, profession or vocation and the person entitled to the interest are both bodies of persons and some other person has control over both of them. In this subsection, the references to a body of persons include references to a partnership, and “control” has the meaning given by section 840.
If interest paid under deduction of tax in accordance with section 349(2) is deductible in computing the profits or gains of a trade, profession or vocation the amount so deductible shall be the gross amount.
This section does not apply for the purposes of corporation tax.
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in obtaining for the purposes of the trade the grant of a patent, an extension of the term of a patent, the registration of a design or trade mark, the extension of the period of copyright in a design or the renewal of registration of a trade mark, or
in connection with a rejected or abandoned application for a patent made for the purposes of the trade. References in this section to a trade mark include references to a service mark within the meaning of the Trade Marks (Amendment) Act 1984.
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Notwithstanding anything in section 74, where a person carrying on a trade makes any payment to be used for the purposes of technical education related to that trade at any university or university college or at any such technical college or other similar institution as may for the time being be approved for the purposes of this section by the Secretary of State, the payment may be deducted as an expense in computing the profits or gains of the trade for the purposes of tax.
For the purposes of this section, technical education shall be deemed to be related to a trade if, and only if, it is technical education of a kind specially requisite for persons employed in the class of trade to which that trade belongs.
In relation to technical colleges or other institutions in Northern Ireland, this section shall have effect as if for the reference to the Secretary of State there were substituted a reference to the Department of Education for Northern Ireland.
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Any sum expended in making a payment to the trustees of an approved profit sharing scheme by a company which is in relation to that scheme the grantor or a participating company— if, and only if, one of the conditions in subsection (2) below is fulfilled.
shall be deducted in computing for the purposes of Schedule D the profits or gains of a trade carried on by that company; or
if that company is an investment company or a company in the case of which section 75 applies by virtue of section 76, shall be treated as expenses of management,
The conditions referred to in subsection (1) above are—
that before the expiry of the relevant period the sum in question is applied by the trustees in the acquisition of shares for appropriation to individuals who are eligible to participate in the scheme by virtue of their being or having been employees or directors of the company making the payment; and
that the sum is necessary to meet the reasonable expenses of the trustees in administering the scheme.
For the purposes of subsection (2)(a) above “the relevant period” means the period of nine months beginning on the day following the end of the period of account in which the sum in question is charged as an expense of the company incurring the expenditure or such longer period as the Board may allow by notice given to that company.
For the purposes of this section, the trustees of an approved profit sharing scheme shall be taken to apply sums paid to them in the order in which the sums are received by them.
In this section—
“the designated day” means such day as the Board may specify for the purpose in regulations;
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If a person (“the employer”) carrying on a trade, profession, vocation or business for the purposes of which he employs a person (“the employee”) makes available to a charity, on a basis which is expressed and intended to be of a temporary nature, the services of the employee then, notwithstanding anything in section 74 or 75, any expenditure incurred (or disbursed) by the employer which is attributable to the employment of that employee shall continue to be deductible in the manner and to the like extent as if, during the time that his services are so made available to the charity, they continued to be available for the purposes of the employer’s trade, business, profession or vocation.
In subsection (1) above—
With respect to expenditure attributable to the employment of a person on or after 26th November 1986 and before 1st April 1997, this section shall have effect as if the references to a charity included references to any of the following bodies, that is to say—
in England and Wales, any local education authority and any educational institution maintained by such an authority;
in Scotland, any education authority, any educational establishment maintained by such an authority, and any college of education or central institution within the meaning of the Education (Scotland) Act 1980;
in Northern Ireland, any education and library board, college of education or controlled school within the meaning of the Education and Libraries (Northern Ireland) Order 1986 and any institution of further education which is under the management of an education and library board by virtue of Article 28 of that Order; and
any other educational body which is for the time being approved for the purposes of this section by the Secretary of State or, in Northern Ireland, the Department of Education for Northern Ireland.
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This section applies where in relation to any land used in connection with a trade, profession or vocation— and that amount is referred to below as “the amount chargeable”.
tax has become chargeable under section 34 or 35 on any amount (disregarding any reduction in that amount under section 37(2) and (3)); or
tax would have become so chargeable on that amount but for the operation of section 37(2) and (3) or but for any exemption from tax;
Subject to subsections (3) to (8) below, where— he shall be treated, in computing the profits or gains of the trade, profession or vocation chargeable to tax under Case I or II of Schedule D, as paying in respect of that land rent for the period (in addition to any actual rent), becoming due from day to day, of an amount which bears to the amount chargeable the same proportion as that part of the relevant period bears to the whole.
during any part of the relevant period the land in relation to which the amount chargeable arose is occupied by the person for the time being entitled to the lease as respects which it arose, and
that occupation is for the purposes of a trade, profession or vocation carried on by him,
As respects any period during which a part only of the land in relation to which the amount chargeable arose is occupied as mentioned in subsection (2) above, that subsection shall apply as if the whole were so occupied, but the amount chargeable shall be treated as reduced by so much thereof as, on a just apportionment, is attributable to the remainder of the land.
Where a person, although not in occupation of the land or any part of the land, deals with his interest in the land or that part as property employed for the purposes of a trade, profession or vocation carried on by him, subsections (2) and (3) above shall apply as if the land or part were occupied by him for those purposes.
Where section 37(2) and (3) has effect in relation to a lease granted out of the interest referred to in subsection (4) above, subsections (5) and (6) of that section shall apply for modifying the operation of subsections (2) and (3) above as they apply for modifying the operation of subsection (4) of that section.
In computing profits or gains chargeable under Case I or II of Schedule D for any chargeable period, rent shall not by virtue of subsection (4) above be treated as paid by a person for any period in respect of land in so far as rent treated under section 37(4) as paid by him for that period in respect of the land has in any previous chargeable period been deducted, or falls in that chargeable period to be deducted under Part II.
Where, in respect of expenditure on the acquisition of his interest in the land in relation to which the amount chargeable arose, a person has become entitled to an allowance under section 60 of the 1968 Act (mineral depletion) for any chargeable period, then— and the reference in this subsection to an allowance under section 60 of the 1968 Act includes a reference to an allowance under Part III of Schedule 13 to the Finance Act 1986 in respect of expenditure falling within paragraph 4(1)(b) of that Schedule.
if the allowance is in respect of the whole of the expenditure, no deduction shall be allowed him under this section for that or any subsequent chargeable period; or
if the allowance is in respect of part only of the expenditure (“the allowable part”), a deduction allowed him under this section for that or any subsequent chargeable period shall be the fraction— of the amount which apart from this subsection would fall to be deducted, where— A is the whole of the expenditure, and B is the allowable part of the expenditure;
Where the amount chargeable arose under section 34(2) by reason of an obligation which included the carrying out of work in respect of which any capital allowance has fallen or will fall to be made, this section shall apply as if the obligation had not included the carrying out of that work and the amount chargeable had been calculated accordingly.
In this section “the relevant period” means—
where the amount chargeable arose under section 34, the period treated in computing that amount as the duration of the lease;
where the amount chargeable arose under section 35, the period treated in computing that amount as the duration of the lease remaining at the date of the assignment.
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in the sums to be deducted in computing for the purposes of Case I or Case II of Schedule D the profits or gains of any trade, profession or vocation carried on by that person; or
if that person is an investment company or a company in the case of which section 75 applies by virtue of section 76, in the sums to be deducted as expenses of management in computing the company’s profits for the purposes of corporation tax;
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Where a payment is made by way of addition to a redundancy payment or to the corresponding amount of any other employer’s payment and the additional payment would be— but for the permanent discontinuance of the trade, profession, vocation or business, the additional payment shall, subject to subsection (2) below, be so allowable or so eligible notwithstanding that discontinuance and, if made after the discontinuance, shall be treated as made on the last day on which the trade, profession, vocation or business was carried on.
allowable as a deduction in computing for the purposes of Schedule D the profits or gains or losses of a trade, profession or vocation; or
eligible for relief under section 75 or 76 as expenses of management of a business,
Subsection (1) above applies to an additional payment only so far as it does not exceed three times the amount of the redundancy payment or of the corresponding amount of the other employer’s payment.
In this section references to the permanent discontinuance of a trade, profession, vocation or business include references to any occasion on which it is treated as permanently discontinued by virtue of section 113(1) or 337(1).
In this section references to a redundancy payment or to the corresponding amount of an employer’s payment shall be construed as in sections 579 and 580.
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In computing the profits or gains or losses for any period of a trade which consists of or includes the carrying on of a cemetery, there shall be allowed as a deduction—
any capital expenditure incurred by the person engaged in carrying on the trade in providing any land in the cemetery sold during that period for the purpose of interments, and
the appropriate fraction of the residue at the end of that period of the relevant capital expenditure.
Subject to subsection (3) below, the relevant capital expenditure is capital expenditure incurred for the purposes of the trade in question by the person engaged in carrying it on, being—
expenditure on any building or structure other than a dwelling-house, being a building or structure in the cemetery likely to have little or no value when the cemetery is full; and
expenditure incurred in providing land taken up by any such building or structure, and any other land in the cemetery not suitable or adaptable for use for interments and likely to have little or no value when the cemetery is full.
Relevant capital expenditure—
does not include expenditure incurred on buildings or structures which have been destroyed before the beginning of the first period to which subsection (1) above applies in the case of the trade in question; and
of other expenditure incurred before that time, includes only the fraction— where— A is the number of grave-spaces which at that time were or could have been made available in the cemetery for sale, and B is the number already sold.
For the purposes of this section—
the residue of any expenditure at the end of a period is the amount incurred before that time which remains after deducting—
any amount allowed in respect of that expenditure under subsection (1)(b) above in computing the profits or gains or losses of the trade for any previous period, and
if, after the beginning of the first period to which subsection (1) above applies in the case of a trade and before the end of the period mentioned at the beginning of this subsection, any asset representing that expenditure is sold or destroyed, the net proceeds of sale or, as the case may be, any insurance money or other compensation of any description received by the person carrying on the trade in respect of the destruction and any money received by him for the remains of the asset; and
the appropriate fraction of the residue of any expenditure at the end of any period is— where— A is the number of grave-spaces in the cemetery sold in the period, and B is the number of grave-spaces which at the end of the period are or could be made available in the cemetery for sale.
Where in any chargeable period there is a change in the persons engaged in carrying on a trade which consists of or includes the carrying on of a cemetery, any allowance to be made under this section to the persons carrying on the trade after the change shall, whether or not it is to be assumed for other purposes that the trade was discontinued and a new trade set up and commenced, be computed—
as if they had at all times been engaged in carrying on the trade;
as if everything done to or by any of their predecessors in carrying on the trade had been done to or by them; and
without regard to the price paid on any sale on the occasion of any such change.
No expenditure shall be taken into account under both paragraph (a) and paragraph (b) of subsection (1) above, whether for the same or different periods.
This section shall apply in relation to a trade which consists of or includes the carrying on of a crematorium and, in connection therewith, the maintenance of memorial garden plots, as it applies in relation to a trade which consists of or includes the carrying on of a cemetery, but subject to the modifications that—
references to the cemetery or land in the cemetery shall be taken as references to the land which is devoted wholly to memorial garden plots, and
references to grave-spaces shall be taken as references to memorial garden plots, and
references to the sale or use of land for interments shall be taken as references to its sale or use for memorial garden plots.
In this section—
references to the sale of land include references to the sale of a right of interment in land, and to the appropriation of part of a memorial garden in return for a dedication fee or similar payment;
references to capital expenditure incurred in providing land shall be taken as references to the cost of purchase and to any capital expenditure incurred in levelling or draining it or otherwise rendering it suitable for the purposes of a cemetery or a memorial garden; and
the reference in subsection (4)(a)(ii) to subsection (1) above includes a reference to section 141 of the 1970 Act and section 22 of the Finance Act 1952 (which made similar provision to that made by this section).
Section 84 of the 1968 Act (which relates to expenditure which is reimbursed to a person carrying on a trade) shall apply for the purposes of this section as it applies for the purposes of Part I of that Act.
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A regional development grant which, apart from this subsection, would be taken into account as a receipt in computing the profits of a trade, profession or vocation which are chargeable under Case I or II of Schedule D, shall not be taken into account as a receipt in computing those profits.
A regional development grant which is made to an investment company—
shall not be taken into account as a receipt in computing its profits under Case VI of Schedule D; and
shall not be deducted, by virtue of section 75(2), from the amount treated as expenses of management.
In this section “regional development grant” means a payment by way of grant under Part II of the Industrial Development Act 1982.
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A payment to which this section applies which is made to a person carrying on a trade the profits of which are chargeable under Case I of Schedule D shall be taken into account as a receipt in computing those profits; and any such payment which is made to an investment company shall be taken into account as a receipt in computing its profits under Case VI of Schedule D.
This section applies to any payment which would not, apart from this section, be taken into account as mentioned in subsection (1) above, being a payment by way of a grant under— other than a grant designated as made towards the cost of specified capital expenditure or as made by way of compensation for the loss of capital assets and other than a grant falling within subsection (3) below.
section 7 or 8 of the Industrial Development Act 1982 or section 7 or 8 of the Industry Act 1972; or
section 1 of the Industries Development Act (Northern Ireland) 1966 or section 4 of the Industries Development Act (Northern Ireland) 1971; or
any of Articles 7, 9 and 30 of the Industrial Development (Northern Ireland) Order 1982;
A payment by way of grant which is made— shall not be taken into account as mentioned in subsection (1) above, whether by virtue of this section or otherwise.
under Article 7 of the Order referred to in subsection (2)(c) above, and
in respect of a liability for corporation tax (including a liability which has already been met),
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Where a company purchases its own shares from a dealer, the purchase price shall be taken into account in computing the profits of the dealer chargeable to tax under Case I or II of Schedule D; and accordingly—
tax shall not be chargeable under Schedule F in respect of any distribution represented by any part of the price, and
the dealer shall not be entitled in respect of the distribution to a tax credit under section 231, and
sections 208 and 234(1) shall not apply to the distribution.
For the purposes of subsection (1) above a person is a dealer in relation to shares of a company if the price received on their sale by him otherwise than to the company would be taken into account in computing his profits chargeable to tax under Case I or II of Schedule D.
Subject to subsection (4) below, in subsection (1) above—
the reference to the purchase of shares includes a reference to the redemption or repayment of shares and to the purchase of rights to acquire shares, and
the reference to the purchase price includes a reference to any sum payable on redemption or repayment.
Subsection (1) above shall not apply in relation to— if in either case the shares were issued to and continuously held by the person from whom they are redeemed.
the redemption of fixed-rate preference shares, or
the redemption, on terms settled or substantially settled before 6th April 1982, of other preference shares issued before that date,
In this section—
If the total amount of relevant distributions received by a company in an accounting period exceeds £50,000, those distributions are to be taken into account in calculating for corporation tax purposes the profits of the company in that period (and accordingly section 130(2) of CTA 2009 does not apply in relation to those distributions).
A company (“company A”) receives a “relevant distribution” if—
it receives a distribution made by a company . . . (“company B”),
the value of the shares or stock in respect of which the distribution is made (“the holding”) is materially reduced by reason of the distribution,
a profit on the sale of the holding (to anyone other than company B) would be taken into account in calculating company A's profits in respect of relevant insurance business, and
either—
the holding amounts to, or is an ingredient in a holding amounting to, 10% of all holdings of the same class in company B, or
the period between the acquisition by company A of the holding and that company first taking steps to dispose of the holding does not exceed 30 days.
In this section “relevant insurance business” means any kind of insurance business other than business in relation to which section 111 of the Finance Act 2012 applies.
Section 177(7) of TCGA 1992 (provision supplementing provision corresponding to subsection (2)(d)(i) above) applies for the purposes of subsection (2)(d)(i).
Section 731(4) below (interpretation of “taking steps to dispose of securities”) applies for the purposes of subsection (2)(d)(ii) as if the reference to the securities were to the holding.
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Subject to the provisions of this section, a person who is or has been carrying on a trade of farming or market gardening in the United Kingdom may claim that subsection (2) or (3) below shall have effect in relation to his profits from that trade for any two consecutive years of assessment if his profits for either year do not exceed such part of his profits for the other year as is there specified.
If the claimant’s profits for either year do not exceed seven-tenths of his profits for the other year or are nil, his profits for each year shall be adjusted so as to be equal to one-half of his profits for the two years taken together or, as the case may be, for the year for which there are profits.
If the claimant’s profits for either year exceed seven-tenths but are less than three-quarters of his profits for the other year, his profits for each year shall be adjusted by adding to the profits that are lower and deducting from those that are higher an amount equal to three times the difference between them less three-quarters of those that are higher.
No claim shall be made under this section—
in respect of any year of assessment before a year in respect of which a claim has already been made under this section; or
in respect of a year of assessment in which the trade is (or by virtue of section 113(1) is treated as) set up and commenced or permanently discontinued.
Any adjustment under this section shall have effect for all the purposes of the Income Tax Acts (including any further application of this section where the second of any two years of assessment is the first of a subsequent pair) except that—
subsection (2) above shall not prevent a person obtaining relief under those Acts for a loss sustained by him in any year of assessment;
any adjustment under this section shall be disregarded for the purposes of section 63(1)(b); and
where, after a claim has been made under this section in respect of the profits for any two years of assessment, the profits for both or either of those years are adjusted for any other reason, this section shall have effect as if the claim had not been made but without prejudice to the making of a further claim in respect of those profits as so adjusted.
This section applies to the profits of a trade carried on by a person in partnership as it applies to the profits of a sole trader except that— and where during the years of assessment to which the claim relates there is a change in the persons engaged in carrying on the trade but a notice is given under section 113(2), the claim shall be made jointly by all the persons who are individuals and have been engaged in carrying on the trade at any time during those years. Where a person who is required by this subsection to join in the making of a claim has died, this subsection shall have effect as if it required his personal representatives to join in making the claim.
the profits to which the claim relates shall be those chargeable in accordance with section 111; and
any claim in respect of those profits shall be made jointly by all the partners who are individuals;
In this section references to profits from a trade for a year of assessment are references to the profits or gains from that trade which are chargeable to income tax for that year before—
any deduction for losses sustained in any year of assessment;
any deduction or addition for capital allowances or charges (not being allowances or charges given or made by deduction or addition in the computation of profits or gains);
any deduction for relief under Schedule 9 to the Finance Act 1981 (stock relief).
Any claim under this section shall be made by notice given to the inspector not later than two years after the end of the second of the years of assessment to which the claim relates but any such further claim as is mentioned in subsection (5)(c) above shall not be out of time if made before the end of the year of assessment following that in which the adjustment is made.
Where a person makes a claim under this section in respect of any year of assessment, any claim by him for relief for that year under any other provision of the Income Tax Acts— but no claim shall by virtue of this subsection be made, revoked or amended after the determination of the claim under this section.
shall not be out of time if made before the end of the period in which the claim under this section is required to be made; and
if already made, may be revoked or amended before the end of that period;
There shall be made all such alterations of assessments or repayments of tax (whether in respect of such profits as are mentioned in subsection (1) above or of other income of the person concerned) as may be required in consequence of any adjustment under this section.
Nothing in this section shall be construed as applying to profits chargeable to corporation tax.
This section applies where the first of the two years mentioned in subsection (1) above is the year 1987-88 or a subsequent year of assessment.
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In computing for tax purposes the profits or gains or losses of a trade carried on by a lessor of tied premises—
there shall be taken into account as a trading receipt any rent payable for the premises to him, and there shall be allowed as deduction any rent paid for the premises by him, but
no deduction shall be allowed in respect of the premises either by reference to his being entitled to a rent for the premises which is less than the rent which might have been obtained (or less than their annual value or the rent payable by him for them) or in respect of the annual value of the premises.
For the purposes of this section, premises shall be deemed to be tied premises in relation to any lessor of the premises, and in relation to any trade carried on by him, if, but only if, in the course of that trade, he is concerned (whether as principal or agent) in the supply of goods sold or used on the premises and accordingly deals with the premises or his interest in the premises as property employed for the purposes of that trade; and in this section “the relevant trade”, in relation to any tied premises and to any lessor thereof, means any trade carried on by him in relation to which they are tied premises.
Where part only of premises in respect of which rent is paid by or payable to a lessor of the premises are tied premises in relation to him, the rent paid or payable for the tied premises shall for the purposes of this section be taken to be that part of the entire rent which, on a fair and just apportionment, is attributable to them.
Subject to subsection (5) below, a lessor of tied premises who is chargeable to tax for any chargeable period in respect of the profits or gains of the relevant trade shall not be liable for that period (or for the part of it during which he carries on that trade) to any tax in respect of the premises under Schedule A.
Where, for any chargeable period or part of a chargeable period, a lessor of tied premises becomes entitled to any rent under a lease comprising the tied premises and other premises, but is by virtue of subsection (4) above relieved of liability to tax in respect of the tied premises under Schedule A—
his liability in respect of the rent shall be computed in the first instance as it would be apart from this section, but
his total liability (so computed) in respect of the rent shall be reduced by the part which, on a fair and just apportionment, is attributable to the tied premises for the chargeable period or part thereof for which he is so relieved of liability in respect of them.
If the lessor of tied premises outside the United Kingdom is chargeable to tax for any chargeable period in respect of the profits or gains of the relevant trade, he shall not be liable for that period (or for the part of it during which he carries on that trade) to tax under Case V of Schedule D in respect of any rent for the premises.
Where the person carrying on a trade is, in the case of any premises, entitled in equity to the interest of any lessor of those premises, then, in relation to that person, subsections (1) to (3) above shall apply as if he were the lessor of the premises, and as if any rent payable to or paid by the lessor were payable to or paid by him; and, in relation to the lessor of the premises, subsections (4) and (5) above (or, in the case of premises outside the United Kingdom, subsection (6) above) shall apply as they would apply to the person carrying on the trade if the lessor’s interest in the premises and in any other relevant land were vested in him.
In this section “lease” includes an agreement for a lease if the term to be covered by the lease has begun, and any tenancy, but does not include a mortgage or heritable security, and “lessor” shall be construed accordingly, and includes the successors in title of a lessor.
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In computing for tax purposes the profits or gains of a trade of dealing in land, there shall be disregarded—
so much of the cost of woodlands in the United Kingdom purchased in the course of the trade as is attributable to trees or saleable underwood growing on the land; and
where any amount has been disregarded under paragraph (a) above and, on a subsequent sale of the woodlands in the course of the trade, all or any of the trees or underwood to which the amount disregarded was attributable are still growing on the land, so much of the price for the land as is equal to the amount so disregarded in respect of those trees or underwood.
In computing the profits or gains of a trade of dealing in land, any trading receipt falling within subsection (1), (4) or (5) of section 34 or section 35 or 36 shall be treated as reduced by the amount on which tax is chargeable by virtue of that section.
Where, on a claim being made under subsection (2)(b) of section 36, the amount on which tax was chargeable by virtue of that section is treated as reduced, subsection (2) above shall be deemed to have applied to the amount as reduced, and any such adjustment of liability to tax shall be made (for all relevant chargeable periods) whether by means of an assessment or otherwise, as may be necessary, and may be so made at any time at which it could be made if it related only to tax for the chargeable period in which that claim is made.
Subsection (1) above shall not apply where the purchase mentioned in paragraph (a) of that subsection was made under a contract entered into before 1st May 1963.
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In computing for any tax purpose the profits or gains of a trade which has been discontinued, any trading stock belonging to the trade at the discontinuance shall be valued as follows—
if— the value of the stock shall be taken to be the amount realised on the sale or the value of the consideration given for the transfer; and
the stock is sold or transferred for valuable consideration to a person who carries on, or intends to carry on, a trade in the United Kingdom, and
the cost of the stock may be deducted by the purchaser as an expense in computing for any tax purpose the profits or gains of that trade,
if the stock does not fall to be valued under paragraph (a) above, its value shall be taken to be the amount which it would have realised if it had been sold in the open market at the discontinuance of the trade.
For the purposes of this section “trading stock”, in relation to any trade—
means property of any description, whether real or personal, being either—
property such as is sold in the ordinary course of the trade, or would be so sold if it were mature or if its manufacture, preparation or construction were complete; or
materials such as are used in the manufacture, preparation or construction of any such property as is referred to in sub-paragraph (i) above; and
includes also any services, article or material which would, if the trade were a profession or vocation, be treated, for the purposes of section 101, as work in progress of the profession or vocation, and references to the sale or transfer of trading stock shall be construed accordingly.
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Where, in computing for any tax purpose the profits or gains of a profession or vocation which has been discontinued, a valuation is taken of the work of the profession or vocation in progress at the discontinuance, that work shall be valued as follows—
if— the value of the work shall be taken to be the amount paid or other consideration given for the transfer; and
the work is transferred for money or any other valuable consideration to a person who carries on, or intends to carry on, a profession or vocation in the United Kingdom, and
the cost of the work may be deducted by that person as an expense in computing for any tax purpose the profits or gains of that profession or vocation,
if the work does not fall to be valued under paragraph (a) above, its value shall be taken to be the amount which would have been paid for a transfer of the work on the date of the discontinuance as between parties at arm’s length.
Where a profession or vocation is discontinued, and the person by whom it was carried on immediately before the discontinuance so elects by notice sent to the inspector at any time within 12 months after the discontinuance—
the amount (if any) by which the value of the work in progress at the discontinuance (as ascertained under subsection (1) above) exceeds the actual cost of the work shall not be brought into account in computing the profits or gains of the period immediately before the discontinuance; but
the amount by which any sums received for the transfer of the work exceed the actual cost of the work shall be included in the sums chargeable to tax by virtue of section 103 as if it were a sum to which that section applies received after the discontinuance.
References in this section to work in progress at the discontinuance of a profession or vocation shall be construed as references to— and references in this section to the transfer of work in progress shall include references to the transfer of any benefits and rights which accrue, or might reasonably be expected to accrue, from the carrying out of the work.
any services performed in the ordinary course of the profession or vocation, the performance of which was wholly or partly completed at the time of the discontinuance and for which it would be reasonable to expect that a charge would have been made on their completion if the profession or vocation had not been discontinued; and
any article produced, and any such material as is used, in the performance of any such services,
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Any question arising under section 100(1)(a) or 101(1)(a) shall be determined as follows, for the purpose of computing for any tax purpose the profits or gains of both the trades or, as the case may be, the professions or vocations concerned—
in a case where the same body of General Commissioners have jurisdiction with respect to both the trades, professions or vocations concerned, the question shall be determined by those Commissioners unless all parties concerned agree that it shall be determined by the Special Commissioners;
in any other case, the question shall be determined by the Special Commissioners; and
the General or Special Commissioners shall determine the question in like manner as an appeal.
Where, by virtue of section 113 or 337(1), a trade, profession or vocation is treated as having been permanently discontinued for the purpose of computing tax, it shall also be so treated for the purposes of sections 100 and 101; but those sections shall not apply in a case where a trade, profession or vocation carried on by a single individual is discontinued by reason of his death.
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Where any trade, profession or vocation the profits or gains of which are chargeable to tax under Case I or II of Schedule D has been permanently discontinued, tax shall be charged under Case VI of that Schedule in respect of any sums to which this section applies which are received after the discontinuance.
Subject to subsection (3) below, this section applies to the following sums arising from the carrying on of the trade, profession or vocation during any period before the discontinuance (not being sums otherwise chargeable to tax)—
where the profits or gains for that period were computed by reference to earnings, all such sums in so far as their value was not brought into account in computing the profits or gains for any period before the discontinuance, and
where those profits or gains were computed on a conventional basis (that is to say, were computed otherwise than by reference to earnings), any sums which, if those profits or gains had been computed by reference to earnings, would not have been brought into the computation for any period before the discontinuance because the date on which they became due, or the date on which the amount due in respect thereof was ascertained, fell after the discontinuance.
This section does not apply to any of the following sums—
sums received by a person beneficially entitled thereto who is not resident in the United Kingdom, or by a person acting on his behalf, which represent income arising directly or indirectly from a country or territory outside the United Kingdom, or
a lump sum paid to the personal representatives of the author of a literary, dramatic, musical or artistic work as consideration for the assignment by them, wholly or partially, of the copyright in the work, or
sums realised by the transfer of trading stock belonging to a trade at the discontinuance of the trade, or by the transfer of the work of a profession or vocation in progress at its discontinuance. Paragraph (b) above shall have effect in relation to public lending right as it has effect in relation to copyright.
Where— subsections (1) to (3) above shall apply as if the amount released were a sum received after the discontinuance.
in computing for tax purposes the profits or gains of a trade, profession or vocation a deduction has been allowed for any debt incurred for the purposes of the trade, profession or vocation, and
the whole or any part of that debt is thereafter released, and
the trade, profession or vocation has been permanently discontinued at or after the end of the period for which the deduction was allowed and before the release was effected,
For the purposes of this section the value of any sum received in payment of a debt shall be treated as not brought into account in the computation of the profits or gains of a trade, profession or vocation to the extent that a deduction has been allowed in respect of that sum under section 74(j).
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Where any trade, profession or vocation the profits or gains of which are chargeable to tax under Case I or II of Schedule D has been permanently discontinued, and the profits or gains for any period before the discontinuance were computed on a conventional basis, tax shall be charged under Case VI of that Schedule in respect of any sums to which this subsection applies which are received on or after the discontinuance.
Subject to subsection (3) below, subsection (1) above applies to all sums arising from the carrying on of the trade, profession or vocation during any period before the discontinuance, not being sums otherwise chargeable to tax, in so far as the amount or value of the sums was not brought into account in computing the profits or gains for any period before the discontinuance.
In subsection (2) above the reference to sums otherwise chargeable to tax includes any sums which (disregarding this section) are chargeable to tax under section 103 or to which that section would have applied but for subsection (3)(a) and (b) of that section.
Where, in the case of any trade, profession or vocation the profits or gains of which are chargeable to tax under Case I or II of Schedule D, there has been— tax shall be charged under Case VI of that Schedule in respect of sums to which this subsection applies which are received after the change and before the trade, profession or vocation is permanently discontinued.
a change from a conventional basis to the earnings basis, or
a change of conventional basis which may result in receipts dropping out of computation,
Subsection (4) above applies to all sums arising from the carrying on of the trade, profession or vocation during any period before the change, not being sums otherwise chargeable to tax, in so far as the amount or value of the sums was not brought into account in computing the profits or gains for any period.
It is hereby declared that where work in progress at the discontinuance of a profession or vocation, or the responsibility for its completion, is transferred, the sums to which subsection (1) above applies include any sums received by way of consideration for the transfer, and any sums received by way of realisation by the transferee, on behalf of the transferor, of the work in progress transferred.
Where in the case of any profession or vocation, the profits or gains of which are chargeable to tax under Case II of Schedule D— then, in so far as no counterbalancing credit was brought into account in computing profits for tax purposes for any period ending before or with the date of the change, tax shall be charged under subsection (4) above in respect of that amount for the year of assessment in which the change occurred as if that amount were a sum to which that subsection applies, and the change of basis were a change of the kind described in that subsection.
there has been a change from a conventional basis to the earnings basis, or a change of conventional basis, and
the value of the work in progress at the time of the change was debited in the accounts and allowed as a deduction in computing profits for tax purposes for a period after the change,
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In computing the charge to tax in respect of sums received by any person which are chargeable to tax by virtue of section 103 or 104(1) (including amounts treated as sums received by him by virtue of section 103(4)), there shall be deducted from the amount which, apart from this subsection, would be chargeable to tax—
any loss, expense or debit (not being a loss, expense or debit arising directly or indirectly from the discontinuance itself) which, if the trade, profession or vocation had not been discontinued, would have been deducted in computing for tax purposes the profits or gains of the person by whom it was carried on before the discontinuance, or would have been deducted from or set off against those profits or gains as so computed, and
any capital allowance to which the person who carried on the trade, profession or vocation was entitled immediately before the discontinuance and to which effect has not been given by way of relief before the discontinuance.
No amount shall be deducted under subsection (1) above if that amount has been allowed under any other provision of the Tax Acts.
No amount shall be deducted more than once under subsection (1) above; and— but, in the case of a loss which is to be allowed after the discontinuance, not so as to authorise its deduction from any sum chargeable for a chargeable period preceding that in which the loss is incurred.
any expense or debit shall be apportioned between a sum chargeable under section 103 and a sum chargeable under section 104(1) in such manner as may be just;
as between sums chargeable, whether under section 103 or 104(1), for one chargeable period and sums so charged for a subsequent chargeable period, any deduction in respect of a loss or capital allowance shall be made against sums chargeable for the earlier chargeable period;
subject to paragraph (b) above, as between sums chargeable for any chargeable period under section 103 and sums so chargeable under section 104(1), any deduction in respect of a loss or capital allowance shall be made against the last-mentioned sums rather than the first-mentioned;
In computing the charge to tax in respect of sums received by any person which are chargeable to tax by virtue of section 104(4), there shall be deducted any expense or debit which is not otherwise allowable and which, but for the change in basis, would have been deducted in computing for tax purposes the profits or gains of the trade, profession or vocation, but no amount shall be deducted more than once under this subsection.
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Subject to subsection (2) below, in the case of a transfer for value of the right to receive any sum to which section 103, 104(1) or 104(4) applies, any tax chargeable by virtue of either of those sections shall be charged in respect of the amount or value of the consideration (or, in the case of a transfer otherwise than at arm’s length, in respect of the value of the right transferred as between parties at arm’s length), and references in this Chapter, except section 101(2), to sums received shall be construed accordingly.
Where a trade, profession or vocation is treated as permanently discontinued by reason of a change in the persons carrying it on, and the right to receive any sum to which section 103 or 104(1) applies is or was transferred at the time of the change to the persons carrying on the trade, profession or vocation after the change, tax shall not be charged by virtue of either of those sections, but any sum received by those persons by virtue of the transfer shall be treated for all purposes as a receipt to be brought into the computation of the profits or gains of the trade, profession or vocation in the period in which it is received.
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chargeable to tax by virtue of section 103 or 104, and
received in any year of assessment beginning not later than six years after the discontinuance or, as the case may be, change of basis by the person by whom the trade, profession or vocation was carried on before the discontinuance or change, or by his personal representatives,
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If an individual born before 6th April 1917, or the personal representatives of such an individual, is chargeable to tax under section 104 and— the net amount with which he is so chargeable to tax shall be reduced by multiplying that net amount by the fraction given below.
the individual was engaged in carrying on a trade, profession or vocation on 18th March 1968, and
the profits or gains of the trade, profession or vocation were not computed by reference to earnings in the period in which that 18th March fell, or in any subsequent period ending before or with the relevant date,
Where section 104(4) applies in relation to a change of basis taking place on a date before 19th March 1968, then, in relation to tax chargeable by reference to that change of basis, that earlier date shall be substituted for the date in subsection (1)(a) above and subsection (1)(b) above shall be omitted.
The fraction referred to in subsection (1) above is—
where on 5th April 1968 the individual had not attained the age of 52—
where on that date he had attained the age of 52, but had not attained the age of 53— and so on, reducing the fraction by— for each year he had attained up to the age of 64;
where on that date he had attained the age of 65, or any greater age—
In this section—
Subsections (1) to (4) above shall apply as follows as respects the net amount of any sum chargeable under section 104 which is assessed by reference to a sum accruing to a partnership—
the part of that net amount which is apportioned to any partner (who is an individual), or the personal representative of such an individual, shall be a net amount with which that person is chargeable under that section, and
if the part of that net amount which is so apportioned is a greater proportion of that amount than is the individual’s share (that is to say, the part to be included in his total income) of the total amount of the partnership profits assessed to income tax for the three years of assessment ending with the year in which the discontinuance or change of basis took place, the amount of the reduction to be given by way of relief shall not exceed the amount of relief which would have been so given if the apportionment had been made by reference to his share of that total amount.
For the purposes of this section the trade, profession or vocation carried on before a permanent discontinuance shall not be treated as the same as any carried after the discontinuance.
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The following provisions have effect for the purposes of sections 103 to 109.
For the purposes of those sections, any reference to the permanent discontinuance of a trade, profession or vocation includes a reference to the occurring of any event which, under section 113 or 337(1), is to be treated as equivalent to the permanent discontinuance of a trade, profession or vocation.
The profits or gains of a trade, profession or vocation in any period shall be treated as computed by reference to earnings where all credits and liabilities accruing during that period as a consequence of its being carried on are brought into account in computing those profits or gains for tax purposes, and not otherwise, and “earnings basis” shall be construed accordingly.
“Conventional basis” has the meaning given by section 103(2), so that profits or gains are computed on a conventional basis if computed otherwise than by reference to earnings.
There is a change from a conventional basis to the earnings basis at the end of a period the profits or gains of which were computed on a conventional basis if the profits or gains of the next succeeding period are computed by reference to earnings; and, if the profits or gains of two successive periods are computed on different conventional bases, a change of conventional basis occurs at the end of the earlier period.
In sections 103 and 104—
“trading stock” has the meaning given by section 100(2);
references to work in progress at the discontinuance of a profession or vocation, and to the transfer of work in progress, are to be construed in accordance with section 101(3); and
the reference to work in progress at the time of a change of basis is also to be construed in accordance with section 101(3), substituting therein for this purpose references to the change of basis for references to the discontinuance.
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Where a trade or business is carried on by two or more persons in partnership, and the control and management of the trade or business is situated abroad, the trade or business shall be deemed to be carried on by persons resident outside the United Kingdom, and the partnership shall be deemed to reside outside the United Kingdom, notwithstanding the fact that some of the members of the partnership are resident in the United Kingdom and that some of its trading operations are conducted within the United Kingdom.
Where any part of the trade or business of a partnership firm whose management and control is situated abroad consists of trading operations within the United Kingdom, the firm shall, subject to subsection (3) below, be chargeable in respect of the profits of those trading operations within the United Kingdom to the same extent as, and no further than, a person resident abroad is chargeable in respect of trading operations by him within the United Kingdom, notwithstanding the fact that one or more members of the firm are resident in the United Kingdom.
For the purpose of charging any such firm as is mentioned in subsection (2) above in respect of the profits of its trading operations within the United Kingdom, an assessment may be made on the firm in respect of those profits in the name of any partner resident in the United Kingdom.
In any case where— the arrangements referred to in paragraph (b) above shall not affect any liability to tax in respect of the resident partner’s share of any income or capital gains of the partnership.
a person resident in the United Kingdom (in this subsection and subsection (5) below referred to as “the resident partner”) is a member of a partnership which resides or is deemed to reside outside the United Kingdom; and
by virtue of any arrangements falling within section 788 any of the income or capital gains of the partnership is relieved from tax in the United Kingdom,
If, in a case where subsection (4) above applies, the resident partner’s share of the income of the partnership consists of or includes a share in a qualifying distribution made by a company resident in the United Kingdom, then, notwithstanding anything in the arrangements, the resident partner (and not the partnership as a whole) shall be regarded as entitled to that share of the tax credit in respect of the distribution which corresponds to his share of the distribution.
Section 115(5) has effect as respects the application of this section where the partners in a partnership include a company.
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Where there is a change in the persons engaged in carrying on any trade, profession or vocation chargeable under Case I or II of Schedule D, then, subject to the provisions of this section and of section 114(3)(b), the amount of the profits or gains of the trade, profession or vocation on which income tax is chargeable for any year of assessment and the persons on whom it is chargeable, shall be determined as if the trade, profession or vocation had been permanently discontinued, and a new one set up and commenced, at the date of the change.
Subject to section 114(3)(b), where there is such a change as is mentioned in subsection (1) above, and a person engaged in carrying on the trade, profession or vocation immediately before the change continues to be so engaged immediately after it, the persons so engaged immediately before and the persons so engaged immediately after the change may, by notice signed by them and sent to the inspector at any time within two years after the date of the change, elect that subsection (1) above shall not apply to treat the trade, profession or vocation as discontinued or a new one as set up and commenced.
Where there is in any year of assessment a change in the persons engaged in carrying on a trade, profession or vocation, and subsection (1) above does not apply by reason of a notice under subsection (2) above, then—
income tax in respect of the trade, profession or vocation for that year shall be assessed and charged separately on those so engaged before the change and on those so engaged after the change, but the amount on which tax is chargeable shall be computed as if there had been no such change in that year, and shall be apportioned as may be just; and
if, after the change but before the end of the second year of assessment following that in which the change occurred, there is a permanent discontinuance of the trade, profession or vocation (including a change treated as such), then, on that discontinuance, section 63 shall apply, as respects any period before the first-mentioned change, to the persons charged or chargeable for that period as it would apply if no such change had taken place and they had been charged to tax accordingly for the subsequent period up to the discontinuance.
There shall be made any such assessment, reduction of an assessment or, on the making of a claim therefor, repayment of income tax as may in any case be necessary for giving effect to this section.
Any question which arises as to the manner in which any sum is to be apportioned under subsection (3)(a) above shall be determined, for the purposes of the tax of all of the persons as respects whose liability to tax the apportionment is material— and any such Commissioners shall determine the question in like manner as an appeal, except that all those persons shall be entitled to appear and be heard by the Commissioners who are to make the determination, or to make representations to them in writing.
in a case where the same body of General Commissioners have jurisdiction with respect to all those persons, by those Commissioners, unless all those persons agree that it shall be determined by the Special Commissioners;
in a case where different bodies of Commissioners have jurisdiction with respect to those persons, by such of those bodies as the Board may direct, unless all those persons agree that it shall be determined by the Special Commissioners; and
in any other case, by the Special Commissioners;
In the case of the death of a person who, if he had not died, would under the provisions of this section have become chargeable to tax for any year, the tax which would have been so chargeable shall be assessed and charged upon his executors or administrators, and shall be a debt due from and payable out of his estate; and where under those provisions an election may be made by any person, it may in the case of his death be made by his executors or administrators instead of by him.
For the purposes of this section, a change in the personal representatives of any person, or in the trustees of any trust, shall not be treated as a change in the persons engaged in carrying on any trade, profession or vocation carried on by those personal representatives or trustees as such.
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So long as a trade is carried on by persons in partnership, and any of those persons is a company, the profits and losses (including terminal losses) of the trade shall be computed for the purposes of corporation tax in like manner, and by reference to the like accounting periods, as if the partnership were a company, and without regard to any change in the persons carrying on the trade, except that—
references to distributions shall not apply; and
subject to section 116(5), no deduction or addition shall be made for charges on income, or for capital allowances and charges, nor in any accounting period for losses incurred in any other period nor for any expenditure to which section 401(1) applies; and
a change in the persons engaged in carrying on the trade shall be treated as the transfer of the trade to a different company if there continues to be a company so engaged after the change, but not a company that was so engaged before the change.
A company’s share in the profits or loss of any accounting period of the partnership, or in any matter excluded from the computation by subsection (1)(b) above, shall be determined according to the interests of the partners during that period, and corporation tax shall be chargeable as if that share derived from a trade carried on by the company alone in its corresponding accounting period or periods; and the company shall be assessed and charged to tax for its corresponding accounting period or periods accordingly. In this subsection “corresponding accounting period or periods” means the accounting period or periods of the company comprising or together comprising the accounting period of the partnership, and any necessary apportionment shall be made between corresponding accounting periods if more than one.
Where any of the persons engaged in carrying on the trade is an individual, income tax shall be chargeable in respect of his share of the profits, and he shall be entitled to relief for his share of any loss, as if all the partners had been individuals except that—
income tax shall be chargeable, and any relief from income tax shall be given, by reference to the computations made for corporation tax, but so that the amounts so computed for an accounting period of the capital allowances and charges falling to be made in taxing the trade shall (as regards the individual’s share of them) be given or made for the year or years of assessment comprising that period and, where necessary, apportioned accordingly; and
section 113 shall not apply by reason of any change in the persons engaged in carrying on the trade unless an individual begins or ceases to be so engaged, and, where it does apply, an election under subsection (2) of that section shall be made only by the individuals so engaged, and only if an individual so engaged before the change continues to be so engaged after it; and
sections 388 and 389 shall not apply except where section 394 applies to the partnership as a whole.
Section 111 shall apply to income tax chargeable in accordance with this section, matters relevant only to corporation tax being omitted from the assessment.
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Subsections (2) and (3) below have effect as respects income tax chargeable in accordance with section 114 for any year of assessment throughout all or any part of which one or more of the persons engaged in carrying on the trade is an individual.
Notwithstanding any difference between the partners' interests during the basis period and their interests during the year of assessment, the amount of the individual’s income from the partnership for the year of assessment, or the total of the amounts of the individuals' incomes from the partnership for that year, shall be deemed to be not less than the profits of the basis period, reduced, where any share was apportioned to a company under section 114(2), by the amount of that company’s share.
Where there are two or more individuals and, but for subsection (2) above, the total of the amounts of the individuals' incomes from the partnership for the year would fall short of the profits of the basis period reduced, where any share was apportioned to a company under section 114(2), by the amount of that company’s share, that amount shall be apportioned—
according to the individuals' interests during the year of assessment, disregarding any company’s interest; and
in so far as that does not determine, or fully determine, the apportionment, between the individuals in equal shares.
Where a trade or business is carried on by two or more persons in partnership, and the control and management of the trade or business is situated abroad but those persons include a company resident in the United Kingdom, then as regards that company, this section and section 114 shall have effect as if the partnership were resident in the United Kingdom, and an assessment may be made on the company accordingly.
Subject to subsection (4) above, where the partners in a partnership include a company, section 112 shall apply whether for corporation tax or for income tax; and this section and section 114 shall have effect accordingly.
In this section and section 114— and references in subsection (1) above to an individual’s income from the partnership are references to that income before deduction of capital allowances or charges on income.
For the purposes of this section and section 114 “profits” shall not be taken as including chargeable gains.
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The provisions of subsection (2) below shall apply in relation to a company (“the partner company”) which is a member of a partnership carrying on a trade if arrangements are in existence (whether as part of the terms of the partnership or otherwise) whereby—
in respect of the whole or any part of the value of, or of any portion of, the partner company’s share in the profits or loss of any accounting period of the partnership, another member of the partnership or any person connected with another member of the partnership receives any payment or acquires or enjoys, directly or indirectly, any other benefit in money’s worth; or
in respect of the whole or any part of the cost of, or of any portion of, the partner company’s share in the loss of any accounting period of the partnership, the partner company or any person connected with that company receives any payment or acquires or enjoys, directly or indirectly, any other benefit in money’s worth, other than a payment in respect of group relief to the partner company by a company which is a member of the same group as the partner company for the purposes of group relief.
In any case where the provisions of this subsection apply in relation to the partner company—
the company’s share in the loss of the relevant accounting period of the partnership and its share in any charges on income, within the meaning of section 338, paid by the partnership in that accounting period shall not be available for set-off for the purposes of corporation tax except against its share in the profits of the trade carried on by the partnership; and
except in accordance with paragraph (a) above, no trading losses shall be available for set-off for the purposes of corporation tax against the company’s share in the profits of the relevant accounting period of the partnership; and
except in accordance with paragraphs (a) and (b) above, no amount which, apart from this subsection, would be available for relief against profits shall be available for set-off for the purposes of corporation tax against so much of the company’s total profits as consists of its share in the profits of the relevant accounting period of the partnership; and
notwithstanding anything in section 239, no advance corporation tax may be set against the company’s liability to corporation tax on its share in the profits of the relevant accounting period of the partnership.
In subsection (2) above “relevant accounting period of the partnership” means any accounting period of the partnership in which any such arrangements as are specified in subsection (1) above are in existence or to which any such arrangements apply.
If a company is a member of a partnership and tax in respect of any profits of the partnership is chargeable under Case VI of Schedule D, this section shall apply in relation to the company’s share in the profits or loss of the partnership as if—
the profits or loss to which the company’s share is attributable were the profits of, or the loss incurred in, a trade carried on by the partnership; and
any allowance which falls to be made under section 46(1) of the Finance Act 1971 (machinery and plant on lease) were an allowance made in taxing that trade.
For the purposes of this section, subsection (2) of section 114 shall have effect for determining a company’s share in the profits or loss of any accounting period of a partnership as if, in subsection (1)(b) of that section, the words “or for capital allowances and charges” were omitted.
In this section “arrangements” means arrangements of any kind whether in writing or not.
Section 839 shall apply for the purposes of this section.
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An amount which may be given or allowed to an individual under section 353, 380 or 381 below or section 71 of the 1968 Act— may be given or allowed otherwise than against income consisting of profits or gains arising from the trade only to the extent that the amount given or allowed or (as the case may be) the aggregate amount does not exceed the relevant sum.
in respect of a loss sustained by him in a trade, or of interest paid by him in connection with the carrying on of a trade, in a relevant year of assessment; or
as an allowance falling to be made to him for a relevant year of assessment either in taxing a trade or by way of discharge or repayment of tax to which he is entitled by reason of his participation in a trade,
In this section—
A person’s contribution to a trade at any time is the aggregate of—
the amount which he has contributed to it as capital and has not, directly or indirectly, drawn out or received back (other than anything which he is or may be entitled so to draw out or receive back at any time when he carries on the trade as a limited partner or which he is or may be entitled to require another person to reimburse to him), and
the amount of any profits or gains of the trade to which he is entitled but which he has not received in money or money’s worth.
To the extent that an allowance is taken into account in computing profits or gains or losses in the year of the loss by virtue of section 383(1) it shall, for the purposes of this section, be treated as falling to be made in the year of the loss (and not the year of assessment for which the year of loss is the basis year).
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An amount which may be given or allowed under section 338, 393(2) or 403(1) to (3) and (7) below or section 74 of the 1968 Act— may be given or allowed to that company (“the partner company”) otherwise than against profits or gains arising from the trade, or to another company, only to the extent that the amount given or allowed or (as the case may be) the aggregate amount does not exceed the relevant sum.
in respect of a loss incurred by a company in a trade, or of charges paid by a company in connection with the carrying on of a trade, in a relevant accounting period; or
as an allowance falling to be made to a company for a relevant accounting period either in taxing a trade or by way of discharge or repayment of tax to which it is entitled by reason of its participation in a trade,
In this section—
has transferred all his or her income and assets, or covenanted all his or her income, to the community (in the case of an independent community) or the parent body (in the case of a constituent community).
Any income of an overseas life insurance company from the investments of its life assurance fund (excluding the pension fund and general annuity fund, if any), wherever received, shall, to the extent provided in this section, be deemed to be profits comprised in Schedule D and shall be charged to corporation tax under Case III of Schedule D.
the sub-contractor;
In subsection (1) above “income” shall not include—
distributions which are not qualifying distributions or income attributable to offshore income gains; or
annual profits or gains chargeable to tax by virtue of section 714(2) or 716(3).
a person nominated by the sub-contractor or the contractor; or
Qualifying distributions received from companies resident in the United Kingdom shall be brought into account under this section notwithstanding their exclusion from the charge to corporation tax.
a person nominated by a person who is a sub-contractor under another such contract relating to all or any of the construction operations.
A portion only of the income from the investments of the life assurance fund (excluding the pension fund and general annuity fund, if any) shall be charged in accordance with subsection (1) above, and for any accounting period that portion shall be determined by the formula— where— A is the total income from those investments for that period; B is the average of the liabilities for that period to policy holders resident in the United Kingdom and to policy holders resident abroad whose proposals were made to the company at or through its branch or agency in the United Kingdom; and C is the average of the liabilities for that period to all the company’s policy holders;
“ITA 2007” means the Income Tax Act 2007;
the aggregate of the appropriate portions calculated under subsection (1) above;
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Where rent is payable in respect of any land or easement, and either— the rent shall, subject to section 122, be charged to tax under Schedule D, and, subject to subsection (2) below, shall be subject to deduction of income tax under section 348 or 349 as if it were a royalty or other sum paid in respect of the user of a patent.
the land or easement is used, occupied or enjoyed in connection with any of the concerns specified in section 55(2); or
the lease or other agreement under which the rent is payable provides for the recoupment of the rent by way of reduction of royalties or payments of a similar nature in the event of the land or easement being so used, occupied or enjoyed,
Where the rent is rendered in produce of the concern, it shall, instead of being treated as provided by subsection (1) above, be charged under Case III of Schedule D, and the value of the produce so rendered shall be taken to be the amount of the profits or income arising therefrom.
For the purposes of this section—
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Where rent is payable in respect of any easement enjoyed in the United Kingdom in connection with any electric, telegraphic or telephonic wire or cable (not being such an easement as is mentioned in section 119(1)), the rent shall be charged to tax under Schedule D, and, subject to subsections (2) to (5) below, shall be subject to deduction of income tax under section 348 or 349 as if it were a royalty or other sum paid in respect of the user of a patent.
Any payment of rent to which subsection (1) above applies which does not exceed £2.50 per year may, if the payer so elects, be treated as not affected by so much of that subsection as provides that the rent shall be subject to deduction of income tax, and shall in that event be made without deduction of income tax accordingly.
Any payment of rent to which subsection (1) above applies which is made without deduction of income tax, whether by virtue of subsection (2) above or otherwise, shall, unless income tax is assessed thereon under section 350, be chargeable to tax under Case III of Schedule D.
Any payment of rent to which subsection (1) above applies which is made subject to deduction of income tax shall, if it is paid by a person carrying on a trade which consists of or includes the provision of a radio relay service and the wire or cable in question is used by that person for the purposes of that service—
be deductible (notwithstanding anything in section 74(q)) in computing the amount of the profits or gains of the trade to be charged under Case I of Schedule D, and
be deemed for the purposes of sections 348 and 349 not to be payable out of profits or gains brought into charge to income tax.
In this section—
“easement” and “rent” have the same meanings as in section 119;
the reference to easements enjoyed in connection with any electric, telegraphic or telephonic wire or cable includes (without prejudice to the generality of that expression) references to easements enjoyed in connection with any pole or pylon supporting any such wire or cable, or with any apparatus (including any transformer) used in connection with any such wire or cable; and
“radio relay service” means the retransmission by wire to their customers of broadcast programmes (which may or may not be television programmes) which the persons carrying on the service receive either by wire or by wireless from the British Broadcasting Corporation or from the persons outside the United Kingdom who broadcast the programmes in question.
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Where for any year of assessment rights to work minerals in the United Kingdom are let, the lessor shall, subject to subsection (2) below, be entitled, on making a claim for the purpose, to be repaid so much of the income tax paid by him by deduction or otherwise in respect of the rent or royalties for that year as is equal to the amount of the tax on any sums proved to have been wholly, exclusively and necessarily disbursed by him as expenses of management or supervision of those minerals in that year.
No repayment of tax shall be made under subsection (1) above if, or to such extent as, the expenses in question have been otherwise allowed as a deduction in computing income for the purposes of income tax.
In computing for the purposes of corporation tax the income of a company for any accounting period from the letting of rights to work minerals in the United Kingdom, there may be deducted any sums disbursed by the company wholly, exclusively and necessarily as expenses of management or supervision of those minerals in that period.
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Subject to the following provisions of this section, a person resident or ordinarily resident in the United Kingdom who in any year of assessment or accounting period is entitled to receive any mineral royalties under a mineral lease or agreement shall be treated— and this section shall have effect notwithstanding any provision of section 119(1) making the whole of certain kinds of mineral royalties chargeable to tax under Schedule D, but without prejudice to any provision of that section providing for any such royalties to be subject to deduction of income tax under section 348 or 349.
for the purposes of income tax, or as the case may be for the purposes of corporation tax on profits exclusive of chargeable gains, as if the total of the mineral royalties receivable by him under that lease or agreement in that year or period and any management expenses available for set-off against those royalties in that year or period were each reduced by one-half; and
for the purposes of the 1979 Act or as the case may be for the purposes of corporation tax on chargeable gains, as if there accrued to him in that year or period a chargeable gain equal to one-half of the total of the mineral royalties receivable by him under that lease or agreement in that year or period;
For the purposes of subsection (1)(a) above, “management expenses available for set-off” against royalties means— and if neither paragraph (a) nor paragraph (b) above applies, the reference in subsection (1)(a) above to management expenses available for set-off shall be disregarded.
where section 121 applies in respect of the royalties, any sum brought into account under subsection (1) of that section in determining the amount of the repayment of income tax in respect of those royalties or, as the case may be, deductible from those royalties under subsection (2) of that section in computing the income of a company for the purposes of corporation tax; and
if the royalties are chargeable to tax under Schedule A, any sums deductible under Part II as payments made in respect of management of the property concerned;
The amount of the chargeable gain treated as accruing to any person by virtue of subsection (1)(b) above shall, notwithstanding anything in the enactments relating to the computation of chargeable gains, be the whole amount calculated in accordance with that subsection, and, accordingly, no reduction shall be made on account of expenditure incurred by that person or of any other matter whatsoever.
Where subsection (1) above applies in relation to mineral royalties receivable under a mineral lease or agreement by a person not chargeable to corporation tax in respect of those royalties, then, in so far as the amount of income tax paid, by deduction or otherwise, by him in respect of those mineral royalties in any year of assessment exceeds the amount of income tax for which he is liable in respect of those royalties by virtue of subsection (1)(a) above—
the amount of the excess shall in the first instance be set against the tax for which he is chargeable by virtue of subsection (1)(b) above; and
on the making of a claim in that behalf, he shall be entitled to repayment of tax in respect of the balance of that excess.
In this section references to mineral royalties refer only to royalties receivable on or after 6th April 1970, and the expression “mineral royalties” means so much of any rents, tolls, royalties and other periodical payments in the nature of rent payable under a mineral lease or agreement as relates to the winning and working of minerals; and the Board may by regulations—
provide whether, and to what extent, payments made under a mineral lease or agreement and relating both to the winning and working of minerals and to other matters are to be treated as mineral royalties; and
provide for treating the whole of such payments as mineral royalties in cases where the extent to which they relate to matters other than the winning and working of minerals is small.
In this section—
In the application of this section to Northern Ireland—
references to mineral royalties include references to periodical payments—
of compensation under section 29 or 35 of the Mineral Development Act (Northern Ireland) 1969 (“the 1969 Act”) or under section 4 of the Petroleum (Production) Act (Northern Ireland) 1964 (“the 1964 Act”); and
made as mentioned in section 37 of the 1969 Act or under section 55(4)(b) of that Act or under section 11 of the 1964 Act (payments in respect of minerals to persons entitled to a share of royalties under section 13(3) of the Irish Land Act 1903); and
in its application to any such payments as are mentioned in paragraph (a) above, references to the mineral lease or agreement under which mineral royalties are payable shall be construed as references to the enactment under which the payments are made.
In any case where, before the commencement of this section, for the purposes of the 1979 Act or of corporation tax on chargeable gains, a person was treated as if there had accrued to him in any year of assessment or accounting period ending before 6th April 1988 a chargeable gain equal to the relevant fraction, determined in accordance with section 29(3)(b) of the Finance Act 1970, of the total of the mineral royalties receivable by him under that lease or agreement in that year or period, subsection (1)(b) above shall have effect in relation to any mineral royalties receivable by him under that lease or agreement in any later year or period with the substitution for the reference to one-half of a reference to the relevant fraction as so determined.
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In this section—
“foreign dividends” means any interest, dividends or other annual payments payable out of or in respect of the stocks, funds, shares or securities of any body of persons not resident in the United Kingdom (but not including any such payment to which section 348 or 349(1) applies) and references to dividends shall be construed accordingly;
“relevant foreign dividends” means foreign dividends payable out of or in respect of stocks, funds, shares or securities which are not held in a recognised clearing system;
“banker” includes a person acting as a banker; and
references to coupons include, in relation to any dividends, warrants for or bills of exchange purporting to be drawn or made in payment of those dividends.
Where relevant foreign dividends are entrusted to any person in the United Kingdom for payment to any persons in the United Kingdom, they shall be assessed and charged to income tax under Schedule D by the Board, and Parts III and IV of Schedule 3 shall apply in relation to the income tax to be so assessed and charged.
Where— tax under Schedule D shall extend, in the cases mentioned in paragraph (a) above, to the dividends, and, in the cases mentioned in paragraphs (b) and (c) above, to the proceeds of the sale or other realisation, and income tax shall be assessed and charged and paid under this subsection in accordance with Parts III and IV of Schedule 3.
a banker or any other person in the United Kingdom, by means of coupons received from any other person or otherwise on his behalf, obtains payment of any foreign dividends elsewhere than in the United Kingdom, or
any banker in the United Kingdom sells or otherwise realises coupons for foreign dividends, and pays over the proceeds to any person or carries them to his account, or
any dealer in coupons in the United Kingdom purchases any such coupons otherwise than from a banker or another dealer in coupons,
In the cases mentioned in subsections (2) and (3) above, no tax shall be chargeable if it is proved, on a claim in that behalf made to the Board, that the person owning the stocks, funds, shares or securities and entitled to the dividends or proceeds is not resident in the United Kingdom.
Where stocks, funds, shares or securities are held under a trust, and the person who is the beneficiary in possession under the trust is the sole beneficiary in possession and can, by means either of the revocation of the trust or the exercise of any power under the trust, call upon the trustees at any time to transfer the stocks, funds, shares or securities to him absolutely free from the trust, that person shall, for the purposes of subsection (4) above, be deemed to be the person owning the stocks, funds, shares or securities.
Where any income of any person is by virtue of any provision of the Tax Acts (and in particular, but without prejudice to the generality of the preceding words, Chapter III of Part XVII) to be deemed to be income of any other person, that income is not exempt from tax by virtue of subsection (4) above by reason of the first mentioned person not being resident in the United Kingdom.
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Section 349(2) shall not apply to interest paid on any quoted Eurobond where—
the person by or through whom the payment is made is not in the United Kingdom; or
the payment is made by or through a person who is in the United Kingdom but either of the conditions mentioned in subsection (2) below is satisfied.
The conditions are—
that it is proved, on a claim in that behalf made to the Board, that the person who is the beneficial owner of the quoted Eurobond and is entitled to the interest is not resident in the United Kingdom;
that the quoted Eurobond is held in a recognised clearing system.
In a case falling within subsection (1)(b) above the person by or through whom the payment is made shall deliver to the Board—
on demand by the Board an account of the amount of any such payment; and
not later than 12 months after making any such payment, and unless within that time he delivers an account with respect to the payment under paragraph (a) above, a written statement specifying his name and address and describing the payment.
Where by virtue of any provision of the Tax Acts interest paid on any quoted Eurobond is deemed to be income of a person other than the person who is the beneficial owner of the quoted Eurobond, subsection (2)(a) above shall apply as if it referred to that other person.
Subsections (3) to (6) of section 123 shall apply in relation to interest on quoted Eurobonds as they apply to foreign dividends but with the following modifications—
subsection (4) shall apply as if it required a claim to have been made on or before the event by virtue of which tax would otherwise be chargeable; and
paragraph 6(1) of Schedule 3 shall apply with the omission of paragraphs (a) and (b).
In this section—
An order under subsection (6) above—
may contain such transitional and other supplemental provisions as appear to the Board to be necessary or expedient; and
may be varied or revoked by a subsequent order so made.
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Any payment to which this subsection applies shall be made without deduction of income tax, shall not be allowed as a deduction in computing the income or total income of the person by whom it is made and shall not be a charge on income for the purposes of corporation tax.
Subject to the following provisions of this section, subsection (1) above applies to any payment which—
is an annuity or other annual payment charged with tax under Case III of Schedule D, not being interest; and
is made under a liability incurred for consideration in money or money’s worth all or any of which is not required to be brought into account in computing for the purposes of income tax or corporation tax the income of the person making the payment.
Subsection (1) above does not apply to—
any payment which in the hands of the recipient is income falling within section 683(1)(a) or (c) or (6);
any payment made to an individual under a liability incurred in consideration of his surrendering, assigning or releasing an interest in settled property to or in favour of a person having a subsequent interest;
any annuity granted in the ordinary course of a business of granting annuities; or
any annuity charged on an interest in settled property and granted at any time before 30th March 1977 by an individual to a company whose business at that time consisted wholly or mainly in the acquisition of interests in settled property or which was at that time carrying on life assurance business in the United Kingdom.
In the application of this section to Scotland the references in subsection (3) above to settled property shall be construed as references to property held in trust.
Subsection (1) above applies to a payment made after 5th April 1988 irrespective of when the liability to make it was incurred.
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Where a security to which this section applies is issued at a discount, tax shall not be charged in respect of the discount under Case III of Schedule D; but the discount shall not for that reason be regarded as annual profits or gains chargeable to tax under Case VI of Schedule D.
This section applies to all securities issued by the Treasury after 6th March 1973 except Treasury bills.
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This section applies to—
payments known as enterprise allowance and made by the Manpower Services Commission in pursuance of arrangements under section 2(2)(d) of the Employment and Training Act 1973; and
corresponding payments made in Northern Ireland by the Department of Economic Development.
Any such payment which would (apart from this section) be charged to tax under Case I or II of Schedule D shall be charged to tax under Case VI of that Schedule.
Nothing in subsection (2) above shall prevent such a payment—
being treated for the purposes of section 623(2)(c) or 833(4)(c) as immediately derived from the carrying on or exercise of a trade, profession or vocation; or
being treated for the purposes of paragraph 1 of Schedule 19 as trading income.
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Subject to subsection (4) below, this section applies where a person (“A”) has contracted to sell securities and, to enable him to fulfil the contract, he enters into an arrangement under which—
another person (“B”) is to transfer securities to A or his nominee; and
in return securities of the same kind and amount are to be transferred (whether or not by A or his nominee) to B or his nominee.
Subject to subsection (4) below, this section also applies where, to enable B to make the transfer to A or his nominee, B enters into an arrangement under which—
another person (“C”) is to transfer securities to B or his nominee; and
in return securities of the same kind and amount are to be transferred (whether or not by B or his nominee) to C or his nominee.
Any transfer made in pursuance of an arrangement mentioned in subsection (1) or (2) above shall not be taken into account for the purposes of the Tax Acts in computing the profits or losses of any trade carried on by the transferor or transferee.
The Treasury may provide by regulations that this section or any provision of it or section 149B(9) of the 1979 Act does not apply unless such conditions as are specified in the regulations are fulfilled; and the conditions may relate to the capacity in which any person involved in any arrangement is acting, the Board’s approval of any such person or of the arrangement, the nature of the securities or otherwise.
In this section “securities” includes stocks and shares.
This section applies to transfers made after such date as is specified for this purpose by regulations made under section 61 of the Finance Act 1986 or, if no such regulations have been made before 6th April 1988, under this section.
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In this Part of this Act — . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . “investment company”, means any company whose business consists wholly or mainly in the making of investments and the principal part of whose income is derived therefrom, but includes any savings bank or other bank for savings except any which, for the purposes of the Trustee Savings Bank Act 1985, is a successor or a further successor to a trustee savings bank.
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The income which, as income deriving from investments of a description specified in any of the relevant provisions, is eligible for relief from tax by virtue of that provision shall be taken to include any relevant stock lending fee.
For the purposes of this section the relevant provisions are sections 613(4) and 614(3) and section 186 of the Finance Act 2004.
In this section “relevant stock lending fee”, in relation to investments of any description, means any amount, in the nature of a fee, which is payable in connection with any stock lending arrangement relating to investments which, but for any transfer under the arrangement, would be investments of that description.
In this section “stock lending arrangement” has the same meaning as in section 263B of the 1992 Act.
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Tax under Case I, II or III of Schedule E shall, except as provided to the contrary by any provision of the Tax Acts, be chargeable on the full amount of the emoluments falling under that Case, subject to such deductions only as may be authorised by the Tax Acts, and the expression “emoluments” shall include all salaries, fees, wages, perquisites and profits whatsoever.
Tax under Case III of Schedule E shall be chargeable whether or not tax is chargeable in repect of the same office or employment under Case I or II of that Schedule, but shall not be chargeable on any emoluments falling under Case I or II for the same or another chargeable period.
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Where a person ordinarily performs the whole or part of the duties of his office or employment in the United Kingdom, then, for the purposes of Cases I and II of Schedule E, his emoluments for any period of absence from the office or employment shall be treated as emoluments for duties performed in the United Kingdom, except in so far as it is shown that, but for that absence, they would have been emoluments for duties performed outside the United Kingdom.
Where an office or employment is in substance one the duties of which fall in the chargeable period to be performed outside the United Kingdom, then, for the purposes of Cases I and II of Schedule E, there shall be treated as so performed any duties performed in the United Kingdom the performance of which is merely incidental to the performance of the other duties outside the United Kingdom.
Subsection (2) above shall not be construed as affecting any question under section 193(1) or paragraph 3 of Schedule 12 as to where any duties are performed or whether a person is absent from the United Kingdom.
For the purposes of Cases I and II of Schedule E, but subject to section 194(7) and paragraph 5 of Schedule 12, the following duties shall be treated as performed in the United Kingdom, namely—
the duties of any office or employment under the Crown which is of a public nature and the emoluments of which are payable out of the public revenue of the United Kingdom or of Northern Ireland; and
any duties which a person performs on a vessel engaged on a voyage not extending to a port outside the United Kingdom, or which a person resident in the United Kingdom performs on a vessel or aircraft engaged on a voyage or journey beginning or ending in the United Kingdom or on a part beginning or ending in the United Kingdom of any other voyage or journey.
For the purposes of Case III of Schedule E, emoluments shall be treated as received in the United Kingdom if they are paid, used or enjoyed in, or in any manner or form transmitted or brought to, the United Kingdom, and subsections (6) to (9) of section 65 shall apply for the purposes of this subsection as they apply for the purposes of subsection (5) of that section.
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Where— then, notwithstanding that the pension or payment is paid voluntarily or is capable of being discontinued, it shall be deemed to be income for the purposes of assessment to tax, and shall be assessed and charged under Schedule E.
a person has ceased to hold any office or employment, and
a pension or annual payment is paid to him, or to his widow or child, or to any relative or dependant of his, by the person under whom he held the office or by whom he was employed, or by the successors of that person, and
that pension or annual payment is paid otherwise than by or on behalf of a person outside the United Kingdom,
For the avoidance of doubt, it is hereby declared that the expressions “annuity” and “pension” in Schedule E include respectively an annuity and a pension which is paid voluntarily or is capable of being discontinued.
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Subject to the provisions of this section, where— then, for all the purposes of the Income Tax Acts, the services which the worker renders or is under an obligation to render to the client under that contract shall be treated as if they were the duties of an office or employment held by the worker, and all remuneration receivable under or in consequence of that contract shall be treated as emoluments of that office or employment and shall be assessable to income tax under Schedule E accordingly.
an individual (“the worker”) renders or is under an obligation to render personal services to another person (“the client”) and is subject to, or to the right of, supervision, direction or control as to the manner in which he renders those services; and
the worker is supplied to the client by or through a third person (“the agency”) and renders or is under an obligation to render those services under the terms of a contract between the worker and the agency (“the relevant contract”); and
remuneration receivable under or in consequence of that contract would not, apart from this section, be chargeable to income tax under Schedule E,
Subsection (1)(b) above includes cases in which the third person is an unincorporated body of which the worker is a member.
Subsection (1) above shall apply whether or not the worker renders or is under an obligation to render the services in question as a partner in a firm or a member of an unincorporated body; and where, in any case in which that subsection applies, the worker is a partner in a firm or a member of such a body, remuneration receivable under or in consequence of the relevant contract shall be treated for all the purposes of the Income Tax Acts as income of the worker and not as income of the firm or body.
For the purposes of this section, any remuneration which the client pays or provides by reason of the worker being a person who renders or is under an obligation to render the services in question shall be treated as receivable in consequence of the relevant contract.
Subsection (1) above shall not apply—
if the services in question are services as an actor, singer, musician or other entertainer or as a fashion, photographic or artist’s model; or
if the services in question are rendered wholly in the worker’s own home or at other premises which are neither under the control or management of the client nor premises at which the worker is required, by reason of the nature of the services, to render them; or
if in rendering the services the worker is or would be a sub-contractor within the meaning of section 560.
Where an individual enters into arrangements with another person with a view to the rendering of personal services by the individual, being arrangements such that, if and when he renders any such services as a result of the arrangements, those services will be treated under subsection (1) above as if they were the duties of an office or employment held by him, then for all purposes of the Income Tax Acts any remuneration receivable under or in consequence of the arrangements shall be treated as emoluments of an office or employment held by the individual and shall be assessable to income tax under Schedule E accordingly.
In this section “remuneration”, in relation to an individual, does not include anything in respect of which he would not have been chargeable to tax under Schedule E if it had been receivable in connection with an office or employment held by him but, subject to that, includes every form of payment and all perquisites, benefits and profits whatsoever.
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Subject to section 185, where a person realises a gain by the exercise, or by the assignment or release, of a right to acquire shares in a body corporate obtained by that person as a director or employee of that or any other body corporate, he shall be chargeable to tax under Schedule E on an amount equal to the amount of his gain, as computed in accordance with this section.
Without prejudice to section 185, where tax may by virtue of this section become chargeable in respect of any gain which may be realised by the exercise of a right which is not capable of being exercised more than seven years after it is obtained, tax shall not be chargeable under any other provision of the Tax Acts in respect of the receipt of the right.
Subject to section 136(4)— (a just apportionment being made of any entire consideration given for the grant of the right to acquire those shares and other shares or otherwise for the grant of the right to acquire those shares and for something besides).
the gain realised by the exercise of any such right at any time shall be taken to be the difference between the amount that a person might reasonably expect to obtain from a sale in the open market at that time of the shares acquired and the amount or value of the consideration given whether for them or for the grant of the right; and
the gain realised by the assignment or release of any such right shall be taken to be the difference between the amount or value of the consideration for the assignment or release and the amount or value of the consideration given for the grant of the right;
For the purposes of subsection (3) above, neither the consideration given for the grant of the right nor any such entire consideration as is mentioned in that subsection shall be taken to include the performance of any duties in or in connection with the office or employment by reason of which the right was granted, and no part of the amount or value of the consideration given for the grant shall be deducted more than once under that subsection.
Where such a right as is mentioned in subsection (1) above is obtained as mentioned therein and is capable of being exercised later than seven years after it is obtained, and the receipt of the right is chargeable to tax under any other provision of the Tax Acts, then—
the tax so charged shall be deducted from any tax which is chargeable under subsection (1) above by reference to the gain realised by the exercise, assignment or release of that right; and
for the purpose of any such charge to tax in relation to the receipt of the right, the value of the right shall be taken to be not less than the market value at the time the right is obtained— reduced by the amount or value (or, if variable, the least amount or value) of the consideration for which the shares may be so acquired.
of the shares which may be acquired by the exercise of the right, or
of shares for which shares so acquired may be exchanged,
Subject to subsection (7) below, a person shall, in the case of a right granted by reason of his office or employment, be chargeable to tax under this section in respect of a gain realised by another person— but in a case within paragraph (b) above the gain realised shall be treated as reduced by the amount of any gain realised by a previous holder on an assignment of the right.
if the right was granted to that other person, or
if the other person acquired the right otherwise than by or under an assignment made by way of a bargain at arm’s length, or if the two are connected persons at the time when the gain is realised,
A person shall not be chargeable to tax by virtue of subsection (6)(b) above in respect of any gain realised by another person if the first-mentioned person was divested of the right by operation of law on his bankruptcy or otherwise, but the other person shall be chargeable to tax in respect of the gain under Case VI of Schedule D.
In any case where— he shall be treated for the purposes of this section and section 136 as realising a gain by the assignment or release of the first right, so far as it relates to the shares in question, for a consideration equal to the amount or value of the benefit referred to in paragraph (c) above.
a person has obtained any such right to acquire shares as is mentioned in subsection (1) above (“the first right”); and
as to any of the shares to which the first right relates, he omits or undertakes to omit to exercise the right or grants or undertakes to grant to another a right to acquire the shares or any interest in them; and
in consideration for or otherwise in connection with that omission, grant or undertaking, he receives any benefit in money or money’s worth;
Where subsection (8) above has had effect on any occasion, nothing in that subsection affects the application of this section in relation to a gain realised on a subsequent occasion, except that on that subsequent occasion so much of the consideration given for the grant of the first right as was deducted on the first occasion shall not be deducted again.
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If a right to acquire shares in a body corporate is assigned or released in whole or in part for a consideration which consists of or comprises another right to acquire shares in that or any other body corporate, that other right shall not be treated as consideration for the assignment or release, but section 135 and this section shall apply in relation to it as they apply in relation to the right assigned or released and as if the consideration for its acquisition—
did not include the value of the right assigned or released, but
did include the amount or value of the consideration given for the grant of the right assigned or released so far as that has not been offset by any valuable consideration for the assignment or release other than the consideration consisting of the other right.
If— those transactions shall be treated for the purposes of subsection (1) above as a single transaction whereby the one right is assigned for a consideration which consists of or comprises the other right.
as a result of two or more transactions a person ceases to hold a right to acquire shares in a body corporate and he or a connected person comes to hold another right to acquire shares in that or any other body corporate (whether or not acquired from the person to whom the other right was assigned), and
any of those transactions was effected under arrangements to which two or more persons holding rights in respect of which tax may be chargeable under this section were parties,
Subsection (2) above applies in relation to two or more transactions whether they involve an assignment preceding, coinciding with or subsequent to an acquisition.
In the case of a right to acquire shares granted before 3rd May 1966—
the amount of the gain realised at any time by the exercise, or by the assignment or release, of the right shall not exceed the difference between the market value of those shares at that time and their market value on 3rd May 1966 (and no gain shall be treated as so realised unless the later value exceeds the earlier value); and
subsection (2) of section 135 shall not affect tax chargeable under Case I of Schedule E in respect of the receipt of the right, but the amount, if any, on which tax is so chargeable shall be taken into account under subsection (3)(a) and (b) of that section in relation to the gain realised by the exercise or by the assignment or release, of the right as if that amount formed part (in addition to any other amount) of the consideration for the grant of the right.
For the purposes of this section and section 135— and this section and section 135 shall apply in relation to any securities issued by a body corporate as they apply to shares in that body corporate.
references to the release of a right include references to agreeing to the restriction of the exercise of the right;
“director” means— and includes any person who is to be or has been a director;
in relation to a body corporate the affairs of which are managed by a board of directors or similar body, a member of that board or similar body;
in relation to a body corporate the affairs of which are managed by a single director or similar person, that director or person;
in relation to a body corporate the affairs of which are managed by the members themselves, a member of the body corporate;
“employee”, in relation to a body corporate, includes any person taking part in the management of the affairs of the body corporate who is not a director, and includes a person who is to be or has been an employee; and
in so far as the context permits, “shares” includes stock;
Where in any year of assessment a body corporate grants a right in respect of which tax may become chargeable under section 135, or allots or transfers any shares in pursuance of such a right, or receives notice of the assignment of such a right or provides any benefit in money or money’s worth— it shall deliver particulars thereof in writing to the inspector not later than 30 days after the end of that year.
for the assignment or for the release in whole or in part of such a right; or
for or in connection with an omission or undertaking to omit to exercise such a right; or
for or in connection with the grant or undertaking to grant a right to acquire shares or an interest in shares to which such a right relates;
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In any case where— he shall be entitled to pay tax by instalments in accordance with subsection (4) below.
for any year of assessment a person is chargeable to tax under Schedule E, by virtue of section 135, on an amount equal to a gain realised by the exercise of a right to acquire shares which was obtained before 6th April 1984; and
the shares acquired in the exercise of that right were acquired for a consideration which, subject to subsection (2) below, was not less than the market value (determined as for the purposes of the 1979 Act) of shares of the same class at the time the right was granted or, if the right was granted before 6th April 1982, 90 per cent. of that market value; and
following an assessment for the year in which that right was exercised (“the relevant year”) an amount of tax chargeable by virtue of section 135 in respect of the amount referred to in paragraph (a) above and exceeding £250 is payable to the collector pursuant to regulations under section 203; and
the person concerned makes an election in accordance with subsection (3) below,
Shares which are acquired for a consideration less than that required by paragraph (b) of subsection (1) above by reason only of a diminution in the market value of shares of that class (determined as for the purposes of the 1979 Act) which is attributable solely to the share capital of the company issuing the shares being varied after the right to acquire the shares was granted, shall for the purposes of that paragraph be regarded as having been acquired for a consideration not less than that required by that paragraph.
An election under this section shall be made by notice to the inspector before the expiry of the period of 60 days beginning immediately after the end of the relevant year.
Where an election has been made under this section the tax referred to in subsection (1)(c) above shall, subject to subsection (5) and (6) below, be paid in five equal instalments as follows—
the first shall be due and payable at the expiry of the period of 14 days beginning on the date on which application for the tax is made pursuant to regulations under section 203;
the fifth shall be due and payable on the last day of the fifth year following the end of the relevant year; and
the second, third and fourth instalments shall be due on such dates as will secure, so far as may be, that the interval between any two consecutive dates is the same.
In any case where the date which, apart from this subsection, would be the due date for the fifth instalment of tax under subsection (4) above is earlier than the due date referred to in paragraph (a) of that subsection, all five instalments shall be due on the later date.
Tax which, by virtue of an election under this section, is not yet due and payable in accordance with subsection (4) above may nevertheless be paid at any time and shall become due and payable forthwith if the person who made the election becomes bankrupt under the law of any part of the United Kingdom.
Subject to any other provision of the Income Tax Acts requiring income of any description to be treated as the highest part of a person’s income, for the purposes of paragraph (c) of subsection (1) above in determining what tax is chargeable on a person by virtue of section 135 in respect of the amount referred to in paragraph (a) of that subsection, that amount shall be treated as the highest part of his income for the relevant year.
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Subject to section 185 and the following provisions of this section, where a person has acquired or acquires shares or an interest in shares in a body corporate in pursuance of a right conferred on him or opportunity offered to him as a director or employee of that or any other body corporate, and not in pursuance of an offer to the public— and any amount chargeable under this subsection shall be treated as earned income, whether or not it would otherwise fall to be so treated.
if the market value of the shares at the end of the period mentioned in subsection (9) below exceeds their market value at the time of the acquisition, he shall be chargeable to tax under Schedule E for the year of assessment in which that period ends on an amount equal, except as provided by subsection (8) below, to the excess (or, if his interest is less than the full beneficial ownership, such part of that amount as corresponds to his interest);
if he receives, by virtue of his ownership of or interest in the shares, any benefit not received by the majority of persons who— and the benefit is not otherwise chargeable to income tax, he shall be chargeable to tax under Schedule E for the year of assessment in which he receives the benefit on an amount equal to the value of the benefit;
hold shares forming part of the ordinary share capital of the same body corporate; and
have acquired the shares otherwise than as mentioned above;
Subsection (1) above does not apply if the acquisition—
was made in pursuance of arrangements under which employees of a body corporate receive as part of their emoluments shares or interests in shares in that body or in a body controlling it to an extent determined in advance by reference to the profits of either body; and
where the arrangements were made or modified after 22nd March 1973, was of shares or an interest in shares which satisfy the conditions set out in subsection (4)(a) below and the arrangements satisfy the condition set out in subsection (4)(b) below.
Subsection (1)(a) above does not apply if—
the acquisition was an acquisition of shares in a body and either of the following conditions was satisfied immediately after the acquisition, namely—
that the shares were not subject to such restrictions as are specified in subsection (6) below, and were not exchangeable for shares subject to such restrictions, and the majority of the available shares of the same class was acquired otherwise than as mentioned in subsection (1) above; or
that the shares were not subject to such restrictions as are specified in paragraph (a) or (b) of subsection (6) below and were not exchangeable for shares subject to such restrictions, and the majority of the available shares of the same class was acquired by persons who were or had been employees or directors of, or of a body controlled by, that body and who were together able as holders of the shares to control that body; or
the acquisition was an acquisition after 5th April 1984 of an interest in shares which consists of units in an authorised unit trust and—
prior to the acquisition the unit trust was approved by the Board for the purposes of this section and, at the time of the acquisition, continues to be so approved, and
the condition set out in subsection (7) below is fulfilled with respect to the body corporate (in that subsection referred to as “the relevant company”) directorship of or employment by which gave rise to the right or opportunity by virtue of which the acquisition was made; or
the acquisition took place before 6th April 1981.
The conditions referred to in subsection (2)(b) above are as follows—
that the shares—
are not subject to such restrictions as will or may result in the person acquiring the shares or an interest in the shares obtaining a benefit through an increase, subsequent to the acquisition, of the value or the value to him of the shares or interest; and
cannot (whether by one transaction or a series of transactions) be exchanged for or converted into shares which are subject to such restrictions; and
are either shares of a class quoted on a recognised stock exchange or are shares in a company which is not under the control of another company;
that the arrangements allow every full-time employee of the company concerned who—
has been a full-time employee of that company for a continuous period of not less than five years, and
is chargeable to tax in respect of his employment under Case I of Schedule E, and
is not less than 25 years old, to acquire shares or interests in shares of the same class on similar terms.
For the purposes of subsection (3)(a) above—
shares in a body are available shares if they are not held by or for the benefit of an associated company of that body; and
shares are exchangeable for other shares if (whether by one transaction or a series of transactions) they can be exchanged for or converted into the other shares.
The restrictions referred to in subsection (3)(a) above are—
restrictions not attaching to all shares of the same class; or
restrictions ceasing or liable to cease at some time after the acquisition; or
restrictions depending on the shares being or ceasing to be held by directors or employees of any body corporate (other than such restrictions imposed by a company’s articles of association as require shares to be disposed of on ceasing to be so held).
The condition referred to in subsection (3)(b) above is fulfilled with respect to the relevant company if, for no continuous period of one month or more, throughout which any director or employee of the relevant company either— do investments in the relevant company and in any other company in relation to which the relevant company is an associated company make up more than 10 per cent. by value of the investments subject to the trusts of the unit trust.
has, by virtue of his office or employment, any such right or opportunity as is referred to in subsection (1) above to acquire units in the unit trust, or
retains any beneficial interest in any units in the unit trust which he acquired in pursuance of such a right or opportunity,
The amount on which or on part of which the person making the acquisition is chargeable to tax under subsection (1)(a) above (“the chargeable amount”) shall, in the following cases, be reduced as follows, that is to say— and similarly where the interest acquired is less than the full beneficial ownership, and such assessments, alterations of assessments or repayments of tax shall be made as may be necessary to give effect to the reduction.
where, in accordance with the terms on which the acquisition of the shares was made, the consideration for the acquisition is subsequently increased, the chargeable amount shall be reduced by an amount equal to the increase; and
where, in accordance with those terms, the shares are subsequently disposed of for a consideration which is less than their market value at the time of the disposal, the chargeable amount shall be reduced so as to be equal to the excess of that consideration over the market value of the shares at the time of the acquisition;
The period referred to in subsection (1)(a) above is a period ending at the earliest of the following times— and for the purposes of subsection (1)(a) and paragraph (b) above a person whose beneficial interest in shares is reduced shall be treated as ceasing to have an interest in such part of the shares as is proportionate to the reduction.
the expiration of seven years from the acquisition of the shares or interest in the shares;
the time when the person making the acquisition ceases to have any beneficial interest in the shares;
in relation only to a person who acquires shares, the time when by reason of their ceasing to be subject to such restrictions as are specified in subsection (6) above either of the conditions in subsection (3)(a) above would be satisfied in relation to the shares if they had been acquired at that time;
Subsection (11) below applies where—
a person has acquired shares or an interest in shares as mentioned in subsection (1) above (and the shares which he acquires or in which he acquires an interest are in sub-paragraphs (b) and (c) and subsection (11) below referred to as “the original shares”); and
the circumstances of his acquisition of the original shares are such that the application of subsection (1)(a) above is not excluded; and
after 18th March 1986 by virtue of his holding of the original shares or the interest in them he acquires (whether or not for consideration) additional shares or an interest in additional shares (and the shares which he so acquires or in which he so acquires an interest are in subsection (11) below referred to as “the additional shares”).
Where this subsection applies—
the additional shares or, as the case may be, the interest in them shall be treated as having been acquired as mentioned in subsection (1) above and in circumstances falling within subsection (10)(b) above and, for the purposes of subsection (9)(a) above, as having been acquired at the same time as the original shares or the interest in them;
for the purposes of subsections (1)(a) and (8) above, the additional shares and the original shares shall be treated as one holding of shares and the market value of the shares comprised in that holding at any time shall be determined accordingly (the market value of the original shares at the time of acquisition being attributed proportionately to all the shares in the holding); and
for the purposes of those subsections, any consideration given for the acquisition of the additional shares or the interest in them shall be taken to be an increase falling within subsection (8)(a) above in the consideration for the original shares or the interest in them.
Subsection (1)(b) above does not apply where the benefit is received by virtue of a person’s ownership of or of an interest in shares which were acquired before 6th April 1972.
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Where— he shall be treated for the purposes of section 138(1) as acquiring the shares in pursuance of an offer to the public.
a director or employee of a body corporate acquires shares in pursuance of an opportunity to acquire shares of that class offered to directors and employees of the body in their capacity as such (“the discount offer”); and
the discount offer is made in conjunction with an offer to the public (“the main offer”) under which shares of the same class may be acquired on the same terms, except that a discount in price is offered to directors and employees; and
the director or employee is chargeable to tax under Schedule E on an amount equal to the discount in the price of the shares acquired by him; and
at least 75 per cent. of the aggregate number of shares of the class in question which are acquired in pursuance of the discount offer and the main offer taken together are shares acquired in pursuance of the main offer,
Where a director or employee acquires an interest in shares, subsection (1) above shall apply as if the references in that subsection to the acquisition of shares were references to the acquisition of an interest in shares.
For the purposes of section 138 and this section, where a person acquires any shares or an interest in shares in a body corporate in pursuance of a right conferred on him or opportunity offered to him as a person connected with a director or employee of that or any other body corporate, the shares or interest shall be deemed to be acquired by the director or employee, and section 32A(4) of the 1979 Act shall apply with the necessary modifications; and where that person receives a benefit as mentioned in section 138(1)(b) the benefit shall be deemed to be received by the director or employee.
For the purposes of section 138, a person who disposes of shares or an interest in shares otherwise than by a bargain at arm’s length with a person who is not connected with him shall be deemed not to cease to have a beneficial interest in the shares.
Where in any year of assessment a person acquires shares or an interest in shares as mentioned in section 138(1) (disregarding subsections (1) and (2) above), the body from which the shares are or the interest is acquired shall deliver to the inspector within 30 days of the end of that year particulars in writing of the shares and the acquisition.
The Board may by notice require the managers or trustees of any unit trust scheme which is an authorised unit trust approved by the Board for the purposes of section 138 to furnish to the Board within such time as they may direct (but not being less than 30 days) such information as the Board think necessary for the purposes of enabling them to determine—
whether the condition in subsection (7) of that section is being or has at any time been fulfilled; and
the liability to tax of any unit holder whose rights were acquired as mentioned in subsection (1) of that section.
Subject to subsection (9) below, in determining for the purposes of section 138 (including any valuation made for those purposes) whether shares which, or interests in which, have been acquired or are or are to be acquired by any person are subject to any restrictions, there shall be regarded as a restriction attaching to the shares any contract, agreement, arrangement or condition by which his freedom to dispose of the shares or any interest in them or to exercise any right conferred by them is restricted or by which such a disposal or exercise may result in any disadvantages to him or a person connected with him, except where the restriction is imposed as a condition of a loan which is not a related loan as defined by subsection (8) below. This subsection does not apply where the person acquired the shares before 19th October 1972.
A loan made to any person is a related loan for the purposes of subsection (7) above if— but a loan made by the body corporate, associated company or person mentioned in paragraph (a) above is not a related loan if that body, company or person carries on a business of making personal loans and the loan is made in the ordinary course of that business.
it is made, arranged, guaranteed or in any way facilitated by—
the body corporate of which he is a director or employee, or
an associated company of that body, or
if that body or an associated company of it is a close company, any person having a material interest in the close company; or
it is made to a person connected with another person and would have been such a loan if it had been made to that other person;
For the purposes of section 138(3)(a), shares acquired by any person shall not, by virtue of subsection (7) above, be regarded as subject to any restriction by reason only of any contract, agreement, arrangement or condition providing for the disposal of the shares, when that person ceases to hold the office or employment by virtue of which he acquired the shares, to a person nominated in accordance with the contract, agreement, arrangement or condition if he is required to dispose of them at a price not exceeding their market value.
Any reference in subsection (7) above to a contract, agreement, arrangement or condition does not include a reference to so much of any contract, agreement, arrangement or condition as contains provisions similar in purpose and effect to any of the provisions of the Model Rules set out in the Model Code for Securities Transactions by Directors of Listed Companies issued by the Stock Exchange in November 1984.
In section 138 and this section—
“corresponding accounting period”, in relation to a recipient company, has the meaning given by paragraph 8;
“the persons affected”, in relation to a small maintenance order, means the person liable to make the payments under the order and any person for the time being entitled to the payments, and
references to the variation of an order include references to the making of an order changing the persons entitled to the payments under it.
For the purposes of section 138 and this section, section 168(11) shall apply for determining whether a person has a material interest in a company, but with the omission of the words following “417(3)”.
If, on a person ceasing to have a beneficial interest in any shares, he acquires, after 18th March 1986, other shares or an interest in other shares and the circumstances are such that, for the purposes of sections 78 to 81 of the 1979 Act (reorganisations etc.) the shares in which he ceases to have a beneficial interest constitute original shares and the other shares constitute a new holding—
section 78 of that Act (which equates the original shares with the new holding) shall apply for the purposes of this section and section 138;
if any such consideration is given for the new holding as is mentioned in section 79(1) of that Act, it shall be treated for the purposes of this section and section 138 as an increase falling within section 138(8)(a) in the consideration for the shares; and
if any such consideration is received for the disposal of the original shares as is mentioned in section 79(2) of the 1979 Act— and in paragraphs (a) to (c) above “the original shares” shall be construed in accordance with sections 78 to 81 of the 1979 Act.
the consideration shall be apportioned among the shares comprised in the new holding, and
the amount which, apart from this paragraph, would at any subsequent time be the market value of any of those shares shall be taken to be increased by the amount of the consideration apportioned to them;
In any case where section 138(1) applies and the acquisition was an acquisition of units in an authorised unit trust—
any reference in section 138(1)(a), (8) or (9) or subsection (4) above or section 32A(4) of the 1979 Act to shares shall be construed as references to units; and
any reference in those provisions to an interest in shares shall be omitted.
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For the purposes of section 135, 136, 138 or 139, a right to acquire shares is obtained by a person as a director or employee (within the meaning of the section in question) of a body corporate— and paragraph (a) above shall apply to a right granted by reason of a person’s office or employment after he has ceased to hold it if it would apply to a right so granted in the last chargeable period in which he did hold it.
if it is granted to him by reason of his office or employment as such a director or employee who is chargeable to tax in respect of that office or employment under Case I of Schedule E; or
if the right is assigned to him and was granted by reason of any such office or employment of his to some other person;
For those purposes any question whether a person is connected with another shall be determined in accordance with section 839.
For those purposes—
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Subject to the following provisions of this section and section 157(3), where a non-cash voucher provided for an employee by reason of his employment is received by the employee, then, for the purposes of the Income Tax Acts— and the expense incurred as mentioned in paragraph (a) above by the person providing the voucher is referred to below as “the chargeable expense”.
he shall be treated as having received in the relevant year of assessment an emolument from his employment of an amount equal to the expense incurred by the person providing the voucher in or in connection with the provision of the voucher and the money, goods or services for which it is capable of being exchanged; and
any money, goods or services obtained by the employee or any other person in exchange for the voucher shall be disregarded;
In subsection (1)(a) above “the relevant year of assessment” means—
in relation to a cheque voucher, the year of assessment in which the voucher is handed over in exchange for money, goods or services (a voucher which is posted being treated as handed over at the time of posting); and
in relation to any other non-cash voucher, the year of assessment in which the chargeable expense is incurred or, if later, the year of assessment in which the voucher is received by the employee.
There shall be deductible under section 198, 201 or 332(3) from the amount taxable under subsection (1) above such amounts, if any, as would have been so deductible if the cost of the goods or services in question had been incurred by the employee out of his emoluments.
The chargeable expense shall be treated as reduced by any part of that expense made good to the person incurring it by the employee.
Where a non-cash voucher provided for an employee by reason of his employment is appropriated to him (whether by attaching it to a card held for him or in any other way), subsections (1) and (2) above shall have effect as if the employee had received the voucher at the time when it was so appropriated.
Subsections (1) and (2) above shall not apply in relation to a transport voucher provided for an employee of a passenger transport undertaking under arrangements in operation on 25th March 1982 and intended to enable that employee or a relation of his to obtain passenger transport services provided by—
his employer;
a subsidiary of his employer;
a body corporate of which his employer is a subsidiary; or
another passenger transport undertaking.
In this section—
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Subject to the provisions of this section and section 157(3), where a credit-token is provided for an employee by reason of his employment, then, for the purposes of the Income Tax Acts—
on each occasion on which the employee uses the credit-token to obtain money, goods or services he shall be treated as having received an emolument from his employment of an amount equal to the expense incurred by the person providing the credit-token in or in connection with the provision of the money, goods or services obtained; and
any money, goods or services obtained by the employee by use of the credit-token shall be disregarded.
There shall be deductible under section 198, 201 or 332(3) from the amount taxable under subsection (1) above such amounts, if any, as would have been so deductible if the cost of the goods or services in question had been incurred by the employee out of his emoluments.
The expense incurred by the person providing the credit-token as mentioned in subsection (1)(a) above shall be treated as reduced by any part of that expense made good to that person by the employee.
In this section “credit-token” means a card, token, document or other thing given to a person by another person who undertakes— but does not include a non-cash voucher or a cash voucher.
that on the production of it (whether or not some other action is also required) he will supply money, goods and services (or any of them) on credit; or
that where, on the production of it to a third party (whether or not some other action is also required) the third party supplies money, goods and services (or any of them), he will pay the third party for them (whether or not taking any discount or commission);
For the purposes of subsection (4) above, the use of an object to operate a machine provided by the person giving the object, or by a third party, shall be treated as production of the object to that person or, as the case may be, third party.
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Where a cash voucher provided for an employee by reason of his employment is received by the employee, then, subject to subsection (5) below, for the purposes of the Income Tax Acts (and in particular section 203)—
he shall be treated as being paid by his employer, at the time when he receives the voucher, an emolument of his employment equal to the sum of money for which the voucher is capable of being exchanged as mentioned in subsection (3) below; and
any money obtained by the employee or any other person in exchange for the voucher shall be disregarded.
Where a cash voucher provided for an employee by reason of his employment is appropriated to him (whether by attaching it to a card held for him or in any other way), subsections (1) and (5) of this section shall have effect as if the employee had received the voucher at the time when it was so appropriated.
In this section “cash voucher” (subject to subsection (4) below) means any voucher, stamp or similar document capable of being exchanged (whether singly or together with such other vouchers, stamps or documents, and whether immediately or only after a time) for a sum of money greater than, equal to or not substantially less than the expense incurred in providing the voucher by the person who provides it (whether or not it is also capable of being exchanged for goods or services), except that it does not include—
any document intended to enable a person to obtain payment of the sum mentioned in the document, being a sum which if paid to him directly would not have been chargeable to income tax under Schedule E; or
a savings certificate the accumulated interest payable in respect of which is exempt from tax (or would be so exempt if certain conditions were satisfied).
Where— then, in determining whether the voucher, stamp or document is a cash voucher within the meaning of this section, the expense incurred by him in providing it shall be treated as reduced by that difference or part.
a voucher, stamp or similar document is capable of being exchanged (as mentioned above) for a sum of money substantially less than the expense incurred in providing the voucher by the person who provides it, and
the difference or part of the difference represents the cost to that person of providing benefits in connection with sickness, personal injury or death,
Subsection (1) above shall not apply to a cash voucher received by an employee if, at the time when the voucher is received, the scheme under which it was issued is a scheme approved by the Board for the purposes of this subsection; and the Board shall not approve a scheme for those purposes unless satisfied that it is practicable for income tax in respect of all payments made in exchange for vouchers issued under the scheme to be deducted in accordance with regulations under section 203.
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If a person furnishes to the inspector a statement of the cases and circumstances in which non-cash vouchers or credit-tokens are provided for any employees (whether his own or those of anyone else) and the inspector is satisfied that no additional tax is payable under section 141 or 142 by reference to the vouchers or tokens mentioned in the statement, the inspector shall notify the person accordingly and nothing in those sections shall apply to the provision of those vouchers or tokens or their use.
The inspector may, if in his opinion there is reason to do so, by notice served on the person to whom the notification under subsection (1) above was given, revoke the notification, either as from the date of its making or as from such later date as may be specified in the notice under this subsection; and all such income tax becomes chargeable, and all such returns are to be made by that person and by the employees in question, as would have been chargeable or would have had to be made in the first instance if the notification under subsection (1) above had never been given or, as the case may be, it had ceased to have effect on the specified date.
For the purposes of sections 141 and 142 where a person incurs expense in or in connection with the provision by him of non-cash vouchers or credit-tokens for two or more employees as members of a group or class, the expense incurred in respect of any one of them shall be taken to be such part of that expense as is just and reasonable.
For the purposes of sections 141, 142 and 143 and this section—
a non-cash voucher, cash voucher or credit-token provided for an employee by his employer shall be deemed to be provided for him by reason of his employment; and
any reference to a non-cash voucher, cash voucher or credit-token being provided for or received by an employee includes a reference to it being provided for or received by a relation of his.
In sections 141, 142, 143 and this section—
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Subject to the provisions of this section, where living accommodation is provided for a person in any period by reason of his employment, and is not otherwise made the subject of any charge to him by way of income tax, he is to be treated for the purposes of Schedule E as being in receipt of emoluments of an amount equal to the value to him of the accommodation for the period, less so much as is properly attributable to that provision of any sum made good by him to those at whose cost the accommodation is provided.
The value of the accommodation to the employee in any period is the rent which would have been payable for the period if the premises had been let to him at an annual rent equal to their annual value as ascertained under section 837; but for a period in which those at whose cost the accommodation is provided pay rent at an annual rate greater than the annual value as so ascertained, the value of the accommodation to the employee is an amount equal to the rent payable by them for the period.
From any amount to be treated as emoluments under subsection (1) above there are deductible under section 198 or 332(3) such amounts (if any) as would have been so deductible if the accommodation had been paid for by the employee out of his emoluments.
Subject to subsection (5) below, subsection (1) above does not apply to accommodation provided for the employee in any of the following cases— and in any such case there is no charge to tax under Schedule E (either by virtue of this section or under section 131 or otherwise) in respect of a liability for rates on the premises being discharged for or on behalf of the employee or the employee being reimbursed for the discharge of that liability.
where it is necessary for the proper performance of the employee’s duties that he should reside in the accommodation;
where the accommodation is provided for the better performance of the duties of his employment, and his is one of the kinds of employment in the case of which it is customary for employers to provide living accommodation for employees;
where there is a special threat to his security, special security arrangements are in force and he resides in the accommodation as part of those arrangements;
If the accommodation is provided by a company and the employee is a director of the company or of an associated company, then, except in a case where paragraph (c) of subsection (4) above applies, no exemption is given by virtue of that subsection unless, for each employment of his which is employment as director of the company or an associated company, the following conditions are fulfilled, that is—
he has no material interest in the company, and
either his employment is as a full-time working director or the company is non-profit-making (meaning that neither does it carry on a trade nor do its functions consist wholly or mainly in the holding of investments or other property) or is established for charitable purposes only.
If by reason of a person’s employment accommodation is provided for others being members of his family or household, he is to be treated under subsections (1) to (3) above as if it were accommodation provided for him.
For the purposes of this section, living accommodation provided for an employee, or for members of his family or household, by his employer is deemed to be provided by reason of his employment unless—
the employer is an individual, and it can be shown that he makes the provision in the normal course of his domestic, family or personal relationships; or
the accommodation is provided by a local authority for an employee of theirs, and it can be shown that the terms on which it is provided are no more favourable than those on which similar accommodation is provided by the authority for persons who are not their employees but are otherwise similarly circumstanced.
For the purposes of this section—
a company is associated with another if one has control of the other or both are under the control of the same person; and
the expressions “employment”, “family or household”, “director”, “full-time working director”, “material interest” and (in relation to a body corporate) “control” shall be construed in accordance with subsections (2), (4) and (8) to (12) of section 168 as if this section were included in Chapter II of this Part.
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This section applies where—
living accommodation is provided for a person in any period, by reason of his employment;
by virtue of section 145 he is treated for the purposes of Schedule E as being in receipt of emoluments of an amount calculated by reference to the value to him of that accommodation, or would be so treated if there were disregarded any sum made good by him to those at whose cost the accommodation is provided; and
the cost of providing the accommodation exceeds £75,000.
Where this section applies, the employee shall be treated for the purposes of Schedule E as being in receipt of emoluments (in addition to those which he is treated as receiving by virtue of section 145) of an amount equal to the additional value to him of the accommodation for the period, less so much of any rent paid by the employee, in respect of the accommodation, to the person providing it as exceeds the value to the employee of the accommodation for the period (as determined under section 145).
The additional value of the accommodation to the employee in any period is the rent which would have been payable for that period if the premises had been let to him at an annual rent equal to the appropriate percentage of the amount by which the cost of providing the accommodation exceeds £75,000.
For the purposes of this section, the cost of providing any living accommodation shall be taken to be the aggregate of—
the amount of any expenditure incurred in acquiring the estate or interest in the property held by a relevant person; and
the amount of any expenditure incurred by a relevant person before the year of assessment in question on improvements to the property.
The aggregate amount mentioned in subsection (4) above shall be reduced by the amount of any payment made by the employee to a relevant person, so far as that amount represents a reimbursement of any such expenditure as is mentioned in paragraph (a) or (b) of that subsection or represents consideration for the grant to the employee of a tenancy of the property.
Subject to subsection (8) below, where throughout the period of six years ending with the date when the employee first occupied the property, any estate or interest in the property was held by a relevant person (whether or not it was the same estate, interest or person throughout), the additional value shall be calculated as if in subsection (4) above—
the amount referred to in paragraph (a) were the market value of that property as at that date; and
the amount referred to in paragraph (b) did not include expenditure on improvements made before that date.
In this section, “relevant person” means any of the following—
the person providing the accommodation;
where the person providing the accommodation is not the employee’s employer, that employer;
any person, other than the employee, who is connected with a person falling within paragraph (a) or (b) above.
Subsection (6) above does not apply where the employee first occupied the property before 31st March 1983.
Any amount which is deductible, by virtue of section 145(3), from an amount to be treated as emoluments under that section may, to the extent to which it exceeds the amount of those emoluments, be deductible from the amount to be treated as emoluments under this section.
For the purposes of this section, living accommodation shall be treated as provided for a person by reason of his employment if it is so treated for the purposes of section 145; and “employment” has the same meaning in this section as in that.
In this section— and section 839 shall apply for the purposes of this section.
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Subject to the provisions of this section and section 188, tax shall be charged under Schedule E in respect of any payment to which this section applies which is made to the holder or past holder of any office or employment, or to his executors or administrators, whether made by the person under whom he holds or held the office or employment or by any other person.
This section applies to any payment (not otherwise chargeable to tax) which is made, whether in pursuance of any legal obligation or not, either directly or indirectly in consideration or in consequence of, or otherwise in connection with, the termination of the holding of the office or employment or any change in its functions or emoluments, including any payment in commutation of annual or periodical payments (whether chargeable to tax or not) which would otherwise have been so made.
For the purposes of this section and section 188, any payment made to the spouse or any relative or dependant of a person who holds or has held an office or employment, or made on behalf of or to the order of that person, shall be treated as made to that person, and any valuable consideration other than money shall be treated as a payment of money equal to the value of that consideration at the date when it is given.
Any payment which is chargeable to tax by virtue of this section shall be treated as income received on the following date, that is to say— and shall be treated as emoluments of the holder or past holder of the office or employment assessable to tax under Schedule E; and any such payment shall be treated for all the purposes of the Income Tax Acts as earned income.
in the case of a payment in commutation of annual or other periodical payments, the date on which the commutation is effected; and
in the case of any other payment, the date of the termination or change in respect of which the payment is made;
In the case of the death of any person who, if he had not died, would have been chargeable to tax in respect of any such payment, the tax which would have been so chargeable shall be assessed and charged upon his executors or administrators and shall be a debt due from and payable out of his estate.
This section shall not apply to any payment made in pursuance of an obligation incurred before 6th April 1960.
Where any payment chargeable to tax under this section is made to any person in any year of assessment, it shall be the duty of the person by whom it is made to deliver particulars thereof in writing to the inspector not later than 30 days after the end of that year.
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Where a person holding an employment is absent from work for any period by reason of sickness or disability, any sums which— shall be chargeable to income tax under Schedule E as emoluments of the employment for that period if, apart from this section, they would not be so chargeable for that or any other period.
are paid to, or to the order or for the benefit of, that person (or a member of his family or household) in respect of any such absence from work; and
are, by reason of his employment, paid as a result of any arrangements entered into by his employer,
Where the funds for making payments under any arrangements are attributable partly to contributions made by the employer and partly to contributions made by the persons employed by him, subsection (1) above shall apply only to such part of the sums paid as a result of the arrangements as it is just and reasonable to regard as attributable to the employer’s contributions.
In this section “employment” means an office or employment the emoluments of which fall to be assessed under Schedule E and related expressions shall be construed accordingly; and the reference to a person’s family or household is to his spouse, his sons and daughters and their spouses, his parents and his dependants.
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allowances paid under a scheme of the kind described in the Job Release Act 1977, being a scheme which provides for the payment of allowances for periods beginning earlier than one year before the date on which the recipient attains pensionable age, as defined in that Act;
maternity pay (whether paid during the subsistence of a contract of employment or not) within the meaning of section 33 of the Employment Protection (Consolidation) Act 1978 or, in Northern Ireland, Article 15 of the Industrial Relations (No.2) (Northern Ireland) Order 1976;
payments of statutory sick pay within the meaning of section 1 of the Social Security and Housing Benefits Act 1982 or, in Northern Ireland, Article 3 of the Social Security (Northern Ireland) Order 1982; and
payments of statutory maternity pay under Part V of the Social Security Act 1986 or, in Northern Ireland, under Part VI of the Social Security (Northern Ireland) Order 1986.
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Subject to the following provisions of this section, payments to any person of income support under the Social Security Act 1986 in respect of any period shall be charged to income tax under Schedule E if during that period—
his right to income support is subject to the condition specified in section 20(3)(d)(i) of that Act (availability for employment); or
he is one of a married or unmarried couple and section 23 of that Act (trade disputes) applies to him but not to the other person;
In this section “married couple” and “unmarried couple” have the same meaning as in Part II of the Social Security Act 1986.
Where the amount of income support paid to any person in respect of any week or part of a week exceeds the taxable maximum for that period as defined below, the excess shall not be taxable.
Where payments of unemployment benefit and payments of income support are made to any person in respect of the same week or part of a week, the amount taxable in respect of that period in respect of those payments shall not exceed the taxable maximum for that period within the meaning of subsection (3) above.
For the purposes of subsections (3) and (4) above, the taxable maximum in respect of a week shall be determined in accordance with subsections (6) to (8) below and the taxable maximum in respect of part of a week shall be equal to one-sixth of the taxable maximum in respect of a week multiplied by the number of days in the part.
Where the income support is paid to one of a married or unmarried couple in a case not falling within subsection (1)(b) above, the taxable maximum in respect of a week shall be equal to the aggregate of—
the weekly rate specified for the week in question in relation to unemployment benefit in paragraph 1 of Part I of Schedule 4 to the Social Security Act 1975; and
the increase for an adult dependant specified for that week in paragraph 1(a) of Part IV of that Schedule.
Where the income support is paid to one of a married or unmarried couple in a case falling within subsection (1)(b) above, the taxable maximum in respect of a week shall—
if the applicable amount (within the meaning of Part II of the Social Security Act 1986) consists only of an amount in respect of them, be equal to one half of that amount; and
if the applicable amount includes other amounts, be equal to one half of the portion of it which is included in respect of them.
Where the income support is paid to a person who is not one of a married or unmarried couple, the taxable maximum in respect of a week shall be equal to the weekly rate referred to in subsection (6)(a) above.
In its application to Northern Ireland this section shall have effect as if—
for the references to the Social Security Act 1986, to Part II of that Act and to sections 20(3)(d)(i) and 23 of that Act there were substituted respectively references to the Social Security (Northern Ireland) Order 1986, Part III of that Order and Articles 21(3)(d)(i) and 24 of that Order; and
for the references to paragraph 1 of Part 1 of Schedule 4 to the Social Security Act 1975 and paragraph 1(a) of Part IV of that Schedule there were substituted respectively references to paragraph 1 of Part I of Schedule 4 to the Social Security (Northern Ireland) Act 1975 and paragraph 1(a) of Part IV of that Schedule.
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A benefit officer may by notice notify a person who is taxable in respect of any unemployment benefit or income support of the amount on which he is taxable and any such notification shall state the date on which it is issued and shall inform the person to whom it is given that he may object to the notification by notice given within 60 days after the date of issue of the notification.
Where— that amount shall not be questioned in any appeal against any assessment in respect of income including that amount.
no objection is made to a notification of an amount under subsection (1) above within the period specified in that subsection (or such further period as may be allowed by virtue of subsection (5) below); or
an objection is made but is withdrawn by the objector by notice,
Where— then, subject to subsection (4) below, that amount as so varied shall not be questioned in any appeal against any assessment in respect of income including that amount.
an objection is made to a notification of an amount under subsection (1) above within the period specified in that subsection (or such further period as may be allowed by virtue of subsection (5) below), and
the benefit officer and the objector come to an agreement that the amount notified should be varied in a particular manner, and
the officer confirms the agreement to vary in writing,
Subsection (3) above shall not apply if, within 60 days from the date when the agreement was come to, the objector gives notice to the benefit officer that he wishes to repudiate or resile from the agreement.
“foreign dividends” has the meaning given by section 123.
a benefit officer is satisfied that there was a reasonable excuse for not objecting within that time, and
the objection was made thereafter without unreasonable delay, and
the officer gives consent in writing;
Where a benefit officer has notified an amount to a person under subsection (1) above, he may by another notice notify the person of an alteration in the amount previously notified and, if he does so, the original notification shall be cancelled and this section shall apply to such a subsequent notification as it applies to the original notification.
In this section “benefit officer” means the appropriate officer, in Great Britain, of the Department of Employment or of the Department of Health and Social Security, as the case may be, or, in Northern Ireland, of the Department of Health and Social Services.
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Subject to the provisions of this Chapter, where in any year a person is employed in director’s or higher-paid employment and by reason of his employment there are paid to him in respect of expenses any sums which, apart from this section, are not chargeable to tax as his income, those sums are to be treated as emoluments of the employment and accordingly chargeable to income tax under Schedule E.
Subsection (1) above is without prejudice to any claim for deductions under section 198, 201 or 332(3).
The reference in subsection (1) above to sums paid in respect of expenses includes any sums put at the employee’s disposal by reason of his employment and paid away by him.
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Subject to section 163, where in any year a person is employed in director’s or higher-paid employment and— there is to be treated as emoluments of the employment, and accordingly chargeable to income tax under Schedule E, an amount equal to whatever is the cash equivalent of the benefit.
by reason of his employment there is provided for him, or for others being members of his family or household, any benefit to which this section applies; and
the cost of providing the benefit is not (apart from this section) chargeable to tax as his income,
The benefits to which this section applies are accommodation (other than living accommodation), entertainment, domestic or other services, and other benefits and facilities of whatsoever nature (whether or not similar to any of those mentioned above in this subsection), excluding however— and subject to the exceptions provided for by section 155.
any benefit consisting of the right to receive, or the prospect of receiving, any sums which would be chargeable to tax under section 149; and
any benefit chargeable under section 157, 158, 160 or 162;
For the purposes of this section and sections 155 and 156, the persons providing a benefit are those at whose cost the provision is made.
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Where the benefit of a car is taxable under section 157, section 154 does not apply to any benefit in connection with the car other than a benefit in connection with the provision of a driver for the car.
Section 154 does not apply where the benefit consists in provision for the employee, in premises occupied by the employer or others providing it, of accomodation, supplies or services used by the employee solely in performing the duties of his employment.
Where living accommodation is provided by reason of a person’s employment— are not benefits to which section 154 applies.
alterations and additions to the premises concerned which are of a structural nature, and
repairs to the premises of a kind which, if the premises were let under a lease to which section 11 of the Landlord and Tenant Act 1985 (repairing obligations) applies, would be the obligation of the lessor under the covenants implied by subsection (1) of that section,
Section 154 does not apply to a benefit consisting in the provision by the employee’s employer for the employee himself, or for the spouse, children or dependants of the employee, of any pension, annuity, lump sum, gratuity or other like benefit to be given on the employee’s death or retirement.
Section 154 does not apply to a benefit consisting in the provision by the employee’s employer of meals in any canteen in which meals are provided for the staff generally.
Section 154 does not apply where the benefit consists— and for the purpose of this subsection, medical treatment includes all forms of treatment for, and all procedures for diagnosing, any physical or mental ailment, infirmity or defect.
in providing the employee with medical treatment outside the United Kingdom (including providing for him to be an in-patient) in a case where the need for the treatment arises while the employee is outside the United Kingdom for the purpose of performing the duties of his employment; or
in providing insurance for the employee against the cost of such treatment in such a case;
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The cash equivalent of any benefit chargeable to tax under section 154 is an amount equal to the cost of the benefit, less so much (if any) of it as is made good by the employee to those providing the benefit.
Subject to the following subsections, the cost of a benefit is the amount of any expense incurred in or in connection with its provision, and (here and in those subsections) includes a proper proportion of any expense relating partly to the benefit and partly to other matters.
Where the benefit consists in the transfer of an asset by any person, and since that person acquired or produced the asset it has been used or has depreciated, the cost of the benefit is deemed to be the market value of the asset at the time of transfer.
Where the asset referred to in subsection (3) above is not a car and before the transfer a person (whether or not the transferee) has been chargeable to tax in respect of the asset in accordance with subsection (5) below, the amount which under subsection (3) above is deemed to be the cost of the benefit shall (if apart from this subsection it would be less) be deemed to be—
the market value of the asset at the time when it was first applied (by those providing the benefit in question) for the provision of any benefit for a person, or for members of his family or household, by reason of his employment, less
the aggregate of the amounts taken into account as the cost of the benefit in charging tax in accordance with subsection (5) below in the year or years up to and including that in which the transfer takes place.
Where the benefit consists in an asset being placed at the employee’s disposal, or at the disposal of others being members of his family or household, for his or their use (without any transfer of the property in the asset), or of its being used wholly or partly for his or their purposes, then the cost of the benefit in any year is deemed to be—
the annual value of the use of the asset ascertained under subsection (6) below; plus
the total of any expense incurred in or in connection with the provision of the benefit excluding—
the expense of acquiring or producing it incurred by the person to whom the asset belongs; and
any rent or hire charge payable for the asset by those providing the benefit.
Subject to subsection (7) below, the annual value of the use of the asset, for the purposes of subsection (5) above—
in the case of land, is its annual value determined in accordance with section 837; and
in any other case is 20 per cent. of its market value at the time when it was first applied (by those providing the benefit in question) in the provision of any benefit for a person, or for members of his family or household, by reason of his employment.
Where there is payable, by those providing the benefit, any sum by way of rent or hire-charge for the asset, the annual amount of which is equal to, or greater than, the annual value of the use of the asset as ascertained under subsection (6) above, that amount shall be substituted for the annual value in subsection (5)(a) above.
From the cash equivalent there are deductible in each case under section 198, 201 or 332(3) such amounts (if any) as would have been so deductible if the cost of the benefit had been incurred by the employee out of his emoluments.
In the case of assets first applied before 6th April 1980 by those providing the benefit in question in the provision of any benefit for a person, or for members of his family or household, by reason of his employment—
subsection (4) above shall not have effect; and
in subsection (6)(b) above for the words “20 per cent.” there shall be substituted the words “10 per cent.”.
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Where in any year in the case of a person employed in director’s or higher-paid employment, a car is made available (without any transfer of the property in it) either to himself or to others being members of his family or household, and— there is to be treated as emoluments of the employment, and accordingly chargeable to income tax under Schedule E, an amount equal to whatever is the cash equivalent of that benefit in that year.
it is so made available by reason of his employment and it is in that year available for his or their private use; and
the benefit of the car is not (apart from this section) chargeable to tax as the employee’s income,
Subject to the provisions of this section, the cash equivalent of that benefit is to be ascertained— the equivalent in each case being shown in the second or third column of the applicable Table by reference to the age of the car at the end of the relevant year of assessment.
from Tables A and B in Part I of Schedule 6, in the case of cars with an original market value of up to £19,250; and
from Table C in that Part in the case of cars with an original market value of more than that amount;
Where in any year the benefit of a car is chargeable to tax under this section as the employee’s income he shall not be taxable—
under Schedule E in respect of the discharge of any liability of his in connection with the car;
under section 141 or 142 in respect of any non-cash voucher or credit-token to the extent that it is used by him—
for obtaining money which is spent on goods or services in connection with the car; or
for obtaining such goods or services;
under section 153 in respect of any payment made to him in respect of expenses incurred by him in connection with the car.
The Treasury may by order taking effect from the beginning of any year beginning after it is made—
increase or further increase the money sum specified in subsection (2)(a) above;
with or without such an increase, substitute for any of the three Tables a different Table of cash equivalents;
increase or further increase the money sum specified in paragraph 1(1) of Part II of Schedule 6.
Part II of Schedule 6 has effect—
with respect to the application of the Tables in Part I; and
for the reduction of the cash equivalent under this section in cases where the car has not been available for the whole of the relevant year, or the use of it has been preponderantly business use, or the employee makes any payment for the use of it.
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Where in any year in the case of a person employed in director’s or higher-paid employment fuel is provided by reason of his employment for a car which is made available as mentioned in section 157, an amount equal to whatever is the cash equivalent of that benefit in that year shall be treated as emoluments of the employment and, accordingly, shall be chargeable to income tax under Schedule E.
Subject to the provisions of this section, the cash equivalent of that benefit shall be ascertained from Table A below where the car has an internal combustion engine with one or more reciprocating pistons and from Table B below in the case of other cars; and for the purposes of Table A below a car’s cylinder capacity is the capacity of its engine calculated as for the purposes of the Vehicles (Excise) Act 1971 or the Vehicles (Excise) Act (Northern Ireland) 1972. Cylinder capacity of car in cubic centimetres Cash equivalent 1,400 or less £480 More than 1,400 but not more than 2,000 £600 More than 2,000 £900 Original market value of car Cash equivalent Less than £6,000 £480 £6,000 or more but less than £8,500 £600 £8,500 or more £900
Without prejudice to the generality of subsection (1) above, fuel is provided for a car if—
any liability in respect of the provision of fuel for the car is discharged;
a non-cash voucher or a credit-token is used to obtain fuel for the car or money which is spent on such fuel;
any sum is paid in respect of expenses incurred in providing fuel for the car. In this subsection “non-cash voucher” and “credit-token” have the meanings given by section 141(7) and 142(4) respectively.
The Treasury may by order taking effect from the beginning of any year beginning after it is made substitute a different Table for either of the Tables in subsection (2) above.
Where paragraph 2 or 3 of Part II of Schedule 6 applies to reduce the cash equivalent of the benefit of the car for which the fuel is provided, the same reduction shall be made to the cash equivalent of the benefit of the fuel ascertained under subsection (2) above.
If in the relevant year— the cash equivalent is nil.
the employee is required to make good to the person providing the fuel the whole of the expense incurred by him in or in connection with the provision of fuel for his private use and he does so; or
the fuel is made available only for business travel;
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This section applies to any car in the case of which the inspector is satisfied (whether on a claim under this section or otherwise) that it has for any year been included in a car pool for the use of the employees of one or more employers.
A car is to be treated as having been so included for a year if—
in that year it was made available to, and actually used by, more than one of those employees and, in the case of each of them, it was made available to him by reason of his employment but it was not in that year ordinarily used by one of them to the exclusion of the others; and
in the case of each of them any private use of the car made by him in that year was merely incidental to his other use of it in the year; and
it was in that year not normally kept overnight on or in the vicinity of any residential premises where any of the employees was residing, except while being kept overnight on premises occupied by the person making the car available to them.
Where this section applies to a car, then for the year in question the car is to be treated under sections 154 and 157 as not having been available for the private use of any of the employees.
A claim under this section in respect of a car for any year may be made by any one of the employees mentioned in subsection (2)(a) above (referred to below as “the employees concerned”) or by the employer on behalf of all of them.
On an appeal against the decision of the inspector on a claim under this section all the employees concerned may take part in the proceedings, and the determination of the body of Commissioners or county court appealed to shall be binding on all those employees, whether or not they have taken part in the proceedings.
Where an appeal against the decision of the inspector on a claim under this section has been determined, no appeal against the inspector’s decision on any other such claim in respect of the same car and the same year shall be entertained.
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Where in the case of a person employed in director’s or higher-paid employment there is outstanding for the whole or part of a year a loan (whether to the employee himself or a relative of his) of which the benefit is obtained by reason of his employment and— there is to be treated as emoluments of the employment, and accordingly chargeable to income tax under Schedule E, an amount equal to whatever is the cash equivalent of the benefit of the loan for that year.
no interest is paid on the loan for that year; or
the amount of interest paid on it for the year is less than interest at the official rate,
Where in the case of a person employed in director’s or higher-paid employment— then there is to be treated as emoluments of the employment, and accordingly chargeable to income tax under Schedule E, an amount equal to that which is released or written off.
there is in any year released or written off the whole or part of a loan (whether to the employee himself or a relative of his, and whether or not such a loan as is mentioned in subsection (1) above), and
the benefit of that loan was obtained by reason of his employment,
Where there was outstanding at any time when a person was in director’s or higher-paid employment the whole or part of a loan to him (or to a relative of his) the benefit of which was obtained by reason of his employment, and that director’s or higher-paid employment has terminated, whether on the employee ceasing to be employed or ceasing to be employed in director’s or higher-paid employment, subsection (2) above applies as if it had not terminated.
Part I of Schedule 7 has effect as to what is meant by the benefit of a loan obtained by reason of a person’s employment; the cash equivalent of the benefit is to be ascertained in accordance with Part II of that Schedule; and Part III of that Schedule has effect for excluding from the operation of subsection (1) above loans on which interest is eligible for relief under subsection (1) of section 353 or which would be so eligible apart from subsection (2) of that section.
In this section, sections 161 and 162 and Schedule 7—
“loan” includes any form of credit;
references to a loan include references to any other loan applied directly or indirectly towards the replacement of the first-mentioned loan;
references to making a loan include arranging, guaranteeing or in any way facilitating a loan (related expressions being construed accordingly); and
references to the official rate of interest are to the rate prescribed from time to time by the Treasury by order.
For the purposes of this section and section 161, a person is a relative of another person if he or she is—
the spouse of that other; or
a parent or remoter forebear, child or remoter issue, or brother or sister of that other or of the spouse of that other; or
the spouse of a person falling within paragraph (b) above.
Subject to section 161, this section applies to loans whether made before or after this Act is passed.
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There is no charge to tax under section 160(1) if the cash equivalent does not exceed £200 or (for a year in which there are two or more loans outstanding) the total of all the cash equivalents does not exceed that amount.
Where the amount of interest paid on a loan for the year in which it is made is not less than interest at the official rate applying for that year for the purposes of section 160 and the loan is made— subsection (1) of that section shall not apply to the loan in any subsequent year by reason only of an increase in the official rate since the year in which the loan was made.
for a fixed and unvariable period; and
at a fixed and unvariable rate of interest,
Where a loan was made at any time before 6th April 1978— section 160(1) shall not apply to the loan if it is shown that the rate of interest is not less than such rate as could have been expected to apply to a loan on the same terms (other than as to the rate of interest) made at that time between persons not connected with each other (within the meaning of section 839) dealing at arm’s length.
for a fixed and unvariable period; and
at a fixed and unvariable rate of interest,
If the employee shows that he derived no benefit from a loan made to a relative of his, section 160(1) and (2) above shall not apply to that loan.
Section 160(2) does not apply where the amount released or written off is chargeable to income tax as income of the employee apart from that section, except—
where it is chargeable only by virtue of section 148; or
to the extent that the amount exceeds the sums previously falling to be treated as the employee’s income under section 677.
On the employee’s death—
a loan within subsection (1) of section 160 ceases to be outstanding for the purposes of the operation of that subsection; and
no charge arises under subsection (2) of that section by reference to any release or writing-off which takes effect on or after the death.
Section 160(2) does not apply to benefits received in pursuance of arrangements made at any time with a view to protecting the holder of shares acquired before 6th April 1976 from a fall in their market value.
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Where— section 160(1) and Schedule 7 apply as if the employee had the benefit of an interest-free loan obtained by reason of his employment (“the notional loan”).
a person employed or about to be employed in director’s or higher-paid employment (“the employee”), or a person connected with him, acquires shares in a company (whether the employing company or not); and
the shares are acquired at an under-value in pursuance of a right or opportunity available by reason of his employment,
The provisions of this section have effect subject to sections 185 and 186; and in this section—
references to shares being acquired at an under-value are references to shares being acquired either without payment for them at the time or being acquired for an amount then paid which is less than the market value of fully paid up shares of that class (in either case with or without obligation to make payment or further payment at some later time); and
any reference, in relation to any shares, to the under-value on acquisition is a reference to the market value of fully paid up shares of that class less any payment then made for the shares.
The amount initially outstanding of the notional loan is so much of the under-value on acquisition as is not chargeable to tax as an emolument of the employee; and—
the loan remains outstanding until terminated under subsection (4) below; and
payments or further payments made for the shares after the initial acquisition go to reduce the amount outstanding of the notional loan.
The notional loan terminates on the occurrence of any of the following events—
the whole amount of it outstanding is made good by means of payments or further payments made for the shares; or
the case being one in which the shares were not at the time of acquisition fully paid up, any outstanding or contingent obligation to pay for them is released, transferred or adjusted so as no longer to bind the employee or any person connected with him; or
the shares are so disposed of by surrender or otherwise that neither he nor any such person any longer has a beneficial interest in the shares; or
the employee dies.
If the notional loan terminates as mentioned in subsection (4)(b) or (c) above, there is then for the year in which the event in question occurs the same charge to income tax on the employee, under section 160(2), as if an amount equal to the then outstanding amount of the notional loan had been released or written off from a loan within that section.
Where after 6th April 1976 shares are acquired, whether or not at an under-value but otherwise as mentioned in subsection (1) above, and— then for the year in which the disposal is effected the amount of the excess is treated as emoluments of the employee’s employment and accordingly chargeable to income tax under Schedule E.
the shares are subsequently disposed of by surrender or otherwise so that neither the employee nor any person connected with him any longer has a beneficial interest in them; and
the disposal is for a consideration which exceeds the then market value of the shares,
If at the time of the event giving rise to a charge in relation to any shares by virtue of subsection (5) or (6) above the employee has ceased to be in the director’s or higher-paid employment by virtue of which he is the employee for the purposes of this section in relation to those shares, those subsections shall apply as if he had not so ceased.
No charge arises under subsection (6) above by reference to any disposal effected after the death of the employee, whether by his personal representatives or otherwise.
This section applies in relation to acquisition and disposal of an interest in shares less than full beneficial ownership (including an interest in the proceeds of sale of part of the shares but not including a share option) as it applies in relation to the acquisition and disposal of shares, subject to the following modifications—
for references to the shares acquired there shall be substituted references to the interest in shares acquired;
for the reference to the market value of the shares acquired there shall be substituted a reference to the proportion corresponding to the size of the interest of the market value of the shares in which the interest subsists;
for the reference to shares of the same class as those acquired there shall be substituted a reference to shares of the same class as those in which the interest subsists; and
for the reference to the market value of fully paid up shares of that class there shall be substituted a reference to the proportion of that value corresponding to the size of the interest.
In this section— and section 839 applies for the purposes of this section.
“shares” includes stock and also includes securities as defined in section 254(1);
“acquisition” in relation to shares includes receipt by way of allotment or assignment or otherwise howsoever;
any reference to payment for shares includes giving any consideration in money or money’s worth or making any subscription, whether in pursuance of a legal liability or not;
“market value” has the same meaning as, for the purposes of the 1979 Act, it has by virtue of section 150 of that Act;
This section, in respect of any shares or any interest in shares, operates only to include an amount in emoluments so far as any amount corresponding to it, and representing the same benefit, does not otherwise fall to be so included under the Tax Acts.
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This section applies where, in the case of a person employed in director’s or higher-paid employment, living accommodation is provided by reason of the employment and, accordingly, a charge to tax would arise in his case under section 145 but for the case being one of those specified in subsection (4) of that section.
Where, by reason of expenditure incurred in one or more of the following, that is to say,— or by reason of such expenditure being reimbursed to the employee, an amount falls to be included in the emoluments of his employment, that amount shall not exceed the limit specified in subsection (3) below.
heating, lighting or cleaning the premises concerned;
repairs to the premises, their maintenance or decoration;
the provision in the premises of furniture or other appurtenances or effects which are normal for domestic occupation;
That limit is—
10 per cent. of the net amount of the emoluments of the employment or, if the accommodation is provided for a period of less than a year, so much of that percentage of the net amount as is attributable to the period; less
where the expenditure is incurred by a person other than the employee, so much as is properly attributable to the expenditure of any sum made good by the employee to that other.
The net amount of the emoluments of a person’s employment for the purposes of subsection (3) above is the amount of those emoluments (leaving out of account the expenditure in question) after— and, for the purposes of this subsection, in the case of employment by a company there shall be taken into account, as emoluments of the employment, the emoluments of any employment by an associated company.
any capital allowance; and
any deductions allowable under section 198, 199, 201, 332(3), 592(7), 594 or 619(1)(a);
For the purposes of subsection (4) above, a company is an associated company of another if one of them has control of the other or both are under the control of the same person.
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Subject to the provisions of this Chapter, where in any year a person (“the recipient”) is employed as a director of a company and— the amount so accounted for to the Board, less so much (if any) as is made good by the recipient to that other person or so deducted, shall be treated as emoluments of the employment and accordingly chargeable to income tax under Schedule E.
a payment of, or on account of, income assessable to income tax under Schedule E as emoluments of that employment is made to him in circumstances in which the person making the payment is required, by regulations made under section 203, to deduct an amount of income tax on making the payment; and
the whole of that amount is not so deducted but is, or any part of it is, accounted for to the Board by someone other than the recipient;
A person shall not be treated, for the purposes of subsection (1) above, as employed as a director of a company if he has no material interest in the company and either paragraph (a) or paragraph (b) of section 167(5) is satisfied.
Where an amount treated as emoluments of a person’s employment, by subsection (1) above, is accounted for to the Board at a time when the employment has come to an end, those emoluments shall be treated, for the purposes of the Income Tax Acts, as having arisen in the year in which the employment ended; but that subsection shall not apply in relation to any amount accounted for to the Board after the death of the director in question.
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Nothing in section 331 shall be construed as conferring on any person other than the person holding the scholarship in question any exemption from the charge to tax under section 154.
For the purposes of this Chapter, any scholarship provided for a member of a person’s family or household shall, without prejudice to any other provision of this Chapter, be taken to have been provided by reason of that person’s enployment if it is provided under arrangements entered into by, or by any person connected with, his employer (whether or not those arrangements require the employer or connected person to contribute directly or indirectly to the cost of providing the scholarship).
Section 154 does not apply to a benefit consisting in a payment in respect of a scholarship— if, in the year in which the payment is made, not more than 25 per cent. of the total amount of the payments made from that fund, or under that scheme, in respect of scholarships held as mentioned in paragraph (b) above is attributable to relevant scholarships.
provided from a trust fund or under a scheme; and
held by a person receiving full-time instruction at a university, college, school or other educational establishment; and
which would not be regarded, for the purposes of this Chapter, as provided by reason of a person’s employment were subsection (2) above and section 168(3) to be disregarded;
This section does not have effect in relation to any payment if—
it is made in respect of a scholarship awarded before 15th March 1983, and
the first payment in respect of the scholarship was made before 6th April 1984; and
in relation to payments made after 5th April 1989, the person holding the scholarship is receiving full-time instruction at the university, college, school or other educational establishment at which he was receiving such instruction on—
15th March 1983, in a case where the first payment in respect of the scholarship was made before that date; or
the date on which the first such payment was made, in any other case.
For the purposes of subsection (4)(c) above, a payment made before 6th April 1989 in respect of any period beginning on or after that date shall be treated as made at the beginning of that period.
In this section— and section 839 applies for the purposes of this section.
“scholarship” includes an exhibition, bursary or other similar educational endowment;
“relevant scholarship” means a scholarship which is provided by reason of a person’s employment (whether or not that employment is director’s or higher-paid employment); and for the purposes of this definition
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If a person furnishes to the inspector a statement of the cases and circumstances in which payments of a particular character are made, or benefits or facilities of a particular kind are provided, for any employees (whether his own or those of anyone else), and the inspector is satisfied that no additional tax is payable under this Chapter by reference to the payments, benefits or facilities mentioned in the statement, the inspector shall notify the person accordingly; and then nothing in this Chapter applies to those payments, or to the provision of those benefits or facilities, or otherwise for imposing any additional charge to income tax.
The inspector may, if in his opinion there is reason to do so, by notice served on the person to whom notification under subsection (1) above was given, revoke the notification, either as from the date of its making or from such later date as may be specified in the notice under this subsection; and then all such income tax becomes chargeable, and all such returns are to be made by that person and by the employees in question as would have been chargeable or would have had to be made in the first instance if the notification under subsection (1) had never been given or, as the case may be, it had ceased to have effect on the specified date.
In relation to a notification given before 6th April 1988, the reference in subsection (2) above to income tax includes a reference to income tax chargeable under the corresponding enactments in force before that date, and accordingly, where the notification is revoked for any period before that date, that subsection has effect in relation to years of assessment before the year 1988-89.
The validity of any notification given under section 199 of the 1970 Act which was continued in force by paragraph 14 of Schedule 9 to the Finance Act 1976 shall not be affected by the repeal of that paragraph by this Act but shall continue in force as if made under subsection (1) above in relation to tax liability under sections 153 to 156; and subsection (2) above shall apply accordingly.
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In this Chapter “director’s or higher-paid employment” means—
subject to subsection (5) below, employment as a director of a company; or
employment with emoluments at the rate of £8,500 a year or more.
For this purpose emoluments are to be calculated—
on the basis that they include all such amounts as come or would but for section 157(3) come into charge under this Chapter or section 141, 142, 143 or, in the case of those in director’s or higher-paid employment, 145; and
without any deduction under section 198, 201 or 332(3).
Where a person is employed in two or more employments by the same employer and either— all the employments are to be treated as director’s or higher-paid.
the total of the emoluments of those employments (applying this section) is at the rate of £8,500 a year or more; or
one or more of those employments is (apart from this subsection) director’s or higher-paid,
All employees of a partnership or body over which an individual or another partnership or body has control are to be treated for the purposes of this section (but not for any other purpose) as if the employment were an employment by the individual or by that other partnership or body as the case may be.
A person’s employment is not director’s or higher-paid by reason only of its being employment as a director of a company (without prejudice to its being so under subsection (1)(b) or (3) above) if he has no material interest in the company and either—
his employment is as a full-time working director; or
the company is non-profit-making (meaning that neither does it carry on a trade nor do its functions consist wholly or mainly in the holding of investments or other property) or is established for charitable purposes only.
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The following provisions of this section apply for the interpretation of expressions used in this Chapter.
Subject to section 165(6)(b), “employment” means an office or employment the emoluments of which fall to be assessed under Schedule E; and related expressions shall be construed accordingly.
For the purposes of this Chapter— are deemed to be paid to or made for him or them by reason of his employment, except any such payment or provision made by the employer, being an individual, as can be shown to have been made in the normal course of his domestic, family or personal relationships.
all sums paid to an employee by his employer in respect of expenses, and
all such provision as is mentioned in this Chapter which is made for an employee, or for members of his family or household, by his employer,
References to members of a person’s family or household are to his spouse, his sons and daughters and their spouses, his parents and his servants, dependants and guests.
As respects cars, the following definitions apply—
“car” means any mechanically propelled road vehicle except—
a vehicle of a construction primarily suited for the conveyance of goods or burden of any description,
a vehicle of a type not commonly used as a private vehicle and unsuitable to be so used,
a motor cycle as defined in section 190(4) of the Road Traffic Act 1972, and
an invalid carriage as defined in section 190(5) of that Act;
the age of a car at any time is the interval between the date of its first registration and that time;
“business travel” means travelling which a person is necessarily obliged to do in the performance of the duties of his employment;
the date of a car’s first registration is the date on which it was first registered—
in Great Britain, under the Vehicles (Excise) Act 1971 or corresponding earlier legislation; or
elsewhere, under the corresponding legislation of any country or territory;
the original market value of a car is the inclusive price which it might reasonably have been expected to fetch if sold in the United Kingdom singly in a retail sale in the open market immediately before the date of its first registration (“inclusive price” meaning the price inclusive of customs or excise duty, of any tax chargeable as if it were a duty of customs, and of value added tax and car tax); and
“private use”, in relation to a car made available to any person, or to others being members of his family or household, means any use otherwise than for his business travel.
For the purposes of this Chapter—
a car made available in any year to an employee, or to others being members of his family or household, by reason of his employment is deemed to be available in that year for his or their private use unless the terms on which the car is made available prohibit such use and no such use is made of the car in that year;
a car made available to an employee, or to others being members of his family or household, by his employer is deemed to be made available to him or them by reason of his employment (unless the employer is an individual and it can be shown that the car was made so available in the normal course of his domestic, family or personal relationships).
For the purposes of section 156, the market value of an asset at any time is the price which it might reasonably have been expected to fetch on a sale in the open market at that time.
Subject to subsection (9) below, “director” means— and includes any person in accordance with whose directions or instructions the directors of the company (as defined above) are accustomed to act.
in relation to a company whose affairs are managed by a board of directors or similar body, a member of that board or similar body;
in relation to a company whose affairs are managed by a single director or similar person, that director or person; and
in relation to a company whose affairs are managed by the members themselves, a member of the company,
A person is not under subsection (8) above to be deemed to be a person in accordance with whose directions or instructions the directors of the company are accustomed to act by reason only that the directors act on advice given by him in a professional capacity.
“Full-time working director” means a director who is required to devote substantially the whole of his time to the service of the company in a managerial or technical capacity.
A person shall be treated as having a material interest in a company—
if he, either on his own or with any one or more of his associates, or if any associate of his with or without such other associates, is the beneficial owner of, or able, directly or through the medium of other companies or by any other indirect means, to control, more than 5 per cent. of the ordinary share capital of the company; or
if, in the case of a close company, on an amount equal to the whole distributable income of the company falling to be apportioned under Part XI for the purpose of computing total income, more than 5 per cent. of that amount could be apportioned to him together with his associates (if any), or to any associate of his, or any such associates taken together. In this subsection “associate” has the same meaning as in section 417(3), except that for this purpose “relative” in that subsection has the meaning given by section 160(6).
“Control”, in relation to a body corporate or partnership, has the meaning given to it by section 840; and the definition of “control” in that section applies (with the necessary modifications) in relation to an unincorporated association as it applies in relation to a body corporate.
“Year” means year of assessment (except where the expression is used with reference to the age of a car).
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In this Chapter—
References in this Chapter to the employees to whom a profit-related pay scheme relates are references to the employees who will receive any payments of profit-related pay under the scheme.
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One half of any profit-related pay to which this section applies shall be exempt from income tax.
This section applies to any profit-related pay paid to an employee by reference to a profit period and in accordance with a registered scheme, but only so far as it does not exceed the lower of the two limits specified in the following provisions of this section.
The first of the limits referred to in subsection (2) above is one fifth of the aggregate of—
the pay (but not any profit-related pay) paid to the employee in the profit period in respect of his employment in the employment unit concerned (or, if the employee is eligible to receive profit-related pay by reference to part only of the period, so much of his pay, but not any profit-related pay, as is paid in that part); and
the profit-related pay paid to him by reference to that period in respect of that employment.
The second of the limits referred to in subsection (2) above is £3000 (or, if the profit period is less than 12 months, or the employee is eligible to receive profit-related pay by reference to part only of the profit period, a proportionately reduced amount).
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Profit-related pay shall not be exempt from income tax by virtue of section 171 if—
it is paid to an employee in respect of his employment in an employment unit during a time when he also has another employment; and
he receives in respect of that other employment during that time profit-related pay which is exempt from income tax by virtue of that section.
Subject to subsection (3) below, profit-related pay in respect of which no secondary Class 1 contributions under Part I of the Social Security Act 1975 or Part I of the Social Security (Northern Ireland) Act 1975 are payable shall not be exempt from income tax by virtue of section 171.
Subsection (2) above shall not apply to profit-related pay in respect of which no Class 1 contributions are payable only because the employee’s earnings are below the lower earnings limit for such contributions.
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Where the emoluments of all the employees to whom a profit-related pay scheme relates are paid by the same person, an application to register the scheme under this Chapter may be made to the Board by that person.
Where subsection (1) above does not apply to a profit-related pay scheme, no application to register it may be made unless all the persons who pay emoluments to employees to whom the scheme relates are bodies corporate which are members of the same group; and in that case an application may be made by the parent company of the group.
In subsection (2) above— in applying for the purposes of this section the definition of “51 per cent. subsidiary” in section 838, any share capital of a registered industrial and provident society (within the meaning of section 486) shall be treated as ordinary share capital.
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No application may be made to register a scheme under this Chapter if any employment to which the scheme relates is—
employment in an office under the Crown or otherwise in the service of the Crown; or
employment by an excluded employer.
For the purposes of this section “excluded employer” means—
a person in an employment within subsection (1) above;
a body under the control of the Crown, or of one or more persons acting on behalf of the Crown;
a local authority;
a body under the control of one or more local authorities, or of the Crown (or one or more persons acting on behalf of the Crown) and one or more local authorities.
For the purposes of this section a person has control of a body only if one or more of the following conditions is satisfied—
in the case of a body whose affairs are managed by its members, he has the power to appoint more than half of the members;
in the case of a body having a share capital, he holds more than half of its issued share capital;
in the case of a body whose members vote in general meeting, he has the power to exercise more than half of the votes exercisable in general meeting;
the articles of association or other rules regulating the body give him the power to secure that the affairs of the body are conducted in accordance with his wishes.
For the purposes of this section a person shall be taken to possess rights and powers possessed by— including rights and powers which such an officer or body is taken to possess by virtue of this subsection.
a person appointed by him to an office by virtue of which the rights or powers are exercisable; or
a body which he controls;
Subsections (3) and (4) above apply with the necessary modifications for the purpose of determining whether persons together have control of a body.
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An application for the registration of a profit-related pay scheme under this Chapter—
shall be in such form as the Board may prescribe;
shall contain a declaration by the applicant that the scheme complies with the requirements of Schedule 8;
shall contain an undertaking by the applicant that the emoluments paid to any employee to whom the scheme relates and to whom minimum wage legislation applies will satisfy that legislation without taking account of profit-related pay;
shall specify the profit period or periods to which the scheme relates;
shall be supported by such information as the Board may require.
An application for the registration of a profit-related pay scheme under this Chapter shall be accompanied by a report by an independent accountant, in a form prescribed by the Board, to the effect that in his opinion—
the scheme complies with the requirements of Schedule 8;
the books and records maintained and proposed to be maintained by the applicant are adequate for the purpose of enabling the documents required by section 180(1) to be produced.
An application for the registration of a profit-related pay scheme under this Chapter shall be made within the period of six months ending immediately before the beginning of the profit period, or the first of the profit periods, to which the scheme relates.
In subsection (1) above “minimum wage legislation” means the provisions relating to remuneration in Part II of the Wages Act 1986, the Wages Councils (Northern Ireland) Order 1982, the Agricultural Wages Act 1948, the Agricultural Wages (Scotland) Act 1949 and the Agricultural Wages (Regulation) (Northern Ireland) Order 1977.
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If an application for registration of a profit-related pay scheme under this Chapter is made more than three months (but not more than six months) before the beginning of the profit period, or the first of the profit periods, to which the scheme relates, then subject to subsection (2) below, the Board shall register the scheme before the beginning of that period.
If the Board are not satisfied that an application made as mentioned in subsection (1) above complies with the requirements of this Chapter, they may within 30 days after the day on which they receive the application—
refuse the application; or
by notice to the applicant either require him to amend the application or require him to give them such further information as may be specified in the notice, and in either case to do so within such time, not exceeding 30 days after the day on which the notice is given, as may be so specified.
If a notice under subsection (2) above is complied with and the Board are satisfied that the application complies with the requirements of this Chapter, the Board shall register the scheme before the beginning of the profit period.
If a notice under subsection (2) above is complied with but the Board remain not satisfied that the application complies with the requirements of this Chapter, the Board shall refuse the application.
If a notice under subsection (2) above is not complied with but the Board are before the beginning of the profit period satisfied that the application complies with the requirements of this Chapter, the Board may register the scheme before the beginning of the period; but if they do not do so, the application shall be regarded as having been refused.
If an application for registration of a profit-related pay scheme under this Chapter is made within the period of three months before the beginning of the profit period, or the first of the profit periods, to which the scheme relates, then—
if before the beginning of the profit period the Board are satisfied that the application complies with the requirements of this Chapter, they shall register the scheme before the beginning of the period; but
in any other case, the application shall be regarded as having been refused.
After registering a scheme under this Chapter, the Board shall by notice inform the applicant that they have done so.
The Board shall give notice to the applicant if they refuse his application under subsection (2) or (4) above.
For the purposes of this section an application does not comply with the requirements of this Chapter if the scheme to which it relates does not comply with the requirements of Schedule 8.
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Where— the scheme employer and his successor may make a joint written application to the Board under this section for the amendment of the registration of the scheme.
a scheme employer ceases to fulfil the conditions which section 173 requires to be fulfilled by an applicant for registration of the scheme; and
he is succeeded by a person who would be eligible to apply for registration to the scheme; and
there is otherwise no other material change in the employment unit or in the circumstances relating to the scheme;
If on receiving an application under this section the Board are satisfied— the Board shall amend the registration of the scheme by substituting the successor for the previous scheme employer.
that the conditions in subsection (1)(a), (b) and (c) above are fulfilled; and
that, apart from the change of scheme employer, there would be no grounds for cancelling the registration of the scheme,
An application under this section shall be made before the end of the period of one month beginning with the date of the succession.
Where the Board amend the registration of a scheme under this section, this Chapter shall (subject to any necessary modifications) have effect as if the successor had been the scheme employer throughout.
The Board shall give notice to the applicants if they refuse an application under this section.
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If after a scheme has been registered under this Chapter it appears to the Board— the Board may cancel the registration and, subject to subsection (5) below, the cancellation shall have effect from the beginning of that profit period.
that the scheme has not been or will not be administered in accordance with this Chapter in relation to a profit period; or
that the circumstances relating to the scheme have during a profit period become such that (if it were not registered) an application to register it under this Chapter would be excluded by section 174; or
in the case of a scheme which employs (as the method of determining the distributable pool for a profit period) the method described as method B in paragraph 14 of Schedule 8, that losses were incurred in a profit period or in the preceding period of 12 months; or
that the undertaking given in compliance with section 175(1)(c) has not been complied with in relation to employment at any time during a profit period;
If after a scheme has been registered under this Chapter it appears to the Board— the Board may cancel the registration with effect from the beginning of the profit period (or first profit period) to which the scheme related.
that at the time of registration the scheme did not comply with the requirements of Schedule 8 or that the application did not comply with the requirements of this Chapter; or
in the case of a scheme which employs (as the method of determining the distributable pool for a profit period) the method described as method A in paragraph 13 of Schedule 8, that losses were incurred in the base year specified in the scheme;
If after a scheme has been registered under this Chapter the scheme employer fails to comply with the requirements of section 180 in relation to a profit period, the Board may cancel the registration with effect from the beginning of that profit period.
If the scheme employer by notice requests the Board to cancel the registration of the scheme with effect from the beginning of a profit period specified in the notice, the Board shall comply with the request.
Where— then, if the notice is given before the end of the period of one month beginning with that day, the Board shall comply with the request.
the scheme employer has given to the Board in accordance with section 181(3) notice of a change in the employment unit, or in the circumstances relating to the scheme, which is a ground for cancellation of the registration of the scheme by virtue of subsection (1)(a) or (b) above, and
the Board are satisfied that the change is not brought about with a view to the registration of a new scheme, and
in the notice the scheme employer requests the Board to cancel the registration of the scheme with effect from the date of the change,
The Board shall give notice to the scheme employer of the cancellation of a scheme’s registration.
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This section applies where—
payments of profit-related pay are made to an employee in accordance with a registered scheme; and
in consequence of the relief given by this Chapter in respect of registered schemes, less income tax is deducted from the payments in accordance with section 203 than would have been deducted if the scheme had not been registered; and
the registration of the scheme is subsequently cancelled with effect from a time before that relevant for the purposes of the relief.
Where this section applies, an amount equal to the shortfall in the deductions made in accordance with section 203 shall be payable by the scheme employer to the Board; and regulations under that section may include provision as to the collection and recovery of any such amount.
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After every profit period of a registered scheme, the scheme employer shall, within the period allowed by subsection (2) below, send to the Board—
a return in such form and containing such information as the Board may prescribe; and
a report by an independent accountant in such form and containing such information as the Board may prescribe and stating that in his opinion the terms of the scheme have been complied with in respect of the profit period.
Subject to subsection (3) below, the period allowed for complying with subsection (1) above is—
seven months from the end of the profit period if the employment unit to which the scheme relates is an undertaking or part of an undertaking of a public company; and
ten months from the end of the profit period in any other case.
If before the end of the period allowed by subsection (2) above the scheme employer gives the Board notice that an extension of three months has been allowed under section 242(3) of the Companies Act 1985, or under Article 250(3) of the Companies (Northern Ireland) Order 1986, in relation to a financial year of the employer which corresponds with the profit period in question, then the period allowed by subsection (2) above shall be correspondingly extended.
In subsection (2)(a) above, “public company” has the meaning given by section 1(3) of the Companies Act 1985 or Article 12(3) of the Companies (Northern Ireland) Order 1986.
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The Board may by notice require any person to give them, within a period of 30 days or such longer period as may be specified in the notice, any information which is so specified and which—
that person has or can reasonably be required to obtain; and
the Board consider they need to have in order to perform their functions under this Chapter.
Without prejudice to the generality of subsection (1)(b) above, the Board may in particular require a person under subsection (1) to give them—
information to enable them to determine whether the registration of a scheme should be cancelled;
information to enable them to determine the liability to tax of any person who is or has been an employee to whom a registered scheme relates or who pays or has paid emoluments to such an employee;
information about the administration of a profit-related pay scheme which is or has been a registered scheme;
information about any change of person paying emoluments to employees to whom a registered scheme relates.
The scheme employer of a registered scheme shall by notice inform the Board without delay if he becomes aware of anything that is or may be a ground for cancellation of the registration of the scheme.
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An appeal to the Special Commissioners may be made by a scheme employer—
against a refusal by the Board under section 176(2) or (4) of an application for registration of the scheme;
against a refusal by the Board of an application under section 177;
against the cancellation by the Board of the registration of the scheme.
An appeal under this section shall be made by notice given to the Board within 30 days of the day on which the scheme employer was notified of the refusal or, as the case may be, the cancellation.
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For the purposes of this Chapter, “independent accountant”, in relation to a profit-related pay scheme, means a person who—
is within section 389(1)(a) or (b) of the Companies Act 1985 or Article 397(1)(a) or (b) of the Companies (Northern Ireland) Order 1986 (qualification for appointment as auditor); and
is not excluded by subsections (2) to (5) below.
A person is not an independent accountant in relation to a profit-related pay scheme if—
he is the employer of employees to whom the scheme relates; or
he is a partner or an employee of, or partner of an employee of, a person within subsection (3) below; or
he is an employee of a person within paragraph (b) above.
The persons within this subsection are—
any person having employees to whom the scheme relates;
any body corporate which is the subsidiary or holding company of a body corporate within paragraph (a) above or a subsidiary of such a body’s holding company.
For the purposes of this section—
an auditor of a company is not to be regarded as an employee of it; and
“holding company” and “subsidiary” are to be construed in accordance with section 736 of the Companies Act 1985 or Article 4 of the Companies (Northern Ireland) Order 1986.
A body corporate cannot be an independent accountant in relation to a scheme.
For the purposes of this Chapter, “independent accountant”, in relation to a scheme, includes a Scottish firm all the partners of which are independent accountants in relation to the scheme.
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The provisions of this section shall apply where, in accordance with the provisions of an approved share option scheme, an individual obtains a right to acquire shares in a body corporate by reason of his office or employment as a director or employee of that or any other body corporate and he obtains that right—
in the case of a savings-related share option scheme, on or after 15th November 1980; or
in the case of any other share option scheme, on or after 6th April 1984.
Subject to subsections (4) and (6) below, tax shall not be chargeable under any provision of the Tax Acts in respect of the receipt of the right.
Subject to subsections (4) and, except where paragraph 27(3) of Schedule 9 applies, (5) below, if he exercises the right in accordance with the provisions of the scheme at a time when it is approved—
tax shall not be chargeable under any provision of the Tax Acts in respect of the exercise nor under section 138(1)(a) in respect of an increase in the market value of the shares;
section 29A(1) of the 1979 Act (assets deemed to be acquired at market value) shall not apply in calculating the consideration for the acquisition of the shares by him or for any corresponding disposal of them to him.
Subsections (2) and (3) above shall not apply in respect of a right, obtained by a person under a scheme which is a savings-related share option scheme, which is exercised within three years of its being obtained by virtue of a provision included in a scheme pursuant to paragraph 21 of Schedule 9.
Subsection (3) above shall not apply in relation to the exercise by any person of a right in accordance with the provisions of a scheme which is not a savings-related share option scheme if—
the period beginning with his obtaining the right and ending with his exercising it is less than three, or greater than ten, years; or
the right is exercised within three years of the date on which he last exercised (in circumstances in which subsection (3) above applied) any right obtained under the scheme or under any other approved share option scheme which is not a savings-related share option scheme (any such right exercised on the same day being disregarded).
Where, in the case of a right obtained by a person under a scheme which is not a savings-related share option scheme, the aggregate of— is less than the market value, at the time he obtains the right, of the same quantity of issued shares of the same class, he shall be chargeable to tax under Schedule E for the year of assessment in which he obtains the right on the amount of the difference; and the amount so chargeable shall be treated as earned income, whether or not it would otherwise fall to be so treated.
the amount or value of any consideration given by him for obtaining the right, and
the price at which he may acquire the shares by exercising the right,
For the purposes of section 32(1)(a) of the 1979 Act (computation of chargeable gains: allowable expenditure) the consideration given for shares acquired in the exercise of the right shall be taken to have included that part of any amount on which income tax is payable in accordance with subsection (6) above which is attributable to the shares disposed of. This subsection applies whether or not the exercise is in accordance with the provisions of the scheme and whether or not the scheme is approved at the time of the exercise.
Where a person is chargeable to tax under subsection (6) above on any amount (the “amount of the discount”) and subsequently, in circumstances in which subsection (3) above does not apply—
he is chargeable to tax under section 135, the amount of the gain on which he is chargeable to tax under that section shall be reduced by that part of the amount of the discount which is attributable to the shares in question; or
he is treated by virtue of section 162 as having had the benefit of a notional interest-free loan, the amount of the notional loan initially outstanding shall be reduced by that part of the amount of the discount which is attributable to the shares in question.
Where the provisions of a scheme which is not a savings-related share option scheme are approved in pursuance of an application made under paragraph 1 of Schedule 10 to the Finance Act 1984 before 1st January 1985 (and the approval has not been withdrawn), this section shall apply in relation to any right obtained before 1st July 1985 as if the scheme containing those provisions had been approved under that Schedule during the period beginning with the date on which that right was obtained and ending with the date on which those provisions were actually so approved.
In this section “savings-related share option scheme” has the meaning given by Schedule 9.
The provisions of this section apply where, after 5th April 1979 and before 1st January 2003, the trustees of an approved profit sharing scheme appropriate shares— to an individual who participates in the scheme (“the participant”).
which have previously been acquired by the trustees, and
as to which the conditions in Part II of Schedule 9 are fulfilled,
Notwithstanding that, by virtue of such an appropriation of shares as is mentioned in subsection (1) above, the beneficial interest in the shares passes to the participant to whom they are appropriated—
the value of the shares at the time of the appropriation shall be treated as not being income of his chargeable to tax under Schedule E; and
he shall not be chargeable to income tax under that Schedule by virtue of section 78 or 79 of the Finance Act 1988 in respect of the shares or by virtue of section 162 in any case where the shares are appropriated to him at an undervalue within the meaning of that section.
Subject to the provisions of this section and paragraph 4 of Schedule 10, if, in respect of or by reference to any of a participant’s shares, the trustees become or the participant becomes entitled, before the release date, to receive any money or money’s worth (“a capital receipt”), . . . the appropriate percentage (determined as at the time the trustees become or the participant becomes so entitled) of so much of the amount or value of the receipt as exceeds the appropriate allowance for that year, as determined under subsection (12) below counts as employment income of the participant for the year of assessment in which the entitlement arises.
If the trustees dispose of any of a participant’s shares at any time before the release date or, if it is earlier, the date of the participant’s death, then, subject to subsections (6) and (7) below, . . . the appropriate percentage of the locked-in value of the shares at the time of the disposal counts as employment income of the participant for the year of assessment in which the disposal takes place.
Subject to paragraphs 5 and 6(6) of Schedule 10, the locked-in value of a participant’s shares at any time is—
if prior to that time he has become entitled to a capital receipt (within the meaning of subsection (3) above) which is referable to those shares and— the amount by which their initial market value exceeds the amount or value of that capital receipt or, if there has been more than one such receipt, the aggregate of them; and
an amount calculated by reference to that capital receipt counts as his employment income by virtue of subsection (3) above, or
if the entitlement to the capital receipt arose before 6th April 2003, he was chargeable to income tax by virtue of that subsection (as it had effect before that date) in respect of that capital receipt,
in any other case, their initial market value.
Subject to subsection (7) below, if, on a disposal of shares falling within subsection (4) above, the proceeds of the disposal are less than the locked-in value of the shares at the time of the disposal, subsection (4) above shall have effect as if that locked-in value were reduced to an amount equal to the proceeds of the disposal.
If, at any time prior to the disposal of any of a participant’s shares, a payment was made to the trustees to enable them to exercise rights arising under a rights issue, then, subject to subsection (8) below, subsections (4) and (6) above shall have effect as if the proceeds of the disposal were reduced by an amount equal to that proportion of that payment or, if there was more than one, of the aggregate of those payments which, immediately before the disposal, the market value of the shares disposed of bore to the market value of all the participant’s shares held by the trustees at that time.
For the purposes of subsection (7) above— and any reference in subsection (7) or paragraph (a) above to the rights arising under a rights issue is a reference to rights conferred in respect of a participant’s shares, being rights to be allotted, on payment, other shares or securities or rights of any description in the same company.
no account shall be taken of any payment to the trustees if or to the extent that it consists of the proceeds of a disposal of rights arising under a rights issue; and
in relation to a particular disposal the amount of the payment or, as the case may be, of the aggregate of the payments referred to in that subsection shall be taken to be reduced by an amount equal to the total of the reduction (if any) previously made under that subsection in relation to earlier disposals;
If at any time the participant’s beneficial interest in any of his shares is disposed of, the shares in question shall be treated for the purposes of the relevant provisions as having been disposed of at that time by the trustees for (subject to subsection (10) below) the like consideration as was obtained for the disposal of the beneficial interest; and for the purposes of this subsection there is no disposal of the participant’s beneficial interest if and at the time when—
in England and Wales or Northern Ireland, that interest becomes vested in any person on the insolvency of the participant or otherwise by operation of law, or
in Scotland, that interest becomes vested in a judicial factor, in a trustee on the participant’s sequestrated estate or in a trustee for the benefit of the participant’s creditors.
If— then for the purposes of the relevant provisions the proceeds of the disposal shall be taken to be equal to the market value of the shares at the time of the disposal.
a disposal of shares falling within subsection (4) above is a transfer to which paragraph 2(2)(c) of Schedule 9 applies, or
any other disposal falling within that subsection is not at arm’s length,
a disposal of shares falling within that subsection is one which is treated as taking place by virtue of subsection (9) above and takes place within the period of retention,
Where the trustees of an approved scheme acquire any shares as to which the requirements of Part II of Schedule 9 are fulfilled and, within the period of 18 months beginning with the date of their acquisition, those shares are appropriated in accordance with the scheme, section 686 shall not apply to income consisting of dividends on those shares received by the trustees; and, for the purpose of determining whether any shares are appropriated within that period, shares which were acquired at an earlier time shall be taken to be appropriated before shares of the same class which were acquired at a later time.
For the purposes of subsection (3) above, “the appropriate allowance”, in relation to any year of assessment, means a sum which, subject to a maximum of £60, is the product of multiplying £20 by 1 plus the number of years which fall within the period of three years immediately preceding the year in question and in which shares were appropriated to the participant under the scheme; and if in any year (and before the release date) the trustees become or the participant becomes entitled, in respect of or by reference to any of his shares, to more than one capital receipt, the receipts shall be set against the appropriate allowance for that year in the order in which they are received.
Schedule 10 shall have effect with respect to profit sharing schemes.
In sections 185 and 186, this section and Schedules 9 and 10 “the relevant provisions” means those sections (including this section) and Schedules.
For the purposes of the relevant provisions, except where the context otherwise requires—
For the purposes of the application of the relevant provisions in relation to any share option scheme or profit sharing scheme, a person has a material interest in a company if he, either on his own or with one or more associates, or if any associate of his with or without such other associates,—
is the beneficial owner of, or able, directly or through the medium of other companies, or by any other indirect means to control, more than 25 per cent., or in the case of a share option scheme which is not a savings-related share option scheme more than 10 per cent., of the ordinary share capital of the company, or
where the company is a close company, possesses, or is entitled to acquire, such rights as would, in the event of the winding-up of the company or in any other circumstances, give an entitlement to receive more than 25 per cent., or in the case of a share option scheme which is not a savings-related share option scheme more than 10 per cent., of the assets which would then be available for distribution among the participators.
Subsection (3) above shall have effect subject to the provisions of Part VI of Schedule 9.
For the purposes of subsection (2) above, a participant’s salary for a year of assessment means such of the emoluments of the office or employment by virtue of which he is entitled to participate in a profit sharing scheme as are liable to be paid in that year under deduction of tax pursuant to section 203 after deducting therefrom amounts included by virtue of Chapter II of this Part.
Section 839 shall apply for the purposes of the relevant provisions.
For the purposes of the relevant provisions a company is a member of a consortium owning another company if it is one of a number of companies which between them beneficially own not less than three-quarters of the other company’s ordinary share capital and each of which beneficially owns not less than one-twentieth of that capital.
Where the disposal referred to in section 186(4) is made from a holding of shares which were appropriated to the participant at different times, then, in determining for the purposes of the relevant provisions—
the initial market value and the locked-in value of each of those shares, . . .
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Any of the relevant provisions with respect to— shall have effect in relation to a profit sharing scheme notwithstanding any direction given to the trustees with respect to shares of a particular description or to shares appropriated to the participant at a particular time.
the order in which any of a participant’s shares are to be treated as disposed of for the purposes of those provisions, or
the shares in relation to which an event is to be treated as occurring for any such purpose,
In the relevant provisions “workers’ cooperative” means a registered society, as defined in section 1119 of CTA 2010, which is a cooperative society and the rules of which include provisions which secure— and in this subsection “cooperative society” has the same meaning as in section 2 of the Co-operative and Community Benefit Societies Act 2014 or, as the case may be, section 1 of the Industrial and Provident Societies Act (Northern Ireland) 1969.
that the only persons who may be members of it are those who are employed by, or by a subsidiary of, the society and those who are the trustees of its profit sharing scheme; and
that, subject to any provision about qualifications for membership which is from time to time made by the members of the society by reference to age, length of service or other factors of any description, all such persons may be members of the society;
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Tax shall not be charged by virtue of section 148 in respect of the following payments, that is to say— and references in paragraph (f) above to an overseas territory, to the government of such a territory, and to employment in the public service of such a territory shall be construed as if they occurred in the Overseas Development and Cooperation Act 1980, and sections 10(2) and 13(1) and (2) of that Act (which relate to the construction of such references) shall apply accordingly.
any payment made in connection with the termination of the holding of an office or employment by the death of the holder, or made on account of injury to or disability of the holder of an office or employment;
any sum chargeable to tax under section 313;
a benefit provided in pursuance of a retirement benefits scheme within the meaning of Chapter II of Part IX of the 1970 Act or Chapter I of Part XIV of this Act or of an agreement as described in section 220(2) of the 1970 Act, where under section 220 of that Act or section 595 of this Act the holder of the office or employment was chargeable to tax in respect of sums paid, or treated as paid, with a view to the provision of the benefit;
a benefit paid in pursuance of any such scheme or fund as was described in section 221(1) and (2) of the 1970 Act or as is described in section 596(1);
any terminal grant, gratuity or other lump sum paid under any Royal Warrant, Queen’s Order, or Order in Council relating to members of Her Majesty’s forces, and any payment made in commutation of annual or other periodical payments authorised by any such Warrant or Order;
a payment of benefit under any superannuation scheme administered by the government of an overseas territory within the Commonwealth, or of compensation for loss of career, interruption of service or disturbance made in connection with any change in the constitution of any such overseas territory to persons who, before the change, were employed in the public services of that territory;
Subsection (1)(d) above shall not apply to any compensation paid for loss of office or employment or for loss or diminution of emoluments unless the loss or diminution is due to ill-health; but this subsection shall not be taken to apply to any payment properly regarded as a benefit earned by past service.
Tax shall not be charged by virtue of section 148 in respect of any payment in the case of which the following conditions are satisfied—
that the payment is in respect of an office or employment in which the holder’s service included foreign service; and
that the foreign service comprised either—
in any case, three-quarters of the whole period of service down to the relevant date, or
where the period of service down to the relevant date exceeded ten years, the whole of the last ten years, or
where the period of service down to the relevant date exceeded 20 years, one-half of that period, including any ten of the last 20 years.
Tax shall not be charged by virtue of section 148 in respect of a payment of an amount not exceeding £25,000 (“the exempt sum”) and, subject to subsection (5) below, in the case of a payment which exceeds that amount shall be charged only in respect of the excess.
Where two or more payments in respect of which tax is chargeable by virtue of section 148, or would be so chargeable apart from subsection (4) above, are made to or in respect of the same person in respect of the same office or employment, or in respect of different offices or employments held under the same employer or under associated employers, subsection (4) above shall apply as if those payments were a single payment of an amount equal to that aggregate amount; and the amount of any one payment chargeable to tax shall be ascertained as follows, that is to say—
where the payments are treated as income of different chargeable periods, the exempt sum shall be deducted from a payment treated as income of an earlier period before any payment treated as income of a later period; and
subject to that, the exempt sum shall be deducted rateably from the payments according to their respective amounts.
The person chargeable to tax by virtue of section 148 in respect of any payment may make a claim for such relief in respect of the payment as is applicable thereto under Schedule 11.
For the purposes of this section and Schedule 11 offices or employments in respect of which payments to which section 148 applies are made shall be treated as held under associated employers if, on the date which is the relevant date in relation to any of those payments, one of those employers is under the control of the other or of a third person who controls or is under the control of the other on that or any other such date. In this subsection “control” has the meaning given by section 840.
In this section—
“the relevant date” and “foreign service” have the same meaning as in Schedule 11; and
references to an employer or to a person controlling or controlled by an employer include references to his successors.
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it is paid in pursuance of any such scheme or fund as was described in section 221(1) and (2) of the 1970 Act or as is described in section 596(1) and is neither a payment of compensation to which section 188(2) applies nor a payment chargeable to tax under section 600; or
it is a benefit paid in pursuance of any such scheme or arrangement as was referred to in section 220 of the 1970 Act or a retirement benefits scheme within the meaning of section 611 of this Act and the person to whom it is paid was chargeable to tax under section 220 of the 1970 Act or section 595 of this Act in respect of sums paid, or treated as paid, with a view to the provision of the benefit; or
it is paid under approved personal pension arrangements (within the meaning of Chapter IV of Part XIV).
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in pursuance of a resolution of the House of Commons to a person ceasing to be a Member of that House on a dissolution of Parliament, or
under section 13 of the Parliamentary Pensions etc. Act 1984 (grants to persons ceasing to hold certain Ministerial and other offices), or
under section 3 of the European Parliament (Pay and Pensions) Act 1979 (resettlement grants to persons ceasing to be Representatives),
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A payment on account of an allowance to which this section applies shall not be treated as income for any purposes of the Income Tax Acts.
This section applies to any allowance paid since the beginning of 1977 by the Secretary of State or the Department of Economic Development under any scheme of the kind described in the Job Release Act 1977, being a scheme which provides for the payment of allowances for periods beginning not earlier than one year before the date on which the recipient attains pensionable age as defined in that Act.
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In this Part “foreign emoluments” means the emoluments of a person not domiciled in the United Kingdom from an office or employment under or with any person, body of persons or partnership resident outside, and not resident in, the United Kingdom, but shall be taken not to include the emoluments of a person resident in the United Kingdom from an office or employment under or with a person, body of persons or partnership resident in the Republic of Ireland.
Where the duties of an office or employment are performed wholly outside the United Kingdom and the emoluments from the office or employment are foreign emoluments, the emoluments shall be excepted from Case I of Schedule E.
If it appears to the Board on a claim made by the holder of an office or employment that out of any foreign emoluments from the office or employment he has made payments in circumstances corresponding to those in which the payments would have reduced his liability to income tax, the Board may allow those payments as a deduction in computing the amount of the emoluments.
Subject to subsection (2) above, there shall be allowed in charging tax on foreign emoluments from an office or employment under Case I or II of Schedule E for the year of assessment 1988-89 a deduction equal to one-quarter of the emoluments in any case where—
the holder of the office or employment was in that year of assessment not resident in the United Kingdom or was not resident in the United Kingdom for at least two of the preceding ten years of assessment; and
he— and he held such an office or employment in the year 1984-85 and in each subsequent year of assessment.
held an office or employment the emoluments of which were foreign emoluments chargeable under Case I or II of Schedule E at any time in the period beginning with 6th April 1983 and ending with 13th March 1984, or
in fulfilment of an obligation incurred before 14th March 1984, performed duties of such an office or employment in the United Kingdom before 1st August 1984,
Paragraph 2(2) and (3) of Schedule 12 shall have effect with the necessary modifications in relation to the amount of emoluments to be excepted under subsection (2) above as they have effect in relation to the amount of emoluments in respect of which a deduction is allowed under section 193(1), and, subject to that, for the purposes of subsections (2) and (4) above the amount of any emoluments shall be taken to be the amount remaining after any capital allowance and after any deductions under subsection (3) above or section 193(4), 194(1), 195(7), 198, 199, 201, 332, 592 or 594.
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Where in any year of assessment— then, in charging tax under Case I of Schedule E on the amount of the emoluments from that employment attributable to that period, or to so much of it as falls in that year of assessment, there shall be allowed a deduction equal to the whole of that amount. Schedule 12 shall have effect for the purpose of supplementing this subsection.
the duties of an office or employment are performed wholly or partly outside the United Kingdom; and
any of those duties are performed in the course of a qualifying period (within the meaning of Schedule 12) which falls wholly or partly in that year and consists of at least 365 days;
Subsections (3) and (4) below apply where a person (“the employee”) who is resident and ordinarily resident in the United Kingdom holds an office or employment (“the overseas employment”) the duties of which are performed wholly outside the United Kingdom and the emoluments from which are not foreign emoluments.
For the purposes of section 198(1) there shall be treated as having been necessarily incurred in the performance of the duties of the overseas employment expenses of the employee in travelling from any place in the United Kingdom to take up the overseas employment and in travelling to any place in the United Kingdom on its termination; and if travel is partly for a purpose mentioned in this subsection and partly for another purpose this subsection applies only to such part of the expenses as is properly attributable to the former purpose.
Where, for the purpose of enabling the employee to perform the duties of the overseas employment— there shall be allowed, in charging tax under Case I of Schedule E on the emoluments from that employment, a deduction of an amount equal to so much of that cost, or, as the case may be, those expenses as falls to be included in those emoluments. Where board and lodging is partly for the purpose mentioned in this subsection and partly for another purpose, this subsection applies only to such part of the cost or expenses as is properly attributable to the former purpose.
board and lodging outside the United Kingdom is provided for him and the cost of it is borne by or on behalf of his employer; or
he incurs expenses out of the emoluments of the employment on such board and lodging for himself and those expenses are reimbursed by or on behalf of his employer,
Subsection (6) below applies where a person resident and ordinarily resident in the United Kingdom— and either or both of those places is outside the United Kingdom.
holds two or more offices or employments the duties of one or more of which are performed wholly or partly outside the United Kingdom; and
travels from one place having performed there duties of one office or employment to another place for the purpose of performing duties of another office or employment (the emoluments from which are not foreign emoluments);
For the purposes of section 198(1) expenses incurred by such a person on such travel shall be treated as having been necessarily incurred in the performance of the duties which he is to perform at his destination; and if travel is partly for the purpose of performing those duties and partly for another purpose this subsection applies only to such part of the expenses as is properly attributable to the former purpose.
References in the Income Tax Acts (including any provision of this Act, but without prejudice to any express reference to subsection (3) above) to section 198 and to deductions allowable under sections 198, 199, 201 or 332 shall be construed as including a reference to subsection (3) above and to deductions allowable under that subsection.
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Where— there shall be allowed, in charging tax under Case I of Schedule E on the emoluments from that office or employment, a deduction of an amount equal to so much of that cost or, as the case may be, those expenses as falls to be included in those emoluments.
travel facilities are provided for any journey to which this subsection applies and the cost of them is borne by or on behalf of the employer; or
expenses are incurred out of the emoluments of any office or employment mentioned in subsection (2), (3) or (5) below on any such journey and those expenses are reimbursed by or on behalf of the employer,
Subsection (1) above applies where a person is absent from the United Kingdom for a continuous period of 60 days or more for the purpose of performing the duties of one or more offices or employments and applies to travel of the following descriptions between any place in the United Kingdom and the place of performance of any of those duties outside the United Kingdom, that is to say— but that subsection does not extend to more than two outward and two return journeys by the same person in any year of assessment. For the purposes of this subsection “child” includes a stepchild and an illegitimate child but does not include a person who is aged 18 or over at the beginning of the outward journey.
any journey by his spouse or any child of his—
accompanying him at the beginning of the period of absence; or
to visit him during that period;
any return journey following a journey of a kind described in paragraph (a) above;
Where a person holds an office or employment the duties of which are performed partly outside the United Kingdom, subsection (1) above applies, subject to subsection (4) below, to any journey by him—
from any place in the United Kingdom to the place of performance of any of those duties outside the United Kingdom;
from the place of performance of any of those duties outside the United Kingdom to any place in the United Kingdom.
Subsection (1) does not apply by virtue of subsection (3) unless the duties concerned can only be performed outside the United Kingdom and the journey is made wholly and exclusively for the purpose—
where the journey falls within subsection (3)(a), of performing the duties concerned; or
where the journey falls within subsection (3)(b), of returning after performing the duties concerned.
Where a person is absent from the United Kingdom for the purposes of performing the duties of one or more offices or employments, subsection (1) above applies, subject to subsection (6) below, to—
any journey by him from the place of performance of any of those duties outside the United Kingdom to any place in the United Kingdom;
any return journey following a journey of a kind described in paragraph (a) above.
Subsection (1) does not apply by virtue of subsection (5) unless the duties concerned can only be performed outside the United Kingdom and the absence mentioned in subsection (5) was occasioned wholly and exclusively for the purpose of performing the duties concerned.
For the purpose of applying this section in a case where the duties of the office or employment or (as the case may be) any of the offices or employments are performed on a vessel, in section 132(4)(b) the words from “or which” to the end shall be ignored.
In such a case as is mentioned in subsection (7) above, subsection (4) above shall have effect as if “the duties concerned” in paragraphs (a) and (b) read “the duties concerned, or those duties and other duties of the office or employment”.
Where apart from this subsection a deduction in respect of any cost or expenses is allowable under a provision of this section or section 193 and a deduction in respect of the same cost or expenses is also allowable under another provision of this section or section 193 or of any other enactment, a deduction in respect of the cost or expenses may be made under either, but not both, of those provisions.
References in the Income Tax Acts (including any provision of this Act, but without prejudice to any express reference to subsection (1) above) to section 198 and to deductions allowable under sections 198, 199, 201 or 332 shall be construed as including a reference to subsection (1) above and to deductions allowable under that subsection.
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Subject to subsection (2) below, this section applies in the case of an office or employment in respect of which a person (“the employee”) who is not domiciled in the United Kingdom is in receipt of emoluments for duties performed in the United Kingdom.
This section does not apply unless subsection (3) below is satisfied in respect of a date on which the employee arrives in the United Kingdom to perform duties of the office or employment; and where subsection (3) is so satisfied, this section applies only for a period of five years beginning with that date.
This subsection is satisfied in respect of a date if the employee—
was not resident in the United Kingdom in either of the two years of assessment immediately preceding the year of assessment in which the date falls; or
was not in the United Kingdom for any purpose at any time during the period of two years ending with the day immediately preceding the date.
Where subsection (3) above is satisfied (by virtue of paragraph (a) of that subsection) in respect of more than one date in any year of assessment, only the first of those dates is relevant for the purposes of this section.
Subsection (7) below applies to any journey by the employee—
from his usual place of abode to any place in the United Kingdom in order to perform any duties of the office or employment there; or
to his usual place of abode from any place in the United Kingdom after performing such duties there.
Where the employee is in the United Kingdom for a continuous period of 60 days or more for the purpose of performing the duties of one or more offices or employments in the case of which this section applies, subsection (7) below applies to any journey by his spouse, or any child of his, between his usual place of abode and the place of performance of any of those duties in the United Kingdom, if the journey— but subsection (7) as it applies by virtue of this subsection does not extend to more than two journeys to the United Kingdom and two return journeys by the same person in any year of assessment.
is made to accompany him at the beginning of that period or to visit him during it; or
is a return journey following a journey falling within paragraph (a) above;
Subject to subsection (8) below, where— there shall be allowed, in charging tax under Case I or II of Schedule E on the emoluments from the office or employment concerned, a deduction of an amount equal to so much of that cost or, as the case may be, those expenses as falls to be included in those emoluments.
travel facilities are provided for any journey to which this subsection applies and the cost of them is borne by or on behalf of a person who is an employer in respect of any office or employment in the case of which this section applies; or
expenses are incurred out of the emoluments of any office or employment in the case of which this section applies on such a journey and those expenses are reimbursed by or on behalf of the employer;
If a journey is partly for a purpose mentioned in subsection (5) or (6) above and partly for another purpose, only so much of the cost or expenses referred to in subsection (7) as is properly attributable to the former purpose shall be taken into account in calculating any deduction made under subsection (7) as it applies by virtue of subsection (5) or, as the case may be, (6).
For the purposes of this section a person’s usual place of abode is the country (outside the United Kingdom) in which he normally lives.
In subsection (6) above “child” includes a step-child and an illegitimate child but does not include a person who is aged 18 or over at the beginning of the journey to the United Kingdom.
References in the Income Tax Acts (including any provision of this Act, but without prejudice to any express reference to subsection (7) above) to section 198 and to deductions allowable under section 198, 199, 201 or 332 shall be construed as including a reference to subsection (7) above and to deductions allowable under it.
Where apart from this subsection a deduction in respect of any cost or expenses is allowable under a provision of this section and a deduction in respect of the same cost or expenses is also allowable under another provision of this section or of any other enactment, a deduction in respect of the cost or expenses may be made under either, but not both, of those provisions.
Where by virtue of subsection (3) of section 38 of the Finance Act 1986 any provision of section 37 of that Act applied in the case of any employee at any time during the year 1984-85 or 1985-86 (and that section applied to him immediately before 6th April 1988), this section shall apply in his case for the years 1988-89 to 1990-91 as if the following were substituted for subsections (2) to (4)—.
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No charge to tax under Schedule E shall arise in respect of travel facilities provided for members of the naval, military or air forces of the Crown going on, or returning from, leave.
Subsection (1) above applies whether the charge would otherwise have arisen under section 131, 141 or 154 and applies not only to travel vouchers and warrants for particular journeys but also to allowances and other payments for and in respect of leave travel, whether or not a warrant was available.
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If the holder of an office or employment is necessarily obliged to incur and defray out of the emoluments of that office or employment the expenses of travelling in the performance of the duties of the office or employment, or of keeping and maintaining a horse to enable him to perform those duties, or otherwise to expend money wholly, exclusively and necessarily in the performance of those duties, there may be deducted from the emoluments to be assessed the expenses so necessarily incurred and defrayed.
Subject to subsection (3) below, where the emoluments for any duties do not fall within Case I or II of Schedule E, then in relation to those or any other emoluments of the office or employment, subsection (1) above and Chapter II of Part I of the 1968 Act and Chapter I of Part III of the Finance Act 1971 (capital allowances in respect of machinery and plant) shall apply as if the performance of those duties did not belong to that office or employment.
There may be deducted from any emoluments chargeable under Case III of Schedule E the amount of— being in either case expenses for which a deduction might have been made under subsection (1) above from emoluments of the office or employment if they had been chargeable under Case I of Schedule E for the chargeable period in which the expenses were incurred; but a deduction shall not be made twice, whether under this subsection or otherwise, in respect of the same expenses from emoluments of the office or employment.
any expenses defrayed out of those emoluments, and
any other expenses defrayed in the United Kingdom in the chargeable period or in an earlier chargeable period in which the holder of the office or employment has been resident in the United Kingdom,
No deduction shall be made under this section in respect of expenditure incurred by a Member of the House of Commons in, or in connection with, the provision or use of residential or overnight accommodation to enable him to perform his duties as such a Member in or about the Palace of Westminster or his constituency.
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Subject to the provisions of subsection (2) below, where the Treasury are satisfied with respect to any class of persons in receipt of any salary, fees or emoluments payable out of the public revenue that such persons are obliged to lay out and expend money wholly, exclusively and necessarily in the performance of the duties in respect of which such salary, fees or emoluments are payable, the Treasury may fix such sum as in the opinion of the Treasury represents a fair equivalent of the average annual amount laid out and so expended by persons of that class, and in charging income tax on that salary or those fees or emoluments there shall be deducted from the amount thereof the sums so fixed by the Treasury.
If any such person would, but for the provisions of subsection (1) above, be entitled to deduct a larger amount than the sum so fixed, that amount may be deducted instead of the sum so fixed.
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which is paid to a Member of the House of Commons; and
for which provision is made by resolution of that House, and
which is expressed to be in respect of additional expenses necessarily incurred by the Member in staying overnight away from his only or main residence for the purpose of performing his parliamentary duties, either in the London area, as defined in such a resolution, or in his constituency,
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Subject to the provisions of this section, the following may be deducted from the emoluments of any office or employment to be assessed to tax, if defrayed out of those emoluments, that is to say—
any fee or contribution mentioned in subsection (2) below, and
any annual subscription paid to a body of persons approved for the purposes of this section by the Board.
The fees and contributions referred to in subsection (1)(a) above are—
the fee payable in respect of the retention of a name in the Register of Architects;
the fee payable in respect of the retention of a name in the dentists register or in a roll or record kept for a class of ancillary dental workers;
the fee payable in respect of the retention of a name in either of the registers of ophthalmic opticians or in the register of dispensing opticians;
the annual fee payable by a registered patent agent;
the fee payable in respect of the retention of a name in the register of pharmaceutical chemists;
the fee and contribution to the Compensation Fund or Guarantee Fund payable on the issue of a solicitor’s practising certificate; and
the annual fee payable by a registered veterinary surgeon or by a person registered in the Supplementary Veterinary Register.
The Board may, on the application of the body, approve for the purposes of this section any body of persons not of a mainly local character whose activities are carried on otherwise than for profit and are solely or mainly directed to all or any of the following objects—
the advancement or spreading of knowledge (whether generally or among persons belonging to the same or similar professions or occupying the same or similar positions);
the maintenance or improvement of standards of conduct and competence among the members of any profession;
the indemnification or protection of members of any profession against claims in respect of liabilities incurred by them in the exercise of their profession.
If the activities of a body approved for the purposes of this section are to a significant extent directed to objects other than those mentioned in subsection (3) above, the Board may determine that such specified part only of any annual subscription paid to the body may be deducted under this section as corresponds to the extent to which its activities are directed to objects mentioned in that subsection; and in doing so the Board shall have regard to all relevant circumstances and, in particular, to the proportions of the body’s expenditure attributable to the furtherance of objects so mentioned and other objects respectively.
A fee, contribution or subscription shall not be deducted under this section from the emoluments of any office or employment unless—
the fee is payable in respect of a registration (or retention of a name in a roll or record) or certificate which is a condition, or one of alternative conditions, of the performance of the duties of the office or employment or, as the case may be, the contribution is payable on the issue of such a certificate; or
the subscription is paid to a body the activities of which, so far as they are directed to the objects mentioned in subsection (3) above, are relevant to the office or employment, that is to say, the performance of the duties of the office or employment is directly affected by the knowledge concerned or involves the exercise of the profession concerned.
Any approval given and any determination made under this section may be withdrawn, and any such determination varied, so as to take account of any change of circumstances; and where a body is approved for the purposes of this section in pursuance of an application made before the end of any year of assessment, a deduction may be made under this section in respect of a subscription paid to the body in that year, whether the approval is given before or after the end of the year.
Any body aggrieved by the failure of the Board to approve the body for the purposes of this section, or by their withdrawal of the approval, or by any determination made by them under this section or the variation of or refusal to withdraw or vary such a determination may, by notice given to the Board within 30 days from the date on which the body is notified of their decision, require the matter to be determined by the Special Commissioners, and the Special Commissioners shall thereupon hear and determine the matter in like manner as an appeal.
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This section applies where an individual (“the employee”) is entitled to receive payments from which income tax falls to be deducted by virtue of section 203 and regulations under that section, and the person liable to make the payments (“the employer”) withholds sums from them.
If the conditions mentioned in subsections (3) to (7) below are fulfilled the sums shall, in assessing tax under Schedule E, be allowed to be deducted as expenses incurred in the year of assessment in which they are withheld.
The sums must be withheld in accordance with a scheme which is (or is of a kind) approved by the Board at the time they are withheld and which either contains provisions falling within subsection (4)(a) below, or contains provisions falling within subsection (4)(a) below and provisions falling within subsection (4)(b) below.
The provisions are that—
the employer is to pay sums withheld to a person (“the agent”) who is approved by the Board at the time they are withheld, and the agent is to pay them to a charity or charities;
the employer is to pay sums withheld directly to a charity which (or charities each of which) is at the time the sums are withheld approved by the Board as an agent for the purpose of paying sums to other charities.
The sums must be withheld in accordance with a request by the employee that they be paid to a charity or charities in accordance with a scheme approved (or of a kind approved) by the Board.
The sums must constitute gifts by the employee to the charity or charities concerned, must not be paid by the employee under a covenant, and must fulfil any conditions set out in the terms of the scheme concerned.
The sums must not in any year of assessment exceed £120 in the case of any employee (however many offices or employments he holds or has held).
The circumstances in which the Board may grant or withdraw approval of schemes (or kinds of schemes) or of agents shall be such as are prescribed by the Treasury by regulations; and the circumstances so prescribed (whether relating to the terms of schemes or the qualifications of agents or otherwise) shall be such as the Treasury think fit.
The Treasury may by regulations make provision—
that a participating employer or agent shall comply with any notice which is served on him by the Board and which requires him within a prescribed period to make available for the Board’s inspection documents of a prescribed kind or records of a prescribed kind;
that a participating employer or agent shall in prescribed circumstances furnish to the Board information of a prescribed kind;
for, and with respect to, appeals to the Special Commissioners against the Board’s refusal to grant, or their withdrawal of, approval of any scheme (or any kind of scheme) or agent;
generally for giving effect to subsections (1) to (7) above. In this subsection “prescribed” means prescribed by the regulations.
For the purposes of subsection (9) above a person is a participating employer or agent if he is an employer or agent who participates, or has at any time participated, in a scheme under this section.
In this section “charity” has the same meaning as in section 506.
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On the making of any payment of, or on account of, any income assessable to income tax under Schedule E, income tax shall, subject to and in accordance with regulations made by the Board under this section, be deducted or repaid by the person making the payment, notwithstanding that when the payment is made no assessment has been made in respect of the income and notwithstanding that the income is in whole or in part income for some year of assessment other than the year during which the payment is made.
The Board shall make regulations with respect to the assessment, charge, collection and recovery of income tax in respect of all income assessable thereto under Schedule E, and those regulations may, in particular, include provision— and any such regulations shall have effect notwithstanding anything in the Income Tax Acts.
for requiring any person making any payment of, or on account of, any such income, when he makes the payment, to make a deduction or repayment of income tax calculated by reference to tax tables prepared by the Board, and for rendering persons who are required to make any such deduction or repayment accountable to, or, as the case may be, entitled to repayment from, the Board;
for the production to and inspection by persons authorised by the Board of wages sheets and other documents and records for the purpose of satisfying themselves that income tax has been and is being deducted, repaid and accounted for in accordance with the regulations;
for the collection and recovery, whether by deduction from any such income paid in any later year or otherwise, of income tax in respect of any such income which has not been deducted or otherwise recovered during the year;
for requiring the payment of interest on sums due to the Board— and for determining the date (being not less than 14 days after the end of the year of assessment in respect of which the sums are due) from which such interest is to be calculated;
which are not paid by the due date; and
of which the amount is determined by the inspector (before or after the due date) in accordance with the regulations;
for the assessment and charge of income tax by the inspector in respect of income to which this section applies; and
for appeals with respect to matters arising under the regulations which would otherwise not be the subject of an appeal;
The deductions of income tax required to be made by regulations under subsection (2)(a) above may be required to be made at the basic rate or other rates in such cases or classes of cases as may be provided for by the regulations.
Any reference in this section to a payment of, or on account of, any income assessable under Schedule E includes a reference to anything which, in accordance with regulations under subsection (2) above, is to be treated as a payment of, or on account of, any such income.
Regulations under this section shall not affect any right of appeal to the General or Special Commissioners which a person would have apart from the regulations.
The tax tables referred to in subsection (2)(a) above shall be constructed with a view to securing that so far as possible—
the total income tax payable in respect of any income assessable under Schedule E for any year of assessment is deducted from such income paid during that year; and
the income tax deductible or repayable on the occasion of any payment of, or on account of, any such income is such that the total net income tax deducted since the beginning of the year of assessment bears to the total income tax payable for the year the same proportion that the part of the year which ends with the date of the payment bears to the whole year.
In subsection (6) above references to the total income tax payable for the year shall be construed as references to the total income tax estimated to be payable for the year in respect of the income in question, subject to a provisional deduction for allowances and reliefs, and subject also, if necessary, to an adjustment for amounts overpaid or remaining unpaid on account of income tax in respect of income assessable under Schedule E for any previous year.
For the purpose of estimating the total income tax payable as mentioned in subsection (6)(a) above, it may be assumed in relation to any payment of, or on account of, income assessable under Schedule E that the income paid in the part of the year of assessment which ends with the making of the payment will bear to the income for the whole of that year the same proportion as that part of the year bears to the whole year.
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he has claimed unemployment benefit in respect of a period including that time; or
he has claimed a payment of income support under the Social Security Act 1986 or the Social Security (Northern Ireland) Order 1986 in respect of a period including that time and his right to that income support is subject to the condition specified in section 20(3)(d)(i) of that Act or, in Northern Ireland, Article 21(3)(d)(i) of that Order (availability for employment); or
he is disqualified at the time from receiving unemployment benefit by virtue of section 19 of the Social Security Act 1975 or of section 19 of the Social Security (Northern Ireland) Act 1975 (loss of employment due to stoppage of work) or would be so disqualified if he otherwise satisfied the conditions for entitlement;
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Subject to the provisions of this section, no assessment under Schedule E need be made on a person in respect of income of his assessable to income tax under that Schedule for any year of assessment if the total net tax deducted in the year in question from that income is the same as it would have been if all the relevant circumstances had been known to all parties throughout the year, and deductions and repayments had throughout the year been made accordingly, and had been so made by reference to cumulative tax tables.
In subsection (1) above—
“cumulative tax tables” means tax tables prepared under section 203 which are so framed as to require the tax which is to be deducted or repaid on the occasion of each payment made in the year to be ascertained by reference to a total of emoluments paid in the year up to the time of making that payment; and
references to the total net tax deducted shall be construed as references to the total income tax deducted during the year by virtue of regulations made under section 203, less any income tax repaid by virtue of any such regulations.
Nothing in this section shall be construed as preventing an assessment being made on a person in respect of his income assessable under Schedule E, and, without prejudice to the generality of the preceding provisions of this subsection, an assessment shall be made in respect of the income of a person so assessable for any year of assessment if the person assessable requires an assessment to be made by notice given to the inspector within five years from the end of the year of assessment.
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has been taken into account in the making of deductions or repayments of tax under section 203, and
was received not less than 12 months before the beginning of the year of assessment in which the assessment is made,
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The following provisions of this Chapter, together with section 418, shall, subject to section 339(6) and to any other express exceptions, have effect with respect to the meaning of “distribution” and for determining the persons to whom certain distributions are to be treated as made, but references in the Corporation Tax Acts to distributions of a company shall not apply to distributions made in respect of share capital in a winding up.
In the Corporation Tax Acts “distribution”, in relation to any company, means—
any dividend paid by the company, including a capital dividend;
subject to subsections (5) and (6) below, any other distribution out of assets of the company (whether in cash or otherwise) in respect of shares in the company, except so much of the distribution, if any, as represents repayment of capital on the shares or is, when it is made, equal in amount or value to any new consideration received by the company for the distribution;
subject to section 230, any redeemable share capital or any security issued by the company in respect of shares in or securities of the company otherwise than wholly for new consideration, or such part of any redeemable share capital or any security so issued as is not properly referable to new consideration;
any interest or other distribution out of assets of the company in respect of securities of the company, where they are securities under which the consideration given by the company for the use of the principal thereby secured represents more than a reasonable commercial return for the use of that principal, except so much, if any, of any such distribution as represents that principal and so much as represents a reasonable commercial return for the use of that principal;
any interest or other distribution out of assets of the company in respect of securities of the company (except so much, if any, of any such distribution as represents the principal thereby secured and except so much of any distribution as falls within paragraph (d) above), where the securities are—
securities issued as mentioned in paragraph (c) above, but excluding securities issued before 6th April 1965 in respect of shares and securities issued before 6th April 1972 in respect of securities; or
securities convertible directly or indirectly into shares in the company or securities issued after 5th April 1972 and carrying any right to receive shares in or securities of the company, not being (in either case) securities quoted on a recognised stock exchange nor issued on terms which are reasonably comparable with the terms of issue of securities so quoted; or
securities under which the consideration given by the company for the use of the principal secured is to any extent dependent on the results of the company’s business or any part of it; or
securities issued by the company (“the issuing company”) and held by a company not resident in the United Kingdom where the issuing company is a 75 per cent. subsidiary of the other company or both are 75 per cent. subsidiaries of a third company which is not resident in the United Kingdom; or
securities issued by the company (“the issuing company”) and held by a company not resident in the United Kingdom (“the non-resident company”) where less than 90 per cent. of the share capital of the issuing company is directly owned by a company resident in the United Kingdom and both the issuing company and the non-resident company are 75 per cent. subsidiaries of a third company which is resident in the United Kingdom; or
securities which are connected with shares in the company, and for this purpose securities are so connected if, in consequence of the nature of the rights attaching to the securities or shares and in particular of any terms or conditions attaching to the right to transfer the shares or securities, it is necessary or advantageous for a person who has, or disposes of or acquires, any of the securities also to have, or to dispose of or to acquire, a proportionate holding of the shares;
any such amount as is required to be treated as a distribution by subsection (4) below or section 210.
Without prejudice to section 254(11), no amount shall be regarded for the purposes of subsection (2)(d) and (e) above as representing the principal secured by a security issued after 5th April 1972 in so far as it exceeds any new consideration which has been received by the company for the issue of the security.
Where on a transfer of assets or liabilities by a company to its members or to a company by its members, the amount or value of the benefit received by a member (taken according to its market value) exceeds the amount or value (so taken) of any new consideration given by him, the company shall, subject to subsections (5) and (6) below, be treated as making a distribution to him of an amount equal to the difference.
Subsection (4) above shall not apply where the company and the member receiving the benefit are both resident in the United Kingdom and either the former is a subsidiary of the latter or both are subsidiaries of a third company also so resident; and any amount which would apart from this subsection be a distribution shall not constitute a distribution by virtue of subsection (2)(b) above.
No transfer of assets (other than cash) or of liabilities between one company and another shall constitute, or be treated as giving rise to, a distribution by virtue of subsection (2)(b) or (4) above if they are companies—
both of which are resident in the United Kingdom and neither of which is a 51 per cent. subsidiary of a company not so resident; and
which, neither at the time of the transfer nor as a result of it, are under common control. For the purposes of this subsection two companies are under common control if they are under the control of the same person or persons, and for this purpose “control” shall be construed in accordance with section 416.
The question whether one body corporate is a subsidiary of another for the purpose of subsection (5) above shall be determined as a question whether it is a 51 per cent. subsidiary of that other, except that that other shall be treated as not being the owner—
of any share capital which it owns directly in a body corporate, if a profit on a sale of the shares would be treated as a trading receipt of its trade; or
of any share capital which it owns indirectly, and which is owned directly by a body corporate for which a profit on the sale of the shares would be a trading receipt; or
of any share capital which it owns directly or indirectly in a body corporate not resident in the United Kingdom.
For the purposes of subsection (2)(c) above— and in determining the amount of the distribution constituted by the issue of any redeemable share capital or any security, the capital or security shall be taken at that value.
the value of any redeemable share capital shall be taken to be the amount of the share capital together with any premium payable on redemption, or in a winding up, or in any other circumstances; and
the value of any security shall be taken to be the amount of the principal thereby secured (including any premium payable at maturity or in a winding up, or in any other circumstances);
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Where a company— the amount so paid up shall, except as provided by any provision of the Corporation Tax Acts, be treated as a distribution made in respect of the shares on which it is paid up, except in so far as that amount exceeds the amount or aggregate amount of share capital so repaid less any amounts previously so paid up and treated by virtue of this subsection as distributions.
repays any share capital or has done so at any time after 6th April 1965, and
at or after the time of that repayment issues any share capital as paid up otherwise than by the receipt of new consideration,
Subsection (1) above shall not apply where the repaid share capital consists of fully paid preference shares—
if those shares existed as issued and fully paid preference shares on 6th April 1965 and throughout the period from that date until the repayment those shares continued to be fully paid preference shares, or
if those shares were issued after 6th April 1965 as fully paid preference shares wholly for new consideration not derived from ordinary shares and throughout the period from their issue until the repayment those shares continued to be fully paid preference shares.
Except in relation to a company within paragraph D of section 704, subsection (1) above shall not apply if the issue of share capital mentioned in paragraph (b) of that subsection—
is of share capital other than redeemable share capital; and
takes place after 5th April 1973 and more than ten years after the repayment of share capital mentioned in paragraph (a) of that subsection.
In this section—
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Where— then, except as otherwise provided by any provision of the Corporation Tax Acts, for the purposes of sections 209 and 210, distributions afterwards made by the company in respect of shares representing that share capital shall not be treated as repayments of share capital, except to the extent to which those distributions, together with any relevant distributions previously so made, exceed the amounts so paid up (then or previously) on such shares after 6th April 1965 and not falling to be treated as qualifying distributions or, where the share capital was issued before 6th April 1973, as distributions.
a company issues any share capital as paid up otherwise than by the receipt of new consideration, or has done so after 6th April 1965; and
any amount so paid up does not fall to be treated as a qualifying distribution or, where the issue took place before 6th April 1973, did not fall to be treated as a distribution;
Except in relation to a company within paragraph D of section 704, subsection (1) above shall not prevent a distribution being treated as a repayment of share capital if it is made—
more than ten years after the issue of share capital mentioned in paragraph (a) of that subsection; and
in respect of share capital other than redeemable share capital.
In subsection (1) above “relevant distribution” means so much of any distribution made in respect of shares representing the relevant share capital as apart from that subsection would be treated as a repayment of share capital, but by virtue of that subsection cannot be so treated.
For the purposes of subsection (1) above all shares of the same class shall be treated as representing the same share capital, and where shares are issued in respect of other shares, or are directly or indirectly converted into or exchanged for other shares, all such shares shall be treated as representing the same share capital.
Where share capital is issued at a premium representing new consideration, the amount of the premium is to be treated as forming part of that share capital for the purpose of determining under this Chapter whether any distribution made in respect of shares representing the share capital is to be treated as a repayment of share capital.
Subsection (5) above shall not have effect in relation to any part of the premium after that part has been applied in paying up share capital.
Subject to subsection (5) above, premiums paid on redemption of share capital are not to be treated as repayments of capital.
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Any interest or other distribution— shall not be a distribution for the purposes of the Corporation Tax Acts unless the application of this subsection is excluded by subsection (2) or (3) below.
which is paid out of the assets of a company (“the borrower”) to another company which is within the charge to corporation tax; and
which is so paid in respect of securities of the borrower which fall within any of sub-paragraphs (i) to (iii) and (vi) of paragraph (e) of section 209(2); and
which does not fall within paragraph (d) of section 209(2),
Subsection (1) above does not apply in the case of any interest or other distribution which is paid in respect of a security of the borrower falling within section 209(2)(e)(iii) if— and for the purposes of paragraph (c) above negotiations shall not be regarded as having been in progress on 9th March 1982 unless, before that date, the borrower had applied to the lender for a loan and had supplied the lender with any documents required by him to support the application.
the principal secured does not exceed £100,000; and
the borrower is under an obligation to repay the principal and interest before the expiry of the period of five years beginning on the date on which the principal was paid to the borrower; and
that obligation either was entered into before 9th March 1982 or was entered into before 1st July 1982 pursuant to negotiations which were in progress on 9th March 1982; and
where the period for repayment of either principal or interest is extended after 8th March 1982 (but paragraph (b) above still applies), the interest or other distribution is paid within the period which was applicable immediately before that date;
Subsection (1) above does not apply in a case where the company to which the interest or other distribution is paid is entitled under any enactment, other than section 208, to an exemption from tax in respect of that interest or distribution.
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The provisions of this section and sections 214 to 218 have effect for facilitating certain transactions whereby trading activities carried on by a single company or group are divided so as to be carried on by two or more companies not belonging to the same group or by two or more independent groups.
References in the Corporation Tax Acts to distributions of a company shall not apply to any distribution— and any such distribution is referred to in this section as an “exempt distribution”.
which falls within subsection (3) below, and
in respect of which the conditions specified in subsections (4) to (12) below are satisfied;
The following distributions fall within this subsection— and in this section and sections 214 to 217 references to a relevant company are to the distributing company, to each subsidiary whose shares are transferred as mentioned in paragraph (a) or (b) (ii) above and to each transferee company mentioned in paragraph (b) above.
a distribution consisting of the transfer to all or any of its members by a company (“the distributing company”) of shares in one or more companies which are its 75 per cent. subsidiaries;
a distribution consisting of the transfer by a company (“the distributing company”) to one or more other companies (“the transferee company or companies”) of— and the issue of shares by the transferee company or companies to all or any of the members of the distributing company;
a trade or trades; or
shares in one or more companies which are 75 per cent. subsidiaries of the distributing company,
Each relevant company must be resident in the United Kingdom at the time of the distribution.
The distributing company must at the time of the distribution be either a trading company or a member of a trading group and each subsidiary whose shares are transferred as mentioned in subsection (3)(a) or (b)(ii) above must at that time be either a trading company or the holding company of a trading group.
In a case within subsection (3)(1)(a) above—
the shares must not be redeemable, must constitute the whole or substantially the whole of the distributing company’s holding of the ordinary share capital of the subsidiary and must confer the whole or substantially the whole of the distributing company’s voting rights in the subsidiary; and
subject to subsections (7) and (12)(b) below, the distributing company must after the distribution be either a trading company or the holding company of a trading group.
Subsection (6)(b) above does not apply if the transfer relates to two or more 75 per cent. subsidiaries of the distributing company and that company is dissolved without there having been after the distribution any net assets of the company available for distribution in a winding up or otherwise.
In a case within subsection (3)(b) above—
if a trade is transferred the distributing company must either not retain any interest or retain only a minor interest in that trade;
if shares in a subsidiary are transferred those shares must constitute the whole or substantially the whole of the distributing company’s holding of the ordinary share capital of the subsidiary and must confer the whole or substantially the whole of the distributing company’s voting rights in the subsidiary;
the only or main activity of the transferee company or each transferee company after the distribution must be the carrying on of the trade or the holding of the shares transferred to it;
the shares issued by the transferee company or each transferee company must not be redeemable, must constitute the whole or substantially the whole of its issued ordinary share capital and must confer the whole or substantially the whole of the voting rights in that company; and
subject to subsections (9) and (12)(b) below, the distributing company must after the distribution be either a trading company or the holding company of a trading group.
Subsection (8)(e) above does not apply if there are two or more transferee companies each of which has a trade or shares in a separate 75 per cent. subsidiary of the distributing company transferred to it and the distributing company is dissolved without there having been after the distribution any net assets of the company available for distribution in a winding up or otherwise.
The distribution must be made wholly or mainly for the purpose of benefiting some or all of the trading activities which before the distribution are carried on by a single company or group and after the distribution will be carried on by two or more companies or groups.
The distribution must not form part of a scheme or arrangements the main purpose or one of the main purposes of which is—
the avoidance of tax (including stamp duty); or
without prejudice to paragraph (a) above, the making of a chargeable payment, as defined by section 214, or what would be such a payment if any of the companies mentioned in that section were an unquoted company; or
the acquisition by any person or persons other than members of the distributing company of control of that company, of any other relevant company or of any company which belongs to the same group as any such company; or
the cessation of a trade or its sale after the distribution. In paragraph (c) above “group” means a company which has one or more 51 per cent. subsidiaries together with that or those subsidiaries.
Where the distributing company is a 75 per cent. subsidiary of another company—
the group (or, if more than one, the largest group) to which the distributing company belongs at the time of the distribution must be a trading group;
subsections (6)(b) and (8)(e) above shall not apply; and
the distribution must be followed by one or more other distributions falling within subsection (3)(a) or (b)(ii) above which satisfy the conditions of this section and result in members of the holding company of the group (or, if more than one, the largest group) to which the distributing company belonged at the time of the distribution becoming members of—
the transferee company or each transferee company to which a trade was transferred by the distributing company; or
the subsidiary or each subsidiary whose shares were transferred by the distributing company; or
a company (other than that holding company) of which the company or companies mentioned in sub-paragraph (i) or (ii) above are 75 per cent. subsidiaries.
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If within five years after the making of an exempt distribution there is a chargeable payment—
the amount or value of the payment shall be treated as income chargeable to tax under Case VI of Schedule D;
unless the payment is a transfer of money’s worth, sections 349(1) and 350 shall apply to the payment as if it were an annual sum payable otherwise than out of profits or gains charged to income tax;
the payment shall be regarded as a distribution for the purposes of sections 337(2), 338(2)(a) and 427(4) and paragraph 3 of Schedule 19; and
the payment shall not (if it otherwise would) be treated as a repayment of capital for the purposes of section 210 or 211.
In this section “a chargeable payment” means any payment made otherwise than for bona fide commercial reasons or forming part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax (including stamp duty), being a payment which—
a company concerned in an exempt distribution makes directly or indirectly to a member of that company or of any other company concerned in that distribution; and
is made in connection with, or with any transaction affecting, the shares in that or any such company; and
is not a distribution or exempt distribution or made to another company which belongs to the same group as the company making the payment.
Where a company concerned in an exempt distribution is an unquoted company subsection (2)(a) above shall have effect as if any reference to the making of a payment by, or to a member of, a company concerned in the exempt distribution included a reference to the making of a payment by or to any other person in pursuance of a scheme or arrangements made with the unquoted company or, if the unquoted company is— with any of the persons mentioned in paragraph (a) above.
under the control of five or fewer persons; and
not under the control of (and only of) a company which is not itself under the control of five or fewer persons,
References in this section to a company concerned in an exempt distribution are to any relevant company and to any other company which was connected with any such company for the whole or any part of the period beginning with the exempt distribution and ending with the making of the payment which is in question under this section.
For the purposes of subsection (4) above and this subsection a company shall be deemed to have been connected in the period referred to in that subsection with each company to which a company connected with it was connected in that period.
References in this section to a payment include references to a transfer of money’s worth including the assumption of a liability.
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A distribution shall be treated as an exempt distribution in any case in which, before the distribution is made, the Board have, on the application of the distributing company, notified that company that the Board are satisfied that it will be such a distribution.
A payment shall not be treated as a chargeable payment in any case in which, before the payment is made, the Board have, on the application of the person intending to make it, notified him that they are satisfied that it will be made for bona fide commercial reasons and will not form part of any scheme or arrangements the main purpose, or one of the main purposes, of which is the avoidance of tax (including stamp duty).
A company which becomes or ceases to be connected with another company may make an application under subsection (2) above as respects any payments that may be made by it at any time after becoming or ceasing to be so connected (whether or not there is any present intention to make any payments); and where a notification is given by the Board on such an application no payment to which the notification relates shall be treated as a chargeable payment by reason only of the company being or having been connected with the other company.
References in subsections (2) and (3) above to a payment shall be construed as in section 214.
Any application under this section shall be in writing and shall contain particulars of the relevant transactions and the Board may, within 30 days of the receipt of the application or of any further particulars previously required under this subsection, by notice require the applicant to furnish further particulars for the purposes of enabling the Board to make their decision; and if any such notice is not complied with within 30 days or such longer period as the Board may allow, the Board need not proceed further on the application.
The Board shall notify their decision to the applicant within 30 days of receiving the application or, if they give a notice under subsection (5) above, within 30 days of the notice being complied with.
If the Board notify the applicant that they are not satisfied as mentioned in subsection (1) or (2) above or do not notify their decision to the applicant within the time required by subsection (6) above, the applicant may within 30 days of the notification or of that time require the Board to transmit the application, together with any notice given and further particulars furnished under subsection (5) above, to the Special Commissioners; and in that event any notification by the Special Commissioners shall have effect for the purposes of this section as if it were a notification by the Board.
If any particulars furnished under this section do not fully and accurately disclose all facts and circumstances material for the decision of the Board or the Special Commissioners, any resulting notification that the Board or Commissioners are satisfied as mentioned in subsection (1) or (2) above shall be void.
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Where a company makes an exempt distribution it shall within 30 days after the distribution make a return to the inspector giving particulars of the distribution and of the circumstances by reason of which it is exempt.
Where within five years after the making of an exempt distribution a person makes a chargeable payment which consists of a transfer of money’s worth, he shall within 30 days after the transfer make a return to the inspector giving particulars—
of the transaction effecting the transfer;
of the name and address of the recipient or each recipient and the value of what is transferred to him or each of them; and
if the transfer is accompanied by a chargeable payment consisting of a payment of money, of that payment.
Subject to subsection (4) below, where within five years after the making of an exempt distribution a person makes a payment or a transfer of money’s worth which would be a chargeable payment but for the fact that it is made for bona fide commercial reasons and does not form part of any such scheme or arrangements as are mentioned in section 214(2), that person shall within 30 days after making the payment or transfer make a return to the inspector giving particulars—
in the case of a transfer, of the transaction by which it is effected;
of the name and address of the recipient or each recipient and the amount of the payment made, or the value of what is transferred, to him or each of them; and
of the circumstances by reason of which the payment or transfer is not a chargeable payment.
Subsection (3) above does not apply where the payment or transfer is one in relation to which a notification under section 215(3) has effect.
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Where a distribution falling within section 213(3) has been made and the inspector has reason to believe that it may form part of any such scheme or arrangements as are mentioned in section 213(11), he may by notice require any relevant company or any person controlling any such company to furnish him within such time, not being less than 30 days, as may be specified in the notice with—
a declaration in writing stating whether or not, according to information which the company or that person has or can reasonably obtain, any such scheme or arrangements exist or have existed;
such other information as the inspector may reasonably require for the purposes of section 213(11) and the company or that person has or can reasonably obtain.
If the inspector has reason to believe that a person has not delivered an account or made a return which he is required to deliver or make by virtue of section 214(1)(b) or 216(2) or (3) in respect of any payment or transfer, he may by notice require that person to furnish him within such time, not being less than 30 days, as may be specified in the notice with such information relating to the payment or transfer as he may reasonably require for the purposes of section 214.
If the inspector has reason to believe that a payment or transfer has been made within five years after the making of an exempt distribution and that the payment or transfer is a chargeable payment by reason of the existence of any such scheme or arrangements as are mentioned in section 214(3), he may by notice require the person making the payment or transfer or, if that person is a company, any person controlling it to furnish him within such time, not being less than 30 days, as may be specified in the notice with—
a declaration in writing stating whether or not, according to information which that person has, or can reasonably obtain, any such scheme or arrangements exist or have existed;
such other information as the inspector may reasonably require for the purposes of section 214 and that person has or can reasonably obtain.
Any recipient of a chargeable payment and any person on whose behalf such a payment is received shall, if so required by the inspector, state whether the payment received by him or on his behalf is received on behalf of any person other than himself and, if so, the name and address of that person.
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In sections 213 to 217—
In determining for the purposes of section 213(3) to (9) whether a company whose shares are transferred by the distributing company is a 75 per cent. subsidiary of the distributing company there shall be disregarded any share capital of the first-mentioned company which is owned indirectly by the distributing company.
In determining for the purposes of sections 213 to 217 whether one company is a 75 per cent. subsidiary of another, the other company shall be treated as not being the owner of—
any share capital which it owns directly in a body corporate if a profit on a sale of the shares would be treated as a trading receipt of its trade; or
any share capital which it owns indirectly and which is owned directly by a body corporate for which a profit on the sale of the shares would be a trading receipt.
Section 839 applies for the purposes of sections 213 to 217.
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Where, apart from this subsection, a payment falls within subsection (1)(b) above, subsection (1) above shall not apply to the extent that the liability in question could without undue hardship have been discharged otherwise than through the redemption, repayment or purchase of shares in the company or another unquoted company which is a trading company or the holding company of a trading group.
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The vendor must be resident and ordinarily resident in the United Kingdom in the year of assessment in which the purchase is made and if the shares are held through a nominee the nominee must also be so resident and ordinarily resident.
The residence and ordinary residence of trustees shall be determined for the purposes of this section as they are determined under section 52 of the 1979 Act for the purposes of that Act.
The residence and ordinary residence of personal representatives shall be taken for the purposes of this section to be the same as the residence and ordinary residence of the deceased immediately before his death.
The references in this section to a person’s ordinary residence shall be disregarded in the case of a company.
The shares must have been owned by the vendor throughout the period of five years ending with the date of the purchase.
If at any time during that period the shares were transferred to the vendor by a person who was then his spouse living with him then, unless that person is alive at the date of the purchase but is no longer the vendor’s spouse living with him, any period during which the shares were owned by that person shall be treated for the purposes of subsection (5) above as a period of ownership by the vendor.
Where the vendor became entitled to the shares under the will or on the intestacy of a previous owner or is the personal representative of a previous owner—
any period during which the shares were owned by the previous owner or his personal representatives shall be treated for the purposes of subsection (5) above as a period of ownership by the vendor, and
that subsection shall have effect as if it referred to three years instead of five.
In determining whether the condition in subsection (5) above is satisfied in a case where the vendor acquired shares of the same class at different times—
shares acquired earlier shall be taken into account before shares acquired later, and
any previous disposal by him of shares of that class shall be assumed to be a disposal of shares acquired later rather than of shares acquired earlier.
If for the purposes of capital gains tax the time when shares were acquired would be determined under any provision of Chapter II of Part IV of the 1979 Act (reorganisation of share capital, conversion of securities, etc.) then, unless the shares were allotted for payment or were comprised in share capital to which section 249 applies, it shall be determined in the same way for the purposes of this section.
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If immediately after the purchase the vendor owns shares in the company, then, subject to section 224, the vendor’s interest as a shareholder must be substantially reduced.
If immediately after the purchase any associate of the vendor owns shares in the company then, subject to section 224, the combined interests as shareholders of the vendor and his associates must be substantially reduced.
The question whether the combined interests as shareholders of the vendor and his associates are substantially reduced shall be determined in the same way as is (under the following subsections) the question whether a vendor’s interest as a shareholder is substantially reduced, except that the vendor shall be assumed to have the interests of his associates as well as his own.
Subject to subsection (5) below, the vendor’s interest as a shareholder shall be taken to be substantially reduced if and only if the total nominal value of the shares owned by him immediately after the purchase, expressed as a fraction of the issued share capital of the company at that time, does not exceed 75 per cent. of the corresponding fraction immediately before the purchase.
The vendor’s interest as a shareholder shall not be taken to be substantially reduced where—
he would, if the company distributed all its profits available for distribution immediately after the purchase, be entitled to a share of those profits, and
that share, expressed as a fraction of the total of those profits, exceeds 75 per cent. of the corresponding fraction immediately before the purchase.
In determining for the purposes of subsection (5) above the division of profits among the persons entitled to them, a person entitled to periodic distributions calculated by reference to fixed rates or amounts shall be regarded as entitled to a distribution of the amount or maximum amount to which he would be entitled for a year.
In subsection (5) above “profits available for distribution” has the same meaning as it has for the purposes of Part VIII of the Companies Act 1985, except that for the purposes of that subsection the amount of the profits available for distribution (whether immediately before or immediately after the purchase) shall be treated as increased— and where the aggregate of the sums payable by the company on the purchase and on any contemporaneous redemption, repayment or purchase of other shares of the company exceeds the amount of the profits available for distribution immediately before the purchase, that amount shall be treated as further increased by an amount equal to the excess.
in the case of every company, by £100, and
in the case of a company from which any person is entitled to periodic distributions of the kind mentioned in subsection (6) above, by a further amount equal to that required to make the distribution to which he is entitled in accordance with that subsection;
References in this section to entitlement are, except in the case of trustees and personal representatives, references to beneficial entitlement.
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Subject to section 224, where the company making the purchase is immediately before the purchase a member of a group and— the vendor’s interest as a shareholder in the group must be substantially reduced.
immediately after the purchase the vendor owns shares in one or more other members of the group (whether or not he then owns shares in the company making the purchase), or
immediately after the purchase the vendor owns shares in the company making the purchase and immediately before the purchase he owned shares in one or more other members of the group,
In subsections (5) to (7) below “relevant company” means the company making the purchase and any other member of the group in which the vendor owns shares immediately before or immediately after the purchase, but subject to subsection (4) below.
Subject to section 224, where the company making the purchase is immediately before the purchase a member of a group and at that time an associate of the vendor owns shares in any member of the group, the combined interests as shareholders in the group of the vendor and his associates must be substantially reduced.
The question whether the combined interests as shareholders in the group of the vendor and his associates are substantially reduced shall be determined in the same way as is (under the following subsections) the question whether a vendor’s interest as a shareholder in a group is substantially reduced, except that the vendor shall be assumed to have the interests of his associates as well as his own (and references in subsections (5) to (7) below to a relevant company shall be construed accordingly).
The vendor’s interest as a shareholder in the group shall be ascertained by—
expressing the total nominal value of the shares owned by him in each relevant company as a fraction of the issued share capital of the company,
adding together the fractions so obtained, and
dividing the result by the number of relevant companies (including any in which he owns no shares).
Subject to subsection (7) below, the vendor’s interest as a shareholder in the group shall be taken to be substantially reduced if and only if it does not exceed 75 per cent. of the corresponding interest immediately before the purchase.
The vendor’s interest as a shareholder in the group shall not be taken to be substantially reduced if—
he would, if every member of the group distributed all its profits available for distribution immediately after the purchase (including any profits received by it on a distribution by another member), be entitled to a share of the profits of one or more of them, and
that share, or the aggregate of those shares, expressed as a fraction of the aggregate of the profits available for distribution of every member of the group which is— exceeds 75 per cent. of the corresponding fraction immediately before the purchase.
a relevant company, or
a 51 per cent. subsidiary of a relevant company,
Subsections (6) and (7) of section 221 shall apply for the purposes of subsection (7) above as they apply for the purposes of subsection (5) of that section.
Subject to the following subsections, in this section “group” means a company which has one or more 51 per cent. subsidiaries, but is not itself a 51 per cent. subsidiary of any other company, together with those subsidiaries.
Where the whole or a significant part of the business carried on by an unquoted company (“the successor company”) was previously carried on by— the successor company and any company of which it is a 51 per cent. subsidiary shall be treated as being a member of the same group as the company making the purchase (whether or not, apart from this subsection, the company making the purchase is a member of a group).
the company making the purchase, or
a company which is (apart from this subsection) a member of a group to which the company making the purchase belongs,
Subsection (10) above shall not apply if the successor company first carried on the business there referred to more than three years before the time of the purchase.
For the purposes of this section a company which has ceased to be a 51 per cent. subsidiary of another company before the time of the purchase shall be treated as continuing to be such a subsidiary if at that time there exist arrangements under which it could again become such a subsidiary.
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Subject to section 224, the vendor must not immediately after the purchase be connected with the company making the purchase or with any company which is a member of the same group as that company. In this subsection “group” has the same meaning as it has for the purposes of section 222.
Subject to section 224, the purchase must not be part of a scheme or arrangement which is designed or likely to result in the vendor or any associate of his having interests in any company such that, if he had those interests immediately after the purchase, any of the conditions in sections 221 and 222 and subsection (1) above could not be satisfied.
A transaction occurring within one year after the purchase shall be deemed for the purposes of subsection (2) above to be part of a scheme or arrangement of which the purchase is also part.
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any of the conditions in sections 221 to 223 which are applicable are not satisfied in relation to the vendor, but
he proposed or agreed to the purchase in order that the condition in section 221(2) or 222(3) could be satisfied in respect of the redemption, repayment or purchase of shares owned by a person of whom he is an associate,
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A payment made by a company on the redemption, repayment or purchase of its own shares shall be deemed—
to be one to which section 219 applies if, before it is made, the Board have on the application of the company notified the company that they are satisfied that the section will apply; and
to be one to which section 219 does not apply if, before it is made, the Board have on the application of the company notified the company that they are satisfied that the section will not apply.
An application under this section shall be in writing and shall contain particulars of the relevant transactions; and the Board may, within 30 days of the receipt of the application or of any further particulars previously required under this subsection, by notice require the applicant to furnish further particulars for the purpose of enabling the Board to make their decision.
If a notice under subsection (2) above is not complied with within 30 days or such longer period as the Board may allow, the Board need not proceed further on the application.
The Board shall notify their decision to the applicant within 30 days of receiving the application or, if they give a notice under subsection (2) above, within 30 days of the notice being complied with.
If particulars furnished under this section do not fully and accurately disclose all facts and circumstances material for the decision of the Board, any resulting notification by the Board shall be void.
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A company which treats a payment made by it as one to which section 219 applies shall within 60 days after making the payment make a return to the inspector giving particulars of the payment and of the circumstances by reason of which that section is regarded as applying to it.
Where a company treats a payment made by it as one to which section 219(1)(a) applies, any person connected with the company who knows of any such scheme or arrangement affecting the payment as is mentioned in section 223(2) shall, within 60 days after he first knows of both the payment and the scheme or arrangement, give a notice to the inspector containing particulars of the scheme or arrangement.
Where the inspector has reason to believe that a payment treated by the company making it as one to which section 219(1)(a) applies may form part of a scheme or arrangement of the kind referred to therein or in section 223(2), he may by notice require the company or any person who is connected with the company to furnish him within such time, not being less than 60 days, as may be specified in the notice with—
a declaration in writing stating whether or not, according to information which the company or that person has or can reasonably obtain, any such scheme or arrangement exists or has existed, and
such other information as the inspector may reasonably require for the purposes of the provision in question and the company or that person has or can reasonably obtain.
The recipient of a payment treated by the company making it as one to which section 219 applies, and any person on whose behalf such a payment is received, shall if so required by the inspector state whether the payment received by him or on his behalf is received on behalf of any person other than himself and, if so, the name and address of that person.
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Any question whether a person is an associate of another in relation to a company shall be determined for the purposes of sections 219 to 226 and 228 in accordance with the following provisions of this section.
A husband and wife living together are associates of one another, a person under the age of 18 is an associate of his parents, and his parents are his associates.
A person connected with a company is an associate of the company and of any company controlled by it, and the company and any company controlled by it are his associates.
Where a person connected with one company has control of another company, the second company is an associate of the first.
Where shares in a company are held by trustees (other than bare trustees) then in relation to that company, but subject to subsection (8) below, the trustees are associates of— and any such person is an associate of the trustees.
any person who directly or indirectly provided property to the trustees or has made a reciprocal arrangement for another to do so,
any person who is, by virtue of subsection (2) above, an associate of a person within paragraph (a) above, and
any person who is or may become beneficially entitled to a significant interest in the shares;
Where shares in a company are comprised in the estate of a deceased person, then in relation to that company the deceased’s personal representatives are associates of any person who is or may become beneficially entitled to a significant interest in the shares, and any such person is an associate of the personal representatives.
Where one person is accustomed to act on the directions of another in relation to the affairs of a company, then in relation to that company the two persons are associates of one another.
Subsection (5) above shall not apply to shares held on trusts which— and for the purposes of this subsection “group” means a company which has one or more 51 per cent. subsidiaries, together with those subsidiaries.
relate exclusively to an exempt approved scheme as defined in Chapter I of Part XIV, or
are exclusively for the benefit of the employees, or the employees and directors, of the company referred to in that subsection or of companies in a group to which that company belongs, or their dependants (and are not wholly or mainly for the benefit of directors or their relatives);
For the purposes of subsections (5) and (6) above a person’s interest is significant if its value exceeds 5 per cent. of the value of all the property held on the trusts or, as the case may be, comprised in the estate concerned, excluding any property in which he is not and cannot become beneficially entitled to an interest.
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Any question whether a person is connected with a company shall be determined for the purposes of sections 219 to 227 in accordance with the following provisions of this section.
A person is connected with a company if he directly or indirectly possesses or is entitled to acquire more than 30 per cent. of—
the issued ordinary share capital of the company, or
the loan capital and issued share capital of the company, or
the voting power in the company.
Where a person— his interest in that loan capital shall be disregarded for the purposes of subsection (2) above.
acquired or became entitled to acquire loan capital of a company in the ordinary course of a business carried on by him, being a business which includes the lending of money, and
takes no part in the management or conduct of the company,
A person is connected with a company if he directly or indirectly possesses or is entitled to acquire such rights as would, in the event of the winding up of the company or in any other circumstances, entitle him to receive more than 30 per cent. of the assets of the company which would then be available for distribution to equity holders of the company; and for the purposes of this subsection— shall be determined in accordance with paragraphs 1 and 3 of Schedule 18, taking references in paragraph 3 to the first company as references to an equity holder and references to a winding up as including references to any other circumstances in which assets of the company are available for distribution to its equity holders.
the persons who are equity holders of the company, and
the percentage of the assets of the company to which a person would be entitled,
A person is connected with a company if he has control of it.
References in this section to the loan capital of a company are references to any debt incurred by the company—
for any money borrowed or capital assets acquired by the company, or
for any right to receive income created in favour of the company, or
for consideration the value of which to the company was (at the time when the debt was incurred) substantially less than the amount of the debt (including any premium thereon).
For the purposes of this section a person shall be treated as entitled to acquire anything which he is entitled to acquire at a future date or will at a future date be entitled to acquire.
For the purposes of this section a person shall be assumed to have the rights or powers of his associates as well as his own.
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In sections 219 to 228—
“capital receipt” means money or money’s worth to which the trustees of or a participant in a profit sharing scheme become or becomes entitled as mentioned in section 186(3), but subject to paragraph 4 of Schedule 10;
References in sections 219 to 228 to the owner of shares are references to the beneficial owner except where the shares are held on trusts (other than bare trusts) or are comprised in the estate of a deceased person, and in such a case are references to the trustees or, as the case may be, to the deceased’s personal representatives.
References in sections 219 to 228 to a payment made by a company include references to anything else that is, or would but for section 219 be, a distribution.
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shall, notwithstanding section 209(2)(c), not constitute a distribution within the meaning of section 209(2); and
for purposes of sections 210 and 211 shall not be treated as issued “as paid up otherwise than by the receipt of new consideration”.
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Subject to sections 95(1)(b) and 247, where a company resident in the United Kingdom makes a qualifying distribution and the person receiving the distribution is another such company or a person resident in the United Kingdom, not being a company, the recipient of the distribution shall be entitled to a tax credit equal to such proportion of the amount or value of the distribution as corresponds to the rate of advance corporation tax in force for the financial year in which the distribution is made.
Subject to section 241(5), a company resident in the United Kingdom which is entitled to a tax credit in respect of a distribution may claim to have the amount of the credit paid to it if—
the company is wholly exempt from corporation tax or is only not exempt in respect of trading income; or
the distribution is one in relation to which express exemption is given (otherwise than by section 208), whether specifically or by virtue of a more general exemption from tax, under any provision of the Tax Acts.
A person, not being a company resident in the United Kingdom, who is entitled to a tax credit in respect of a distribution may claim to have the credit set against the income tax chargeable on his income under section 3 or on his total income for the year of assessment in which the distribution is made and where the credit exceeds that income tax, to have the excess paid to him.
Where a distribution mentioned in subsection (1) above is, or falls to be treated as, or under any provision of the Tax Acts is deemed to be, the income of a person other than the recipient, that person shall be treated for the purposes of this section as receiving the distribution (and accordingly the question whether he is entitled to a tax credit in respect of it shall be determined by reference to where he, and not the actual recipient, is resident); and where any such distribution is income of a United Kingdom trust the trustees shall be entitled to a tax credit in respect of it if no other person falls to be treated for the purposes of this section as receiving the distribution.
In subsection (4) above “United Kingdom trust” means a trust administered under the law of any part of the United Kingdom, not being a trust the general administration of which is ordinarily carried on outside the United Kingdom and the trustees, or a majority of the trustees, of which are resident or ordinarily resident outside the United Kingdom.
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An individual who, having made a claim in that behalf, is entitled to relief under Chapter I of Part VII by virtue of section 278(2) in respect of any year of assessment shall be entitled to a tax credit in respect of any qualifying distribution received by him in that year to the same extent as if he were resident in the United Kingdom.
Where a qualifying distribution is income of a fund to which section 615(2)(b) or (c) applies the persons entitled to receive the income shall be entitled to a tax credit in respect of the distribution to the same extent as a recipient mentioned in section 231(1).
Where a qualifying distribution is income of, or of the government of, any sovereign power or of any international organisation, that power, government or organisation shall be entitled to a tax credit in respect of the distribution to the same extent as a recipient mentioned in section 231(1). In this subsection “international organisation” means an organisation of which two or more sovereign powers, or the governments of two or more sovereign powers, are members; and if in any proceedings a question arises whether a person is within this subsection, a certificate issued by or under the authority of the Secretary of State stating any fact relevant to that question shall be conclusive evidence of that fact.
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Where in any year of assessment the income of any person, not being a company resident in the United Kingdom, includes a distribution in respect of which that person is not entitled to a tax credit—
no assessment shall be made on that person in respect of income tax at the basic rate on the amount or value of the distribution;
that person’s liability under any assessment made in respect of income tax at a higher rate on the amount or value of the distribution or on any part of the distribution shall be reduced by a sum equal to income tax at the basic rate on so much of the distribution as is assessed at that higher rate;
the amount or value of the distribution shall be treated for the purposes of sections 348 and 349(1) as not brought into charge to income tax.
Where a person has paid tax (“the tax paid”) in respect of excess liability on, or on any part of, a non-qualifying distribution, then if, apart from this subsection, he would be liable to pay an amount of tax in respect of excess liability on, or on any part of, a repayment of the share capital or of the principal of the security which constituted that non-qualifying distribution, he shall be so liable only to the extent (if any) to which that amount exceeds the amount of the tax paid. In this subsection—
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Without prejudice to subsections (3) and (4) below but subject to section 95(1)(c), a company which makes a qualifying distribution shall, if the recipient so requests in writing, furnish to him a statement in writing showing the amount or value of the distribution and (whether or not the recipient is a person entitled to a tax credit in respect of the distribution) the amount of the tax credit to which a recipient who is such a person is entitled in respect of that distribution.
The duty imposed by subsection (1) above shall be enforceable at the suit or instance of the person requesting the information.
Every warrant or cheque or other order drawn or made, or purporting to be drawn or made, in payment of any dividend or interest distributed by any company, being a company within the meaning of the Companies Act 1985 or the Companies (Northern Ireland) Order 1986, or a company created by letters patent or by or in pursuance of an Act, shall have annexed to itself or be accompanied by a statement in writing showing—
in the case of interest which is not a qualifying distribution—
the gross amount which, after deduction of the income tax appropriate thereto, corresponds to the net amount actually paid;
the rate and the amount of income tax appropriate to such gross amount, and
the net amount actually paid;
in the case of a dividend or interest which is a qualifying distribution, each of the following amounts—
the amount of the dividend or interest paid, and
(whether or not the recipient is a person entitled to a tax credit in respect of that distribution) the amount of the tax credit to which a recipient who is such a person is entitled in respect of that distribution.
If a company fails to comply with the provisions of subsection (3) above, the company shall in respect of each offence incur a penalty of £10 except that the aggregate amount of any penalties imposed under this subsection on any company in respect of offences connected with any one distribution of dividends or interest shall not exceed £100.
Where a company makes a distribution which is not a qualifying distribution it shall make a return to the inspector—
within 14 days from the end of the accounting period in which the distribution is made; or
if the distribution is made on a date not falling in an accounting period, within 14 days from that date.
A return under subsection (5) above shall contain—
particulars of the transaction giving rise to the distribution; and
the name and address of the person, or each of the persons, receiving the distribution, and the amount or value of the distribution received by him or by each of them.
Where it is not in the circumstances apparent whether a transaction gives rise to a distribution in respect of which a return is required to be made under subsection (5) above, the company shall—
within the time within which such a return would be required to be made if the transaction did give rise to such a distribution, make a return to the inspector containing particulars of the transaction in question; and
if required by a notice served on the company by the inspector, furnish him within the time specified in the notice with such further information in relation to the transaction as he may reasonably require.
If it appears to the inspector that particulars of any transaction ought to have been and have not been included in a return under subsection (5) or (7) above, he may by a notice served on the company require the company to furnish him within the time specified in the notice with such information relating thereto as he may reasonably require.
Any power which the inspector may exercise under paragraph 17 of Schedule 19 for the purposes of that Schedule may be exercised by him for the purposes of subsections (5) to (8) above.
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Where a person entitled to a tax credit in respect of a distribution to which this section applies is, by reason of any exemption from tax, entitled to recover tax 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. thereof, subsection (3) below shall apply to the income represented by any part of the distribution which is not a part—
to which profits arising after the date of acquisition are attributable in accordance with section 236; or
in relation to which the date of acquisition is earlier than 6th April 1965.
For the purposes of this section and section 236, the date of acquisition, in relation to any part of a distribution or profits attributable to it, is the date on which the shares, securities or rights by virtue of which a person is entitled to that part were acquired by him.
Where this subsection applies to any income—
the exemption from tax shall not extend to that income; and
it shall be treated for the purposes of sections 348 and 349(1) as not brought into charge to income tax; and
no amount of interest shall be deducted from or set off against it under section 353.
Where, by virtue of this section, an exemption from tax does not apply to any income represented by a distribution or part of a distribution, the person entitled to the income shall be liable to tax or, as the case may be, additional tax, on it at a rate equal to the additional rate in force at the time the distribution is made and shall be assessable to income tax or corporation tax accordingly.
This section applies to any qualifying distribution except any amount which is treated as such in accordance with section 209(3) or sections 210 and 211.
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Section 235 shall be construed in accordance with the following provisions of this section.
Two or more holdings are associated if they were acquired by persons acting in concert or under arrangements made by any person.
There shall be attributed—
to the distributions made by a company at any time (whether before or after the passing of this Act) in respect of any class of shares, securities or rights such of its relevant profits arising after the date of acquisition and before that time as remain after allowing for earlier distributions made in respect of that or any other class of shares, securities or rights, and for distributions made at or to be made after that time in respect of other classes of shares, securities or rights; and
to any part of a distribution made at any time to which a person is entitled by virtue of any part of his holding of any class of shares, securities or rights, such proportion of the profits attributable under paragraph (a) above to the distributions made at that time in respect of that class as corresponds to that part of his holding.
For the purposes of subsection (3) above profits arising in part of an accounting period shall be taken to be a proportionate part of the profits arising in the whole of the accounting period except where a different method of arriving at the profits arising in that part can be shown to be fair and reasonable.
For the purposes of this section the relevant profits of a company are, subject to subsection (6) below, its profits computed on a commercial basis after allowing for any provision properly made for corporation tax; and the computation shall be made without regard to any capital gains or losses or to any such amount as is mentioned in section 235(5), and—
shall include franked investment income received from any company not related to the first-mentioned company; and
shall exclude group income and franked investment income received from a company related to the first-mentioned company.
There shall be treated as included in the relevant profits of a company the appropriate portion of the relevant profits of any company related to it.
For the purposes of this section a company (“the owned company”) is related to another company (“the owning company”) if— and the appropriate proportion of the relevant profits of a related company is that proportion of those profits which the owning company would receive by virtue of the shares, securities or rights owned by it, if all the relevant profits of the owned company were distributed and, so far as received directly or indirectly by a company related to the owning company, were distributed by that related company, no account being taken of any profits arising at a time when the owned company was not related to the owning company.
the owning company owns not less than 10 per cent. of any one class of shares in the owned company; or
any company related to the owning company owns not less than 10 per cent. of any one class of shares in the owned company;
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This section has effect where any person (“the recipient”) receives an amount treated as a distribution by virtue of section 209(3) or 210 or 211(1); and in this section—
any such distribution is referred to as a bonus issue; and
“relevant tax credit” in relation to a bonus issue means the tax credit to which the recipient becomes entitled in respect of the bonus issue.
Subject to subsection (6) below, if the recipient is entitled by reason of— to recover tax in respect of any distribution received by him, no account shall be taken for the purposes of any such exemption or set-off of any bonus issue or relevant tax credit received by him.
any exemption from tax, or
the setting-off of losses against profits or income,
Subject to subsection (6) below, where, by virtue of this section, no account is to be taken for the purposes of any exemption from tax of any bonus issue and the relevant tax credit, the person entitled to that issue and that credit shall be liable to tax or, as the case may be, additional tax, on them at a rate equal to the additional rate in force at the time the bonus issue is made and shall be assessable to income tax or corporation tax accordingly.
Subject to subsection (6) below, a bonus issue and the relevant tax credit shall be treated for the purposes of sections 241 and 244 as not being franked investment income.
Subject to subsection (6) below—
the relevant tax credit relating to a bonus issue shall not be available to set against any income tax which the recipient is entitled to deduct under section 348 or with which he is chargeable by virtue of section 349(1), and
no interest may be deducted or set off under section 353 from or against so much of a person’s income as consists of bonus issues and relevant tax credits.
Nothing in subsections (2) to (5) above shall affect the proportion (if any) of any bonus issue made in respect of any shares or securities which, if it were declared as a dividend, would represent a normal return to the recipient 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 those securities are derived from shares or securities previously acquired by the recipient, the shares or securities which were previously acquired; nor shall anything in those subsections affect the like proportion of the relevant tax credit relating to that bonus issue.
For the purposes of subsection (6) above—
if the consideration provided by the recipient 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 recipient 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 recipient first acquired any of the relevant shares or securities and to any dividends and other distributions made in respect of them during that time.
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In this Chapter— and references to any accounting or other period in which a franked payment is made are references to the period in which the distribution in question is made.
References in this Chapter to distributions or payments received by a company apply to any received by another person on behalf of or in trust for the company but not to any received by the company on behalf of or in trust for another person.
References in this Chapter to using franked investment income to frank distributions of a company shall be construed in accordance with section 241(5).
References in this Chapter to an amount of profits on which corporation tax falls finally to be borne are references to the amount of those profits after making all deductions and giving all reliefs that for the purposes of corporation tax are made or given from or against those profits, including deductions and reliefs which under any provision are treated as reducing them for those purposes.
Schedule 13 shall have effect for the purpose of regulating the time and manner in which advance corporation tax is to be accounted for and paid.
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Subject to section 497 and subsection (2) below, advance corporation tax paid by a company (and not repaid) in respect of any distribution made by it in an accounting period shall be set against its liability to corporation tax on any profits charged to corporation tax for that accounting period and shall accordingly discharge a corresponding amount of that liability.
The amount of advance corporation tax to be set against a company’s liability for any accounting period under subsection (1) above shall not exceed the amount of advance corporation tax that would have been payable (apart from section 241) in respect of a distribution made at the end of that period of an amount which, together with the advance corporation tax so payable in respect of it, is equal to the company’s profits charged to corporation tax for that period.
Where in the case of any accounting period of a company there is an amount of surplus advance corporation tax, the company may, within two years after the end of that period, claim to have the whole or any part of that amount treated for the purposes of this section (but not of any further application of this subsection) as if it were advance corporation tax paid in respect of distributions made by the company in any of its accounting periods beginning in the six years preceding that period (but so that the amount which is the subject of the claim is set, so far as possible, against the company’s liability for a more recent accounting period before a more remote one) and corporation tax shall, so far as may be required, be repaid accordingly. In this subsection “surplus advance corporation tax”, in relation to any accounting period of a company, means advance corporation tax which cannot be set against the company’s liability to corporation tax for that period because the company has no profits charged to corporation tax for that period or because of subsection (2) above or section 797(4).
Where in the case of any accounting period of a company there is an amount of surplus advance corporation tax which has not been dealt with under subsection (3) above, that amount shall be treated for the purposes of this section (including any further application of this subsection) as if it were advance corporation tax paid in respect of distributions made by the company in the next accounting period.
Effect shall be given to subsections (1) and (4) above as if on a claim in that behalf by the company and, for that purpose, a return made by the company under section 11 of the Management Act containing particulars of advance corporation tax or surplus advance corporation tax which falls to be dealt with under those subsections shall be treated as a claim.
For the purposes of this section the profits of a company charged to corporation tax for any period shall be taken to be the amount of its profits for that period on which corporation tax falls finally to be borne.
This section has effect subject to subsections (5) to (7) of section 430 and the following provisions of this Chapter.
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Where a company (“the surrendering company”) has paid an amount of advance corporation tax in respect of a dividend or dividends paid by it in an accounting period and the advance corporation tax has not been repaid, it may, on making a claim, surrender the benefit of the whole or any part of that amount—
to any company which was a subsidiary of the surrendering company throughout that accounting period, or
in such proportions as the surrendering company may determine, to any two or more companies which were subsidiaries of the surrendering company throughout that period.
Subject to subsections (4) and (5) below, where the benefit of any amount of advance corporation tax (“the surrendered amount”) is surrendered under this section to a subsidiary, then—
if the advance corporation tax mentioned in subsection (1) above was paid in respect of one dividend only or of dividends all of which were paid on the same date, the subsidiary shall be treated for the purposes of section 239 as having paid an amount of advance corporation tax equal to the surrendered amount in respect of a distribution made by it on the date on which the dividend or dividends were paid;
if the advance corporation tax mentioned in subsection (1) above was paid in respect of dividends paid on different dates, the subsidiary shall be treated for the purposes of section 239 as having paid an amount of advance corporation tax equal to the appropriate part of the surrendered amount in respect of a distribution made by it on each of those dates.
For the purposes of paragraph (b) of subsection (2) above “the appropriate part of the surrendered amount”, in relation to any distribution treated as made on the same date as that on which a dividend was paid, means such part of that amount as bears to the whole of it the same proportion as the amount of that dividend bears to the total amount of the dividends mentioned in that paragraph.
No advance corporation tax which a subsidiary is treated as having paid by virtue of subsection (2) above shall be set against the subsidiary’s liability to corporation tax under subsection (3) of section 239; but in determining for the purposes of subsections (3) and (4) of that section what (if any) amount of surplus advance corporation tax there is in any accounting period of a subsidiary, an amount so treated as having been paid shall be set against its liability to corporation tax before any advance corporation tax paid in respect of any distribution made by the subsidiary.
No advance corporation tax which a subsidiary is treated as having paid by virtue of subsection (2) above shall be set against the subsidiary’s liability to corporation tax for any accounting period in which, or in any part of which, it was not a subsidiary of the surrendering company.
Any claim under this section shall be made within six years after the end of the accounting period to which it relates and shall require the consent, notified to the inspector in such form as the Board may require, of the subsidiary or subsidiaries concerned.
No amount of advance corporation tax which has been dealt with under section 239(3) shall be available for the purposes of a claim under this section; and no amount of advance corporation tax the benefit of which has been surrendered under this section shall be treated for the purposes of that section as advance corporation tax paid by the surrendering company.
A payment made by a subsidiary to a surrendering company in pursuance of an agreement between them as respects the surrender of the benefit of an amount of advance corporation tax, being a payment not exceeding that amount—
shall not be taken into account in computing profits or losses of either company for corporation tax purposes; and
shall not for any of the purposes of the Corporation Tax Acts be regarded as a distribution or a charge on income.
References in this section to dividends shall be construed as including references to distributions made on the redemption, repayment or purchase by a company of its own shares, and references to the payment of dividends shall be construed accordingly.
References in this section to a company apply only to bodies corporate resident in the United Kingdom; and, subject to subsection (11) below, for the purposes of this section the question whether one body corporate is the subsidiary of another shall be determined as a question whether it is a 51 per cent. subsidiary of that other, except that that other shall be treated as not being the owner—
of any share capital which it owns directly in a body corporate if a profit on the sale of the shares would be treated as a trading receipt of its trade; or
of any share capital which it owns indirectly, and which is owned directly by a body corporate for which a profit on the sale of the shares would be a trading receipt; or
of any share capital which it owns directly or indirectly in a body corporate not resident in the United Kingdom.
Notwithstanding that, apart from this subsection, one company (“the subsidiary company”) would at any time, by virtue of subsection (10) above, be a subsidiary of another company (“the parent company”) for the purposes of this section, the subsidiary company shall not be treated at that time as a subsidiary for those purposes—
if arrangements are in existence by virtue of which any person has or could obtain, or any persons together have or could obtain, control of the subsidiary company but not of the parent company; and
unless the following conditions are also fulfilled, namely—
that the parent company is beneficially entitled to more than 50 per cent. of any profits available for distribution to equity holders of the subsidiary company; and
that the parent company would be beneficially entitled to more than 50 per cent. of any assets of the subsidiary company available for distribution to its equity holders on a winding up. In this subsection “control” has the meaning given by section 840 and “arrangements” means arrangements of any kind, whether in writing or not.
Where by virtue of any enactment a Minister of the Crown or Northern Ireland department has power to give directions to a statutory body as to the disposal of assets belonging to, or to a subsidiary of, that body, the existence of that power shall not be regarded as constituting (or as having at any time constituted) an arrangement within the meaning of subsection (11) above.
Schedule 18 shall have effect for the purposes of subsection (11)(b) above, subject to the following modifications—
for any reference to section 413(7) to (10) there shall be substituted a reference to subsection (11)(b) above; and
paragraph 7(1) shall be omitted and for any reference to the relevant accounting period there shall be substituted a reference to the accounting period current at the time in question.
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Where in any accounting period a company receives franked investment income the company shall not be liable to pay advance corporation tax in respect of qualifying distributions made by it in that period unless the amount of the franked payments made by it in that period exceeds the amount of that income.
If in an accounting period there is such an excess, advance corporation tax shall be payable on an amount which, when the advance corporation tax payable thereon is added to it, is equal to the excess.
If the amount of franked investment income received by a company in an accounting period exceeds the amount of the franked payments made by it in that period the excess shall be carried forward to the next accounting period and treated for the purposes of this section (including any further application of this subsection) as franked investment income received by the company in that period.
Without prejudice to section 238(5), Schedule 13 shall apply for the purpose of regulating the manner in which effect is to be given to subsections (1) to (3) above.
No franked investment income shall be used to frank distributions of a company (that is to say, used in accordance with this section and Schedule 13 so as to relieve the company from, or obtain repayment of, advance corporation tax for which the company would otherwise be liable) if the amount of the tax credit comprised in it has been paid under subsection (2) of section 231; and no payment shall be made under that subsection in respect of the tax credit comprised in franked investment income which has been so used.
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Where a company has a surplus of franked investment income for any accounting period—
the company may, on making a claim for the purpose, require that the amount of the surplus shall for all or any of the purposes mentioned in subsection (2) below be treated as if it were a like amount of profits chargeable to corporation tax; and
subject to subsection (4) below, the provisions mentioned in subsection (2) below shall apply in accordance with this section to reduce the amount of the surplus for purposes of section 241(3); and
the company shall be entitled to have paid to it the amount of the tax credit comprised in the amount of franked investment income by which the surplus is so reduced.
The purposes for which a claim may be made under subsection (1) above are those of—
the setting of trading losses against total profits under section 393(2);
the deduction of charges on income under section 338 or paragraph 5 of Schedule 4;
the deduction of expenses of management under section 75 or 76;
the setting of certain capital allowances against total profits under section 74(3) of the 1968 Act;
the setting of losses against income under section 573(2).
Where a company makes a claim under this section for any accounting period, the reduction falling to be made in profits of that accounting period shall be made, as far as may be, in profits chargeable to corporation tax rather than in the amount treated as profits so chargeable under this section.
Where a claim under this section relates to section 393(2) or 573(2) of this Act or to section 74(3) of the 1968 Act and an accounting period of the company falls partly before and partly within the time mentioned in that subsection, then—
the restriction imposed by section 393(3) or 573(3) of this Act or by section 74(4) of the 1968 Act on the amount of the relief shall be applied only to any relief to be given apart from this section, and shall be applied without regard to any amount treated as profits of the accounting period under this section; but
relief under this section shall be given only against a part of the amount so treated proportionate to the part of the accounting period falling within that time.
Subject to subsection (7) below, subsection (5) above shall apply, with the necessary adaptations— as it applies in relation to relief given in respect of a loss (the reference to the company ceasing to be within the charge to corporation tax in respect of the trade being construed as a reference to its ceasing to be within that charge at all, and as respects the relief mentioned in paragraph (c) above, the reference to the purposes of section 393(1) being construed as a reference to the purposes of corporation tax on chargeable gains).
in relation to relief given in respect of management expenses; and
in relation to relief given in respect of capital allowances; and
in relation to relief given in respect of losses under section 573(2);
Any amount which may be dealt with under subsection (5) above as a loss shall be so dealt with rather than under subsection (6) above, except in so far as the company concerned otherwise elects.
The time limits for claims under this section shall be as follows—
if and so far as the purpose for which the claim is made is the setting of trading losses against total profits under section 393(2), two years from the end of the accounting period in which the trading loss is incurred;
if and so far as the purpose for which the claim is made is the deduction of charges on income under section 338 or paragraph 5 of Schedule 4 or of expenses of management under section 75 or 76, six years from the end of the accounting period in which the charges were paid or the expenses of management were incurred;
if and so far as the purpose for which the claim is made is the setting of capital allowances against total profits under section 74(3) of the 1968 Act, two years from the end of the accounting period for which the capital allowances fall to be made;
if and so far as the purpose for which the claim is made is the setting of a loss against income under section 573(2), two years from the end of the accounting period in which the loss was incurred.
For the purposes of a claim under this section for any accounting period, the surplus of franked investment income for that accounting period shall be calculated without regard to the part, if any, carried forward from an earlier accounting period; and for the purposes of subsection (5) above franked investment income which by virtue of section 241(5) cannot be used to frank distributions of a company shall be left out of account.
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Where a company has a surplus of franked investment income for any accounting period, the company, instead of or in addition to making a claim under section 242, may on making a claim for the purpose require that the surplus shall be taken into account for relief under section 393(1) or 394, up to the amount of franked investment income for the accounting period which, if chargeable to corporation tax, would have been so taken into account by virtue of section 393(8); and (subject to the restriction to that amount of franked investment income) the following subsections shall have effect where the company makes a claim under this section for any accounting period.
The amount to which the claim relates shall for the purposes of the claim be treated as trading income of the accounting period.
The reduction falling to be made in trading income of an accounting period shall be made as far as possible in trading income chargeable to corporation tax rather than in the amount treated as trading income so chargeable under this section.
If the claim relates to section 393(1), section 242(5) shall apply in relation to it.
If the claim relates to section 394 and an accounting period of the company falls partly outside the three years mentioned in subsection (1) of that section, then—
the restriction imposed by subsection (2) of that section on the amount of the reduction that may be made in the trading income of that period shall be applied only to any relief to be given apart from this section, and shall be applied without regard to any amount treated as trading income of the accounting period by virtue of this section, but
relief under this section shall be given only against a part of the amount so treated proportionate to the part of the accounting period falling within the three years in question.
The time limits for claims under this section shall be as follows—
if and so far as the purpose for which the claim is made is the allowance of relief under section 393(1), six years from the end of the accounting period for which the claim is made,
if and so far as the purpose for which the claim is made is the allowance of relief under section 394, six years from the time when the company ceases to carry on the trade.
For the purposes of a claim under this section for any accounting period the surplus of franked investment income for that period shall be calculated without regard to the part, if any, carried forward from an earlier accounting period.
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Without prejudice to section 242(9) or 243(7), the surplus of franked investment income for an accounting period for which a claim is made under either of those sections shall be calculated without regard to any part of that surplus which, when the claim is made, has been used to frank distributions made by the company in a later accounting period.
Where in consequence of a claim under either section 242 or section 243 for any accounting period a company is entitled to payment of a sum in respect of tax credit—
an amount equal to that sum shall be deducted from any advance corporation tax which apart from this subsection would fall, under section 239, to be set against the company’s liability to corporation tax for the next accounting period or the benefit of which could be surrendered under section 240; and
if that amount exceeds that advance corporation tax or there is no such advance corporation tax, that excess or that amount (as the case may be) shall be carried forward and similarly deducted in relation to the following accounting period and so on.
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This section applies if—
within any period of three years there is both a change in the ownership of a company and (either earlier or later in that period, or at the same time) a major change in the nature or conduct of a trade or business carried by the company; or
at any time after the scale of the activities in a trade or business carried on by a company has become small or negligible, and before any considerable revival of the trade or business, there is a change in the ownership of the company.
Sections 239 and 241 and Schedule 13 shall apply to an accounting period in which the change of ownership occurs as if the part ending with the change of ownership, and the part after, were two separate accounting periods; and for that purpose the profits of the company charged to corporation tax for the accounting period (as defined in section 239(6)) shall be apportioned between those parts.
No advance corporation tax paid by the company in respect of distributions made in an accounting period beginning before the change of ownership shall be treated under section 239(4) as paid by it in respect of distributions made in an accounting period ending after the change of ownership; and this subsection shall apply to an accounting period in which the change of ownership occurs as if the part ending with the change of ownership, and the part after, were two separate accounting periods.
In subsection (1) above “a major change in the nature or conduct of a trade or business” includes— and this section applies even if the change is the result of a gradual process which began outside the period of three years mentioned in subsection (1)(a) above.
a major change in the type of property dealt in, or services or facilities provided, in the trade or business; or
a major change in customers, outlets or markets of the trade or business; or
a change whereby the company ceases to be a trading company and becomes an investment company or vice versa; or
where the company is an investment company, a major change in the nature of the investments held by the company;
In this section—
Subsection (3) above applies to advance corporation tax which a company is treated as having paid by virtue of section 240 as it applies to advance corporation tax which it has actually paid.
Sections 768(8) and (9) and 769 shall apply also for the purposes of this section and as if in subsection (3) of section 769 the reference to the benefit of the losses were a reference to the benefit of advance corporation tax.
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If, at the beginning of any financial year, the basic rate percentage for the appropriate year of assessment has not been determined (whether under the Provisional Collection of Taxes Act 1968 or otherwise), then, subject to subsection (2) below, advance corporation tax in respect of distributions made in that financial year shall be payable under Schedule 13 and may be assessed under that Schedule according to the rate of advance corporation tax fixed for the previous financial year.
Subsection (1) above does not apply with respect to any distribution made in a financial year after— whichever is the earlier.
the date on which is determined the basic rate percentage for the appropriate year of assessment; or
5th August in that year,
If a rate of advance corporation tax for any financial year is not fixed, under section 14(3) or any other enactment, or if advance corporation tax for any financial year is charged otherwise than as it has been paid or assessed, the necessary adjustment shall be made by discharge or repayment of tax or by a further assessment.
In subsections (1) and (2) above “the basic rate percentage for the appropriate year of assessment”, in relation to a financial year, means the percentage at which income tax at the basic rate is charged for the year of assessment which begins on 6th April in that financial year.
Where different rates of advance corporation tax are in force in different parts of an accounting period, the maximum set-off permitted for that accounting period under section 239(2) shall be determined by apportioning the profits of the company charged to corporation tax for that period (as defined in section 239(6)) between the different parts of the period, calculating the maximum for each part as if it were a separate accounting period and aggregating the result.
Where the rate of advance corporation tax for any financial year differs from the rate last fixed—
any advance corporation tax payable in respect of a distribution made in that financial year on or before 5th April shall be calculated according to the rate last fixed and— shall have effect in relation to the distribution as if the rate for that year were the same as the rate last fixed;
the definition of “franked payment” in section 238(1), and
section 231(1) and Schedule 13,
if a distribution is made on or before 5th April in an accounting period which extends beyond 5th April in that year and another distribution is made, or franked investment income is received, in that period after that date, then— for that accounting period, shall be determined under section 241 and Schedule 13 as if the part of the accounting period ending with, and the part of it beginning after, that date were separate accounting periods.
the company’s liability for advance corporation tax,
the amount of any such tax, and
the amount of any surplus of franked investment income,
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Where a company (“the receiving company”) receives dividends from another company (“the paying company”), both being bodies corporate resident in the United Kingdom, and the paying company is— then, subject to the following provisions of this section, the receiving company and the paying company may jointly elect that this subsection shall apply to the dividends received from the paying company by the receiving company (“the election dividends”).
a 51 per cent. subsidiary of the other or of a company so resident of which the other is a 51 per cent. subsidiary; or
a trading or holding company owned by a consortium the members of which include the receiving company,
So long as an election under subsection (1) above is in force the election dividends shall be excluded from sections 14(1) and 231 and are accordingly not included in references to franked payments made by the paying company or the franked investment income of the receiving company but are in the Corporation Tax Acts referred to as “group income” of the receiving company.
Where an election under subsection (1) above is in force the paying company may by notice to the collector state that it does not wish the election to have effect in relation to any amount of dividends specified in the notice and the Corporation Tax Acts shall then have effect in relation to that amount as if there had been no such election.
Where a company (“the recipient company”) receives from another company (“the payer company”), both being bodies corporate resident in the United Kingdom, any payments which are for corporation tax charges on income of the payer company and either— then, subject to the following provisions of this section, the recipient company and the payer company may jointly elect that this subsection shall apply to any such payments received from the payer company by the recipient company, and so long as the election is in force those payments may be made without deduction of income tax and neither section 349 nor section 350 shall apply thereto.
the conditions in subsection (1)(a) or (b) above would be satisfied in relation to the companies if the payments were dividends, or
the recipient company is a 51 per cent. subsidiary of the payer company,
Subsections (1) to (4) above shall not apply to dividends or other payments received by a company on any investments, if a profit on the sale of those investments would be treated as a trading receipt of that company, and shall not apply to a dividend in any case where, if those subsections do not apply to it, the receiving company will, or would but for section 235 or 237, be entitled by virtue of any exemption to claim payment of the tax credit to which it is entitled in respect of the dividend.
Where— and advance corporation tax ought to have been paid or income tax ought to have been deducted, as the case may be, the inspector may make such assessments, adjustments or set-offs as may be required for securing that the resulting liabilities to tax (including interest on unpaid tax) of the paying or payer company and the receiving or recipient company are, so far as possible, the same as they would have been if the advance corporation tax had been duly paid or the income tax had been duly deducted.
the paying company purports by virtue of an election under subsection (1) above to pay any dividends without paying advance corporation tax, or
the payer company purports by virtue of an election under subsection (4) above to make any payment without deduction of income tax,
Where tax assessed under subsection (6) above on the paying or payer company is not paid by that company before the expiry of the period of three months from the date on which that tax is payable, that tax shall, without prejudice to the right to recover it from that company, be recoverable from the receiving or recipient company.
In determining for the purposes of this section whether one body corporate is a 51 per cent. subsidiary of another, that other shall be treated as not being the owner—
of any share capital which it owns directly or indirectly in a body corporate not resident in the United Kingdom, or
of any share capital which it owns indirectly, and which is owned directly by a body corporate for which a profit on the sale of the shares would be a trading receipt.
For the purposes of this section—
“trading or holding company” means a trading company or a company the business of which consists wholly or mainly in the holding of shares or securities of trading companies which are its 90 per cent. subsidiaries;
“trading company” means a company whose business consists wholly or mainly of the carrying on of a trade or trades; and
a company is owned by a consortium if three-quarters or more of the ordinary share capital of the company is beneficially owned between them by companies resident in the United Kingdom of which none beneficially owns less than one-twentieth of that capital, and those companies are called the members of the consortium.
References in this section to dividends or payments received by a company apply to any received by another person on behalf of or in trust for the company, but not to any received by the company on behalf of or in trust for another person, and references to “group income” shall be construed accordingly.
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The Board may make regulations with respect to the procedure to be adopted for giving effect to section 247 and as to the information and evidence to be furnished by a company in connection with that section and, subject to the provisions of such regulations, an election under that section (“the election”) shall be made by notice to the inspector which shall set out the facts necessary to show that the companies are entitled to make the election.
The election shall not have effect in relation to dividends or other payments paid less than three months after the giving of the notice and before the inspector is satisfied that the election is validly made, and has so notified the companies concerned; but shall be of no effect if within those three months the inspector notifies the companies concerned that the validity of the election is not established to his satisfaction.
The companies concerned shall have the like right of appeal against any decision that the validity of the election is not established as the company paying the dividends or other payments would have if it were an assessment made on that company, and Part V of the Management Act shall apply accordingly.
The election shall cease to be in force if at any time the companies cease to be entitled to make the election, and on that happening each company shall forthwith notify the inspector.
Either of the companies making the election may at any time give the inspector notice revoking the election; and any such notice shall have effect from the time it is given.
The Board shall not make any regulations under subsection (1) above unless a draft of them has been laid before and approved by a resolution of the House of Commons.
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Subject to subsections (7) to (9) below, this section applies to any of the following share capital, that is to say—
any share capital issued by a company resident in the United Kingdom in consequence of the exercise by any person of an option conferred on him to receive in respect of shares in the company (whether the last-mentioned shares were issued before or after the coming into force of this section) either a dividend in cash or additional share capital; and
any bonus share capital issued by a company so resident in respect of any shares in the company of a relevant class (whether the last-mentioned shares were issued before or after the coming into force of this section).
For the purposes of subsection (1)(b) above a class of shares is a relevant class if—
shares of that class carry the right to receive bonus share capital in the company of the same or a different class; and
that right is conferred by the terms on which shares of that class were originally issued or by those terms as subsequently extended or otherwise varied.
Where a company issues any share capital in a case in which two or more persons are entitled thereto, the following provisions of this section and paragraph 12(1) to (3) of Schedule 19 shall have effect as if the company had issued to each of those persons separately a part of that share capital proportionate to his interest therein on the due date of issue.
Subject to the following provisions of this section, where a company issues any share capital in a case in which an individual is beneficially entitled to that share capital, that individual shall be treated as having received on the due date of issue income of an amount which, if reduced by an amount equal to income tax on that income at the basic rate for the year of assessment in which that date fell, would be equal to the appropriate amount in cash, and—
no assessment shall be made on the individual in respect of income tax at the basic rate on that income but he shall be treated as having paid tax at the basic rate on it or, if his total income is reduced by any deductions, on so much of it as is part of his total income as so reduced;
no repayment shall be made of income tax treated by virtue of paragraph (a) above as having been paid; and
that income shall be treated for the purposes of sections 348 and 349(1) as not brought into charge to income tax.
Where a company issues any share capital to the personal representatives of a deceased person as such during the administration period, the amount of income which, if the case had been one in which an individual was beneficially entitled to that share capital, that individual would have been treated under subsection (4) above as having received shall be deemed for the purposes of Part XVI to be part of the aggregate income of the estate of the deceased. This subsection shall be construed as if it were contained in Part XVI.
Where a company issues any share capital to trustees in respect of any shares in the company held by them (or by them and one or more other persons) in a case in which a dividend in cash paid to the trustees in respect of those shares would have been to any extent income to which section 686 applies, then—
there shall be ascertained the amount of income which, if the case had been one in which an individual was beneficially entitled to that share capital, that individual would have been treated under subsection (4) above as having received; and
income of that amount shall be treated as having arisen to the trustees on the due date of issue and as if it had been chargeable to income tax at the basic rate; and
paragraphs (a) to (c) of subsection (4) above shall, with the substitution of “income” for “total income” and with all other necessary modifications, apply to that income as they apply to income which an individual is treated as having received under that subsection.
This section does not apply to—
any share capital of which the due date of issue is earlier than 6th April 1975; or
any share capital issued by a company in respect of shares in the company which confer on the holder a right to convert or exchange them into or for shares in the company of a class which is not a relevant class for the purposes of subsection (1)(b) above where the due date of issue of the share capital so issued precedes the earlier of the following dates, namely—
the day next after the earliest date after 5th August 1975 on which conversion or exchange of the shares could be effected by an exercise of that right; and
6th April 1976 or, in the case of share capital issued by an investment trust, 6th April 1977.
Where, in a case within subsection (4) above, the share capital in question is issued in respect of shares in the company issued before 6th April 1975 which confer on the holder a right to convert or exchange them into or for shares of a different class, this section shall not apply to so much (if any) of any bonus share capital issued by the company after 5th April 1976 in connection with an exercise of that right as would have been issued if that right had been exercised so as to effect the conversion or exchange of the shares on the earliest possible date after 5th April 1975; and subsections (5) and (6) above shall, where applicable, have effect accordingly.
Where any bonus share capital falling within subsection (1)(b) above is after 5th April 1975 converted into or exchanged for shares in the company in question of a different class, then—
this section shall not apply to any shares in the company issued, in connection with the conversion or exchange, in consideration of the cancellation, extinguishment or acquisition by the company of that bonus share capital; but
section 230(a) and (b) shall apply to any shares in the company issued, in connection with the conversion or exchange, in consideration of the cancellation, extinguishment or acquisition by the company of so much of that bonus share capital as caused an individual to be treated under subsection (4) above as having received an amount of income on the due date of issue (or would have done so if the case had been one in which an individual was beneficially entitled to that share capital).
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A company shall for each of its accounting periods make, in accordance with this section, returns to the inspector of all share capital to which section 249 applies (“relevant share capital”) and which was issued by it in that period.
A return shall be made for—
each complete quarter falling within the accounting period, that is to say, each of the periods of three months ending with 31st March, 30th June, 30th September or 31st December which falls within that period;
each part of the accounting period which is not a complete quarter and ends on the first (or only), or begins immediately after the last (or only), of those dates which falls within the accounting period;
if none of those dates falls within the accounting period, the whole accounting period.
A return for any period for which a return is required to be made under this section (a “return period”) shall be made within 30 days from the end of that period.
No return need be made under this section by a company for any period in which it has issued no relevant share capital.
The return made by a company for any return period shall state—
the date on which any relevant share capital issued by it in the period was issued and, if different, the date on which the company was first required to issue it;
particulars of the terms on which any such share capital so issued by it was issued; and
what is, in relation to any such share capital so issued, the appropriate amount in cash.
If it appears to the inspector that a company ought to have, but has not, made a return for any return period, he may (notwithstanding subsection (4) above) by notice require the company to make a return for that period within such time (not being less than 30 days) as may be specified in the notice; and a return required to be made under this subsection shall, if such be the case, state that no relevant share capital was issued in the period in question.
As regards any share capital included in a return made under this section by a company, the inspector may by notice require the company to furnish him within such time (not being less than 30 days) as may be specified in the notice with such further information relating thereto as he may reasonably require for the purposes of sections 230 and 249, this section and section 251 and paragraph 12 of Schedule 19.
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For the purposes of sections 249 and 250 — and in section 254 the definition of “security” (in subsection (1)) and subsections (5) and (11) shall not apply.
“bonus share capital”, in relation to a company, means share capital issued by the company otherwise than wholly for new consideration or such part of any share capital so issued as is not properly referable to new consideration;
“due date of issue”, in relation to any share capital issued by a company, means the earliest date on which the company was required to issue that share capital;
an option to receive either a dividend in cash or additional share capital is conferred on a person not only where he is required to choose one or the other, but also where he is offered the one subject to a right, however expressed, to choose the other instead, and a person’s abandonment of, or failure to exercise, such a right is to be treated as an exercise of the option;
In sections 249 and 250 “the appropriate amount in cash”, in relation to any share capital to which section 249 applies—
in a case where that share capital was issued — and where the relevant cash dividend is not substantially greater nor substantially less than the market value of that share capital on the relevant date, means the amount of the relevant cash dividend or, in a case in which section 249(3) applies, a due proportion of that amount;
in consequence of the exercise of an option such as is mentioned in section 249(1)(a); or
in a quantity which is determined by or determines the amount of a dividend in cash payable in respect of share capital in the company of a different class,
in a case where paragraph (a) above does not apply, means the market value of that share capital on the relevant date or, in a case in which section 249(3) applies, a due proportion of that market value.
In subsection (2) above—
Where, in a case falling within subsection (2)(a)(ii) above, the company on the occasion on which it issues the share capital in question also issues a dividend in cash (“the accompanying cash dividend”) in respect of the shares in the company in respect of which that share capital is issued, “the relevant cash dividend” means the cash dividend mentioned in subsection (2)(a)(ii) above reduced by the amount of the accompanying cash dividend.
Section 150(3) of the 1979 Act (market value of shares or securities listed in the Stock Exchange Daily Official List) shall apply for the purposes of subsection (3) above as it applies for the purposes of that Act.
In the case of shares or securities which are not quoted on a recognised stock exchange at the time when their market value for the purposes of subsection (2) above falls to be determined, subsection (3) of section 152 of the 1979 Act shall apply with respect to the determination of their market value for those purposes as it applies with respect to a determination falling within subsection (1) of that section.
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If an inspector discovers that— ought not to have been made, or is or has become excessive, the inspector may make any such assessments as may in his judgment be required for recovering any tax that ought to have been paid or any payment of tax credit that ought not to have been made and generally for securing that the resulting liabilities to tax (including interest on unpaid tax) of the persons concerned are what they would have been if only such set-offs or payments had been made as ought to have been made.
any set-off of advance corporation tax under section 239, or
any set-off or payment of tax credit,
In any case where— an assessment under this section may be made for recovering any interest that ought not to have been paid.
interest has been paid under section 826 on a payment of tax credit; and
interest ought not to have been paid on that payment, either at all or to any extent,
Where— any sum recovered shall as far as possible be treated as relating to a payment of tax credit made later rather than to a payment made earlier.
an assessment is made under this section to recover tax credit paid to a company in respect of franked investment income received by the company in an accounting period; and
more than one payment of tax credit has been made in respect of that period,
Subsections (2) and (3) above shall have effect in relation to payments of tax credit claimed in respect of accounting periods ending after such day as may be appointed for the purpose of those subsections by order made by the Treasury, not being earlier than 31st March 1992.
The Management Act shall apply to any assessment under this section for recovering a payment of tax credit or interest on such a payment as if it were an assessment to income tax for the year of assessment, or in the case of a company, corporation tax for the accounting period, in respect of which the payment was claimed, and as if that payment represented a loss of tax to the Crown; and any sum charged by any such assessment shall, subject to any appeal against the assessment, be due within 14 days after the issue of the notice of assessment.
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The Board may by regulations— and references in this Act and in any other enactment to section 234(5) to (9) and to Schedule 13 shall be construed as including references to any such regulations.
modify, supplement or replace any of the provisions of subsections (5) to (9) of section 234 for the purpose of requiring companies resident in the United Kingdom to make returns and give information to the inspector in respect of distributions made by them, whether before or after the passing of this Act, which are not qualifying distributions;
modify, supplement or replace any of the provisions of Schedule 13 for the purpose of regulating the time and manner in which advance corporation tax is to be accounted for and paid or the manner in which effect is to be given to section 241(1) to (3);
Without prejudice to the generality of subsection (1) above, regulations under that subsection may, in relation to advance corporation tax, modify any provision of Parts II to VI of the Management Act or apply any such provision with or without modifications.
Regulations under this section may—
make different provision for different descriptions of companies and for different circumstances and may authorise the Board, where in their opinion there are special circumstances justifying it, to make special arrangements as respects advance corporation tax or the repayment of income tax borne by a company or the payment to a company of amounts in respect of any tax credit to which it is entitled;
include such transitional and other supplemental provisions as appear to the Board to be expedient or necessary.
The Board shall not make any regulations under this section unless a draft of them has been laid before and approved by a resolution of the House of Commons.
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In this Part, except where the context otherwise requires— and in this section “a 90 per cent. group” means a company and all of its 90 per cent. subsidiaries.
Sub-paragraph (d)above does not apply where the acquisition, construction or extension concerned was made in pursuance of a contract entered into before 24thMarch 1973. For the purposes of sub-paragraph (1)(a)(iv)above, share or loan capital or debt shall be deemed to be issued or incurred otherwise than for adequate consideration if— In relation to any loan capital or debt mentioned in sub-paragraph (1)(c)above which was issued or incurred by the company for money borrowed by it for the purpose of financing expenditure on any acquisition, construction or extension falling within sub-paragraph (1)(d)above, the expression “loan creditor” in sub-paragraph (1)(c)above shall be construed as if, in the definition of that expression in subsections (7)to (9)of section 417,subsection (9)were omitted. References in sub-paragraphs (1)(a)and (2)(b)above to the redemption or repayment of a company’s share capital shall be construed as including references to the purchase by the company of its own shares. References in sub-paragraphs (1)to (4)above to money applied or to be applied for any purpose shall be deemed to include references to money applied or to be applied in or towards the replacement of that money.
consist of or include a distribution of all or any of the apportioned income; and
exceed the company’s relevant income for that later period,
In this Part, the expressions “in respect of shares in the company” and “in respect of securities of the company”, in relation to a company which is a member of a 90 per cent. group, mean respectively in respect of shares in that company or any other company in the group and in respect of securities of that company or any other company in the group.
Without prejudice to section 209(2)(b) as extended by subsection (2) above, in relation to a company which is a member of a 90 per cent. group, “distribution” includes anything distributed out of assets of the company (whether in cash or otherwise) in respect of shares in or securities of another company in the group.
Nothing in subsections (2) and (3) above shall require a company to be treated as making a distribution to any other company which is in the same group and is resident in the United Kingdom.
Where share capital has been issued at a premium representing new consideration, any part of that premium afterwards applied in paying up share capital shall be treated as new consideration also for that share capital, except in so far as the premium has been taken into account under section 211(5) so as to enable a distribution to be treated as a repayment of share capital.
Subject to subsection (7) below, no consideration derived from the value of any share capital or security of a company, or from voting or other rights in a company, shall be regarded for the purposes of this Part as new consideration received by the company unless the consideration consists of—
money or value received from the company as a qualifying distribution;
money received from the company as a payment which for those purposes constitutes a repayment of that share capital or of the principal secured by the security; or
the giving up of the right to the share capital or security on its cancellation, extinguishment or acquisition by the company.
No amount shall be regarded as new consideration by virtue of subsection (6)(b) or (c) above in so far as it exceeds any new consideration received by the company for the issue of the share capital or security in question or, in the case of share capital which constituted a qualifying distribution on issue, the nominal value of that share capital.
Where two or more companies enter into arrangements to make distributions to each other’s members, all parties concerned (however many) may for the purposes of this Part be treated as if anything done by any one of those companies had been done by any of the others.
A distribution shall be treated under this Part as made, or consideration as provided, out of assets of a company if the cost falls on the company.
References in this Part to issuing share capital as paid up apply also to the paying up of any issued share capital.
Where securities are issued at a price less than the amount repayable on them, and are not quoted on a recognised stock exchange, the principal secured shall not be taken for the purposes of this Part to exceed the issue price, unless the securities are issued on terms reasonably comparable with the terms of issue of securities so quoted.
For the purposes of this Part a thing is to be regarded as done in respect of a share if it is done to a person as being the holder of the share, or as having at a particular time been the holder, or is done in pursuance of a right granted or offer made in respect of a share; and anything done in respect of shares by reference to share holdings at a particular time is to be regarded as done to the then holders of the shares or the personal representatives of any share holder then dead. This subsection shall apply in relation to securities as it applies in relation to shares.
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Where any right or obligation created before 6th April 1973 is expressed by reference to a dividend at a gross rate or of a gross amount, that right or obligation shall continue to have effect, in relation to a dividend payable on or after that date, as if the reference were to a dividend of an amount which, when there is added to it such proportion thereof as corresponds to the rate of advance corporation tax in force on that date, that is to say, 6th April 1973, is equal to a dividend at that gross rate or of that gross amount.
Subsection (1) above shall apply with the necessary modifications to a dividend partly at a gross rate or of a gross amount and shall apply to any distribution other than a dividend as it applies to a dividend.
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Subject to the provisions of this section and section 261, the claimant shall be entitled—
if he proves— to a deduction of £3,795 from his total income;
that for the year of assessment he has his wife living with him, or
that his wife is wholly maintained by him during the year of assessment, and that he is not entitled in computing the amount of his income for that year for income tax purposes to make any deduction in respect of the sums paid for the maintenance of his wife,
in any other case, to a deduction of £2,425 from his total income.
Subject to the provisions of this section, subsection (1) above shall have effect— and for the purposes of this subsection a person who would have been of the age of 65 or upwards within the year of assessment if he had not died in the course of it shall be treated as having been of that age within that year.
in relation to a claim by a person who proves that he or his wife was at any time within the year of assessment of the age of 65 or upwards, as if the sum specified in paragraph (a) were £4,675; and
in relation to a claim by a person who proves that he was at any time within the year of assessment of the age of 65 or upwards, as if the sum specified in paragraph (b) were £2,960;
Subject to the provisions of this section, subsection (1) above shall have effect— and for the purposes of this subsection, a person who would have been of the age of 80 or upwards within the year of assessment if he had not died in the course of it shall be treated as having been of that age within that year.
in relation to a claim by a person who proves that he or his wife was at any time within the year of assessment of the age of 80 or upwards, as if the sum specified in paragraph (a) were £4,845; and
in relation to a claim by a person who proves that he was at any time within the year of assessment of the age of 80 or upwards, as if the sum specified in paragraph (b) were £3,070;
For any year of assessment for which a person is entitled to increased personal relief by virtue of subsection (3) above, he shall not be entitled to increased relief under subsection (2) above.
Where the claimant’s total income for the year of assessment exceeds £9,800, subsections (2) and (3) above shall not apply except in a case where the deduction to be allowed under subsection (1) above will be increased by virtue of this subsection; and in such a case subsection (2) or (3), as the case may be, shall apply as if the sums mentioned in it were reduced by two-thirds of the excess of that total income over £9,800.
If the total income of the claimant includes any earned income of his wife, the deduction to be allowed under this section shall be increased by the amount of that earned income or by £2,425, whichever is the less.
For the purposes of subsection (6) above—
any earned income of the claimant’s wife arising in respect of any pension, superannuation or other allowance, deferred pay or compensation for loss of office, given in respect of his past services in any office or employment, shall be deemed not to be earned income of his wife; and
no payment of benefit under the Social Security Acts 1975 or the Social Security (Northern Ireland) Acts 1975 except— shall be treated as earned income.
a Category A retirement pension (exclusive of any increase under section 10 of the Social Security Pensions Act 1975 or Article 12 of the Social Security Pensions (Northern Ireland) Order 1975);
unemployment benefit, and
invalid care allowance,
Subsection (1) above shall have effect in relation to any claim by a man who becomes married in the year of assessment for which the claim is made and has not previously in that year been entitled to relief under paragraph (a) of that subsection, as if the sum specified in that paragraph were reduced, for each month of that year ending before the date of the marriage, by one-twelfth of the amount by which it exceeds the sum specified in paragraph (b) of that subsection. In this subsection “month” means a month beginning with the 6th day of a month of the calendar year.
If the retail prices index for the month of December preceding a year of assessment is higher than it was for the previous December, then, unless Parliament otherwise determines, this section shall apply for that year as if for each amount specified in subsections (1) to (6) above as they applied for the previous year (whether by virtue of this subsection or otherwise) there were substituted an amount arrived at by increasing the amount for the previous year by the same percentage as the percentage increase in the retail prices index, and if—
in the case of an amount specified in subsection (5) above, the result is not a multiple of £100, rounding it up to the nearest amount which is such a multiple;
in the case of any other amount, the increase is not a multiple of £10, rounding the increase up to the nearest amount which is such a multiple.
Subsection (9) above shall not require any change to be made in the amounts deductible or repayable under section 203 between the beginning of a year of assessment and 5th May in that year.
The Treasury shall in each year of assessment make an order specifying the amounts which by virtue of subsection (9) above will be treated as specified for the following year of assessment in subsections (1) to (6) above.
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If the claimant proves that he is a widower and that for the year of assessment a person, being a relative of his or of his deceased wife, is resident with him in the capacity of a housekeeper, or that he has no relative of his own or of his deceased wife who is able and willing to act in such capacity and that he has employed some other person to reside with him for the purpose, he shall be entitled to a deduction of £100 from his total income in respect of that relative or person.
No relief shall be allowed under this section—
unless the claimant proves that no other individual is entitled to relief in respect of the relative under the provisions of this Chapter, or, if any other individual is so entitled, that the other individual has relinquished his claim thereto; or
where the relative is a married woman living with her husband, and the husband has claimed and been allowed the higher relief under section 257(1), or the relative is a man who has claimed and been allowed that higher relief; or
to a person entitled to relief under section 259.
Not more than one deduction shall be allowed under this section to any claimant for any year.
This section shall apply to a claimant being a widow as it applies to a claimant being a widower, with the substitution of “her deceased husband” for “his deceased wife”.
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This section applies—
to any individual who is not entitled for the year of assessment to the higher (married persons) relief under section 257(1); and
to any married man who is entitled for the year of assessment to that higher relief but whose wife was throughout that year totally incapacitated by physical or mental infirmity.
Subject to subsections (3) and (4) below and to section 260, if the claimant, being a person to whom this section applies, proves in the case of a year of assessment that a qualifying child is resident with him for the whole or part of the year, he shall be entitled to a deduction from his total income of an amount equal to the difference between the higher (married persons) relief and the lower (single persons) relief under subsection (1) of section 257 as it applies to persons not falling within subsection (2) or (3) of that section.
A claimant is entitled to only one deduction under subsection (2) above for any year of assessment irrespective of the number of qualifying children resident with him in that year.
A person to whom this section applies by virtue of subsection (1)(a) above shall not be entitled to relief under this section for a year of assessment during any part of which that person is married and living with his or her spouse unless the child in connection with whom the relief is claimed is resident with that person during a part of the year in which that person is not married and living with his or her spouse.
For the purposes of this section a qualifying child means, in relation to any claimant and any year of assessment, a child who—
is born in, or is under the age of 16 years at the commencement of, the year or, being over that age at the commencement of that year, is receiving full-time instruction at any university, college, school or other educational establishment; and
is a child of the claimant or, not being such a child, is born in, or is under the age of 18 years at the commencement of, the year and maintained for the whole or part of that year by the claimant at his own expense.
In subsection (5)(a) above the reference to a child receiving full-time instruction at an educational establishment includes a reference to a child undergoing training by any person (“the employer”) for any trade, profession or vocation in such circumstances that the child is required to devote the whole of his time to the training for a period of not less than two years. For the purposes of a claim in connection with a child undergoing training, the inspector may require the employer to furnish particulars with respect to the training of the child in such form as may be prescribed by the Board.
If any question arises under this section whether a child is receiving full-time instruction at an educational establishment, the Board may consult the Secretary of State or the Department of Education for Northern Ireland.
In subsection (5)(b) above the reference to a child of the claimant includes a reference to a stepchild of his, an illegitimate child of his if he has married the other parent after the child’s birth and an adopted child of his if the child was under the age of 18 years when he was adopted.
Notwithstanding anything in section 9 of the Family Law Reform Act 1969 or section 5 of the Age of Majority Act (Northern Ireland) 1969 or any rule of law in Scotland, for the purposes of subsection (5) above a child whose birthday falls on 6th April shall be taken to be over the age of 16 at the commencement of the year which begins with his 16th birthday and over the age of 18 at the commencement of the year which begins with his 18th birthday.
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Where for any year of assessment two or more individuals are entitled to relief under section 259 in connection with the same child—
the amount referred to in subsection (2) of that section shall be apportioned between them; and
the deduction to which each of them is entitled under that section shall, subject to subsection (2) below, be equal to so much of that amount as is apportioned to him.
Where for any year of assessment amounts are apportioned to an individual under this section in respect of two or more children, the deduction to which he is entitled for that year under section 259 shall be equal to the sum of those amounts or the amount referred to in subsection (2) of that section, whichever is the less.
Any amount required to be apportioned under this section shall be apportioned between the individuals concerned in such proportions as may be agreed between them or, in default of agreement, in proportion to the length of the periods for which the child in question is resident with them respectively in the year of assessment; and where the proportions are not so agreed, the apportionment shall be made by such body of General Commissioners, being the General Commissioners for a division in which one of the individuals resides, as the Board may direct, or, if none of the individuals resides in Great Britain, by the Special Commissioners.
Where a claim is made under section 259 and it appears that, if the claim is allowed, an apportionment will be necessary under this section, the Board may if they think fit direct that the claim itself shall be dealt with by any specified body of Commissioners which could under this section be directed to make the apportionment and that the same Commissioners shall also make any apportionment which proves to be necessary; and where a direction is given under this subsection no other body of Commissioners shall have jurisdiction to determine the claim.
The Commissioners making any apportionment under this section shall hear and determine the case in like manner as an appeal, but any individual who is, or but for the provisions of this section would be, entitled to relief in connection with the child shall be entitled to appear and be heard by the Commissioners or to make representations to them in writing.
For the purposes of this section an individual shall not be regarded as entitled to relief under section 259 for any year of assessment in connection with the same child as another individual if there is another child in connection with whom he, and he alone, is entitled to relief under that section for that year.
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for that year of assessment, and
unless she marries again before the beginning of it, for the next following year of assessment,
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If the claimant proves that he maintains at his own expense— being (whether falling within paragraph (a) or (b) above) a person whose total income does not in a year exceed by more than £100 a sum equal to the basic retirement pension for that year, he shall be entitled in respect of each such person whom he so maintains to a deduction from his total income of £100 reduced, if the total income of the person so maintained exceeds the basic retirement pension, by the amount of the excess.
any relative of his or of his wife who is incapacitated by old age or infirmity from maintaining himself; or
his or his wife’s mother who, whether or not incapacitated, is either widowed, or living apart from her husband, or a single woman in consequence of dissolution or annulment of marriage,
Where the claimant under subsection (1) above is a woman—
the references in that subsection to the claimant’s wife shall be construed as references to the claimant’s husband; and
unless she is a married woman living with her husband, for each reference in that subsection to £100 there shall be substituted a reference to £145.
For the purposes of this section “the basic retirement pension” for any year means the aggregate of the payments to which a person would be entitled in that year on account of a Category A retirement pension under the Social Security Acts 1975 or the Social Security (Northern Ireland) Acts 1975 if the weekly rate of his pension consisted (and consisted only) of the full amount of the basic component.
Subject to subsection (7) below, where two or more persons jointly maintain any such person as is mentioned in subsection (1) above, the deduction of £100 or less mentioned in that subsection in respect of the person so maintained shall be apportioned between them in proportion to the amount or value of their respective contributions towards the maintenance of that person. The apportionment under this subsection may be effected as the persons entitled to claim the relief agree, and, subject to any such agreement, subsections (5) and (6) below shall apply to the apportionment.
Any apportionment under subsection (4) above shall be made by such body of General Commissioners, being the General Commissioners for a division in which one of the individuals resides, as the Board may direct, or, if none of the individuals resides in Great Britain, by the Special Commissioners.
Where a claim is made under subsection (1) above and it appears that, if the claim is allowed, an apportionment will be necessary under subsection (4) above, the Board may if they think fit direct that the claim itself shall be dealt with by any specified body of Commissioners which could under this section be directed to make the apportionment and that the same Commissioners shall also make any apportionment which proves to be necessary; and where a direction is given under this subsection no other body of Commissioners shall have jurisdiction to determine the claim.
Where, without subsection (2)(b) above, the claimant’s relief would fall to be reduced by any proportion under subsection (4) above, any increase in the claimant’s relief attributable to subsection (2)(b) above shall be reduced by the same proportion; and accordingly subsection (4) above shall be read without reference to the modifications made by subsection (2)(b).
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Subject to subsection (3) below, if the claimant proves— he shall be entitled to a deduction of £540 from his total income.
that he is a married man who for the year of assessment has his wife living with him, and that one of them was, and the other was not, a registered blind person for the whole or part of the year; or
that, not being such a married man, he was a registered blind person for the whole or part of the year,
Subject to subsection (3) below, if the claimant proves— he shall be entitled to a deduction of £1,080 from his total income.
that he is a married man who for the year of assessment has his wife living with him, and
that he was a registered blind person for the whole or part of the year and his wife was also a registered blind person for the whole or part of the year,
Unless a claimant who is entitled to relief for the year of assessment under section 264 in respect of the services of a son or daughter relinquishes his claim to that relief, he shall not be allowed relief under this section for that year.
In this section “registered blind person” means a person registered as a blind person in a register compiled under section 29 of the National Assistance Act 1948 or, in the case of a person ordinarily resident in Scotland or in Northern Ireland, a person who is a blind person within the meaning of section 64(1) of that Act.
Where— his wife shall be entitled to a deduction from her total income of an amount equal to the excess.
a man is entitled to relief under section 257A, but
the amount which he is entitled to deduct from his total income by virtue of that section exceeds what is left of his total income after all other deductions have been made from it,
This section shall not apply for a year of assessment unless the claimant’s husband has given to the inspector written notice that it is to apply; and any such notice—
shall be given not later than six years after the end of the year of assessment to which it relates,
shall be in such form as the Board may determine, and
shall be irrevocable.
Subject to the provisions of this section, section 274 and Schedules 14 and 15 and sections 192 to 194 of the Finance Act 2004, an eligible individual who pays any such premium as is specified in subsection (2) below . . . shall (without making any claim) be entitled to relief under this section.
The premiums referred to in subsection (1) above are any premiums paid by an individual under a policy of insurance or contract for a deferred annuity, where—
the payments are made to —
a person who has permission under Part 4A of the Financial Services and Markets Act 2000 or under paragraph 15 of Schedule 3 to that Act (as a result of qualifying for authorisation under paragraph 12(1) of that Schedule) to effect or carry out contracts of long-term insurance; or
a member of the Society who effects or carries out contracts of long-term insurance in accordance with Part 19 of the Financial Services and Markets Act 2000;
a registered friendly society; or
in the case of a deferred annuity, the National Debt Commissioners; and
the insurance or, as the case may be, the deferred annuity is on the life of the individual or on the life of his spouse or civil partner; and
the insurance or contract was made by him or his spouse or civil partner.
Subject to subsections . . . (10) and (11) below, no relief under this section shall be given—
except in respect of premiums payable under policies for securing a capital sum on death, whether in conjunction with any other benefit or not;
in respect of premiums payable under any policy issued in respect of an insurance made after 19th March 1968 unless the policy is a qualifying policy;
in respect of premiums payable under any policy issued in respect of an insurance made after 13th March 1984 . . . ;
in respect of premiums payable during the period of deferment in respect of a policy of deferred assurance.
Subject to subsection (8) below, relief under this section in respect of any premiums paid by an individual in a year of assessment shall be given by making good to the person to whom they are paid any deficiency arising from the deductions authorised under subsection (5) below; and this section and Schedule 14 shall have effect in relation to any premium or part of a premium which is paid otherwise than in the year of assessment in which it becomes due and payable as if it were paid in that year.
Subject to the provisions of Schedule 14—
an individual resident in the United Kingdom who is entitled to relief under this section in respect of any premium may deduct from any payment in respect of the premium and retain an amount equal to 12.5 per cent of the payment; and
the person to whom the payment is made shall accept the amount paid after the deduction in discharge of the individual’s liability to the same extent as if the deduction had not been made and may recover the deficiency from the Board.
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a person is entitled to relief under this section in respect of part only of a payment made to a registered friendly society; and
the insurance or contract was made by the society in the course of tax exempt life or endowment business (as defined in section 466(2)),
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subsection (4) above shall not apply; and
there shall be deducted from his total income an amount equal to one-half of that part of the payment. This subsection shall also apply in relation to any payment made to an organisation of persons in police service but only where the annual amount of the part of the payment attributable to the provision of the benefits in question is £20 or more.
Where the individual is not resident in the United Kingdom (but is entitled to relief by virtue of subsection (1A)(b)), subsection (4) above shall not apply but . . . the like relief shall be given to him under paragraph 6 of Schedule 14.
Subsections (5) and (8) above shall apply in relation to an individual who is not resident in the United Kingdom but is a member of the armed forces of the Crown or the spouseor civil partner of such a member as if the individual were so resident.
Subsection (3)(b) above shall not apply—
to any policy of life insurance having as its sole object the provision on an individual’s death or disability of a sum substantially the same as any amount then outstanding under a mortgage of his residence, or of any premises occupied by him for the purposes of a business, being a mortgage the principal amount secured by which is repayable by instalments payable annually or at shorter regular intervals; or
to any policy of life insurance issued in connection with an approved scheme as defined in Chapter I of Part XIV.
Subsection (3)(a) and (d) above shall not affect premiums payable—
under policies or contracts made in connection with any superannuation or bona fide pension scheme for the benefit of the employees of any employer, or of persons engaged in any particular trade, profession, vocation or business, or for the benefit of the spouse, civil partner, widow, widower , surviving civil partner or children or other dependants of any such employee or person, or
under policies taken out by teachers in the schools known in the year 1918 as secondary schools, pending the establishment of a superannuation or pension scheme for those teachers.
Schedule 14 shall have effect for the purpose of modifying, for certain cases, and supplementing the provisions of this section.
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Schedule 15, Part I of which contains the basic rules for determining whether or not a policy is a qualifying policy, Part II of which makes provision for the certification etc. of policies as qualifying policies and Part III of which modifies Parts I and II in their application to certain policies issued by non-resident companies, shall have effect for the purpose of determining whether or not a policy is a qualifying policy; and, accordingly, any reference in this Act to a qualifying policy shall be construed in accordance with that Schedule.
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Where a policy of life insurance to which this section applies has been issued and, within four years from the making of the insurance in respect of which it was issued, any of the following events happens, that is to say— the body by whom the policy was issued shall pay to the Board, out of the sums payable by reason of the surrender or, as the case may be, out of the sum falling due or out of the fund available to pay the sums which will be due on death or on the maturity of the policy, a sum determined in accordance with the following provisions of this section, unless the body is wound up and the event is a surrender or conversion effected in connection with the winding-up.
the surrender of the whole or part of the rights conferred by the policy;
the falling due (otherwise than on death) of a sum payable in pursuance of a right conferred by the policy to participate in profits; and
the conversion of the policy into a paid-up or partly paid-up policy;
The sum payable under subsection (1) above shall, subject to the following provisions of this section, be equal to the lower of the following, that is to say—
the appropriate percentage of the premiums payable under the policy up to the happening of the event; and
the surrender value of the policy at the time of the happening of the event less the complementary percentage of the premiums mentioned in paragraph (a) above.
If the event is one of those mentioned below, the sum payable to the Board shall not exceed the following limit, that is to say—
if it is the surrender of part of the rights conferred by the policy, the value of the rights surrendered at the time of the surrender;
if it is the conversion of the policy into a partly paid-up policy, the surrender value at the time of the conversion, of so much of the policy as is paid up; and
if it is the falling due of a sum, that sum.
If the event was preceded by the happening of such an event as is mentioned in subsection (1) above, subsection (2) above shall apply—
as if the lower of the amounts mentioned therein were reduced by the sum paid under this section in respect of the earlier event; and
if the earlier event was such an event as is mentioned in paragraph (a) or (c) of subsection (3) above, as if the surrender value of the policy were increased by the amount which, under that paragraph, limited or might have limited the sum payable under this section in respect of the earlier event.
For the purposes of this section the appropriate percentage, in relation to any event, is the percentage equal to the following fraction of the percentage found by doubling that mentioned in section 266(5)(a) as in force for the year of assessment in which the event happened, that is to say— and the complementary percentage, in relation to any event, is 100 per cent. less the appropriate percentage.
if the event happens in the first two of the four years mentioned in subsection (1) above, three-sixths;
if it happens in the third of those years, two-sixths; and
if it happens in the last of those years, one-sixth;
Where the annual amount of the premiums payable under a policy of life insurance is at any time increased (whether under the policy or by any contract made after its issue) so as to exceed by more than 25 per cent.— the additional rights attributable to the excess shall be treated for the purposes of this section as conferred by a new policy issued in respect of an insurance made at that time, and the excess shall be treated as premiums payable under the new policy.
if the insurance was made on or before 26th March 1974, the annual amount as at that date, or
in the case of any other insurance, the first annual amount so payable,
This section applies to any policy of life insurance which is a qualifying policy unless— and in relation to a policy of life insurance issued in respect of an insurance made before 27th March 1974 applies only in accordance with subsection (6) above.
it is a policy in respect of the premiums on which relief under section 266 is not available by virtue of subsection (3)(c) of that section; or
it is a policy of life insurance issued in connection with an approved scheme, as defined in Chapter I of Part XIV;
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Where a policy of life insurance to which this section applies has been issued and, in the fifth or any later year from the making of the insurance in respect of which it was issued, either of the following events happens, that is to say— then, if either of those events has happened before, the body by whom the policy was issued shall pay to the Board, out of the sums payable by reason of the surrender, or, as the case may be, out of the sum falling due, a sum determined in accordance with the following provisions of this section.
the surrender of the whole or part of the rights conferred by the policy; and
the falling due (otherwise than on death or maturity) of a sum payable in pursuance of a right conferred by the policy to participate in profits;
The sum payable under subsection (1) above shall, subject to the following provisions of this section, be equal to the applicable percentage of the lower of the following— and the percentage to be applied for this purpose shall be a percentage equal to that mentioned in section 266(5)(a) as in force for the year of assessment in which the event happens.
the total of the premiums which are payable in that year under the policy; and
the sums payable by reason of the surrender or, as the case may be, the sum falling due;
Where, after a sum has become payable under subsection (1) above, and within the same year from the making of the insurance, another such event happens as is mentioned therein, the sums payable under that subsection in respect of both or all of the events shall not exceed the applicable percentage of the total mentioned in subsection (2)(a) above.
Where, on the happening of an event in the fifth or any later year from the making of the insurance, any sum is payable under subsection (1) of section 268 as applied by subsection (6) of that section as well as under subsection (1) above, subsection (2) above shall apply as if the sums or sum mentioned in paragraph (b) thereof were reduced by the sum payable under that section.
This section applies to any policy of life insurance which is a qualifying policy unless—
it is a policy in respect of the premiums on which relief under section 266 is not available by virtue of subsection (3)(c) of that section; or
it is a policy issued in the course of an industrial insurance business; or
it was issued in respect of an insurance made before 27th March 1974.
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Where on the happening of an event in relation to a policy of life insurance a sum is payable under section 268 or 269, relief under section 266 in respect of the relevant premiums paid under the policy shall be reduced by the sum so payable or, as the case may be, by so much of the sum as does not exceed the amount of that relief (or as does not exceed so much of that amount as remains after any previous reduction under this section).
For the purposes of this section the relevant premiums are—
in relation to a sum payable under section 268, the premiums payable under the policy up to the happening of the event by reason of which the sum is payable; and
in relation to a sum payable under section 269, the premiums payable in the year (from the making of the insurance) in which the event happens by reason of which the sum is payable.
Where the relevant premiums are payable in more than one year of assessment the reduction in relief under this section shall, so far as possible, reduce relief for an earlier year of assessment before reducing relief for a later one.
Any sum paid under section 268 or 269 by reason of any event shall be treated— and where that sum exceeds that liability he shall be entitled, on a claim made by him not later than six years after the end of the year of assessment in which the event happens, to repayment of the excess.
as between the parties, as received by the person by whom the premiums under the policy were paid; and
for the purposes of section 266, as a sum paid by that person in satisfaction of his liability resulting from the reduction of relief under this section;
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Where— then, subject to subsection (2) below, the same results shall follow under sections 268 to 270 as if at the time the sum was lent there had been a surrender of part of the rights conferred by the policy or contract and the sum had been paid as consideration for the surrender (and if the policy is a qualifying policy, whether or not the premiums under it are eligible for relief under section 266, those results shall follow under section 269, whether or not a gain would be treated as arising on the surrender).
under section 547 a gain arising in connection with a policy or contract would be treated as forming part of an individual’s total income; and
the policy was issued in respect of an insurance made after 26th March 1974 or the contract was made after that date; and
any sum is at any time after the making of the insurance or contract lent to or at the direction of that individual by or by arrangement with the body issuing the policy or, as the case may be, the body with which the contract was made;
Subsection (1) above does not apply—
in relation to a policy if—
it is a qualifying policy; and
either interest at a commercial rate is payable on the sum lent or the sum is lent to a full-time employee of the body issuing the policy for the purpose of assisting him in the purchase or improvement of a dwelling used or to be used as his only or main residence; or
in relation to a contract if and to the extent that interest on the sum lent is eligible for relief under section 353 by virtue of section 365.
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Any body by whom a policy to which section 268 or 269 applies has been issued shall, within 30 days of the end of each period of 12 months ending with 31st March in every year, make a return to the collector of the sums which, in that period, have become payable by it under either of those sections.
Any sum which is to be included in a return made under subsection (1) above shall be due at the time by which the return is to be made and shall be paid without being demanded.
Where any sum which was or ought to have been included in such a return is not paid by the end of the period for which the return was to be made, it may be recovered by an assessment as if it were income tax for the year of assessment in which that period ends; and where it appears to the inspector that a sum which ought to have been so included had not been included or that a return is not correct he may make such an assessment to the best of his judgment.
All the provisions of the Income Tax Acts relating to the assessment and collection of tax, interest on unpaid tax, appeals and penalties shall, with the necessary modifications, apply in relation to sums due under this section; and for the purposes of those provisions so far as they relate to interest on unpaid tax, a sum assessed in pursuance of this section shall be treated as having been payable when it would have been payable had it been included in a return under subsection (1) above.
Where, on an appeal against an assessment made in pursuance of this section, it is determined that a greater sum has been assessed than was payable, the excess, if paid, shall be repaid.
Where a body has paid a sum which is payable under section 268 or 269 it shall give within 30 days to the person by whom the sum is, under section 270(4), treated as received a statement specifying that sum and showing how it has been arrived at.
The Board or an inspector may, by notice served on the body by whom a policy to which section 268 or 269 applies has been issued, require the body, within such time, not being less than 30 days, as may be specified in the notice— as the Board or officer may reasonably require for the purposes of those sections or this section.
to furnish such particulars; or
to make available for inspection by an officer authorised by the Board such books and other documents in the possession or under the control of the body;
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In this subsection “war insurance premiums” means any additional premium . . . paid in order to extend an existing life insurance policy to risks arising from war or war service abroad, and any part of any premium . . . paid in respect of a life insurance policy covering those risks, or either of them, which is attributable to those risks, or either of them.
The aggregate of the premiums . . . in respect of which relief is given to any person under section 266 shall not exceed £1,500 in any year of assessment or one-sixth of that person’s total income, whichever is the greater.
The aggregate of the relief given under section 266 in respect of premiums . . . payable for securing any benefits other than capital sums on death shall not exceed the amount of the income tax calculated at 12.5% on £100.
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in relation to premiums to which section 266 applies, means 15 per cent.;
in relation to other payments, means the basic rate of income tax.
War insurance premiums shall not be taken into account in calculating the limits of one-sixth of total income or of £100 mentioned in this section.
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This section applies if—
pursuant to an employer-financed retirement benefits scheme, the employer in any year of assessment pays a sum with a view to the provision of any relevant benefits for or in respect of any employee of that employer, and
the payment is made under such an insurance or contract as is mentioned in section 266. This section applies whether or not the accrual of the relevant benefits is dependent on any contingency.
Relief, if not otherwise allowable, shall be given to that employee under section 266 in respect of the payment to the extent, if any, to which such relief would have been allowable to him if—
the payment had been made by him, and
the insurance or contract under which the payment is made had been made with him.
For the purposes of subsection (1)(a) benefits are provided in respect of an employee if they are provided for the employee’s spouse, widow or widower, children, dependants or personal representatives.
If a sum within subsection (1) is paid with a view to the provision of benefits for or in respect of more than one employee of the employer, part of it is to be treated as paid for or in respect of each of them.
The amount treated as paid for or in respect of each employee is— where— A is the sum paid, B is the amount which would have had to be paid to secure the benefits to be provided for or in respect of the employee in question, and C is the total amount which would have had to be paid to secure the benefits to be provided for or in respect of all the employees if separate payments had been made in the case of each of them.
This section does not apply if—
in the year of assessment in which the sum is paid the earnings from the employee’s employment are (or, if there are none, would be if there were any) earnings charged on remittance, or
the employee is not domiciled in the United Kingdom in the tax year in which the sum is paid and the conditions in subsection (7) are met.
Those conditions are—
that the employment is with a foreign employer, and
that, on a claim made by the employee, the Board are satisfied that the pension scheme corresponds to a registered pension scheme.
In subsection (6)(a) “earnings charged on remittance” means earnings which are taxable earnings under—
section 22 of ITEPA 2003 (chargeable overseas earnings for year when remittance basis applies and employee outside section 26), or
section 26 of that Act (foreign earnings for year when remittance basis applies and employee meets section 26A requirement).
Section 835BA of ITA 2007 (deemed domicile) applies for the purposes of subsection (6)(b).
In this section—
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Where any of the claimant’s income is income the income tax on which (at the basic rate) he is entitled to charge against any other person, or to deduct, retain or satisfy out of any payment, he shall not be entitled to relief under this Chapter in respect of that income, except to the extent, if any, that the relief would exceed tax at the basic rate on that income.
Notwithstanding subsection (1) above, relief under section 273 may be given to the extent that the deduction from tax provided for by that section can be made from so much of the income tax with which the claimant is chargeable as exceeds what would be the amount of that tax if all income tax were chargeable at the basic rate to the exclusion of any other rate.
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Subject to subsection (2) below, the following persons having joint interests, that is to say— may claim any relief under this Chapter according to their respective shares and interests, and any such claims which are proved may be dealt with in the same manner as in the case of several interests.
coparceners, joint tenants, or tenants in common of the profits of any property, and
joint tenants, or tenants of land or tenements in partnership, being in the actual and joint occupation thereof in partnership, who are entitled to the profits thereof in shares, and
partners carrying on a trade, profession or vocation together who are entitled to the profits thereof in shares,
The income of a partner from a partnership carrying on any trade, profession or vocation shall be deemed to be the share to which he is entitled during the year to which the claim relates in the partnership profits, such profits being estimated according to the provisions of the Income Tax Acts.
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Subject to the provisions of this section, no relief under this Chapter shall be given in the case of any individual who is not resident in the United Kingdom.
Subject to subsection (3) below, subsection (1) above shall not apply in the case of any individual who satisfies the Board that he or she—
is a Commonwealth citizen or a citizen of the Republic of Ireland; or
is a person who is or who has been employed in the service of the Crown, or who is employed in the service of any missionary society or in the service of any territory under Her Majesty’s protection; or
is resident in the Isle of Man or the Channel Islands; or
has previously resided within the United Kingdom, and is resident abroad for the sake of his or her health, or the health of a member of his or her family resident with him or her; or
is a widow whose late husband was in the service of the Crown.
No relief under this Chapter shall be given so as to reduce the amount of the income tax payable by the individual below the amount which results from applying the fraction— to the amount which would have been payable by him by way of income tax if the tax were chargeable on his total income from all sources (including income which is not subject to income tax charged in the United Kingdom) where— A is the amount of his income subject to income tax charged in the United Kingdom; and B is the amount of his total income.
Subsection (3) above shall have effect as if the amount of any relief to which an individual is entitled under section 266(4) were an amount by which his liability to income tax is reduced.
For the purposes of subsection (3) above as it applies to an individual whose income includes income eligible for double taxation relief— and, accordingly, where this subsection applies, the amount of the tax chargeable in respect of the income eligible for double taxation relief shall not be affected by subsections (2) and (3) above.
in computing the amount of the income tax payable by the individual, the tax chargeable in respect of the income eligible for double taxation relief shall be disregarded;
in computing the amount of his income subject to income tax charged in the United Kingdom, the income eligible for double taxation relief shall be disregarded; and
in computing his total income from all sources, including income which is not subject to income tax charged in the United Kingdom, income eligible for double taxation relief shall be included, and the income tax which would be chargeable on that total income shall be computed without regard to the double taxation relief available in respect of the income eligible for double taxation relief;
Subsection (5) shall not operate so as to make the tax payable by an individual for a year of assessment higher than it would have been if the double taxation relief had not been available.
In subsection (5) above “income eligible for double taxation relief” means any dividends, interest, royalties or other profits which are chargeable to income tax but in respect of which relief (other than credit) is available under an Order in Council under section 788 so as to limit the rate of income tax so chargeable (but not so as to confer an exemption and make it income which is not subject to income tax charged in the United Kingdom).
Any claim which an individual is entitled to make by virtue of subsection (2) above shall be made to the Board.
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Subject to the provisions of this Chapter, a woman’s income chargeable to income tax shall, so far as it is income for— during which she is a married woman living with her husband, be deemed for income tax purposes to be his income and not to be her income.
a year of assessment; or
any part of a year of assessment, being a part beginning with 6th April,
The question whether there is any income of hers chargeable to income tax for any year of assessment and, if so, what is to be taken to be the amount thereof for income tax purposes shall not be affected by the provisions of subsection (1) above.
Any tax falling to be assessed in respect of any income which, under subsection (1) above, is to be deemed to be the income of a woman’s husband shall, instead of being assessed on her, or on her trustee, guardian, curator, receiver or committee, or on her executors or administrators, be assessable on him or, in the appropriate cases, on his trustee, guardian, curator, receiver or committee, or on his executors or administrators.
Nothing in subsection (3) above shall affect the operation of section 111.
Any deduction from a man’s total income made under section 257(6) and (7) shall be treated as reducing the earned income of his wife.
References in this section to a woman’s income include references to any sum which, apart from the provisions of this section, would fall to be included in computing her total income, and this subsection has effect in relation to any such sum notwithstanding that some enactment (including, except so far as the contrary is expressly provided, an enactment passed after the passing of this Act) requires that that sum should not be treated as income of any person other than her.
For the purposes of sections 380 and 381 of this Act and section 71 of the 1968 Act (set off of capital allowances against general income), subsection (1)(b) above shall have effect as if the words “being a part beginning with 6th April” were omitted.
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Where during any part of a year of assessment a husband and wife are living together but his income for that year does not or, if there were any, would not include any of hers, then if either of them— that amount or, as the case may be, so much of it as cannot be deducted from or set off against his or her own income for that year shall instead be deducted from and set off against the income for that year of the other spouse.
would, if he or she had sufficient income for that year, be entitled to have any amount deducted from or set off against it under a provision to which this subsection applies, and
makes a claim in that behalf,
Subsection (1) above applies—
in the case of the husband, to any provision of Chapter I of this Part and sections 289 and 353;
in the case of the wife, to—
any provision of that Chapter except sections 257(1)(b), (2)(b) and (3)(b), 258, 259 and 262;
section 289 but only in respect of amounts subscribed by her for shares issued in the part of the year of assessment mentioned in subsection (1) above; and
section 353 so far as applicable to interest paid in the part of the year mentioned in subsection (1) above.
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Where in any year of assessment tax has been deducted under section 203 from the earned income of a wife and, apart from this section, a repayment of tax for that year would fall to be made to her husband in consequence of an assessment under Schedule E, so much of the repayment as is attributable to the tax so deducted shall be made to her and not to him.
The amount of a repayment attributable to tax deducted as mentioned in subsection (1) above is the excess (if any) of the total net tax so deducted in the year of assessment over the tax chargeable on the wife’s relevant earned income included in her husband’s total income for that year after allowing— but that amount shall not exceed the aggregate of the amounts repayable for that year in respect of the total net tax deducted in that year under section 203 from the income of the wife and the income of her husband.
any relief for that year under section 266 in respect of any payment made by her of the kind mentioned in paragraph 5 of Schedule 14; and
any relief for that year to which her husband is entitled under any other provision of the Income Tax Acts to the extent to which it cannot be allowed because his income, exclusive of her earned income, is insufficient;
Where in consequence of an assessment under Schedule E any amount is repayable under this section to the wife of the person on whom the assessment is made the inspector shall notify both of them of his determination of that amount and, subject to subsection (4) below, an appeal shall lie against the determination as if it were a decision on a claim.
Any appeal under subsection (3) above shall be to the General Commissioners for the division in which the spouses reside or, if they reside in different divisions, for the division in which one of them resides, as the Board may direct, or, if neither of them resides in Great Britain, to the Special Commissioners; and on any such appeal by one of the spouses the other shall have the same rights as an appellant, including any right to require the statement of a case for the opinion of the court.
The Board may make regulations—
modifying subsection (2) above in relation to such cases as may be specified in the regulations;
modifying section 824 in relation to cases in which a repayment falls to be made under this section.
This section does not apply to any repayment for a year of assessment—
for which the husband is chargeable to income tax at a rate or rates higher than the basic rate; or
for which any earned income of the wife has been assessed otherwise than under Schedule E.
For the purposes of this section earned income of a wife has the same meaning as for the purposes of subsection (6) of section 257 and relevant earned income of a wife means so much of her earned income as exceeds the relief available in respect of it under that subsection.
References in this section to the total net tax deducted in any year under section 203 are references to the total income tax deducted during that year by virtue of regulations made under that section less any income tax repaid by virtue of any such regulations.
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A married woman shall be treated for income tax purposes as living with her husband unless—
they are separated under an order of a court of competent jurisdiction, or by deed of separation, or
they are in fact separated in such circumstances that the separation is likely to be permanent.
Where a married woman is living with her husband and either— the same consequences shall follow for income tax purposes as would have followed if, throughout that year of assessment, they had been in fact separated in such circumstances that the separation was likely to be permanent.
one of them is, and the other is not, resident in the United Kingdom for a year of assessment, or
both of them are resident in the United Kingdom for a year of assessment, but one of them is, and the other is not, absent from the United Kingdom throughout that year,
Where subsection (2) above applies and the net aggregate amount of income tax falling to be borne by the husband and the wife for the year is greater than it would have been but for that subsection, the Board shall cause such relief to be given (by the reduction of such assessments on the husband or the wife or the repayment of such tax paid, by deduction or otherwise, by the husband or the wife, as the Board may direct) as will reduce that net aggregate amount by the amount of the excess.
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If, within six months before the 6th July in any year of assessment for which his income would include any of hers, a husband or a wife makes an application for the purpose in such manner and form as the Board may prescribe, income tax for that year shall be assessed, charged and recovered on the income of the husband and on the income of the wife as if they were not married, and all the provisions of the Income Tax Acts with respect to the assessment, charge and recovery of income tax shall, save as otherwise provided by those Acts, apply as if they were not married.
Notwithstanding an application under subsection (1) above the income of the husband and the wife shall be treated as one in estimating total income; and the amount of tax payable by each of them shall be ascertained by first dividing between them, in proportion to the amounts of their respective incomes, the amount that would be payable by them if no reliefs were given under Chapter I or III of this Part and then applying section 284 to give effect to those reliefs.
Subject to subsection (4) below, an application duly made by a husband or wife under subsection (1) above shall have effect, not only as respects the year of assessment for which it is made, but also for any subsequent year of assessment.
A person who has made any such application for any year of assessment may give, for any subsequent year of assessment, a notice to withdraw that application, and where such a notice is given, the application shall not have effect with respect to the year for which the notice is given or any subsequent year.
A notice of withdrawal under subsection (4) above shall be in such form, and be given in such manner, as may be prescribed by the Board, and shall not be valid unless it is given within the period allowed by law for making, for the year for which the notice is given, applications similar to that to which the notice relates.
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Where, by virtue of an application under section 283(1), income tax for any year of assessment is to be assessable and chargeable on the incomes of a husband and wife as if they were not married, the total relief given to the husband and the wife by way of personal reliefs shall be the same as if the application had not had effect with respect to the year and, subject to subsections (2) and (3) below, the reduction of tax flowing from the personal reliefs shall be allocated to the husband and the wife—
so far as it flows from relief under section 273 or Chapter III of this Part, to the husband or the wife according as he or she made the payment giving rise to the relief;
so far as it flows from relief in respect of a dependent relative under section 263 or relief in respect of a son or daughter under section 264, to the husband or the wife according as he or she maintains the relative or son or daughter; and
as to the balance, in proportion to the amounts of tax which would have been payable by them respectively if no personal reliefs had been allowable.
Subject to subsection (3) below, the amount of reduction of tax allocated to the wife by virtue of subsection (1) above shall not be less than the reduction resulting from section 279(5) in the tax chargeable in respect of her earned income, and the amount of reduction of tax allocated to the husband shall be correspondingly reduced.
Where the amount of reduction of tax allocated to the husband under subsection (1) above exceeds the tax chargeable on the income of the husband for the year of assessment, the balance shall be applied to reduce the tax chargeable on the income of the wife for that year; and where the amount of reduction of tax allocated to the wife under that subsection exceeds the tax chargeable on her income for the year of assessment, the balance shall be applied to reduce the tax chargeable on the income of the husband for that year.
Returns of the total incomes of the husband and the wife may be made for the purposes of this section either by the husband or by the wife, but, if the Board are not satisfied with any such return, they may obtain a return from the wife or the husband, as the case may be.
In this section “personal reliefs” means the reliefs provided for by Chapters I and III of this Part.
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Where an appeal against the original assessment has been heard in whole or in part by the Special Commissioners, any appeal from the notice under subsection (1) above shall be an appeal to the Special Commissioners, and where an appeal against the original assessment has been heard in whole or in part by the General Commissioners for any division, any appeal from the notice shall be an appeal to the General Commissioners for that division.
Where a notice is given under subsection (1) above—
income tax up to the amount required to be paid by the notice shall cease to be recoverable under the original assessment, and
where the tax charged by the original assessment carried interest under section 86 of the Management Act, such adjustment shall be made of the amount payable under that section in relation to that assessment, and such repayment shall be made of any amounts previously paid under that section in relation thereto, as are necessary to secure that the total sum, if any, paid or payable under that section in relation to that assessment is the same as it would have been if the amount which ceases to be recoverable had never been charged.
Where the amount payable under a notice given under subsection (1) above is reduced as the result of an appeal, or of the stating of a case for the opinion of the High Court—
the Board shall, if in the light of that result they are satisfied that the original assessment was excessive, cause such relief to be given by way of repayment or otherwise as appears to them to be just, but
subject to any relief so given, a sum equal to the reduction in the amount payable under the notice shall again become recoverable under the original assessment.
The Board and the inspector shall have the like powers of obtaining information with a view to the giving of, and otherwise in connection with, a notice under subsection (1) above as they would have had with a view to the making of, and otherwise in connection with, the potential assessment if the necessary conditions had been fulfilled for the making of such an assessment.
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Where a woman dies who at any time before her death was a married woman living with her husband, he or, if he is dead, his executors or administrators, may, not later than two months from the date of the grant of probate or letters of administration in respect of her estate or, with the consent of her executors or administrators, at any later date, serve on her executors or administrators and on the inspector a notice declaring that, to the extent permitted by this section, he disclaims or they disclaim responsibility for unpaid income tax in respect of all income of hers for any year of assessment or part of a year of assessment during which he was her husband and she was living with him.
A notice under subsection (1) above shall not be deemed to be validly served on the inspector unless it specifies the names and addresses of the woman’s executors or administrators.
Where a notice under subsection (1) above has been duly served on a woman’s executors or administrators and on the inspector—
it shall be the duty of the Board to exercise such powers as they may then or thereafter be entitled to exercise under section 285 in connection with any assessment made on or before the date when the service of the notice is completed, being an assessment in respect of any of the income to which the notice relates; and
the assessments (if any) which may be made after that date shall in all respects, and in particular as respects the persons assessable and the tax payable, be the assessments which would have fallen to be made if—
an application for separate assessment under section 283(1) had been in force in respect of the year of assessment in question; and
all assessments previously made had been made accordingly.
In the application of this section to Scotland, the reference to the date of the grant of probate or letters of administration shall be construed as a reference to the date of confirmation.
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Where a man and his wife living with him jointly so elect or have elected for any year of assessment, the wife’s earnings and their other income shall be chargeable to income tax as provided in the following provisions of this section.
References in this section to the wife’s earnings are references to any earned income of hers other than—
income arising in respect of any pension, superannuation or other allowance, deferred pay or compensation for loss of office given in respect of the husband’s past services in any office or employment; or
any payment of benefit under the Social Security Acts except a Category A retirement pension (exclusive of any increase under section 10 of the Social Security Pensions Act 1975 or Article 12 of the Social Security Pensions (Northern Ireland) Order 1975), unemployment benefit or invalid care allowance. In this subsection “the Social Security Acts” means the Social Security Acts 1975 and the Social Security (Northern Ireland) Acts 1975.
In charging the income of the husband and wife in accordance with section 279—
the wife’s earnings shall be charged to income tax as if she were a single woman with no other income; and
the husband’s other income shall be charged to income tax as if the wife’s earnings were nil.
Subject to subsections (5) and (6) below, the reliefs to be given under Chapter I of this Part shall be determined as if the husband and the wife were not married and— and accordingly the reliefs to be given under that Chapter in respect of the income chargeable under either paragraph (a) or paragraph (b) of subsection (3) above shall not reduce the tax or the income chargeable under the other of those paragraphs.
the wife’s earnings were her only income; and
the husband’s income included all income of the wife, other than her earnings;
No relief shall be given to either the husband or the wife under section 257(2) or (3) or 259.
References in Chapter I of this Part to the claimant shall be construed as including the wife.
Notwithstanding anything to the contrary in the Income Tax Acts, where any amount is under any provision of those Acts to be deducted from or set off against income in respect of any payments, loss or capital allowance, then—
if under that provision it is (or is in the first instance) to reduce the wife’s earned income, or is to be deducted or set off in respect of payments made by her or, in the case of relief under Chapter III of this Part, in respect of a payment made by her as a subscription for shares, it shall be treated as reducing her earnings and as not reducing any other income; and
in any other case, it shall be treated as not reducing the wife’s earnings.
Subsection (7) above shall not affect the giving of any relief under section 388 for a year of assessment for which no election under this section was in force.
Income tax charged on the wife’s earnings under subsection (3)(a) above shall, whether or not an application under section 283 is in force, be assessed and recovered as if she were a single woman, and any repayment of tax assessed in pursuance of this subsection shall be made to her.
Where subsection (4) of section 284 applies for the purposes of subsections (1) to (3) of that section, it shall apply also for the purposes of this section; but, subject to that, nothing in this section shall be taken to affect the provisions of the Management Act as to returns.
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An election under section 287 (“an election”) must be made in such form and manner as the Board may prescribe and must be made not earlier than six months before the beginning of the year of assessment for which it is made nor later than 12 months after the end of that year or such later time as the Board may in any particular case allow.
An election for any year of assessment shall, unless revoked, have effect for any subsequent year of assessment.
An election in force for any year may be revoked by notice in such form and manner as the Board may prescribe and any such notice must be given jointly by the husband and the wife not later than 12 months after the end of that year or such later time as the Board may in any particular case allow.
An election or revocation of an election under this section that could have been made jointly with a person who has died may, within the time permitted by this section, be made jointly with his personal representatives.
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This Chapter has effect for affording relief from income tax where an individual who qualifies for the relief subscribes for eligible shares in a qualifying company, and either—
those shares are issued to him after 5th April 1983 for the purpose of raising money for a qualifying trade which is being carried on by the company or which it intends to carry on; or
those shares are issued to him after 18th March 1986 for the purpose of raising money—
for research and development which is being carried on by the company or by any subsidiary of the company on the date on which the shares are issued, or begins so to be carried on immediately thereafter, and from which it is intended that a qualifying trade (to be so carried on) will be derived; or
both for any such research and development and the resulting trade; or
those shares are issued to him after 5th April 1985 and before 19th March 1986 for the purpose of raising money—
for research and development which is being carried on at the time when the shares are issued, or begins immediately thereafter, and from which the company intends to derive a qualifying trade which will be carried on by it; or
both for any such research and development and the resulting trade; or
those shares are issued to him after the passing of the Finance Act 1986 (25th July 1986) for the purpose of raising money for oil exploration which— and from which it is intended that a qualifying trade (to be so carried on) will be derived.
is being carried on by the company, or by any subsidiary of the company, on the date on which the shares are issued; or
begins so to be carried on immediately thereafter;
Subsection (1)(d) above shall not apply unless—
throughout the period of three years beginning with the date on which the shares were issued the company, or any subsidiary of the company, holds an exploration licence which was granted to it, or to another such subsidiary;
the exploration is carried out solely within the area to which the licence applies; and
on the date on which the shares are issued, neither the company nor any subsidiary of the company holds an appraisal licence or a development licence relating to that area or any part of that area.
Where, at any time after the issue of the shares but before the end of the period mentioned in subsection (2)(a) above, the company, or any subsidiary of the company, comes to hold an appraisal licence or development licence which relates to the area, or any part of the area, to which the exploration licence relates, the exploration licence and that other licence shall be treated for the purposes of subsection (2)(a) above as a single exploration licence.
In this Chapter “eligible shares” means new ordinary shares which, throughout the period of five years beginning with the date on which they are issued, carry no present or future preferential right to dividends or to a company’s assets on its winding up and no present or future preferential right to be redeemed.
Subject to subsection (6) below, the relief in respect of the amount subscribed by an individual for any eligible shares shall be given as a deduction of that amount from his total income for the year of assessment in which the shares are issued, and references in this Chapter to the amount of the relief are references to the amount of that deduction.
If— the relief shall be given partly by way of deduction from the claimant’s total income for the year of assessment in which the shares are issued and partly by way of deduction from his total income for the preceding year of assessment.
the shares are issued before 6th October in a year of assessment; and
the claimant so requests in his claim for relief;
A deduction from the claimant’s total income for the year of assessment preceding that in which the shares are issued shall be of such amount as may be specified in the claim; but
that amount shall not exceed one half of the total relief in respect of the shares; and
the aggregate of that amount and the amounts of any other deductions made by virtue of subsection (6) above from the claimant’s total income for the year of assessment preceding that in which the shares are issued shall not exceed £5,000.
The relief shall be given on a claim and shall not be allowed—
in a case falling within subsection (1)(a)—
unless and until the company has carried on the trade for four months; and
if the company is not carrying on that trade at the time when the shares are issued, unless the company begins to carry it on within two years after that time;
in a case falling within subsection (1)(b) or (c) unless and until the company or (as the case may be) the subsidiary has carried on the research and development for four months;
in a case falling within subsection (1)(d) unless and until the company has carried on the exploration for four months.
A claim for relief may be allowed— if the conditions for the relief are then satisfied.
under subsection (1)(a), (c) or (d) at any time after the trade, the research and development or the exploration (as the case may be) has been carried on by the company for four months;
under subsection (1)(b) at any time after the research and development has been carried on for four months;
In the case of a claim allowed before the end of the relevant period, the relief shall be withdrawn if by reason of any subsequent event it appears that the claimant was not entitled to the relief allowed.
An individual is not entitled to relief in respect of any shares unless the shares are subscribed for and issued for bona fide commercial purposes and not as part of a scheme or arrangement the main purpose, or one of the main purposes of which, is the avoidance of tax.
In this Chapter “the relevant period”, in relation to relief in respect of any eligible shares issued by a company, means—
as respects sections 291, 299, 300, 302 and 303, the period beginning with the incorporation of the company (or, if the company was incorporated more than two years before the date on which the shares were issued, beginning two years before that date) and ending five years after the issue of the shares; and
as respects sections 293, 294, 297, 308 and 309, the period beginning with the date on which the shares were issued and ending either—
three years after that date; or
in a case falling within subsection (1)(a), where the company was not at that date carrying on a qualifying trade, three years after the date on which it subsequently began to carry on such a trade.
Where by reason of its being wound up, or dissolved without winding up, the company carries on the qualifying trade for a period shorter than four months, subsection (8)(a) above shall have effect as if it referred to that shorter period but only if it is shown that the winding up or dissolution was for bona fide commercial reasons and not as part of a scheme or arrangement the main purpose or one of the main purposes of which was the avoidance of tax.
The relief shall be treated for the purposes of section 835(5) as a deduction to be made under Chapter I of this Part after all other deductions under that Chapter and shall be disregarded for the purposes of calculating relief under section 550(2), paragraph 3 of Schedule 2 and paragraphs 4 and 16 of Schedule 11 where an election has effect under paragraph 12 of that Schedule.
Where effect is given to a claim for relief by repayment of tax, section 824 shall have effect in relation to the repayment as if the time from which the 12 months mentioned in subsections (1)(b) and (3)(a) of that section are to be calculated were the end of the year of assessment in which the shares are issued or, if the period mentioned in subsection (8)(a) above ends in a later year, the end of that later year.
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Subject to section 311(3), the relief shall not be given in respect of any amount subscribed by an individual for eligible shares issued to him by any company in any year of assessment unless the amount or total amount subscribed by him for the eligible shares issued to him by the company in that year is £500 or more.
No more than £40,000 may be deducted by way of relief under section 289 from the total income of an individual for a year of assessment.
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Subject to section 292, an individual qualifies for the relief if he— and, in relation to shares issued after 5th April 1986, an individual who is at any time performing duties which are treated by virtue of section 132(4)(a) as performed in the United Kingdom shall be treated for the purposes of this section as resident and ordinarily resident in the United Kingdom at that time.
subscribes for the eligible shares on his own behalf,
is resident and ordinarily resident in the United Kingdom at the time when they are issued, and
is not at any time in the relevant period connected with the company;
An individual is connected with the company if he, or an associate of his, is—
an employee of the company or of a partner of the company;
a partner of the company; or
subject to subsection (3) below, a director of the company or of another company which is a partner of that company.
An individual is not connected with a company by reason only that he, or an associate of his, is a director unless he or his associate (or a partnership of which he or his associate is a member) receives a payment from the company during the period of five years beginning with the date on which the shares are issued or is entitled to receive such a payment in respect of that period or any part of it; but for that purpose there shall be disregarded—
any payment or reimbursement of travelling or other expenses wholly, exclusively and necessarily incurred by him or his associate in the performance of his duties as a director of the company;
any interest which represents no more than a reasonable commercial return on money lent to the company;
any dividend or other distribution which does not exceed a normal return on the investment;
any payment for the supply of goods which does not exceed their market value; and
any reasonable and necessary remuneration which —
is paid for services rendered to the company in the course of a trade or profession (not being secretarial or managerial services or services of a kind provided by the company itself); and
is taken into account in computing the profits or gains of the trade or profession under Case I or II of Schedule D or would be so taken into account if it fell in a period on the basis of which those profits or gains are assessed under that Schedule.
An individual is connected with the company if he directly or indirectly possesses or is entitled to acquire more than 30 per cent. of—
the issued ordinary share capital of the company; or
the loan capital and issued share capital of the company; or
the voting power in the company.
For the purposes of subsection (4)(b) above the loan capital of a company shall be treated as including any debt incurred by the company—
for any money borrowed or capital assets acquired by the company; or
for any right to receive income created in favour of the company; or
for consideration the value of which to the company was (at the time when the debt was incurred) substantially less than the amount of the debt (including any premium thereon).
An individual is connected with the company if he directly or indirectly possesses or is entitled to acquire such rights as would, in the event of the winding up of the company or in any other circumstances, entitle him to receive more than 30 per cent. of the assets of the company which would then be available for distribution to equity holders of the company, and for the purposes of this subsection— shall be determined in accordance with paragraphs 1 and 3 of Schedule 18, taking references in paragraph 3 to the first company as references to an equity holder and references to a winding up as including references to any other circumstances in which assets of the company are available for distribution to its equity holders.
the persons who are equity holders of the company, and
the percentage of the assets of the company to which the individual would be entitled,
An individual is connected with a company if he has control of it within the meaning of section 840.
For the purposes of this section an individual shall be treated as entitled to acquire anything which he is entitled to acquire at a future date or will at a future date be entitled to acquire, and there shall be attributed to any person any rights or powers of any other person who is an associate of his.
In determining for the purposes of this section whether an individual is connected with a company, no debt incurred by the company by overdrawing an account with a person carrying on a business of banking shall be treated as loan capital of the company if the debt arose in the ordinary course of that business.
Where an individual subscribes for shares in a company with which he is not connected (either within the meaning of this section or by virtue of section 309(6)(b)) he shall nevertheless be treated as connected with it if he subscribes for the shares as part of any arrangement which provides for another person to subscribe for shares in another company with which that or any other individual who is a party to the arrangement is connected (within the meaning of this section or by virtue of section 309(6)(b)).
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An individual is not entitled to relief in respect of any shares in a company which are issued after 18th March 1986 where, at the date mentioned in subsection (2) below—
he is one of a group of persons—
who control the company; or
to whom belongs an interest amounting in the aggregate to more than a half share in the trade carried on by the company;
he is also an individual, or one of a group of persons—
controlling another company; or
to whom belongs an interest amounting in the aggregate to more than a half share in another trade; and
the trade carried on by the company, or a substantial part of it— as the other trade or (as the case may be) the trade carried on by the other company.
is concerned with the same or similar types of property or parts thereof or provides the same or similar services or facilities; and
serves substantially the same or similar outlets or markets;
The date mentioned in subsection (1) above is—
the date on which the shares are issued; or
if later, the date on which the company begins to carry on the trade.
For the purposes of subsection (1) above—
the persons to whom a trade belongs, and (where a trade belongs to two or more persons) their respective shares in that trade, shall be determined in accordance with section 344(1)(a) and (b), (2) and (3); and
any interest, rights or powers of a person who is an associate of another person shall be treated as those of that other person.
For the purposes of this section—
references to a company’s trade include references to the trade of any of its subsidiaries; and
“trade” in the expressions “another trade”, “other trade” and “trade carried on by the other company” includes any business, profession or vocation.
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Subject to section 294, a company is a qualifying company if it is incorporated in the United Kingdom and complies with the requirements of this section.
The company must, throughout the relevant period, be an unquoted company which is resident in the United Kingdom and not resident elsewhere, and be—
a company which exists wholly, or substantially wholly, for the purpose of carrying on wholly or mainly in the United Kingdom one or more qualifying trades; or
a company whose business consists wholly of—
the holding of shares or securities of, or the making of loans to, one or more qualifying subsidiaries of the company; or
both the holding of such shares or securities, or the making of such loans, and the carrying on wholly or mainly in the United Kingdom of one or more qualifying trades.
In this section “qualifying subsidiary”, in relation to a company, means a subsidiary of that company of a kind which may be held by virtue of sections 308 and 309.
Where a company has one or more qualifying subsidiaries, it shall not be a qualifying company in relation to shares issued after 18th March 1986 if the qualifying trade or trades carried on by the company and its subsidiaries, taken as a whole, are not carried out wholly or mainly in the United Kingdom.
Without prejudice to the generality of subsection (2) above, but subject to subsection (6) below, a company ceases to comply with that subsection if before the end of the relevant period a resolution is passed, or an order is made, for the winding up of the company (or, in the case of a winding up otherwise than under the Insolvency Act 1986 or the Companies (Northern Ireland) Order 1986, any other act is done for the like purpose) or the company is dissolved without winding up.
A company shall not be regarded as ceasing to comply with subsection (2) above if it does so by reason of being wound up or dissolved without winding up and—
it is shown that the winding up or dissolution is for bona fide commercial reasons and not part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax; and
the company’s net assets, if any, are distributed to its members or dealt with as bona vacantia before the end of the relevant period or, in the case of a winding up, the end (if later) of three years from the commencement of the winding up.
The company’s share capital must not, at any time in the relevant period, include any issued shares that are not fully paid up.
Subject to sections 308 and 309, the company must not at any time in the relevant period— and no arrangements must be in existence at any time in that period by virtue of which the company could fall within paragraph (a) or (b) above.
control (or together with any person connected with it control) another company or be under the control of another company (or another company and any other person connected with that other company); or
be a 51 per cent. subsidiary of another company or itself have a 51 per cent. subsidiary;
A company is not a qualifying company in relation to shares issued before 19th March 1986 if—
an individual has acquired a controlling interest in the company’s trade after 5th April 1983; and
at any time in the period mentioned in subsection (10) below he has, or has had, a controlling interest in another trade; and
the trade carried on by the company or a substantial part of it—
is concerned with the same or similar types of property or parts thereof or provides the same or similar services or facilities as the other trade, or
serves substantially the same or similar outlets or markets as the other trade. Section 298(1) and (2) shall apply for the purposes of this subsection.
The period referred to in subsection (9) above is the period beginning two years before and ending three years after—
the date on which the shares were issued; or
if later, the date on which the company began to carry on the trade.
In subsections (9) and (10) above references to a company’s trade include references to the trade of any of its subsidiaries.
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Subject to section 296, a company is not a qualifying company in relation to shares issued after 18th March 1986 if at any time during the relevant period— is greater than half the value of the company’s assets as a whole.
the value of the interests in land held by the company at that time; or
where lower, the value of the interests in land which were held by the company immediately after the issue of the shares (adjusted in accordance with section 295);
For the purposes of this section, the value of the interests in land held by a company on any date shall be arrived at by first aggregating the market value on that date of each of those interests and then deducting—
the amount of any debts of the company which are secured on any of those interests (including any debt secured by a floating charge on property which comprises any of those interests);
the amount of any unsecured debts of the company which do not fall due for payment before the expiry of the period of 12 months beginning with that date; and
the amount paid up in respect of those shares of the company (if any) which carry a present or future preferential right to the company’s assets on its winding up.
For the purposes of this section, the value of a company’s assets as a whole shall be arrived at by first aggregating the market value of each of those assets and then deducting the amount of the debts and liabilities of the company.
For the purposes of subsection (3) above, the amount paid up in respect of those shares of a company (if any) which carry a present or future preferential right to the company’s assets on its winding up shall be treated as a debt of the company, but otherwise a company’s share capital, share premium account and reserves shall not be treated for those purposes as debts or liabilities of the company.
In this section “interest in land” means any estate or interest in land, any right in or over land or affecting the use or disposition of land, and any right to obtain such an estate, interest or right from another which is conditional on that other’s ability to grant the estate, interest or right in question, except that it does not include—
the interest of a creditor (other than a creditor in respect of a rentcharge) whose debt is secured by way of a mortgage, an agreement for a mortgage or a charge of any kind over land; or
in Scotland, the interest of a creditor in a charge or security of any kind over land.
In arriving at the value of any interest in land for the purposes of this section—
it shall be assumed that there is no source of mineral deposits in the land of a kind which it would be practicable to exploit by extracting them from underground otherwise than by means of opencast mining or quarrying; and
any borehole on the land shall be disregarded if it was made in the course of oil exploration.
Where a company is a member of a partnership which holds any interest in land—
that interest shall, for the purposes of this section and sections 295 and 296, be treated as an interest in land held by the company; but
its value at any time shall, for those purposes, be taken to be such fraction of its value (apart from this subsection) as is equal to the fraction of the assets of the partnership to which the company would be entitled if the partnership were dissolved at that time.
Where a qualifying company has one or more subsidiaries, the company and its subsidiaries (“the group”) shall be treated as a single company or the purposes of this section and sections 295 and 296; but any debt owed by, or liability of, one member of the group to another shall be disregarded for those purposes.
The Treasury may by order amend subsection (1) above by substituting a different fraction for the fraction for the time being specified there.
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For the purposes of section 294(1)(b), the value of the interests in land held by a company immediately after the issue of the shares in question (“the original interests”) shall be adjusted by—
adding—
the cost of any interests in land subsequently acquired by the company (“the later interests”); and
any expenditure (whenever payable) incurred by the company wholly and exclusively in enhancing the value of any of the original or later interests;
deducting any consideration received by the company on the disposal of any of the original or later interests or on the grant by the company of any interest in land out of any of those interests;
deducting any consideration otherwise derived by the company from its ownership of any of the original or later interests.
Any sum which is received by a company by way of rent, or which is attributable to the use of any premises by the company, shall be disregarded for the purposes of subsection (1)(c) above.
For the purposes of this section—
the cost of an interest in land acquired by a company shall be taken to be the amount or value of the consideration given by the company, or on its behalf, wholly and exclusively for the acquisition of the interest;
consideration shall be brought into account without any discount for the postponement of the right to receive any part of it; and
the grant of an interest in land out of any of the original interests shall be treated as a disposal of the original interest in question.
Where— the value of the company’s interest at that time shall be calculated on the assumption that the aggregate amount payable as mentioned in paragraph (b) above is a nominal amount and, where the interest was acquired after the issue of the shares in question, it shall be assumed that the company paid the appropriate premium when acquiring the interest.
the interest of a company as lessee under a lease (“the lease”) falls to be valued at any time for the purposes of section 294 or the cost of acquiring that interest falls to be calculated for the purposes of this section; and
the aggregate amount of the rent payable by the lessee under the lease before the end of the relevant period exceeds that which would be so payable under a lease of the premises at a full market rent (but otherwise on the same terms and conditions as the lease);
In determining, for the purposes of this section, the consideration for the disposal or acquisition of an interest in land, no account shall be taken in the first instance of any contingent liability assumed by the company or by any other person.
If it is subsequently shown to the satisfaction of the Board that a contingent liability which was not taken into account in determining the consideration for a disposal or acquisition has become enforceable and is being or had been enforced, such adjustment, whether by way of a further assessment or the discharge or repayment of tax or otherwise, shall be made as is required in consequence.
Where the relief obtainable under subsection (6) above requires a discharge or repayment of tax, it shall be given on a claim to the Board and such a claim may be made at any time.
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Where a company raises any amount through the issue of eligible shares, section 294—
shall not have effect to deny relief in relation to those shares if the aggregate of that amount and of all other amounts (if any) so raised within the period of 12 months ending with the date of that issue does not exceed £50,000; and
where that aggregate exceeds £50,000, shall have effect to deny relief only in relation to the excess.
Where— each reference to £50,000 in subsection (1)(a) and (b) above shall have effect as if it were a reference to— where A is the total number of companies (apart from the company in question or any of its subsidiaries) which are members of any such partnership or parties to any such joint venture during the relevant period.
at any time within the relevant period, the company in question or any of its subsidiaries carries on any trade or part of a trade in partnership, or as a party to a joint venture, with one or more other persons; and
that other person, or at least one of those other persons, is a company;
Where section 294, as read with this section, requires a restriction to be placed on the relief given on claims in respect of shares issued to two or more individuals, the available relief shall be divided between them in proportion to the amounts which have been respectively subscribed by them for the shares to which their claims relate and which would, apart from the restrictions, be eligible for the relief.
A claimant who is dissatisfied with the manner in which the available relief is divided under this section between him and any other claimant or claimants may apply to the appropriate Commissioners who shall, after giving the other claimant or claimants an opportunity to appear and be heard or to make representations in writing, determine the question for all the claimants in the same way as an appeal.
In this section “the appropriate Commissioners” means—
in a case where the same body of General Commissioners has jurisdiction with respect to all the claimants, those Commissioners, unless all the claimants agree that the question should be determined by the Special Commissioners;
in a case where different bodies of General Commissioners have jurisdiction with respect to the claimants, such of those bodies as the Board may direct, unless all the claimants agree that the question should be determined by the Special Commissioners;
in any other case, the Special Commissioners.
In calculating the aggregate mentioned in subsection (1)(a) above in respect of any period of 12 months which begins on or before 18th March 1986, any amount raised by the issue of eligible shares on or before that date shall be disregarded.
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Subject to section 298(6) and (7) below, a trade is a qualifying trade if it complies with the requirements of this section.
Subject to subsection (9) below, the trade must not at any time in the relevant period consist of one or more of the following activities if that activity amounts, or those activities when taken together amount, to a substantial part of the trade—
dealing in commodities, shares, securities, land or futures;
dealing in goods otherwise than in the course of an ordinary trade of wholesale or retail distribution;
banking, insurance, money-lending, debt-factoring, hire-purchase financing or other financial activities;
oil extraction activities;
leasing (including letting ships on charter or other assets on hire) or receiving royalties or licence fees;
providing legal or accountancy services;
providing services or facilities for any trade carried on by another person which consists to any substantial extent of activities within any of paragraphs (a) to (f) above and in which a controlling interest is held by a person who also has a controlling interest in the trade carried on by the company;
property development;
farming.
For the purposes of subsection (2)(b) above—
a trade of wholesale distribution is one in which the goods are offered for sale and sold to persons for resale by them, or for processing and resale by them, to members of the general public for their use or consumption;
a trade of retail distribution is one in which the goods are offered for sale and sold to members of the general public for their use or consumption;
a trade is not an ordinary trade of wholesale or retail distribution if—
it consists to a substantial extent of dealing in goods of a kind which are collected or held as an investment or of that activity and any other activity of a kind falling within subsection (2) above, taken together; and
a substantial proportion of those goods are held by the company for a period which is significantly longer than the period for which a vendor would reasonably be expected to hold them while endeavouring to dispose of them at their market value; and
in determining whether a trade is an ordinary trade of wholesale or retail distribution regard shall be had to the extent to which it has the following features, that is to say— those features in sub-paragraphs (i) to (iii) being regarded as indications that the trade is such an ordinary trade and those in sub-paragraphs (iv) to (viii) being regarded as indications of the contrary.
the goods are bought by the trader in quantities larger than those in which he sells them;
the goods are bought and sold by the trader in different markets;
the trader employs staff and incurs expenses in the trade in addition to the cost of the goods and, in the case of a trade carried on by a company, in addition to any remuneration paid to any person connected with it;
there are purchases or sales from or to persons who are connected with the trader;
purchases are matched with forward sales or vice versa;
the goods are held by the trader for longer than is normal for goods of the kind in question;
the trade is carried on otherwise than at a place or places commonly used for wholesale or retail trade;
the trader does not take physical possession of the goods;
A trade shall not be treated as failing to comply with this section by reason only of its consisting to a substantial extent of receiving royalties or licence fees if—
the company carrying on the trade is engaged throughout the relevant period in—
the production of films; or
the production of films and the distribution of films produced by it in the relevant period; and
all royalties and licence fees received by it in that period are in respect of films produced by it in that period or sound recordings in relation to such films or other products arising from such films.
A trade shall not be treated as failing to comply with this section by reason only that at any time after 19th March 1985 it consists to a substantial extent of receiving royalties or licence fees if—
the company carrying on the trade is engaged in research and development throughout the relevant period; and
all royalties and licence fees received by it in that period are attributable to research and development which it has carried out.
A trade shall not be treated as failing to comply with this section by reason only of its consisting of letting ships, other than oil rigs or pleasure craft, on charter if— but where any of the requirements mentioned in paragraphs (a) to (d) above are not satisfied in relation to any lettings of such ships, the trade shall not thereby be treated as failing to comply with this section if those lettings and any other activity of a kind falling within subsection (2) above do not, when taken together, amount to a substantial part of the trade.
every ship let on charter by the company carrying on the trade is beneficially owned by the company;
every ship beneficially owned by the company is registered in the United Kingdom; and
throughout the relevant period the company is solely responsible for arranging the marketing of the services of its ships; and
the conditions mentioned in subsection (7) below are satisfied in relation to every letting on charter by the company;
The conditions are that— but this subsection shall have effect, in relation to any letting between the company in question and its subsidiary, or between it and another company of which it is a subsidiary or between it and a company which is a subsidiary of the same company of which it is a subsidiary, as if paragraph (c) were omitted.
the letting is for a period not exceeding 12 months and no provision is made at any time (whether in the lease or otherwise) for extending it beyond that period otherwise than at the option of the lessee;
during the period of the letting there is no provision in force (whether made in the lease or otherwise) for the grant of a new letting to end, otherwise than at the option of the lessee, more than 12 months after that provision is made;
the letting is by way of a bargain made at arm’s length between the company and a person who is not connected with it;
under the terms of the charter the company is responsible as principal—
for taking, throughout the period of the charter, management decisions in relation to the ship, other than those of a kind generally regarded by persons engaged in trade of the kind in question as matters of husbandry; and
for defraying all expenses in connection with the ship throughout that period, or substantially all such expenses, other than those directly incidental to a particular voyage or to the employment of the ship during that period; and
no arrangements exist by virtue of which a person other than the company may be appointed to be responsible for the matters mentioned in paragraph (d) above on behalf of the company;
The trade must, during the relevant period, be conducted on a commercial basis and with a view to the realisation of profits.
A trade which consists to any substantial extent of oil extraction activities shall, if it would be a qualifying trade were it not for subsection (2)(d) above, be treated as a qualifying trade for the purposes of section 289(1)(d).
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For the purposes of sections 293(9) and 297 a person has a controlling interest in a trade—
in the case of a trade carried on by a company, if—
he controls the company;
the company is a close company and he or an associate of his is a director of the company and the beneficial owner of, or able directly or through the medium of other companies or by any other indirect means to control, more than 30 per cent. of the ordinary share capital of the company; or
not less than half of the trade could in accordance with section 344(2) be regarded as belonging to him;
in any other case, if he is entitled to not less than half of the assets used for, or the income arising from, the trade.
For the purposes of subsection (1) above, there shall be attributed to any person any rights or powers of any other person who is an associate of his.
References in this section and section 297 to a trade shall be construed without regard to so much of the definition of “trade” in section 832(1) as relates to adventures or concerns in the nature of trade; but the foregoing provisions do not affect the construction of references in section 297(2)(g) or subsection (1) above to a trade carried on by a person other than the company and those references shall be construed as including a reference to any business, profession or vocation.
The Treasury may by order amend section 297 and this section, except in relation to shares issued before 19th March 1986, in such manner as they consider expedient.
In section 297—
Section 297 shall have effect in relation to shares issued before 19th March 1986 subject to the following modifications— and in relation to shares issued after 18th March 1986 section 297(2) shall have effect with the omission of paragraphs (h) and (j).
in subsection (2) the words “or those activities when taken together amount” shall be omitted;
subsection (2)(h) shall not apply unless the shares were issued after 19th March 1985;
subsection (2)(j) shall not apply unless the shares were issued after 13th March 1984;
in subsection (3) the words in paragraph (a) “to members of the general public for their use or consumption” and paragraph (c) shall be omitted; and
subsections (6) and (7) shall be omitted;
Section 297(2) shall have effect so far as it relates to oil extraction only in relation to shares issued after 25th July 1986.
Section 297(4) shall have effect in relation to shares issued before 17th March 1987 with the omission of paragraph (a)(ii), together with the word “or” immediately before it, (but not the word “and” at the end of it) and the words in paragraph (b) “in that period” in the second place where they appear.
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Where an individual disposes of any eligible shares before the end of the relevant period, then—
if the disposal is otherwise than by way of a bargain made at arm’s length, he shall not be entitled to any relief in respect of those shares; and
in any other case, the amount of relief to which he is entitled in respect of those shares shall be reduced by the amount or value of the consideration which he receives for them.
Where after 18th March 1986 an option, the exercise of which would bind the grantor to purchase any shares, is granted to an individual during the relevant period, the individual shall not be entitled to any relief in respect of the shares to which the option relates.
Where an individual holds ordinary shares of any class in a company and the relief has been given (and not withdrawn) in respect of some shares of that class but not others, any disposal by him of ordinary shares of that class in the company, and any option of the kind mentioned in subsection (2) above, shall be treated for the purposes of this section as relating—
first, to those (if any) in respect of which relief has been given (and not withdrawn) under Chapter II of Part IV of the Finance Act 1981 rather than to others; and
then, to those in respect of which relief has been given (and not withdrawn) under this Chapter (or Schedule 5 to the Finance Act 1983).
Where the relief has been given (and not withdrawn) to an individual in respect of shares of any class in a company which have been issued to him at different times, any disposal by him of shares of that class shall, subject to subsection (3) above, be treated for the purposes of this section as relating to those issued earlier rather than to those issued later.
Where shares in respect of which the relief was given have by virtue of any such allotment as is mentioned in section 77(2)(a) of the 1979 Act (not being an allotment for payment) fallen to be treated under section 78 of that Act as the same asset as a new holding—
a disposal of the whole or part of the new holding shall be treated for the purposes of this section as a disposal of the whole or a corresponding part of those shares; and
the new holding shall be treated for the purposes of subsection (3) above as shares in respect of which the relief has been given.
For the purposes of this section—
shares in a company shall not be treated as being of the same class unless they would be so treated if dealt with on the Stock Exchange; and
references to a disposal of shares include references to the grant of an option (after 18th March 1986) the exercise of which would bind the grantor to sell the shares.
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Subject to section 299, where an individual who subscribes for eligible shares in a company— the amount of the relief to which he is entitled in respect of the shares shall be reduced by the value received; but the value received shall be disregarded to the extent to which relief under Schedule 5 to the Finance Act 1983 or under this Chapter has been reduced on its account.
has, before the issue of the shares but within the relevant period, received any value from the company; or
after their issue but before the end of the relevant period, receives any such value;
For the purposes of this section an individual receives value from the company if the company—
repays, redeems or repurchases any of its share capital or securities which belong to the individual or makes any payment to him for giving up his right to any of the company’s share capital or any security on its cancellation or extinguishment;
repays any debt owed to the individual other than a debt which was incurred by the company—
on or after the date on which he subscribed for the shares in respect of which the relief is claimed; and
otherwise than in consideration of the extinguishment of a debt incurred before that date;
makes to the individual any payment for giving up his right to any debt (other than a debt in respect of a payment of the kind mentioned in section 291(3)(a) or (e) or an ordinary trade debt) on its extinguishment;
releases or waives any liability of the individual to the company or discharges, or undertakes to discharge, any liability of his to a third person;
makes a loan or advance to the individual which has not been repaid in full before the issue of the shares in respect of which relief is claimed;
provides a benefit or facility for the individual;
transfers an asset to the individual for no consideration or for consideration less than its market value or acquires an asset from him for consideration exceeding its market value; or
makes to him any other payment except a payment of the kind mentioned in section 291(3)(a), (b), (c), (d) or (e) or a payment in discharge of an ordinary trade debt.
For the purposes of this section an individual also receives value from the company if he receives in respect of ordinary shares held by him any payment or asset in a winding up or in connection with a dissolution of the company, being a winding up or dissolution falling within section 293(6).
The value received by an individual is—
in a case within paragraph (a), (b) or (c) of subsection (2) above, the amount receivable by the individual or, if greater, the market value of the shares, securities or debt in question;
in a case within paragraph (d) of that subsection, the amount of the liability;
in a case within paragraph (e) of that subsection, the amount of the loan or advance reduced by the amount of any repayment made before the issue of the shares in respect of which relief is claimed;
in a case within paragraph (f) of that subsection, the cost to the company of providing the benefit or facility less any consideration given for it by the individual;
in a case within paragraph (g) of that subsection, the difference between the market value of the asset and the consideration (if any) given for it;
in a case within paragraph (h) of that subsection, the amount of the payment; and
in a case within subsection (3) above, the amount of the payment or, as the case may be, the market value of the asset.
For the purposes of this section an individual also receives value from the company if any person who would, for the purposes of section 291, be treated as connected with the company— and the value received by the individual is the amount receivable by the individual or, if greater, the market value of the shares or securities in question.
purchases any of its share capital or securities which belong to the individual; or
makes any payment to him for giving up any right in relation to any of the company’s share capital or securities;
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Where by virtue of section 300 any relief is withheld or withdrawn in the case of an individual to whom ordinary shares in a company have been issued at different times before 19th March 1986 the relief shall be withheld or withdrawn in respect of shares issued earlier rather than in respect of shares issued later.
Where relief to which an individual is entitled in respect of eligible shares issued after 18th March 1986 is reduced by virtue of section 300, effect shall be given to the reduction by apportioning it, as between any such eligible shares held by him, in such a way as appears to the inspector, or on an appeal to the Commissioners concerned, to be just and reasonable.
For the purposes of section 300(2)(d) a company shall be treated as having released or waived a liability if the liability is not discharged within 12 months of the time when it ought to have been discharged.
For the purposes of section 300(2)(e) there shall be treated as if it were a loan made by the company to the individual—
the amount of any debt (other than an ordinary trade debt) incurred by the individual to the company; and
the amount of any debt due from the individual to a third person which has been assigned to the company.
In this section and section 300, “an ordinary trade debt” means any debt for goods or services supplied in the ordinary course of a trade or business where the credit given does not exceed six months and is not longer than that normally given to the customers of the person carrying on the trade or business.
In this section and section 300—
any reference to a payment or transfer to an individual includes a reference to a payment or transfer made to him indirectly or to his order or for his benefit; and
any reference to an individual includes a reference to an associate of his and any reference to the company includes a reference to any person connected with the company.
Section 300 shall apply in relation to shares issued before 19th March 1986 with the omission—
in subsection (2)(e) of the words “which has not been repaid in full before the issue of the shares in respect of which relief is claimed”; and
in subsection (4)(c) of the words “reduced by the amount of any repayment made before the issue of the shares in respect of which relief is claimed”.
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An individual is not entitled to relief in respect of any shares in a company where—
at any time in the relevant period, the company or any of its subsidiaries—
begins to carry on as its trade or as part of its trade a trade which was previously carried on at any time in that period otherwise than by the company or any of its subsidiaries; or
acquires the whole, or greater part, of the assets used for the purposes of a trade previously so carried on; and
subsection (2) below applies in relation to that individual.
This subsection applies in relation to an individual where— and the individual is that person or one of those persons.
any person or group of persons to whom an interest amounting in the aggregate to more than a half share in the trade (as previously carried on) belonged, at any time in the relevant period, is or are a person or group of persons to whom such an interest in the trade carried on by the company belongs or has, at any such time, belonged; or
any person or group of persons who control or, at any such time, have controlled the company is or are a person or group of persons who, at any such time, controlled another company which previously carried on the trade;
An individual is not entitled to relief in respect of any shares in a company where— and that individual is that person or one of those persons.
the company comes to acquire all of the issued share capital of another company, at any time in the relevant period; and
any person or group of persons who control or have, at any such time, controlled the company is or are a person or group of persons who, at any such time, controlled that other company;
For the purposes of subsection (2) above—
the persons to whom a trade belongs and, where a trade belongs to two or more persons, their respective shares in that trade shall be determined in accordance with section 344(1)(a) and (b), (2) and (3); and
any interest, rights or powers of a person who is an associate of another person shall be treated as those of that other person.
In this section—
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The relief to which an individual is entitled in respect of any shares in a company shall be reduced in accordance with subsection (2) below if at any time in the relevant period the company repays, redeems or repurchases any of its share capital which belongs to any member other than— or makes any payment to any such member for giving up his right to any of the company’s share capital on its cancellation or extinguishment.
that individual; or
another individual whose relief is thereby withdrawn or reduced by virtue of section 299 or reduced by virtue of section 300(2)(a);
Where subsection (1) above applies, the amount of relief to which an individual is entitled shall be reduced by the amount receivable by the member or, if greater, the nominal value of the share capital in question; and where, apart from this subsection, two or more individuals would be entitled to relief the reduction shall be made in proportion to the amounts of relief to which they would, apart from this subsection, have been entitled.
Where at any time in the relevant period a member of a company receives or is entitled to receive any value from the company within the meaning of this subsection, then, for the purposes of section 291(4) in its application to any subsequent time— shall each be treated as reduced in accordance with subsection (4) below.
the amount of the company’s issued ordinary share capital; and
the amount of the part of that capital which consists of the shares which (within the meaning of section 291) the individual directly or indirectly possesses or is entitled to acquire, and the amount of the part consisting of the remainder,
The amount of each of the parts mentioned in subsection (3)(b) above shall be treated as equal to such proportion of that amount as the amount subscribed for that part less the relevant value bears to the amount subscribed; and the amount of the issued share capital shall be treated as equal to the sum of the amounts treated under this subsection as the amount of those parts respectively.
In subsection (4) above “the relevant value”, in relation to each of the parts there mentioned, means the value received by the member or members entitled to the shares of which that part consists.
For the purposes of subsection (3) above a member of a company receives or is entitled to receive value from the company in any case in which an individual would receive value from the company by virtue of section 300(2)(d), (e), (f), (g) or (h) (but treating as excepted from paragraph (h) all payments made for full consideration) and the value received shall be determined as for the purposes of that section.
For the purposes of subsection (6) above a person shall be treated as entitled to receive anything which he is entitled to receive at a future date or will at a future date be entitled to receive.
Subsection (1) above does not apply in relation to the redemption of any share capital for which the redemption date was fixed before 15th March 1983.
Where— subsection (1) above shall not apply in relation to any redemption of any of the original shares within 12 months of the date on which those shares were issued. In relation to companies incorporated under the law of Northern Ireland references in this subsection to the Companies Act 1985 and to section 117 of that Act shall have effect as references to the Companies (Northern Ireland) Order 1986 and to Article 127 of that Order.
a company issues share capital (“the original shares”) of nominal value equal to the authorised minimum (within the meaning of the Companies Act 1985) for the purposes of complying with the requirements of section 117 of that Act (public company not to do business unless requirements as to share capital complied with); and
after the registrar of companies has issued the company with a certificate under section 117, it issues eligible shares;
Where relief to which an individual is entitled in respect of eligible shares issued after 18th March 1986 is reduced by virtue of this section, effect shall be given to the reduction by apportioning it as between any such eligible shares held by him in such a way as appears to the inspector, or on appeal to the Commissioners concerned, to be just and reasonable.
In relation to shares issued before 19th March 1986, subsection (1)(b) above shall have effect with the omission of the words “withdrawn or reduced by virtue of section 299 or”.
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In the case of any amount subscribed by a married woman for eligible shares issued to her at a time— the deduction under section 289(5) shall, subject to Chapter II of this Part and subsections (2) to (5) below, be made from his total income, and references in this Chapter to the relief to which an individual is entitled in respect of any shares shall be construed accordingly.
when she is living with her husband; and
which falls in a year of assessment for which his income includes (or, if there were any, would include) any of hers,
The limits in section 290 shall apply jointly to a husband and wife as respects amounts subscribed for shares at a time— but if the husband dies or they are divorced or cease to live together before the end of any such year those limits shall apply to the wife as respects amounts subscribed by her for shares issued in the remainder of the year as if it were a separate year of assessment.
when they are married and living together; and
which falls in a year of assessment for which his income includes (or, if there were any, would include) any of hers;
Where an application under section 283(1) or an election under section 287(1) is in force for a year of assessment in which shares are issued for which amounts have been subscribed both by the husband and the wife, then, if section 290(2) requires a restriction to be placed on the relief given on a claim or claims in respect of those amounts, the available relief shall be divided between the husband and wife in proportion to the amounts which have been respectively subscribed by them for the shares to which the claim or claims relate and which would, apart from the restriction, be eligible for the relief.
Subsections (2) and (3) above shall apply in relation to the limit of £5,000 imposed by section 289(7) as it applies in relation to the limit of £40,000 imposed by section 290(2); and for this purpose the reference in subsection (3) above to a division in proportion to the amounts subscribed by the husband and wife shall be construed as a reference to a division in proportion to the aggregate amounts of the relevant deductions sought by each of them in their claims under section 289(6).
Subsection (1) of section 299 shall not apply to a disposal made by a married woman to her husband at a time when she is living with him or to a disposal made at such a time by him to her; but where shares issued to one of them have been transferred to the other by a transaction inter vivos—
that subsection shall apply on the disposal of the shares by the transferee to a third person; and
if at any time the husband and wife are divorced or cease to live together and any of those shares have not been disposed of by the transferee before that time, any assessment for withdrawing relief in respect of those shares shall be made on the transferee.
Where a husband and wife are divorced or cease to live together, then, if any relief given in respect of shares for which either of them has subscribed and which were issued while they were married and living together falls to be withdrawn by virtue of a subsequent disposal of those shares by the person who subscribed for them, any assessment for withdrawing that relief shall be made on the person making the disposal and shall be made by reference to the reduction of tax flowing from the amount of the relief regardless of any allocation of that relief under section 280 or of any allocation of the reduction under section 284.
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Where shares in respect of which relief has been given and not withdrawn have by virtue of any such allotment, otherwise than for payment, as is mentioned in section 77(2)(a) of the 1979 Act fallen to be treated under section 78 of that Act as the same asset as a new holding—
a disposal of the whole or part of the new holding shall be treated for the purposes of this Part as a disposal of the whole or a corresponding part of those shares; and
the new holding shall be treated for the purposes of section 299(3) as shares in respect of which relief has been given and not withdrawn.
Where— the relief shall be reduced by an amount equal to whichever is the smaller of those excesses.
there is, by virtue of any such allotment for payment as is mentioned in section 77(2)(a) of the 1979 Act, a reorganisation affecting ordinary shares in respect of which relief has been given; and
immediately before the reorganisation the relief had not been withdrawn; and
the amount of relief (or, where the relief has been reduced, the amount remaining) and the market value of the shares immediately before the reorganisation, exceeds their market value immediately after the reorganisation;
Subsection (2) above shall also apply where—
an individual who has received, or become entitled to receive, in respect of any ordinary shares in a company, a provisional allotment of shares in or debentures of the company disposes of his rights; and
subsection (2) above would have applied (apart from this subsection) had those rights not been disposed of but an allotment of shares or debentures made to him.
This section has effect in relation to reorganisations occurring after 18th March 1986.
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A claim for relief in respect of eligible shares issued by a company in any year of assessment shall be made—
not earlier than the end of the period of four months mentioned in section 289(8)(a), (b) or (c), as the case may be; and
not later than two years after the end of that year of assessment or, if that period of four months ended after the end of that year, not later than two years after the end of that period.
A claim for relief in respect of eligible shares in a company shall not be allowed unless it is accompanied by a certificate issued by the company in such form as the Board may direct and certifying that the conditions for the relief, so far as applying to the company and the trade, are satisfied in relation to those shares.
Before issuing a certificate for the purposes of subsection (2) above a company shall furnish the inspector with a statement to the effect that it satisfies the conditions for the relief, so far as they apply in relation to the company and the trade, and has done so at all times since the beginning of the relevant period.
No such certificate shall be issued without the authority of the inspector or where the company, or a person connected with the company, has given notice to the inspector under section 310(2).
Any statement under subsection (3) above shall contain such information as the Board may reasonably require, shall be in such form as the Board may direct and shall contain a declaration that it is correct to the best of the company’s knowledge and belief.
Where a company has issued a certificate for the purposes of subsection (2) above, or furnished a statement under subsection (3) above and— the company shall be liable to a penalty not exceeding £250 or, in the case of fraud, £500.
the certificate or statement is made fraudulently or negligently; or
the certificate was issued in contravention of subsection (4) above;
For the purposes of regulations made under section 203 no regard shall be had to the relief unless a claim for it has been duly made and admitted.
No application shall be made under section 55(3) or (4) of the Management Act (application for postponement of payment of tax pending appeal) on the ground that the applicant is entitled to the relief unless a claim for the relief has been duly made by him.
For the purposes of section 86 of the Management Act (interest on overdue tax), tax charged by an assessment— and section 91 of that Act (effect on interest of reliefs) shall not apply in consequence of any discharge or repayment for giving effect to the relief.
shall be regarded as due and payable notwithstanding that relief from the tax (whether by discharge or repayment) is subsequently given on a claim for the relief; but
shall, unless paid earlier or due and payable later, be regarded as paid on the date of the making of the claim on which the relief is given;
For the purposes of the provisions of the Management Act relating to appeals against decisions on claims, the refusal of the inspector to authorise the issue of a certificate under subsection (2) above shall be taken to be a decision refusing a claim made by the company. This subsection shall not apply in relation to shares issued before 19th March 1986.
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Where any relief has been given which is subsequently found not to have been due, it shall be withdrawn by the making of an assessment to tax under Case VI of Schedule D for the year of assessment for which the relief was given; but where by virtue of section 289(6) relief has been given for each of two consecutive years of assessment, any withdrawal of relief shall be made for the first of those years before being made for the second.
Subject to subsections (3) to (7) below, any assessment for withdrawing relief which is made by reason of an event occurring after the date of the claim may be made within six years after the end of the year of assessment in which that event occurs.
No assessment for withdrawing relief in respect of shares issued to any person shall be made by reason of any event occurring after his death.
Where a person has, by a disposal or disposals to which section 299(1)(b) applies, disposed of all the ordinary shares issued to him by a company, no assessment for withdrawing relief in respect of any of those shares shall be made by reason of any subsequent event unless it occurs at a time when he is connected with the company within the meaning of section 291.
Subsection (2) above is without prejudice to section 36 of the Management Act (fraud and wilful default) and section 37 of that Act (neglect).
In its application to an assessment made by virtue of this section, section 86 of the Management Act (interest on overdue tax) shall have effect as if the reckonable date were—
in the case of relief withdrawn by virtue of section 289(11)—
so far as effect has been given to the relief in accordance with regulations under section 203, 5th April in the year of assessment in which effect was so given;
so far as effect has not been so given, the date on which the relief was granted.
in the case of relief withdrawn by virtue of section 291, 293, 297, 302, 303(1) or 305 in consequence of any event after the grant of the relief, the date of that event;
in the case of relief withdrawn by virtue of section 299(1) in consequence of a disposal after the grant of the relief, the date of the disposal;
in the case of relief withdrawn by virtue of section 300 in consequence of a receipt of value after the grant of the relief, the date of the receipt.
For the purposes of subsection (6) above the date on which the relief is granted is the date on which a repayment of tax for giving effect to the relief was made or, if there was no such repayment, the date on which the inspector issued a notice to the claimant showing the amount of tax payable after giving effect to the relief.
Where a company has ceased to be a qualifying company in consequence of the operation of section 294, subsection (6) above shall apply as if the relief was withdrawn in consequence of an event which occurred at the time when the company so ceased to be a qualifying company.
Subsections (1) to (7) above apply in relation to relief under Chapter II of Part IV of the Finance Act 1981 as they apply in relation to relief under this Chapter (or Schedule 5 to the Finance Act 1983) but—
with the substitution for references to sections 299 (in both places), 291, 289(11), 293, 297, 302, 303(1), 305 and 300 of this Act of references respectively to sections 57, 54, 59(1), 53(7), 54, 55, 56, 59(2) and 58 of the Finance Act 1981; and
with the omission of subsection (6)(a)(i).
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A qualifying company may, in the relevant period, have one or more subsidiaries if—
the conditions mentioned in subsection (2) below are satisfied in respect of the subsidiary or, as the case may be, each subsidiary and, except as provided by subsection (3) below, continue to be so satisfied until the end of the relevant period; and
the subsidiary or, as the case may be, each subsidiary exists wholly, or substantially wholly, for the purpose of carrying on one or more qualifying trades or is a property managing, or dormant, subsidiary.
The conditions referred to are—
that the qualifying company, or another of its subsidiaries, possesses not less than 90 per cent. of the issued share capital of, and not less than 90 per cent. of the voting power in, the subsidiary;
that the qualifying company, or another of its subsidiaries, would in the event of a winding up of the subsidiary or in any other circumstances be beneficially entitled to receive not less than 90 per cent. of the assets of the subsidiary which would then be available for distribution to the equity holders of the subsidiary;
that the qualifying company or another of its subsidiaries is beneficially entitled to not less than 90 per cent. of any profits of the subsidiary which are available for distribution to the equity holders of the subsidiary;
that no person other than the qualifying company or another of its subsidiaries has control of the subsidiary within the meaning of section 840; and
that no arrangements are in existence by virtue of which the conditions in paragraphs (a) to (d) above could cease to be satisfied.
The conditions shall not be regarded as ceasing to be satisfied by reason only of the subsidiary or the qualifying company being wound up, or dissolved without winding up, if—
it is shown that the winding up or dissolution is for bona fide commercial reasons and not part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax; and
the net assets, if any, of the subsidiary or, as the case may be, the qualifying company are distributed to its members or dealt with as bona vacantia before the end of the relevant period, or in the case of a winding up, the end (if later) of three years from the commencement of the winding up.
The conditions shall not be regarded as ceasing to be satisfied by reason only of the disposal by the qualifying company or (as the case may be) by another subsidiary, within the relevant period, of all its interest in the subsidiary if it is shown that the disposal is for bona fide commercial reasons and not part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax.
For the purposes of this section—
a subsidiary of a qualifying company is a property managing subsidiary if it exists wholly, or substantially wholly, for the purpose of holding and managing property used by the qualifying company, or by any of its subsidiaries, for the purposes of—
research and development from which it is intended that a qualifying trade to be carried on by the company or any of its subsidiaries will be derived; or
one or more qualifying trades so carried on;
a subsidiary is a dormant subsidiary if it has no profits for the purposes of corporation tax and no part of its business consists in the making of investments; and
the persons who are equity holders of a subsidiary and the percentage of the assets of a subsidiary to which an equity holder would be entitled shall be determined in accordance with paragraphs 1 and 3 of Schedule 18, taking references in paragraph 3 to the first company as references to an equity holder and references to a winding up as including references to any other circumstances in which assets of the subsidiary are available for distribution to its equity holders.
In relation to shares issued before 19th March 1986 this section shall have effect subject to the following modifications—
the following paragraph shall be substituted for subsection (1)(b)—;
the following subsection shall be substituted for subsection (2)—; and
subsections (4) and (5) shall be omitted.
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Where a qualifying company has one or more subsidiaries in the relevant period, this Chapter shall have effect subject to subsections (2) to (8) below.
The shares issued by the qualifying company may, instead of or as well as being issued for the purpose mentioned in subsection (1)(a) of section 289, be issued for the purpose of raising money for a qualifying trade which is being carried on by a subsidiary or which a subsidiary intends to carry on; and, where shares are so issued, subsections (8), (9), (12)(b)(ii) and (13) of that section shall have effect as if references to the company were or, as the case may be, included references to the subsidiary.
In relation to a qualifying trade carried on by a subsidiary the reference in section 297(2)(g) to another person shall not include a reference to the company of which it is a subsidiary.
In section 303(1) references to the company (except the first) shall include references to a company which during the relevant period is a subsidiary of the company whether it becomes a subsidiary before or after the redemption, repayment, repurchase or payment referred to in that subsection.
In subsections (2), (4) and (6) of section 291, references to the company (except, in each subsection, the first such reference) include references to a company which is during the relevant period a subsidiary of that company—
whether it becomes a subsidiary before, during or after the year of assessment in respect of which the individual concerned claims relief; or
whether or not it is such a subsidiary while he is such an employee, partner or director as is mentioned in subsection (2) or while he has or is entitled to acquire such capital or voting power or rights as are mentioned in subsections (4) and (6).
Without prejudice to the provisions of section 291 (as it has effect in accordance with subsection (5) above), an individual shall be treated as connected with a company if—
he has at any time in the relevant period had control (within the meaning of section 840) of another company which has since that time and before the end of the relevant period become a subsidiary of the company; or
he directly or indirectly possesses or is entitled to acquire any loan capital of a subsidiary of that company.
Section 291(5) and (8) shall apply for the purposes of this section.
In sections 300(1) and 303(3) references to the receipt of value from the company shall include references to the receipt of value from any company which during the relevant period is a subsidiary of that company, whether it becomes a subsidiary before or after the individual concerned receives any value from it, and other references to the company in sections 300 and 301 and in section 303(6) shall be construed accordingly.
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Where an event occurs by reason of which any relief given to an individual falls to be withdrawn by virtue of sections 291, 299, 300 or 304(2) to (6), the individual shall within 60 days of his coming to know of the event give a notice to the inspector containing particulars of the event.
Where an event occurs by reason of which any relief in respect of any shares in a company falls to be withdrawn by virtue of section 289(11), 293, 297, 300, 302 or 303— shall within 60 days of the event or, in the case of a person within paragraph (b) above, of his coming to know of it, give a notice to the inspector containing particulars of the event or payment.
the company; and
any person connected with the company who has knowledge of that matter;
Where— the company or (as the case may be) that person or (where it so appears to each of them) both the company and that person shall give notice to the inspector setting out the particulars of the case.
a company has issued a certificate under section 306(2) in respect of any eligible shares in the company; and
it appears to the company, or to any person connected with the company who has knowledge of the matter, that section 294 may have effect to deny relief in respect of those shares;
If the inspector has reason to believe that a person has not given a notice which he is required to give under subsection (1) or (2) above in respect of any event, or under subsection (3) above in respect of any particular case, the inspector may by notice require that person to furnish him within such time (not being less than 60 days) as may be specified in the notice with such information relating to the event or case as the inspector may reasonably require for the purposes of this Chapter.
Where relief is claimed in respect of shares in a company and the inspector has reason to believe that it may not be due by reason of any such arrangement or scheme as is mentioned in section 289(11), 291(10), 293(8) or 308(2)(e), he may by notice require any person concerned to furnish him within such time (not being less than 60 days) as may be specified in the notice with—
a declaration in writing stating whether or not, according to the information which that person has or can reasonably obtain, any such arrangement or scheme exists or has existed;
such other information as the inspector may reasonably require for the purposes of the provision in question and as that person has or can reasonably obtain.
References in subsection (5) above to the person concerned are references, in relation to sections 289(11), 291(10) and 308(2)(e), to the claimant and, in relation to sections 289(11), 293(8) and 308(2)(e), to the company and any person controlling the company.
Where relief has been given in respect of shares in a company— shall, if so required by the inspector, state whether the payment or asset received by him or on his behalf is received on behalf of any person other than himself and, if so, the name and address of that person.
any person who receives from the company any payment or asset which may constitute value received (by him or another) for the purposes of sections 300, 301 and 303(3); and
any person on whose behalf such a payment or asset is received,
Where relief has been claimed in respect of shares in a company, any person who holds or has held shares in the company and any person on whose behalf any such shares are or were held shall, if so required by the inspector, state whether the shares which are or were held by him or on his behalf are or were held on behalf of any person other than himself and, if so, the name and address of that person.
No obligation as to secrecy imposed by statute or otherwise shall preclude the inspector from disclosing to a company that relief has been given or claimed in respect of a particular number or proportion of its shares.
This section shall have effect in relation to relief under Chapter II of Part IV of the Finance Act 1981 as it has effect in relation to relief under this Chapter but with the substitution—
in subsection (1) for “291, 299, 300 or 304(2) to (6)” of “54, 57, 58 and 60(6) of the Finance Act 1981”;
for subsection (3) of the following subsection—;
in subsection (5) for references to sections 289(11), 291(10), 293(8) and 308(2)(e) of references to sections 54(9), 55(8) and 59(1) of the 1981 Act;
in subsection (6) for “289(11), 293(10) and 308(2)(e)” and “289(11), 293(8) and 308(2)(e)” of “54(9) and 59(1) of the Finance Act 1981” and “55(8) and 59(1) of that Act”, respectively;
in subsection (7) for “300, 301 or 303(3)” of “58 or 59(4) of the Finance Act 1981”.
In any case where this section has effect in accordance with subsection (10) above and the qualifying company has one or more subsidiaries—
subsection (3) above shall, where the inspector has notified the subsidiary that relief has been given in respect of shares in the company of which it is a subsidiary, apply to the subsidiary as respects any transfer of its shares as it applies to the company as respects any transfer of shares in the company; and
subsections (5) and (6) above shall have effect in relation to any such arrangements as are mentioned in paragraph (c) of subsection (2) of section 308 (as that subsection has effect by virtue of subsection (6) of that section) as they have effect in relation to any such arrangement as is mentioned in section 289(11).
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Shares subscribed for, issued to, held by or disposed of for an individual by a nominee shall be treated for the purposes of this Chapter as subscribed for, issued to, held by or disposed of by that individual.
Where eligible shares issued after 18th March 1986 are held on a bare trust for two or more beneficiaries, this Chapter shall have effect (with the necessary modifications) as if—
each beneficiary had subscribed as an individual for all of those shares; and
the amount subscribed by each beneficiary was equal to the total amount subscribed on the issue of those shares divided by the number of beneficiaries.
Section 290(1) shall not apply where the amount is subscribed as nominee for an individual by the person or persons having the management of an investment fund approved for the purposes of this section by the Board (“the managers of an approved fund”).
Where an individual claims relief in respect of eligible shares in a company which have been issued to the managers of an approved fund as nominee for that individual, section 306(2) shall apply as if it required—
the certificate referred to in that section to be issued by the company to the managers;
the claim for relief to be accompanied by a certificate issued by the managers, in such form as the Board may authorise, certifying that the managers hold certificates issued to them by the companies concerned, for the purposes of sections 306(2), in respect of the holdings of eligible shares shown on the managers' certificate.
The managers of an approved fund may be required by a notice given to them by an inspector or other officer of the Board to deliver to the officer, within the time limited by the notice, a return of the holdings of eligible shares shown on certificates issued by them in accordance with subsection (4) above in the year of assessment to which the return relates.
Section 306(6) shall not apply in relation to any certificate issued by the managers of an approved fund for the purposes of subsection (4) above.
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In this Chapter— and “the 1984 Regulations” means the Petroleum (Production) (Landward Areas) Regulations 1984.
before the commencement period.
the aggregate of the appropriate portions so calculated for a previous year and brought into account on the previous happening of a chargeable event.
The approved amount for passenger payments is— where— M is the number of miles of business travel by the employee, by car or van, for which the employee carries a qualifying passenger in the tax year in question and in respect of which passenger payments are made; and R is 5p per mile. If the employee carries more than one qualifying passenger for all or part of a tax year, the approved amount for passenger payments is the total of the amounts calculated under sub-paragraph (1) in respect of each qualifying passenger. In this paragraph “qualifying passenger” means a passenger who is also an employee for whom the travel is business travel. The Treasury may by regulations amend sub-paragraph (1) so as to alter the rate.
A vehicle is a “company vehicle” in a tax year if in that year— Section 168(6) (when cars and vans are made available for private use and are made available by reason of employment) applies for the purposes of sub-paragraph (1).
“Employment” includes an office and “employee” includes an office-holder.
“Tax year” means a year of assessment.
Section 839 applies for the purposes of this Chapter other than section 291.
References in this Chapter to a disposal of shares include references to a disposal of an interest or right in or over the shares and an individual shall be treated for the purposes of this Chapter as disposing of any shares which he is treated by virtue of section 86(1) of the 1979 Act as exchanging for other shares.
References in this Chapter to the reduction of any amount include references to its reduction to nil.
For the purposes of this Chapter—
in relation to shares issued after 18th March 1986, the market value at any time of any asset shall be taken to be the price which it might reasonably be expected to fetch on a sale at that time in the open market free from any interest or right which exists by way of security in or over it;
in relation to shares issued before 19th March 1986, “market value” shall be construed in accordance with section 150 of the 1979 Act.
References in this Chapter to relief given to an individual in respect of eligible shares, and to the withdrawal of such relief, include respectively references to relief given to him in respect of those shares at any time after he has disposed of them and references to the withdrawal of such relief at any such time.
In relation to any case falling within section 289(1)(d), any reference in that section to any licence being held by, or granted to, any person shall be read as including a reference to such a licence being held by, or (as the case may be) granted to, that person together with one or more other persons.
The Treasury may by order amend any of the definitions set out in subsection (1) above which relate to licences under the Petroleum (Production) Act 1934 or the Petroleum (Production) Act (Northern Ireland) 1964.
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Where— that sum shall be treated for the purpose of computing that individual’s total income as received by him after deduction of income tax from a corresponding gross amount (“the gross amount”).
an individual who holds, has held, or is about to hold, an office or employment gives in connection with his holding that office or employment an undertaking (whether absolute or qualified, and whether legally valid or not) the tenor or effect of which is to restrict him as to his conduct or activities; and
in respect of the giving of that undertaking by him, or of the total or partial fulfilment of that undertaking by him, any sum is paid either to him or to any other person; and
apart from this section, the sum paid would neither fall to be treated as income of any person for the purposes of income tax for any year of assessment nor fall to be taken into account as a receipt in computing, for the purposes of income tax for any year of assessment, the amount of any income of, or loss incurred by, any person;
In any case where subsection (1) above applies—
no assessment shall be made on the individual in respect of income tax at the basic rate on the gross amount but he shall be treated as having paid income tax at the basic rate on that amount or, if his total income is reduced by any deductions, on so much of that amount as is part of his total income as so reduced;
no repayment shall be made of income tax treated by virtue of paragraph (a) above as having been paid; and
the gross amount shall be treated for the purposes of sections 348 and 349 as not brought into charge to income tax.
Where the individual has died before the payment of the sum referred to in subsection (1) above, so much of subsections (1) and (2) above as relates to the results which are to follow from the matters specified in paragraphs (a) to (c) of subsection (1) above shall have effect as if that sum had been paid immediately before the death.
Where valuable consideration otherwise than in the form of money is given in respect of the giving of, or of the total or partial fulfilment of, any undertaking, subsections (1) to (3) above shall apply as if a sum had instead been paid equal to the value of that consideration.
Where any sum is paid or valuable consideration given to any person in any year of assessment in respect of the giving of, or the total or partial fulfilment of, an undertaking satisfying the conditions specified in subsection (1)(a) above (not being a sum from which income tax is duly deducted under any provision of the Income Tax Acts), it shall be the duty of the person paying over the sum or giving the consideration to deliver particulars thereof in writing to the inspector not later than one month after the end of that year, identifying the recipient of the payment or consideration, the undertaking in connection with which it was made or given and the individual who gave that undertaking.
In this section—
“office or employment” means any office or employment whatsoever such that the emoluments thereof, if any, are or would be chargeable to income tax under Case I or II of Schedule E; and
references to the giving of valuable consideration do not include references to the mere assumption of an obligation to make over or provide valuable property, rights or advantages, but do include references to the doing of anything in or towards the discharge of such an obligation.
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Where the duties of any employment which are performed by a person in the United Kingdom or a designated area consist wholly or mainly— the Income Tax Acts shall have effect as if the performance by that person of those duties constituted the carrying on by him of a trade within Case I of Schedule D; and accordingly Schedule E shall not apply to the emoluments from the employment so far as attributable to his performance of those duties.
of taking part, as a diver, in diving operations concerned with the exploration or exploitation of the seabed, its subsoil and their natural resources; or
of acting, in relation to any such diving operations, as a diving supervisor,
In this section “designated area” means any area designated under section 1(7) of the Continental Shelf Act 1964.
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Income from wounds and disability pensions to which this subsection applies shall be exempt from income tax and shall not be reckoned in computing income for any purposes of the Income Tax Acts.
Subsection (1) above applies to—
wounds pensions granted to members of the naval, military or air forces of the Crown;
retired pay of disabled officers granted on account of medical unfitness attributable to or aggravated by naval, military or air-force service;
disablement or disability pensions granted to members, other than commissioned officers, of the naval, military or air forces of the Crown on account of medical unfitness attributable to or aggravated by naval, military or air-force service;
disablement pensions granted to persons who have been employed in the nursing services of any of the naval, military or air forces of the Crown on account of medical unfitness attributable to or aggravated by naval, military or air-force service; and
injury and disablement pensions payable under any scheme made under the Injuries in War (Compensation) Act 1914, the Injuries in War Compensation Act 1914 (Session 2) and the Injuries in War (Compensation) Act 1915 or under any War Risks Compensation Scheme for the Mercantile Marine.
Where the amount of any retired pay or pensions to which subsection (1) above applies is not solely attributable to disablement or disability, the relief conferred by that subsection shall extend only to such part as is certified by the Secretary of State for Social Services, after consultation with the appropriate government department, to be attributable to disablement or disability.
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Where, under the scheme relating to men in the Armed Forces of the Crown announced on behalf of His Majesty’s Government in the United Kingdom on 15th April 1946 or under any other scheme certified by the Treasury to make analogous provision for classes of persons to whom the first-mentioned scheme does not apply, a person who has served in the armed forces of the Crown at any time during the continuance in force of the Emergency Powers (Defence) Act 1939 voluntarily undertakes to serve therein for a further period, any sum payable to him in pursuance of the scheme out of moneys provided by Parliament by way of gratuity at the end of his further period of service shall not be regarded as income for any income tax purposes.
Where, under the scheme relating to members of the Women’s Royal Naval Service, the Auxiliary Territorial Service and the Women’s Auxiliary Air Force announced on behalf of His Majesty’s Government in the United Kingdom on 20th November 1946, or under any other scheme certified by the Treasury to make analogous provision for classes of persons to whom the first-mentioned scheme does not apply, a woman who has served in or with the armed forces of the Crown at any time during the continuance in force of the Emergency Powers (Defence) Act 1939 voluntarily undertakes to serve in or with those forces for a further period, any sum payable to her in pursuance of the scheme out of moneys provided by Parliament by way of gratuity at the end of her further period of service shall not be regarded as income for any income tax purposes.
Any allowance payable out of the public revenue to or in respect of any class of persons, being members of the armed forces of the Crown, as respects which the Treasury certifies either— shall not be regarded as income for any income tax purposes.
that it is payable to the persons in question in lieu of food or drink normally supplied in kind to members of the armed forces, or
that it is payable in respect of the persons in question as a contribution to the expenses of a mess,
The sums known as training expenses allowances payable out of the public revenue to members of the reserve and auxiliary forces of the Crown, and the sums payable by way of bounty out of the public revenue to such members in consideration of their undertaking prescribed training and attaining a prescribed standard of efficiency, shall not be treated as income for any income tax purpose.
Any sum which, in pursuance of the scheme as to service emoluments contained in the Command Paper laid before Parliament in August 1950, becomes payable out of moneys provided by Parliament by way of bounty to a person who, having served in the armed forces of the Crown, voluntarily undertakes to serve for a further period shall not be regarded as income for any income tax purpose.
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annuities and additional pensions paid to holders of the Victoria Cross;
annuities and additional pensions paid to holders of the George Cross;
annuities paid to holders of the Albert Medal or of the Edward Medal;
additional pensions paid to holders of the Military Cross;
additional pensions paid to holders of the Distinguished Flying Cross;
additional pensions paid to holders of the Distinguished Conduct Medal;
additional pensions paid to holders of the Conspicuous Gallantry Medal;
additional pensions paid to holders of the Distinguished Service Medal;
additional pensions paid to holders of the Military Medal;
additional pensions paid to holders of the Distinguished Flying Medal;
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Payments of pensions or allowances to which this section applies shall not be treated as income for any purposes of the Income Tax Acts.
This section applies to—
any pension or allowance payable by or on behalf of the Department of Health and Social Security under so much of any Order in Council, Royal Warrant, order or scheme as relates to death due to—
service in the armed forces of the Crown or war-time service in the merchant navy, or
war injuries;
any pension or allowance at similar rates and subject to similar conditions which is payable by the Ministry of Defence in respect of death due to peacetime service in the armed forces of the Crown before 3rd September 1939; and
any pension or allowance which is payable under the law of a country other than the United Kingdom and is of a character substantially similar to a pension or allowance falling within paragraph (a) or (b) above.
Where a pension or allowance falling within subsection (2) above is withheld or abated by reason of the receipt of another pension or allowance not falling within that subsection, there shall be treated as falling within that subsection so much of the other pension or allowance as is equal to the pension or allowance that is withheld or, as the case may be, to the amount of the abatement.
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An Agent-General who is resident in the United Kingdom shall be entitled to the same immunity from income tax as that to which the head of a mission so resident is entitled under the Diplomatic Privileges Act 1964.
Any person having or exercising any employment to which this subsection applies (not being a person employed in any trade, business or other undertaking carried on for the purposes of profit) shall be entitled to the same immunity from income tax as that to which a member of the staff of a mission is entitled under the Diplomatic Privileges Act 1964.
The employments to which subsection (2) above applies are the employment in the United Kingdom as— of a person certified by the High Commissioner of the country in question or, as the case may be, by the Agent-General for the state, province or self-governing colony in question to be ordinarily resident outside the United Kingdom and to be resident in the United Kingdom solely for the purpose of the performance of his duties as such member or official agent.
a member of the personal staff of any Agent-General; or
an official agent for, or for any state or province of, any of the countries for the time being mentioned in Schedule 3 to the British Nationality Act 1981 or the Republic of Ireland; or
an official agent for any self-governing colony,
In this section—
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Income arising from any office or employment to which this section applies shall be exempt from income tax, and no account shall be taken of any such income in estimating the amount of income for any income tax purposes.
The offices and employments to which this section applies are the following, that is to say—
the office of a consul in the United Kingdom in the service of any foreign state; and
the employment of an official agent in the United Kingdom for any foreign state, not being an employment exercised by a Commonwealth citizen or a citizen of the Republic of Ireland or exercised in connection with any trade, business or other undertaking carried on for the purposes of profit.
In this section—
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Where a consular officer or employee in the United Kingdom of any foreign state to which this section applies— then any income of his falling within Case IV or V of Schedule D shall be exempt from income tax, and he shall be treated as not resident in the United Kingdom for the purposes of sections 48 and 123(4).
is not a British citizen, a British Dependent Territories citizen or a British Overseas citizen, and
is not engaged in any trade, profession, vocation or employment in the United Kingdom, otherwise than as such a consular officer or employee, and
either is a permanent employee of that state or was not ordinarily resident in the United Kingdom immediately before he became a consular officer or employee in the United Kingdom of that state;
Without prejudice to section 321, the income arising from a person’s employment in the United Kingdom as a consular employee of any foreign state to which this section applies shall be exempt from income tax, except in the case of a person who is not a national of that state but is a British citizen, a British Dependent Territories citizen or a British Overseas citizen.
For the purposes of this section “consular employee” includes any person employed, for the purposes of the official business of a consular officer, at any consulate or consular establishment or at any other premises used for those purposes.
This section shall apply to any foreign state to which Her Majesty by Order in Council directs that it shall apply for the purpose of giving effect to any consular convention or other arrangement with that state making similar provision in the case of Her Majesty’s consular officers or employees in that state.
An Order in Council under subsection (4) above— and any statutory instrument under this section shall be subject to annulment in pursuance of a resolution of the House of Commons.
may limit the operation of this section in relation to any state in such manner as appears to Her Majesty to be necessary or expedient having regard to the arrangement with that state;
may be made so as to have effect from a date earlier than the making of the Order or the passing of this Act (but not earlier than the coming into force of the arrangement with regard to which it is made); and
may contain such transitional provisions as appear to Her Majesty to be necessary or expedient;
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The emoluments paid by the government of any designated country to any member of a visiting force of that country who is not a British citizen, a British Dependent Territories citizen or a British Overseas citizen shall be exempt from income tax.
A period during which a member of a visiting force to whom subsection (1) above applies is in the United Kingdom by reason solely of his being a member of that force shall not be treated for the purposes of income tax either as a period of residence in the United Kingdom or as creating a change of his residence or domicile.
Subsection (2) above shall not affect the operation of section 278 in relation to any person for any year of assessment.
In subsections (1) and (2) above references to a visiting force shall apply to a civilian component of such a force as they apply to the force itself; and those subsections shall be construed as one with the Visiting Forces Act 1952, but so that, for the purposes of this section, references to a designated country shall be substituted in that Act for references to a country to which a provision of that Act applies.
For the purpose of conferring on persons attached to any designated allied headquarters the like benefits as are conferred by subsections (1) and (2) above on members of a visiting force or civilian component, any members of the armed forces of a designated country shall, while attached to any such headquarters, be deemed to constitute a visiting force of that country, and there shall be a corresponding extension of the class of persons who may be treated as members of a civilian component of such a visiting force.
In the case of persons of any category for the time being agreed between Her Majesty’s government in the United Kingdom and the other members of the North Atlantic Council—
employment by a designated allied headquarters shall be treated for the purposes of subsection (2) above as if it were service as a member of a visiting force of a designated country; and
the emoluments paid by a designated allied headquarters to persons employed by such a headquarters shall be exempt from income tax.
The exemption conferred by subsection (6)(b) above shall cease to apply to British citizens, British Dependent Territories citizens and British Overseas citizens if it becomes unnecessary that it should so apply for the purpose of giving effect to any agreement between parties to the North Atlantic Treaty.
For the purposes of this section—
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The Treasury may by order designate for the purposes of this section—
any international organisation—
if one of its members is the United Kingdom or any of the Communities; and
if the agreement under which that member became a member provides for exemption from tax, in relation to the organisation, of the kind for which provision is made by this section; or
any of the Communities or the European Investment Bank.
Where an organisation has been so designated, a person not resident in the United Kingdom shall not be liable to income tax in respect of income from any security issued by the organisation if he would not be liable but for the fact that—
the security or income is issued, made payable or paid in the United Kingdom or in sterling; or
the organisation maintains an office or other place of business in the United Kingdom.
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Any terminal bonus, or interest or other sum, payable under a certified contractual savings scheme— shall be disregarded for all purposes of the Income Tax Acts.
in respect of money raised under section 12 of the National Loans Act 1968, or
in respect of shares in a building society,
In this section “certified contractual savings scheme” means, except in relation to a building society, a scheme—
governed by regulations made under section 12 of the National Debt Act 1958 or section 52 of the Finance Act 1969; and
providing for periodical contributions by individuals for a specified period, and the repayment in accordance with the regulations of contributions together with any additional sum by way of bonus or interest, and
certified by the Treasury as qualifying for exemption under this section.
In this section “certified contractual savings scheme” means, in relation to a building society, a scheme—
providing for periodical contributions by individuals for a specified period, being contributions by way of investment in shares in the building society, and
certified by the Treasury as corresponding to a scheme certified under subsection (2) above, and as qualifying for exemption under this section.
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If any common investment fund established under section 42 of the Administration of Justice Act 1982 is for the time being designated for the purposes of this subsection by an agreement between the Board and the investment manager of the fund—
subject to subsection (2) below, the investment manager shall be entitled to exemption from income tax in respect of so much of the income derived from that fund or any investment thereof as is paid by him by way of dividend on the shares into which the fund is divided; and
dividends on those shares shall be paid without deduction of income tax and shall be chargeable under Case III of Schedule D. A claim for exemption under paragraph (a) shall be made to the Board.
Where the income or part of the income derived in a year of assessment from the fund or its investments consists of interest on securities, the income or part (as the case may be) shall for the purposes of subsection (1)(a) above be calculated by treating it as the amount it would be apart from section 714(5), but reduced by an amount (if any) equal to the excess of A over B.
In subsection (2) above— A is the total amount of allowances to which, by virtue of section 714(4), the investment manager of the fund is entitled in the year of assessment in respect of all securities comprised in the fund; and B is the total amount of annual profits or gains which, by virtue of section 714(2), he is treated as receiving in the year of assessment in respect of those securities.
In subsections (2) and (3) above “interest” and “securities” have the same meanings as in sections 710 and 711.
Where at any time by virtue of subsection (1) above the income of any person from any source becomes chargeable to income tax as provided by that subsection, not having previously been chargeable by direct assessment on that person, section 66(3) shall apply as if the source of that income were a new source of income acquired by that person at that time.
The Accountant General and any other person authorised to invest in a fund designated for the purposes of subsection (1) above shall as respects each year of assessment furnish to the Board, at such time and in such manner as they may direct, particulars of any sums paid without deduction of tax by virtue of that subsection and of the persons to whom they were paid, except that particulars shall not be required of any case where the total of such sums paid to any person in that year did not exceed £15.
An agreement designating a fund for the purposes of subsection (1) above may provide for incidental and consequential matters, including arrangements for giving effect to subsection (1)(a) above by provisional repayments of tax deducted at source, and may be determined by the Board or the investment manager of the fund by one year’s notice expiring at the end of any year of assessment.
The reference to the Accountant General is a reference to the Accountant General of the Supreme Court of England and Wales and in relation to money in the Supreme Court of Judicature of Northern Ireland, or money in a county court in Northern Ireland, and in relation to investments representing such money, includes a reference to the Accountant General of the Supreme Court of Judicature of Northern Ireland or any other person by whom such funds are held.
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The following interest shall not be regarded as income for any income tax purpose—
any interest on damages in respect of personal injuries to a plaintiff or any other person, or in respect of a person’s death, which is included in any sum for which judgment is given by virtue of a provision to which this paragraph applies; and
any interest on damages or solatium in respect of personal injuries sustained by a pursuer or by any other person, decree for payment of which is included in any interlocutor by virtue of section 1 of the Interest on Damages (Scotland) Act 1958.
The provisions to which subsection (1)(a) above applies are—
section 3 of the Law Reform (Miscellaneous Provisions) Act 1934;
section 17 of the Law Reform (Miscellaneous Provisions) Act (Northern Ireland) 1937;
section 35A of the Supreme Court Act 1981;
section 69 of the County Courts Act 1984;
section 33A of the Judicature (Northern Ireland) Act 1978; and
Article 45A of the County Courts (Northern Ireland) Order 1980.
A payment in satisfaction of a cause of action, including a payment into court, shall not be regarded as income for any income tax purpose to the extent to which it is in respect of interest which would fall within subsection (1) above if included in a sum for which a judgment is given or if decree for payment of it were included in an interlocutor.
In this section “personal injuries” includes any disease and any impairment of a person’s physical or mental condition.
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Income arising from a scholarship held by a person receiving full-time instruction at a university, college, school or other educational establishment shall be exempt from income tax, and no account shall be taken of any such income in computing the amount of income for income tax purposes.
In this section “scholarship” includes an exhibition, bursary or any other similar educational endowment.
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the persons from time to time holding any full-time office as clergyman or minister of any religious denomination, or
any particular person holding such an office,
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the making good to him, in consequence of his being the holder of his office, of statutory amounts payable in connection with the premises or statutory deductions falling to be made in connection therewith, except in so far as an amount or deduction is properly attributable to a part of the premises in respect of which he receives rent;
the payment on his behalf, except as aforesaid, of such a statutory amount; and
unless he is in director’s or higher-paid employment (as defined in section 167), the value to him of any expenses incurred in connection with the provision in the premises of living accommodation for him, being expenses incurred in consequence of his being the holder of his office.
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any sums of money paid or expenses incurred by him wholly, exclusively and necessarily in the performance of his duty as a clergyman or minister;
such part of the rent (not exceeding one-quarter) as the inspector by whom the assessment is made may allow, paid by him in respect of a dwelling-house any part of which is used mainly and substantially for the purposes of his duty as such clergyman or minister; and
in respect of expenses borne by him in the maintenance, repairs, insurance or management of any premises in which, in right of such an interest as is mentioned in subsection (1) above, he has such a residence as is mentioned in that subsection, such part of the expenses as, together with any deduction allowable in respect of such expenses under paragraph (a) above, is equal to one-quarter of the amount of the expenses. On an appeal to the General Commissioners or Special Commissioners, the Commissioners shall have jurisdiction to review the inspector’s decision under paragraph (b) above.
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Regulations under Chapter 3 of Part 6 of ITTOIA 2005 (income from individual investment plans) may include provision generally for the purpose of the administration of corporation tax in relation to plans.
The Treasury may make regulations providing that an individual who invests under a plan shall be entitled to relief from income tax in respect of the investments.
The regulations shall set out the conditions subject to which plans are to operate and the extent to which investors are to be entitled to relief from tax.
In particular, the regulations may—
specify the description of individuals who may invest and the kind of investments they may make;
specify maximum investment limits and minimum periods for which investments are to be held;
provide that investments are to be held by persons (“plan managers”) on behalf of investors;
specify how relief from tax is to be claimed by, and granted to, investors or plan managers on their behalf;
provide that plans and plan managers must be such as are approved by the Board;
specify the circumstances in which approval may be granted and withdrawn.
The regulations may include provision—
that in prescribed circumstances—
an investor under a plan shall cease to be, and be treated as not having been, entitled to relief from tax in respect of the investments; and
he or the plan manager concerned (depending on the terms of the regulations) shall account to the Board for tax from which relief has already been given on the basis that the investor was so entitled;
that an investor under a plan or the plan manager concerned (depending on the terms of the regulations) shall account to the Board for tax from which relief has been given in circumstances such that the investor was not entitled to it;
adapting, or modifying the effect of, any enactment relating to income tax in order to—
secure that investors under plans are entitled to relief from tax in respect of investments;
secure that investors under plans cease to be, and are treated as not having been, so entitled;
secure that investors under plans or plan managers account for tax as mentioned in paragraph (a) or (b) above;
that a person who is, or has at any time been, either an investor under a plan or a plan manager—
shall comply with any notice which is served on him by the Board and which requires him within a prescribed period to make available for the Board’s inspection documents (of a prescribed kind) relating to a plan or to investments which are or have been held under it;
shall, within a prescribed period of being required to do so by the Board, furnish to the Board information (of a prescribed kind) about a plan or about investments which are or have been held under it;
generally for the purpose of bringing plans into existence, and generally for the purpose of the administration of plans and the administration of income tax and corporation tax in relation to them.
In this section “prescribed” means prescribed by the regulations.
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shall, if his ordinary residence has been in the United Kingdom, be assessed and charged to income tax notwithstanding that at the time the assessment or charge is made he may have left the United Kingdom, if he has so left the United Kingdom for the purpose only of occasional residence abroad, and
shall be charged as a person actually residing in the United Kingdom upon the whole amount of his profits or gains, whether they arise from property in the United Kingdom or elsewhere, or from any allowance, annuity or stipend, or from any trade, profession, employment or vocation in the United Kingdom or elsewhere.
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Where— the question whether he is resident in the United Kingdom shall be decided without regard to any place of abode maintained in the United Kingdom for his use.
a person works full-time in one or more of the following, that is to say, a trade, profession, vocation, office or employment; and
no part of the trade, profession or vocation is carried on in the United Kingdom and all the duties of the office or employment are performed outside the United Kingdom;
Where an office or employment is in substance one of which the duties fall in the year of assessment to be performed outside the United Kingdom there shall be treated for the purposes of this section as so performed any duties performed in the United Kingdom the performance of which is merely incidental to the performance of the other duties outside the United Kingdom.
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A person shall not be charged to income tax under Schedule D as a person residing in the United Kingdom, in respect of profits or gains received in respect of possessions or securities out of the United Kingdom, if— but if any such person resides in the United Kingdom for such a period he shall be so chargeable for that year.
he is in the United Kingdom for some temporary purpose only and not with any view or intent of establishing his residence there, and
he has not actually resided in the United Kingdom at one time or several times for a period equal in the whole to six months in any year of assessment,
For the purposes of Cases I, II and III of Schedule E, a person who is in the United Kingdom for some temporary purpose only and not with the intention of establishing his residence there shall not be treated as resident in the United Kingdom if he has not in the aggregate spent at least six months in the United Kingdom in the year of assessment, but shall be treated as resident there if he has.
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Where a company begins or ceases to carry on a trade, or to be within the charge to corporation tax in respect of a trade, the company’s income shall be computed as if that were the commencement or, as the case may be, discontinuance of the trade, whether or not the trade is in fact commenced or discontinued.
Subject to subsection (3) below and to any other provision of the Corporation Tax Acts which expressly authorises such a deduction, no deduction shall be made in computing income from any source—
in respect of dividends or other distributions; nor
in respect of any yearly interest, annuity or other annual payment or in respect of any such other payments as are mentioned in section 348(2), but not including sums which are, or but for any exemption would be, chargeable under Schedule A.
In computing income from a trade, subsection (2)(b) above shall not prevent the deduction of yearly interest payable in the United Kingdom on an advance from a bank carrying on a bona fide banking business in the United Kingdom.
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Subject to sections 339, 494 and 787, in computing the corporation tax chargeable for any accounting period of a company any charges on income paid by the company in the accounting period, so far as paid out of the company’s profits brought into charge to corporation tax, shall be allowed as deductions against the total profits for the period as reduced by any other relief from tax, other than group relief.
Subject to the following subsections, to section 339 and to any other express exceptions, “charges on income” means for the purposes of corporation tax— but no payment which is deductible in computing profits or any description of profits for purposes of corporation tax shall be treated as a charge on income.
payments of any description mentioned in subsection (3) below, not being dividends or other distributions of the company; and
payments which are qualifying donations (within the meaning of section 339);
Subject to subsections (4) to (6) below, the payments referred to in subsection (2)(a) above are— and for the purposes of this section any interest payable by a company as mentioned in paragraph (b) above shall be treated as paid on its being debited to the company’s account in the books of the person to whom it is payable.
any yearly interest (whether charged to revenue or capital), annuity or other annual payment and any such other payments as are mentioned in section 348(2) but not including sums which are or, but for any exemption would be, chargeable under Schedule A; and
any other interest (whether charged to revenue or capital) payable in the United Kingdom on an advance from a bank carrying on a bona fide banking business in the United Kingdom, or from a person who in the opinion of the Board is bona fide carrying on business as a member of the Stock Exchange or bona fide carrying on the business of a discount house in the United Kingdom;
No such payment as is mentioned in subsection (3)(a) above made by a company to a person not resident in the United Kingdom shall be treated as a charge on income unless the company is so resident and either—
the company deducts income tax from the payment in accordance with section 349, and accounts under Schedule 16 for the tax so deducted, or
it is a payment of interest on a quoted Eurobond falling within section 124; or
the payment is a payment of interest falling within section 340; or
the payment is one payable out of income brought into charge to tax under Case IV or V of Schedule D.
No such payment made by a company as is mentioned in subsection (3) above shall be treated as a charge on income if—
the payment, not being interest, is charged to capital or the payment is not ultimately borne by the company; or
the payment is not made under a liability incurred for a valuable and sufficient consideration (and, in the case of a company not resident in the United Kingdom, incurred wholly and exclusively for the purposes of a trade carried on by it in the United Kingdom through a branch or agency), and is not a covenanted donation to charity (within the meaning of section 339).
No such payment of interest as is mentioned in subsection (3) above made by a company shall be treated as a charge on income unless—
the company exists wholly or mainly for the purpose of carrying on a trade; or
the payment of interest is wholly and exclusively laid out or expended for the purposes of a trade carried on by the company; or
the company is an investment company, within the meaning of section 130 and including an authorised unit trust; or
the payment of interest would, on the assumptions made below, be eligible for relief under section 353 by virtue of section 354 if it were made by an individual. For the purposes of paragraph (d) above, it shall be assumed that if the land concerned is occupied by the company the conditions of section 355(1) are satisfied if the land either— but the limit imposed by section 357 shall apply only in a case falling within paragraph (ii) above and shall then apply without regard to any loan made in connection with any other land.
is not used as a residence; or
is used as an individual’s main or only residence;
Any payment to which section 125(1) applies shall not be a charge on income for the purposes of corporation tax.
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A qualifying donation is a payment made by a company to a charity, other than—
a covenanted payment to charity, as defined in section 660(3); and
a payment which is deductible in computing profits or any description of profits for purposes of corporation tax.
A qualifying donation shall not constitute a charge on the income of the company unless a claim is made by the company and the company is resident in the United Kingdom and is not a close company.
A payment made by a company is not a qualifying donation unless, on the making of it, the company deducts out of it a sum representing the amount of income tax on it.
Where, with a view to securing relief under section 338 a company makes a payment subject to such a deduction as is mentioned in subsection (3) above, then, whether or not it proves to be a qualifying donation, the payment—
shall be treated as a relevant payment for the purposes of Schedule 16; and
shall in the hands of the recipient (whether a charity or not) be treated for the purposes of this Act as if it were an annual payment.
In any accounting period of a company, the maximum amount allowable under section 338 by virtue of subsection (2)(b) of that section in respect of qualifying donations made by the company shall be a sum equal to 3 per cent. of the dividends paid on the company’s ordinary share capital in that accounting period.
A covenanted donation to charity shall not be regarded for the purposes of the definition of “charges on income” in section 338, or for any of the other purposes of the Corporation Tax Acts, as being, by reason of any provision of this Act, a distribution.
Notwithstanding anything in any other provision of the Tax Acts, a covenanted donation to charity made by a company shall not be a charge on income for the purposes of section 338 unless the company— and any such payment from which a deduction is made as mentioned in paragraph (a) above shall be treated as a relevant payment for the purposes of Schedule 16, whether or not it would otherwise fall to be so treated.
deducts out of it a sum representing the amount of income tax on it; and
accounts for that tax in accordance with Schedule 16;
In this section “covenanted donation to charity” means a payment under a disposition or covenant made by the company in favour of a charity whereby the like annual payments (of which the donation is one) become payable for a period which may exceed three years and is not capable of earlier termination under any power exercisable without the consent of the persons for the time being entitled to the payments.
For the purposes of this section “charity” includes the Trustees of the National Heritage Memorial Fund and the Historic Buildings and Monuments Commission for England and, additionally, in subsections (1) to (5) above includes the Trustees of the British Museum, the Trustees of the British Museum (Natural History) and any Association of a description specified in section 508, but, subject to that, in this section “charity” has the same meaning as in section 506.
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A payment of interest by a company is one to which section 338(4)(c) applies if the company is carrying on a trade and—
under the terms of the contract under which the interest is payable, the interest is to be paid, or may be required to be paid, outside the United Kingdom; and
the interest is in fact paid outside the United Kingdom; and
either—
the liability to pay the interest was incurred wholly or mainly for the purposes of activities of the company’s trade carried on outside the United Kingdom; or
the interest is payable in a currency other than sterling and, subject to subsection (2) below, the liability to pay the interest was incurred wholly or mainly for the purposes of activities of that trade, wherever carried on.
Subsection (1)(c)(ii) above does not apply where—
the trade is carried on by a body of persons over whom the person entitled to the interest has control; or
the person entitled to the interest is a body of persons over whom the person carrying on the trade has control; or
the person carrying on the trade and the person entitled to the interest are both bodies of persons, and some other person has control over both of them. In this subsection references to a body of persons include references to a partnership and “control” has the meaning given by section 840.
For the purposes of subsection (1) above the company paying the interest shall be treated as carrying on any trade carried on by a 75 per cent. subsidiary of it (both being bodies corporate) if the subsidiary (as well as the company making the payment) is resident in the United Kingdom.
In determining for the purposes of this section whether one company is a 75 per cent. subsidiary of another that other company shall be treated as not being the owner—
of any share capital which it owns directly in a body corporate if a profit on a sale of the shares would be treated as a trading receipt of its trade; or
of any share capital which it owns indirectly, and which is owned directly by a body corporate for which a profit on the sale of the shares would be a trading receipt; or
of any share capital which it owns directly or indirectly in a body corporate not resident in the United Kingdom.
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This section applies where—
the relationship between two companies is as mentioned in subsection (2) below;
one of the companies makes to the other a payment which, for the purposes of corporation tax, is a charge on income of the company making it; and
in the hands of the company receiving it, the payment is chargeable to tax under Case III of Schedule D.
The relationship between two companies which is referred to in subsection (1)(a) above is— and section 840 applies for the purposes of this section.
that one company controls the other; or
that another person controls both companies; or
that one company is a 51 per cent. subsidiary of the other; or
that both companies are 51 per cent. subsidiaries of another company;
In a case where this section applies, the payment referred to in subsection (1)(b) above shall be treated for the purposes of corporation tax as received by the company to which it is paid on the same day as that on which it is for those purposes treated as paid by the company paying it.
Subject to subsection (5) below, where the payment referred to in subsection (1)(b) above is a “relevant payment” for the purposes of Schedule 16, it shall be treated for the purposes of that Schedule as received on the same day as that on which, by virtue of subsection (3) above, it is treated as received for the purposes of corporation tax; and the reference in paragraph 5(1) of that Schedule to the accounting period in which the payment is received shall be construed accordingly.
Subsection (4) above does not apply if the day on which the payment would be treated as received apart from that subsection falls within the same accounting period (of the receiving company) as the day on which it would be treated as received under that subsection.
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In this section references to a company’s final year are references to the financial year in which the affairs of the company are completely wound up, and references to a company’s penultimate year are references to the last financial year preceding its final year.
Subject to subsection (3) below—
corporation tax shall be charged on the profits of the company arising in the winding-up in its final year at the rate of corporation tax fixed or proposed for the penultimate year; but
where the corporation tax charged on the company’s income included in those profits falls to be calculated or reduced in accordance with section 13, it shall be so calculated or reduced in accordance with such rate or fraction fixed or proposed for the penultimate year as is applicable under that section.
If, before the affairs of the company are completely wound up, any of the rates or fractions mentioned in subsection (2) above has been fixed or proposed for the final year, that subsection shall have effect in relation to that rate or fraction as if for the references to the penultimate year there were substituted references to the final year.
An assessment on the company’s profits for an accounting period which falls after the commencement of the winding-up shall not be invalid because made before the end of the accounting period.
In making an assessment after the commencement of the winding-up of the company but before the date when its affairs are completely wound up, the inspector may, with the concurrence of the liquidator, act on an assumption as to when that date will fall, so far as it governs section 12(7).
The assumption of the wrong date shall not alter the company’s final and penultimate year, and, if the right date is later, an accounting period shall end on the date assumed, and a new accounting period shall begin and section 12(7) shall thereafter apply as if that new accounting period began with the commencement of the winding-up.
References in this section to a rate or fraction fixed or proposed are references to a rate or fraction fixed by an Act passed before the completion of the winding-up or, if not so fixed, proposed by a Budget resolution (and without regard to any subsequent Act); except that if a rate or fraction so fixed is proposed to be altered by a Budget resolution any such reference to it is a reference to it as proposed to be so altered. In this subsection “Budget resolution” means a resolution of the House of Commons for fixing any such rate or fraction as is mentioned in this section.
Where the winding-up commenced before the company’s final year, paragraphs (a) and (b) of subsection (2) (but not subsection (3)) above shall apply in relation to the company’s profits arising at any time in its penultimate year.
Any assessment made by virtue of section 8(4) shall be subject to any such adjustment by discharge or repayment of tax or by a further assessment as may be required to give effect to this section.
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Where, on a company (“the predecessor”) ceasing to carry on a trade, another company (“the successor”) begins to carry it on, and— then the Corporation Tax Acts shall have effect subject to subsections (2) to (6) below. In paragraphs (a) and (b) above references to the trade shall apply also to any other trade of which the activities comprise the activities of the first mentioned trade.
on or at any time within two years after that event the trade or an interest amounting to not less than a three-fourths share in it belongs to the same persons as the trade or such an interest belonged to at some time within a year before that event; and
the trade is not, within the period taken for the comparison under paragraph (a) above, carried on otherwise than by a company which is within the charge to tax in respect of it;
The trade shall not be treated as permanently discontinued nor a new trade as set up and commenced for the purpose of the allowances and charges provided for by the Capital Allowances Acts; but—
there shall be made to or on the successor in accordance with those Acts all such allowances and charges as would, if the predecessor had continued to carry on the trade, have fallen to be made to or on it; and
the amount of any such allowance or charge shall be computed as if—
the successor had been carrying on the trade since the predecessor began to do so, and
everything done to or by the predecessor had been done to or by the successor (but so that no sale or transfer which on the transfer of the trade is made to the successor by the predecessor of any assets in use for the purpose of the trade shall be treated as giving rise to any such allowance or charge). The preceding provisions of this subsection shall not apply if the successor is a dual resident investing company (within the meaning of section 404) which begins to carry on the trade after 31st March 1987.
The predecessor shall not be entitled to relief under section 394, except as provided by subsection (6) below; and, subject to subsection (4) below and to any claim made by the predecessor under section 393(2), the successor shall be entitled to relief under section 393(1), as for a loss sustained by the successor in carrying on the trade, for any amount for which the predecessor would have been entitled to claim relief if it had continued to carry on the trade.
Where the amount of relevant liabilities exceeds the value of relevant assets, the successor shall be entitled to relief by virtue of subsection (3) above only if, and only to the extent that, the amount of that excess is less than the amount mentioned in that subsection. This subsection does not apply where the predecessor ceased to carry on the trade or part of a trade before 19th March 1986 nor, in a case where subsection (7) below applies, in relation to any earlier event, within the meaning of that subsection, which occurred before that date (but without prejudice to its application in relation to any later event which occurred on or after that date).
Any securities, within the meaning of section 731, which at the time when the predecessor ceases to carry on the trade form part of the trading stock belonging to the trade shall be treated for the purposes of that section as having been sold at that time in the open market by the predecessor and as having been purchased at that time in the open market by the successor.
On the successor ceasing to carry on the trade— but for the purposes of that section, as it applies by virtue of this subsection to the giving of relief to the predecessor, the predecessor shall be treated as ceasing to carry on the trade when the successor does so.
if the successor does so within four years of succeeding to it, any relief which might be given to the successor under section 394 on its ceasing to carry on the trade may, so far as it cannot be given to the successor, be given to the predecessor as if the predecessor had incurred the loss (including any amount treated as a loss under subsection (4) of that section); and
if the successor ceases to carry on the trade within one year of succeeding to it, relief may be given to the predecessor under that section in respect of any loss incurred by it (or amount treated as such a loss under subsection (4) of that section);
Where the successor ceases to carry on the trade within the period taken for the comparison under subsection (1)(a) above and on its doing so a third company begins to carry on the trade, then no relief shall be given to the predecessor by virtue of subsection (6) above by reference to that event, but, subject to that, subsections (2) to (6) above shall apply both in relation to that event (together with the new predecessor and successor) and to the earlier event (together with the original predecessor and successor), but so that— and if the conditions of this subsection are thereafter again satisfied, it shall apply again in like manner.
in relation to the earlier event “successor” shall include the successor at either event; and
in relation to the later event “predecessor” shall include the predecessor at either event;
Where, on a company ceasing to carry on a trade, another company begins to carry on the activities of the trade as part of its trade, then that part of the trade carried on by the successor shall be treated for the purposes of this section as a separate trade, if the effect of so treating it is that subsection (1) or (7) above has effect on that event in relation to that separate trade; and where, on a company ceasing to carry on part of a trade, another company begins to carry on the activities of that part as its trade or part of its trade, the predecessor shall for purposes of this section be treated as having carried on that part of its trade as a separate trade if the effect of so treating it is that subsection (1) or (7) above has effect on that event in relation to that separate trade.
Where under subsection (8) above any activities of a company’s trade fall, on the company ceasing or beginning to carry them on, to be treated as a separate trade, such apportionments of receipts, expenses, assets or liabilities shall be made as may be just.
Where, by virtue of subsection (9) above, any item falls to be apportioned and, at the time of the apportionment, it appears that it is material as respects the liability to tax (for whatever period) of two or more companies, any question which arises as to the manner in which the item is to be apportioned shall be determined, for the purposes of the tax of all those companies— and any such Commissioners shall determine the question in like manner as if it were an appeal except that all those companies shall be entitled to appear and be heard by the Commissioners who are to make the determination or to make representations to them in writing.
in a case where the same body of General Commissioners have jurisdiction with respect to all those companies, by those Commissioners, unless all the companies agree that it shall be determined by the Special Commissioners;
in a case where different bodies of Commissioners have jurisdiction with respect to those companies, by such of those bodies as the Board may direct, unless all the companies agree that it shall be determined by the Special Commissioners; and
in any other case, by the Special Commissioners,
Any relief obtainable under this section by way of discharge or repayment of tax shall be given on the making of a claim.
In the application of this section to any case in relation to which subsection (4) above does not apply—
subsection (9) above shall have effect with the substitution for the words following “separate trade” of the words “any necessary apportionment shall be made of receipts or expenses”; and
subsection (10) above shall have effect with the substitution for “item” of “sum”.
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For the purposes of section 343—
a trade carried on by two or more persons shall be treated as belonging to them in the shares in which they are entitled to the profits of the trade;
a trade or interest in a trade belonging to any person as trustee (otherwise than for charitable or public purposes) shall be treated as belonging to the persons for the time being entitled to the income under the trust; and
a trade or interest in a trade belonging to a company shall, where the result of so doing is that subsection (1) or (7) of section 343 has effect in relation to an event, be treated in any of the ways permitted by subsection (2) below.
For the purposes of section 343, a trade or interest in a trade which belongs to a company engaged in carrying it on may be regarded— and any ordinary share capital owned by a company may, if any person or body of persons has the power to secure by means of the holding of shares or the possession of voting power in or in relation to any company, or by virtue of any power conferred by the articles of association or other document regulating any company, that the affairs of the company owning the share capital are conducted in accordance with his or their wishes, be regarded as owned by the person or body of persons having that power.
as belonging to the persons owning the ordinary share capital of the company and as belonging to them in proportion to the amount of their holdings of that capital, or
in the case of a company which is a subsidiary company, as belonging to a company which is its parent company, or as belonging to the persons owning the ordinary share capital of that parent company, and as belonging to them in proportion to the amount of their holdings of that capital,
For the purposes of subsection (2) above—
references to ownership shall be construed as references to beneficial ownership;
a company shall be deemed to be a subsidiary of another company if and so long as not less than three-quarters of its ordinary share capital is owned by that other company, whether directly or through another company or other companies, or partly directly and partly through another company or other companies;
the amount of ordinary share capital of one company owned by a second company through another company or other companies, or partly directly and partly through another company or other companies, shall be determined in accordance with section 838(5) to (10); and
where any company is a subsidiary of another company, that other company shall be considered as its parent company unless both are subsidiaries of a third company.
In determining, for the purposes of section 343, whether or to what extent a trade belongs at different times to the same persons, persons who are relatives of one another and the persons from time to time entitled to the income under any trust shall respectively be treated as a single person, and for this purpose “relative” means husband, wife, ancestor, lineal descendant, brother or sister.
For the purposes of section 343(4), relevant assets are— and for the purposes of paragraph (b) above the assumption by the successor of any liabilities of the predecessor shall not be treated as the giving of consideration to the predecessor by the successor.
assets which were vested in the predecessor immediately before it ceased to carry on the trade, which were not transferred to the successor and which, in a case where the predecessor was the predecessor on a previous application of section 343, were not by virtue of subsection (9) of that section apportioned to a trade carried on by the company which was the successor on that application; and
consideration given to the predecessor by the successor in respect of the change of company carrying on the trade;
For the purposes of section 343(4), relevant liabilities are liabilities which were outstanding and vested in the predecessor immediately before it ceased to carry on the trade, which were not transferred to the successor and which, in a case where the predecessor was the predecessor on a previous application of section 343, were not by virtue of subsection (9) of that section apportioned to a trade carried on by the company which was the successor on that application; but a liability representing the predecessor’s share capital, share premium account, reserves or relevant loan stock is not a relevant liability.
For the purposes of section 343(4)—
the value of assets (other than money) shall be taken to be the price which they might reasonably be expected to have fetched on a sale in the open market immediately before the predecessor ceased to carry on the trade; and
the amount of liabilities shall be taken to be their amount at that time.
Where the predecessor transferred a liability to the successor but the creditor concerned agreed to accept settlement of part of the liability as settlement of the whole, the liability shall be treated for the purposes of subsection (6) above as not having been transferred to the successor except as to that part.
A liability representing the predecessor’s share capital, share premium account, reserves or relevant loan stock shall, for the purposes of subsection (6) above, be treated as not doing so if, in the period of one year ending with the day on which the predecessor ceased to carry on the trade, the liability arose on a conversion of a liability not representing its share capital, share premium account, reserves or relevant loan stock.
Where a liability of the predecessor representing its relevant loan stock is not a relevant liability for the purposes of section 343(4) but is secured on an asset of the predecessor not transferred to the successor, the value of the asset shall, for the purposes of section 343(4), be reduced by an amount equal to the amount of the liability.
In this section “relevant loan stock” means any loan stock or similar security (whether secured or unsecured) except any in the case of which subsection (12) below applies.
This subsection applies where, at the time the liability giving rise to the loan stock or other security was incurred, the person who was the creditor was carrying on a trade of lending money.
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Subject to the provisions of this section and sections 400 and 435, the amount to be included in respect of chargeable gains in a company’s total profits for any accounting period shall be the total amount of chargeable gains accruing to the company in the accounting period after deducting any allowable losses accruing to the company in the period and, so far as they have not been allowed as a deduction from chargeable gains accruing in any previous accounting period, any allowable losses previously accruing to the company while it has been within the charge to corporation tax.
Except as otherwise provided by the Corporation Tax Acts, the total amount of the chargeable gains to be included in respect of chargeable gains in a company’s total profits for any accounting period shall for purposes of corporation tax be computed in accordance with the principles applying for capital gains tax, all questions— being determined in accordance with the provisions relating to capital gains tax as if accounting periods were years of assessment.
as to the amounts which are or are not to be taken into account as chargeable gains or as allowable losses, or in computing gains or losses, or charged to tax as a person’s gain; or
as to the time when any such amount is to be treated as accruing,
Subject to subsection (4) below, where the enactments relating to capital gains tax contain any reference to income tax or to the Income Tax Acts the reference shall, in relation to a company, be construed as a reference to corporation tax or to the Corporation Tax Acts; but—
this subsection shall not affect the references to income tax in section 33(2) of the 1979 Act (exclusion of expenditure by reference to hypothetical income tax); and
in so far as those enactments operate by reference to matters of any specified description, account shall for corporation tax be taken of matters of that description which are confined to companies, but not of any which are confined to individuals.
The 1979 Act as extended by this section shall not be affected in its operation by the fact that capital gains tax and corporation tax are distinct taxes but, so far as is consistent with the Corporation Tax Acts, shall apply in relation to capital gains tax and corporation tax on chargeable gains as if they were one tax, so that, in particular, a matter which in a case involving two individuals is relevant for both of them in relation to capital gains tax shall in a like case involving an individual and a company be relevant for him in relation to that tax and for it in relation to corporation tax.
Where assets of a company are vested in a liquidator under section 145 of the Insolvency Act 1986 or Article 498 of the Companies (Northern Ireland) Order 1986 or otherwise, this section and the enactments applied by this section shall apply as if the assets were vested in, and the acts of the liquidator in relation to the assets were the acts of, the company (acquisitions from or disposals to him by the company being disregarded accordingly).
This section applies where a person who is connected with a company resident in the United Kingdom receives or becomes entitled to receive in respect of shares in the company any capital distribution from the company, other than a capital distribution representing a reduction of capital, and— and that person is referred to below as “the shareholder”.
the capital so distributed derives from the disposal of assets in respect of which a chargeable gain accrued to the company; or
the distribution constitutes such a disposal of assets;
If the corporation tax assessed on the company for the accounting period in which the chargeable gain accrues included any amount in respect of chargeable gains, and any of the tax assessed on the company for that period is not paid within six months from the date determined under subsection (3) below, the shareholder may by an assessment made within two years from that date be assessed and charged (in the name of the company) to an amount of that corporation tax—
not exceeding the amount or value of the capital distribution which the shareholder has received or become entitled to receive; and
not exceeding a proportion equal to the shareholder’s share of the capital distribution made by the company of corporation tax on the amount of that gain at the rate in force when the gain accrued.
The date referred to in subsection (2) above is whichever is the later of—
the date when the tax becomes due and payable by the company; and
the date when the assessment was made on the company.
Where the shareholder pays any amount of tax under this section, he shall be entitled to recover from the company a sum equal to that amount together with any interest paid by him under section 87A of the Management Act on that amount.
The provisions of this section are without prejudice to any liability of the shareholder in respect of a chargeable gain accruing to him by reference to the capital distribution as constituting a disposal of an interest in shares in the company.
With respect to chargeable gains accruing in accounting periods ending on or before the day, not being earlier than 31st March 1992, appointed by order by the Treasury for the purposes of this section, this section shall have effect—
with the substitution for the words in subsection (3) after “above” of the words “is the date when the tax becomes payable by the company”; and
with the omission of the words in subsection (4) from “together” to the end of the subsection.
In this section “capital distribution” has the same meaning as in section 72(5)(b) of the 1979 Act and “connected with” shall be construed in accordance with section 839.
If at any time a chargeable gain accrues to a company which at that time is a member of a group of companies and any of the corporation tax assessed on the company for the accounting period in which the chargeable gain accrues is not paid within six months from the date determined under subsection (2) below by the company, then, if the tax so assessed included any amount in respect of chargeable gains— may at any time within two years from the date determined under subsection (2) below be assessed and charged (in the name of the company to whom the chargeable gain accrued) to an amount of that corporation tax not exceeding corporation tax on the amount of that gain at the rate in force when the gain accrued.
a company which was at the time when the gain accrued the principal company of the group; and
any other company which in any part of the period of two years ending with that time was a member of that group of companies and owned the asset disposed of or any part of it, or where that asset is an interest or right in or over another asset, owned either asset or any part of either asset;
The date referred to in subsection (1) above is whichever is the later of—
the date when the tax becomes due and payable by the company; and
the date when the assessment is made on the company.
A company paying any amount of tax under subsection (1) above shall be entitled to recover a sum of that amount— and a company paying any amount under paragraph (b) above shall be entitled to recover a sum of that amount from the company to which the chargeable gain accrued, and so far as it is not so recovered, to recover from any company which is for the time being a member of the group and which has while a member of the group owned the asset disposed of or any part of it (or where that asset is an interest or right in or over another asset, owned either asset or any part of it) such proportion of the amount unrecovered as is just having regard to the value of the asset at the time when the asset, or an interest or right in or over it, was disposed of by that company.
from the company to which the chargeable gain accrued, or
if that company is not the company which was the principal company of the group at the time when the chargeable gain accrued, from that principal company,
Any reference in subsection (3) above to an amount of tax includes a reference to any interest paid under section 87A of the Management Act on that amount.
Section 272 of the 1970 Act shall apply for the interpretation of this section as it applies for the interpretation of sections 273 to 281 of that Act.
In relation to any chargeable gains accruing in accounting periods ending on or before the day, not being earlier than 31st March 1992, appointed by order by the Treasury for the purposes of this section, this section shall have effect—
with the substitution for the words in subsection (2) after “above” of the words “is the date when the tax becomes payable by the company”; and
with the omission of subsection (4).
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Subject to any provision to the contrary in the Income Tax Acts, where any annuity or other annual payment charged with tax under Case III of Schedule D, not being interest, is payable wholly out of profits or gains brought into charge to income tax—
the whole of the profits or gains shall be assessed and charged with income tax on the person liable to the annuity or other annual payment, without distinguishing the annuity or other annual payment; and
the person liable to make the payment, whether out of the profits or gains charged with income tax or out of any annual payment liable to deduction, or from which a deduction has been made, shall be entitled on making the payment to deduct and retain out of it a sum representing the amount of income tax thereon; and
the person to whom the payment is made shall allow the deduction on receipt of the residue of the payment, and the person making the deduction shall be acquitted and discharged of so much money as is represented by the deduction, as if that sum had been actually paid; and
the deduction shall be treated as income tax paid by the person to whom the payment is made.
Subject to any provision to the contrary in the Income Tax Acts, where— is paid wholly out of profits or gains brought into charge to income tax, the person making the payment shall be entitled on making the payment to deduct and retain out of it a sum representing the amount of the income tax thereon.
any royalty or other sum paid in respect of the user of a patent; or
any rent, royalty or other payment which, by section 119 or 120, is declared to be subject to deduction of income tax under this section or section 349 as if it were a royalty or other sum paid in respect of the user of a patent;
This section does not apply to a small maintenance payment within the meaning of section 351 or to any payment to which section 687 applies.
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Where— is not payable or not wholly payable out of profits or gains brought into charge to income tax, the person by or through whom any payment thereof is made shall, on making the payment, deduct out of it a sum representing the amount of income tax thereon. This subsection does not apply to any payment to which section 687 applies.
any annuity or other annual payment charged with tax under Case III of Schedule D, not being interest; or
any royalty or other sum paid in respect of the user of a patent; or
any rent, royalty or other payment which, by section 119 or 120, is declared to be subject to deduction of income tax under this section or section 348 as if it were a royalty or other sum paid in respect of the user of a patent,
Subject to subsection (3) below and to any other provision to the contrary in the Income Tax Acts, where any yearly interest of money chargeable to tax under Case III of Schedule D is paid— the person by or through whom the payment is made shall, on making the payment, deduct out of it a sum representing the amount of income tax thereon for the year in which the payment is made.
otherwise than in a fiduciary or representative capacity, by a company or local authority; or
by or on behalf of a partnership of which a company is a member; or
by any person to another person whose usual place of abode is outside the United Kingdom;
Subsection (2) above does not apply— and subsection (1) above does not apply to any small maintenance payment within the meaning of section 351.
to interest payable in the United Kingdom on an advance from a bank carrying on a bona fide banking business in the United Kingdom; or
to interest paid by such a bank in the ordinary course of that business; or
to any payment to which section 124 applies; or
to any payment to which section 369 or 479(1) applies;
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Where any payment within section 349 is made by or through any person, that person shall forthwith deliver to the inspector an account of the payment, and shall be assessable and chargeable with income tax at the basic rate on the payment, or on so much thereof as is not made out of profits or gains brought into charge to income tax.
In section 349(1) any reference to a payment or sum as being not payable, or not wholly payable, out of profits or gains brought into charge to income tax shall be construed as a reference to it as being payable wholly or in part out of a source other than profits or gains brought into charge; and any such reference elsewhere in the Tax Acts shall be construed accordingly.
All the provisions of the Income Tax Acts relating to persons who are to be chargeable with income tax, to income tax assessments, and to the collection and recovery of income tax, shall, so far as they are applicable, apply to the charge, assessment, collection and recovery of income tax under this section.
Section 349 and this section have effect subject to the provisions of Schedule 16 which has effect for the purpose of regulating the time and manner in which companies resident in the United Kingdom— and for that purpose the Board may by regulations modify, supplement or replace any of the provisions of Schedule 16; and references in this Act and in any other enactment to any of those provisions shall be construed as including references to any such regulations.
are to account for and pay income tax in respect of payments from which tax is deductible under section 349, and
are to be repaid income tax in respect of payments received by them;
Without prejudice to the generality of subsection (4) above, regulations under that subsection may, in relation to income tax for which a company is liable to account, modify any provision of Parts II to VI of the Management Act or apply any such provision with or without modifications.
Regulations under this section may—
make different provision for different descriptions of companies and for different circumstances and may authorise the Board, where in their opinion there are special circumstances justifying it, to make special arrangements as respects income tax for which a company is liable to account or the repayment of income tax borne by a company;
include such transitional and other supplemental provisions as appear to the Board to be expedient or necessary.
The Board shall not make any regulations under this section unless a draft of them has been laid before and approved by a resolution of the House of Commons.
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In this section “small maintenance payments” means payments under an order made by a court in the United Kingdom— in respect of which the two conditions mentioned in subsection (2) below are satisfied; and “small maintenance order” means an order providing for the making of small maintenance payments.
by one of the parties to a marriage (including a marriage which has been dissolved or annulled) to or for the benefit of the other party to that marriage for that other party’s maintenance,
to any person under 21 years of age for his own benefit, maintenance or education, or
to any person for the benefit, maintenance or education of a person under 21 years of age,
The first of the conditions referred to in subsection (1) above is—
in the case of payments falling within paragraph (a) of that subsection, that the order for the time being requires them to be made—
weekly at a rate not exceeding £48 per week, or
monthly at a rate not exceeding £208 per month;
in the case of payments falling within paragraph (b) (but not within paragraph (a)) of that subsection, that the order for the time being requires them to be made—
weekly at a rate not exceeding £48 per week, or
monthly at a rate not exceeding £208 per month;
in the case of payments falling within paragraph (c) (but not within paragraph (a) or (b)) of that subsection, that the order for the time being requires them to be made— and the second of those conditions is that the payments would fall within section 348 or 349(1), apart from subsection (3) of each of those sections and subsection (3) below.
weekly at a rate not exceeding £25 per week, or
monthly at a rate not exceeding £108 per month;
Small maintenance payments shall be made without deduction of income tax.
Any sums paid in or towards the discharge of a small maintenance payment shall be chargeable under Case III of Schedule D, but the tax shall (notwithstanding anything in sections 64 to 67) be computed in all cases on the payments falling due in the year of assessment, so far as paid in that or any other year.
A person making a claim in that behalf shall be entitled, in computing his total income for any year of assessment for any of the purposes of the Income Tax Acts, to deduct sums paid by him in or towards the discharge of any small maintenance payments which fall due in that year; and, for the purposes of section 276, any amount which can be deducted under this subsection in computing the total income of a person shall be treated as if it were income the tax on which that person is entitled to charge against another person.
The Treasury may from time to time by order increase any, or all, of the amounts for the time being specified in subsection (2) above.
An order under subsection (6) above which increases the amount for the time being specified in sub-paragraph (i) of paragraph (a), (b) or (c) of subsection (2) above shall increase the amount for the time being specified in sub-paragraph (ii) of that paragraph so that it is 52 twelfths of the amount specified in sub-paragraph (i) by virtue of the order or, if that does not give a convenient round sum, such other amount as appears to the Treasury to be the nearest convenient round sum; and an order under that subsection may contain provision whereby it—
does not in general affect payments falling due in the year of assessment in which it comes into force under small maintenance orders made before its coming into force, but
in the case of a small maintenance order which was made before that time but is varied or revived after that time, does apply in relation to payments falling due under that order at any time after the variation or revival.
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A person making any payment which is subject to deduction of income tax by virtue of section 339, 348, 349 or 687 shall, if the recipient so requests in writing, furnish him with a statement in writing showing the gross amount of the payment, the amount of tax deducted, and the actual amount paid.
The duty imposed by subsection (1) above shall be enforceable at the suit or instance of the person requesting the statement.
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Where a person pays interest in any year of assessment, that person, if he makes a claim to the relief, shall for that year of assessment be entitled (subject to . . . section 52 of ITTOIA 2005) to relief in accordance with this section in respect of so much (if any) of the amount of that interest as is eligible for relief under this section by virtue of section 365.
annual interest chargeable to tax under Case III of Schedule D; or
interest payable in the United Kingdom or the Republic of Ireland on an advance from a bank carrying on a bona fide banking business in the United Kingdom or the Republic of Ireland or from a person bona fide carrying on a business as a member of the Stock Exchange or bona fide carrying on the business of a discount house in the United Kingdom or the Republic of Ireland;
This section does not apply to a payment of relevant loan interest to which section 369 applies.
Where a person is entitled for a year of assessment to relief under this section in respect of an amount of interest which is eligible for relief by virtue of section 365, the relief is given as a tax reduction for that tax year.
Relief under this section shall not be given in respect of—
interest on a debt incurred by overdrawing an account or by debiting the account of any person as the holder of a credit card or under similar arrangements; or
where interest is paid at a rate in excess of a reasonable commercial rate, so much of the interest as represents the excess.
The amount of the tax reduction is 23% of the amount of the interest.
The tax reduction is given effect at Step 6 of the calculation in section 23 of ITA 2007.
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Where any person is entitled for any year of assessment to relief . . . in respect of any amount of interest as is eligible for that relief partly as mentioned in subsection (1A) above and partly as mentioned in section 383 of ITA 2007 (relief for interest payments), that amount of interest shall be apportioned between the cases to which each of those provisions applies without regard to what parts of the total amount borrowed remain outstanding but according to . . . — and subsection (1A) above or section 383 of ITA 2007 shall apply accordingly to the case in which that subsection or section applies.
the proportions of the total amount borrowed which were applied for different purposes; . . .
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Subject to sections 355 to 358 and subsections (2) to (6) below, interest is eligible for relief under section 353 if it is paid by a person for the time being owning an estate or interest in land, or the property in a caravan or house-boat, in the United Kingdom or the Republic of Ireland on a loan to defray money applied—
in purchasing that estate, interest or property, or another estate, interest or property absorbed into, or given up to obtain, that estate, interest or property; or
in improving or developing the land, or buildings on the land; or
in paying off another loan, if interest on that other loan would have been eligible for relief under section 353 had the loan not been paid off (on the assumption, if the loan was free of interest, that it carried interest) or would have been so eligible apart from section 353(2).
In this section and section 355—
references to money applied in improving or developing land or buildings include references to payments in respect of maintenance or repairs incurred by reason of dilapidation attributable to a period before the estate or interest was acquired, but otherwise do not include references to payments in respect of maintenance or repairs, or any of the other payments mentioned in section 25(1); and
references to money applied in improving or developing land include references to expenditure incurred or defrayed directly or indirectly in respect of street works, other than works of maintenance or repair, for any highway or road, or in Scotland any right of way, adjoining or serving the land.
Interest is eligible for relief under section 353 in the case of a caravan only if the caravan—
is a large caravan, or
taken with the land on which it stands, is for the time being a rateable hereditament for the purposes of a relevant enactment and the owner or the wife or husband of the owner has as occupier of the caravan duly paid rates under the relevant enactment for the period in which the interest was paid. In this subsection—
References in this section and in section 355 to an estate or interest do not include references—
to a rentcharge or, in Scotland, a superiority or the interest of a creditor in a contract of ground annual; or
to the interest of a chargee or mortgagee or, in Scotland, the interest of a creditor in a charge or security of any kind over land.
Where this section applies to a loan by reason of the land, caravan or house-boat concerned being used as a person’s only or main residence, and the borrower raises another loan to defray money to be applied as mentioned in subsection (1) above with a view to the use of other land or another caravan or house-boat as that person’s only or main residence and the disposal of the first-mentioned land, caravan or house-boat, then in relation to interest payable within 12 months from the making of the other loan, this section—
shall continue to apply to the first-mentioned loan, whether or not the first-mentioned land, caravan or house-boat continues to be so used; and
shall apply to the other loan to the same extent (if any) as if no interest were payable on the first-mentioned loan.
If it appears to the Board reasonable to do so, having regard to all the circumstances of a particular case, they may direct that in relation to that case subsection (5) above shall have effect as if for the reference to 12 months there were substituted a reference to such longer period as meets the circumstances of that case.
Where interest is payable by the tenant occupier of any property to the landlord in pursuance of arrangements whereby money advanced at interest by the landlord is applied by the tenant in purchasing the landlord’s estate or interest, or in the case of a caravan or house-boat the property in the caravan or house-boat, but that estate or interest or property is not to pass to the tenant until some time after the interest begins to be payable, this section and section 355(5) shall have effect in relation to the tenant as if he were the owner of the landlord’s estate, interest or property.
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Subject to the following provisions of this section and sections 356 to 358, section 354 shall not apply unless the land, caravan or house-boat in question— and shall in a case within paragraph (a) above apply only within the limit imposed by section 357.
is at the time the interest is paid used as the only or main residence of the person by whom it is paid (“the borrower”) or of a dependent relative or former or separated spouse of his, or, if the interest is paid less than 12 months after the date on which the loan is made, is so used within 12 months after that date; or
is, in any period of 52 weeks comprising the time at which the interest is payable and falling wholly or partly within the year of assessment, let at a commercial rent for more than 26 weeks and, when not so let, either available for letting at such a rent or used as mentioned in paragraph (a) above or prevented from being so available or used by any works of construction or repair;
If it appears to the Board reasonable to do so, having regard to all the circumstances of a particular case, they may direct that in relation to that case subsection (1) above shall have effect as if for the references to 12 months there were substituted references to such longer period as meets the circumstances of that case.
The land, caravan or house-boat does not fall within subsection (1)(a) above by reason of its being used as the only or main residence of a dependent relative of the borrower unless it is provided rent-free and without any other consideration.
Relief under section 353 for interest eligible for it by virtue of section 354 in a case where it is eligible only because the land, caravan or house-boat referred to in it falls under subsection (1)(b) above shall be given only against income from the letting of that or any other land, caravan or house-boat, but may, if and to the extent that such income for the year of assessment is insufficient, be given against such income for the following year, and so on, provided the first-mentioned land, caravan or house-boat continues to fall under that subsection.
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Section 355(1) shall not prevent relief being given under section 353 in a case where the land, caravan or house-boat in question— and at that time he resides in living accommodation which is for him job-related.
is, at the time the interest is paid, used by the borrower as a residence or, if it is paid less than 12 months after the date on which the loan is made, is so used by him within 12 months after that date; or
is intended at that time to be used in due course as his only or main residence;
A borrower for whom there are two or more properties falling within subsection (1) above may not by virtue of this section claim relief for any period under section 353 in respect of more than one of them.
Subject to subsections (4) and (5) below, living accommodation is job-related for a person if—
it is provided for him by reason of his employment, or for his spouse by reason of her employment, in any of the following cases—
where it is necessary for the proper performance of the duties of the employment that the employee should reside in that accommodation;
where the accommodation is provided for the better performance of the duties of the employment, and it is one of the kinds of employment in the case of which it is customary for employers to provide living accommodation for employees;
where, there being a special threat to the employee’s security, special security arrangements are in force and the employee resides in the accommodation as part of those arrangements; or
under a contract entered into at arm’s length and requiring him or his spouse to carry on a particular trade, profession or vocation, he or his spouse is bound—
to carry on that trade, profession or vocation on premises or other land provided by another person (whether under a tenancy or otherwise); and
to live either on those premises or on other premises provided by that other person.
If the living accommodation is provided by a company and the employee is a director of that or an associated company, subsection (3)(a)(i) or (ii) above shall not apply unless—
the company of which the employee is a director is one in which he or she has no material interest; and
either—
the employment is as a full-time working director, or
the company is non-profit making, that is to say, it does not carry on a trade nor do its functions consist wholly or mainly in the holding of investments or other property, or
the company is established for charitable purposes only.
Subsection (3)(b) above does not apply if the living accommodation concerned is in whole or in part provided by—
a company in which the borrower or his spouse has a material interest; or
any person or persons together with whom the borrower or his spouse carries on a trade or business in partnership.
For the purposes of this section—
a company is an associated company of another if one of them has control of the other or both are under the control of the same person; and
“employment”, “director”, “full-time working director”, “material interest” and “control”, in relation to a body corporate, have the same meanings as they have for the purposes of Chapter II of Part V.
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Interest on a loan (“the limited loan”) which (apart from this subsection) is eligible for relief under section 353 by virtue of section 355(1)(a) or 356(1) shall be so eligible for relief only to the extent that the amount on which it is payable does not exceed the following limit, that is to say, the qualifying maximum for the year of assessment reduced by the amount on which interest is payable by the borrower under any earlier loans so eligible for relief, so that—
if the amount on which interest is payable under the limited loan exceeds the limit, so much only of that interest is eligible for relief as bears to the whole of that interest the same proportion as that part of that amount which does not exceed the limit bears to the whole of that amount; and
if the amount on which interest is payable under any earlier loans is equal to or exceeds the qualifying maximum for the year of assessment, none of the interest on the limited loan is eligible for relief.
Where a loan on which interest is payable by the borrower was made jointly to the borrower and another person, not being the borrower’s husband or wife, then, if— the amount on which interest is payable under the loan shall be treated for the purposes of this section as being such part only of that amount as bears to the whole thereof the same proportion as the amount of interest paid by the borrower bears to the whole of the interest paid on the loan.
the land, caravan or house-boat concerned is used as the main or only residence of that other person, or of a dependent relative or former or separated spouse of his, and
that other person owns an estate or interest in the land or the property in the caravan or house-boat, and
that other person pays part of the interest payable on the loan; or
that other person falls within sub-paragraphs (i) and (ii) of paragraph (a) above and is by virtue of section 356 entitled to claim relief under section 353 in respect of that part of the interest,
For the purposes of this section—
any interest payable on a loan made to the borrower’s husband or wife shall be treated as payable on a loan made to the borrower; and
where interest is payable on more than one loan made or treated as made to the borrower and the loans were made simultaneously it shall be treated as payable on one loan.
Where section 354 continues to apply to a loan by virtue of section 354(5)(a), this section shall also continue to have effect in relation to the loan as if section 354 applied to it by virtue of section 355(1)(a).
References in this section to the borrower’s husband or wife do not include references to a separated husband or wife.
In determining whether the amount on which interest is payable under a loan exceeds the limit in subsection (1) above, no account shall be taken of so much (if any) of that amount as consists of interest which has been added to capital and does not exceed £1000.
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Where any interest paid by persons as the personal representatives of a deceased person or as the trustees of a settlement made by his will would, on the assumptions required by this section, be eligible for relief under section 353 by virtue of section 354 above and, in a case where subsection (3) below applies, one of the conditions in subsection (4) below is satisfied, that interest shall be so eligible notwithstanding sections 354 to 357.
For the purposes of subsection (1) above it shall be assumed that the deceased would have survived and been the borrower.
If, at his death,— that shall be assumed for the purposes of subsection (1) above to have continued to be the case.
the land, caravan or house-boat concerned was used as his only or main residence, or
it was used by him as a residence or was intended to be used in due course as his only or main residence and, in either case, he resided in job-related living accommodation;
The conditions referred to in subsection (1) above are—
that, at the time the interest is paid, the land, caravan or house-boat concerned is used as the only or main residence of the deceased’s widow or widower or of any dependent relative of the deceased;
that, at that time, it is used by the deceased’s widow or widower as a residence or is intended to be used in due course as his or her only or main residence and, in either case, he or she resides in job-related living accommodation.
In this section “personal representatives” has the meaning given by section 701; and subsections (3) to (6) of section 356 apply in relation to this section as they apply in relation to that.
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Where an individual is a member of a partnership which, under section 44 of the 1968 Act, is entitled to a capital allowance or liable to a balancing charge for any year of assessment in respect of machinery or plant belonging to the individual, any interest paid by him in the basis period (as defined in section 72 of that Act) for that year on a loan to defray money applied as capital expenditure on the provision of that machinery or plant is eligible for relief under section 353, except interest falling due and payable more than three years after the end of the year of assessment in which the debt was incurred.
Where the machinery or plant is in use partly for the purposes of the trade, profession or vocation carried on by the partnership and partly for other purposes, such part only of the interest is eligible for relief under section 353 as is just and reasonable to attribute to the purposes of the trade, profession or vocation, having regard to all the relevant circumstances and, in particular, to the extent of the use for those other purposes.
Where the holder of an office or employment— the interest so paid is eligible for relief under section 353 unless it is interest falling due and payable more than three years after the end of the year of assessment in which the debt was incurred.
is under Chapter II of Part I of the 1968 Act or Chapter I of Part III of the Finance Act 1971 entitled to a capital allowance or liable to a balancing charge, (or would be so entitled or liable but for some contribution made by the employer), for any year of assessment in respect of machinery or plant belonging to him and in use for the purposes of the office or employment; and
pays interest in that year on a loan to defray money applied as capital expenditure on the provision of that machinery or plant;
Where the machinery or plant is in use partly for the purposes of the office or employment and partly for other purposes, such part only of the interest is eligible for relief under section 353 as it is just and reasonable to attribute to the purposes of the office or employment, having regard to all the relevant circumstances and, in particular, to the extent of the use for those other purposes.
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Subject to the following provisions of this section and sections 361 to 364, interest is eligible for relief under section 353 if it is interest on a loan to an individual to defray money applied— and either the conditions stated in subsection (2) below or those stated in subsection (3) below are satisfied.
in acquiring any part of the ordinary share capital of a close company satisfying any of the conditions of section 424(4); or
in lending money to such a close company which is used wholly and exclusively for the purposes of the business of the company or of any associated company of it which is a close company satisfying any of those conditions; or
in paying off another loan interest on which would have been eligible for relief under section 353 had the loan not been paid off (on the assumption, if the loan was free of interest, that it carried interest);
The conditions first referred to in subsection (1) above are— but the condition in paragraph (c) above shall not apply in a case where the individual has worked for the greater part of his time in the actual management or conduct of the business of the company, or of an associated company of the company.
that, when the interest is paid, the company continues to satisfy any of the conditions of section 424(4) and the individual has a material interest in the company; and
that he shows that in the period from the application of the proceeds of the loan to the payment of the interest he has not recovered any capital from the company, apart from any amount taken into account under section 363(1); and
that, if the company exists wholly or mainly for the purpose of holding investments or other property, no property held by the company is used as a residence by the individual;
The conditions secondly referred to in subsection (1) above are—
that, when the interest is paid, the company continues to satisfy any of the conditions of section 424(4) and the individual holds any part of the ordinary share capital of the company; and
that in the period from the application of the proceeds of the loan to the payment of the interest the individual has worked for the greater part of his time in the actual management or conduct of the company or of an associated company of the company; and
that he shows in the period from the application of the proceeds of the loan to the payment of the interest he has not recovered any capital from the company, apart from any amount taken into account under section 363(1).
In this section expressions to which a meaning is assigned by Part XI have that meaning, but—
in relation to any loan made after 5th April 1987, paragraph 39 of Schedule 9 shall have effect for determining whether the interest on the loan is eligible for relief under section 353 by virtue of this section; and
in relation to any loan made before 14th November 1986, section 417 shall have effect subject to the following modifications—
in subsection (3)(c) for the words following “deceased person” there shall be substituted the words “subject to subsection (3A) below, any other person interested therein”; and
after subsection (3) there shall be added—
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Subject to the following provisions of this section and sections 363 and 364, interest is eligible for relief under section 353 if it is interest on a loan to an individual to defray money applied— and the conditions in subsection (2) below are satisfied.
in acquiring a share or shares in a body which is a co-operative as defined by section 363(5); or
in lending money to any such body which is used wholly and exclusively for the purposes of the business of that body or of a subsidiary of that body; or
in paying off another loan interest on which would have been eligible for relief under section 353 had the loan not been paid off (on the assumption, if it was free of interest, that it carried interest);
The conditions referred to in subsection (1) above are—
that the loan was made after 10th March 1981;
that, when the interest is paid, the body continues to be a co-operative; and
that in the period from the application of the proceeds of the loan to the payment of the interest the individual has worked for the greater part of his time as an employee of the body or of a subsidiary of the body; and
that he shows that in that period he has not recovered any capital from the body apart from any taken into account under section 363(1).
Subject to sections 362 to 365, interest is eligible for relief under section 353 if it is interest on a loan to an individual to defray money applied— and the conditions stated in subsection (4) below are satisfied.
in acquiring any part of the ordinary share capital of an employee-controlled company; or
in paying off another loan, interest on which would have been eligible for relief under section 353 had the loan not been paid off (on the assumption, if it was free of interest, that it carried interest);
The conditions referred to in subsection (3) above are that—
the company is, throughout the period beginning with the date on which the shares are acquired and ending with the date on which the interest is paid—
an unquoted company resident in the United Kingdom and not resident elsewhere; and
a trading company or the holding company of a trading group;
the shares are acquired before, or not later than 12 months after, the date on which the company first becomes an employee-controlled company;
during the year of assessment in which the interest is paid the company either—
first becomes an employee-controlled company; or
is such a company throughout a period of at least nine months;
the individual or his spouse is a full-time employee of the company throughout the period beginning with the date on which the proceeds of the loan are applied and ending with the date on which the interest is paid or, if at that date he has ceased to be such an employee, ending with whichever is the later of—
the date on which he ceased to be such an employee;
the date 12 months before the payment of the interest; and
the individual shows that in the period from the application of the proceeds of the loan to the payment of the interest he has not recovered any capital from the company, apart from any amount taken into account under section 363(1).
For the purposes of this section a company is employee-controlled at any time when more than 50 per cent.— is beneficially owned by persons who, or whose spouses, are full-time employees of the company.
of the issued ordinary share capital of the company, and
of the voting power in the company,
Where an individual owns beneficially, or he and his spouse together own beneficially, more than 10 per cent. of the issued ordinary share capital of, or voting power in, a company, the excess shall be treated for the purposes of subsection (5) above as being owned by an individual who is neither a full-time employee of the company nor the spouse of such an employee.
Where an individual and his spouse are both full-time employees of the company, subsection (6) above shall apply in relation to them with the omission of the words “or he and his spouse together own beneficially”.
In this section—
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Subject to sections 363 to 365, interest is eligible for relief under section 353 if it is interest on a loan to an individual to defray money applied— and the conditions stated in subsection (2) below are satisfied.
in purchasing a share in a partnership; or
in contributing money to a partnership by way of capital or premium, or in advancing money to a partnership, where the money contributed or advanced is used wholly for the purposes of the trade, profession or vocation carried on by the partnership; or
in paying off another loan interest on which would have been eligible for relief under that section had the loan not been paid off (on the assumption, if the loan was free of interest, that it carried interest);
The conditions referred to in subsection (1) above are—
that, throughout the period from the application of the proceeds of the loan until the interest was paid, the individual has been a member of the partnership otherwise than as a limited partner; and
that he shows that in that period he has not recovered any capital from the partnership, apart from any amount taken into account under section 363(1).
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If at any time after the application of the proceeds of the loan the individual has recovered any amount of capital from the close company, co-operative, employee-controlled company or partnership without using that amount in repayment of the loan, he shall be treated for the purposes of sections 353, 360, 361 and 362 as if he had at that time repaid that amount out of the loan, so that out of the interest otherwise eligible for relief (or, where section 367(4) applies, out of the proportion so eligible) and payable for any period after that time there shall be deducted an amount equal to interest on the amount of capital so recovered.
The individual shall be treated as having recovered an amount of capital from the close company, co-operative, employee-controlled company or partnership if— and where a sale or assignment is not a bargain made at arm’s length, the sale or assignment shall be deemed to be for a consideration of an amount equal to the market value of what is disposed of.
he receives consideration of that amount or value for the sale, exchange or assignment of any part of the ordinary share capital of the company or of his share or shares in the co-operative or of his interest in the partnership, or of any consideration of that amount or value by way of repayment of any part of that ordinary share capital or of his share or shares in the co-operative; or
the close company, co-operative, employee-controlled company or partnership repays that amount of a loan or advance from him or the partnership returns that amount of capital to him; or
he receives consideration of that amount or value for assigning any debt due to him from the close company, co-operative, employee-controlled company or partnership;
In the application of this section to Scotland for the word “assignment” wherever it occurs there shall be substituted the word “assignation”.
Section 360, or, as the case may be, 361(2) or (4) or 362(2) and subsections (1) to (3) above, shall apply to a loan within section 360(1)(c), 361(1)(c) or (3)(b) or 362(1)(c) as if it, and any loan it replaces, were one loan, and so that—
references to the application of the proceeds of the loan were references to the application of the proceeds of the original loan; and
any restriction under subsection (1) above which applies to any loan which has been replaced shall apply to the loan which replaces it.
In this section and sections 361 and 362—
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Interest is eligible for relief under section 353 if it is interest on a loan to the personal representatives of a deceased person, the proceeds of which are applied— and the interest is paid in respect of a period ending within one year from the making of the loan within paragraph (a) above.
in paying, before the grant of representation or confirmation, capital transfer tax or inheritance tax payable on the delivery of the personal representatives' account and attributable to the value of personal property to which the deceased was beneficially entitled immediately before his death and which vests in the personal representatives or would vest in them if the property were situated in the United Kingdom; or
in paying off another loan interest on which would have been eligible for that relief by virtue of this section if the loan had not been paid off (on the assumption, if the loan was free of interest, that it carried interest);
If or to the extent that any relief in respect of interest eligible for it under subsection (1) above cannot be given against income of the year in which the interest is paid because of an insufficiency of income in that year, it may instead be given against income of the preceding year of assessment, and so on; and if or to the extent that it cannot be so given it may instead be given against income of the year following that in which the interest is paid, and so on.
Sufficient evidence of the amount of capital transfer tax or inheritance tax paid as mentioned in subsection (1)(a) above and of any statements relevant to its computation may be given by the production of a document purporting to be a certificate from the Board.
For the purposes of subsections (1) to (3) above—
references to capital transfer tax or inheritance tax include any interest payable on that tax; and
references to interest in respect of a period ending within a given time apply whether or not interest continues to run after that time.
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Subject to the following provisions of this section, interest is eligible for relief under section 353 if it is interest on a loan in respect of which the following conditions are satisfied—
that the loan was made as part of a scheme under which not less than nine-tenths of the proceeds of the loan were applied to the purchase by the person to whom it was made of an annuity ending with his life or with the life of the survivor of two or more persons (“the annuitants”) who include the person to whom the loan was made;
that the loan was made before 9th March 1999;
that at the time the loan was made the person to whom it was made or each of the annuitants had attained the age of 65 years;
that the loan was secured on land in the United Kingdom or the Republic of Ireland and the person to whom it was made or one of the annuitants owns an estate or interest in that land; and
that, if the loan was made after 26th March 1974, the person to whom it was made or each of the annuitants used the land on which it was secured as his only or main residence immediately before 9th March 1999 .
Interest is not eligible for relief by virtue of this section unless it is payable by the person to whom the loan was made or by one of the annuitants.
Where— the loan shall be deemed for the purposes of subsection (1)(aa) above to have been made before that date.
a loan made on or after 9th March 1999 was made in pursuance of an offer made by the lender before that date, and
the offer was either in writing or evidenced by a note or memorandum made by the lender before that date,
If the loan was made after 26th March 1974 interest on it is eligible for relief by virtue of this section only to the extent that the amount on which it is payable does not exceed the sum of £30,000; and if the interest is payable by two or more persons the interest payable by each of them is so eligible only to the extent that the amount on which it is payable does not exceed such amount as bears to that sum the same proportion as the interest payable by him bears to the interest payable by both or all of them.
Subject to subsection (1AC) below, the conditions in paragraphs (aa) and (a) of subsection (1) above shall be treated as satisfied in relation to a loan (“the new loan”) if—
the new loan was made on or after the day on which the Finance Act 1999 was passed;
the new loan was made as part of a scheme (“the scheme”) under which the whole or any part of the proceeds of the loan was used to defray money applied in paying off another loan (“the old loan”); and
the conditions in subsection (1) above were, or were treated by virtue of this subsection as, satisfied with respect to the old loan.
If only part of the proceeds of the new loan was used to defray money applied in paying off the old loan, subsection (1AB) above applies only if, under the scheme, not less than nine-tenths of the remaining part of the proceeds of the new loan was applied to the purchase by the person to whom it was made of an annuity ending with his life or with the life of the survivor of two or more persons who include him.
In subsection (1AC) above “the remaining part” means the part of the proceeds of the new loan that was not used to defray money applied in paying off the old loan.
The condition in subsection (1)(d) above shall be treated as satisfied in relation to a loan if—
the person to whom the loan was made, or any of the annuitants, ceased to use the land as his only or main residence at a time falling within the period of twelve months ending with 8th March 1999, and
the intention at that time of the person to whom the loan was made, or each of the annuitants owning an estate or interest in the land, was to take steps, before the end of the period of twelve months after the day on which the land ceased to be so used, with a view to the disposal of his estate or interest.
If it appears to the Board reasonable to do so, having regard to all the circumstances of a particular case, they may direct that in relation to that case subsection (1A) above shall have effect as if for the reference to 12 months there were substituted a reference to such longer period as meets the circumstances of that case.
A person who claims relief under section 353 in respect of any payment of interest shall furnish to the inspector a statement in writing by the person to whom the payment is made, showing—
the date when the debt was incurred;
the amount of the debt when incurred;
the interest paid in the year of assessment for which the claim is made . . . ; and
the name and address of the debtor.
Where any such interest as is mentioned in section 353 is paid, the person to whom it is paid shall, if the person who pays it so requests in writing, furnish him with such statement as regards that interest as is mentioned in subsection (1) above; and the duty imposed by this subsection shall be enforceable at the suit or instance of the person making the request.
Subsections (1) and (2) above do not apply to interest paid to a building society, or to a local authority.
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in connection with the application of money, and
on the occasion of, or within what is in the circumstances a reasonable time from, the application of the money;
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In section 365(3) references to the qualifying maximum for the year of assessment are references to such sum as Parliament may determine for the purpose for that year.
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Interest in respect of which relief is given under section 353 shall not be allowable as a deduction for any other purpose of the Income Tax Acts.
Relief shall not be given under section 353 against income chargeable to corporation tax, and shall not be given against any other income of a company, except where both of the following conditions are satisfied, that is to say—
that the company is not resident in the United Kingdom; and
that the interest cannot be taken into account in computing corporation tax chargeable on the company.
Where interest on any debt or liability is taken into account in the computation of profits or gains or losses for the purposes of Case I or II of Schedule D no relief shall be given under section 353—
in respect of the payment of that interest; or
in respect of interest on the same debt or liability which is paid in any year of assessment for which that computation is relevant.
Where relief is given under section 353 in respect of the interest paid in any year of assessment on any debt or liability—
that interest shall not be taken into account in the computation of profits or gains or losses for the purposes of Case I or II of Schedule D for any year of assessment; and
interest on that debt or liability shall not be taken into account in that computation for any year of assessment for which the interest so paid could have been taken into account but for the relief.
For the purposes of subsections (3) and (4) above, all interest capable of being taken into account in such a computation as is mentioned in those subsections which is payable by any person on money advanced to him on current account, whether advanced on one or more accounts or by the same or separate banks or other persons, shall be treated as interest payable on the same debt.
References in subsections (3) and (4) above to relief given or an amount taken into account are references to relief given or an amount taken into account on a claim or in an assessment which has been finally determined.
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Sections 353 and 365 have effect as if—
purchase and resale arrangements involved the making of a loan, and
alternative finance return were interest.
Section 366 has effect accordingly.
In this section—
If a person who is a qualifying borrower makes a payment of relevant loan interest to which this section applies, he shall be entitled, on making the payment, to deduct and retain out of it a sum equal to the applicable percentage thereof.
Where a sum is deducted under subsection (1) above from a payment of relevant loan interest—
the person to whom the payment is made shall allow the deduction on receipt of the residue;
the borrower shall be acquitted and discharged of so much money as is represented by the deduction as if the sum had been actually paid; and
the sum deducted shall be treated as income tax paid by the person to whom the payment is made.
In subsection (1) above “the applicable percentage” means 23 per cent..
The following payments, that is to say— shall not be allowable as deductions for any purpose of the Income Tax Acts except in so far as they fall to be treated as such payments by virtue only of section 375(2) and would be allowable apart from this subsection.
payments of relevant loan interest to which this section applies, and
payments which would be such payments but for section 373(5),
In any case where— so much of that full amount as cannot be deducted from his total income shall be deducted from the amount of income on which he is chargeable to tax by virtue of subsection (3) above.
payments of relevant loan interest to which this section applies become due in any year; and
the total income of the borrower for that year is such that he cannot benefit from any or, as the case may be, the full amount of the relevant personal reliefs to which he is entitled;
In subsection (4) above “relevant personal relief” means any relief to which the borrower concerned is entitled under Chapter I of Part VII other than— and for the purposes of subsection (4) above the full amount of those reliefs means the amount of them determined without regard to section 276.
relief under section 266 which is given either by deduction by virtue of subsection (5) of that section or in accordance with paragraph 6 of Schedule 14; and
relief under section 273;
Sections 967(2) and 968(2) of CTA 2010 do not apply to a payment of relevant loan interest to which this section applies, but any person by whom such a payment is received shall be entitled to recover from the Board, in accordance with regulations, an amount which by virtue of subsection (2)(c) above is treated as income tax paid by him; and any amount so recovered shall be treated for the purposes of the Tax Acts in like manner as the payment of relevant loan interest to which it relates.
The following provisions of the Management Act, namely— shall apply in relation to an amount which is paid to any person by the Board as an amount recoverable in accordance with regulations made by virtue of subsection (6) above but to which that person is not entitled as if it were income tax which ought not to have been repaid and, where that amount was claimed by that person, as if it had been repaid as respects a chargeable period as a relief which was not due.
section 29(1)(c) (excessive relief) as it has effect apart from section 29(2) to (10) of that Act;
section 30 (tax repaid in error etc.) apart from subsection (1B),
section 86 (interest), and
section 95 (incorrect return or accounts),
In the application of section 86 of the Management Act by virtue of subsection (7) above in relation to sums due and payable by virtue of an assessment made for the whole or part of a year of assessment (“the relevant year of assessment”) under section 29(1)(c) or 30 of that Act, as applied by that subsection, the relevant date—
is 1st January in the relevant year of assessment in a case where the person falling within subsection (6) above has made a relevant interim claim; and
in any other case, is the later of the following dates, that is to say—
1st January in the relevant year of assessment; or
the date of the making of the payment by the Board which gives rise to the assessment.
In this section—
“relief” means relief by way of— deduction in computing profits or gains, or deduction or set off against income or total profits; and
Subject to this section and sections 373 to 376, in this Part “relevant loan interest” means interest which is paid and payable in the United Kingdom to a qualifying lender and to which subsection (2) . . . below applies.
Subject to subsection (4) below, this subsection applies to interest if, disregarding section 353(2) and any other provision applying to interest falling to be treated as relevant loan interest—
it is interest falling within section . . . 365; and
apart (where applicable) from section . . . 365(3), the whole of the interest would be eligible for relief under section 353;. . .
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in respect of which there was in force on 31st March 1983—
an option notice given under section 24(2) of the Housing Subsidies Act 1967 (option mortgages) other than one falling within section 27(3)(b) of the Finance Act 1982; or
an option notice given under Article 142(2) of the Housing (Northern Ireland) Order 1981 (option mortgages in Northern Ireland) other than one falling within section 27(4)(b) of the Finance Act 1982; and
which relates to a dwelling in respect of which, at the time the interest is paid, the condition in section 355(1) is fulfilled.
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In determining whether subsection (2) above applies to any interest, section 365 shall have effect as if the words “or the Republic of Ireland” were omitted.
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in paragraph (a) after the word “used”, where it first occurs, there were inserted the words “wholly or to a substantial extent”; and
paragraph (b) and the word “or” immediately preceding it were omitted.
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subsection (1) of that section shall have effect as if for the words from “section 354” to “used” (where it first occurs) there were substituted the words “interest shall not be relevant loan interest for the purposes of section 369 unless the dwelling to which the loan relates is at the time the interest is paid used wholly or partly” and paragraph (b) and the word “or” immediately preceding it were omitted; and
subsection (3) of that section shall have effect as if for “land, caravan or house-boat” there were substituted “dwelling”.
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Where at a time when interest on a loan (“the first loan”) is relevant loan interest, the borrower raises another loan to defray money to be applied as mentioned in section 354(1) with a view— then, in relation to interest payable within 12 months from the making of the other loan, the condition in section 355(1) shall be treated as continuing to be fulfilled.
to the use of other land or another caravan or house-boat wholly or partly as that person’s only or main residence, and
to the disposal of the land, caravan, house-boat or dwelling to which the first loan relates,
If in a case falling within subsection (1) above the interest on the first loan is interest to which section 370(2) applies and a direction is given under section 354(6) extending the period within which section 354 applies to that loan, subsection (1) above shall have effect in relation to that case as if for the reference to 12 months there were substituted a reference to such longer period as is specified in the direction.
If in a case falling within subsection (1) above the interest on the first loan is interest to which section 370(3) applies and, having regard to the circumstances of that case, it appears to the Board reasonable to do so, they may direct that, in relation to that case, subsection (1) above shall have effect as if for the reference to 12 months there were substituted a reference to such longer period as meets the circumstances of the case.
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Notwithstanding anything in section 370(2), interest on a home improvement loan (other than interest to which section 370(3) applies) is not relevant loan interest unless—
the qualifying lender to whom the interest is payable is a building society or a local authority or the Northern Ireland Housing Executive; or
the qualifying lender to whom the interest is payable has given notice to the Board in accordance with regulations that he is prepared to have those home improvement loans in respect of which he is the lender and which were made after such date as he may specify in the notice brought within the tax deduction scheme.
A qualifying lender may not specify a date in a notice under subsection (1) above which is earlier than the earliest date on which paragraph 2 of Schedule 7 to the Finance Act 1982 applied, or, if that paragraph did not apply, section 370 applies to interest on any loan (whether or not a home improvement loan) made by him.
In this section “home improvement loan” means a loan made to defray money applied wholly in improving or developing land or buildings on land or in paying off another loan which was itself to defray money so applied.
Section 354(2) shall apply for the purposes of this section as it applies for the purposes of sections 354 and 355.
The provisions of this section have effect in relation to a loan where, by virtue of . . . section 365(3), only part of the interest on the loan would (apart from section 353(2)) be eligible for relief under section 353; and in this section any such loan is referred to as a “limited loan”.
None of the interest on a limited loan is relevant loan interest unless—
the loan is made on or after 6th April 1987; or
the qualifying lender to whom the interest is payable has given notice to the Board in accordance with regulations that he is prepared to have limited loans of a description which includes that limited loan brought within the tax deduction scheme.
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Where the condition in paragraph (a) or (b) of subsection (2) above is fulfilled . . . only so much of the interest as (apart from section 353(2)) would be eligible for relief under section 353 is relevant loan interest.
Where a loan on which interest is payable by the borrower was made jointly to the borrower and another person who is not the borrower’s husband or wife, the interest on the loan is not relevant loan interest unless—
each of the persons to whom the loan was made is a qualifying borrower; and
in relation to each of them considered separately, the whole of that interest is relevant loan interest, in accordance with section 370 and this section.
In subsection (6) above references to the borrower’s husband or wife do not include references to a separated husband or wife . . . .
Section 369 does not apply to any relevant loan interest unless—
in the case of a loan of a description specified by regulations for the purposes of this paragraph, the borrower or, in the case of joint borrowers, each of them has given notice to the lender in the prescribed form certifying—
that he is a qualifying borrower; and
that the interest is relevant loan interest; and
such other matters as may be prescribed; or
the Board have given notice to the lender and the borrower that the interest may be paid under deduction of tax; or
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the loan to which the interest relates is of a description specified by regulations for the purposes of this paragraph and was made—
if sub-paragraph (2) of paragraph 2 of Schedule 7 to the Finance Act 1982 applied to interest on the loan which became due on or after a date earlier than 6th April 1983, being a date specified by the Board in pursuance of sub-paragraph (5) of that paragraph, before that earlier date; or
if the qualifying lender is a building society or a local authority, before 1st April 1983; or
if sub-paragraphs (i) and (ii) above do not apply and the interest falls within section 370(2), before 6th April 1983.
Where notice has been given as mentioned in paragraph (a) or (b) of subsection (1) above, section 369 applies to any relevant loan interest to which the notice relates and which becomes due on or after the relevant date, as defined by subsection (3) below; and in a case falling within paragraph . . . (d) of subsection (1) above, section 369 applies to the relevant loan interest referred to in that paragraph.
In subsection (2) above “the relevant date” means—
in the case of a notice under subsection (1)(a) above, the date the notice is given, and
in the case of a notice under subsection (1)(b) above, a date specified in the notice as being the relevant date (which may be earlier than the date so specified as the date from which the interest may be paid under deduction of tax).
If at any time— the borrower shall give notice of the fact to the lender.
the interest on a loan ceases to be relevant loan interest; or
a person making payments of relevant loan interest ceases to be a qualifying borrower;
Without prejudice to subsection (3) below, in relation to a payment of interest— section 369 shall have effect as if the payment were a payment of relevant loan interest made by a qualifying borrower.
which is due after the time referred to in subsection (1) above and before the date on which notice is given under that subsection, and
from which a deduction was made as mentioned in section 369(1),
as respects which any of the conditions mentioned in section 374(1) is fulfilled, and
Nothing in subsection (2) above shall be taken as regards the borrower as entitling him to any deduction or to retain any amount deducted and, accordingly, where any amount that has been deducted exceeds the amount which ought to have been deducted, he shall be liable to make good the excess and an inspector may make such assessments as may in his judgment be required for recovering the excess.
The Management Act shall apply to an assessment under subsection (3) above as if it were an assessment to income tax for the year of assessment in which the deduction was made.
the assessment were among those specified in sections 55(1) (recovery of tax not postponed) and 86(2) (interest on overdue tax) of that Act; and
the sum charged by the assessment were tax specified in paragraph 3 of the Table in section 86(4) of that Act (reckonable date).
If, as a result of receiving a notice under subsection (1) above or otherwise, a qualifying lender has reason to believe that any interest is no longer relevant loan interest or that a borrower is no longer a qualifying borrower, the lender shall furnish the Board with such information as is in his possession with respect to those matters.
If there is any unreasonable delay in the giving of a notice under subsection (1) above, the borrower shall be liable to a penalty not exceeding so much of the aggregate amount that he is liable to make good under subsection (3) above as is attributable to that delay.
Where it appears to the Board that any of the provisions of sections 370 to 373 is not or may not be fulfilled with respect to any interest, or that a qualifying borrower has or may have ceased to be a qualifying borrower, they shall give notice of that fact to the lender and the borrower specifying the description of relevant loan interest concerned or, as the case may be, that the borrower has or may have ceased to be a qualifying borrower.
Section 369 shall not apply to any payment of relevant loan interest of a description to which a notice under subsection (6) above relates and which becomes due or is made after such date as may be specified in the notice and before such date as may be specified in a further notice given by the Board to the lender and the borrower.
In any case where— regulations may provide for a sum to be paid by the Board of an amount equal to that which the borrower would have been able to deduct from that payment by virtue of section 369 if it had been made after the relevant date.
section 369 applies to any relevant loan interest by virtue of a notice under section 374(1)(b), and
the relevant date specified in the notice is earlier than the date from which the interest begins to be paid under deduction of tax, and
a payment of that interest was made on or after the relevant date but not under deduction of tax,
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it could have been disclosed to that other person in accordance with that subsection; or
the disclosure is made for the purposes of any civil or criminal proceedings concerned with the loan to which the disclosure relates.
In any case where an amount to which a person is not entitled is paid to him by the Board in pursuance of regulations made by virtue of subsection (8) above, regulations may—
provide for an officer of the Board to make such assessments as may in his judgment be required for recovering that amount from that person; and
make provision corresponding to that made by subsection (4A) above and subsections (4) and (5) of section 374A.
Subsections (1), (5) and (6) above shall not apply where interest ceases to be relevant loan interest by virtue of section 38 of the Finance Act 1999.
This section applies where, in the case of any loan, interest on the loan never has been relevant loan interest or the borrower never has been a qualifying borrower.
Without prejudice to subsection (3) below, in relation to a payment of interest— section 369 shall have effect as if the payment of interest were a payment of relevant loan interest made by a qualifying borrower.
as respects which either of the conditions mentioned in paragraphs (a) and (b) of section 374(1) is fulfilled, and
from which a deduction was made as mentioned in section 369(1),
Nothing in subsection (2) above shall be taken as regards the borrower as entitling him to make any deduction or to retain any amount deducted and, accordingly, where any amount has been deducted, he shall be liable to make good that amount and an officer of the Board may make such assessments as may in his judgment be required for recovering that amount.
The Management Act shall apply to an assessment under subsection (3) above as if it were an assessment to income tax for the year of assessment in which the deduction was made . . . .
If the borrower fraudulently or negligently makes any false statement or representation in connection with the making of any deduction, he shall be liable to a penalty not exceeding the amount deducted.
Subject to subsection (2) below, an individual is a qualifying borrower with respect to the interest on any loan.
In relation to interest paid at a time when the borrower or the borrower’s husband or wife holds an office or employment which would, but for some special exemption or immunity from tax, be a taxable employment under Part 2 of ITEPA 2003 (as defined by section 66(3) of that Act), the borrower is not a qualifying borrower.
In subsection (2) above references to the borrower’s husband or wife do not include references to a separated husband or wife . . . .
The following bodies are qualifying lenders:—
a building society;
a local authority;
the Bank of England;
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a person who has permission under Part 4A of the Financial Services and Markets Act 2000 to effect or carry out contracts of long-term insurance;
any company to which property and rights belonging to a trustee savings bank were transferred by section 3 of the Trustee Savings Bank Act 1985;
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a development corporation within the meaning of the New Towns Act 1981 or the New Towns (Scotland) Act 1968;
the Homes and Communities Agency;
the Regulator of Social Housing,
the Greater London Authority so far as exercising its housing or regeneration functions or its new towns and urban development functions;
the Northern Ireland Housing Executive;
the Scottish Special Housing Association;
the Secretary of State if the loan is made by him under section 79 of the Housing Associations Act 1985;
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the Church of England Pensions Board;
any body which is for the time being registered under section 376A.
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If relevant loan interest payable by a qualifying borrower— then, subject to subsection (2) below, the terms of repayment are by virtue of this section varied in accordance with subsection (3) below.
is payable under a loan agreement requiring combined payments, and
is payable to a qualifying lender who, in accordance with subsection (5) below, is specified for the purposes of this section, and
is interest on a loan made before 1st April 1983, or if it is interest in respect of which the Board notified an earlier date to the lender under paragraph 2(5) of Schedule 7 to the Finance Act 1982, before that earlier date,
Subsection (1) above does not apply to any combined payments unless—
the qualifying lender concerned has, in accordance with regulations, given notice to the qualifying borrower that this section is to apply to combined payments which the borrower is required to make under the loan agreement; and
the qualifying borrower has not, in accordance with regulations, given notice to the qualifying lender that he wishes to continue with combined payments which, allowing for any sums he is entitled to deduct by virtue of section 369, do not exceed the combined payments which he would have been required to make but for the provisions of that section.
Where subsection (1) applies, the amount of any combined payment payable by the qualifying borrower concerned which includes a payment of relevant loan interest shall be determined by the lender so as to secure, so far as practicable— and for the purposes of paragraph (b) above “net payment” means a payment which, so far as it is a payment of interest, consists of interest from which the sum provided for by section 369(1) has been deducted.
that the principal and interest are repaid over the period which is for the time being agreed between the lender and the borrower; and
that, unless there is a change in that period or in the basic rate of income tax or in the rate of interest charged by the lender, the amount of each net payment due from the borrower to the lender will be of the same amount;
Where the qualifying borrower gives a notice under subsection (2)(b) above, the amount of any combined payment payable by him which includes a payment of relevant loan interest and the period over which the principal and interest on the loan are to be repaid shall be determined by the lender so as to secure, so far as practicable, that, unless there is a change in the basic rate of income tax or in the rate of interest charged by the lender—
the amount of each net payment as defined in subsection (3) above which is due from the borrower to the lender will be of the same amount; and
the amount of each such payment does not exceed what, apart from section 369, would have been the amount of the combined payment payable by the borrower on the effective date of the notice under subsection (2)(a) above, less tax at the basic rate for the year of assessment in which that effective date falls on so much of that combined payment as would have consisted of interest.
Nothing in this section or in the loan agreement shall prevent the borrower from making, at such time or times as he chooses, additional repayments of capital of any amount so as to secure that the principal and interest on the loan are repaid within a period which is not shorter than that referred to in subsection (3)(a) above.
For the purposes of subsection (4)(b) above the effective date of a notice under subsection (2)(a) above is the date which, in accordance with regulations, is the due date for the first combined payment which, in consequence of that notice and the notice under subsection (2)(b) above, is a net payment for the purposes of subsection (3)(b) above.
The repeal by this Act of section 28 of the Finance Act 1982 shall not affect the variation of any agreement in pursuance of that section before 26th July 1984 and accordingly, where the borrower gave a notice under subsection (2)(b) of that section, the maximum amount of any combined payment payable under the agreement as so varied which includes a payment of relevant loan interest shall continue to be the amount which would, apart from section 369, have been the first combined payment payable by the borrower after the date referred to in subsection (1)(c) above less tax at the basic rate for the year 1983-84 on so much of that combined payment as would have consisted of interest (subject to any change in the basic rate of income tax or in the rate of interest charged by the lender); and subsection (5) above shall apply in relation to any agreement as so varied.
A building society is by virtue of this subsection specified for the purposes of this section; and the Treasury may by order specify any other qualifying lender or class of qualifying lender for the purposes of this section.
The giving of a notice under subsection (2)(a) or (b) above does not affect the right of the qualifying lender and the qualifying borrower to vary, by agreement, the terms on which interest or capital or both is to be repaid.
In this section—
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a housing association which is for the time being approved for the purposes of section 488 and which borrows or has borrowed from a qualifying lender on the security of a freehold or leasehold estate of that association on land in the United Kingdom; and
a self-build society which is for the time being approved for the purposes of section 489 and which borrows or has borrowed from a qualifying lender on the security of a freehold or leasehold estate of that society on land in the United Kingdom.
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may contain such modifications of the provisions of sections 369 to 377, and
may make the application of any of those provisions subject to such special conditions,
The Board may by regulations make provision—
for the purposes of any provision of sections 369 to 376A which relates to any matter or thing to be specified by or done in accordance with regulations;
for the application of those sections in relation to loan interest paid by personal representatives and trustees;
with respect to the furnishing of information by borrowers or lenders, including, in the case of lenders, the inspection of books, documents and other records on behalf of the Board;
for, and with respect to, appeals to the tribunal against the refusal of the Board to issue a notice under section 374(1)(b) or the issue of a notice under section 375(6) or (7); and
generally for giving effect to sections 369 to 376A.
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references to a self-build society are references to a self-build society within the meaning of Part I of the Housing Associations Act 1985 or, in Northern Ireland, Part VII of the Housing (Northern Ireland) Order 1981; and
in its application to Scotland —
“a freehold or leasehold estate” means any interest in land, and
any reference to a loan on the security of such an estate is a reference to a loan upon a heritable security within the meaning of section 9(8)(a) of the Conveyancing and Feudal Reform (Scotland) Act 1970.
In sections 369 to 378— “contracts of general insurance” means contracts which fall within Part I of Schedule 1 to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 and “contracts of long-term insurance” means contracts which fall within Part II of that Schedule; “prescribed” . . . means prescribed by the Board; “qualifying borrower” has the meaning given by section 376(1) to (3); “qualifying lender” has the meaning given by section 376(4) . . . ; “regulations” . . . means regulations made by the Board under section 378; “relevant loan interest” has the meaning given by section 370(1); “separated” means separated under an order of a court of competent jurisdiction or by deed of separation or in such circumstances that the separation is likely to be permanent.
The Board shall maintain, and publish in such manner as they consider appropriate, a register for the purposes of section 376(4).
The following are entitled to be registered—
a person who has permission under Part 4A of the Financial Services and Markets Act 2000—
to accept deposits; or
to effect or carry out contracts of general insurance;
a 90 per cent subsidiary of a person mentioned in—
section 376(4)(e); or
paragraph (a) above;
any other body whose activities and objects appear to the Board to qualify it for registration.
If the Board are satisfied that an applicant for registration is entitled to be registered, they may register the applicant generally or in relation to any description of loan specified in the register, with effect from such date as may be so specified; and a body which is so registered shall become a qualifying lender in accordance with the terms of its registration.
The registration of any body may be varied by the Board— and where they do so, they shall give the body written notice of the variation and of the date from which it is to have effect.
where it is general, by providing for it to be in relation to a specified description of loan, or
where it is in relation to a specified description of loan, by removing or varying the reference to that description of loan,
If it appears to the Board at any time that a body which is registered under this section would not be entitled to be registered if it applied for registration at that time, the Board may by written notice given to the body cancel its registration with effect from such date as may be specified in the notice.
The date specified in a notice under subsection (3) or (4) above shall not be earlier than the end of the period of 30 days beginning with the date on which the notice is served.
Any body which is aggrieved by the failure of the Board to register it under this section, or by the variation or cancellation of its registration, may appeal, by notice given to the Board before the end of the period of 30 days beginning with the date on which the body is notified of the Board’s decision. . . .
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Where any person sustains a loss in any trade, profession, vocation or employment carried on by him either solely or in partnership, he may, by notice given within two years after the year of assessment, make a claim for relief from income tax on an amount of his income equal to the amount of the loss.
Subject to section 492(2), relief may be given under subsection (1) above in respect of a person’s loss sustained in the last preceding year of assessment in any trade, profession, vocation or employment still carried on by him in the year for which the claim is made, in so far as relief in respect of that loss has not already been given under that subsection or otherwise; and where relief is claimed by virtue of this subsection it shall be given in priority to any relief under that subsection in respect of a loss sustained in the year for which the relief is claimed.
Where there is in any year of assessment a change on which a trade, profession or vocation is treated under section 113(1) as permanently discontinued, and a person engaged in carrying it on immediately before the change continues to be so engaged immediately afterwards, it shall, notwithstanding the discontinuance, be treated as the same trade, profession or vocation for the purposes of subsection (2) above, except as respects the computation of profits or gains and losses.
This section applies in relation to losses sustained in the occupation of woodlands in respect of which a person has elected under section 54 to be charged to income tax under Schedule D as it applies in relation to losses sustained in a trade.
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Where an individual carrying on a trade sustains a loss in the trade in— he may, by notice given within two years after the year of assessment in which the loss is sustained, make a claim for relief under this section.
the year of assessment in which it is first carried on by him; or
any of the next three years of assessment;
Subject to section 492 and this section, relief shall be given under subsection (1) above from income tax on an amount of the claimant’s income equal to the amount of the loss, being income for the three years of assessment last preceding that in which the loss is sustained, taking income for an earlier year before income for a later year.
Relief shall not be given for the same loss or the same portion of a loss both under subsection (1) above and under any other provision of the Income Tax Acts.
Relief shall not be given under subsection (1) above in respect of a loss sustained in any period unless it is shown that the trade was carried on throughout that period on a commercial basis and in such a way that profits in the trade (or, where the carrying on of the trade forms part of a larger undertaking, in the undertaking as a whole) could reasonably be expected to be realised in that period or within a reasonable time thereafter.
Relief shall not be given under subsection (1) above in respect of a loss sustained by an individual in a trade if—
at the time when it is first carried on by him he is married to and living with another individual who has previously carried on the trade; and
the loss is sustained in a year of assessment later than the third year of assessment after that in which the trade was first carried on by the other individual.
For the purposes of this section an individual carries on a trade whether he does so solely or in partnership; and (except as respects the computation of profits or gains and losses) an individual continues to carry on the same trade notwithstanding a change in the persons engaged in carrying it on if he is engaged in carrying it on immediately before and immediately after the change.
This section applies, with the necessary modifications, in relation to a profession or vocation as it applies in relation to a trade.
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A claim for relief under section 380 or 381 may require that the relief be given only by reference to the income of the person sustaining the loss, without extending to the income of that person’s wife or husband.
Subject to any requirement under subsection (1) above, relief under section 380 or 381 shall be given in respect of a loss sustained by any person by treating the loss as reducing first his income of the corresponding class, then his other income, then the income of the corresponding class of that person’s wife or husband, then the other income of the wife or husband. For the purposes of this subsection “income of the corresponding class” means earned or unearned income according as income arising during the same period as the loss to the person sustaining it from profits or gains of the same trade, profession, vocation or employment would have been that person’s earned or unearned income.
Where relief under section 380 or 381 has been given to a person for any year of assessment, he shall not be entitled, in computing the amount of the assessment for any subsequent year, to a deduction of any portion of the amount in respect of which such relief has been obtained.
For the purposes of sections 380 and 381, the amount of a loss sustained in a trade, (including the occupation of woodlands in a case where section 380(4) applies), profession or vocation shall be computed in like manner as the profits or gains arising or accruing from the trade, profession or vocation are computed under the provisions of the Income Tax Acts applicable to Case I or II of Schedule D.
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Subject to the provisions of this section, any claim made under section 380 or 381 for relief in respect of a loss sustained by the claimant in any trade in any year of assessment (“the year of loss”) may require the amount of that loss to be determined as if an amount equal to the capital allowances for the year of assessment for which the year of loss is the basis year were to be deducted in computing the profits or gains or losses of the trade in the year of loss; and a claim may be so made notwithstanding that apart from those allowances the claimant has not sustained a loss in the trade in the year of loss.
Capital allowances for any year of assessment shall be taken into account by virtue of this section only if and so far as they are not required to offset balancing charges for the year; and, for the purposes of this subsection, the capital allowances for a year of assessment shall be treated as required to offset balancing charges for the year up to the amount on which the balancing charges fall to be made after deducting from that amount the amount (if any) of capital allowances for earlier years which is carried forward to that year and would, without the balancing charges, be non-effective in that year.
In the case of a claim under section 380, where the capital allowances taken into account by virtue of this section are those for the year of assessment for which the claim is made or for the preceding year (the year of loss being the basis year for that year itself, or the claim being made by way of carry-forward of the loss by virtue of section 380(2)) relief shall not be given by reference to those allowances in respect of an amount greater than the amount non-effective in the year for which the claim is made, or, in the case of allowances for the preceding year, the amount non-effective in both years.
In the case of a claim under section 381, where the capital allowances taken into account by virtue of this section are those for the year of loss, relief shall not be given by reference to those allowances in respect of an amount greater than the amount non-effective in that year.
For the purposes of this section—
where the end of the basis period for a year of assessment (as defined in section 72 of the 1968 Act) falls in, or coincides with the end of, any year of assessment, that year is the basis year for the first-mentioned year of assessment, but so that, if a year of assessment would under the foregoing provision be the basis year both for that year itself and for another year of assessment, it shall be the basis year for the year itself and not for the other year;
any reference to the capital allowances or balancing charges for a year of assessment shall be construed as a reference to those falling to be made in taxing the trade for that year (but not including, in the case of allowances, any part of the allowances for an earlier year carried forward under section 70(4) of the 1968 Act);
any reference to an amount of capital allowances non-effective in a year shall be construed as referring to the amount to which, by reason of an insufficiency of profits or gains, effect cannot be given in taxing the trade for the year; and
effect shall be deemed to be given in taxing the trade to allowances carried forward from an earlier year before it is given to allowances arising in a later year.
Where, on a claim made by virtue of this section, relief is not given under section 380 or 381 for the full amount of the loss determined as mentioned in subsection (1) above, the relief shall be referred as far as may be to the loss sustained by the claimant in the trade rather than to the capital allowances in respect of the trade.
Subject to subsection (8) below, where for any year of assessment relief is given under section 380 or 381 by reference to any capital allowances, then, for all the purposes of the Income Tax Acts, effect shall be deemed to have been given to those allowances up to the amount in respect of which relief is so given, as if (in accordance with section 70(2) of the 1968 Act) a deduction in respect thereof had been allowed in taxing the trade for that year, or— and any relief previously given for a subsequent year on the basis that effect had not been given to the allowances as aforesaid shall be adjusted where necessary by an assessment.
where relief is given under section 380, in the case of allowances for the following year, in taxing the trade for that following year;
where relief is given under section 381, in the case of allowances for any later year, in taxing the trade for that later year;
Where in any year of assessment a trade is permanently discontinued, or is treated for the purposes of section 113 as permanently discontinued, and, immediately before the discontinuance, the trade was being carried on in partnership, then, notwithstanding subsection (7) above, for the purposes of any claim for relief made by virtue of section 385(5)(c) or 388 and relating to that discontinuance, effect shall not be deemed to have been given either— but where the same partner claims relief both under section 380 or 381 and under section 385(5) or 388 in respect of the same allowances, the total amount for which relief is to be given to him by reference thereto shall not exceed the greater of the amounts for which, apart from any deficiency of income, relief might have been given under either section separately, and the total amount for which relief is to be given to all the partners under those sections in respect of any allowances shall not in any event exceed the amount of the allowances to which effect has not been given apart from those sections.
to any part of the capital allowances falling to be made in taxing the trade for that year by reason of relief given under section 380 or 381 by reference to those allowances; or
to any part of the capital allowances falling to be made in taxing the trade for the preceding year by reason of relief so given by reference to them, in so far as that relief must be referred to the part of the allowances apportionable to the part of the year within 12 months of the discontinuance on an apportionment made by reference to the comparative lengths of the two parts of the year;
Where a person claiming relief under section 380 or 381 has, since the end, where the claim is under section 380, of the year for which the claim is made, or, where the claim is under section 381, of the year of loss, carried on the trade in question in partnership, effect shall not be given to this section in relation to that claim except with the written consent of, or of the personal representatives of, every other person who has been engaged in carrying on the trade between the end of that year and the making of the claim.
Where the claim is for a loss sustained before an event treated as the permanent discontinuance of the trade, subsection (9) above shall not require the consent of any person as having been so engaged since that discontinuance, or as the personal representative of such a person.
Relief from tax may be given by virtue of this section by reference to capital allowances for a year of assessment before the passing of any Act granting income tax for that year, as if income tax had been granted for the year without alteration; but if relief given to a person by virtue of this section for any year of assessment is affected by a subsequent alteration of the law, or by any discontinuance of the trade or other event occurring after the end of the year, any necessary adjustment may be made, and so much of any repayment of tax as exceeded the amount repayable in the events that happened may, if not otherwise made good, be assessed under Case VI of Schedule D and recovered from that person accordingly.
This section applies (with any necessary adaptations)— as it applies in relation to a trade.
in the case of a claim under section 380, in relation to a profession, vocation or employment and in relation to the occupation of woodlands the profits or gains of which are assessable under Schedule D by virtue of an election under section 54; and
in relation to a claim under section 381, in relation to a profession or vocation,
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Subject to subsection (2) below, a loss (including any amount in respect of capital allowances which, by virtue of section 383, is to be treated as a loss) shall not be available for relief under section 380 unless it is shown that, for the year of assessment in which the loss is claimed to have been sustained, the trade was being carried on on a commercial basis and with a view to the realisation of profits in the trade or, where the carrying on of the trade formed part of a larger undertaking, in the undertaking as a whole.
Subsection (1) above shall not apply—
to a loss made, or an allowance in respect of expenditure incurred, by any person in the exercise of functions conferred by or under any enactment (including an enactment contained in a local or private Act); or
to an allowance in respect of expenditure incurred before 6th April 1960.
Where during a year of assessment there is a change in the manner in which a trade is being carried on, it shall be treated for the purposes of this section as having been carried on throughout the year in the way in which it was being carried on by the end of the year.
Subject to subsection (5) below, where a trade is (or falls to be treated as being) carried on for a part only of a year of assessment by reason of its being (or falling to be treated as being) set up and commenced, or discontinued, or both, in that year, subsections (1) to (3) above shall have effect in relation to the trade as regards that part of that year as if any reference to the manner of carrying on the trade for or by the end of that year were a reference to the manner of carrying it on for or by the end of that part of that year.
Where in any year of assessment there is a change in the persons engaged in carrying on a trade, then, for the purposes of the application of subsections (1) to (4) above in the case of any person who, being engaged in carrying on the trade immediately before the change, continues to be so engaged immediately after it, the trade carried on by that person immediately before the change shall be treated as continuing to be carried on by him notwithstanding the change, whether or not it falls to be treated for any other purpose as having been discontinued on the change.
There shall be disregarded for the purposes of section 383 any allowances made to an individual under Chapter I of Part III of the Finance Act 1971 in respect of expenditure incurred on the provision of machinery or plant for leasing in the course of a trade unless—
the trade is carried on by him (alone or in partnership) for a continuous period of at least six months in, or beginning or ending in, the year of the loss (as defined in section 383); and
he devotes substantially the whole of his time to carrying it on (alone or in partnership) throughout that year or if it is set up or permanently discontinued (or both) in that year, for a continuous period of at least six months beginning or ending in that year.
Subsection (6) above shall apply also to expenditure incurred by an individual on the provision for the purposes of a trade carried on by him (alone or in partnership) of an asset which is not to be leased if payments in the nature of royalties or licence fees are to accrue from rights granted by him in connection with that asset.
Where relief has been given in a case to which subsection (6) above applies it shall be withdrawn by the making of an assessment under Case VI of Schedule D.
For the purposes of subsection (1) above, the fact that a trade was being carried on at any time so as to afford a reasonable expectation of profit shall be conclusive evidence that it was then being carried on with a view to the realisation of profits.
Subsections (1) to (5) and (9) above— and subsection (6) above is without prejudice to section 41 of the Finance Act 1976.
apply to professions and vocations as they apply to trades, with references to a commercial basis construed accordingly; and
have effect without prejudice to section 397;
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Where a person has, in any trade, profession or vocation carried on by him either alone or in partnership, sustained a loss (to be computed in the same way as profits or gains under the provisions of the Income Tax Acts applicable to Cases I and II of Schedule D) in respect of which relief has not been wholly given either under section 380 or under any other provision of those Acts, he may make a claim requiring that any portion of the loss for which relief has not been so given shall be carried forward and, as far as may be, deducted from or set off against the amount of profits or gains on which he is assessed to income tax under Schedule D in respect of that trade, profession or vocation for subsequent years of assessment.
In the application of this section to a loss sustained by a partner in a partnership, “the amount of profits or gains on which he is assessed” shall, in respect of any year, be taken to mean such portion of the amount on which the partnership is assessed to income tax under Schedule D in respect of the trade, profession or vocation as he would be required to include in a return of his total income for that year.
Any relief under this section shall be given as far as possible from the first subsequent assessment, and so far as it cannot be so given, then from the next assessment, and so on.
Where in any year of assessment relief cannot be given, or cannot be wholly given, in respect of a loss carried forward under this section because the amount of the profits or gains of the trade assessed under Case I of Schedule D for that year is insufficient, any interest or dividends being interest or dividends— shall be treated for the purposes of the application of this section as if they were profits or gains on which the person carrying on the trade was assessed under that Case in respect of that trade for that year of assessment, and relief shall be given accordingly by repayment or otherwise.
on investments arising in that year, and
which would fall to be taken into account as trading receipts in computing the profits or gains of the trade for the purposes of assessment under that Case but for the fact that they have been subjected to tax under other provisions of the Income Tax Acts,
Where there is in any year of assessment a change on which a trade, profession or vocation is treated under section 113 as permanently discontinued, and a person engaged in carrying it on immediately before the change continues to be so engaged immediately thereafter, then—
the trade, profession or vocation carried on by him immediately before and that carried on immediately after the change shall, notwithstanding the discontinuance, be treated as the same for the purposes of this section, except as respects the computation of profits or gains and losses; and
in respect of a loss sustained by him in the trade, profession or vocation in the part of that year before the change, relief shall be given under this section from the assessment relating to the part of the year after the change as if it were an assessment for a subsequent year; and
for the purposes of this section, there shall be treated as a loss so sustained in the part of the year before the change his share of the non-effective amount (if any) of any capital allowances falling to be made in taxing the trade, profession or vocation for that part of that year. For the purposes of paragraph (c) above—
the persons engaged in carrying on the trade, profession or vocation immediately before the change shall be treated as entitled to capital allowances in the shares in which they are then entitled to the profits of the trade, profession or vocation, and
“the non-effective amount” means, in relation to any such allowances, the amount to which, because of an insufficiency of profits or gains, effect cannot be given in taxing the trade, profession or vocation.
Where a loss is sustained by a person in the occupation of woodlands, and that person, if he had made a profit, would by reason of his election under section 54 have been chargeable for the following year to income tax under Schedule D computed on the amount of that profit, this section shall apply so as to give relief in respect of that loss in the same manner, and to the same extent, as if it were a loss sustained in a trade.
In so far as relief in respect of any loss has been given to any person under this section, that person shall not be entitled to claim relief in respect of that loss under any other provision of the Income Tax Acts.
So far as a claim under this section concerns the amount of the loss for any year of assessment it must be made within six years after the year of assessment in question, but the question whether any and if so how much relief on that amount should be given under this section against tax for any year of assessment may be the subject of a separate claim made not later than six years after that year of assessment.
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Where— then, subject to subsection (2) below, section 385 (except subsection (5)) shall apply as if the income so derived were profits or gains on which that individual was assessed under Schedule D in respect of that business for that year.
a business carried on by any individual, or any individuals in partnership, has been transferred to a company in consideration solely or mainly of the allotment of shares in the company to that individual or those individuals; and
in the case of any individual to whom, or to whose nominee or nominees, shares have been so allotted, his total income for any year of assessment throughout which he is the beneficial owner of the shares, and throughout which the company carries on the business, includes any income derived by him from the company, whether by way of dividends on those shares or otherwise;
Where under section 385 as applied by subsection (1) above a loss falls to be deducted from or set off against any income for any year of assessment, the deduction or set-off shall be made in the first place against that part, if any, of the income in respect of which the individual has been, or is liable to be, assessed to tax for that year.
This section, in its application to the year of assessment in which a business is transferred, shall have effect as if, for the reference in subsection (1)(b) to the year of assessment throughout which the individual is the beneficial owner of the shares and the business is carried on by the company, there were substituted a reference to the period from the date of the transfer to the following 5th April.
Where a change to which subsection (5) of section 385 applies has occurred before a transfer to which this section applies, paragraph (a), but not paragraph (c), of that subsection shall for the purposes of this section apply in relation to the earlier change as it applies for the purposes of that section.
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Subject to the provisions of this section, where under section 350 a person has been assessed to income tax in respect of a payment made wholly and exclusively for the purposes of a trade, profession or vocation, the amount on which tax has been paid under that assessment shall be treated for the purposes of sections 385 and 386 as though it were a loss sustained in that trade, profession or vocation, and relief in respect of the loss shall be allowed accordingly.
Relief shall not be allowed by virtue of this section in respect of any payment, or part of a payment, which is not ultimately borne by the person assessed, or which is charged to capital.
This section shall not apply—
to any payment falling within section 349(2);
to any payment falling within section 349 by virtue of section 43(1);
to any such payment of rent as is referred to in section 120(4);
to any capital sum paid in respect of any patent rights assessed under section 349(1) by virtue of section 524;
to any payment of, or on account of, copyright royalties to which section 536 applies; or
to any payment to which section 349(1) applies by virtue of section 737.
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Where a trade, profession or vocation is permanently discontinued in the year 1988-89 or any later year, and any person then carrying it on, either alone or in partnership, has sustained therein a loss to which this section applies (“a terminal loss”), that person may, subject to the provisions of this section and of section 389, make a claim requiring that the amount of the terminal loss shall, as far as may be, be deducted from or set off against the amount of profits or gains on which he has been charged to income tax under Schedule D in respect of the trade, profession or vocation for the three years of assessment last preceding that in which the discontinuance occurs; and there shall be made all such reductions of assessments or repayments of tax as may be necessary to give effect to the claim.
Relief shall not be given in respect of the same matter both under this section and under some other provision of the Income Tax Acts.
Any relief under this section shall be given as far as possible from the assessment for a later rather than an earlier year.
Where— any relevant interest or dividends arising in that year shall be treated for the purposes of the application of this section as if they were profits or gains on which the person carrying on the trade was assessed under Case I of Schedule D in respect of that trade for that year of assessment, and relief shall be given accordingly by repayment or otherwise. For the purposes of this subsection “any relevant interest or dividends” means interest or dividends which would fall to be taken into account as trading receipts in computing the profits or gains of the trade for the purpose of assessment under Case I of Schedule D but for the fact that they have been subjected to tax under other provisions of the Income Tax Acts.
a claim under this section is made in respect of a terminal loss sustained in a trade, and
relief cannot be given, or cannot be wholly given, against the profits or gains of the trade charged to income tax under Schedule D for any year because the amount of those profits or gains is insufficient,
The profits or gains on which a person or partnership has been charged to income tax for any year of assessment shall be treated for the purposes of any relief under this section from the assessment for that year as reduced by the amount of those profits or gains applied in making any payment from which income tax was deducted, but was not accounted for because the payment was made out of profits or gains brought into charge to income tax; and the like reduction shall be made in the amount of the terminal loss for which relief may be given under this section from the assessments for earlier years unless the payment was one which, if not made out of profits or gains brought into charge to income tax—
could have been assessed to income tax under section 350, and
if so assessed, could have been treated as a loss by virtue of section 387.
The question whether a person has sustained any and, if so, what terminal loss in a trade, profession or vocation shall be determined for the purposes of this section by taking the amounts (if any) of the following, in so far as they have not otherwise been taken into account so as to reduce or relieve any charge to tax—
the loss sustained by him in the trade, profession or vocation in the year of assessment in which it is permanently discontinued;
the relevant capital allowances for that year of assessment;
the loss sustained by him in the trade, profession or vocation in the part of the preceding year of assessment beginning 12 months before the discontinuance; and
the same fraction of the relevant capital allowances for that preceding year of assessment as the part thereof beginning 12 months before the discontinuance is of a year.
In subsection (6) above “the relevant capital allowances” means, in relation to any year of assessment, any capital allowances falling to be made in taxing the trade, profession or vocation for that year, excluding amounts carried forward from an earlier year; and for the purposes of paragraphs (a) and (c) of that subsection the amount of a loss shall, subject to the provisions of this section, be computed in the same way as profits or gains under the provisions of the Income Tax Acts applicable to Cases I and II of Schedule D.
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Sections 387, 458 and 474 shall apply to the computation of losses, or of profit or loss, for any purpose of this section or section 388 as they apply to any such computation for the corresponding purposes of section 385.
Where on the permanent discontinuance of a trade which consists of or includes the working of a mine, oil well or other source of mineral deposits within the meaning of Schedule 13 to the Finance Act 1986, a claim for relief is made both under section 388 above and section 15(1) of the 1968 Act (carry-back of balancing allowances), the balancing allowance in respect of which the claim is made under section 15(1) shall be left out of account for the purposes of section 388(6), but relief under section 388 shall be given in priority to relief under section 15(1).
Where a person claiming relief under section 388 on a discontinuance has, since the beginning of the third year of assessment preceding that in which the discontinuance occurs, carried on the trade, profession or vocation in partnership—
in section 388(1) “the amount of profits or gains on which he has been charged to income tax” shall be taken to mean, in respect of any year or part of a year for which the partnership was assessed in respect of the trade, profession or vocation, such portion of the amount of the profits or gains on which the partnership has been, or is treated by virtue of section 388(5) as having been, charged to income tax in respect of it for that year or part of a year as would be required to be included in a return of his total income for that year;
any reduction in the amount of his terminal loss which falls to be made under section 388(5) by reason of profits or gains having been applied by the partnership in any such year or part of a year in making any payment shall be limited to the same proportion of the profits or gains brought into charge which were so applied; and
if he was carrying on the trade, profession or vocation immediately before the discontinuance, the amounts to be included in his terminal loss by virtue of section 388(6)(b) or (d) shall be such part only of the amounts therein mentioned (in so far as they have not otherwise been taken into account so as to reduce or relieve any charge to tax) as would fall to his share on a division made according to the shares in which the partners were then entitled to the profits of the trade, profession or vocation.
For all purposes of this section and section 388 a trade, profession or vocation shall be treated as discontinued, and a new one as set up and commenced, when it is so treated for the purposes of section 113; but—
a person who continues to be engaged in carrying it on immediately after such a discontinuance shall not be entitled to relief in respect of any terminal loss on that discontinuance; and
on any discontinuance, a person not continuing to be so engaged may be given relief in respect of a terminal loss against profits or gains on which he was charged in respect of the same trade, profession or vocation for a period before a previous discontinuance, if he has been continuously engaged in carrying it on between the two discontinuances, and, in his case, if the previous discontinuance occurred within 12 months before the other—
it shall be disregarded for the purposes of paragraphs (a) and (c) of section 388(6), except that those paragraphs shall be taken to include any amount on which relief could have been allowed to him as for a loss sustained before the previous discontinuance by virtue of section 385(5)(c), so far as it is referable to a period within those 12 months; and
paragraph (d) of section 388(6) shall be taken to include the whole amount of the allowances in question instead of the fraction there mentioned.
Where a trade, profession or vocation is being carried on by any persons in partnership immediately before it is permanently discontinued, relief under section 388 given to one of them on the discontinuance shall not, in relation to a claim made by another of them by virtue of paragraph (c) of section 385(5), be taken to affect the non-effective amount of any allowances within the meaning of that paragraph.
Subject to subsection (7) below, a claim for relief under section 388 may require that, in so far as they have not been otherwise taken into account so as to reduce or relieve any charge to tax, capital allowances in respect of the trade under Part I of the 1968 Act or Chapter I of Part III of the Finance Act 1971, being allowances which— shall be added to the terminal loss sustained by him (or, if he has not sustained a terminal loss computed in accordance with the provisions of this section and section 388, shall be treated as a terminal loss so sustained), and the allowances to be taken into account for this purpose may include allowances arising before a previous discontinuance.
fall to be made to the claimant by way of discharge or repayment of tax, and
fall to be so made for the year of assessment in which the discontinuance occurs or the preceding year of assessment,
For the purposes of subsection (6) above—
there shall be taken into account such fraction only of the allowances for the preceding year of assessment referred to in that subsection as the part of that year beginning 12 months before the discontinuance giving rise to the claim is of a year; and
the allowances for any year shall not be treated as including any amounts carried forward from an earlier year.
Where a person occupying woodlands has elected to be charged to income tax in respect thereof under Schedule D, this section and section 388 shall apply to a terminal loss sustained by him in the occupation of the woodlands as they apply to a terminal loss sustained in a trade.
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a payment of interest eligible for relief under section 353 is money wholly and exclusively laid out or expended for the purposes of a trade, profession or vocation the profits of which are chargeable to tax under Case I or II of Schedule D, and
full effect cannot be given to such relief in respect of the payment by reason of a want or deficiency of income of the year of assessment in which the payment is made,
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Subject to the following provisions of this section, sections 380 to 386 and 388 and 389, so far as applicable, shall apply in relation to a loss incurred by any person in the carrying on of a trade, profession or vocation chargeable in accordance with section 65(3) as they apply to a loss incurred in a trade, profession or vocation chargeable to tax under Case I or II of Schedule D.
Relief shall not be given by virtue of subsection (1) above except on income falling within section 65(2) or (3), 192(2), (3) or (4) or 196.
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Where in any year of assessment a person sustains a loss in any transaction, whether he was engaged therein solely or in partnership, being a transaction of such a nature that, if any profits had arisen therefrom, he would have been liable to be assessed to income tax in respect thereof under Case VI of Schedule D, he may make a claim requiring—
that the amount of the loss sustained by him shall, as far as may be, be deducted from or set off against the amount of any profits or gains arising from any transaction in respect of which he is assessed for that year under that Case, and
that any portion of the loss for which relief is not so given shall, as far as may be, be carried forward and deducted from or set off against the amount of any profits or gains arising from any transaction in respect of which he is assessed to income tax under that Case for any subsequent year of assessment.
In the application of this section to a loss sustained by a partner in a partnership, “the amount of any profits or gains arising from any transaction in respect of which he is assessed” shall be taken to mean in respect of any year such portion of the amount on which the partnership is assessed under Case VI of Schedule D in respect of any transaction as falls to be taken into account in computing his total income for that year.
Any relief under this section by way of the carrying forward of the loss shall be given as far as possible from the first subsequent assessment in respect of any profits or gains arising from any transaction in respect of which he is assessed under Case VI of Schedule D for any year, and, so far as it cannot be so given, then from the next such assessment, and so on.
This section does not apply to any loss sustained in a transaction falling within section 34, 35 or 36.
So far as a claim under this section concerns the amount of the loss for any year of assessment, it must be made within six years after the year of assessment in question; but the question whether any and if so how much relief on that amount should be given under this section against tax for any year of assessment may be the subject of a separate claim made not later than six years after that year of assessment.
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Where in any accounting period a company carrying on a trade incurs a loss in the trade, the company may make a claim requiring that the loss be set off for the purposes of corporation tax against any trading income from the trade in succeeding accounting periods; and (so long as the company continues to carry on the trade) its trading income from the trade in any succeeding accounting period shall then be treated as reduced by the amount of the loss, or by so much of that amount as cannot, on that claim or on a claim (if made) under subsection (2) below, be relieved against income or profits of an earlier accounting period.
Subject to section 492(2), where in any accounting period ending after 5th April 1988 a company carrying on a trade incurs a loss in the trade, then (subject to subsection (5) below) the company may make a claim requiring that the loss be set off for the purposes of corporation tax against profits (of whatever description) of that accounting period and, if the company was then carrying on the trade and the claim so requires, of preceding accounting periods ending within the time specified in subsection (3) below; and, subject to that subsection and to any relief for an earlier loss, the profits of any of those periods shall then be treated as reduced by the amount of the loss, or by so much of that amount as cannot be relieved under this subsection against profits of a later accounting period.
The time referred to in subsection (2) above is a time equal in length to the accounting period in which the loss is incurred; but the amount of the reduction which may be made under that subsection in the profits of an accounting period falling partly before that time shall not exceed a part of those profits proportionate to the part of the period falling within that time.
Where a company incurs a loss in a trade in an accounting period for which one or more first-year allowances fall to be made to it under Chapter I of Part III of the Finance Act 1971 in respect of expenditure on the provision for the purposes of the trade of machinery or plant, subsections (2) and (3) above shall have effect in relation to so much of the loss as does not exceed the allowance or allowances which are so made as if the time specified in subsection (3) above were a period of three years ending immediately before the accounting period in which the loss is incurred.
Subsection (2) above shall not apply to trades falling within Case V of Schedule D; and, except in so far as it represents an excess in respect of expenditure incurred before the year 1960-61 of capital allowances over balancing charges, a loss incurred in a trade in any accounting period shall not be relieved under that subsection unless the trade is one carried on in the exercise of functions conferred by or under any enactment (including an enactment contained in a local or private Act), or it is shown that for that accounting period the trade was being carried on on a commercial basis and with a view to the realisation of gain in the trade or in any larger undertaking of which the trade formed part. This subsection has effect without prejudice to section 397.
For the purposes of subsection (5) above, the fact that a trade was being carried on at any time so as to afford a reasonable expectation of gain shall be conclusive evidence that it was then being carried on with a view to the realisation of gain; and where in an accounting period there is a change in the manner in which a trade is being carried on, it shall for those purposes be treated as having throughout the accounting period been carried on in the way in which it was being carried on by the end of that period.
The amount of a loss incurred in a trade in an accounting period shall be computed for the purposes of this section in the same way as trading income from the trade in that period would have been computed.
For the purposes of this section “trading income” means, in relation to any trade, the income which falls or would fall to be included in respect of the trade in the total profits of the company; but where— any interest or dividends on investments which would fall to be taken into account as trading receipts in computing that trading income but for the fact that they have been subjected to tax under other provisions shall be treated for the purposes of subsection (1) above as if they were trading income of the trade.
in an accounting period a company incurs a loss in a trade in respect of which it is within the charge to corporation tax under Case I or V of Schedule D, and
in any later accounting period to which the loss or any part of it is carried forward under subsection (1) above relief in respect thereof cannot be given, or cannot wholly be given, because the amount of the trading income of the trade is insufficient,
Where in an accounting period the charges on income paid by a company— then, up to the amount of that excess or of those payments, whichever is the less, the charges on income so paid shall in computing a loss for the purposes of subsection (1) above be deductible as if they were trading expenses of the trade.
exceed the amount of the profits against which they are deductible, and
include payments made wholly and exclusively for the purposes of a trade carried on by the company,
In this section references to a company carrying on a trade refer to the company carrying it on so as to be within the charge to corporation tax in respect of it.
A claim under subsection (1) above must be made within six years after the end of the accounting period in which the loss is incurred, and must be so made notwithstanding that relief cannot be given in respect of the loss until after the end of that period of six years; and a claim under subsection (2) above must be made within two years from the end of the accounting period in which the loss is incurred.
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Where a company ceasing to carry on a trade after 5th April 1988 has in any accounting period falling wholly or partly within the previous 12 months incurred a loss in the trade, the company may make a claim requiring that the loss be set off for the purposes of corporation tax against trading income from the trade in accounting periods falling wholly or partly within the three years preceding those 12 months (or within any less period throughout which the company has carried on the trade); and, subject to subsections (2) to (6) below and to any relief for earlier losses, the trading income of any of those periods shall be then treated as reduced by the amount of the loss, or by so much of that amount as cannot be relieved under this subsection against income of a later accounting period.
Relief under subsection (1) above shall not be given in respect of any loss in so far as the loss has been or can be otherwise taken into account so as to reduce or relieve any charge to tax.
Where a loss is incurred in an accounting period falling partly outside the 12 months mentioned in subsection (1) above, relief shall be given under that subsection in respect of a part only of that loss proportionate to the part of the period falling within those 12 months; and the amount of the reduction which may be made under that subsection in the trading income of an accounting period falling partly outside the three years there mentioned shall not exceed a part of that income proportionate to the part of the period falling within those three years.
A claim for relief under this section may require that capital allowances in respect of the trade, being allowances which fall to be made to the company by way of discharge or repayment of tax, and to be so made for an accounting period falling wholly or partly within the 12 months ending when the company ceases to carry on the trade, shall (so far as they cannot be otherwise taken into account so as to reduce or relieve any charge to corporation tax) be added to the loss incurred by the company in that accounting period or, if the company has not incurred a loss in the period, shall be treated as a loss so incurred. For the purposes of this subsection the allowances for any period shall not be treated as including amounts carried forward from an earlier period.
Subsections (7) to (10) of section 393 shall apply for the purposes of this section as they apply for the purposes of subsection (1) of that section; and relief shall not be given under this section in respect of a loss incurred in a trade so as to interfere with any relief under section 338 in respect of payments made wholly and exclusively for the purposes of that trade.
A claim under this section must be made within six years from the time when the company ceases to carry on the trade.
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Subject to the provisions of this section, if— then, in the accounting period specified in paragraph (c) above and in any subsequent accounting period, the first company shall not be entitled to claim relief as mentioned in paragraph (b) above except in computing its profits (if any) arising under the leasing contract.
under a contract entered into on or after 6th March 1973 a company (“the first company”) incurs capital expenditure on the provision of machinery or plant which the first company lets to another person by another contract (a (“leasing contract”); and
apart from this subsection, the first company would be entitled to claim relief under subsection (1) or (2) of section 393 in respect of losses incurred on the leasing contract; and
in the accounting period for which a first-year allowance, within the meaning of Chapter I of Part III of the Finance Act 1971, in respect of the expenditure referred to in paragraph (a) above is made to the first company, arrangements are in existence by virtue of which, at some time during or after the expiry of that accounting period, a successor company will be able to carry on any part of the first company’s trade which consists of or includes the performance of all or any of the obligations which, apart from the arrangements, would be the first company’s obligations under the leasing contract,
For the purposes of this section a company is a successor of the first company if the circumstances are such that—
section 343 applies in relation to the first company and the other company as the predecessor and the successor within the meaning of that section; or
the two companies are connected with each other within the terms of section 839.
For the purposes of this section losses incurred on a leasing contract and profits arising under such a contract shall be computed as if the performance of the leasing contract were a trade begun to be carried on by the first company, separately from any other trade which it may carry on, at the commencement of the letting under the leasing contract.
In determining whether the first company would be entitled to claim relief as mentioned in subsection (1)(b) above, any losses incurred on the leasing contract shall be treated as incurred in a trade carried on by that company separately from any other trade which it may carry on.
In this section “arrangements” means arrangements of any kind whether in writing or not.
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Subject to subsection (2) below, where in any accounting period a company incurs a loss in a transaction in respect of which the company is within the charge to corporation tax under Case VI of Schedule D, the company may make a claim requiring that the loss be set off against the amount of any income arising from transactions in respect of which the company is assessed to corporation tax under that Case for the same or any subsequent accounting period; and the company’s income in any accounting period from such transactions shall then be treated as reduced by the amount of the loss, or by so much of that amount as cannot be relieved under this section against income of an earlier accounting period.
This section shall not apply to a loss incurred in a transaction falling within section 34, 35 or 36.
A claim under this section must be made within six years after the end of the accounting period in which the loss is incurred and must be so made notwithstanding that relief cannot be given in respect of the loss until after the end of that period of six years.
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Any loss incurred in a trade of farming or market gardening shall be excluded from section 380 if in each of the prior five years a loss was incurred in carrying on that trade; and where a loss is so excluded any related capital allowance shall also be excluded from that section.
Any loss incurred in any accounting period by a company in carrying on a trade of farming or market gardening shall be excluded from section 393(2) if a loss, computed without regard to capital allowances, was incurred in carrying on that trade in that accounting period, and in each of the chargeable periods wholly or partly comprised in the prior five years.
Subsections (1) and (2) above shall not restrict relief for any loss or for any capital allowance, if it is shown by the claimant—
that the whole of the farming or market gardening activities in the year next following the prior five years are of such a nature, and carried on in such a way, as would have justified a reasonable expectation of the realisation of profits in the future if they had been undertaken by a competent farmer or market gardener, but
that, if that farmer or market gardener had undertaken those activities at the beginning of the prior period of loss, he could not reasonably have expected the activities to become profitable until after the end of the year next following the prior period of loss.
Subsections (1) and (2) above shall not restrict relief where the carrying on of the trade forms part of, and is ancillary to, a larger trading undertaking.
In this section—
For the purposes of this section, a capital allowance is related to a loss incurred in a trade if it falls to be made in taxing that trade and its basis year is the year of assessment in which the loss was incurred.
In ascertaining for the purposes of this section whether a loss was incurred in any part of the prior five years or earlier, the rules applicable to Case I of Schedule D shall be applied; and in this section “loss computed without regard to capital allowances” means, in relation to a chargeable period of a company, a loss so ascertained, but so that, notwithstanding section 73(2) of the 1968 Act, no account shall be taken of any allowance or charge under any of the Capital Allowances Acts.
Subsections (1) and (2) above shall not restrict relief for any loss or capital allowance if the trade was set up and commenced within the prior five years, and, for the purposes of this subsection, a trade shall be treated as discontinued, and a new trade set up, in any event which under any of the provisions of the Tax Acts is to be treated as equivalent to the permanent discontinuance or setting up of a trade.
For the purposes of subsection (8) above a trade shall not be treated as discontinued if, under section 343(2), it is not to be treated as discontinued for the purpose of capital allowances and charges.
Where at any time there has been a change in the persons engaged in carrying on a trade, this section shall, notwithstanding subsection (8) above, apply to any person who was engaged in carrying on the trade immediately before and immediately after the change as if the trade were the same before and after without any discontinuance, and as if— and accordingly relief from income tax or from corporation tax may be restricted under this section by reference to losses some of which are incurred in years of assessment and some, computed without regard to capital allowances, are incurred in a company’s chargeable periods. In this subsection “control” has the same meaning as in Part XI.
a husband and his wife were the same person, and
a husband or his wife were the same person as any company of which either the husband or the wife has control, or of which the two of them have control;
Where a company sustains a loss on the exercise or disposal of a right to receive any amount, being a right to which section 56(2) . . . applies, in a case where— then the amount of that interest shall be included in the amounts against which the amount of its loss may be set off under section 91 of CTA 2010.
if a profit had arisen from that exercise or disposal, that profit would have been chargeable to corporation tax by virtue of section 56(2) . . . , and
the company is chargeable to corporation tax under Part 5 of CTA 2009 (loan relationships) in respect of interest payable on that amount,
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If, apart from section 72(1) of the Finance Act 1985 or section 128 above, gains arising to any person in the course of dealing in commodity or financial futures or in qualifying options would constitute, for the purposes of the Tax Acts, profits or gains chargeable to tax under Schedule D otherwise than as the profits of a trade, then any loss arising in the course of that dealing shall not be allowable against profits or gains which are chargeable to tax under Schedule D.
Relief shall not be given to any person under section 380, 381 or 393(2) in respect of a loss sustained in a trade of dealing in commodity futures if—
the loss was sustained in a trade carried on in partnership and that person or one or more of the other partners was a company; and
a scheme has been effected or arrangements have been made (whether by the partnership agreement or otherwise) such that the sole or main benefit that might be expected to accrue to that person from his interest in the partnership was the obtaining of a reduction in tax liability by means of any such relief.
Where relief has been given in a case to which subsection (2) above applies it shall be withdrawn by the making of an assessment under Case VI of Schedule D.
Subsection (2) above does not apply where the scheme was effected or the arrangements were made wholly before 6th April 1976.
In this section “commodity futures”, “financial futures” and “qualifying options” have the same meanings as in section 72 of the Finance Act 1985, and the reference in subsection (1) to a loss arising in the course of dealing in commodity or financial futures includes any loss which is regarded as arising in the course of such dealing by virtue of subsection (2A) of that section.
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Where any amount of government investment in a body corporate is written-off on or after 6th April 1988, an amount equal to the amount written-off shall be set off against the body’s tax losses as at the end of the accounting period ending last before the write-off date and, to the extent to which that amount exceeds those losses, against the body’s tax losses as at the end of the next accounting period and so on.
For the purposes of subsection (1) above a body’s tax losses as at the end of an accounting period are—
any losses which under section 393(1) are or, if a claim had been made under that subsection, would be available for relief against its trading income for the next accounting period;
in the case of an investment company, any expenses of management or charges on income which under section 75(3) are available for carry forward to the next accounting period;
any allowances which under section 74(2) of the 1968 Act are available for carry forward to the next accounting period;
any amount paid by way of charges on income so far as it exceeds the company’s profit for the period and is not taken into account under 75(3) or 393(9); and
any allowable losses available under 345 so far as not allowed in that or a previous accounting period.
The set off to be made under subsection (1) above for any accounting period shall be made first against the amounts in paragraphs (a) to (d) of subsection (2) above and, so far as it cannot be so made, against the amount in paragraph (e) of that subsection.
For the purposes of subsection (1) above there shall be excluded from a body’s tax losses as at the end of the accounting period ending last before the write-off date any amounts in respect of which a claim has been made before the write-off date under section 393(2) or 402 of this Act or section 74(3) of the 1968 Act but the body’s tax losses as at the end of any subsequent accounting period shall be determined as if no such claim had been made on or after that date.
Any amount that could be set off under subsection (1) above against a body’s tax losses as at the end of an accounting period (or could be so set off if that body then had any such losses) may be set off against the tax losses of any other body corporate which at the end of that period is a member of the same group as the first-mentioned body, or partly against the tax losses of one member of that group and partly against those of the other or any of the others, as may be just and reasonable.
Expenditure shall not be treated for the purposes of section 84 of the 1968 Act or section 42 of the 1979 Act as met by the Crown by reason only of the writing-off of any government investment in the body in question and a sum shall not by reason only of any such writing-off be treated as not having been deductible in computing the profits or gains of that body for the purposes of Case I or II of Schedule D.
For the purposes of this section an amount of government investment in a body corporate is written-off— and the amount written-off and the write-off date are the amount in respect of which the liability is extinguished and the date on which it is extinguished, the amount subscribed for the shares that are cancelled and the date of cancellation or the amount of reduction in the commencing capital debt or public dividend capital and the date of the reduction, as the case may be.
if its liability to repay any money lent to it out of public funds by a Minister of the Crown is extinguished;
if any of its shares for which a Minister of the Crown has subscribed out of public funds are cancelled; or
if its commencing capital debt is reduced otherwise than by being paid off or its public dividend capital is reduced otherwise than by being repaid (including, in either case, a reduction to nil);
In subsection (7) above “commencing capital debt” means any debt to a Minister of the Crown assumed as such under an enactment and “public dividend capital” means any amount paid by a Minister of the Crown under an enactment in which that amount is so described or under an enactment corresponding to an enactment in which a payment made on similar terms to another body is so described.
This section shall not have effect in relation to any amount written-off if and to the extent to which it is replaced by money lent, or a payment made, out of public funds or by shares subscribed for, whether for money or money’s worth, by a Minister of the Crown.
In this section—
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Where a person incurs expenditure for the purposes of a trade, profession or vocation before the time when he begins to carry it on and the expenditure— the expenditure shall be treated for the purposes of corporation tax as incurred on the day on which the trade, profession or vocation is first carried on by him and for the purposes of relief under Chapter I of this Part as if it were the amount of a loss sustained by him in the trade, profession or vocation in the year of assessment in which it is set up and commenced.
is incurred not more than three years before that time; and
is not allowable as a deduction in computing his profits or gains from the trade, profession or vocation for the purposes of Case I or II of Schedule D but would have been so allowable if incurred after that time,
A claim for relief under the Income Tax Acts in respect of an amount treated as a loss by virtue of subsection (1) above shall be made separately from any claim for relief under those Acts in respect of any other loss.
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Subject to and in accordance with this Chapter and section 492(8), relief for trading losses and other amounts eligible for relief from corporation tax may, in the cases set out in subsections (2) and (3) below, be surrendered by a company (“the surrendering company”) and, on the making of a claim by another company (“the claimant company”) may be allowed to the claimant company by way of a relief from corporation tax called “group relief”.
Group relief shall be available in a case where the surrendering company and the claimant company are both members of the same group. A claim made by virtue of this subsection is referred to as a “group claim”.
Group relief shall also be available in the case of a surrendering company and a claimant company either where one of them is a member of a consortium and the other is— or, in accordance with section 406, where one of them is a member of a group of companies and the other is owned by a consortium and another company is a member of both the group and the consortium. A claim made by virtue of this subsection is referred to as “a consortium claim”.
a trading company which is owned by the consortium and which is not a 75 per cent. subsidiary of any company; or
a trading company—
which is a 90 per cent. subsidiary of a holding company which is owned by the consortium; and
which is not a 75 per cent. subsidiary of a company other than the holding company; or
a holding company which is owned by the consortium and which is not a 75 per cent. subsidiary of any company;
A consortium claim shall not be made if the share in the consortium of the member in the relevant accounting period of the surrendering company (or, where that company is a trading company falling within subsection (3)(b) above, its holding company) is nil or if a profit on a sale of the share capital of the other company or its holding company which the member owns would be treated as a trading receipt of that member.
Subject to the provisions of this Chapter, two or more claimant companies may make claims relating to the same surrendering company, and to the same accounting period of that surrendering company.
A payment for group relief— and in this subsection “a payment for group relief” means a payment made by the claimant company to the surrendering company in pursuance of an agreement between them as respects an amount surrendered by way of group relief, being a payment not exceeding that amount.
shall not be taken into account in computing profits or losses of either company for corporation tax purposes, and
shall not for any of the purposes of the Corporation Tax Acts be regarded as a distribution or a charge on income;
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Subject to the provisions of this Chapter, if in any accounting period the surrendering company has incurred a loss, computed as for the purposes of section 393(2), in carrying on a trade, the amount of the loss may be set off for the purposes of corporation tax against the total profits of the claimant company for its corresponding accounting period.
Subsection (1) above shall not apply to so much of a loss as is excluded from subsection (2) of section 393 by subsection (5) of that section or by section 397.
Subject to the provisions of this Chapter, if for any accounting period any capital allowances fall to be made to the surrendering company which— so much of the amount of those allowances (exclusive of any carried forward from an earlier period) as exceeds its income of the relevant class arising in that accounting period (before deduction of any losses of any other period or of any capital allowances) may be set off for purposes of corporation tax against the total profits of the claimant company for its corresponding accounting period.
are to be given by discharge or repayment of tax, and
are to be available primarily against a specified class of income,
Subject to the provisions of this Chapter, if for any accounting period the surrendering company (being an investment company) may under subsection (1) of section 75 deduct as expenses of management any amount disbursed for that accounting period, so much of that amount (exclusive of any amount deductible only by virtue of subsection (3) of that section) as exceeds the company’s profits of that accounting period may be set off for purposes of corporation tax against the total profits of the claimant company (whether an investment company or not) for its corresponding accounting period.
The surrendering company’s profits of the period shall be determined for the purposes of subsection (4) above without any deduction under section 75 and without regard to any deduction falling to be made in respect of losses or allowances of any other period.
References in subsections (4) and (5) above to section 75 do not include references to that section as applied by section 76 to companies carrying on life assurance business.
Subject to the provisions of this Chapter and section 494(4), if in any accounting period the surrendering company has paid any amount by way of charges on income, so much of that amount as exceeds its profits of the period may be set off for the purposes of corporation tax against the total profits of the claimant company for its corresponding accounting period.
The surrendering company’s profits of the period shall be determined for the purposes of subsection (7) above without regard to any deduction falling to be made in respect of losses or allowances of any other period, or to expenses of management deductible only by virtue of section 75(3).
In applying any of the preceding subsections in the case of a consortium claim— and that fraction shall be equal to that member’s share in the consortium in the accounting period referred to in section 402(4), subject to any further reduction under section 408(2) and subject also to sections 405(4) and 406(2) and (6).
where the claimant company is a member of a consortium, only a fraction of the loss referred to in subsection (1) above, or of the excess referred to in subsection (3), (4) or (7) above, as the case may be, may be set off under the subsection in question;
where the surrendering company is a member of a consortium that loss or excess shall not be set off under the subsection in question against more than a fraction of the total profits of the claimant company;
Where a company owned by a consortium— the amount of that loss which is available to any member of the consortium on a consortium claim shall be determined on the assumption that the company owned by the consortium has made a claim under section 393(2) requiring the loss to be so set off.
has in any relevant accounting period incurred such a loss as is referred to in subsection (1) above, and
has profits (of whatever description) of that accounting period against which that loss could be set off under section 393(2),
Where the company referred to in subsection (10) above is a group/consortium company, the amount of the loss shall be determined under that subsection before any reduction is made under section 405(1) to (3).
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Notwithstanding any other provision of this Chapter, no loss or other amount shall be available for set off by way of group relief in accordance with section 403 if, in the material accounting period of the company which would otherwise be the surrendering company, that company is for the purposes of this section a dual resident investing company.
In this section “the material accounting period” means, according to the kind of group relief which would be appropriate, the accounting period— but subsection (1) above does not have effect unless the material accounting period begins on or after 1st April 1987.
in which the loss is incurred; or
for which the capital allowances fall to be made; or
for which the expenses of management are disbursed; or
for which the amount is paid by way of charges on income;
In Schedule 17—
Part I has effect where an accounting period of a company in which it is a dual resident investing company begins before and ends on or after 1st April 1987 and references in subsections (1) and (2) above to the material accounting period shall be construed accordingly; and
Part II has effect with respect to the time at which certain interest and other payments are to be treated as paid.
A company is for the purposes of this section a dual resident company in any accounting period in which—
it is resident in the United Kingdom; and
it is also within a charge to tax under the laws of a territory outside the United Kingdom—
because it derives its status as a company from those laws; or
because its place of management is in that territory; or
because under those laws it is for any other reason regarded as resident in that territory for the purposes of that charge.
In any accounting period throughout which it is not a trading company, a dual resident company is for the purposes of this section an investing company.
In any accounting period of a dual resident company in which it is a trading company, the company is nevertheless for the purposes of this section an investing company if—
in that period it carries on a trade of such a description that its main function or one of its main functions consists of all or any of the following, namely—
acquiring and holding, directly or indirectly, shares, securities or investments of any other description, including interests in companies (resident outside, as well as in, the United Kingdom) with which the dual resident company is connected, within the terms of section 839;
making payments which, by virtue of any enactment, are charges on income for the purposes of corporation tax;
making payments (of interest or other sums) which are similar to those referred to in sub-paragraph (ii) above but which are deductible in computing the profits of the company for the purposes of corporation tax;
obtaining funds (by borrowing or in any other manner whatsoever) for the purpose of, or otherwise in connection with, any of the activities referred to in sub-paragraphs (i) to (iii) above; or
it does not fall within paragraph (a) above, but in that accounting period it carries on all or any of the activities referred to in sub-paragraphs (i) to (iv) of that paragraph and does so—
to an extent which does not appear to be justified by any trade which it does carry on; or
for a purpose which does not appear to be appropriate to any such trade; or
in that period—
the amount paid by the company by way of charges on income exceeds its profits of the period, determined as mentioned in section 403(8); and
those charges include an amount which falls to be treated as a charge on income by virtue of section 78(2) or paragraph 5(2) of Schedule 4; and
the paying of those charges by the company is its main activity or one of its main activities.
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For the purposes of a consortium claim in respect of the loss or other amount of any relevant accounting period of a group/consortium company, that loss or other amount shall be treated as reduced (or, as the case may be, extinguished) by first deducting therefrom the potential relief attributable to group claims.
Subject to subsection (3) below, in relation to the loss or other amount of a relevant accounting period of a group/consortium company, the potential relief attributable to group claims is the aggregate amount of group relief that would be claimed if every company which, as a member of the same group of companies as the group/consortium company, could make a group claim in respect of that loss or other amount made such a claim for an amount which, when set against the claimant company’s total profits for its corresponding accounting period, would equal those profits.
Where for any accounting period another member of the group of companies of which the group/consortium company is a member has a loss or other amount available for relief and one or more group claims is or are in fact made in respect of that loss or other amount, account shall be taken of the relief so claimed before determining (in relation to the loss or other amount of the group/consortium company) the potential relief attributable to group claims under subsection (2) above.
In any case where— the total profits of the corresponding accounting period of the group/consortium company against a fraction of which that loss or other amount may be set off (in accordance with section 403(9)(b)) shall be treated as reduced (or as the case may be extinguished) by deducting therefrom the potential relief available to the group/consortium company by way of group claims.
a consortium claim is made by a group/consortium company in respect of a loss or other amount of an accounting period of a member of the consortium, and
the corresponding accounting period of the group/consortium company is a relevant accounting period,
Subject to subsection (6) below, in relation to a relevant accounting period of a group/consortium company, the potential relief available to the company by way of group claims is the maximum amount of group relief that could be claimed by the company for that accounting period on group claims relating to the losses or other amounts available for relief of other members of the group of companies of which the group/consortium company is a member.
Where another member of the group of companies of which the group/consortium company is a member in fact makes one or more group claims in respect of losses or other amounts of other members of the group, account shall be taken of the relief already claimed by that company in determining the potential relief available to the group/consortium company by way of group claims under subsection (5) above.
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In this section—
“link company” means a company which is a member of a consortium and is also a member of a group of companies; and
“consortium company”, in relation to a link company, means a company owned by the consortium of which the link company is a member; and
“group member”, in relation to a link company, means a company which is a member of the group of which the link company is also a member but is not itself a member of the consortium of which the link company is a member.
Subject to subsections (3) and (4) below, where the link company could (disregarding any deficiency of profits) make a consortium claim in respect of the loss or other amount eligible for relief of a relevant accounting period of a consortium company, a group member may make any consortium claim which could be made by the link company; and the fraction which is appropriate under section 403(9) where a group member is the claimant company shall be the same as that which would be appropriate if the link company were the claimant company.
A group member may not, by virtue of subsection (2) above, make a consortium claim in respect of the loss or other amount of any accounting period of a consortium company unless the claimant company was a member of the group concerned throughout the whole of the accounting period or, as the case may be, each accounting period of the link company which, if that company were making the claim, would be a corresponding accounting period in relation to that accounting period of the consortium company.
The maximum amount of relief which, in the aggregate, may be claimed by group members and the link company by consortium claims relating to the loss or other amount of a relevant accounting period of a consortium company shall not exceed the relief which could have been claimed by the link company (disregarding any deficiency of profits) if subsections (2) and (3) above had not been enacted.
Subject to subsections (6) to (8) below, where a group member has for a relevant accounting period a loss or other amount available for relief, a consortium company may make any claim in respect of that loss or other amount which it could make if the group member were a member of the consortium at all times when the link company was such a member, but not at any other time.
The fraction which is appropriate under section 403(9) in relation to a consortium claim made by virtue of subsection (5) above shall be the same as that which would be appropriate if the link company were the surrendering company, except that the accounting period in respect of which the member’s share in the consortium is to be ascertained shall be that of the group member which is in fact the surrendering company.
A consortium company may not, by virtue of subsection (5) above, make a consortium claim in respect of the loss or other amount of any accounting period of a group member unless the group member was a member of the group in question throughout the whole of that accounting period.
For any accounting period of a consortium company (“the claimant company’s accounting period”) the maximum amount of relief which, in the aggregate, may be claimed by that company by consortium claims relating to the losses or other amounts of accounting periods of the link company and group members shall not exceed that fraction of the total profits of the claimant company’s accounting period which would be brought into account under section 403(9)(b) on a consortium claim in respect of which—
the link company was the surrendering company; and
the link company’s accounting period was the same as the claimant company’s accounting period.
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Group relief for an accounting period shall be allowed as a deduction against the claimant company’s total profits for the period—
before reduction by any relief derived from a subsequent accounting period, but
as reduced by any other relief from tax (including relief in respect of charges on income under section 338(1)) determined on the assumption that the company makes all relevant claims under section 393(2) of this Act and section 74(3) of the 1968 Act (set-off of capital allowances against total profits).
For the purposes of this section “relief derived from a subsequent accounting period” means—
relief under section 393(2) or 394 in respect of a loss incurred in an accounting period after the accounting period the profits of which are being computed; and
relief under section 74(3) of the 1968 Act in respect of capital allowances falling to be made for an accounting period after the accounting period the profits of which are being computed.
The reductions to be made in total profits of an accounting period against which any relief derived from a subsequent accounting period is to be set off shall include any group relief for that first-mentioned accounting period.
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For the purposes of group relief an accounting period of the claimant company which falls wholly or partly within an accounting period of the surrendering company corresponds to that accounting period.
If an accounting period of the surrendering company and a corresponding accounting period of the claimant company do not coincide—
the amount which may be set off against the total profits of the claimant company for the corresponding accounting period shall be reduced by applying the fraction— (if that fraction is less than unity); and
the total profits of the claimant company for the corresponding accounting period shall be reduced by applying the fraction— where— A is the length of the period common to the two accounting periods; B is the length of the accounting period of the surrendering company; C is the length of the corresponding accounting period of the claimant company.
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Subject to the following provisions of this section, group relief shall be given if, and only if, the surrendering company and the claimant company are members of the same group, or fulfil the conditions for relief for a consortium, throughout the whole of the surrendering company’s accounting period to which the claim relates, and throughout the whole of the corresponding accounting period of the claimant company.
Where on any occasion two companies become or cease to be members of the same group, then, for the purposes specified in subsection (3) below, it shall be assumed as respects each company that— and an apportionment under this subsection shall be on a time basis according to the respective lengths of the component accounting periods except that, if it appears that that method would work unreasonably or unjustly, such other method shall be used as appears just and reasonable.
on that occasion (unless a true accounting period of the company begins or ends then) an accounting period of the company ends and a new one begins, the new accounting period to end with the end of the true accounting period (unless before then there is a further break under this subsection); and
the losses or other amounts of the true accounting period are apportioned to the component accounting periods; and
the amount of total profits for the true accounting period of the company against which group relief may be allowed in accordance with section 407(1) is also apportioned to the component accounting periods;
Where the one company is the surrendering company and the other company is the claimant company—
references in section 403 to accounting periods, to profits, and to losses, allowances, expenses of management or charges on income of the surrendering company shall be construed in accordance with subsection (2) above;
references in subsection (1) above and section 408 to accounting periods shall be so construed (so that if the two companies are members of the same group in the surrendering company’s accounting period, they must under that section also be members of the same group in any corresponding accounting period of the claimant company);
references in section 408 to profits, and amounts to be set off against the profits, shall be so construed (so that an amount apportioned under subsection (2) above to a component accounting period may fall to be reduced under subsection (2) of that section).
Subsections (2) and (3) above shall apply with the necessary modifications where a company begins or ceases to fulfil the conditions for relief for a consortium, either as a surrendering company or as a claimant company, as it applies where two companies become or cease to be members of the same group except that, in a case where— the basis of apportionment which is adopted under subsection (2) above in relation to the losses or other amounts or, as the case may be, the total profits of the true accounting period of the company owned by the consortium shall be the same on each of the claims.
the surrendering company is owned by a consortium and two or more members of the consortium claim relief in respect of losses or other amounts of the surrendering company, or
the claimant company is owned by a consortium and claims relief in respect of losses or other amounts of two or more members of the consortium,
In subsection (6) below—
In any case where— no relief shall be allowed on the primary claim, or, as the case may be, any relief which was so allowed shall be withdrawn.
the company making the primary claim or, if that claim is made by virtue of section 406(2), the company which is the link company for the purposes of that subsection was not a member of the consortium throughout the whole of the principal accounting period; and
on or after the date on which the primary claim is made, a consortium claim is made which— and the accounting period to which the claim relates falls, in whole or in part, within the principal accounting period; and
is in respect of the loss or other amount of an accounting period of a surrendering company (being a company owned by the consortium referred to in paragraph (a) above, other than the principal surrendering company); and
is made by the company making the primary claim or, in a case where it or the primary claim is made by virtue of section 406(2), is made by any member of the group in question other than the company making the primary claim;
at any time during the principal accounting period the surrendering company is a member of the same group of companies as the principal surrendering company;
In any case where— no relief shall be allowed on the principal claim or, as the case may be, any relief which was so allowed shall be withdrawn.
a company (“the principal claimant company”) owned by a consortium makes a consortium claim (“the principal claim”) in respect of the loss or other amount of an accounting period of a member of the consortium or, if the principal claim is made by virtue of section 406(5), of a company which, in relation to that member of the consortium, is a group member, within the meaning of that section; and
the member of the consortium concerned (whether as the surrendering company or the link company, within the meaning of section 406) was not a member of the consortium throughout the whole of that accounting period; and
on or after the date on which the principal claim is made, a consortium claim is made— and that accounting period falls, in whole or in part, in the accounting period referred to in paragraph (a) above;
by a company, other than the principal claimant company, which is owned by the consortium and which is a member of the same group of companies as the principal claimant company; and
which relates to the loss or other amount of an accounting period of the consortium member referred to in paragraph (b) above or of a company which in relation to that consortium member is a group member, within the meaning of section 406;
Where any relief which has been allowed is withdrawn by virtue of subsection (6) or (7) above, all such adjustments shall be made, whether by way of assessment or otherwise, as may be necessary in consequence of that withdrawal.
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If, apart from this section, two companies (“the first company” and (“the second company”) would be treated as members of the same group of companies and—
in an accounting period one of the two companies has trading losses or other amounts eligible for relief from corporation tax which it would, apart from this section, be entitled to surrender by way of group relief; and
arrangements are in existence by virtue of which, at some time during or after the expiry of that accounting period— then, for the purposes of this Chapter, the first company shall be treated as not being a member of the same group of companies as the second company.
the first company or any successor of it could cease to be a member of the same group of companies as the second company and could become a member of the same group of companies as a third company; or
any person has or could obtain, or any persons together have or could obtain, control of the first company but not of the second; or
a third company could begin to carry on the whole or any part of a trade which, at any time in that accounting period, is carried on by the first company and could do so either as a successor of the first company or as a successor of another company which is not a third company but which, at some time during or after the expiry of that accounting period, has begun to carry on the whole or any part of that trade;
If a trading company is owned by a consortium or is a 90 per cent. subsidiary of a holding company which is owned by a consortium and—
in any accounting period the trading company or a member of the consortium has trading losses or other amounts eligible for relief from corporation tax which it would, apart from this section, be entitled to surrender by way of group relief; and
arrangements are in existence by virtue of which— then, for the purposes of this Chapter, the trading company shall be treated as though it did not (as the surrendering company or the claimant company) fall within section 402(3).
the trading company or any successor of it could, at some time during or after the expiry of that accounting period, become a 75 per cent. subsidiary of a third company; or
any person who owns, or any persons who together own, less than 50 per cent. of the ordinary share capital of the trading company has or together have, or could at some time during or after the expiry of that accounting period obtain, control of the trading company; or
any person, other than a holding company of which the trading company is a 90 per cent. subsidiary, either alone or together with connected persons, holds or could obtain, or controls or could control the exercise of not less than 75 per cent. of the votes which may be cast on a poll taken at a general meeting of that trading company in that accounting period or in any subsequent accounting period; or
a third company could begin to carry on, at some time during or after the expiry of that accounting period, the whole or any part of a trade which, at any time in that accounting period, is carried on by the trading company and could do so either as a successor of the trading company or as a successor of another company which is not a third company but which, at some time during or after the expiry of that accounting period, has begun to carry on the whole or any part of that trade;
In any case where a trading company is a 90 per cent. subsidiary of a holding company which is owned by a consortium, any reference in subsection (2) above to the trading company, other than a reference in paragraph (b)(iv), shall be construed as including a reference to the holding company.
In this section “third company” means a company which, apart from any provision made by or under any such arrangements as are specified in paragraph (b) of either subsection (1) or subsection (2) above, is not a member of the same group of companies as the first company or, as the case may be, the trading company or the holding company to which subsection (2) above applies.
In subsections (1) and (2) above—
For the purposes of subsections (1) and (2) above a company is the successor of another if it carries on a trade which, in whole or in part, the other company has ceased to carry on and the circumstances are such that—
section 343 applies in relation to the two companies as the predecessor and the successor within the meaning of that section; or
the two companies are connected with each other within the meaning of section 839.
Where by virtue of any enactment a Minister of the Crown or Northern Ireland department has power to give directions to a statutory body as to the disposal of assets belonging to, or to a subsidiary of, that body, the existence of that power shall not be regarded as constituting or as having at any time constituted an arrangement within the meaning of this section.
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Relief shall not be given more than once in respect of the same amount, whether by giving group relief and by giving some other relief (in any accounting period) to the surrendering company, or by giving group relief more than once.
In accordance with subsection (1) above, two or more claimant companies cannot, in respect of any one loss or other amount for which group relief may be given, and whatever their accounting periods corresponding to that of the surrendering company, obtain in all more relief than could be obtained by a single claimant company whose corresponding accounting period coincided with the accounting period of the surrendering company.
Subject to subsections (4) and (5) below, if claims for group relief relating to the same accounting period of the same surrendering company are made by two or more claimant companies which themselves are members of a group of companies, and— those claimant companies shall not obtain in all more relief than could be obtained by a single claimant company which was not a member of the same group as the surrendering company during that part of the surrendering company’s accounting period (but was a member during the remainder of that accounting period).
all the claims so made are admissible only by virtue of subsection (2) and (3) of section 409, and
there is a part of the surrendering company’s accounting period during which none of those claimant companies is a member of the same group as the surrendering company,
If companies which are members of different groups make claims falling within subsection (3) above, that subsection shall apply separately in relation to the companies in each group.
For the purposes of subsection (3) above, there shall be left out of account a claim made by a company if—
the claimant company joins or leaves a group of companies at the same time as the surrendering company; and
both before and after that time either the claimant company is a 75 per cent. subsidiary of the surrendering company or the surrendering company is a 75 per cent. subsidiary of the claimant company or both companies are 75 per cent. subsidiaries of another company.
Subject to subsection (7) below, if claims as respects two or more surrendering companies which themselves are members of a group of companies are made by a claimant company for group relief to be set off against its total profits for any one accounting period, and— the claimant company shall not obtain in all more relief to be set off against its profits for the accounting period than it could obtain on a claim as respects a single surrendering company (with unlimited losses and other amounts eligible for relief) which was not a member of the same group as the claimant company during that part of the claimant company’s accounting period (but was a member during the remainder of that accounting period).
all the claims so made are admissible only by virtue of subsections (2) and (3) of section 409, and
there is a part of the claimant company’s accounting period during which none of the surrendering companies by reference to which the claims are made is a member of the same group as the claimant company,
If claims falling within subsection (6) above are made as respects surrendering companies which are members of different groups, that subsection shall apply separately in relation to claims as respects the surrendering companies in each group.
For the purposes of subsection (6) above there shall be left out of account a claim made as respects a surrendering company if—
the surrendering company joins or leaves the group of companies concerned at the same time as the claimant company; and
both before and after that time either the surrendering company is a 75 per cent. subsidiary of the claimant company or the claimant company is a 75 per cent. subsidiary of the surrendering company or both companies are 75 per cent. subsidiaries of another company.
References in subsections (3) to (6) above to claims for group relief do not include references to consortium claims.
Without prejudice to the provisions of section 87(3) of the 1968 Act, any reference in Part I of that Act to an allowance made includes a reference to an allowance which would be made but for the granting of group relief, or but for that and but for an insufficiency of profits or other income against which to make it.
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A claim for group relief—
need not be for the full amount available,
shall require the consent of the surrendering company notified to the inspector in such form as the Board may require,
must be made within two years from the end of the surrendering company’s accounting period to which the claim relates.
A consortium claim shall require the consent of each member of the consortium, notified to the inspector in such form as the Board may require, in addition to the consent of the surrendering company.
If the inspector discovers that any group relief which has been given is or has become excessive he may make an assessment to corporation tax under Case VI of Schedule D in the amount which ought in his opinion to be charged.
Subsection (3) above is without prejudice to the making of an assessment under section 29(3)(c) of the Management Act and to the making of all such adjustments by way of discharge or repayment of tax or otherwise as may be required where a claimant company has obtained too much relief, or a surrendering company has forgone relief in respect of a corresponding amount.
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The following provisions of this section have effect for the interpretation of this Chapter.
In this Chapter—
For the purposes of this Chapter—
two companies shall be deemed to be members of a group of companies if one is the 75 per cent. subsidiary of the other or both are 75 per cent. subsidiaries of a third company;
“holding company” means a company the business of which consists wholly or mainly in the holding of shares or securities of companies which are its 90 per cent. subsidiaries and which are trading companies; and
“trading company” means a company the business of which consists wholly or mainly in the carrying on of a trade or trades.
In applying for the purposes of this Chapter the definition of “75 per cent. subsidiary” in section 838, any share capital of a registered industrial and provident society shall be treated as ordinary share capital.
References in this Chapter to a company apply only to bodies corporate resident in the United Kingdom; and in determining for the purposes of this Chapter whether one company is a 75 per cent. subsidiary of another, the other company shall be treated as not being the owner—
of any share capital which it owns directly in a body corporate if a profit on a sale of the shares would be treated as a trading receipt of its trade; or
of any share capital which it owns indirectly, and which is owned directly by a body corporate for which a profit on a sale of the shares would be a trading receipt; or
of any share capital which it owns directly or indirectly in a body corporate not resident in the United Kingdom.
References to a company being owned by a consortium shall be construed in accordance with paragraph (a) below except for the purposes of the definition of “group/consortium company” in subsection (2) above and of sections 403(10), 406(1)(b) and 409(5), (6) and (7), and for those purposes shall be construed in accordance with paragraph (b) below—
a company is owned by a consortium if three-quarters or more of the ordinary share capital of the company is beneficially owned between them by companies of which none beneficially owns less than one-twentieth of that capital;
a company is owned by a consortium if— and the companies which so own three-quarters or more of that ordinary share capital are in this Chapter called the members of the consortium.
it is either such a trading company as is referred to in paragraph (a) or (b) of subsection (3) of section 402 or such a holding company as is referred to in paragraph (c) of that subsection, and
three-quarters or more of the ordinary share capital of the company or, in the case of a company within section 402(3)(b), of its holding company is beneficially owned between them by companies of which none beneficially owns less than one-twentieth of that capital;
Notwithstanding that at any time a company (“the subsidiary company”) is a 75 per cent. subsidiary or a 90 per cent. subsidiary of another company (“the parent company”) it shall not be treated at that time as such a subsidiary for the purposes of this Chapter unless, additionally at that time—
the parent company is beneficially entitled to not less than 75 per cent. or, as the case may be, 90 per cent. of any profits available for distribution to equity holders of the subsidiary company; and
the parent company would be beneficially entitled to not less than 75 per cent. or, as the case may be, 90 per cent. of any assets of the subsidiary company available for distribution to its equity holders on a winding-up.
Subject to subsection (9) below, for the purposes of this Chapter, a member’s share in a consortium, in relation to an accounting period of the surrendering company, shall be whichever is the lowest in that period of the following percentages, namely— and if any of those percentages have fluctuated in that accounting period, the average percentage over the period shall be taken for the purposes of this subsection.
the percentage of the ordinary share capital of the surrendering or claimant company which is beneficially owned by that member;
the percentage to which that member is beneficially entitled of any profits available for distribution to equity holders of the surrendering or claimant company; and
the percentage to which that member would be beneficially entitled of any assets of the surrendering or claimant company available for distribution to its equity holders on a winding-up;
In any case where the surrendering or claimant company is a subsidiary of a holding company which is owned by a consortium, for references in subsection (8) above to the surrendering or claimant company there shall be substituted references to the holding company.
Schedule 18 shall have effect for supplementing this section.
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For the purposes of the Tax Acts, a “close company” is one which is under the control of five or fewer participators, or of participators who are directors, except that the expression does not apply—
to a company not resident in the United Kingdom;
to a registered industrial and provident society within the meaning of section 486(12) or to a building society;
to a company controlled by or on behalf of the Crown, and not otherwise a close company; or
to a company falling within section 415 or subsection (5) below.
Subject to section 415 and subsection (5) below, a company resident in the United Kingdom (but not falling within subsection (1)(b) above) is also a close company if— more than half of any amount falling to be apportioned under section 423 in the case of the company (including any sum which has been apportioned to it, or could on either of those assumptions be apportioned to it, under that section) could be apportioned among five or fewer participators, or among participators who are directors.
on the assumption that it is so, or
on the assumption that it and any other such company or companies are so,
In ascertaining under subsection (2) above whether any amount could be apportioned among five or fewer participators or among participators who are directors, account shall, in cases where an original apportionment and any sub-apportionment are involved, be taken only of persons among whom that amount could finally be apportioned as the result of the whole process of original apportionment and sub-apportionment and those persons shall be treated as participators or directors if they are participators or directors of any company in the case of which either an original apportionment or any sub-apportionment could be made.
For the purposes of this section—
a company is to be treated as controlled by or on behalf of the Crown if, but only if, it is under the control of the Crown or of persons acting on behalf of the Crown, independently of any other person, and
where a company is so controlled, it shall not be treated as being otherwise a close company unless it can be treated as a close company as being under the control of persons acting independently of the Crown.
A company is not to be treated as a close company—
if—
it is controlled by a company which is not a close company, or by two or more companies none of which is a close company; and
it cannot be treated as a close company except by taking as one of the five or fewer participators requisite for its being so treated a company which is not a close company;
if it cannot be treated as a close company except by virtue of paragraph (c) of section 416(2) and it would not be a close company if the reference in that paragraph to participators did not include loan creditors who are companies other than close companies.
References in subsection (5) above to a close company shall be treated as applying to any company which, if resident in the United Kingdom, would be a close company.
If shares in any company (“the first company”) are held on trust for an exempt approved scheme as defined in section 592, then, unless the scheme is established wholly or mainly for the benefit of persons who are, or are dependants of, directors or employees or past directors or employees of— the persons holding the shares shall, for the purposes of subsection (5) above, be deemed to be the beneficial owners of the shares and, in that capacity, to be a company which is not a close company.
the first company; or
an associated company of the first company; or
a company which is under the control of any director or associate of a director of the first company or of two or more persons each of whom is such a director or associate; or
a close company;
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Subject to the following provisions of this section, a company is not to be treated as being at any time a close company if—
shares in the company carrying not less than 35 per cent. of the voting power in the company (and not being shares entitled to a fixed rate of dividend, whether with or without a further right to participate in profits) have been allotted unconditionally to, or acquired unconditionally by, and are at that time beneficially held by, the public, and
any such shares have within the preceding 12 months been the subject of dealings on a recognised stock exchange, and the shares have within those 12 months been quoted in the official list of a recognised stock exchange.
Subsection (1) above shall not apply to a company at any time when the total percentage of the voting power in the company possessed by all of the company’s principal members exceeds 85 per cent.
For the purposes of subsection (1) above shares in a company shall be deemed to be beneficially held by the public if, and only if, they— and a corresponding construction shall be given to the reference to shares which have been allotted unconditionally to, or acquired unconditionally by, the public.
fall within subsection (4) below, and
are not within the exceptions in subsection (5) below,
Shares shall fall within this subsection (as being beneficially held by the public)—
if beneficially held by a company resident in the United Kingdom which is not a close company, or by a company not so resident which would not be a close company if it were so resident, or
if held on trust for an exempt approved scheme as defined in section 592, or
if they are not comprised in a principal member’s holding.
Shares shall not be deemed to be held by the public if they are held—
by any director or associate of a director of the company, or
by any company which is under the control of any such director or associate, or of two or more persons each of whom is such a director or associate, or
by any associated company of the company, or
as part of any fund the capital or income of which is applicable or applied wholly or mainly for the benefit of, or of the dependants of, the employees or directors, or past employees or directors, of the company, or of any company within paragraph (b) or (c) above. References in this subsection to shares held by any person include references to any shares the rights or powers attached to which could, for the purposes of section 416, be attributed to that person under subsection (5) of that section.
For the purposes of this section—
a person is a principal member of a company if he possesses a percentage of the voting power in the company of more than 5 per cent. and, where there are more than five such persons, if he is one of the five persons who possess the greatest percentages or if, because two or more persons possess equal percentages of the voting power in the company, there are no such five persons, he is one of the six or more persons (so as to include those two or more who possess equal percentages) who possess the greatest percentages, and
a principal member’s holding consists of the shares which carry the voting power possessed by him.
In arriving at the voting power which a person possesses, there shall be attributed to him any voting power which, for the purposes of section 416, would be attributed to him under subsection (5) or (6) of that section.
In this section “shares” include stock.
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For the purposes of this Part, except paragraphs 2 and 9(1)(a), (2)(a) and (3)(a) of Schedule 19, a company is to be treated as another’s “associated company” at a given time if, at that time or at any other time within one year previously, one of the two has control of the other, or both are under the control of the same person or persons.
For the purposes of this Part, a person shall be taken to have control of a company if he exercises, or is able to exercise or is entitled to acquire, direct or indirect control over the company’s affairs, and in particular, but without prejudice to the generality of the preceding words, if he possesses or is entitled to acquire—
the greater part of the share capital or issued share capital of the company or of the voting power in the company; or
such part of the issued share capital of the company as would, if the whole of the income of the company were in fact distributed among the participators (without regard to any rights which he or any other person has as a loan creditor), entitle him to receive the greater part of the amount so distributed; or
such rights as would, in the event of the winding-up of the company or in any other circumstances, entitle him to receive the greater part of the assets of the company which would then be available for distribution among the participators.
Where two or more persons together satisfy any of the conditions of subsection (2) above, they shall be taken to have control of the company.
For the purposes of subsection (2) above a person shall be treated as entitled to acquire anything which he is entitled to acquire at a future date, or will at a future date be entitled to acquire.
For the purposes of subsections (2) and (3) above, there shall be attributed to any person any rights or powers of a nominee for him, that is to say, any rights or powers which another person possesses on his behalf or may be required to exercise on his direction or behalf.
For the purposes of subsections (2) and (3) above, there may also be attributed to any person all the rights and powers of any company of which he has, or he and associates of his have, control or any two or more such companies, or of any associate of his or of any two or more associates of his, including those attributed to a company or associate under subsection (5) above, but not those attributed to an associate under this subsection; and such attributions shall be made under this subsection as will result in the company being treated as under the control of five or fewer participators if it can be so treated.
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For the purposes of this Part, a “participator” is, in relation to any company, a person having a share or interest in the capital or income of the company, and, without prejudice to the generality of the preceding words, includes—
any person who possesses, or is entitled to acquire, share capital or voting rights in the company;
any loan creditor of the company;
any person who possesses, or is entitled to acquire, a right to receive or participate in distributions of the company (construing “distributions” without regard to section 418) or any amounts payable by the company (in cash or in kind) to loan creditors by way of premium on redemption; and
any person who is entitled to secure that income or assets (whether present or future) of the company will be applied directly or indirectly for his benefit. In this subsection references to being entitled to do anything apply where a person is presently entitled to do it at a future date, or will at a future date be entitled to do it.
The provisions of subsection (1) above are without prejudice to any particular provision of this Part requiring a participator in one company to be treated as being also a participator in another company.
For the purposes of this Part “associate” means, in relation to a participator—
any relative or partner of the participator;
the trustee or trustees of any settlement in relation to which the participator is, or any relative of his (living or dead) is or was, a settlor (“settlement” and “settlor” having here the same meaning as in section 681(4)); and
where the participator is interested in any shares or obligations of the company which are subject to any trust, or are part of the estate of a deceased person— and has a corresponding meaning in relation to a person other than a participator.
the trustee or trustees of the settlement concerned or, as the case may be, the personal representatives of the deceased; and
if the participator is a company, any other company interested in those shares or obligations;
In subsection (3) above “relative” means husband or wife, parent or remoter forebear, child or remoter issue, or brother or sister.
For the purposes of this Part “director” includes any person occupying the position of director by whatever name called, any person in accordance with whose directions or instructions the directors are accustomed to act, and any person who—
is a manager of the company or otherwise concerned in the management of the company’s trade or business, and
is, either on his own or with one or more associates, the beneficial owner of, or able, directly or through the medium of other companies or by any other indirect means, to control 20 per cent. or over of the ordinary share capital of the company.
In subsection (5)(b) above the expression “either on his own or with one or more associates” requires a person to be treated as owning or, as the case may be, controlling what any associate owns or controls, even if he does not own or control share capital on his own.
Subject to subsection (9) below, for the purposes of this Part “loan creditor”, in relation to a company, means a creditor in respect of any debt incurred by the company— or in respect of any redeemable loan capital issued by the company.
for any money borrowed or capital assets acquired by the company; or
for any right to receive income created in favour of the company; or
for consideration the value of which to the company was (at the time when the debt was incurred) substantially less than the amount of the debt (including any premium thereon);
Subject to subsection (9) below, a person who is not the creditor in respect of any debt or loan capital to which subsection (7) above applies but nevertheless has a beneficial interest therein shall, to the extent of that interest, be treated for the purposes of this Part as a loan creditor in respect of that debt or loan capital.
A person carrying on a business of banking shall not be deemed to be a loan creditor in respect of any loan capital or debt issued or incurred by the company for money lent by him to the company in the ordinary course of that business.
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Subject to such exceptions as are mentioned in section 209(1), in the Corporation Tax Acts “distribution”, in relation to a close company, includes, unless otherwise stated, any such amount as is required to be treated as a distribution by subsection (2) below.
Subject to subsection (3) below, where a close company incurs expense in or in connection with the provision for any participator of living or other accommodation, of entertainment, of domestic or other services, or of other benefits or facilities of whatever nature, the company shall be treated as making a distribution to him of an amount equal to so much of that expense as is not made good to the company by the participator.
Subsection (2) above shall not apply to expense incurred in or in connection with the provision—
for a person employed in director’s or higher-paid employment (within the meaning of section 167) of such benefits as are mentioned in any of sections 154 to 165; or
of living accommodation for any person if the accommodation is (within the meaning of section 145) provided by reason of his employment; or
for the spouse, children or dependants of a person employed by the company of any pension, annuity, lump sum, gratuity or other like benefit to be given on that person’s death or retirement.
The amount of the expense to be taken into account under subsection (2) above as a distribution shall be the same as would under Chapter II of Part V be the cash equivalent of the resultant benefit to the participator.
Subsection (2) above shall not apply if the company and the participator are both resident in the United Kingdom and—
one is a subsidiary of the other or both are subsidiaries of a third company also so resident, and
the benefit to the participator arises on or in connection with a transfer of assets or liabilities by the company to him, or to the company by him.
The question whether one body corporate is a subsidiary of another for the purposes of subsection (5) above shall be determined as a question whether it is a 51 per cent. subsidiary of that other, except that that other shall be treated as not being the owner—
of any share capital which it owns directly in a body corporate if a profit on a sale of the shares would be treated as a trading receipt of its trade; or
of any share capital which it owns indirectly, and which is owned directly by a body corporate for which a profit on a sale of the shares would be a trading receipt; or
of any share capital which it owns directly or indirectly in a body corporate not resident in the United Kingdom.
Where each of two or more close companies makes a payment to a person who is not a participator in that company, but is a participator in another of those companies, and the companies are acting in concert or under arrangements made by any person, then each of those companies and any participator in it shall be treated as if the payment made to him had been made by that company. This subsection shall apply, with any necessary adaptations, in relation to the giving of any consideration, and to the provision of any facilities, as it applies in relation to the making of a payment.
For the purposes of this section any reference to a participator includes an associate of a participator, and any participator in a company which controls another company shall be treated as being also a participator in that other company.
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Subject to the following provisions of this section and section 420, where a close company, otherwise than in the ordinary course of a business carried on by it which includes the lending of money, makes any loan or advances any money to an individual who is a participator in the company or an associate of a participator, there shall be assessed on and recoverable from the company, as if it were an amount of corporation tax chargeable on the company for the accounting period in which the loan or advance is made, an amount equal to such proportion of the amount of the loan or advance as corresponds to the rate of advance corporation tax in force for the financial year in which the loan or advance is made. In relation to a loan or advance made in an accounting period ending after the day, not being earlier than 31st March 1992, appointed by order by the Treasury for the purpose of this provision, this subsection shall have effect with the substitution for “assessed on and recoverable” of “due”.
For the purposes of this section the cases in which a close company is to be regarded as making a loan to any person include a case where— and then the close company shall be regarded as making a loan of an amount equal to the debt.
that person incurs a debt to the close company; or
a debt due from that person to a third party is assigned to the close company;
Tax shall be assessable by virtue of this section whether or not the whole or any part of the loan or advance in question has been repaid at the time of the assessment; and tax assessed by virtue of this section shall, subject to any appeal against the assessment, be due within 14 days after the issue of the notice of assessment. The preceding provisions of this subsection shall not apply in relation to a loan or advance made in an accounting period ending after the day, not being earlier than 31st March 1992, appointed by order by the Treasury for the purpose of this provision, but in relation to any such loan or advance tax due by virtue of this section shall be due and payable within 14 days after the end of the accounting period in which the loan or advance was made.
Where a close company has made a loan or advance which gave rise to a charge to tax on the company under subsection (1) above and the loan or advance or any part of it is repaid to the company, relief shall be given from that tax, or a proportionate part of it, by discharge or repayment. Relief under this subsection shall be given on a claim, which must be made within six years from the end of the financial year in which the repayment is made.
Where, under arrangements made by any person otherwise than in the ordinary course of a business carried on by him— then, unless in respect of the matter referred to in paragraph (b) above there falls to be included in the total income of the participator or associate an amount not less than the loan or advance, this section shall apply as if the loan or advance had been made to him.
a close company makes a loan or advance which, apart from this subsection, does not give rise to any charge on the company under subsection (1) above, and
some person other than the close company makes a payment or transfers property to, or releases or satisfies (in whole or in part) a liability of, an individual who is a participator in the company or an associate of a participator,
In subsections (1) and (5)(b) above the references to an individual shall apply also to a company receiving the loan or advance in a fiduciary or representative capacity, and to a company not resident in the United Kingdom.
For the purposes of this section any participator in a company which controls another company shall be treated as being also a participator in that other company.
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Section 419(2)(a) shall not apply to a debt incurred for the supply by the close company of goods or services in the ordinary course of its trade or business unless the credit given exceeds six months or is longer than that normally given to the company’s customers.
Section 419(1) shall not apply to a loan made to a director or employee of a close company, or of an associated company of the close company, if— but if the borrower acquires such a material interest at a time when the whole or part of any such loan made after 30th March 1971 remains outstanding the close company shall be regarded as making to him at that time a loan of an amount equal to the sum outstanding. Section 168(11) shall apply for the purpose of determining whether a person has, for the purpose of this subsection, a material interest in a company, but with the omission of the words following “417(3)”.
neither the amount of the loan, nor that amount when taken together with any other outstanding loans which— exceeds £15,000 and the outstanding loans falling within sub-paragraph (ii) above do not together exceed £10,000; and
were made by the close company or any of its associated companies to the borrower or the wife or husband of the borrower; and
if made before 31st March 1971, were made for the purpose of purchasing a dwelling which was or was to be the borrower’s only or main residence;
the borrower works full-time for the close company or any of its associated companies; and
the borrower does not have a material interest in the close company or in any associated company of the close company;
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Subject to the following provisions of this section, where a company is assessed or liable to be assessed under section 419 in respect of a loan or advance and releases or writes off the whole or part of the debt in respect of it, then—
for the purpose of computing the total income of the person to whom the loan or advance was made, a sum equal to the amount so released or written off shall be treated as income received by him after deduction of income tax from a corresponding gross amount;
no repayment of income tax shall be made in respect of that income and no assessment shall be made on him in respect of income tax at the basic rate on that income;
the income included by virtue of paragraph (a) above in his total income shall, notwithstanding that paragraph, be treated for the purposes of sections 348 and 349(1) as not brought into charge to income tax;
for the purpose of determining whether any or what amount of tax is, by virtue of paragraph (a) above, to be taken into account as having been deducted from a gross amount in the case of an individual whose total income is reduced by any deductions so much only of that gross amount shall be taken into account as is part of his total income as so reduced.
If the loan or advance referred to in subsection (1) above was made to a person who has since died, or to trustees of a trust which has come to an end, this section, instead of applying to the person to whom it was made, shall apply to the person from whom the debt is due at the time of release or writing off (and if it is due from him as personal representative, within the meaning of Part XVI, the amount treated as received by him shall accordingly be included for the purposes of that Part in the aggregate income of the estate) and subsection (1) above shall apply accordingly with the necessary modifications.
This section shall not have effect in relation to a loan or advance made to a person if any sum falls in respect of the loan or advance to be included in his income by virtue of section 677, except so far as the amount released or written off exceeds the sums previously falling to be so included (without the addition for income tax provided for by subsection (6) of that section).
This section shall be construed as one with section 419.
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Subject to subsection (4) below, where a company which is controlled by a close company makes a loan which, apart from this section, does not give rise to a charge under subsection (1) of section 419, that section and section 420 shall apply as if the loan had been made by the close company.
Subject to subsection (4) below, where a company which is not controlled by a close company makes a loan which, apart from this section, does not give rise to a charge under subsection (1) of section 419 and a close company subsequently acquires control of it, that section and section 420 shall apply as if the loan had been made by the close company immediately after the time when it acquired control.
Where two or more close companies together control the company that makes or has made the loan, subsections (1) and (2) above shall have effect— but the loan shall be apportioned between those close companies in such proportion as may be appropriate having regard to the nature and amount of their respective interests in the company that makes or has made the loan.
as if each of them controlled that company; and
as if the loan had been made by each of those close companies,
Subsections (1) and (2) above do not apply if it is shown that no person has made any arrangements (otherwise than in the ordinary course of a business carried on by him) as a result of which there is a connection— and the close company shall be regarded as providing funds for the company making the loan if it directly or indirectly makes any payment or transfers any property to, or releases or satisfies (in whole or in part) a liability of, the company making the loan.
between the making of the loan and the acquisition of control; or
between the making of the loan and the provision by the close company of funds for the company making the loan;
Where, by virtue of this section, sections 419 and 420 have effect as if a loan made by one company had been made by another, any question under those sections or section 421 whether— shall be determined by reference to the company that makes the loan.
the company making the loan did so otherwise than in the ordinary course of a business carried on by it which includes the lending of money;
the loan or any part of it has been repaid to the company;
the company has released or written off the whole or part of the debt in respect of the loan,
This section shall be construed as one with section 419 and section 420 and in this section—
“loan” includes advance; and
references to a company making a loan include references to cases in which the company is, or if it were a close company would be, regarded as making a loan by virtue of section 419(2).
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Subject to section 424, there shall, for the purposes of this Chapter, be apportioned by the inspector among the participators in a close company—
the income of the company for any accounting period; and
as if it were the income of the company for an accounting period, any amount—
which was deducted in respect of annual payments made by the company in arriving at its distributable income for that period, and
which in the case of an individual would not have been deductible or would (apart from section 683(3)) have been treated as his income in computing his total income; and
as if it were the income of the company for an accounting period, any interest paid by the company in that period.
Any amount apportionable under any paragraph of subsection (1) above shall be in addition to the amount (if any) which may be apportioned under any other provision of that subsection.
Any amount apportioned to a close company under this section, or by one or more sub-apportionments under this subsection, shall be further apportioned among the participators in that company.
If any amount of interest apportionable by virtue of paragraph (c) of subsection (1) above is interest paid to a participator in the close company or is (apart from that paragraph) treated for the purposes of income tax as the income of such a participator, the amount so apportionable to that participator shall be reduced by the first-mentioned amount (and without requiring the reduction to be reflected in the amount apportioned to any other person).
In determining for the purposes of this Chapter the person to whom any amount is to be apportionable by virtue of subsection (1)(c) above, any interest which any person possesses as a loan creditor shall be disregarded (but without prejudice to the making of an apportionment to him in any other capacity).
Subject to paragraph 10 of Schedule 19, this section shall, notwithstanding the winding up of a company, or the passing of any resolution or the making of any order or anything else done for the purpose of winding up a company, continue to apply as if the company were not being wound up.
Schedule 19, which makes provision for determining the relevant income and distributions of a company for an accounting period and whether there is any such excess as is mentioned in section 424(1), shall have effect for the purpose of supplementing this Chapter.
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Subject to the following provisions of this Chapter, an apportionment shall not be made under subsection (1)(a) of section 423 of any relevant income of a company unless— and the amount apportioned shall be the amount of that excess.
its relevant income for the accounting period exceeds its distributions for that period; and
if the company is a trading company or a member of a trading group by virtue of paragraph 7(2)(a) of Schedule 19, that excess is more than £1,000;
Subject to paragraphs 10(5) and 11(2) of Schedule 19, there may be apportioned under section 423(1)(a), if the inspector sees reason for it, the whole of the relevant income for an accounting period of a close company which is not a trading company whether or not there is any such excess as is mentioned in subsection (1) above.
Subsection (1)(b) of section 423 does not apply to annual payments which consist of interest or are made wholly and exclusively for the purposes of the company’s trade.
Subsection (1)(c) of section 423 does not apply to a company—
if it is a trading company, or
if it is a member of a trading group, or
if more than 75 per cent. of its income is of one or more of the following descriptions, that is— and for the purposes of paragraph (c) above no account shall be taken of any deduction from the company’s profits for charges on income, expenses of management or other amounts which can be deducted from or set off against or treated as reducing profits of more than one description.
estate or trading income;
interest, and dividends or other distributions, received from a 51 per cent. subsidiary of it (both companies being bodies corporate) if the subsidiary is itself within paragraph (a) or (b) above or this paragraph;
In determining for the purposes of subsection (4)(c)(ii) above whether one body corporate is a 51 per cent. subsidiary of another, that other shall be treated as not being the owner—
of any share capital which it owns directly or indirectly in a body corporate not resident in the United Kingdom, or
of any share capital which it owns indirectly and which is owned directly by a body corporate for which a profit on the sale of the shares would be a trading receipt.
Subsection (1)(c) of section 423 shall not apply to interest which—
would be eligible for relief under section 353 if paid by an individual; or
is money wholly and exclusively laid out or expended for the purposes of a trade carried on by the company.
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Subject to the provisions of this section, any apportionment under section 423, including any sub-apportionment of an amount directly or indirectly apportioned to a company, shall be made according to the respective interests in the company in question of the participators.
In determining for the purposes of this section the respective interests of the participators, the inspector may, if it seems proper to him to do so, attribute to each participator an interest corresponding to his interest in the assets of the company available for distribution among the participators in the event of a winding up or in any other circumstances.
Where income of a company which is not a trading company is apportioned under section 423, the inspector may, if it seems proper to him to do so, treat a loan creditor as having an interest for the purposes of this section to the extent to which the income to be apportioned, or assets representing it, has or have been expended or applied, or is or are available to be expended or applied, in redemption, repayment or discharge of the loan capital or debt (including any premium thereon) in respect of which he is a loan creditor.
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Where a sum has been apportioned under section 423 to an individual (whether by an original apportionment or a sub-apportionment), income tax shall be assessed and charged in respect of that sum in accordance with the following provisions of this section and sections 427 and 428.
Where a sum has been so apportioned to an individual—
it shall be treated for the purpose of computing his total income as income received by him at the end of the accounting period to which the apportionment relates and, subject to section 833(3), shall be deemed to be the highest part of his total income;
no assessment shall be made on the individual in respect of income tax at the basic rate on that sum (nor, in the case mentioned in section 427(1), in respect of income tax at any other rate) but he shall be treated as having paid income tax at the basic rate on that sum or, if his total income is reduced by any deductions, on so much of that sum as is part of his total income as so reduced;
no repayment shall be made of the income tax treated by virtue of paragraph (b) above as having been paid; and
the sum so apportioned shall be treated for the purposes of sections 348 and 349(1) as not brought into charge to income tax.
Where a sum is so apportioned to the personal representatives of a deceased person it shall be treated, in ascertaining the aggregate income of the estate for the purposes of Part XVI, as having been received as mentioned in paragraph (a) of subsection (2) above, and paragraphs (b) to (d) of that subsection shall apply accordingly with the necessary modifications.
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No individual shall be assessed to income tax by virtue of any apportionment unless the sum or, where there is a sub-apportionment, the aggregate sum on which he is so assessable amounts at least to— whichever is the less.
£1,000; or
5 per cent. of the amount apportioned;
Where an apportionment is made by virtue of section 424(2), an individual shall not be charged to tax on a sum treated in consequence of the apportionment or any sub-apportionment as being his income except in so far as it exceeds the amount which, apart from the apportionment, falls in respect of distributions made by the company for the accounting period to be included in his total income.
Where as a result of a company or companies making covenanted payments to charity a sum or sums are apportioned by virtue of section 423(1)(b) and form part of the total income of an individual for any year of assessment, then, except in so far as any such sum is referable to a payment which, if made by the individual, would be treated by virtue of section 683(1) as the income of the individual for the purposes of excess liability, his total income for that year and the total amount assessable for that year in respect of that sum or those sums shall be reduced by the amount of that sum or those sums. In this subsection “covenanted payments to charity” has the same meaning as in section 683.
In this section “excess liability” means the excess of liability to income tax over what it would be if all income tax were chargeable at the basic rate to the exclusion of any higher rate.
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For the purposes of sections 426 and 427— shall respectively be taken to consist of the aggregate of that sum or amount and such proportion of it as corresponds to the appropriate rate of advance corporation tax; but paragraphs (a) and (b) above shall not apply in the case of any apportionment so far as made by virtue of section 423(1)(b) or (c).
the sum apportioned to any person;
the amount mentioned in section 427(1)(b); and
the amount to be excluded from a person’s income in accordance with section 427(4),
For the purposes of paragraphs (a) and (b) of subsection (1) above, the appropriate rate of advance corporation tax is the rate applicable to a distribution made at the end of the accounting period to which the apportionment relates, and for the purposes of paragraph (c) of that subsection the appropriate rate of advance corporation tax is the rate applicable to the distribution mentioned in section 427(4)(a).
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Any income tax chargeable under section 426 in respect of a sum apportioned to a participator shall be assessed on the participator and, subject to the provisions of this section, all the provisions of the Income Tax Acts relating to assessment and the collection and recovery of tax shall with any necessary modifications apply to tax chargeable under that section.
If the whole or any part of the tax assessed on the participator is not paid within 30 days from the date on which the assessment became final and conclusive or by 1st December in the year next following the year of assessment, whichever is the later, a notice of liability to tax under this section may be served on the company and the tax or the part remaining unpaid, as the case may be, shall be payable by the company upon service of the notice.
Where a notice of liability is served under subsection (2) above, any interest due on the tax assessed on the participator and not paid by him, and any interest accruing due on that tax after the date of service, shall be payable by the company.
Where a notice of liability is served on the company and the relevant tax and any interest payable by the company under subsection (3) above is not paid by the company before the expiry of three months from the date of service, that tax and interest may, without prejudice to the right of recovery from the company, be recovered from the participator.
Where, in consequence of a sub-apportionment, subsections (1) to (4) above apply in relation to a participator in a company other than the company in relation to which the original apportionment was made, references in those subsections to the company shall be taken as references to the company in relation to which the original apportionment was made.
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This section has effect where the income of a company is apportioned under section 423(1)(a); and in this section “the apportioned amount” means the aggregate of the amount of that income which is so apportioned (subject to subsection (2) below) and such proportion of the amount as corresponds to the rate of advance corporation tax applicable to a distribution made at the end of the accounting period to which the apportionment relates (“the relevant period”).
Where a company issues to a close company any share capital to which section 249 applies, the amount of the company’s income apportioned under section 423(1)(a) shall, for the purposes of the definition of “apportioned amount” in subsection (1) above, be treated as reduced by an amount equal to the appropriate amount in cash (within the meaning of section 251(2)).
If in the relevant period the company has a surplus of franked investment income, the surplus (so far as not already reduced in consequence of a claim under section 242 or 243 or of being used to frank distributions made by the company in a subsequent accounting period) shall be treated for all purposes as reduced by a sum equal to the apportioned amount or, if that is greater, as extinguished.
If in the relevant period the company has no such surplus (so far as not already reduced as mentioned in subsection (3) above) or the apportioned amount exceeds that surplus (so far as not already so reduced), subsections (5) to (7) below shall have effect in relation to a sum equal to the advance corporation tax comprised in a franked payment made at the end of the relevant period of an amount equal to the apportioned amount or to that excess, as the case may be.
If, apart from this section, surplus advance corporation tax of a later accounting period could by virtue of subsection (3) of section 239 be set against the company’s liability to corporation tax for the relevant period, that advance corporation tax shall not be so set except to such extent, if any, as would be possible if the sum mentioned in subsection (4) above had been advance corporation tax available to be so set against that liability for the relevant period and had, so far as permitted by that section, already been set against that liability.
If the sum mentioned in subsection (4) above exceeds the amount that could, if it were advance corporation tax available for the purpose, be set as mentioned in subsection (5) above against the company’s liability for the relevant period—
there shall be deducted from the excess an amount equal to the advance corporation tax, if any, that could by virtue of subsection (3) of section 239 be set against the company’s liability to corporation tax for earlier accounting periods after taking into account advance corporation tax so set in consequence of a claim already made under that subsection; and
if no such claim has already been made, advance corporation tax shall not by virtue of any such claim be set against the company’s liability to corporation tax for any such earlier accounting periods except to such extent, if any, as would be possible if an amount equal to any deduction under paragraph (a) above had been advance corporation tax available to be so set and had, so far as permitted by section 239, already been set against that liability.
Any excess of the sum mentioned in subsection (4) above remaining after the deduction mentioned in subsection (6)(a) above—
shall be assessed on and recoverable from the company as if it were advance corporation tax payable by the company in respect of a distribution made by it at the end of the relevant period; and
shall carry interest as if it were advance corporation tax so payable; and
shall be treated as surplus advance corporation tax of the relevant period falling to be dealt with in accordance with section 239(4).
Tax assessed by virtue of subsection (7)(a) above shall, subject to any appeal against the assessment, be due within 14 days after the issue of the notice of assessment.
Subsection (7)(c) above shall not be construed as authorising any sum to be carried forward to a later accounting period in any case in which section 245 would prevent the carry-forward of advance corporation tax.
Section 238 shall apply for the interpretation of this section as it applies for the interpretation of Chapter V of Part VI.
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This section has effect for the interpretation of this Chapter.
Unless the context otherwise requires—
Subject to section 439, any division to be made between general annuity business, pension business and other life assurance business shall be made on the principle of— and references to “pension fund” and “general annuity fund” shall be construed accordingly, whether or not any such funds are kept separate from the insurance company’s life assurance fund.
referring to pension business any premiums falling within subsection (4) below, together with the incomings, outgoings and liabilities referable to those premiums and the policies and contracts under which they are or have been paid;
allocating to general annuity business all other annuity business;
The premiums to be referred to pension business are those payable under contracts falling within one or other of the following descriptions, that is to say—
any contract with an individual who is, or would but for an insufficiency of profits or gains be, chargeable to income tax in respect of relevant earnings (as defined in section 623(1) and (2)) from a trade, profession, vocation, office or employment carried on or held by him (being a contract approved by the Board under section 620), or any substituted contract within the meaning of section 622(3);
any contract (including a contract of insurance) entered into for the purposes of, and made with the persons having the management of, an exempt approved scheme as defined in Chapter I of Part XIV, being a contract so framed that the liabilities undertaken by the insurance company under the contract correspond with liabilities against which the contract is intended to secure the scheme;
any contract made under approved personal pension arrangements within the meaning of Chapter IV of Part XIV;
any annuity contract entered into for the purposes of— being a contract which is approved by the Board and made with the persons having the management of the scheme or fund (or those persons and a member of or contributor to the scheme or fund) and by means of which relevant benefits as defined by section 612(1) (but no other benefits) are secured;
a scheme which is approved or is being considered for approval under Chapter I of Part XIV;
a statutory scheme as defined by section 612(1); or
a fund to which section 608 applies,
any annuity contract approved by the Board which is entered into in substitution for a contract within paragraph (d) above;
any contract with the trustees or other persons having the management of a scheme approved under section 620 or, subject to subsection (5) below, of a superannuation fund which was approved under section 208 of the 1970 Act, being a contract which—
was entered into for the purposes only of that scheme or fund or, in the case of a fund part only of which was approved under section 208, for the purposes only of that part of that fund, and
(in the case of a contract entered into or varied after 1st August 1956) is so framed that the liabilities undertaken by the insurance company under the contract correspond with liabilities against which the contract is intended to secure the scheme or fund (or the relevant part of the fund).
Subsection (4)(c) above shall not apply to premiums payable under a contract where the fund in question was approved under section 208 of the 1970 Act unless—
immediately before 6th April 1980 premiums paid under the contract with the trustees or other persons having the management of the fund fell within section 323(4) of that Act (premiums referable to pension business); and
the terms on which benefits are payable from the fund have not been altered since that time; and
section 608 applies to the fund.
In subsections (3) to (5) above “premium” includes any consideration for an annuity.
Where an insurance company carries on life assurance business in conjunction with insurance business of any other category, the life assurance business shall, for the purposes of the Corporation Tax Acts, be treated as a separate business from any other category of business carried on by the company.
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Section 208 shall not prevent franked investment income of a company resident in the United Kingdom which carries on life assurance business from being taken into account as part of the profits in computing trading income in accordance with the provisions applicable to Case I of Schedule D.
In ascertaining for the purposes of section 393 or 394 whether and to what extent a company has incurred a loss on its life assurance business, any profits derived from the investments of its life assurance fund (including franked investment income of a company so resident) shall be treated as part of the profits of that business.
Any such part of the franked investment income from investments held in connection with a company’s life assurance business as is specified in subsection (4) below (“the specified part”) shall not be used under Chapter V of Part VI to frank distributions made by the company.
Subject to subsection (5) below, the specified part shall be, in the case of any unrelieved income, the same fraction of it as the fraction which, on a computation of the profits of the company in respect of its life assurance business in accordance with the provisions applicable to Case I of Schedule D (whether or not the company is in fact charged to tax under that Case for the relevant accounting period or periods), would be connoted by the words in section 433 “such part of those profits as belongs or is allocated to, or is reserved for, or expended on behalf of, policy holders or annuitants”.
If the income exceeds the profits as computed in accordance with the provisions applicable to Case I of Schedule D other than section 433, the specified part shall be that fraction of the income so far as not exceeding the profits, together with the amount of the excess.
For the purposes of section 239 the profits charged to corporation tax for any accounting period (as defined in subsection (6) of that section) shall be reduced by deducting therefrom such fraction thereof as is equal to the fraction of the profits of the company in respect of its life assurance business which under section 433 is excluded from the computation of those profits or would be so excluded if the profits were computed in accordance with the provisions applicable to Case I of Schedule D.
For the purposes of subsection (4) above “unrelieved income” means income which has not been excluded from charge to tax by virtue of any provision and against which no relief has been allowed by deduction or set-off.
Where subsection (3) or (6) above would deny to a company any relief to which it would have been entitled if it had been charged to tax in respect of its life assurance business under Case I of Schedule D, corresponding relief shall be afforded to the company by repayment of, or set-off against, corporation tax or by payment of tax credit comprised in franked investment income from investments held in connection with that business.
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This section has effect in relation to any accounting period of an insurance company carrying on life assurance business and for the purposes of this section—
the life assurance gains are such part of the amount to be included, in accordance with section 345, in the company’s total profits as is attributable to gains from investments held in connection with the company’s life assurance business;
the policy holders' share of the life assurance gains or of the relevant reliefs is such fraction thereof as is equal to the fraction of the profits of the company in respect of its life assurance business which, under section 433, is excluded from the computation of those profits or would be so excluded if the profits were computed in accordance with the provisions applicable to Case I of Schedule D; and
the relevant reliefs are such of the sums to be deducted from or set off against the company’s profits as are deducted from or set off against the life assurance gains.
Corporation tax charged on so much of the policy holders' share of the life assurance gains as remains after setting against it the amounts referred to in subsection (3)(c) below shall be calculated on the basis of a rate of corporation tax of 30 per cent.
For the purposes of this section there shall be ascertained the policy holders' share and the remainder (“the residual part”) of the life assurance gains and of the relevant reliefs; and—
the residual part of the relevant reliefs shall be set against the residual part of those gains; and
if the residual part of the relevant reliefs exceeds the residual part of those gains, the excess (or so much of it as does not, together with the policy holders' share of the relevant reliefs, exceed the policy holders' share of those gains) shall be added to the policy holders' share of the relevant reliefs; and
the policy holders' share of the relevant reliefs, with any addition made under paragraph (b) above, shall be set against the policy holders' share of the life assurance gains.
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Subject to the provisions of this section, profits arising to an insurance company from general annuity business or pension business shall be treated as income within Schedule D, and be chargeable under Case VI of that Schedule, and for that purpose—
the business of each such class shall be treated separately, and
subject to paragraph (a) above, and to subsection (3) below, the profits therefrom shall be computed in accordance with the provisions of this Act applicable to Case I of Schedule D.
Subsection (1) above shall not apply to an insurance company charged to corporation tax in accordance with the provisions applicable to Case I of Schedule D in respect of the profits of its ordinary life assurance business.
In making the computation referred to in subsection (1) above—
section 433 shall apply with the necessary modifications and in particular with the omission of all references to policy holders (other than holders of policies referable to pension business);
no deduction shall be allowed in respect of any expenses of management deductible under section 76;
there may be set off against the profits any loss, to be computed on the same basis as the profits, which has arisen from pension business or general annuity business in any previous accounting period or year of assessment;
where the computation in question is of profits arising to an insurance company from pension business— and the company shall not be entitled to treat as paid out of profits or gains brought into charge to income tax any part of the annuities paid by the company which is referable to pension business; and
group income shall not be taken into account as part of those profits, and
annuities shall be deductible notwithstanding section 337(2);
distributions which are not qualifying distributions shall not be taken into account where the computation in question is of the profits arising to an insurance company or overseas life insurance company from general annuity business or pension business.
Section 396 shall not be taken to apply to a loss incurred by a company on its general annuity business or pension business.
Nothing in section 128 or 399(1) shall affect the operation of this section.
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In the case of a company carrying on general annuity business, the annuities paid by the company, so far as referable to that business and so far as they do not exceed the taxed income of the part of the annuity fund so referable, shall be treated as charges on income.
In computing under section 436 the profits arising to an insurance company from general annuity business—
taxed income, group income and income attributable to offshore income gains shall not be taken into account as part of those profits; and
of the annuities paid by the company and referable to general annuity business—
those which under subsection (1) above are treated as charges on income shall not be deductible, and
those which are not so treated shall (notwithstanding section 337(2)) be deductible.
In subsections (1) and (2) above “taxed income” means income charged to corporation tax otherwise than under section 436, and franked investment income.
Subject to subsection (5) below, franked investment income which is taken into account under subsection (2) above to enable annuities referable to general annuity business to be treated as charges on income shall not be used under Chapter V of Part VI to frank distributions made by the company.
For the purposes of subsection (4) above there shall be deducted from the amount of the franked investment income of the company arising in any accounting period and taken into account under subsection (1) above—
the amount of any profit arising in that accounting period to the company from general annuity business and computed under section 436; and
the amount of any group income arising in that accounting period to the company and referable to its general annuity business.
A company which is not resident in the United Kingdom but carries on through a branch or agency there any general annuity business shall not be entitled to treat any part of the annuities paid by it which are referable to that business as paid out of profits or gains brought into charge to income tax.
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Exemption from corporation tax shall be allowed in respect of income from, and chargeable gains in respect of, investments and deposits of so much of an insurance company’s life assurance fund and separate annuity fund, if any, as is referable to pension business.
The exemption from tax conferred by subsection (1) above shall not exclude any sums from being taken into account as receipts in computing profits or losses for any purpose of the Corporation Tax Acts.
Subject to subsection (6) below, the exclusion by section 208 from the charge to corporation tax of franked investment income shall not prevent such income being taken into account as part of the profits in computing under section 436 income from pension business.
If in the case of any company the income referred to in subsection (1) above includes a distribution in respect of which the company is entitled to a tax credit, the company may, subject to subsections (5) and (6) below, claim to have the amount of that credit paid to it.
If the company is resident in the United Kingdom (so that the distribution and the tax credit in question constitute franked investment income of that company), no franked investment income comprising any tax credit which is paid under subsection (4) above shall, subject to subsection (6) below, be used under Chapter V of Part VI to frank the company’s distributions.
If for any accounting period there is, apart from this subsection, a profit arising to an insurance company from pension business and computed under section 436, and the company so elects as respects all or any part of its franked investment income arising in that period, being an amount of franked investment income not exceeding the amount of that profit, subsections (3) to (5) above shall not apply to the franked investment income to which the election relates.
An election under subsection (6) above shall be made by notice given to the inspector not later than two years after the end of the accounting period to which the election relates or within such longer period as the Board may by notice allow.
Nothing in sections 431(4)(c) or 643(2) of this Act or section 149B(1)(h) of the 1979 Act shall be construed as affording relief in respect of any sums to be brought into account under this section.
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This section applies where for any accounting period — and where this section applies section 431(3) shall have effect subject to the provisions of this section.
any division falls to be made between the pension business and any other kind of long-term business of an insurance company, and
any of the income or gains or losses of the company for that period relate to restricted government securities;
All income, gains or losses of the company which relate to restricted government securities shall be referred to its pension business.
Where the division of the other income, gains or losses of the company is made by reference to the liabilities at any time in the accounting period which are referable to pension business or to two or more kinds of business including pension business, those liabilities shall be treated as reduced by the appropriate amount.
In subsection (3) above “the appropriate amount” means—
in a case in which the total liabilities of the company at the time in question which are referable to long-term business are less than the market value at that time of the investments and deposits held by the company relating to all such business, such proportion of the market value of the restricted government securities held by the company at that time as those liabilities bear to the market value of those investments and deposits, and
in any other case, the market value of the restricted government securities at that time.
In this section—
Subject to subsection (7) below, the following Treasury Stock, namely— are not restricted government securities for the purposes of this section.
2 per cent. Index-linked Treasury Stock 1996;
2 per cent. Index-linked Treasury Stock 2006;
2½ per cent. Index-linked Treasury Stock 2011;
If any of the index-linked stock referred to in subsection (6) above was on 27th March 1982 held by an insurance company against and applied solely towards meeting the liabilities of the company’s pension business, then—
if and so long as the stock continues to be so held by that company, it shall continue to be treated as restricted government securities for the purposes of this section; and
if the stock ceases to be restricted government securities otherwise than by virtue of being actually disposed of or redeemed, on the day on which it so ceases the stock shall be deemed for the purposes of corporation tax, including (subject to subsection (8) below) corporation tax on chargeable gains, to have been disposed of and immediately re-acquired at its market value on that date.
For the purposes of sections 67 and 68 of the 1979 Act (gilt-edged securities)—
in ascertaining the date on which securities were acquired, no account shall be taken of any deemed disposal and re-acquisition resulting from subsection (7)(b) above; and
so long as any index-linked stock continues, by virtue of subsection (7)(a) above, to be treated as restricted government securities for the purposes of this section, it shall be regarded as being stock of a different kind from the index-linked stock referred to in subsection (6) above which is not so treated.
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The provisions of this section apply to any insurance company which carries on or has carried on long term business, and shall have effect for all purposes of the Corporation Tax Acts.
Subject to subsection (4) below, a profit or loss shall not be taken to arise in respect of any asset of the company by reason only that at any time after the base date the asset was or is exchanged for other assets of the company so as to become or cease to be part of the long term assets.
Subject to subsection (5) below, if an asset of the company which has at any time after 29th April 1975 been exchanged as mentioned in subsection (2) above is— then any income arising in respect of the asset after the relevant exchange, and any profit, gain or loss accruing to the company on a disposal of the asset made after the relevant exchange, shall be treated as if the relevant exchange had not taken place.
within the period of one year beginning with the date of that exchange (“the relevant exchange”) exchanged again for other assets of the company so as to cease to be or, as the case may be, become part of the long term assets; or
within the period of six months beginning with the date of the relevant exchange disposed of by the company,
If an insurance company to which this section applies by notice given to the inspector so elects, then, where in the relevant period any relevant asset of the company was or is exchanged as mentioned in subsection (2) above—
that subsection shall not apply in relation to that asset as regards that exchange; and
the company shall be treated as if the asset had been disposed of at market value by the company at the time of the exchange. In this and the following subsection—
Where an insurance company has given a notice under subsection (4) above, subsection (3) above shall, as regards relevant assets disposed of by the company in the relevant period, have effect as if paragraph (b) and the reference to any profit, gain or loss accruing to the company on a disposal made after the relevant exchange were omitted.
If at any time after the base date an insurance company to which this section applies disposed or disposes of an asset which— the asset shall be treated, in a case falling within paragraph (a) above, as if it had been continuously part of the long term assets from the time of its acquisition by the company to the time of the disposal, or, in a case falling within paragraph (b) above, as if it had been continuously not part of the long term assets from the time of its acquisition by the company to the time of its disposal; and if the disposal is one as respects which subsection (3) above applies, this subsection shall apply as if the relevant exchange (within the meaning of that subsection) had not taken place.
was or is part of the long term assets at the time of the disposal, but without having been continuously part of those assets since its acquisition by the company; or
was or is not part of the long term assets at the time of the disposal, but without having been continuously not part of those assets since its acquisition by the company,
Without prejudice to subsection (6) above, if— then, in computing for any purpose of the Corporation Tax Acts the profit, gain or loss (if any) arising on the disposal, the asset shall be deemed to have been acquired by the company on the occasion or latest of the occasions mentioned in paragraph (b) above at a cost equal to the value by reference to which the company was so assessed as regards that occasion.
an insurance company to which this section applies disposes of an asset which, since its acquisition by the company, has on one or more occasions (whether after the base date or not) been exchanged for other assets of the company; and
as regards that occasion or one or more of those occasions the company was assessed to income tax or corporation tax in an amount computed by reference to the value of the asset at the time of the exchange,
There shall be made such assessments, reductions of assessments or, on a claim in that behalf, repayments of tax as may in any case be required in order to give effect to subsection (3) or (4) above.
In this section, unless the context otherwise requires, “asset” includes part of an asset and any reference to a disposal of part of an asset includes a reference to a part disposal of an asset within the meaning of section 19(2)(b) of the 1979 Act; and where part of an asset is exchanged or disposed of as mentioned in any of subsections (2) to (7) above, that subsection shall have effect as if that part of the asset and the part not exchanged or disposed of were separate assets.
For the purposes of this section—
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Corporation tax under Cases IV and V on income arising from investments of the foreign life assurance fund of an insurance company shall be computed as in the case mentioned in section 65(4), that is to say, by reference to the amount of income received in the United Kingdom; and this subsection shall apply notwithstanding that that section relates only to income tax.
Where any of the following securities, namely— for the time being form part of the investments of the foreign life assurance fund of an insurance company, the income arising from those securities, if applied for the purposes of that fund or reinvested so as to form part of that fund, shall not be liable to tax.
securities issued by the Treasury with the condition that the interest thereon shall not be liable to income tax so long as it is shown, in manner directed by the Treasury, that the securities are in the beneficial ownership of persons who are not ordinarily resident in the United Kingdom; or
securities issued by the Treasury with the condition that—
so long as the securities are in the beneficial ownership of persons who are not ordinarily resident in the United Kingdom, the interest thereon shall be exempt from income tax, and
so long as the securities are in the beneficial ownership of persons who are neither domiciled nor ordinarily resident in the United Kingdom, neither the capital thereof nor the interest thereon shall be liable to any taxation present or future; or
securities to which section 581 applies;
Where any income arising abroad from the investments of the foreign life assurance fund of an insurance company has been remitted to the United Kingdom and invested, as part of the investments of that fund, in any such securities as are mentioned in subsection (2) above, that income shall not be liable to tax and any tax paid thereon shall, if necessary, be repaid to the company on the making of a claim.
Any securities issued by the Treasury in pursuance of the power conferred by section 60(1) of the Finance Act 1940 with a modified form of the condition specified in subsection (2)(b) above shall, save in so far as the terms of the issue otherwise provide, be deemed for the purposes of subsections (2) and (3) above to be such securities as are mentioned in subsection (2) above.
Where income arising from the investments of the foreign life assurance fund of an insurance company has been relieved from tax in pursuance of the provisions of this section, a corresponding reduction shall be made—
in the relief granted under section 76 in respect of expenses of management; and
in any amount on which the company is chargeable to tax by virtue of section 436.
In this section “foreign life assurance fund”—
means any fund representing the amount of the liability of an insurance company in respect of its life assurance business with policy holders and annuitants residing outside the United Kingdom whose proposals were made to, or whose annuity contracts were granted by, the company at or through a branch or agency outside the United Kingdom; and
where such a fund is not kept separately from the life assurance fund, means such part of the life assurance fund as represents the liability of the company under such policies and contracts, such liability being estimated in the same manner as it is estimated for the purpose of the company’s periodical return.
Where this section has effect in relation to income arising from investments of any part of an insurance company’s life assurance fund, it shall have the like effect in relation to chargeable gains accruing from the disposal of any such investments, and losses so accruing shall not be allowable losses.
For the purposes of this section, an offshore income gain accruing to an insurance company carrying on life assurance business shall, if it accrues in respect of investments held in connection with that business, be treated as if it were income from investments held in connection with that business.
Where any payment is made by the Export Credits Guarantee Department—
under any agreement entered into under arrangements made by the Secretary of State in pursuance of section 11 of the Export Guarantees and Overseas Investment Act 1978, and
in respect of any income — then, to the extent of the payment, this section shall apply in relation to the income as if it had been received in the United Kingdom (and accordingly cannot be received again in the United Kingdom).
which cannot be transferred to the United Kingdom, and
which arises from investments of the foreign life assurance fund of an insurance company,
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Subsections (2) and (3) below apply where a company resident in the United Kingdom carries on insurance business outside the United Kingdom through a branch or agency and—
that business, or part of it, together with the whole assets of the company used for the purposes of that business or part (or together with the whole of those assets other than cash), is transferred to a company not resident in the United Kingdom;
the business or part is so transferred wholly or partly in exchange for shares, or for shares and loan stock, issued by the transferee company to the transferor company; and
the shares so issued, either alone or taken together with any other shares in the transferee company already held by the transferor company, amount in all to not less than one quarter of the ordinary share capital of the transferee company.
In making any computation in accordance with the provisions of this Act applicable to Case I of Schedule D of the profits or losses of the transferor company for the accounting period in which the transfer occurs, there shall be disregarded any profit or loss in respect of any asset transferred which, apart from this subsection, would fall to be taken into account in making that computation.
Where by virtue of subsection (2) above any profit or loss is disregarded in making any computation otherwise than for the purposes of section 76(2) the profit or loss shall be treated for the purposes of the 1979 Act as a chargeable gain or allowable loss accruing to the transferor company on the transfer.
Where at any time a company resident in the United Kingdom— ceases to be resident in the United Kingdom, the profits or losses of the company in respect of that business for the accounting period ending at that time shall be computed for tax purposes without regard to the whole, or, as the case may be, a corresponding part of any profit or loss in respect of any asset which, apart from this subsection, would fall to be calculated in accordance with section 100(1)(b) and taken into account in making that computation.
which carries on insurance business wholly outside the United Kingdom, and
the whole or part of whose ordinary share capital is beneficially owned by one or more companies resident in the United Kingdom,
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This section applies in relation to policies of life assurance issued before 5th August 1965 by a company carrying on life assurance business, being policies which—
provide for benefits consisting to any extent of investments of a specified description or of a sum of money to be determined by reference to the value of such investments, but
do not provide for the deduction from those benefits of any amount by reference to tax chargeable in respect of chargeable gains.
Where— then the company shall be entitled as against the person receiving the benefits to retain out of those benefits a part not exceeding in amount or value corporation tax, at the rate specified in subsection (3) below, in respect of the chargeable gain referred to in paragraph (b) above, computed without regard to any amount retained under this subsection.
the investments of the company’s life assurance fund, so far as referable to those policies, consist wholly or mainly of investments of the description so specified, and
on the company becoming liable under any of those policies for any such benefits (including benefits to be provided on the surrender of a policy), a chargeable gain accrues to the company from the disposal, in meeting or for the purpose of meeting that liability, of investments of that description forming part of its life assurance fund, or would so accrue if the liability were met by or from the proceeds of such a disposal,
The amount to be retained under subsection (2) above shall, subject to subsection (4) below, be computed by reference to the rate of corporation tax for the time being in force or, if no rate of corporation tax has yet been fixed for the financial year, the rate last in force.
In so far as the chargeable gain represents or would represent a gain belonging or allocated to, or reserved for, policy holders, the amount to be retained shall be computed by reference to a rate of tax not exceeding 37.5 per cent.
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Where an overseas life insurance company receives a qualifying distribution made by a company resident in the United Kingdom and relief in respect of the distribution is not available or is not claimed under arrangements specified in an Order in Council made under section 788, the overseas life insurance company shall be deemed for the purposes of sections 76(3) and (4), 434(8), 436, 438 and 445 to 447 to be entitled to such a tax credit in respect of the distribution as it would be entitled to under section 231 if it were resident in the United Kingdom; and accordingly the distribution shall be treated for the purposes of those provisions as representing income equal to the aggregate of the amount or value of the distribution and the amount of that credit.
Where under subsection (1) above an overseas life insurance company is deemed to be entitled to a tax credit in respect of a distribution, it may claim to have the income represented by the distribution set, subject to subsection (3) below, against its profits chargeable to tax under section 436 or against its income chargeable to tax in accordance with section 445 or partly against the one and partly against the other; but to the extent that any income is so set the tax credit included in it shall not be payable and shall not be set against corporation tax under section 447(4).
The amounts that an overseas life insurance company may by virtue of subsection (2) above set against profits or income of any description shall not exceed the amount of the profits or income of that description and shall be further limited as follows—
the amount set against profits arising from general annuity business shall not exceed a portion of the company’s income from investments referable to that business, and that portion shall be determined by the same formula as determines under section 446 the portion of those profits which is chargeable to tax; and
the amount set against profits from pension business shall not exceed such of its income referable to that business as is represented by distributions in respect of which the company is deemed to be entitled to a tax credit by virtue of this section, and shall not reduce any other income.
Where by virtue of a set-off under this section income or profits of any description are reduced by any amount, that amount shall be left out of account in determining the amount of income tax which is available for set-off against corporation tax under section 11(3).
A claim under this section in respect of a distribution shall not prevent the making of a subsequent claim for relief in respect of that distribution under arrangements specified in an Order in Council made under section 788; but where such a subsequent claim is made the claim under this section shall be deemed never to have been made, and no adjustment (whether by additional assessments or otherwise) to which the subsequent claim gives rise shall be out of time if it is made within 12 months after the making of the subsequent claim.
This section applies to an overseas life insurance company if, by virtue of arrangements specified in an Order in Council made under section 788, no charge to corporation tax under Case III of Schedule D arises under section 445 in respect of any income of the company from the investments of its life assurance fund (excluding the pension fund and general annuity fund, if any).
For the purposes of section 242 so much of any relevant distributions as is received in any year of assessment by an overseas life insurance company to which this section applies in respect of the portion of the investments of its life assurance fund (excluding the pension fund and general annuity fund, if any) attributable to the business of its branch or agency in the United Kingdom shall be deemed to be franked investment income of that company, and accordingly the company may make a claim under subsection (1) of section 242 for any of the purposes specified in subsection (2) of that section.
In subsection (2) above “relevant distributions” means distributions in respect of which the company receiving them is entitled to a tax credit.
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Income tax, for any year of assessment, on the profits or gains arising from a member’s underwriting business or from assets forming part of a premiums trust fund shall be computed on the profits or gains of that year of assessment; but for this purpose and all other purposes of the Income Tax Acts—
the profits or gains arising in any year of assessment from a member’s underwriting business shall be taken to be those arising in the corresponding underwriting year; and
the profits or gains arising from assets forming part of a premiums trust fund shall be taken to be those allocated under the rules or practice of Lloyd’s to the corresponding underwriting year.
Income tax on the profits or gains arising to a member from assets forming part of a premiums trust fund may be assessed on the underwriting agent through whom his business is carried on.
Relief under section 380 in respect of a loss sustained by a member in his underwriting business in any year of assessment shall not be given under subsection (2) of that section but may, if the member so claims and he was a member in the preceding year of assessment, be given against his income for that preceding year, so far as it cannot be given against the income for the year in which the loss was sustained and can be given after any relief for a loss sustained in that preceding year.
In any case where a member has taken out an insurance against losses in his underwriting business—
any premium paid by him on that insurance shall be deducted as an expense in computing the profits or gains arising from that business; and
any insurance money paid to him under that insurance shall be taken into account as a trading receipt in computing those profits or gains for the year of assessment for which the premium was allowed as a deduction.
Where, in accordance with the rules or practice of Lloyd's, and in consideration of the payment of a premium, one member agrees with another to meet liabilities arising from the latter’s business for an underwriting year so that the accounts of the business for that year may be closed— and the assessment referred to above shall be taken to be fair and reasonable only if it is arrived at with a view to producing the result that a profit does not accrue to the member to whom the premium is payable but that he does not suffer a loss. This subsection has effect in relation to premiums payable in connection with the closing of the accounts of a member’s business for an underwriting year ending in the year of assessment 1985-86 or any later year of assessment.
in computing for the purposes of income tax the profits or gains of his business, the amount of the premium shall be deductible as an expense of the member by whom it is payable only to the extent that it is shown not to exceed a fair and reasonable assessment of the value of the liabilities in respect of which it is payable; and
any part of a premium which, by virtue of paragraph (a) above, is not deductible as an expense of the member by whom it is payable, shall be disregarded in computing for the purposes of income tax the profits or gains of the business of the member to whom it is payable;
The cost of acquisition and the consideration for the disposal of assets forming part of a premiums trust fund shall be left out of account in computing the profits or gains or losses of a member’s underwriting business for the purposes of Schedule D (and accordingly shall not be excluded for the purposes of capital gains tax under section 31 or 33 of the 1979 Act).
The Board may by regulations provide—
for the assessment and collection of tax charged in accordance with section 450;
for modifying the provisions of section 450 in relation to syndicates continuing for more than two years after the end of an underwriting year;
for giving credit for foreign tax.
The Treasury may by regulations modify any of the provisions specified in paragraphs (a) to (c) below in their application to companies permitted by the Council of Lloyd’s to act as underwriting agents at Lloyd's—
section 11 of the Management Act (return of profits);
section 87A of that Act (interest on overdue corporation tax); and
section 10(1) of this Act.
Regulations under subsection (2) above shall not have effect with respect to accounting periods ending on or before such day, not being earlier than 31st March 1992, as the Treasury may by order appoint for the purposes of that subsection.
Regulations made under paragraph 17(1)(b) of Schedule 16 to the Finance Act 1973 which are in force immediately before the coming into operation of this Act shall continue in force notwithstanding the repeal of that paragraph by this Act, and shall be deemed to have been made under this section.
If in the case of Lloyd's— then, subject to section 456(4), the provisions of this section and sections 453 to 456 relating to taxation shall have effect in relation to any underwriting member.
arrangements are made for the setting up in relation to each underwriting member of such a special reserve fund as is referred to in the following provisions of this section and sections 453 to 456; and
the arrangements comply with the requirements of this section and sections 453 to 455, are approved by the Board and are certified by the Secretary of State to be in the public interest;
The arrangements must provide for the setting up, in relation to the underwriter, of a special reserve fund vested in trustees who have control over it and power to invest the capital thereof and to vary the investments.
Where part of the business of the underwriter is carried on through an underwriting agent and part is not so carried on, or where different parts of his business are carried on through different underwriting agents, the arrangements may provide for separate special reserve funds being constituted in relation to the different parts of his business.
The arrangements must provide—
for the income arising from the investments of the underwriter’s special reserve fund or funds being held on trust for the underwriter, his personal representatives or assigns; and
that, on the underwriter ceasing to carry on his business, the capital of his special reserve fund or funds, so far as not required for giving effect to the requirements of section 453, shall be paid over to the underwriter or his personal representatives or assigns.
The arrangements must be such as to secure that if, for an underwriting year corresponding to a year of assessment during the whole or any part of which the underwriter continues to carry on his business (subject to section 456(4)), the underwriter makes a profit from his business, he has the right to make, into his special reserve fund or funds, payments (“permissible payments”) the gross amount of which is not in the aggregate greater than £7,000 or 50 per cent. of the profit, whichever is the less, or such less sum as may be specified in the arrangements.
The amount of any permissible payment shall be notified to the inspector not later than 12 months after the date at which the accounts of the business for that underwriting year are deemed by the Board to be closed for the purposes of the arrangements, and no permissible payment shall be made more than 30 days after the date on which the inspector has notified his agreement in writing or, if later, 30 days after the expiration of those 12 months.
Where the underwriter carries on his business during part only of the year of assessment referred to in subsection (5) above, the maximum gross amount of the permissible payments shall be reduced by the application thereto of the proportion which the part of that year of assessment for which he is entitled to profits from the business bears to a full year.
In subsection (5) above “profit” means a profit computed in the manner in which the profits or gains of the business of the underwriting year in question would fall to be computed under Case I of Schedule D if—
income arising from the investments forming part of the premiums trust fund of the underwriter, his special reserve fund or funds and any other fund required or authorised by the rules of Lloyd’s or required by the underwriting agent through whom the business or any part thereof is carried on, to be kept in connection with the business fell to be taken into account; and
all shares of the profits of the business and all charges related to those profits or to the income mentioned in paragraph (a) above, being shares and charges payable to persons other than the underwriter and not otherwise taken into account, fell to be deducted. In paragraph (a) above “income” includes annual profits or gains chargeable to tax by virtue of section 714(2) or 716(3).
The arrangements must be such as to secure that, if it is certified that the underwriter has sustained a loss in his business for an underwriting year subsequent to that which corresponds to the first year of assessment to which section 452(5) applies, there shall be made into his premiums trust fund, out of the capital of his special reserve fund or funds, payments the gross amount of which is equal in the aggregate to the certified amount of the loss.
If the capital of the underwriter’s special reserve fund or funds, reduced by so much thereof as represents sums paid into it or them as a consequence of a profit for a year later than the year of the loss, is less than the net amount of the payments required to be made by subsection (1) above, those payments shall be reduced so that the net amount thereof is equal to the capital of the fund or funds as so reduced.
In this section—
“loss” means a loss computed in the manner in which the profits or gains of the business of the underwriting year in question would fall to be computed under section 452(8); and
where, under any arrangement between the underwriter and another person which provides for the sharing of losses, any amount is paid to the underwriter by that person as that person’s share of a loss for that year, the loss (as so computed) shall be reduced by that amount.
In this section “certified” means certified by a certificate of the inspector, but—
no certificate shall be given by the inspector until 30 days have elapsed from the date on which he has given notice to the underwriter or his personal representatives stating his intention to give a certificate and stating the amount which he proposes to specify as the amount of the loss;
the underwriter or his personal representatives may, on giving notice to the inspector within that 30 day period, appeal to the Special Commissioners;
where notice is so given by the underwriter or his personal representatives, the inspector shall not without the consent of the underwriter or his personal representatives give any certificate until after the hearing of the appeal; and
on the hearing of the appeal, the Special Commissioners may direct the inspector not to give a certificate or to give it with such an amount specified as the amount of the loss as may be specified in the direction.
The arrangements may authorise the making of payments pursuant to subsection (1) above on a provisional basis before the amount of the loss has been finally ascertained and certified by the inspector.
The amount so withdrawn shall not exceed such proportion of the estimated loss as may be specified in the arrangements.
When the amount of the loss has been certified by the inspector such adjustments shall be made by repayment to the underwriter’s special reserve fund or funds, or by further withdrawal of sums for payment into the underwriter’s premiums trust fund, as will secure that the net amount withdrawn from the underwriter’s special reserve fund or funds in respect of the loss is that required pursuant to subsection (1) above; and no tax consequences shall ensue on the withdrawal of sums in respect of a loss until the amount of the loss has been so certified and any such adjustments have been made.
Where such a payment as is mentioned in section 452(5) is made into a special reserve fund of an underwriter by reason of the making by him of a profit for an underwriting year—
subject to subsection (2) below, the payment shall be deemed to be an annual payment chargeable to income tax by way of deduction and payable and paid in the year of assessment corresponding to that underwriting year; and
the sum actually paid shall be deemed for the purposes of sections 452 to 456 and for all income tax purposes to be a net amount corresponding to a gross amount from which income tax has been duly deducted.
Subsection (1)(a) above—
shall not reduce any income other than income derived from the underwriter’s underwriting business or from any deposit made or assets held on trust in connection with that business; and
subject to paragraph (a) above, shall reduce income other than investment income before reducing investment income.
Where such a payment as is mentioned in section 453(1) is made out of a special reserve fund of an underwriter into a premiums trust fund of his by reason that he has sustained a loss for an underwriting year then, subject to section 453(7)—
the payment shall be deemed for all income tax purposes—
to be an annual payment chargeable to income tax by way of deduction and paid out of profits or gains brought into charge to income tax; and
to have been payable and paid to the underwriter; and
to have been payable and paid to him on the last day of the year of assessment corresponding to that underwriting year or, if he ceased to carry on his business before that day, on the last day on which he carried on his business; and
the sum actually paid shall be deemed for the purposes of sections 452 to 456 and for all income tax purposes to be a net amount corresponding to a gross amount from which income tax has been duly deducted for the year of assessment in which the payment is so deemed to have been payable and paid.
Where such a payment as is mentioned in section 453(1) is made out of a special reserve fund of an underwriter by reason that he has sustained a loss, relief in respect of the loss shall, so far as possible, be given by treating the loss as reducing the income represented by the payment.
Where the underwriter ceases to carry on his business before his death and under so much of the arrangements as gives effect to section 452(4)(b) a sum is paid to him or his personal representatives or assigns—
the payment shall be deemed for all income tax purposes—
to be an annual payment chargeable to income tax by way of deduction and paid out of profits or gains brought into charge to income tax; and
to have been payable and paid to the underwriter; and
to have been payable and paid to him on the last day on which he carried on his business; and
the sum actually paid shall be deemed for the purposes of sections 452 to 456 and for all income tax purposes to be a net amount corresponding to a gross amount from which income tax has been duly deducted.
Neither the arrangements, nor any disposition, trust, covenant, agreement or arrangement entered into for the purposes of the arrangements, shall be treated as included in the expression “settlement” for the purposes of Chapter III or IV of Part XV.
In this section “the lower limit” means the limit which would be imposed by section 452(5) if the words “£5,000 or 35 per cent. of that profit, whichever is the less” stood in that subsection in place of the words “£7,000 or 50 per cent. of that profit, whichever is the less”.
Where an underwriter dies while carrying on his business and, after giving effect to the requirements of section 453, his special reserve fund or funds include an amount which represents an excess in the payments made into the fund or funds for any underwriting year over the lower limit—
he shall be deemed for all income tax purposes to have received in the year of assessment corresponding to that underwriting year a payment of that amount—
which was an annual payment chargeable to income tax by way of deduction and paid out of profits or gains brought into charge to income tax, and
which was payable in the year of assessment in which it is deemed to have been paid, and
the payment (to that actual amount) shall be deemed for the purposes of sections 452 to 456 and for all income tax purposes to be a net amount corresponding to a gross amount from which tax has been duly deducted.
Where, to give effect to the requirements of section 453 as to the meeting of a loss, any withdrawal was made at any time from the capital of the underwriter’s special reserve fund or funds, the amount withdrawn shall be regarded for the purposes of subsection (2) above— and, where payments have been made into the underwriter’s special reserve fund or funds for any underwriting year in excess of the lower limit, his fund or funds shall be deemed at all subsequent times to include an amount representing that excess except to the extent that any withdrawal is, under the provisions of this subsection, to be regarded as having been met out of that amount.
as having been met out of payments made into the fund or funds for underwriting years before that in which the loss was incurred, and as having been met before any withdrawal to meet a loss for a later underwriting year; and
as having been met out of so much of the payments made for any underwriting year as was not in excess of the lower limit, rather than out of such part of the payments made for any underwriting year as was in excess of the lower limit; and
subject to that, as having been met out of payments in excess of the lower limit for a later year rather than out of payments in excess of the lower limit for an earlier year;
Any tax chargeable by virtue of this section shall be assessed and charged upon the underwriter’s personal representatives and tax so charged shall be a debt due from and payable out of his estate; and, notwithstanding section 34(1) of the Management Act (which requires assessments to be made not later than six years after the end of the year to which they relate), assessments in respect of tax so chargeable may be made at any time not later than three years after the end of the year of assessment in which the underwriter died.
References in this section to payments made into a special reserve fund or funds for any underwriting year are references to payments made, as described in section 452(5), by reference to the profits made for that underwriting year.
So much of an underwriter’s income as is attributable to payments from his special reserve fund or to such an excess as is mentioned in section 455 shall (so far as remaining after allowing for any relief by which it is reduced) be treated as unearned income if, but only if, his income from his underwriting business falls to be so treated.
Where, as a result of a change in the circumstances in which an underwriting business is carried on, an underwriter’s income from the business falls to be treated as unearned income, the change shall be disregarded for the purposes of subsection (1) above except to the extent that the special reserve fund represents payments made into it after the change; and for this purpose any amount withdrawn after the change to give effect to the requirements of section 453 shall, so far as possible and notwithstanding section 455(3), be regarded as having been met by payments into the fund made after the change.
The arrangements may from time to time be varied with the consent of the Board and the Secretary of State.
If, after giving notice of their intention so to do to the Council of Lloyd's, the Board or the Secretary of State cancel the approval or certificate which they have or he has given with respect to the arrangements, section 452(5) to (9) shall not apply, in the case of any underwriter, to any year of assessment after the year of assessment in which the approval or certificate is cancelled.
In sections 450 to 456—
For the purpose of construing any reference in sections 450 to 456 to the year of assessment which corresponds to an underwriting year or to the underwriting year which corresponds to a year of assessment, an underwriting year and a year of assessment shall be deemed to correspond to each other if the underwriting year ends in the year of assessment.
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Where any person carries on capital redemption business in conjunction with business of any other class, the capital redemption business shall, for the purposes of the Corporation Tax Acts (including the provisions about corporation tax on chargeable gains) and the Income Tax Acts, be treated as a separate business from any other class of business carried on by that person.
In ascertaining whether and to what extent any person has incurred a loss on his capital redemption business for the purposes of section 380 or sections 393 and 394—
any profits derived from investments held in connection with the capital redemption business (including franked investment income of a company resident in the United Kingdom) shall be treated as part of the profits of that business, and
in determining whether any, and if so what, relief can be given under section 385(4) in the case of capital redemption business, the loss which may be carried forward under subsection (1) of that section shall be similarly computed.
In this section “capital redemption business” means the business (not being life assurance business or industrial assurance business) of effecting and carrying out contracts of insurance, whether effected by the issue of policies, bonds or endowment certificates or otherwise, whereby, in return for one or more premiums paid to the insurer, a sum or a series of sums is to become payable to the insured in the future.
This section shall not apply to any capital redemption business in so far as it consists of carrying out contracts of insurance effected before 1st January 1938.
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Subject to subsection (2) below, a registered friendly society shall, on making a claim, be entitled to exemption from income tax and corporation tax (whether on income or chargeable gains) on its profits arising from life or endowment business.
Subsection (1) above—
shall not, subject to section 462, exempt a friendly society registered after 31st December 1957 which at any time in the period of three months ending 3rd May 1966 entered into any transaction in return for a single premium, being a transaction forming part of its life or endowment business;
shall not apply to profits arising from pension business;
shall not apply to profits arising from life or endowment business consisting—
where the profits relate to contracts made after 31st August 1987, of the assurance of gross sums under contracts under which the total premiums payable in any period of 12 months exceed £100 or of the granting of annuities of annual amounts exceeding £156;
where the profits relate to contracts made after 13th March 1984 but before 1st September 1987, of the assurance of gross sums exceeding £750 or of the granting of annuities of annual amounts exceeding £156;
where the profits relate to contracts made before 14th March 1984, of the assurance of gross sums exceeding £500 or of the granting of annuities of annual amounts exceeding £104; and
as respects other life or endowment business (“tax exempt life or endowment business”), has effect subject to the following provisions of this Chapter.
In determining for the purposes of subsection (2)(c)(i) above the total premiums payable in any period of 12 months— and in applying the limit of £156 in subsection (2)(c)(i) above, any bonus or addition declared upon an annuity shall be disregarded.
where those premiums are payable more frequently than annually, there shall be disregarded an amount equal to 10 per cent. of those premiums; and
so much of any premium as is charged on the ground that an exceptional risk of death is involved shall be disregarded;
In applying the limits referred to in subsection (2)(c)(ii) and (iii) above, any bonus or addition which either is declared upon an assurance of a gross sum or annuity or accrues upon such an assurance by reference to an increase in the value of any investments shall be disregarded.
A registered friendly society is within this subsection if its rules make no provision for it to carry on life or endowment business consisting of the assurance of gross sums exceeding £2,000 or of the granting of annuities of annual amounts exceeding £416.
In the case of a registered friendly society within subsection (5) above—
subsection (2)(c)(iii) above shall have effect with the substitution of references to £2,000 and £416 respectively for the references to £500 and £104; and
references in this Chapter to tax exempt life or endowment business shall be construed accordingly.
Where at any time a registered friendly society within subsection (5) above amends its rules so as to cease to be within that subsection, any part of its life or endowment business consisting of business which— shall thereafter continue to be tax exempt life or endowment business for the purposes of this Chapter.
relates to contracts made before that time; and
immediately before that time was tax exempt life or endowment business,
Where at any time a registered friendly society not within subsection (5) above amends its rules so as to bring itself within that subsection, any part of its life or endowment business consisting of business which— shall thereafter continue not to be tax exempt life or endowment business for the purposes of this Chapter.
related to contracts made before that time; and
immediately before that time was not tax exempt life or endowment business,
Where at any time a registered friendly society not within subsection (5) above acquires by way of transfer of engagements or amalgamation from another registered friendly society any life or endowment business consisting of business which— that business shall thereafter continue to be tax exempt life or endowment business for the purposes of this Chapter.
relates to contracts made before that time; and
immediately before that time was tax exempt life or endowment business,
Where at any time a registered friendly society within subsection (5) above acquires by way of transfer of engagements or amalgamation from another registered friendly society any life or endowment business consisting of business which— that business shall thereafter continue not to be tax exempt life or endowment business for the purposes of this Chapter.
relates to contracts made before that time; and
immediately before that time was not tax exempt life or endowment business,
Where at any time a registered friendly society ceases by virtue of section 84 of the Friendly Societies Act 1974 or by virtue of section 72 of the Friendly Societies Act (Northern Ireland) 1970 (conversion into company) to be registered under that Act, any part of its life or endowment business consisting of business which— shall thereafter continue to be tax exempt life or endowment business for the purposes of this Chapter.
relates to contracts made before that time; and
immediately before that time was tax exempt life or endowment business,
For the purposes of the Corporation Tax Acts any part of a company’s business which continues to be tax exempt life or endowment business by virtue of subsection (11) above shall be treated as a separate business from any other business carried on by the company.
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Subject to the following provisions of this section, a registered friendly society other than a society to which subsection (2) below applies shall, on making a claim, be entitled to exemption from income tax and corporation tax (whether on income or chargeable gains) on its profits other than those arising from life or endowment business.
This subsection applies to any society registered after 31st May 1973 unless— and also applies to any society registered before 1st June 1973 with respect to which a direction under subsection (8) below is in force.
its business is limited to the provision, in accordance with the rules of the society, of benefits for or in respect of employees of a particular employer or such other group of persons as is for the time being approved for the purposes of this section by the registrar; or
it was registered before 27th March 1974 and its rules limit the aggregate amount which may be paid by a member by way of contributions and deposits to not more than £1 per month or such greater amount as the registrar may authorise for the purposes of this section;
If a society to which subsection (2) above applies, after 26th March 1974 or such later date as may be specified in a direction under this section, makes a payment to a member in respect of his interest in the society and the payment is made otherwise than in the course of life or endowment business and exceeds the aggregate of any sums paid by him to the society by way of contributions or deposits, after deducting from that aggregate the amount of— the excess shall be treated for the purposes of corporation tax and income tax as a qualifying distribution.
any previous payment so made to him by the society after that date, and
any earlier repayment of such sums paid by him,
Where a registered friendly society— the company into which the society is converted shall be so exempt on its profits arising from any part of that business which relates to contracts made before that time so long as there is no increase in the scale of benefits which it undertakes to provide in the course of carrying on that part of its business.
at any time ceases by virtue of section 84 of the Friendly Societies Act 1974 or by virtue of section 72 of the Friendly Societies Act (Northern Ireland) 1970 (conversion into company) to be registered under that Act; and
immediately before that time was exempt from income tax or corporation tax on profits arising from any business carried on by it other than life or endowment business,
For the purposes of the Corporation Tax Acts any part of a company’s business in respect of the profits from which the company is exempt by virtue of subsection (4) above shall be treated as a separate business from any other business carried on by the company.
If— he may serve a notice on the society referring to the provisions of this subsection and stating that he is considering the question whether, for the protection of the revenue, it is expedient to give a direction that subsection (2) above shall apply to the society as from the date of the notice.
a friendly society registered before 1st June 1973 begins after 26th March 1974 to carry on business other than life or endowment business or, in the opinion of the registrar, begins to carry on business other than life or endowment business on an enlarged scale or of a new character; and
it appears to the registrar, having regard to the restrictions imposed by this section on friendly societies registered later, that for the protection of the revenue it is expedient to do so;
The registrar shall consider any representations or undertakings made or offered to him by the society within the period of one month from service of the notice, and if the society so requests shall afford it an opportunity of being heard by him not later than three weeks after the end of that period.
If, after consideration of any such representations or undertakings, the registrar remains of the opinion that it is expedient to do so, he shall direct that subsection (2) above shall apply to the society as from the date of the notice, but subject to any further direction given by him cancelling that direction.
A friendly society may, within one month from the giving of a direction under subsection (8) above, appeal against it to the court to which or person to whom it might appeal under section 92 of the Friendly Societies Act 1974 or section 81 of the Friendly Societies Act (Northern Ireland) 1970 against cancellation of its registration.
For the purposes of this section a registered friendly society formed on the amalgamation of two or more friendly societies shall be treated as registered before 1st June 1973 if at the time of the amalgamation subsection (2) above did not apply to any of the societies amalgamated, but otherwise shall be treated as registered at that time.
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Subject to subsections (2) to (4) below, section 460(1) shall not apply to so much of the profits arising from tax exempt life or endowment business as is attributable to a policy which, by virtue of paragraph 6(2) of Schedule 15—
is not a qualifying policy; and
would not be a qualifying policy if all policies with other friendly societies were left out of account.
Section 460(2)(a) and subsection (1) above shall not withdraw exemption under section 460(1) for profits arising from any part of a life or endowment business relating to contracts made not later than 3rd May 1966.
If, with respect to a policy issued in respect of an insurance made on or after 1st June 1984 and before 19th March 1985 for the assurance of a gross sum, there is or has been an infringement of any of the conditions in paragraph 3(2) to (11) of Schedule 15, section 460(1) shall not apply to so much as is attributable to that policy of the profits of the registered friendly society or branch concerned which arise from tax exempt life or endowment business.
Nothing in subsection (3) above shall be taken to affect the status of a policy as a qualifying policy.
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Subject to subsections (2) and (3) below, a member of a registered friendly society or branch shall not be entitled to have at any time outstanding contracts with any one or more such societies or branches (taking together all such societies or branches throughout the United Kingdom) for the assurance of—
more than £750 by way of gross sum under tax exempt life or endowment business;
more than £156 by way of annuity under tax exempt life or endowment business. In any case where the member’s outstanding contracts were all made before 14th March 1984 this subsection shall have effect with the substitution for “£750” and “£156” of “£2,000” and “£416” respectively.
Subsection (1)(a) above shall not apply as respects sums assured under contracts made after 31st August 1987.
With respect to contracts for the assurance of gross sums under tax exempt life or endowment business, a member of a registered friendly society or branch shall not be entitled to have outstanding with any one or more such societies or branches (taking together all such societies or branches throughout the United Kingdom) contracts under which the total premiums payable in any period of 12 months exceed £100 unless all those contracts were entered into before 1st September 1987.
In applying the limit in subsection (3) above, the premiums under any contract for an annuity which was made before 1st June 1984 by a new society shall be brought into account as if the contract were for the assurance of a gross sum.
In applying the limits in this section there shall be disregarded—
any bonus or addition which either is declared upon assurance of a gross sum or annuity or accrues upon such an assurance by reference to an increase in the value of any investments;
any approved annuities as defined in section 620(9) or any policy of insurance or annuity contract by means of which the benefits to be provided under an occupational pension scheme as defined in section 51(3)(a) of the Social Security Act 1973 are secured;
any increase in a benefit under a friendly society contract, as defined in section 6 of the Decimal Currency Act 1969, resulting from the adoption of a scheme prescribed or approved in pursuance of subsection (3) of that section; and
so far as concerns the total premiums payable in any period of 12 months—
10 per cent. of the premiums payable under any contract under which the premiums are payable more frequently than annually; and
£10 of the premiums payable under any contract made before 1st September 1987 by a society which is not a new society; and
so much of any premium as is charged on the ground that an exceptional risk of death is involved.
In applying the limits in this section in any case where a member has outstanding with one or more society or branch one or more contracts made after 13th March 1984 and one or more contracts made on or before that date, any contract for an annuity which was made before 1st June 1984 by a new society shall be regarded not only as a contract for the annual amount concerned but also as a contract for the assurance of a gross sum equal to 75 per cent. of the total premiums which would be payable under the contract if it were to run for its full term or, as the case may be, if the member concerned were to die at the age of 75 years.
A registered friendly society or branch may require a member to make and sign a statutory declaration that the total amount assured under outstanding contracts entered into by that member with any one or more registered friendly societies or branches (taking together all such societies or branches throughout the United Kingdom) does not exceed the limits applicable by virtue of this section and that the total premiums under those contracts do not exceed those limits.
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In this section “old society” means a friendly society which is not a new society.
This section applies if, on or after 19th March 1985, an old society—
begins to carry on tax exempt life or endowment business; or
in the opinion of the Board begins to carry on such business on an enlarged scale or of a new character.
If it appears to the Board, having regard to the restrictions placed on qualifying policies issued by new societies by paragraphs 3(1)(b) and (c) and 4(3)(b) of Schedule 15, that for the protection of the revenue it is expedient to do so, the Board may give a direction to the old society under subsection (4) below.
A direction under this subsection is that (and has the effect that) the old society to which it is given is to be treated for the purposes of this Act as a new society with respect to business carried on after the date of the direction.
An old society to which a direction is given may, within 30 days of the date on which it is given, appeal against the direction to the Special Commissioners on the ground that—
it has not begun to carry on business as mentioned in subsection (2) above; or
that the direction is not necessary for the protection of the revenue.
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In this Chapter “life or endowment business” means any business within any of paragraphs (1), (2), (4) and (5) of Schedule 1 to the Friendly Societies Act 1974 or paragraphs 1, 2, 4 and 5 of Schedule 1 to the Friendly Societies Act (Northern Ireland) 1970, any pension business and any other life assurance business, but—
shall not include the issue of a policy affording provision for sickness or other infirmity (whether bodily or mental) unless—
it also affords assurance for a gross sum independent of sickness or other infirmity; and
not less than 60 per cent. of the amount of the premiums is attributable to the provision afforded during sickness or other infirmity; and
there is no bonus or addition which may be declared or accrue upon the assurance of the gross sum;
shall not include the assurance of any annuity the consideration for which consists of sums obtainable on the maturity, or on the surrender, of any other policy of assurance issued by the friendly society, being a policy of assurance forming part of the tax exempt life or endowment business of the friendly society.
In this Chapter— and references in sections 460 to 465 and this subsection to a friendly society include references to any branch of that friendly society.
It is hereby declared that for the purposes of this Chapter (except where provision to the contrary is made) a registered friendly society formed on the amalgamation of two or more friendly societies is to be treated as different from the amalgamated societies.
A registered friendly society formed on the amalgamation of two or more friendly societies shall, for the purposes of this Chapter, be treated as registered not later than 3rd May 1966 if at the time of the amalgamation— or, if the amalgamation took place before 19th March 1985, the society was treated as registered not later than 3rd May 1966 by virtue of the proviso to section 337(4) of the 1970 Act.
all the friendly societies amalgamated were registered friendly societies eligible for the exemption conferred by section 460(1); and
at least one of them was not a new society;
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A trade union which is precluded by Act of Parliament or by its rules from assuring to any person a sum exceeding £3,000 by way of gross sum or £625 by way of annuity shall on making a claim be entitled—
to exemption from income tax and corporation tax in respect of its income which is not trading income and which is applicable and applied for the purpose of provident benefits;
to exemption from tax in respect of chargeable gains which are applicable and applied for the purpose of provident benefits.
In this section “provident benefits” includes any payment, expressly authorised by the rules of the trade union, which is made to a member during sickness or incapacity from personal injury or while out of work, or to an aged member by way of superannuation, or to a member who has met with an accident, or has lost his tools by fire or theft, and includes a payment in discharge or aid of funeral expenses on the death of a member or the wife of a member or as provision for the children of a deceased member.
In determining for the purposes of this section whether a trade union is by Act of Parliament or its rules precluded from assuring to any person a sum exceeding £625 by way of annuity, there shall be disregarded any approved annuities (as defined in section 620(9)).
In this section “trade union” means—
any trade union the name of which is entered in the list of trade unions maintained by the Registrar of Friendly Societies under section 8 of the Trade Union and Labour Relations Act 1974;
any employers' association the name of which is entered in the list of employers' associations maintained by the Registrar of Friendly Societies under section 8 of the Trade Union and Labour Relations Act 1974 and which on 30th September 1971 was a registered trade union for the purposes of section 338 of the 1970 Act; and
the Police Federation for England and Wales, the Police Federation for Scotland, the Police Federation for Northern Ireland and any other organisation of persons in police service which has similar functions.
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In respect of income arising to the trustees of an authorised unit trust, and for the purposes of the provisions relating to relief for capital expenditure, the Tax Acts shall have effect as if—
the trustees were a company resident in the United Kingdom; and
the rights of the unit holders were shares in the company.
The Tax Acts shall also have effect as if the aggregate amount shown in the accounts of the trust as income available for payment to unit holders or for investment were dividends on the shares referred to in subsection (1) above paid to them in proportion to their rights, the date of payment, in the case of income not paid to unit holders, being taken to be—
the date or latest date provided by the terms of the authorised unit trust for any distribution in respect of the distribution period in question;
if no date is so provided, the last day of the distribution period. This subsection shall not apply to any authorised unit trust which is also an approved personal pension scheme (within the meaning of Chapter IV of Part XIV).
References in the Corporation Tax Acts to a body corporate shall be construed in accordance with subsections (1) and (2) above, and section 234(3) and (4) shall apply with any necessary modifications.
Section 75 shall apply in relation to an authorised unit trust whether or not it is an investment company within the meaning of section 130; and sums periodically appropriated for managers' remuneration shall be treated for the purposes of section 75 as sums disbursed as expenses of management.
Subsection (1) above shall not apply in relation to an authorised unit trust under the terms of which the funds of the trust cannot be invested in such a way that income can arise to the trustees which will be chargeable to tax in the hands of the trustees otherwise than— and in this subsection “United Kingdom public revenue dividends” means public revenue dividends payable in the United Kingdom (whether they are also payable outside the United Kingdom or not) out of the public revenue of the United Kingdom.
under Schedule C as profits arising from United Kingdom public revenue dividends, or
under Case III of Schedule D;
In this section—
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This section applies to— except where the trustees of the scheme are not resident in the United Kingdom.
any unit trust scheme that is not an authorised unit trust; and
any authorised unit trust to which, by virtue of subsection (5) of section 468, that section does not apply,
Income arising to the trustees of the scheme shall be regarded for the purposes of the Tax Acts as income of the trustees (and not as income of the unit holders); and the trustees (and not the unit holders) shall be regarded as the persons to or on whom allowances or charges are to be made under the provisions of those Acts relating to relief for capital expenditure.
For the purposes of the Tax Acts the unit holders shall be treated as receiving annual payments (made by the trustees under deduction of tax) in proportion to their rights. This subsection shall not apply to any authorised unit trust which is also an approved personal pension scheme (within the meaning of Chapter IV of Part XIV).
The total amount of those annual payments in respect of any distribution period shall be the amount which, after deducting income tax at the basic rate in force for the year of assessment in which the payments are treated as made, is equal to the aggregate amount shown in the accounts of the scheme as income available for payment to unit holders or for investment.
The date on which the annual payments are treated as made shall be the date or latest date provided by the terms of the scheme for any distribution in respect of the distribution period in question, except that, if— the date on which the payments are treated as made shall be the last day of the period.
the date so provided is more than 12 months after the end of the period; or
no date is so provided,
In this section “distribution period” has the same meaning as in section 468, but—
if the scheme does not make provision for distribution periods, then for the purposes of this section its distribution periods shall be taken to be successive periods of 12 months the first of which began with the day on which the scheme took effect; and
if the scheme makes provision for distribution periods of more than 12 months, then for the purposes of this section each of those periods shall be taken to be divided into two (or more) distribution periods, the second succeeding the first after 12 months (and so on for any further periods).
In this section “unit trust scheme” has the same meaning as in the Financial Services Act 1986, except that the Treasury may by regulations provide that any scheme of a description specified in the regulations shall be treated as not being a unit trust scheme for the purposes of this section.
Regulations under this section may contain such supplementary and transitional provisions as appear to the Treasury to be necessary or expedient.
Sections 686 and 687 shall not apply to a scheme to which this section applies.
Section 720(5) shall not apply in relation to profits or gains treated as received by the trustees of a scheme to which this section applies if or to the extent that those profits or gains represent accruals of interest (within the meaning of Chapter II of Part XVII) which are treated as income in the accounts of the scheme.
This section shall have effect in relation to distribution periods beginning on or after 6th April 1987.
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If— then, whether or not any additional consideration is given for the exchange but subject to subsection (2) below, that person shall be treated for tax purposes (except as regards any tax payable in respect of dividends or interest), both at the time of the exchange and thereafter, as if the exchange had not taken place, and in that case the produce of any subsequent realisation of any of the securities received by him under the exchange (together with any additional consideration, or the appropriate part of any additional consideration, received by him under the exchange) shall be treated as the produce of the realisation of the corresponding securities surrendered by or transferred from him under the exchange, or of a corresponding part thereof, as the case may be.
any securities to which a person who is carrying on a trade which consists wholly or partly in dealing in securities is beneficially entitled are exchanged for other securities; and
the exchange is one to which this section applies,
Subsection (1) above shall not apply to any person who gives notice to the inspector not later than two years after the end of the chargeable period in which the exchange takes place that he desires not to be treated as mentioned in that subsection.
The exchanges to which this section applies are—
any exchange effected under any arrangement carried out under section 2 of the National Loans Act 1939 or section 14 of the National Loans Act 1968 if the Treasury direct, in pursuance of that arrangement, that this section shall apply to exchanges thereunder;
any exchange of securities effected by section 1 of the Bank of England Act 1946; and
any exchange of securities effected in pursuance of any enactment passed after 5th April 1946 which provides for the compulsory acquisition of any securities and the issue of other securities in lieu thereof, if the Treasury direct that this section shall apply to exchanges of securities effected in pursuance of that enactment.
In this section “securities” includes shares, stock, bonds, debentures and debenture stock.
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Where— any person (“the dealer”) who is carrying on a trade which consists wholly or partly in dealing in securities and is beneficially entitled to any securities (“the relevant securities”) to the holders of which the distribution is made shall, in relation to that distribution, be treated for tax purposes in the manner specified in subsections (2) and (3) below, unless he gives notice to the inspector not later than two years after the end of the chargeable period in which the distribution takes place that he desires not to be so treated in relation to that distribution.
in pursuance of any enactment passed after 5th April 1946 any securities are issued to any body corporate as, or as part of, the consideration for the compulsory acquisition of any property under that enactment; and
that body corporate is wound up or the capital thereof is reduced or any bonds, debentures or debenture stock thereof are redeemed, and, in or in connection with the winding up, reduction of capital or redemption, all or any of the securities so issued are distributed to holders of securities of the body corporate (“the distributed securities”); and
the Treasury direct that this section shall apply in relation to the distribution,
If the result of the winding up, reduction of capital or redemption of bonds, debentures or debenture stock is that the relevant securities to which the dealer is beneficially entitled are wholly extinguished without his receiving anything in respect thereof except the distributed securities, he shall be treated for tax purposes (except as regards any tax payable in respect of dividends or interest), both then and thereafter, as if neither the extinction nor the distribution had taken place but as if the produce of any subsequent realisation of any of the distributed securities were the produce of the realisation of the relevant securities or a corresponding part thereof, as the case may be.
In any other case—
the dealer shall be treated as having acquired the distributed securities at a cost equal to such proportion of the cost to him of the relevant securities as may be specified in the direction of the Treasury referred to in subsection (1) above and the question whether he has made any, and if so what, profit or suffered any, and if so what, loss on any subsequent realisation of the distributed securities shall be determined accordingly; and
in considering whether he has, either as the result of the winding up, reduction of capital or redemption of bonds, debentures or debenture stock and the distribution of the securities, or on any subsequent realisation of any of the relevant securities, made any, and if so what, profit or suffered any, and if so what, loss in connection with the relevant securities, the distributed securities shall be left out of account and the cost to him of the relevant securities shall be deemed to be reduced by the amount of the cost at which, under paragraph (a) above, he is taken to have acquired the distributed securities.
In this section “securities” includes shares, stock, bonds, debentures and debenture stock.
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Subsections (3) and (4) below shall have effect where a transaction to which this section applies occurs in relation to any securities (“the original holding”)—
to which a person carrying on a banking business, an insurance business or a business consisting wholly or partly in dealing in securities is beneficially entitled; and
which are such that a profit on their sale would form part of the trading profits of that business.
This section applies to any transaction which, if the securities were not such as are mentioned in subsection (1)(b) above— but does not apply to any transaction in relation to which section 471 applies or would apply if the person concerned had not given a notice under that section.
would result in the original holding being equated with a new holding by virtue of sections 77 to 86 of the 1979 Act (capital gains tax roll-over relief in cases of conversion etc.); or
would be treated by virtue of section 84 of that Act (compensation stock) as an exchange for a new holding which does not involve a disposal of the the original holding;
Subject to subsection (4) below, in making any computation in accordance with the provisions of this Act applicable to Case I of Schedule D of the profits or losses of the business —
the transaction shall be treated as not involving any disposal of the original holding, and
the new holding shall be treated as the same asset as the original holding.
Where under the transaction the person concerned receives or becomes entitled to receive any consideration in addition to the new holding, subsection (3) above shall have effect as if references to the original holding were references to the proportion of it which the market value of the new holding at the time of the transaction bears to the aggregate of that value and the market value at that time (or, if it is cash, the amount) of the consideration.
Subsections (3) and (4) above shall have effect with the necessary modifications in relation to any computation made for the purposes of section 76(2) in a case where securities held by the company concerned are equated with a new holding by virtue of any of sections 77 to 86 of the 1979 Act or are treated as not disposed of by virtue of section 84 of that Act.
In this section “securities” includes shares, any security within the meaning of section 82 of the 1979 Act and any rights, interests or options which by virtue of section 86(7), 93 or 139 of that Act are treated as shares for the purposes of sections 77 to 86 of that Act.
In determining for the purposes of subsection (2)(a) above whether a transaction would result in the original holding being equated with a new holding by virtue of section 85 or 86 of the 1979 Act the reference in section 87(1) of that Act to capital gains tax shall be construed as a reference to income tax.
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in computing for any of the purposes of the Tax Acts the profits arising from, or loss sustained in, the business, and
in the case of an insurance business, also in computing the profits or loss from pension business and general annuity business under section 436,
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is carried on in the United Kingdom by a person not ordinarily resident there, and
in making any such computation as is referred to in subsection (1) above with respect to that business, any interest on any securities issued by the Treasury is excluded by virtue of a condition of the issue thereof regulating the treatment of the interest on those securities for tax purposes,
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This section has effect where paragraphs (a) and (b) of section 474(2) apply to a business for any accounting period or year of assessment.
Up to the amount determined under this section (“the amount ineligible for relief”), interest on money borrowed for the purposes of the business—
shall be excluded in any computation under the Tax Acts of the profits (or losses) arising from the business or, where subsection (6) below applies, arising from any annuity business forming part of the life assurance business, and
shall be excluded from the definition of “charges on income” in section 338.
Subject to subsection (4) below, in determining the amount ineligible for relief, account shall be taken of all money borrowed for the purposes of the business which is outstanding in the accounting or basis period, up to the total cost of the tax-free Treasury securities held for the purpose of the business in that period.
Where the person carrying on the business is a company, account shall not be taken of any borrowed money carrying interest which, apart from subsection (2) above, does not fall to be included in the computations under paragraph (a) of that subsection, and is not to be treated as a charge on income for the purposes of the Corporation Tax Acts.
Subject to subsection (6) below, the amount ineligible for relief shall be equal to a year’s interest on the amount of money borrowed which is to be taken into account under subsection (3) above at a rate equal to the average rate of interest in the accounting or basis period on money borrowed for the purposes of the business, except that in the case of a period of less than 12 months interest shall be taken for that shorter period instead of for a year.
Where relief for expenses of management is to be granted to an insurance company for any accounting period, and that relief falls to be reduced under section 445(8)(b) (by applying the fraction which is investment income of the life assurance fund other than income from tax-free Treasury securities divided by that total investment income)—
the amount ineligible for relief shall be a fraction of the amount of interest in the accounting period on money borrowed for the purposes of the business; and
that fraction shall be the fraction which is income from tax-free Treasury securities divided by total investment income of the life assurance fund (that is to say, one minus the fraction to be applied under section 445(8)(b)).
In this section “tax-free Treasury securities” means securities issued by the Treasury with a condition regulating the treatment of the interest thereon for income tax or corporation tax purposes such that interest on the securities is excluded in computing the income or profits.
For the purposes of this section the cost of a holding of tax-free Treasury securities which has fluctuated in the accounting or basis period shall be the average cost of acquisition of the initial holding, and of any subsequent acquisitions in the accounting or basis period, applied to the average amount of the holding in the accounting or basis period, and this subsection shall be applied separately to securities of different classes.
In this section “accounting or basis period” means the company’s accounting period or the period by reference to which the profits or gains arising in the year of assessment are to be computed.
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Subsection (2) below applies where—
an interest distribution is made for a distribution period to a unit holder; and
the gross income entered in the distribution accounts for the purposes of computing the total amount available for distribution to unit holders does not derive from eligible income entirely.
Where this subsection applies, the obligation to deduct under section 349(2) shall not apply to the relevant amount of the interest distribution to the unit holder if the residence condition is on the distribution date fulfilled with respect to him.
Section 468O makes provision with respect to the circumstances in which the residence condition is fulfilled with respect to a unit holder.
This is how to calculate the relevant amount of the interest distribution— Where— R = the relevant amount; A = the amount of the interest distribution before deduction of tax to the unit holder in question; B = such amount of the gross income as derives from eligible income; C = the amount of the gross income.
In subsection (4) above the references to the gross income are references to the gross income entered as mentioned in subsection (1)(b) above.
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The Board may by regulations make provision with respect to any year of assessment requiring building societies, on such sums as may be determined in accordance with the regulations (including sums paid or credited before the beginning of the year but not previously brought into account under this subsection), to account for and pay an amount representing income tax calculated in part at the basic rate and in part at the reduced rate determined for the year of assessment concerned under section 483(1)(a); and in this section and section 477 such sums are referred to as “aggregate rate sums”.
Regulations under subsection (1) may contain such incidental and consequential provisions as appear to the Board to be appropriate, including provisions requiring the making of returns.
For any year of assessment to which regulations under subsection (1) above apply, dividends or interest payable in respect of shares in, or deposits with or loans to, a building society shall be dealt with for the purposes of corporation tax as follows—
in computing for any accounting period ending in the year of assessment the income of the society from the trade carried on by it, there shall be allowed as a deduction the actual amount paid or credited in the accounting period of any such dividends or interest, together with any amount accounted for and paid by the society in respect thereof as representing income tax;
in computing the income of a company which is paid or credited in the year of assessment with any such dividends or interest which are aggregate rate sums, the company shall—
be treated as having received an amount which, after deduction of income tax, is equal to the amount paid or credited, and
be entitled to a set-off or repayment of income tax accordingly;
no part of any such dividends or interest paid or credited in the year of assessment shall be treated as a distribution of the society or as franked investment income of any company resident in the United Kingdom.
Nothing in section 326 shall be taken as affecting subsection (3)(a) above and that paragraph shall apply to any terminal bonus paid by the society under a certified contractual savings scheme as if it were a dividend on a share in the society.
Except in so far as regulations under subsection (1) above otherwise provide, for any year of assessment to which such regulations apply—
notwithstanding anything in sections 348 to 350, income tax shall not be deducted from any dividends or interest payable in that year in respect of shares in or deposits with or loans to a building society;
subject to subsections (3)(b), (6) and (7) of this section, no repayment of income tax and no assessment to income tax shall be made in respect of any such dividends or interest to or on the person receiving or entitled to the dividends or interest;
any amounts paid or credited in respect of any such dividends or interest shall in computing the total income of an individual entitled thereto be treated as income for that year received by him after deduction of income tax from a corresponding gross amount;
subject to section 7(1), the amounts so paid or credited (and no more) shall, in applying sections 348 and 349(1) to other payments, be treated as profits or gains which have been brought into charge to income tax.
Subsection (5)(b) above shall not prevent an assessment in respect of income tax at a rate other than the basic rate.
Subsection (5)(b) above shall not apply to sums which are payable to exempt pension funds and which are aggregate rate sums; but the amounts paid or credited in respect of such sums shall be treated as paid or credited after deduction of income tax from a corresponding gross amount. In this subsection “exempt pension fund” means any fund or scheme in the case of which provision is made by section 592(2), 613(4), 614(1), (2) or (3), 620(6) or 643(2) for exempting the whole or part of its income from income tax.
For the purpose of determining whether any or what amount of tax is, by virtue of subsection (5)(c) above, to be taken into account as having been deducted from a gross amount in the case of an individual whose total income is reduced by any deductions, so much only of that gross amount shall be taken into account as is part of his total income as so reduced.
Notwithstanding anything in sections 348 to 350, for any year of assessment to which regulations under subsection (1) above apply income tax shall not be deducted upon payment to the society of any interest on advances, being interest payable in that year.
Subsection (9) above shall not apply to any payment of relevant loan interest to which section 369 applies.
In this section “dividend” has the meaning given by regulations under subsection (1) above, but any sum which is paid by a building society by way of dividend and which is not an aggregate rate sum shall be treated for the purposes of Schedule D as paid by way of interest.
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Where a building society investment which is a source of income of any person (“the lender”) is not a relevant building society investment but at any time becomes such an investment, section 67 shall apply as if the investment were a source of income which the lender ceased to possess immediately before that time.
Where a building society investment which is a source of income of any person ceases at any time to be a relevant building society investment, section 66(3) shall apply as if the investment were a new source of income acquired by him immediately after that time.
In this section “building society investment” does not include a quoted Eurobond (as defined in section 124(1)) but, subject to that, means any share in, deposit with or loan to a building society; and for the purposes of this section a building society investment is relevant if dividends or interest payable in respect of it are aggregate rate sums.
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This section shall apply, in place of the provisions of section 10, with respect to any accounting period ending before 6th April 1990 of a building society to which section 344 of the 1970 Act applied immediately before the coming into force of this Act.
Where this section applies to a building society, then —
corporation tax assessed on the society for any accounting period shall be paid within 30 days from the date of the issue of the notice of assessment, except that if the society’s basis period for the year 1965-66 did not extend into the year 1966, the tax shall not be payable before the like time after the last day of the accounting period as 1st January 1966 is after the last day of that basis period; but
if corporation tax has not become payable by the society for an accounting period by the like time from the beginning of that period as there is between the beginning of the society’s basis period for the year 1965-66 and 1st January 1966, the society shall at that time from the beginning of the accounting period make a provisional payment of tax computed on the amount on which the society is chargeable to corporation tax for the accounting period last ended with such adjustments, if any, as may be required for periods of different length or as may be agreed between the society and the inspector.
References in section (2) above to a society’s basis period for the year 1965-66 are references to the period by reference to which the society was assessed to income tax for that year under arrangements entered into under section 445 of the Income Tax Act 1952.
Where, by virtue of subsection (2)(a) above, corporation tax assessed on a building society in respect of a 1989 accounting period would, apart from this subsection, be payable by a date which is earlier than the end of the period of two months from the end of that accounting period, the tax shall be payable within that period of two months.
If, apart from this subsection, the date on which, under subsection (2)(b) above, a building society would be required to make a provisional payment of corporation tax for a 1989 accounting period would fall before the end of the period of two months from the end of that accounting period, that date shall be postponed until the end of that period of two months.
With respect to a 1989 accounting period of a building society to which subsection (4) above applies, in section 825(8)(b) of this Act and paragraph 5(c) in the second column of the Table in section 86(4) of the Management Act (the reckonable date for interest on overdue tax), the reference to the time limit imposed by section (2)(a) above shall be construed as a reference to the limit imposed by subsection (4) above.
In subsections (4) to (6) above a “1989 accounting period” means an accounting period ending in the year 1989-90.
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Any deposit-taker making a payment of interest in respect of a relevant deposit shall be liable to account for and pay an amount representing income tax on that payment, calculated by applying the composite rate (determined in accordance with section 483) to the grossed-up amount of the payment, that is to say, to the amount which after deduction of tax at the composite rate would be equal to the amount actually paid.
Where in relation to any payment of interest a deposit-taker is liable to account for and pay an amount under subsection (1) above—
subject to subsection (3) below, no assessment to income tax shall be made on, and no repayment of income tax shall be made to, the person receiving or entitled to the payment in respect of it;
the payment shall, in computing the total income of the person entitled to it, be treated as income for that year received by him after deduction of income tax at the basic rate from a corresponding gross amount; and
the payment (and no more) shall, in applying sections 348 and 349 to other payments, be treated as profits or gains which have been brought into charge to income tax.
Subsection (2)(a) above shall not prevent an assessment in respect of income tax at a rate other than the basic rate.
For the purpose of determining whether any or what amount of tax is, by virtue of subsection (2)(b) above, to be taken into account as having been deducted from a gross amount in the case of an individual whose total income is reduced by any deductions, so much only of that gross amount shall be taken into account as is part of his total income as so reduced.
Any payment of interest in respect of which an amount is payable under subsection (1) above shall be a relevant payment for the purposes of Schedule 16 whether or not the deposit-taker making the payment is resident in the United Kingdom.
Schedule 16 shall apply in relation to any payment which is a relevant payment by virtue of subsection (5) above—
with the substitution for any reference to a company of a reference to a deposit-taker;
as if any amount payable under subsection (1) above were payable as income tax;
as if paragraph 5 applied only in relation to payments received by the deposit-taker and falling to be taken into account in computing his income chargeable to corporation tax; and
as if in paragraph 7 the reference to section 7(2) included a reference to sections 11(3) and 349(1).
In relation to any deposit-taker who is not a company, Schedule 16 shall have effect as if—
paragraph 5 were omitted; and
references to accounting periods were references to periods for which the deposit-taker makes up his accounts.
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Where a deposit which is a source of income of any person (“the lender”) is not a composite rate deposit but at any time becomes such a deposit, section 67 shall apply as if the deposit were a source of income which the lender ceased to possess immediately before it became a composite rate deposit.
Section 67 shall apply in relation to a deposit which became a composite rate deposit on 6th April 1985 with the omission from subsection (1)(b) of the words from “and shall” to “this provision”.
Where a deposit which is a source of income of any person ceases to be a composite rate deposit, section 66(3) shall apply as if the deposit were a new source of income acquired by him immediately after it ceased to be a composite rate deposit.
For the purposes of this section a deposit is at any time a composite rate deposit if, were the person holding it to make a payment of interest in respect of it at that time, he would be liable to account for and pay an amount on that payment under section 479(1).
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In this section “the relevant provisions” means sections 479 and 480, this section and section 482.
In the relevant provisions “deposit-taker” means any of the following—
the Bank of England;
any institution authorised under the Banking Act 1987 or municipal bank within the meaning of that Act;
the Post Office;
any company to which property and rights belonging to a trustee savings bank were transferred by section 3 of the Trustee Savings Bank Act 1985;
any bank formed under the Savings Bank (Scotland) Act 1819; and
any person or class of person who receives deposits in the course of his business or activities and which is for the time being prescribed by order made by the Treasury for the purposes of this paragraph.
In the relevant provisions “deposit” means a sum of money paid on terms under which it will be repaid with or without interest and either on demand or at a time or in circumstances agreed by or on behalf of the person making the payment and the person to whom it is made.
For the purposes of the relevant provisions a deposit is a relevant deposit if, but only if— and the deposit is not prevented from being a relevant deposit by subsection (5) below.
the person who is beneficially entitled to any interest in respect of the deposit is an individual or, where two or more persons are so entitled, all of them are individuals; or
in Scotland, the person who is so entitled is a partnership all the partners of which are individuals; or
the person entitled to any such interest receives it as a personal representative in his capacity as such;
A deposit is not a relevant deposit if—
a qualifying certificate of deposit has been issued in respect of it or it is a qualifying time deposit;
it is a debt on a debenture (“debenture” having the meaning given in section 744 of the Companies Act 1985) issued by the deposit-taker;
it is a loan made by a deposit-taker in the ordinary course of his business or activities;
it is a debt on a security which is listed on a recognised stock exchange;
it is a general client account deposit;
it forms part of a premiums trust fund (within the meaning of section 457) of an underwriting member of Lloyd's;
it is made by a Stock Exchange money broker (recognised by the Bank of England) in the course of his business as such a broker;
in the case of a deposit-taker resident in the United Kingdom for the purposes of income tax or corporation tax, it is held at a branch of his situated outside the United Kingdom;
in the case of a deposit-taker who is not so resident, it is held otherwise than at a branch of his situated in the United Kingdom; or
the appropriate person has declared in writing to the deposit-taker liable to pay interest in respect of the deposit that—
at the time when the declaration is made, the person who is beneficially entitled to the interest is not, or, as the case may be, all the persons who are so entitled are not, ordinarily resident in the United Kingdom;
in a case falling within subsection (4)(c) above the deceased was, immediately before his death, not ordinarily resident in the United Kingdom.
The Treasury may by order make amendments in this section and sections 479(2) to (7), 480 and 482 providing for deposits of a kind specified in the order to be or, as the case may be, not to be relevant deposits in relation to all deposit-takers or such deposit-takers or classes of deposit-takers as may be so specified.
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For the purposes of sections 479, 480 and 481 and this section, any amount which is credited as interest in respect of a relevant deposit shall be treated as a payment of interest.
A declaration under section 481(5)(k) shall—
if made under sub-paragraph (i), contain an undertaking by the person making it that if the person, or any of the persons in respect of whom it is made, becomes ordinarily resident in the United Kingdom he will notify the deposit-taker accordingly; and
in any case, be in such form as may be prescribed or authorised, and contain such information as may reasonably be required, by the Board.
A deposit-taker shall, on being so required by notice given to him by an inspector, make all declarations which have been made to him under section 481(5) available for inspection by the inspector or by a named officer of the Board.
Where a notice has been given to a deposit-taker under subsection (3) above, the declarations shall be made available within such time as may be specified in the notice, and the person to whom they are to be made available may take copies of or extracts from them.
A deposit-taker shall treat every deposit made with him as a relevant deposit unless satisfied that it is not a relevant deposit, but where he has satisfied himself that a deposit is not a relevant deposit he shall be entitled to continue to so treat it until such time as he is in possession of information which can reasonably be taken to indicate that the deposit is or may be a relevant deposit.
In section 481(5)—
For the purposes of section 481(5)(h) and (j) a deposit is held at a branch of a deposit-taker if it is recorded in his books as a liability of that branch.
A certificate of deposit, as defined in section 56(5), which was issued before 13th March 1984 on terms which provide for interest to be payable on the deposit at any time after 5th April 1985 (whether or not interest is payable on it before that date) shall, if it is not a qualifying certificate of deposit, be treated for the purposes of section 481(5) as if it were a qualifying certificate of deposit.
Any deposit which was made before 6th July 1984 but which is not a qualifying time deposit shall, where it is made on terms which—
do not make provision for the transfer of the right to repayment;
prevent partial withdrawals of, or additions to, the deposit; and
require— be treated for the purposes of section 481(5) as if it were a qualifying time deposit.
the deposit-taker to repay the sum at the end of a specified period which ends after 5th April 1985; or
in a case where interest is payable only at the time of repayment of the deposit, the deposit-taker to repay the sum on demand or on notice;
An order under section 481(2)(f) may prescribe a person or class of person in relation to all relevant deposits or only in relation to relevant deposits of a kind specified in the order.
The Board may by regulations make provision—
requiring any declaration under section 481(5)(k)(i) which does not give the address of the person making it, to be supported by a certificate given by the deposit-taker concerned—
in such form as may be prescribed or authorised by the Board; and
containing such information as may reasonably be required by the Board; and
generally for giving effect to sections 479 to 481 and this section.
Regulations under subsection (11) above or an order under section 481(6) may contain such incidental and consequential provision as appears to the Board or the Treasury, as the case may be, to be appropriate.
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the reduced rate for the purposes of section 476; and
the composite rate for the purposes of section 479.
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be made before 31st December in that year; and
be based only on information relating to periods before the end of the year of assessment in which the order is made.
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If the order made under section 26 of the Finance Act 1984 in the year 1987-88 is made in pursuance of subsection (4) of that section, that order shall, notwithstanding that that subsection is not re-enacted by this Act, apply for the purposes of sections 476 and 479 for the year 1988-89.
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Any savings bank other than a savings bank which is the successor or further successor to an existing trustee savings bank shall on making a claim be entitled to exemption from income tax and corporation tax in respect of the income of its funds to the extent that such income is applied in the payment or credit of interest to any depositor; but, subject to section 325, any such interest shall be chargeable under Case III of Schedule D.
Any gain or loss accruing to a savings bank which is the successor to an existing trustee savings bank on a disposal of an exempt investment held by that existing bank on 21st November 1979, may, if that existing bank has so elected, be computed by reference to the cost of the investment instead of by reference to its market value on the latter date and, in the case of a loss, without any restriction under section 270(4) of the 1970 Act.
In subsection (2) above the reference to an election is a reference to an election under paragraph 2(3) of Schedule 11 to the Finance Act 1980 (under which the election must have been by notice in writing given to the Board within two years after 21st November 1979, and has effect in relation to all exempt investments held by the bank on that date).
Where a savings bank which is the successor to an existing trustee savings bank holds investments which include both exempt investments held by the existing bank on 21st November 1979 and other investments of the same class, any investments of that class which are disposed of by the successor shall be treated for the purposes of subsection (2) above as consisting of the other investments rather than of the exempt investments held on that date.
In this section references to exempt investments held by an existing trustee savings bank on 21st November 1979 are to investments on the disposal of which immediately before that date no chargeable gain or allowable loss would have accrued to the bank by virtue of section 67 of the 1979 Act (gilt-edged securities held for more than a year).
In this section “successor” and “existing”, in relation to a trustee savings bank, have the meanings given by section 1 of the Trustee Savings Bank Act 1985, and “further successor” has the meaning given by paragraph 9 of Schedule 2 to that Act.
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Where the business of a trustee savings bank has been transferred to another trustee savings bank after 21st November 1979 and before the day which was the vesting day for the purposes of the Trustee Savings Bank Act 1985—
any exempt investment which was held on that date by the first bank and was transferred with the business shall be treated for the purposes of section 484 in its application to any savings bank which is the successor to the second bank as if it had been held on that date by the second bank but without prejudice to any election made in respect of the investment by the first bank under sub-paragraph (3) of paragraph 2 of Schedule 11 to the Finance Act 1980; and
the cost of the investment shall be taken for the purposes of that sub-paragraph as equal to the cost of the investment to the first bank.
Where the business of a trustee savings bank was transferred to another trustee savings bank before 21st November 1979 the cost of any exempt investment held by the second bank on that date which— shall be taken for the purposes of section 484(2) in its application to any savings bank which is the successor to the second bank as equal to the cost of the investment to the first bank.
was transferred to it with the business; and
was an exempt investment on the date of the transfer,
In this section references to exempt investments held by a trustee savings bank on 21st November 1979 or the date of the transfer are to investments on the disposal of which immediately before that date no chargeable gain or allowable loss would have accrued to the bank by virtue of section 67 of the 1979 Act (gilt-edged securities held for more than a year) or, in the case of a transfer which took place before that section came into force, section 41 of the Finance Act 1969 (which was re-enacted by section 67 of the 1979 Act).
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Notwithstanding anything in the Tax Acts, share interest or loan interest paid by a registered industrial and provident society shall not be treated as a distribution; and, subject to subsection (7) below and section 487(3), any share or loan interest paid in an accounting period of the society—
shall be deductible in computing, for the purposes of corporation tax, the income of the society for that period from the trade carried on by the society, or
if the society is not carrying on a trade, shall be treated for those purposes as a charge on the income of the society.
Notwithstanding anything in sections 348 to 350, any share interest or loan interest paid by a registered industrial and provident society, except any to which subsection (3) below applies, shall be paid without deduction of income tax.
This subsection applies to any share interest or loan interest payable to a person whose usual place of abode is not within the United Kingdom, and in any such case section 349(2) shall apply to the payment as it applies to a payment of yearly interest, and income tax shall be deducted accordingly.
Any share interest or loan interest paid by a registered industrial and provident society shall be chargeable under Case III of Schedule D.
Where at any time, by virtue of this section, the income of a person from any source, not having previously been chargeable by direct assessment on that person, becomes so chargeable, section 66(3) shall apply as if the source of that income were a new source of income acquired by that person at that time.
Every registered industrial and provident society shall, within three months after the end of any accounting period of the society, deliver to the inspector a return showing—
the name and place of residence of every person to whom the society has by virtue of this section paid without deduction of income tax sums amounting to more than £15 in that period; and
the amount so paid in that period to each of those persons.
If for any accounting period a return under subsection (6) above is not duly made by a registered industrial and provident society, share and loan interest paid by the society in that period shall not be deductible in computing its income, or be treated as a charge on income.
If in the course of, or as part of, a union or amalgamation of two or more registered industrial and provident societies, or a transfer of engagements from one registered industrial and provident society to another, there is a disposal of an asset by one society to another, both shall be treated for the purposes of corporation tax in respect of chargeable gains as if the asset were acquired from the society making the disposal for a consideration of such amount as would secure that neither a gain nor a loss would accrue to that society on the disposal.
Subsections (1) and (8) above shall have effect as if references to a registered industrial and provident society included any co-operative association established and resident in the United Kingdom, and having as its object or primary object to assist its members in the carrying on of agricultural or horticultural businesses on land occupied by them in the United Kingdom or in the carrying on of businesses consisting in the catching or taking of fish or shellfish.
No dividends or bonus deductible in computing income as mentioned in subsection (10) above shall be regarded as a distribution.
In this section— and references to the payment of share interest or loan interest include references to the crediting of such interest.
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Subject to subsection (2) below, in computing for the purposes of corporation tax the income of a credit union for any accounting period—
neither the activity of the credit union in making loans to its members nor in placing on deposit or otherwise investing from time to time its surplus funds shall be regarded as the carrying on of a trade or part of a trade; and
interest received by the credit union on loans made by it to its members shall not be chargeable to tax under Case III of Schedule D or otherwise.
Paragraph (b) of subsection (1) above shall not apply to an accounting period of a credit union for which the credit union is obliged to make a return under section 486(6) and has not done so within three months after the end of that accounting period or such longer period as the inspector shall allow.
No share interest, loan interest or annuity or other annual payment paid or payable by a credit union in any accounting period shall be deductible in computing for the purposes of corporation tax the income of the credit union for that period from any trade carried on by it or be treated for those purposes as a charge on income.
A credit union shall not be regarded as an investment company for the purposes of section 75 above or section 306 of the 1970 Act (capital allowances).
In this section— and references to the payment of share interest or loan interest include references to the crediting of such interest.
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Where a housing association makes a claim in that behalf for any year or part of a year of assessment during which the association was approved for the purposes of this section—
rent to which the association was entitled from its members for the year or part shall be disregarded for tax purposes; and
any yearly interest payable by the association for the year or part shall be treated for tax purposes as payable not by the association but severally by the members of the association who during the year or part were tenants of property of the association, in the proportion which the rents payable by those members for the year or part bear to the aggregate of the rents to which the association was entitled for the year or part from the properties to which the interest relates; and
each member of the association shall be treated for the purposes of section 354 as if he were the owner of the association’s estate or interest in the property of which he is the tenant.
Where the property, or any of the properties, to which any such interest as is mentioned in paragraph (b) of subsection (1) above relates is for any period not subject to a tenancy—
that paragraph shall not apply in relation to so much of the interest as is attributable to the property not subject to a tenancy; and
for the purposes of that paragraph as it applies in relation to a tenant of any other property to which the interest relates, the association shall be deemed to have received, in respect of the property not subject to a tenancy, rent at the rate payable therefor when it was last let by the association.
In computing the income of the association no payments shall be deductible under section 25(3) to (7) in so far as attributable to a period as respects which a claim under subsection (1) above has effect.
Where a claim under subsection (1) above has effect, any adjustment of the liability to tax of a member or of the association which is required in consequence of the claim may be made by an assessment or by repayment or otherwise, as the case may require.
Where a housing association makes a claim in that behalf for an accounting period or part of an accounting period during which it was approved for the purposes of this section, the housing association shall be exempt from corporation tax on chargeable gains accruing to it in the accounting period or part on the disposal by way of sale of any property which has been or is being occupied by a tenant of the housing association.
An approval given for the purposes of this section shall have effect as from such date (whether before or after the giving of the approval) as may be specified by the approving authority and shall cease to have effect if revoked.
The Secretary of State as respects Great Britain, or the Head of the Department of the Environment for Northern Ireland as respects Northern Ireland, may make regulations for the purpose of carrying out the provisions of this section; and, from the coming into operation of regulations under this subsection prescribing requirements or conditions for the purposes of subsection (6)(iii) above, “prescribed” in subsection (6)(iii) above shall mean prescribed by or under such regulations. The power to make regulations under this subsection shall be exercisable by the Secretary of State by statutory instrument and by the Head of the Department of the Environment for Northern Ireland by statutory rule for the purposes of the Statutory Rules (Northern Ireland) Order 1979.
A claim under this section shall be made to the inspector, and shall be made not later than two years after the end of the year of assessment or accounting period to which, or to a part of which, it relates. Section 42 of the Management Act shall not apply to a claim under this section.
Subject to subsection (11) below, no claim under this section shall have effect unless it is proved that during the year or accounting period, or part thereof, to which the claim relates—
no property belonging to the association making the claim was let otherwise than to a member of the association;
no property let by the association, and no part of such property, was occupied, whether solely or as joint occupier, by a person not being a member of the association;
the association making the claim satisfies the conditions specified in subsection (6)(i) and (ii) above and has complied with the conditions prescribed under subsection (6)(iii) for the time being in force; and
any covenants required to be included in grants of tenancies by those conditions have been observed. For the purposes of paragraph (b) above occupation by any other person in accordance with the will, or the provisions applicable on the intestacy, of a deceased member, shall be treated during the first six months after the death as if it were occupation by a member.
Where the Board are satisfied that the requirements of subsection (10) above are substantially complied with they may direct that the claim shall have effect; but if subsequently information comes to the knowledge of the Board which satisfies them that the direction was not justified they may revoke the direction and thereupon the liability of all persons concerned to tax for all relevant years or accounting periods shall be adjusted by the making of assessments or otherwise.
A claim under this section shall be in such form and contain such particulars as may be prescribed by the Board, and, without prejudice to the generality of this provision, the required particulars may include an authority granted by all members of the association for any relevant information contained in any return made by a member under the provisions of the Income Tax Acts to be used by the Board in such manner as the Board may think fit for determining whether the claim ought to be allowed.
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Where a self-build society makes a claim in that behalf for any year or part of a year of assessment during which the society was approved for the purposes of this section, rent to which the society was entitled from its members for the year or part shall be disregarded for tax purposes.
Where a claim under subsection (1) above has effect, any adjustment of the society’s liability to tax which is required in consequence of the claim may be made by an assessment or by repayment or otherwise, as the case may require.
Where a self-build society makes a claim in that behalf for an accounting period or part during which it was approved for the purposes of this section, the society shall be exempt from corporation tax on chargeable gains accruing to it in the accounting period or part thereof on the disposal of any land to a member of the society.
References in this section to the approval of a self-build society are references to its approval by the Secretary of State, and the Secretary of State shall not approve a self-build society for the purposes of this section unless he is satisfied—
that the society is, or is deemed to be, duly registered under the Industrial and Provident Societies Act 1965; and
that the society satisfies such other requirements as may be prescribed by or under regulations under subsection (6) below and will comply with such conditions as may for the time being be so prescribed.
An approval given for the purposes of this section shall have effect as from such date (whether before or after the giving of the approval) as may be specified by the Secretary of State and shall cease to have effect if revoked by him.
The Secretary of State may by statutory instrument make regulations for the purpose of carrying out the provisions of this section; and a statutory instrument containing any such regulations shall be subject to annulment in pursuance of a resolution of the House of Commons.
Section 42 of the Management Act shall not apply to a claim under this section, but such a claim shall be made to the inspector and shall be made not later than two years after the end of the year of assessment or accounting period to which, or to a part of which, it relates.
Subject to subsection (9) below, no claim under this section shall have effect unless it is proved that during the year or accounting period, or part thereof, to which the claim relates— and for the purposes of paragraph (a) above, occupation by any other person in accordance with the will, or the provisions applicable on the intestacy, of a deceased member, shall be treated during the first six months after the death as if it were occupation by a member.
no land owned by the society was occupied, in whole or in part and whether solely or as joint occupier, by a person who was not, at the time of his occupation, a member of the society; and
the society making the claim satisfies the condition specified in paragraph (a) of subsection (4) above and has complied with the conditions prescribed under paragraph (b) of that subsection and for the time being in force;
Notwithstanding the provisions of subsection (8) above, where, on a claim under this section, the Board are satisfied that the requirements of paragraphs (a) and (b) of that subsection are substantially complied with, they may direct that the claim shall have effect; but if, subsequently, information comes to the knowledge of the Board which satisfies them that the direction was not justified, they may revoke the direction and thereupon the liability of the society to tax for all relevant years or accounting periods shall be adjusted by the making of assessments or otherwise.
A claim under this section shall be in such form and contain such particulars as may be prescribed by the Board.
In this section—
In the application of this section to Northern Ireland—
any reference in subsections (4) and (5) above to the Secretary of State shall be construed as a reference to the Department of the Environment for Northern Ireland;
the reference in subsection (4)(a) to the Industrial and Provident Societies Act 1965 shall be construed as a reference to the Industrial and Provident Societies Act (Northern Ireland) 1969; and
for subsection (6) there shall be substituted the following subsection—.
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Subject to subsection (2) below, where a company carries on any business of mutual trading or mutual insurance or other mutual business the provisions of the Tax Acts relating to distributions shall apply to distributions made by the company notwithstanding that they are made to persons participating in the mutual activities of that business and derive from those activities, but shall so apply only to the extent to which the distributions are made out of profits of the company which are brought into charge to corporation tax or out of franked investment income (including group income).
In the case of a company carrying on any mutual life assurance business, the provisions of the Tax Acts relating to distributions shall not apply to distributions made to persons participating in the mutual activities of that business and derived from those activities; but if the business includes annuity business, the annuities payable in the course of that business shall not be treated as charges on the income of the company to any greater extent than if the business were not mutual but were being carried on by the company with a view to the realisation of profits for the company.
Subject to subsections (1) and (2) above, the fact that a distribution made by a company carrying on any such business is derived from the mutual activities of that business and the recipient is a person participating in those activities shall not affect the character which the payment or other receipt has for purposes of corporation tax or income tax in the hands of the recipient.
Where a company does not carry on, and never has carried on, a trade or a business of holding investments, and is not established for purposes which include the carrying on of a trade or of such a business, the provisions of the Tax Acts relating to distributions shall apply to distributions made by the company only to the extent to which the distributions are made out of profits of the company which are brought into charge to corporation tax or out of franked investment income.
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Where any person receives any money or money’s worth— and the body corporate has at any time carried on a trade which consists of or includes the conducting of any mutual business (whether confined to members of the body corporate or not), and is being or has been wound up or dissolved, the provisions of this section shall apply to the receipt.
forming part of the assets of a body corporate, other than assets representing capital; or
forming part of the consideration for the transfer of the assets of a body corporate, other than assets representing capital, as part of a scheme of amalgamation or reconstruction which involves the winding up of the body corporate; or
consisting of the consideration for a transfer or surrender of a right to receive anything falling under paragraph (a) or (b) above, being a receipt not giving rise to any charge to tax on the recipient apart from this section,
If a transfer or surrender of a right under subsection (1)(c) above is not at arm’s length, the person making the transfer or surrender shall, for the purposes of this section, be deemed then to have received consideration equal to the value of the right.
If in respect of a payment of any amount made to the body corporate for the purposes of its mutual business any deduction has been allowed for the purposes of tax in computing the profits or gains or losses of a trade, then—
if at the time of the receipt the recipient is the person, or one of the persons, carrying on that trade, the amount or value of the receipt shall be treated for the purposes of tax as a trading receipt of that trade; and
if at the time of the receipt the recipient is not the person, or one of the persons, carrying on that trade, but was the person, or one of the persons, carrying on that trade when any payment was made to the body corporate for the purposes of its mutual business in respect of which a deduction was allowed for the purposes of tax in computing the profits or gains or losses of the trade, the recipient shall, subject to subsection (6) below, be charged under Case VI of Schedule D for the chargeable period in which the receipt falls on an amount equal to the amount or value of the receipt.
Subsection (3)(a) above applies notwithstanding that, as a result of a change in the persons carrying on the trade, the profits or gains are under section 113 or 337(1) determined as if it had been permanently discontinued and a new trade set up and commenced.
Where an individual is chargeable to tax by virtue of subsection (3)(b) above and the profits or gains of the trade there mentioned fell to be treated as earned income for the purposes of the Income Tax Acts, the sums in respect of which he is so chargeable shall also be treated for those purposes as earned income.
If the trade mentioned in subsection (3)(b) above was permanently discontinued before the time of the receipt, then in computing the charge to tax under subsection (3)(b) above there shall be deducted from the amount or value of the receipt—
any loss, expense or debit (not being a loss, expense or debit arising directly or indirectly from the discontinuance itself) which, if the trade had not been discontinued, would have been deducted in computing for tax purposes the profits or gains or losses of the person by whom it was carried on before the discontinuance, or would have been deducted from or set off against those profits as so computed, and
any capital allowance to which the person who carried on the trade was entitled immediately before the discontinuance and to which effect has not been given by way of relief before discontinuance.
Relief shall not be given under subsection (6) above or under section 105(1) in respect of any loss, expense, debit or allowance if and so far as it has been so given by reference to another charge to tax under this section or under section 103.
For the purposes of subsection (1) above assets representing capital consist of—
assets representing any loan or other capital subscribed, including income derived from any investment of any part of that capital, but not including profits from the employment of that capital for the purposes of the mutual business of the body corporate;
assets representing any profits or gains charged to tax as being profits or gains of any part of the trade carried on by the body corporate which does not consist of the conducting of any mutual business;
(so far as not comprised in paragraphs (a) and (b) above) assets representing taxed income from any investments.
In this section “mutual business” includes any business of mutual insurance or mutual trading.
Subsections (3) to (7) above shall apply with any necessary modifications— as they apply to a trade.
to a profession or vocation; and
to the occupation of woodlands the profits or gains of which are assessable under Schedule D;
It is hereby declared that the description of trades in subsection (1) above does not include any trade all the profits or gains of which are chargeable to tax and, in particular, does not include such a trade carried on by any registered industrial and provident society.
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Where a person carries on as part of a trade— those activities shall be treated for all purposes of income tax, and for the purposes of the charge of corporation tax on income, as a separate trade, distinct from all other activities carried on by him as part of the trade.
any oil extraction activities; or
any of the following activities, namely, the acquisition, enjoyment or exploitation of oil rights; or
activities of both those descriptions,
Relief in respect of a loss incurred by a person shall not be given under section 380 or 381 against income arising from oil extraction activities or from oil rights (“ring fence income”) except to the extent that the loss arises from such activities or rights.
Relief in respect of a loss incurred by a person shall not be given under section 393(2) against his ring fence profits except to the extent that the loss arises from oil extraction activities or from oil rights.
In any case where— then, notwithstanding anything in that subsection, the amount of the loss may be set off, in accordance with section 385 or 393(1), against so much of his trading income in any subsequent chargeable period as is derived from the related activities.
in any chargeable period a person incurs a loss in activities (“separate activities”) which, for that or any subsequent chargeable period, are treated by virtue of subsection (1) above as a separate trade for the purposes specified in that subsection; and
in any subsequent chargeable period any of his trading income is derived from activities (“related activities”) which are not part of the separate activities but which, apart from subsection (1) above, would together with those activities constitute a single trade,
Subject to subsection (7) below, a capital allowance which is to be given to any person by discharge or repayment of tax shall not to any extent be given effect under section 71 of the 1968 Act by deduction from or set off against his ring fence income.
Subject to subsection (7) below, a capital allowance which is to be given to any person by discharge or repayment of tax shall not to any extent be given effect under section 74 of the 1968 Act by deduction from or set off against his ring fence profits.
Subsection (5) or (6) above shall not apply to a capital allowance which falls to be made to a company for any accounting period in respect of an asset used in the relevant accounting period by a company associated with it and so used in carrying on oil extraction activities. For the purposes of this subsection, the relevant accounting period is that in which the allowance in question first falls to be made to the company (whether or not it can to any extent be given effect in that period under section 74(1) of the 1968 Act).
On a claim for group relief made by a claimant company in relation to a surrendering company, group relief shall not be allowed against the claimant company’s ring fence profits except to the extent that the claim relates to losses incurred by the surrendering company that arose from oil extraction activities or from oil rights.
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Schedule 19B to this Act (exploration expenditure supplement) shall have effect.
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Where a person disposes of any oil in circumstances such that the market value of that oil in a particular month falls to be taken into account under section 2 of the Oil Taxation Act 1975 (“the 1975 Act”), otherwise than by virtue of paragraph 6 of Schedule 3 to that Act, in computing for the purposes of petroleum revenue tax the assessable profit or allowable loss accruing to him in any chargeable period from an oil field (or as would so fall but for section 10 of that Act), then— the disposal of the oil and its acquisition by the person to whom it was disposed of shall be treated as having been for a consideration equal to the market value of the oil as so taken into account under section 2 of that Act (or as would have been so taken into account under that section but for section 10 of that Act).
for all purposes of income tax, and
for the purposes of the charge of corporation tax on income,
Where a person makes a relevant appropriation of any oil without disposing of it and does so in circumstances such that the market value of that oil in a particular month falls to be taken into account under section 2 of the 1975 Act in computing for the purposes of petroleum revenue tax the assessable profit or allowable loss accruing to him in any chargeable period from an oil field (or would so fall but for section 10 of that Act), then for all the purposes of income tax and for the purposes of the charge of corporation tax on income, he shall be treated—
as having, at the time of the appropriation—
sold the oil in the course of the separate trade consisting of activities falling within section 492(1)(a) or (b); and
bought it in the course of the separate trade consisting of activities not so falling; and
as having so sold and bought it at a price equal to its market value as so taken into account under section 2 of the 1975 Act (or as would have been so taken into account under that section but for section 10 of that Act). In this subsection “relevant appropriation” has the meaning given by section 12(1) of the 1975 Act.
Where— then, for all purposes of income tax and for the purposes of the charge of corporation tax on income, the disposal of the oil and its acquisition by the person to whom it was disposed of shall be treated as having been for a consideration equal to the market value of the oil in the calendar month in which the disposal was made.
a person disposes otherwise than in a sale at arm’s length (as defined in paragraph 1 of Schedule 3 to the 1975 Act) of oil acquired by him in the course of oil extraction activities carried on by him or by virtue of oil rights held by him, and
subsection (1) above does not apply in relation to the disposal,
If a person appropriates oil acquired by him in the course of oil extraction activities carried on by him or by virtue of oil rights held by him and the appropriation is to refining or to any use except for production purposes of an oil field, within the meaning of Part I of the 1975 Act, then, unless subsection (2) above applies, for all purposes of income tax and for the purposes of the charge of corporation tax on income—
he shall be treated as having, at the time of the appropriation, sold and bought the oil as mentioned in subsection (2)(a)(i) and (ii) above; and
that sale and purchase shall be deemed to have been at a price equal to the market value of the oil in the calendar month in which it was appropriated.
For the purposes of subsections (3) and (4) above—
“calendar month” means a month of the calendar year; and
paragraph 2 of Schedule 3 to the 1975 Act shall apply as it applies for the purposes of Part I of that Act, but with the following modifications, that is to say—
for sub-paragraph (2)(f) there shall be substituted—; and
sub-paragraphs (3) and (4) shall be omitted.
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Section 338 shall have effect subject to the following provisions of this section.
Interest paid by a company shall not be allowable under section 338 as a deduction against the company’s ring fence profits except—
to the extent that it was payable in respect of money borrowed by the company which is shown to have been used to meet expenditure incurred by the company in carrying on oil extraction activities or in acquiring oil rights otherwise than from a connected person or to have been appropriated to meeting expenditure to be so incurred by the company; and
in the case of interest paid by the company to a company associated with it, to the extent that (subject always to paragraph (a) above) the rate at which it was payable did not exceed what, having regard to all the terms on which the money was borrowed and the standing of the borrower, was a reasonable commercial rate. Section 839 shall apply for the purposes of this subsection.
Where a company pays to a company associated with it a charge on income not consisting of a payment of interest, the charge shall not be allowable to any extent under section 338 against the first-mentioned company’s ring fence profits.
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Subsection (2) below applies in any case where—
a person has incurred expenditure (by way of purchase, rent or otherwise) on the acquisition of an asset in a transaction to which paragraph 2 of Schedule 4 to the 1975 Act applies (transactions between connected persons and otherwise than at arm’s length), and
the expenditure incurred by the other person referred to in that paragraph in acquiring, bringing into existence or enhancing the value of the asset as mentioned in that paragraph has been or is to be met by a regional development grant and, in whole or in part, falls to be taken into account under Chapter I of Part I, or under Part II, of the 1968 Act (industrial buildings and structures and scientific research) or Chapter I of Part III of the Finance Act 1971 (machinery or plant).
Where this subsection applies, for the purposes of the charge of income tax or corporation tax on the income arising from those activities of the person referred to in paragraph (a) of subsection (1) above which are treated by virtue of section 492(1) as a separate trade for those purposes, the expenditure referred to in that paragraph shall be treated as reduced by the amount of the regional development grant referred to in paragraph (b) of that subsection.
Subsections (4) to (6) below apply where— and in subsections (4) to (6) below the subsequent relevant period referred to in paragraph (c) above is referred to as “the adjustment period”.
expenditure incurred by any person in relation to an asset in any relevant period (“the initial period”) has been or is to be met by a regional development grant; and
notwithstanding the provisions of section 137 of the Finance Act 1982 and subsections (1) and (2) above, in determining that person’s liability to income tax or corporation tax for the initial period the whole or some part of that expenditure falls to be taken into account under Chapter I of Part I, or under Part II, of the 1968 Act or Chapter I of Part III of the Finance Act 1971; and
in a relevant period subsequent to the initial period either expenditure on the asset becomes allowable under section 3 or 4 of the 1975 Act or the proportion of any such expenditure which is allowable is different as compared with the initial period;
Where this subsection applies—
there shall be redetermined for the purposes of subsections (5) and (6) below the amount of the expenditure referred to in subsection (3)(a) above which would have been taken into account as mentioned in subsection (3)(b) if the circumstances referred to in subsection (3)(c) had existed in the initial period; and
according to whether the amount as so redetermined is greater or less than the amount actually taken into account as mentioned in subsection (3)(b), the difference is in subsections (5) and (6) below referred to as the increase or the reduction in the allowance.
If there is an increase in the allowance, then, for the purposes of the provisions referred to in subsection (3)(b) above, an amount of capital expenditure equal to the increase shall be deemed to have been incurred by the person concerned in the adjustment period on an extension of or addition to the asset referred to in subsection (3)(a) above.
If there is a reduction in the allowance, then, for the purpose of determining the liability to income tax or corporation tax of the person concerned, he shall be treated as having received in the adjustment period, as income of the trade in connection with which the expenditure referred to in subsection (3)(a) above was incurred, a sum equal to the amount of the reduction in the allowance.
In this section—
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Any sum which— shall be so treated for those purposes.
constitutes a tariff receipt of a person who is a participator in an oil field, and
constitutes consideration in the nature of income rather than capital, and
would not, apart from this subsection, be treated for the purposes of this Chapter as a receipt of the separate trade referred to in section 492(1),
To the extent that they would not otherwise be so treated, the activities of a participator in an oil field or a person connected with him in making available an asset in a way which gives rise to tariff receipts of the participator shall be treated for the purposes of this Chapter as oil extraction activities.
In determining for the purposes of subsection (1) above whether any sum constitutes a tariff receipt of a person who is a participator, no account shall be taken of any sum which— but in relation to the person by whom such a sum is actually received, subsection (1) above shall have effect as if he were a participator and as if the condition in paragraph (a) of that subsection were fulfilled.
is in fact received or receivable by a person connected with the participator, and
constitutes a tariff receipt of the participator,
References in this section to a person connected with a participator include references to a person with whom the person is associated within the meaning of paragraph 11 of Schedule 2 to the Oil Taxation Act 1983.
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Section 239 shall have effect subject to the following provisions of this section; and in those provisions any reference to a company’s ring fence income shall be construed, except in relation to relief under section 380 of this Act and section 71 of the 1968 Act, as a reference to the company’s ring fence profits.
Where advance corporation tax is paid by a company (“the distributing company”) in respect of any distribution made by it to a company associated with it and resident in the United Kingdom or, where subsection (3) below applies, in respect of any distribution consisting of a dividend on a redeemable preference share—
that advance corporation tax shall not be set against the distributing company’s liability to corporation tax on any ring fence income of the distributing company; and
if the benefit of any amount of that advance corporation tax is surrendered under section 240 to a subsidiary of the distributing company, the corresponding amount of advance corporation tax which under that section the subsidiary is treated for the purposes of section 239 as having paid shall not be set against the subsidiary’s liability to corporation tax on any ring fence income of the subsidiary.
Subject to subsection (4) below, this subsection applies in relation to the payment of a dividend on redeemable preference shares if the dividend is paid on or after 17th March 1987 and— the company paying the dividend is under the control of a company resident in the United Kingdom, and in this subsection “control” shall be construed in accordance with section 416.
at the time the shares are issued, or
at the time the dividend is paid,
Subsection (3) above does not apply if or to the extent that it is shown that the proceeds of the issue of the redeemable preference shares— and section 839 applies for the purposes of this subsection.
were used to meet expenditure incurred by the company issuing them in carrying on oil extraction activities or in acquiring oil rights otherwise than from a connected person; or
were appropriated to meeting expenditure to be so incurred by that company;
Where in the case of any accounting period of a company there is an amount of advance corporation tax which because of subsection (2) above is not available to be set against the company’s liability to corporation tax for that period on ring fence income of the company, section 239(2) shall as regards that period have effect as if the reference to the company’s profits charged to corporation tax for that period were a reference to the company’s profits so charged exclusive of any ring fence income.
For the purposes of subsections (2) to (4) above, shares in a company are redeemable preference shares either if they are so described in the terms of their issue or if, however they are described, they fulfil the condition in paragraph (a) below and either or both of the conditions in paragraphs (b) and (c) below—
that, as against other shares in the company, they carry a preferential entitlement to a dividend or to any assets in a winding up or both;
that, by virtue of the terms of their issue, the exercise of a right by any person or the existence of any arrangements, they are liable to be redeemed, cancelled or repaid, in whole or in part;
that, by virtue of any material arrangements, the holder has a right to require another person to acquire the shares or is obliged in any circumstances to dispose of them or another person has a right or is in any circumstances obliged to acquire them.
For the purposes of paragraph (a) of subsection (6) above, shares are to be treated as carrying a preferential entitlement to a dividend as against other shares if, by virtue of any arrangements, there are circumstances in which a minimum dividend will be payable on those shares but not on others; and for the purposes of paragraph (c) of that subsection arrangements relating to shares are material arrangements if the company which issued the shares or a company associated with that company is a party to the arrangements.
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In any case where,— sections 239 and 240 shall have effect subject to subsections (3) to (7) below.
on a date not earlier than 17th March 1987, a company which is the surrendering company for the purposes of section 240 paid a dividend; and
at no time in the accounting period of the surrendering company in which that dividend was paid was the surrendering company under the control of a company resident in the United Kingdom (construing “control” in accordance with section 416); and
under section 240(1) the benefit of the advance corporation tax paid in respect of that dividend was surrendered to a subsidiary of the surrendering company; and
that advance corporation tax is not such that the restriction in paragraph (a) or paragraph (b) of section 497(2) applies with respect to it; and
in one or more of the accounting periods of the subsidiary beginning in the six years preceding the accounting period in which falls the date referred to in paragraph (a) above, the subsidiary has a liability to corporation tax in respect of profits which consist of or include ring fence profits,
Where the conditions in subsection (1) above are fulfilled, the subsidiary to which the benefit of the advance corporation tax is surrendered is in the following provisions of this section referred to as a “qualifying subsidiary”; and in those provisions—
“the surrendering company” has the same meaning as in section 240;
“surrendered advance corporation tax” means advance corporation tax which, by virtue of section 240(2), a qualifying subsidiary is treated as having paid in respect of a distribution made on a particular date; and
“the principal accounting period” means the accounting period of the qualifying subsidiary in which that date falls.
So much of section 240(4) as would prevent surrendered advance corporation tax being set against a qualifying subsidiary’s liability to corporation tax under section 239(3) shall not apply, but section 239(3) shall instead have effect subject to the following provisions of this section.
Surrendered advance corporation tax may not under section 239(3) be set against a qualifying subsidiary’s liability to corporation tax for an accounting period earlier than the principal accounting period unless throughout— the qualifying subsidiary was carrying on activities which, under and for the purposes specified in section 492, constitute a separate trade.
that period,
the principal accounting period, and
any intervening accounting period,
Subject to subsection (6) below, for each accounting period of the surrendering company in which is paid a dividend the advance corporation tax on which gives rise, under section 240, to surrendered advance corporation tax, the total amount of that surrendered advance corporation tax in respect of which claims may be made under section 239(3) (whether by one qualifying subsidiary of the surrendering company or by two or more taken together) shall not exceed whichever of the following limits is appropriate to the accounting period of the surrendering company—
for periods ending on or after 17th March 1987 and before 1st April 1989, £10 million;
for periods ending on or after 1st April 1989 and before 1st April 1991, £15 million;
for later periods, £20 million.
In any case where an accounting period of the surrendering company is less than 12 months, the amount which is appropriate to it under subsection (5)(a) to (c) above shall be proportionately reduced.
The amount of surrendered advance corporation tax of the principal accounting period which, on a claim under section 239(3), may be treated as if it were advance corporation tax paid in respect of distributions made by the qualifying subsidiary concerned in any earlier accounting period shall not exceed the amount of advance corporation tax that would have been payable in respect of a distribution made at the end of that earlier period of an amount which, together with the advance corporation tax so payable in respect of it, would equal the qualifying subsidiary’s ring fence profits of that period.
In determining the amount (if any) of advance corporation tax which may be repayable— any advance corporation tax in respect of a distribution actually made on or after 17th March 1987 shall be left out of account.
under section 17(3) of the 1975 Act, or
under section 127(5) of the Finance Act 1981,
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In any case where— section 240 shall have effect, subject to the following provisions of this section, as if the company were a subsidiary of each member of the consortium.
a company (in this section referred to as (“the consortium company”) is owned by a consortium consisting of two members only, each of which owns 50 per cent. of the issued share capital of the company; and
the consortium company carries on a trade consisting of or including activities falling within section 492(1)(a) to (c); and
all of the issued share capital of the consortium company is of the same class and carries the same rights as to voting, dividends and distribution of assets on a winding up,
This section has effect with respect to advance corporation tax paid by either member of the consortium in respect of a dividend paid by it on or after 17th March 1987; and, in relation to a surrender under section 240 of the benefit of the advance corporation tax paid in respect of such a dividend—
“surrendered advance corporation tax” means advance corporation tax which, by virtue of section 240(2), the consortium company is treated as having paid; and
“the notional distribution date” means the date of the distribution in respect of which the surrendered advance corporation tax is treated as paid.
No surrender under section 240 of the benefit of advance corporation tax may be made by virtue of this section—
unless the conditions in paragraphs (a) to (c) of subsection (1) above are fulfilled throughout that accounting period of the consortium company in which falls the notional distribution date; or
if arrangements are in existence by virtue of which any person could cause one or more of those conditions to cease to be fulfilled at some time during that or any later accounting period.
In the application of section 239 in relation to surrendered advance corporation tax resulting from a surrender by either one of the consortium members under section 240, the reference in section 239(2) to the consortium company’s profits charged to corporation tax shall be construed as a reference to one half of so much of those profits as consists of ring fence profits.
So much of any surplus advance corporation tax as consists of or includes surrendered advance corporation tax shall not be treated under section 239(4) as if it were advance corporation tax paid in respect of distributions made by the consortium company in a later accounting period unless the conditions in paragraphs (a) to (c) of subsection (1) above are fulfilled throughout that later period.
In any case where— then, for the purposes of the application of section 239(2) (as modified by subsection (4) above) in relation to that later accounting period, the excess of the surrendered advance corporation tax shall be treated as resulting from a surrender by that one of the consortium members referred to in paragraph (a) above.
as a result of a surrender by one of the consortium members, the consortium company is treated as paying an amount of surrendered advance corporation tax which exceeds the limit applicable under section 239(2) (as modified by subsection (4) above), and
that excess falls to be treated under section 239(4) as advance corporation tax paid by the consortium company in respect of distributions made in a later accounting period,
Where section 240 has effect as mentioned in subsection (2) above, subsection (11) of that section shall have effect with the omission of paragraph (b) (and the word “and” immediately preceding it).
Notwithstanding the provisions of subsection (1) above the consortium company shall not be regarded as a subsidiary for the purposes of section 498.
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Where a participator in an oil field has paid any petroleum revenue tax with which he was chargeable for a chargeable period, then, in computing for corporation tax the amount of his income arising in the relevant accounting period from oil extraction activities or oil rights, there shall be deducted an amount equal to that petroleum revenue tax.
There shall be made all such adjustments of assessments to corporation tax as are required in order to give effect to subsection (1) above.
For the purposes of subsection (1) above, the relevant accounting period, in relation to any petroleum revenue tax paid by a company, is—
the accounting period of the company in or at the end of which the chargeable period for which that tax was charged ends; or
if that chargeable period ends after the accounting period of the company in or at the end of which the trade giving rise to the income referred to above is permanently discontinued, that accounting period.
If some or all of the petroleum revenue tax in respect of which a deduction has been made under subsection (1) above is subsequently repaid, that deduction shall be reduced or extinguished accordingly; and any additional assessment to corporation tax required in order to give effect to this subsection may be made at any time not later than six years after the end of the accounting period in which the first-mentioned tax was repaid.
In this section “chargeable period” has the same meaning as in Part I of the 1975 Act.
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In this Chapter—
For the purposes of subsection (1) above—
“designated area” means an area designated by Order in Council under section 1(7) of the Continental Shelf Act 1964;
“initial treatment” has the same meaning as in Part I of the 1975 Act; and
the definition of “initial storage” in section 12(1) of the 1975 Act shall apply but, in its application for those purposes in relation to the person mentioned in subsection (1)(d) above and to oil won from any one oil field shall have effect as if the reference to the maximum daily production rate of oil for the field as there mentioned were a reference to that person’s share of that maximum daily production rate, that is to say, a share thereof proportionate to his share of the oil won from that field.
For the purposes of this Chapter two companies are associated with one another if—
one is a 51 per cent. subsidiary of the other;
each is a 51 per cent. subsidiary of a third company; or
one is owned by a consortium of which the other is a member. Section 413(6) shall apply for the purposes of paragraph (c) above.
Without prejudice to subsection (3) above, for the purposes of this Chapter, two companies are also associated with one another if one has control of the other or both are under the control of the same person or persons; and in this subsection “control” shall be construed in accordance with section 416.
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Subject to the following provisions of this section, for the purposes of sections 5(2), 380 to 390, 393, 394, 401, 623(2)(c), 644(2)(c) and 833(4)(c) and of Chapter I of Part III of the Finance Act 1971—
the commercial letting of furnished holiday accommodation in the United Kingdom in respect of which the profits or gains are chargeable under Case VI of Schedule D shall be treated as a trade; and
all such lettings made by a particular person or partnership or body of persons shall be treated as one trade.
In their application by virtue of subsection (1) above sections 390(1) and 401(1) shall have effect as if for the references in those sections to Case I of Schedule D there were substituted references to Case VI of that Schedule.
No relief shall be given to an individual under section 381 as it has effect by virtue of subsection (1) above, in respect of a loss sustained in any year of assessment, if any of the accommodation in respect of which the trade is carried on in that year was first let by him as furnished accommodation more than three years before the beginning of that year of assessment.
Relief shall not be given for the same loss or the same portion of a loss both under any provision of Chapters I and II of Part X except sections 391, 392, 395 and 396, as those Chapters apply by virtue of this section, and under any other provision of the Tax Acts.
In computing the profits or gains arising from the commercial letting of furnished holiday accommodation which are chargeable to tax under Case VI of Schedule D, such expenditure may be deducted as would be deductible if the letting were a trade and those profits or gains were accordingly to be computed in accordance with the rules applicable to Case I of that Schedule.
Where there is a letting of accommodation only part of which is holiday accommodation such apportionments shall be made for the purposes of this section as appear to the inspector, or on appeal the Commissioners, to be just and reasonable.
Where a person has been charged to income tax or corporation tax otherwise than in accordance with the provisions of this section, such assessment, reduction or discharge of an assessment or, where a claim for repayment is made, such repayment, shall be made as may be necessary to give effect to those provisions.
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This section has effect for the purposes of section 503.
A letting—
is a commercial letting if it is let on a commercial basis and with a view to the realisation of profits; and
is of furnished accommodation if the tenant is entitled to the use of furniture.
Accommodation shall not be treated as holiday accommodation for the purposes of this section unless—
it is available for commercial letting to the public generally as holiday accommodation for periods which amount, in the aggregate, to not less than 140 days;
the periods for which it is so let amount in the aggregate to at least 70 days; and
for a period comprising at least seven months (which need not be continuous but includes any months in which it is let as mentioned in paragraph (b) above) it is not normally in the same occupation for a continuous period exceeding 31 days.
Any question whether accommodation let by any person other than a company is, at any time in a year of assessment, holiday accommodation shall be determined—
if the accommodation was not let by him as furnished accommodation in the preceding year of assessment but is so let in the following year of assessment, by reference to the 12 months beginning with the date on which he first so let it in the year of assessment;
if the accommodation was let by him as furnished accommodation in the preceding year of assessment but is not so let in the following year of assessment, by reference to the 12 months ending with the date on which he ceased so to let it in the year of assessment; and
in any other case, by reference to the year of assessment.
Any question whether accommodation let by a company is at any time in an accounting period holiday accommodation shall be determined—
if the accommodation was not let by it as furnished accommodation in the period of 12 months immediately preceding the accounting period but is so let in the period of 12 months immediately following the accounting period, by reference to the 12 months beginning with the date in the accounting period on which it first so let it;
if the accommodation was let by it as furnished accommodation in the period of 12 months immediately preceding the accounting period but is not so let by it in the period of 12 months immediately following the accounting period, by reference to the 12 months ending with the date in the accounting period on which it ceased so to let it;
in any other case, by reference to the period of 12 months ending with the last day of the accounting period.
Where, in any year of assessment or accounting period, a person lets furnished accommodation which is treated as holiday accommodation for the purposes of this section in that year or period (“the qualifying accommodation”), he may make a claim under this subsection, within two years after that year or period, for averaging treatment to apply for that year or period to that and any other accommodation specified in the claim which was let by him as furnished accommodation during that year or period and would fall to be treated as holiday accommodation in that year or period if subsection (3)(b) above were satisfied in relation to it.
Where a claim is made under subsection (6) above in respect of any year of assessment or accounting period, any such other accommodation shall be treated as being holiday accommodation in that year or period if the number of days for which the qualifying accommodation and any other such accommodation was let by the claimant as mentioned in subsection (3)(a) above during the year or period amounts on average to at least 70.
Qualifying accommodation may not be specified in more than one claim in respect of any one year of assessment or accounting period.
For the purposes of this section a person lets accommodation if he permits another person to occupy it, whether or not in pursuance of a lease; and “letting” and “tenant” shall be construed accordingly.
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Subject to subsections (2) and (3) below, the following exemptions shall be granted on a claim in that behalf to the Board—
exemption from tax under Schedules A and D in respect of the rents and profits of any lands, tenements, hereditaments or heritages belonging to a hospital, public school or almshouse, or vested in trustees for charitable purposes, so far as the same are applied to charitable purposes only;
exemption from tax under Schedule B in respect of any lands occupied by a charity;
exemption— where the income in question forms part of the income of a charity, or is, according to rules or regulations established by Act of Parliament, charter, decree, deed of trust or will, applicable to charitable purposes only, and so far as it is applied to charitable purposes only;
from tax under Schedule C in respect of any interest, annuities, dividends or shares of annuities,
from tax under Schedule D in respect of any yearly interest or other annual payment, and
from tax under Schedule F in respect of any distribution,
exemption from tax under Schedule C in respect of any interest, annuities, dividends or shares of annuities which are in the names of trustees and are applicable solely towards the repairs of any cathedral, college, church or chapel, or of any building used solely for the purposes of divine worship, so far as the same are applied to those purposes;
exemption from tax under Schedule D in respect of the profits of any trade carried on by a charity, if the profits are applied solely to the purposes of the charity and either—
the trade is exercised in the course of the actual carrying out of a primary purpose of the charity; or
the work in connection with the trade is mainly carried out by beneficiaries of the charity.
Any payment which— shall be chargeable to tax under Case III of Schedule D but shall be eligible for relief from tax under subsection (1)(c) above as if it were an annual payment.
is received by a charity from another charity; and
is not made for full consideration in money or money’s worth; and
is not chargeable to tax apart from this subsection; and
is not, apart from this subsection, of a description which (on a claim) would be eligible for relief from tax by virtue of any provision of subsection (1) above;
If in any chargeable period of a charity— relief shall not be available under either subsection (1) above or section 145 of the 1979 Act for so much of the excess as does not exceed the non-qualifying expenditure incurred in that period.
its relevant income and gains are not less than £10,000; and
its relevant income and gains exceed the amount of its qualifying expenditure; and
the charity incurs, or is treated as incurring, non-qualifying expenditure;
In relation to a chargeable period of less than 12 months, subsection (3) above shall have effect as if the amount specified in paragraph (a) of that subsection were proportionately reduced.
In subsection (3) above “relevant income and gains” means—
income which apart from subsection (1) above would not be exempt from tax together with any income which is taxable notwithstanding that subsection; and
gains which apart from section 145 of the 1979 Act would be chargeable gains together with any gains which are chargeable gains notwithstanding that section.
Where by virtue of subsection (3) above there is an amount of a charity’s relevant income and gains for which relief under subsection (1) above and section 145 of the 1979 Act is not available, the charity may, by notice to the Board, specify which items of its relevant income and gains are, in whole or in part, to be attributed to that amount, and, for this purpose, all covenanted payments to charity (within the meaning of section 660(3)) shall be treated as a single item; and if within 30 days of being required to do so by the Board, a charity does not give notice under this subsection, the items of its relevant income and gains which are to be attributed to the amount in question shall be such as the Board may determine.
Where it appears to the Board that two or more charities acting in concert are engaged in transactions of which the main purpose or one of the main purposes is the avoidance of tax (whether by the charities or by any other person), the Board may by notice given to the charities provide that, for such chargeable periods as may be specified in the notice, subsection (3) above shall have effect in relation to them with the omission of paragraph (a).
An appeal may be brought against a notice under subsection (7) above as if it were notice of the decision of the Board on a claim made by the charities concerned.
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In this section, section 505 and Schedule 20—
For the purposes of section 505 and subsection (1) above, where expenditure which is not actually incurred in a particular chargeable period properly falls to be charged against the income of that chargeable period as being referable to commitments (whether or not of a contractual nature) which the charity has entered into before or during that period, it shall be treated as incurred in that period.
A payment made (or to be made) to a body situated outside the United Kingdom shall not be qualifying expenditure by virtue of this section unless the charity concerned has taken such steps as may be reasonable in the circumstances to ensure that the payment will be applied for charitable purposes.
If in any chargeable period a charity— then, subject to subsection (5) below, the amount so invested or lent in that period shall be treated for the purposes of this section as being an amount of expenditure incurred by the charity, and, accordingly, as being non-qualifying expenditure.
invests any of its funds in an investment which is not a qualifying investment, as defined in Part I of Schedule 20; or
makes a loan (not being an investment) which is not a qualifying loan, as defined in Part II of that Schedule;
If, in any chargeable period, a charity which has in that period made an investment or loan falling within subsection (4) above— any further investment or lending in that period of the sum realised or repaid shall, to the extent that it does not exceed the sum originally invested or lent, be left out of account in determining the amount which, by virtue of subsection (4) above, is treated as non-qualifying expenditure incurred in that period.
realises the whole or part of that investment; or
is repaid the whole or part of that loan;
If the aggregate of the qualifying and non-qualifying expenditure incurred by a charity in any chargeable period exceeds the relevant income and gains of that period, Part III of Schedule 20 shall have effect to treat, in certain cases, some or all of that excess as non-qualifying expenditure incurred in earlier periods.
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There shall on a claim in that behalf to the Board be allowed in the case of— such exemption from tax as falls to be allowed under section 505 in the case of a charity the whole income of which is applied to charitable purposes.
the Trustees of the National Heritage Memorial Fund;
the Historic Buildings and Monuments Commission for England;
The Trustees of the British Museum and the Trustees of the British Museum (Natural History) shall each be entitled, on a claim in that behalf to the Board, to the following exemptions—
exemption from tax under Schedules A and D in respect of any land, or interest in or right over land, vested in them; and
the like exemptions in respect of any dividends of stock vested in them, or in any other person for their use, and in respect of distributions charged under Schedule F, as are granted to charities under section 505.
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Where— there shall, on a claim in that behalf to the Board, be allowed in the case of the Association such exemption from tax as falls to be allowed under section 505 in the case of a charity the whole income of which is applied to charitable purposes.
an Association which has as its object the undertaking of scientific research which may lead to or facilitate an extension of any class or classes of trade is approved for the purposes of this section by the Secretary of State; and
the memorandum of association or other similar instrument regulating the functions of the Association precludes the direct or indirect payment or transfer to any of its members of any of its income or property by way of dividend, gift, division, bonus or otherwise howsoever by way of profit;
The condition specified in paragraph (b) of subsection (1) above shall not be deemed not to be complied with in the case of any Association by reason only that the memorandum or other similar instrument regulating its functions does not prevent the payment to its members of reasonable remuneration for goods, labour or power supplied, or for services rendered, of reasonable interest for money lent, or of reasonable rent for any premises.
In this section “scientific research” means any activities in the fields of natural or applied science for the extension of knowledge.
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Where a body established by or under any enactment and having as its object, or one of its objects, the marketing of an agricultural product or the stabilising of the price of an agricultural product is required, by or under any scheme or arrangements approved by or made with a Minister of the Crown or government department, to pay the whole or part of any surplus derived from its trading operations or other trade receipts into a reserve fund satisfying the conditions specified in subsection (2) below, then, in computing for the purposes of tax the profits or gains or losses of the body’s trade—
there shall be allowed as deductions any sums so required to be paid by the body into the reserve fund out of the profits or gains of the trade, and
there shall be taken into account as trading receipts any sums withdrawn by the body from the fund, except so far as they are so required to be paid to a Minister or government department, or are distributed to producers of the product in question or refunded to persons paying any levy or duty.
The conditions to be satisfied by the reserve fund are as follows—
that no sum may be withdrawn from the fund without the authority or consent of a Minister of the Crown or government department; and
that where money has been paid to the body by a Minister of the Crown or government department in connection with arrangements for maintaining guaranteed prices, or in connection with the body’s trading operations, and is repayable to that Minister or department, sums afterwards standing to the credit of the fund are required as mentioned in subsection (1) above to be applied in whole or in part in repaying the money; and
that the fund is reviewed by a Minister of the Crown at intervals fixed by or under the scheme or arrangements in question, and any amount by which it appears to the Minister to exceed the reasonable requirements of the body is withdrawn therefrom.
In this section references to a Minister of the Crown or government department include references to a Head of a Department or a Department in Northern Ireland, and references to producers of a product include references to producers of one type or quality of a product from another.
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Profits or gains arising to an agricultural society from any exhibition or show held for the purposes of the society shall be exempt from tax if applied solely to the purposes of the society.
In this section “agricultural society” means any society or institution established for the purpose of promoting the interests of agriculture, horticulture, livestock breeding or forestry.
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any trade carried on by a Board shall be treated as if it were part of the trade carried on by the Electricity Council;
subject to paragraph (c) below, any property, rights or liabilities of a Board shall be treated as property, rights or liabilities of the Electricity Council, and anything done by or to a Board shall be deemed to have been done by or to the Electricity Council;
any rights, liabilities or things done — shall be left out of account;
of, by or to the Electricity Council against, to or by a Board, or
of, by or to a Board against, to or by the Electricity Council or any other Board,
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any Area Board established by or under the provisions of the Electricity Act 1947; and
in relation to any time on or after 1st January 1958, the Central Electricity Generating Board.
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The United Kingdom Atomic Energy Authority and the National Radiological Protection Board shall be entitled to exemption from income tax and corporation tax—
under Schedules A, B and C;
under Schedule D in respect of any yearly interest or other annual payment received by the Authority or Board;
under Schedule F in respect of distributions received by the Authority or Board.
Income arising from investments or deposits held for the purposes of any pension scheme provided and maintained by the Authority shall be treated for the purposes of this section as if that income and the source thereof belonged to the Authority.
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Subject to subsection (2) below, the successor company in which the property, rights, liabilities and obligations of the British Airways Board are vested by the Civil Aviation Act 1980 shall be treated for all purposes of corporation tax as if it were the same person as the British Airways Board; and the successor company to which the undertaking of the National Freight Corporation is transferred by the Transport Act 1980 shall be treated for those purposes as if it were the same person as the National Freight Corporation.
The transfer by the Civil Aviation Act 1980 from the British Airways Board to the successor company of liability for any loan made to the Board shall not affect any direction in respect of the loan which has been given by the Treasury under section 581.
A successor company shall not by virtue of subsection (1) above be regarded as a body falling within section 272(5) of the 1970 Act.
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An overseas signatory to the Operating Agreement made pursuant to the Convention on the International Maritime Satellite Organisation which came into force on 16th July 1979 shall be exempt from income tax and corporation tax in respect of any payment received by that signatory from the Organisation in accordance with that Agreement.
In this section “an overseas signatory” means a signatory other than one designated for the purposes of the Agreement by the United Kingdom in accordance with the Convention.
Subsection (2) applies in a case where members of a qualifying contemplative religious community transfer all their income and assets, or covenant all their income, to the community (“the independent community”) (and for this purpose it is irrelevant whether or not the community is part of an order or religious institution).
As respects each chargeable period of the independent community, and each person who is a qualifying member of the independent community at any time in that period, the independent community shall be treated for the purposes of corporation tax as if an amount of its profits for the chargeable period equal to the relevant amount (see subsections (5) to (7)) were income of the qualifying member.
Subsection (4) applies in a case where—
one or more qualifying contemplative religious communities (“constituent communities”) are part of an order or religious institution (“the parent body”), and
members of the constituent communities transfer all their income and assets, or covenant all their income, to the parent body.
As respects each chargeable period of the parent body, and each person who is a qualifying member of a constituent community at any time in that period, the parent body shall be treated for the purposes of corporation tax as if an amount of its profits for the chargeable period equal to the relevant amount (see subsections (5) to (7)) were income of the qualifying member.
For the purposes of subsections (2) and (4), the relevant amount, in relation to a chargeable period, is the amount of the annual personal allowance for persons born after 5 April 1948 (see section 35 of ITA 2007) for—
the tax year which begins in the chargeable period, or
if no tax year begins in the chargeable period, the tax year which is current when the chargeable period begins.
But, if the chargeable period is less than 12 months, the relevant amount is— where— P is the number of days in the chargeable period; A is the amount determined under subsection (5) in relation to the chargeable period.
If, during the chargeable period, an individual ceases to be a qualifying member of the independent community or a constituent community (otherwise than on death), the relevant amount, in relation to the chargeable period and that qualifying member, is— where— Q is the number of days in the chargeable period for which the individual is a qualifying member of the independent community or constituent community; P is the number of days in the chargeable period; B is the amount determined under subsection (5), or subsections (5) and (6), in relation to the chargeable period.
So far as the exemption from corporation tax conferred by this section calls for repayment of tax, no repayment shall be made except on a claim made by the independent community or parent body.
In a case where a member of an independent community or constituent community— the member is, for the purposes of this section, to be taken to have transferred or covenanted all his or her income for that tax year to the community or parent body.
has transferred or covenanted income to the community (in the case of an independent community) or the parent body (in the case of a constituent community), and
has income for a tax year which does not exceed 20% of the annual personal allowance for persons born after 5 April 1948 (see section 35 of ITA 2007) for that tax year,
For the purposes of this section a contemplative religious community is a “qualifying” contemplative religious community if—
the community is established in the United Kingdom,
the members of the community live and practise their religion in a communal establishment, and
the community is not a charity, but the religion that is professed by the members of the community does not prevent the community from being a charity.
In this section—
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Tax shall not be chargeable on dividends (within the meaning of Schedule C) paid out of the public revenue of the United Kingdom where they are income of any bank or issue department of a bank to which this subsection for the time being applies.
Subsection (1) above shall not prevent any such dividends being taken into account in computing profits or gains or losses of a business carried on in the United Kingdom.
A bank or issue department of a bank to which this subsection for the time being applies shall be exempt from tax in respect of chargeable gains accruing to it.
Her Majesty may by Order in Council direct that subsection (1) or (3), or both, shall apply to any bank, or to its issue department, if it appears to Her Majesty that the bank is not resident in the United Kingdom and is entrusted by the government of a territory outside the United Kingdom with the custody of the principal foreign exchange reserves of that territory.
No recommendation shall be made to Her Majesty in Council to make an order under this section unless a draft of the order has been laid before the House of Commons and has been approved by resolution of that House.
Subsection (2) applies if, as respects a chargeable period—
section 508A(2) applies in relation to an independent community,
the profits of the independent community in the chargeable period are less than the total of the amounts that fall to be treated as income of the qualifying members of the community in accordance with section 508A(2), and
the independent community has chargeable gains in the chargeable period.
As respects the chargeable period and each qualifying member of the independent community, the community shall be treated for the purposes of corporation tax as if the relevant amount of its chargeable gains for that period were income of the qualifying member.
Subsection (4) applies if, as respects a chargeable period—
section 508A(4) applies in relation to a parent body,
the profits of the parent body in the chargeable period are less than the total of the amounts that fall to be treated as income of the qualifying members of the constituent communities in accordance with section 508A(4), and
the parent body has chargeable gains in the chargeable period.
As respects the chargeable period and each qualifying member of a constituent community, the parent body shall be treated for the purposes of corporation tax as if the relevant amount of its chargeable gains for that period were income of the qualifying member.
For the purposes of subsections (2) and (4), the relevant amount, in relation to a qualifying member of the independent community or a constituent community, is the smaller of—
the shortfall in profits, and
the average gain.
The shortfall in profits is the difference between—
the relevant amount determined under section 508A(5) to (7) in relation to the qualifying member, and
the amount that has actually been treated as the income of the qualifying member.
The average gain is— where— G is the amount of the chargeable gains which the independent community or parent body has in the chargeable period; N is the number calculated by adding together the relevant value for each qualifying member of the independent community or constituent communities who, under section 508A(2) or (4), falls to be treated as having income.
For the purposes of calculating “N” in subsection (7)—
the relevant value for a qualifying member is 1;
but, if section 508A(7) applies in relation to the qualifying member, the relevant value for that member is— where Q and P have the same meanings as in section 508A(7).
So far as the exemption from corporation tax conferred by this section calls for repayment of tax, no repayment shall be made except on a claim made by the independent community or parent body.
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This section has effect where the trade of any body corporate other than a limited liability company is transferred to a harbour authority by or under a certified harbour reorganisation scheme which provides also for the dissolution of the transferor.
For the purposes of the Corporation Tax Acts, the trade shall not be treated as permanently discontinued, nor shall a new trade be treated as set up and commenced.
The transferee shall be entitled to relief from corporation tax under section 393(1), as for a loss sustained by it in carrying on the transferred trade or any trade of which it comes to form part, for any amount which, if the transferor had continued to carry it on, would have been available to the transferor for carry-forward against chargeable profits of succeeding accounting periods, but subject to any claim made by the transferor under section 393(2).
There shall be made to or on the transferee in accordance with the provisions of the Capital Allowances Acts all such allowances and charges as would, if the transferor had continued to carry on the trade, have fallen to be made to or on it under those Acts and the amount of any such allowance or charge shall be computed as if the transferee had been carrying on the trade since the transferor had begun to do so and as if everything done to or by the transferor had been done to or by the transferee.
No sale or transfer which on the transfer of the trade is made by the transferor to the transferee of any assets in use for the purposes of the trade shall be treated as giving rise to any such allowance or charge as is mentioned in subsection (4) above.
The transferor shall not be entitled to relief under section 394 in respect of the trade.
The transferee shall be entitled to relief from corporation tax in respect of chargeable gains for any amount for which the transferor would have been entitled to claim relief in respect of allowable losses if it had continued to carry on the trade.
Where part only of such trade is transferred to a harbour authority by or under a certified harbour organisation scheme, and the transferor continues to carry on the remainder of the trade, or any such trade is, by or under a certified harbour reorganisation scheme which provides also for the dissolution of the transferor, transferred in parts to two or more harbour authorities, this section shall apply as if the transferred part, or each of the transferred parts, had at all times been a separate trade.
Where a part of any trade is to be treated by virtue of subsection (8) above as having been a separate trade over any period there shall be made any necessary adjustments of accounting periods, and such apportionments as may be just of receipts, expenses, allowances or charges. Subsection (10) of section 343 shall apply to any apportionment under this subsection as it applies to an apportionment under subsection (9) of that section.
In this section—
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A local authority in the United Kingdom— and so far as the exemption from income tax conferred by this subsection calls for repayment of tax, effect shall be given thereto by means of a claim.
shall be exempt from all charge to income tax in respect of its income;
shall be exempt from corporation tax;
Subsection (1) above shall apply to a local authority association as it applies to a local authority.
In this Act “local authority association” means any incorporated or unincorporated association— and for this purpose, if a member of an association is a representative of or appointed by any authority, group of authorities or association, that authority, group or association (and not he) shall be treated as a constituent member of the association.
of which all the constituent members are local authorities, groups of local authorities or local authority associations, and
which has for its object or primary object the protection and furtherance of the interests in general of local authorities or any description of local authorities;
In this Act “local authority” means— and in this subsection “rate” means a rate the proceeds of which are applicable for public local purposes and which is leviable by reference to the value of land or other property.
any authority having power to make or determine a rate;
any authority having power to issue a precept, requisition or other demand for the payment of money to be raised out of a rate;
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Subject to subsection (3) below, where a person incurs capital expenditure after 31st March 1986 on the purchase of patent rights, allowances and charges shall, in accordance with subsections (4) and (6) below, be made to and on him in respect of that expenditure.
No allowance shall be made to a person under subsection (1) above in respect of any expenditure unless—
the allowance falls in accordance with section 528(1) to be made to him in taxing his trade; or
any income receivable by him in respect of the rights would be liable to tax.
For the purposes of this section and section 521 any expenditure incurred for the purposes of a trade by a person about to carry it on shall be treated as if it had been incurred by that person on the first day on which he does carry it on, unless, before that first day, he has sold all the rights on the purchase of which the expenditure was incurred.
For any chargeable period for which a person within subsection (1) above has qualifying expenditure which exceeds any disposal value to be brought into account by him in accordance with section 521(2) there shall be made to him—
except where paragraph (b) or (c) below applies, a writing-down allowance of an amount equal, subject to subsection (5) below, to—
25 per cent. of the excess; or
a proportionately reduced percentage of the excess if the period is part only of a year, or if, in a case where the period is a year of assessment and the allowance falls to be made in taxing a trade, the trade has been carried on for part only of that year;
if an allowance falls to be made to that person in taxing his trade and the period is the chargeable period related to the permanent discontinuance of the trade, a balancing allowance equal to the whole of the excess; and
if paragraph (b) above does not apply but the period is the chargeable period in which the last of the relevant patent rights comes to an end without any of those rights being revived, a balancing allowance equal to the whole of the excess.
For the purposes of subsection (4)(c) above the “relevant patent rights” at any time are those—
on the purchase of which the person concerned has incurred capital expenditure which has been taken into account in determining his qualifying expenditure for any chargeable period; and
which he has not wholly disposed of.
For any chargeable period for which a person’s qualifying expenditure is less than the disposal value which he is to bring into account, there shall be made on him a balancing charge and the amount on which the charge is made shall be an amount equal to the difference.
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For the purposes of section 520(4) to (6), a person’s qualifying expenditure for a chargeable period is the aggregate of the following amounts—
any capital expenditure incurred by him on the purchase of patent rights, being expenditure incurred during the chargeable period or its basis period or at any previous time, other than expenditure which, or any part of which, has formed part of his qualifying expenditure for any previous chargeable period; and
if, for the chargeable period immediately preceding the chargeable period in question, there was an excess of qualifying expenditure over disposal value, the balance of that excess after deducting any writing-down allowance under section 520(4)(a) made by reference to that excess.
If, in any chargeable period or its basis period, a person sells the whole or any part of any patent rights on the purchase of which he has incurred capital expenditure, then, for the purposes of section 520(4) to (6) and subsection (1) above, he is required to bring into account for that chargeable period disposal value equal, subject to subsections (3) and (4) below, to the net proceeds to him of that sale.
The disposal value to be brought into account by any person in respect of any patent rights as a result of one or more sales falling within subsection (2) above shall not (or, as the case may be, shall not in the aggregate) exceed the capital expenditure incurred by him on the purchase of those rights.
Where the person mentioned in subsection (3) above has acquired the patent rights as a result of a transaction which was, or a series of transactions each of which was, between persons who are connected with each other within the terms of section 839, that subsection shall have effect as if it referred to the capital expenditure on the purchase of the rights incurred by whichever party to that transaction or to any of those transactions incurred the greatest such expenditure.
Where a person incurs capital expenditure on the purchase of patent rights and either— there shall be disregarded for the purposes of section 520(4) and (6) and subsection (1) above so much (if any) of that expenditure as exceeds the disposal value to be brought into account by virtue of subsections (2) to (4) above by reason of the sale.
he and the seller are connected with each other within the terms of section 839, or
it appears with respect to the sale, or with respect to transactions of which the sale is one, that the sole or main benefit which, but for this subsection, might have been expected to accrue to the parties was the obtaining of an allowance under section 520(4),
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Subject to subsection (2) below, where a person incurred capital expenditure before 1st April 1986 on the purchase of patent rights, there shall, subject to and in accordance with the following provisions of this Chapter, be made to him writing-down allowances in respect of that expenditure during the writing-down period.
No writing-down allowance shall be made to a person under subsection (1) above in respect of any expenditure unless—
the allowance falls in accordance with section 528(1) to be made to him in taxing his trade; or
any income receivable by him in respect of the rights would be liable to tax.
Subject to subsections (4) to (6) below, the writing-down period referred to in subsection (1) above is 17 years beginning with the chargeable period related to the expenditure.
Where the rights are purchased for a specified period, subsection (3) above shall have effect with the substitution for the reference to 17 years of a reference to 17 years or the number of years comprised within that period, whichever is the less.
Where the rights purchased begin one complete year or more after the commencement of the patent and subsection (4) above does not apply, subsection (3) above shall have effect with the substitution for the reference to 17 years of a reference to 17 years less the number of complete years which, when the rights began, have elapsed since the commencement of the patent or, if 17 complete years have so elapsed, of a reference to one year.
Any expenditure incurred for the purposes of a trade by a person about to carry it on shall be treated for the purposes of subsections (3) to (5) above as if it had been incurred by that person on the first day on which he does carry it on, unless, before that first day, he has sold all the rights on the purchase of which the expenditure was incurred.
Subsections (2) and (3) of section 75 of the 1968 Act (effect of providing for writing-down allowances during a writing-down period of a specified length) shall apply to this section as they apply to the provisions specified in subsection (1) of that section.
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Where a person incurred capital expenditure before 1st April 1986 on the purchase of patent rights and, before the end of the writing-down period under section 522, any of the following events occurs, that is to say— no writing-down allowance shall be made to that person for the chargeable period related to the event or for any subsequent chargeable period.
the rights come to an end without being subsequently revived; or
he sells all those rights or so much of them as he still owns; or
he sells part of those rights and the net proceeds of the sale (so far as they consist of capital sums) are not less than the amount of the capital expenditure remaining unallowed,
Where a person incurred capital expenditure before 1st April 1986 on the purchase of patent rights and, before the end of the writing-down period under section 522, either of the following events occurs, that is to say— there shall, subject to and in accordance with the following provisions of this Chapter, be made to him for the chargeable period related to the event an allowance (“a balancing allowance”) equal, if the event is the rights coming to an end, to the amount of the capital expenditure remaining unallowed and, if the event is a sale, to the amount of the capital expenditure remaining unallowed less the net proceeds of the sale.
the rights come to an end without being subsequently revived, or
he sells all those rights, or so much of them as he still owns, and the net proceeds of the sale (so far as they consist of capital sums) are less than the amount of the capital expenditure remaining unallowed,
Where— there shall, subject to and in accordance with the following provisions of this Chapter, be made on him for the chargeable period related to the sale a charge (“a balancing charge”) on an amount equal to the excess or, where the amount of the capital expenditure remaining unallowed is nil, to those net proceeds.
a person who incurred capital expenditure before 1st April 1986 on the purchase of patent rights sells all or any part of those rights, and
the net proceeds of the sale (so far as they consist of capital sums) exceed the amount of the capital expenditure remaining unallowed, if any,
Where a person who incurred capital expenditure before 1st April 1986 on the purchase of patent rights sells a part of those rights and subsection (3) above does not apply, the amount of any writing-down allowance made in respect of that expenditure for the chargeable period related to the sale or any subsequent chargeable period shall be the amount arrived at by— and so on for any subsequent sales.
subtracting the net proceeds of the sale (so far as they consist of capital sums) from the amount of the expenditure remaining unallowed at the time of the sale, and
dividing the result by the number of complete years of the writing-down period which remained at the beginning of the chargeable period related to the sale,
References in this section to the amount of any capital expenditure remaining unallowed shall, in relation to any event, be construed as references to the amount of that expenditure less any writing-down allowances made in respect thereof for chargeable periods before that related to the event, and less also the net proceeds of any previous sale by the person who incurred the expenditure of any part of the rights acquired by the expenditure, so far as those proceeds consist of capital sums.
Notwithstanding anything in subsections (1) to (5) above—
no balancing allowance shall be made in respect of any expenditure incurred before 1st April 1986 unless a writing-down allowance has been, or, but for the happening of the event giving rise to the balancing allowance, could have been, made in respect of that expenditure, and
the total amount on which a balancing charge is made in respect of any expenditure incurred before 1st April 1986 shall not exceed the total writing-down allowances actually made in respect of that expenditure, less, if a balancing charge has previously been made in respect of that expenditure, the amount on which that charge was made.
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Subject to subsection (2) below, where a person resident in the United Kingdom sells all or any part of any patent rights and the net proceeds of the sale consist wholly or partly of a capital sum, he shall, subject to the provisions of this Chapter, be charged to tax under Case VI of Schedule D, for the chargeable period in which the sum is received by him and successive chargeable periods, being charged in each period on the same fraction of the sum as the period is of six years (or such less fraction as has not already been charged).
If the person by notice served on the inspector not later than two years after the end of the chargeable period in which the sum was received, elects that the whole of the sum shall be charged to tax for that chargeable period, it shall be charged to tax accordingly.
Subject to subsection (4) below, where a person not resident in the United Kingdom sells all or any part of any patent rights and the net proceeds of the sale consist wholly or partly of a capital sum, and the patent is a United Kingdom patent, then, subject to the provisions of this Chapter—
he shall be chargeable to tax in respect of that sum under Case VI of Schedule D; and
section 349(1) shall apply to that sum as if it was an annual sum payable otherwise than out of profits or gains charged to income tax; and
all other provisions of the Tax Acts shall, save as therein otherwise provided, have effect accordingly.
If, not later than two years after the end of the year of assessment in which the sum is paid, the person to whom it is paid, by notice to the Board, elects that the sum shall be treated for the purpose of income tax for that year and each of the five succeeding years as if one-sixth thereof, and no more, were included in his income chargeable to tax for all those years respectively, it shall be so treated, and all such repayments and assessments of tax for each of those years shall be made as are necessary to give effect to the election, but—
the election shall not affect the amount of tax which is to be deducted and assessed under section 349(1) and 350; and
where any sum is deducted under section 349(1), any adjustments necessary to give effect to the election shall be made by way of repayment of tax; and
those adjustments shall be made year by year and as if one-sixth of the sum deducted had been deducted in respect of tax for each year, and no repayment of, or of any part of, that portion of the tax deducted which is to be treated as deducted in respect of tax for any year shall be made unless and until it is ascertained that the tax ultimately falling to be paid for that year is less than the amount of tax paid for that year.
In subsections (3) and (4) above, “tax” shall mean income tax or, in subsection (3) in a case where the seller of the patent rights, being a company, would be within the charge to corporation tax in respect of any proceeds of the sale not consisting of a capital sum, corporation tax.
Where subsection (3) applies to charge a company to corporation tax in respect of a sum paid to it, subsection (4) shall not apply, but the company may, by notice given to the Board not later than two years after the end of the accounting period in which the sum is paid, elect that the sum shall be treated as arising rateably in the accounting periods ending not later than six years from the beginning of that in which the sum is paid (being accounting periods during which the company remains within the charge to corporation tax in respect of any proceeds of the sale not consisting of a capital sum), and there shall be made all such repayments of tax and assessments to tax as are necessary to give effect to any such election.
Subject to subsections (8) and (9) below, where the person selling all or any part of any patent rights (“the seller”) acquired the rights sold, or the rights out of which they were granted, by purchase and the price paid by him consisted wholly or partly of a capital sum, the preceding provisions of this section shall apply as if any capital sum received by him when he sells the rights were reduced by the amount of that sum.
Where between the purchase and the sale the seller has sold part of the rights acquired by him and the net proceeds of that sale consist wholly or partly of a capital sum, the amount of the reduction falling to be made under subsection (7) above in respect of the subsequent sale shall be itself reduced by the amount of that sum.
Nothing in subsections (7) and (8) above shall affect the amount of income tax which is to be deducted and assessed under section 349(1) and (3) by virtue of subsection (3) above, and, where any sum is deducted under section 349(1), any adjustment necessary to give effect to the provisions of this subsection shall be made by way of repayment of tax.
A claim for relief under this section shall be made to the Board.
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Where a person on whom, by reason of the receipt of a capital sum, a charge falls or would otherwise fall to be made under section 524 dies or, being a body corporate, commences to be wound up—
no sums shall be charged under that section on that person for any chargeable period subsequent to that in which the death takes place or the winding up commences; and
the amount falling to be charged for the chargeable period in which the death occurs or the winding up commences shall, subject to subsection (2) below, be increased by the total amounts which, but for the death or winding up, would have fallen to be charged for subsequent chargeable periods.
In the case of a death the personal representatives may, by notice served on the inspector not later than 30 days after notice has been served on them of the charge falling to be made by virtue of subsection (1) above, require that the income tax payable out of the estate of the deceased by reason of the increase provided for by that subsection shall be reduced so as not to exceed the total amount of income tax which would have been payable by him or out of his estate by reason of the operation of section 524 in relation to that sum, if, instead of the amount falling to be charged for the year in which the death occurs being increased by the whole amount of the sums charged for subsequent years, the several amounts falling to be charged for the years beginning with that in which the capital sum was received and ending with that in which the death occurred had each been increased by that whole amount divided by the number of those years.
Where, under section 79 of the 1968 Act (succession to trades) as applied by section 532, a charge under section 524 falls to be made on two or more persons jointly as being the persons for the time being carrying on a trade, and that trade is discontinued, subsection (1) above shall have effect in relation to the discontinuance as it has effect where a body corporate commences to be wound up.
Where subsection (3) above applies—
the additional sum which, under subsection (1) above, falls to be charged for the chargeable period in which the discontinuance occurs shall be apportioned among the members of the partnership immediately before the discontinuance, according to their respective interests in the partnership profits before the discontinuance, and each partner (or, if he is dead, his personal representatives) shall be charged separately for his proportion; and
each partner (or, if he is dead, his personal representatives) shall have the same right to require a reduction of the total income tax payable by him or out of his estate by reason of the increase as would have been exercisable by the personal representatives under subsection (2) above in the case of a death, and that subsection shall have effect accordingly, but as if references to the amount of income tax which would have been payable by the deceased or out of his estate in the event therein mentioned were a reference to the amount of income tax which would in that event have fallen to be paid or borne by the partner in question or out of his estate.
In this section any references to income tax paid or borne or payable or falling to be paid or borne by a person include, in cases where the income of a wife is deemed to be income of the husband, references to the income tax paid or borne, or payable or falling to be paid or borne, by his wife or her husband, as the case may be.
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Where— there shall be made to him, for the chargeable period in which those expenses were paid or incurred, an allowance equal to the amount thereof.
a person, otherwise than for the purposes of a trade carried on by him, pays any fees or incurs any expenses in connection with the grant or maintenance of a patent, or the obtaining of an extension of a term of a patent, or a rejected or abandoned application for a patent, and
those fees or expenses would, if they had been paid or incurred for the purposes of a trade, have been allowable as a deduction in estimating the profits or gains of that trade,
Where a patent is granted in respect of any invention, an allowance equal to so much of the net amount of any expenses incurred by an individual who, whether alone or in conjunction with any other person, actually devised the invention as is properly ascribable to the devising thereof (not being expenses in respect of which, or of assets representing which, an allowance falls to be made under any other provision of the Income Tax Acts) shall be made to that individual for the year of assessment in which the expenses were incurred.
Where— the company may on the making of a claim require that the corporation tax payable by it by reason of the receipt of that sum shall be reduced so as not to exceed the total amount of corporation tax which would have been payable by it if that royalty or sum had been paid in six equal instalments at yearly intervals, the last of which was paid on the date on which the payment was in fact made.
a royalty or other sum is paid to a company in respect of the user of a patent,
the user extended over a period of six complete years or more, and
the payment is one from which a sum representing income tax must be deducted under section 903 of ITA 2007,
Subsection (1) above shall apply in relation to a royalty or other sum where the period of the user is two complete years or more but less than six complete years as it applies to the royalties and sums mentioned in that subsection, but with the substitution for the reference to six equal instalments of a reference to so many equal instalments as there are complete years comprised in that period.
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An allowance or charge under section 520, 522 or 523 shall be made to or on a person in taxing his trade if—
he is carrying on a trade the profits or gains of which are, or, if there were any, would be, chargeable to tax under Case I of Schedule D for the chargeable period for which the allowance or charge is made, and
at any time in that chargeable period or its basis period the patent rights in question, or other rights out of which they were granted, were or were to be used for the purposes of that trade.
Where an allowance falls to be made to a person for any year of assessment under section 520, 522, 523 or 526 as those provisions apply for the purposes of income tax, and the allowance is not to be made in taxing a trade—
the amount of the allowance shall be deducted from or set off against his income from patents for that year of assessment, and
if the amount to be allowed is greater than the amount of his income from patents for that year of assessment, the balance shall be deducted from or set off against his income from patents for the next year of assessment, and so on for subsequent years of assessment, and tax shall be discharged or repaid accordingly. Relief shall be given under this subsection on the making of a claim.
Where an allowance falls to be made to a company for any accounting period under section 520, 522, 523 or 526 as those provisions apply for the purposes of corporation tax, and is not to be made in taxing a trade—
the allowance shall, as far as may be, be given effect by deducting the amount of the allowance from the company’s income from patents of the accounting period;
where the allowance cannot be given full effect under paragraph (a) above in that period by reason of a want or deficiency of income from patents, then (so long as the company remains within the charge to corporation tax) the amount unallowed shall be carried forward to the succeeding accounting period, and shall be treated for the purposes of that paragraph, and of any further application of this paragraph, as the amount of a corresponding allowance for that period.
Effect shall be given to any balancing charge under section 520 or 523 which is not to be made in taxing a trade—
if a charge to income tax, by making the charge under Case VI of Schedule D;
if a charge to corporation tax, by treating the amount on which the charge is to be made as income from patents.
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Subject to subsection (2) below, any income from patent rights arising to an individual where the patent was granted for an invention actually devised by him, whether alone or jointly with any other person, shall be treated for all purposes as earned income.
Where any part of the rights in question or of any rights out of which they were granted has at any time belonged to any other person, so much only of that income shall be treated as earned income as is not properly attributable to the rights which have belonged to that other person.
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Subject to section 531, where after 31st March 1986 a person— allowances and charges shall, in accordance with subsections (2) and (3) below, be made to and on him in respect of his expenditure on the acquisition, so far as not otherwise deducted for the purposes of corporation tax or income tax.
acquires know-how for use in a trade carried on by him, or
acquires know-how, and thereafter sets up and commences a trade in which it is used,
For any chargeable period for which a person within subsection (1) above has qualifying expenditure which exceeds any disposal value to be brought into account by him in accordance with subsection (5) below, there shall be made to him—
unless the period is the chargeable period related to the permanent discontinuance of the trade, a writing-down allowance of an amount equal to—
25 per cent. of the excess, or
a proportionately reduced percentage of the excess if the period is part only of a year, or if the period is a year of assessment but the trade had been carried on for part only of the year; and
if the period is the chargeable period related to the permanent discontinuance of the trade, a balancing allowance equal to the whole of the excess.
For any chargeable period for which a person’s qualifying expenditure is less than the disposal value which he is to bring into account, there shall be made on him a balancing charge and the amount on which the charge is made shall be an amount equal to the difference.
For the purposes of subsections (2) and (3) above a person’s qualifying expenditure for a chargeable period is the aggregate of the following amounts—
any capital expenditure incurred by him on the acquisition of know-how, being expenditure incurred during the chargeable period or its basis period or at any previous time, other than expenditure which, or any part of which, has formed part of his qualifying expenditure for any previous chargeable period; and
if, for the chargeable period immediately preceding the chargeable period in question, there was an excess of qualifying expenditure over disposal value, the balance of that excess after deducting any writing-down allowance under subsection (2)(a) above made by reference to that excess.
If, in any chargeable period or its basis period, a person sells any know-how on the acquisition of which for use in a trade carried on by him he has incurred expenditure falling within subsection (1) above, then, for the purposes of subsections (2) to (4) above, he is required to bring into account for that chargeable period disposal value equal to the net proceeds to him of that sale.
Subject to section 531, where after 19th March 1968 and before 1st April 1986 a person— writing-down allowances in respect of his expenditure on the acquisition, so far as not otherwise deducted for the purposes of corporation tax or income tax, shall be made in taxing the trade during a writing-down period of six years beginning with the chargeable period related to the expenditure; and if during that period he ceases to carry on the trade, an allowance equal to the amount of that expenditure then unallowed shall be made in taxing the trade for the chargeable period related to the discontinuance.
acquired know-how for use in a trade carried on by him, or
acquired know-how, and thereafter sets up and commences a trade in which it is used,
For the purposes of subsections (1) and (6) above, a person incurring expenditure on know-how before the setting up and commencement of the trade in which it is used shall be treated as incurring it on that setting up and commencement.
Subsection (2) of section 75 of the 1968 Act (effect of providing writing-down allowances during writing-down period of a specified length) shall apply to subsection (6) above as it applies to the provisions specified in subsection (1) of that section.
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Subject to subsection (7) below, where, after 19th March 1968, a person disposes of know-how which has been used in a trade carried on by him, and continues to carry on the trade after the disposal, the amount or value of any consideration received by him for the disposal shall— be treated for all purposes as a trading receipt.
if it is received in respect of the disposal of know-how after 31st March 1986, so far as it is not brought into account as disposal value under section 530(5), nor is chargeable to tax as a revenue or income receipt;
in any other case, so far as it is not chargeable to tax as a revenue or income receipt,
Subject to subsection (3) below, where, after 19th March 1968, a person disposes of a trade or part of a trade and, together with that trade or part, of know-how used in it, any consideration received by him for the know-how shall be dealt with in relation both to him and to the person acquiring the know-how, if that person provided the consideration, and for the purposes of corporation tax, income tax and capital gains tax, as a payment for goodwill.
Subsection (2) above shall not apply— and where know-how is disposed of with a trade or part of a trade, but that subsection is excluded in relation to the person acquiring it, section 530(1) and (6) shall apply as if that person had acquired it for use in a trade previously carried on by him.
to either of the persons concerned if they so elect by notice given jointly to the inspector within two years of the disposal, or
to the person acquiring the know-how if the trade in question was, before the acquisition, carried on wholly outside the United Kingdom;
Subject to subsections (5) and (7) below, any consideration received by a person for the disposal of know-how shall— be treated as a profit or gain chargeable to tax under Case VI of Schedule D.
if it is received in respect of the disposal of know-how after 31st March 1986 and is not brought into account as disposal value under section 530(5), or
if it is neither chargeable to tax under subsection (1) above or otherwise as a revenue or income receipt, nor dealt with in relation to him as a payment for goodwill as mentioned in subsection (2) above, (whether the disposal took place before or after 31st March 1986),
Where the person concerned has incurred expenditure wholly and exclusively in the acquisition or disposal of the know-how, the amount which would apart from this subsection be treated as a profit or gain chargeable to tax under Case VI of Schedule D shall be reduced by the amount of that expenditure; but a deduction shall not be twice made in respect of the same expenditure, whether under this subsection or otherwise.
Where subsection (4) above has effect in the case of an individual who devised the know-how in question, whether alone or jointly with any other person, the amount in respect of which he is chargeable to tax by virtue of that subsection shall be treated for all purposes as earned income.
Subsections (1) and (3) to (6) above and section 530(1) and (6) shall not apply on any sale of know-how where the buyer is a body of persons over whom the seller has control, or the seller is a body of persons over whom the buyer has control, or both the seller and the buyer are bodies of persons and some other person has control over both of them; and subsection (2) above shall apply in any such case with the omission of the words “Subject to subsection (3) below”. In this subsection references to a body of persons include references to a partnership.
Where in connection with any disposal of know-how a person gives an undertaking (whether absolute or qualified, and whether legally valid or not) the tenor or effect of which is to restrict his or another’s activities in any way, any consideration received in respect of the giving of the undertaking or its total or partial fulfilment shall be treated for the purposes of this section as consideration received for the disposal of the know-how.
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Subject to subsection (2) below, the Tax Acts shall have effect as if sections 520 to 531, this section and section 533 were contained in Part I of the 1968 Act, and any reference in the Tax Acts to any capital allowance to be given “by way of discharge or repayment of tax and to be available or available primarily against a specified class of income” shall include a reference to any capital allowance given in accordance with subsection (2) or (3) of section 528.
Schedule 7 to the 1968 Act (special provisions as to controlled sales) shall not (by virtue of subsection (1) above) apply with respect to expenditure incurred after 31st March 1986 on the purchase of patent rights.
Subject to subsection (2) above, in Part I of the 1968 Act, as applied by virtue of subsection (1) above to patent rights, the sum referred to in paragraph 4(1)(a) of Schedule 7 to that Act (special provisions as to controlled sales) is the amount of any capital expenditure on the acquisition of the patent rights remaining unallowed, computed in accordance with the provisions of section 523.
The reference in section 82(1) of the 1968 Act (certain payments not to be treated as capital expenditure) to any expenditure or sum in the case of which a deduction of income tax falls or may fall to be made under sections 348 to 350 does not include a sum in the case of which such a deduction falls or may fall to be so made by virtue of section 524(3)(b).
In Part I of the 1968 Act as so applied to know-how—
references in that Part to property and its purchase or sale include references to know-how and its acquisition or disposal;
section 78, together with Schedule 7 to that Act (special provisions as to controlled sales), shall be omitted.
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In sections 520 to 532—
Subject to subsection (3) below, in sections 520 to 532 any reference to the sale of part of patent rights includes a reference to the grant of a licence in respect of the patent in question, and any reference to the purchase of patent rights includes a reference to the acquisition of a licence in respect of a patent.
If a licence granted by a person entitled to any patent rights is a licence to exercise those rights to the exclusion of the grantor and all other persons for the whole of the remainder of the term for which the right subsists, the grantor shall be treated for the purposes of sections 520 to 532 as thereby selling the whole of the rights.
Where, under sections 46 to 49 of the Patents Act 1949 or any corresponding provisions of the law of any country outside the United Kingdom, an invention which is the subject of a patent is made, used, or exercised or vended by or for the service of the Crown or the government of the country concerned, sections 520 to 532 shall have effect as if the making, user, exercise or vending of the invention had taken place in pursuance of a licence, and any sums paid in respect thereof shall be treated accordingly.
Expenditure incurred in obtaining a right to acquire in the future patent rights as respects any invention in respect of which the patent has not yet been granted shall be deemed for all the purposes of sections 520 to 532 to be expenditure on the purchase of patent rights, and if the patent rights are subsequently acquired the expenditure shall be deemed for those purposes to have been expenditure on the purchase of those rights.
Any sum received from a person which by virtue of subsection (5) above is deemed to be expenditure incurred by him on the purchase of patent rights shall be deemed to be proceeds of a sale of patent rights.
In sections 530 and 531 “know-how” means any industrial information and techniques likely to assist in the manufacture or processing of goods or materials, or in the working of a mine, oil-well or other source of mineral deposits (including the searching for, discovery or testing of deposits or the winning of access thereto), or in the carrying out of any agricultural, forestry or fishing operations.
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Where— he may, on making a claim, require that effect shall be given to the following provisions of this section in connection with that payment.
an author of a literary, dramatic, musical or artistic work assigns the copyright in the work wholly or partially, or grants any interest in the copyright by licence; and
the consideration for the assignment or grant consists wholly or partially of a payment to which this section applies, being a payment the whole amount of which would, but for this section, be included in computing the amount of his profits or gains for a single year of assessment; and
the author was engaged on the making of the work for a period of more than 12 months;
If the period for which he was engaged on the making of the work does not exceed 24 months, then, for all income tax purposes, one-half only of the amount of the payment shall be treated as having become receivable on the date on which it actually became receivable, and the remaining half shall be treated as having become receivable 12 months before that date.
If the period for which he was engaged on the making of the work exceeds 24 months, then, for all income tax purposes, one-third only of the amount of the payment shall be treated as having become receivable on the date on which it actually became receivable, and one-third shall be treated as having become receivable 12 months, and one-third 24 months, before that date.
This section applies to— except that it shall not by virtue of paragraph (b) above apply to payments in respect of the copyright in any work which only become receivable more than two years after its first publication.
a lump sum payment, including an advance on account of royalties which is not returnable, and
any payment of or on account of royalties or sums payable periodically,
A claim under this section with respect to any payment to which it applies by virtue only of subsection (4)(b) above shall have effect as a claim with respect to all such payments in respect of the copyright in the same work which are receivable by the claimant, whether before or after the claim; and such a claim may be made at any time not later than 5th April next following the expiration of eight years after the work’s first publication.
A claim cannot be made under this section in respect of a payment if a prior claim has been made under section 535 as respects that payment.
In this section—
“author” includes a joint author; and
any reference to the first publication of a work is a reference to the first occasion on which the work or a reproduction of it is published, performed or exhibited.
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Where not less than ten years after the first publication of the work the author of a literary, dramatic, musical or artistic work assigns the copyright in the work wholly or partially, or grants any interest in the copyright by licence, and— he may by making a claim require that effect shall be given to the following provisions of this section in connection with that payment.
the consideration for the assignment or grant consists wholly or partially of a lump sum payment the whole amount of which would, but for this section, be included in computing the amount of his profits or gains for a single year of assessment, and
the copyright or interest is not assigned or granted for a period of less than two years,
Except where the copyright or interest is assigned or granted for a period of less than six years, the amount of the payment shall for income tax purposes be treated as becoming receivable in six equal instalments at yearly intervals the first of which becomes receivable on the date when the payment actually became receivable.
Where the copyright or interest is assigned or granted for a period of less than six years, the amount of the payment shall for income tax purposes be treated as becoming receivable in a number of equal instalments at yearly intervals the first of which becomes receivable on the date when the payment actually became receivable, the number being the number of whole years in that period.
Subject to subsection (5) below, if the author dies, any instalment which under this section would, but for the death, be treated as becoming receivable after the death shall for income tax purposes be treated as becoming receivable on the date when the last instalment before the death is to be treated as becoming receivable.
If the personal representatives so elect—
the total amount of income tax which would have been payable by the deceased or out of his estate in respect of the payment if the copyright or interest had been assigned or granted for a period beginning with the date when the first instalment is treated as becoming receivable and ending with the day before the death shall be computed, and
the income tax payable out of the estate by reason of the provisions of subsection (4) above shall be reduced so as not to exceed the amount at (a) above. The references in this subsection to the income tax payable by a person include, in cases where the income of a wife is deemed to be the income of the husband, references to the income tax payable by his wife or her husband, as the case may be.
If— any instalment which under this section would, but for the discontinuance, be treated as receivable on a date after the discontinuance shall for income tax purposes be treated as becoming receivable when the last instalment before the discontinuance is to be treated as becoming receivable, unless the author elects to be treated (for all purposes) as if the copyright or interest had been assigned or granted for a period beginning with the date when the first instalment is treated as becoming receivable and ending with the day before the discontinuance.
the payment would, apart from this section, have been taken into account in assessing the profits or gains of a profession or vocation, and
the profession or vocation is permanently discontinued (otherwise than on death) after the date on which the payment actually became receivable,
Notice of any election under subsection (5) or (6) above shall be served on the inspector within two years of the death, or as the case may be of the discontinuance.
In any case where— the amount which, under this section, is to be treated as receivable in instalments shall be the amount of the payment after that deduction, and effect shall not be given to that deduction in any other way.
but for this section, the payment would be included in computing any profits or gains chargeable to tax under Case VI of Schedule D, and
any amount would be deductible from that payment in computing those profits or gains (whether under the general provisions relating to Case VI or under section 105(1)),
A claim cannot be made under this section in respect of a payment if a prior claim has been made under section 534 as respects that payment.
Where it is necessary, in order to give effect to a claim or election under this section, or as a result of the claim or election, to make any adjustment by way of an assessment on any person, the assessment shall not be out of time if it is made within one year of the final determination of the claim or, as the case may be, within one year from the giving of notice of the election.
In this section— and any reference to the first publication of a work is a reference to the first occasion on which the work or a reproduction of it is published, performed or exhibited.
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Subject to the provisions of this section, where the usual place of abode of the owner of a copyright is not within the United Kingdom, section 349(1) shall apply to any payment of or on account of any royalties or sums paid periodically for or in respect of that copyright as it applies to annual payments not payable out of profits or gains brought into charge to income tax.
In subsection (1) above— and the reference to royalties or sums paid periodically for or in respect of a copyright does not include royalties or sums paid in respect of copies of works which are shown on a claim to have been exported from the United Kingdom for distribution outside the United Kingdom.
Subject to subsection (4) below, where any payment to which subsection (1) above applies is made through an agent resident in the United Kingdom and that agent is entitled as against the owner of the copyright to deduct any sum by way of commission in respect of services rendered, the amount of the payment shall for the purposes of section 349(1) be taken to be diminished by the sum which the agent is so entitled to deduct.
Where the person by or through whom the payment is made does not know that any such commission is payable or does not know the amount of any such commission, any income tax deducted by or assessed and charged on him shall be computed in the first instance on, and the account to be delivered of the payment shall be an account of, the total amount of the payment without regard being had to any diminution thereof, and in that case, on proof of the facts on a claim, there shall be made to the agent on behalf of the owner of the copyright such repayment of income tax as is proper in respect of the sum deducted by way of commission.
The time of the making of a payment to which subsection (1) above applies shall, for all tax purposes, be taken to be the time when it is made by the person by whom it is first made and not the time when it is made by or through any other person.
Any agreement for the making of any payment to which subsection (1) above applies in full and without deduction of income tax shall be void.
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Where the artist obtains any sum for the sale of a painting, sculpture or other work of art, or by way of commission or fee for the creation of the work of art, and— he may, by making a claim, require that effect shall be given to the following provisions of this section as respects that sum.
he was engaged on the making of the work of art for a period of more than 12 months, or
he was engaged for a period of more than 12 months in making a number of works of art for an exhibition, and the work is one of them,
If the period for which he was engaged on the making of the work does not exceed 24 months, then, for all income tax purposes, one-half only of the amount of the payment shall be treated as having become receivable on the date on which it actually became receivable, and the remaining half shall be treated as having become receivable 12 months before that date.
If the period for which he was engaged on the making of the work exceeds 24 months, then, for all income tax purposes, one-third only of the amount of the payment shall be treated as having become receivable on the date on which it actually became receivable, and one-third shall be treated as having become receivable 12 months, and one-third 24 months, before that date.
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This Chapter shall have effect for the purposes of imposing, in the manner and to the extent therein provided, charges to tax, including tax under section 426, in respect of gains to be treated in accordance with this Chapter as arising in connection with policies of life insurance, contracts for life annuities and capital redemption policies.
Nothing in this Chapter shall apply—
to any policy of life insurance having as its sole object the provision on an individual’s death or disability of a sum substantially the same as any amount then outstanding under a mortgage of his residence, or of any premises occupied by him for the purposes of a business, being a mortgage the principal amount secured by which is repayable by instalments payable annually or at shorter regular intervals; or
to any policy of life insurance issued in connection with an approved scheme, as defined in Chapter I of Part XIV; or
to a policy of insurance which constitutes, or is evidence of, a contract for the time being approved under section 621. In the application of this subsection to Scotland, for the reference to a mortgage there shall be substituted a reference to a heritable security within the meaning of the Conveyancing (Scotland) Act 1924 (but including a security constituted by ex facie absolute disposition or assignation).
In this Chapter—
For the purposes of this Chapter the falling due of a sum payable in pursuance of a right conferred by a policy or contract to participate in profits shall be treated as the surrender of rights conferred by the policy or contract.
This Chapter shall have effect only as respects policies of life insurance issued in respect of insurances made after 19th March 1968, contracts for life annuities entered into after that date, and capital redemption policies effected after that date.
A policy of life insurance issued in respect of an insurance made on or before 19th March 1968 shall be treated for the purposes of subsection (5) above and the following provisions of this Chapter as issued in respect of one made after that date if it is varied after that date so as to increase the benefits secured or to extend the term of the insurance.
A variation effected before the end of the year 1968 shall be disregarded for the purposes of subsection (6) above if its only effect was to bring into conformity with paragraph 2 of Schedule 9 to the Finance Act 1968 (which is re-enacted, as amended, by paragraph 2 of Schedule 15 to this Act) a policy previously conforming therewith except as respects the amount guaranteed on death, and no increase was made in the premiums payable under the policy.
Subsections (1) to (7) above do not apply in relation to section 554.
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Subject to the provisions of this section, in this Chapter “chargeable event” means, in relation to a policy of life insurance—
if it is not a qualifying policy, any of the following—
any death giving rise to benefits under the policy;
the maturity of the policy;
the surrender in whole of the rights conferred by the policy;
the assignment for money or money’s worth of those rights; and
an excess of the reckonable aggregate value mentioned in subsection (2) of section 546 over the allowable aggregate amount mentioned in subsection (3) of that section, being an excess occurring at the end of any year (as defined in subsection (4) of that section) except, if it ends with another chargeable event, the final year; and
if it is a qualifying policy (whether or not the premiums thereunder are eligible for relief under section 266), any of the above events, but—
in the case of death or maturity, only if the policy is converted into a paid-up policy before the expiry of ten years from the making of the insurance, or, if sooner, of three-quarters of the term for which the policy is to run if not ended by death or disability;
in the case of a surrender or assignment or such an excess as is mentioned in paragraph (a)(v) above, only if it is effected or occurs within that time, or the policy has been converted into a paid-up policy within that time.
The maturity of a policy is not a chargeable event in relation thereto if— unless the circumstances are such that the person making the insurance in respect of which the new policy is issued was an infant when the former policy was issued, and the former policy was one securing a capital sum payable either on a specified date falling not later than one month after his attaining 25 or on the anniversary of the policy immediately following his attainment of that age.
a new policy is issued in consequence of the exercise of an option conferred by the maturing policy, and
the whole of the sums becoming payable under the maturing policy are retained by the company with whom the insurance was made and applied in the payment of one or more premiums under the new policy,
Except as provided by section 544, no event is a chargeable event in relation to a policy issued in respect of an insurance made before 26th June 1982 if the rights conferred by the policy have at any time before that date and before the event been assigned for money or money’s worth and are not at the time of the event held by the original beneficial owner.
No account shall be taken for the purposes of this section of any assignment effected by way of security for a debt, or on the discharge of a debt secured by the rights or share concerned, or of any assignment between spouses living together.
Where subsection (1)(b) applies to a policy which has been varied so as to increase the premiums payable thereunder, it shall so apply as if the references in subsection (1)(b)(i) to the making of the insurance and the term of the policy were references respectively to the taking effect of the variation and the term of the policy as from the variation.
This section has effect subject to paragraph 20 of Schedule 15.
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On the happening of a chargeable event in relation to any policy of life insurance, there shall be treated as a gain arising in connection with the policy—
if the event is a death, the excess (if any) of the surrender value of the policy immediately before the death, plus the amount or value of any relevant capital payments, over the sum of the following—
the total amount previously paid under the policy by way of premiums; and
the total amount treated as a gain by virtue of paragraph (d) below on the previous happening of chargeable events;
if the event is the maturity of the policy, or the surrender in whole of the rights thereby conferred, the excess (if any) of the amount or value of the sum payable or other benefits arising by reason of the event, plus the amount or value of any relevant capital payments, over the sum of the following—
the total amount previously paid under the policy by way of premiums; and
the total amount treated as a gain by virtue of paragraph (d) below on the previous happening of chargeable events;
if the event is an assignment, the excess (if any) of the amount or value of the consideration, plus the amount or value of any relevant capital payments or of any previously assigned share in the rights conferred by the policy, over the sum of the following—
the total amount previously paid under the policy by way of premiums; and
the total amount treated as a gain by virtue of paragraph (d) below on the previous happening of chargeable events;
if the event is the occurrence of such an excess as is mentioned in section 540(1)(a)(v), the amount of the excess.
Where, in a case falling within subsection (1)(b) above, a right to periodical payments arises by reason of the event, there shall be treated as payable by reason thereof an amount equal to the capital value of those payments at the time the right arises.
Where, in a case falling within subsection (1)(c) above, the assignment is between persons who are connected with each other within the meaning of section 839, the assignment shall be deemed to have been made for a consideration equal to the market value of the rights or share assigned.
Where there is an assignment, otherwise than for money or money’s worth, of all the rights conferred by the policy, the calculations required to be made by section 546 shall be made, in the first instance, without regard to any surrender or assignment of part of or a share in those rights which takes place after the assignment, and any gain treated as arising under subsection (1)(d) above on the calculation so made shall be treated as arising to the assignor.
In this section— and the provisions of this section are subject to paragraph 20 of Schedule 15.
“relevant capital payments” means, in relation to any policy, any sum or other benefit of a capital nature, other than one attributable to a person’s disability, paid or conferred under the policy before the happening of the chargeable event; and
references in this subsection and (in relation to premiums) in subsection (1) above to “the policy” include references to any related policy, that is to say, to any policy in relation to which the policy is a new policy within the meaning of paragraph 17 of Schedule 15, and any policy in relation to which that policy is such a policy, and so on;
There shall be disregarded for the purposes of this section any amount which was treated under section 72(9) of the Finance Act 1984 as an additional premium.
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Subject to subsections (2) and (3) below, in this Chapter “chargeable event” means, in relation to any contract for a life annuity—
the surrender in whole of the rights conferred by the contract, or
the assignment for money or money’s worth of those rights, or
an excess of the reckonable aggregate value mentioned in subsection (2) of section 546 over the allowable aggregate amount mentioned in subsection (3) of that section, being an excess occurring at the end of any year (as defined in subsection (4) of that section) except, if it ends with another chargeable event, the final year.
Where the terms of a contract provide for the payment of a capital sum as an alternative, in whole or in part, to payments by way of annuity, the taking of the capital sum shall be treated for the purposes of this section and section 543 as a surrender in whole or in part of the rights conferred by the contract, and where the terms of the contract provide for the payment of a capital sum on death and the contract was made on or after 10th December 1974, the death shall be treated for those purposes as a surrender in whole of the rights conferred by the contract.
Except as provided by section 544, an event referred to in subsection (1) above is not a chargeable event in relation to any contract made before 26th June 1982 if the rights conferred by the contract have at any time before that date and before the event been assigned for money or money’s worth and are not at the time of the event held by the original beneficial owner.
Subsection (4) of section 540 shall, with any necessary modifications, apply for the purposes of this section as it applies for the purposes of that section.
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On the happening of a chargeable event in relation to any contract for a life annuity, there shall be treated as a gain arising in connection with the contract—
if the event is the surrender in whole of the rights conferred by the contract, the excess (if any) of the amount payable by reason of the event plus the amount or value of any relevant capital payments over the sum of the following—
the total amount previously paid under the contract, whether by way of premiums or as lump sum consideration, reduced, if before the happening of the event one or more payments have been made on account of the annuity, by the capital element in that payment or payments, as determined in accordance with section 656; and
the total amount treated as a gain by virtue of paragraph (c) below on the previous happening of chargeable events;
if the event is an assignment, the excess (if any) of the amount or value of the consideration, plus the amount or value of any relevant capital payments or of any previously assigned share in the rights conferred by the contract, over the sum of the following—
the amount specified in paragraph (a)(i) above; and
any amount treated as a gain by virtue of paragraph (c) below on the previous happenings of chargeable events;
if the event is the occurrence of such an excess as is mentioned in section 542(1), the amount of the excess.
Subsection (3) of section 541 shall apply for the purposes of subsection (1) above as it applies for the purposes of subsection (1)(c) of that section, and subsection (4) of that section shall apply for the purposes of this section with the substitution of references to the contract for references to the policy.
In this section “relevant capital payments” means, in relation to any contract, any sum or other benefit of a capital nature paid or conferred under the contract before the happening of the chargeable event.
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In this section “assigned policy” means a policy of life assurance—
which was issued in respect of an insurance made before 26th June 1982; and
the rights conferred by which have been assigned for money or money’s worth before that date; and
in relation to which an event occurring on or after that date would not, apart from this section, be a chargeable event.
In this section “assigned contract” means a contract for a life annuity—
which was made before 26th June 1982; and
the rights conferred by which have been assigned for money or money’s worth before that date; and
in relation to which an event occurring on or after that date would not, apart from this section, be a chargeable event.
In any case where after 23rd August 1982— section 540(3) shall cease to apply to the policy or section 542(3) shall cease to apply to the contract, as the case may be.
the rights conferred by an assigned policy or, as the case may be, an assigned contract are again assigned for money or money’s worth; or
a payment is made by way of premium or as lump sum consideration under the policy or contract; or
subject to subsections (5) and (7) below, a sum is lent by or by arrangement with the body issuing the policy or, as the case may be, the body with which the contract was made;
No account shall be taken for the purposes of subsection (3)(a) above of any assignment effected by way of security for a debt, or on the discharge of a debt secured by the rights concerned, or of an assignment between spouses living together.
Subsection (3)(c) above does not apply unless—
the policy was issued in respect of an insurance made after 26th March 1974 or, as the case may be, the contract was entered into after that date; and
the sum concerned is lent to or at the direction of the individual who, in accordance with subsection (6) below, is at the time of the loan the chargeable individual.
The individual who is at any time the chargeable individual for the purposes of subsection (5)(b) above shall be determined as follows—
if at the time the rights conferred by the policy or contract are vested in an individual as beneficial owner or are held on trusts created by an individual (including such trusts as are referred to in section 547(1)(a)), that individual is the chargeable individual; and
if at that time those rights are held as security for a debt owed by an individual, that individual is the chargeable individual.
Subsection (3)(c) above does not apply in relation to a policy if—
it is a qualifying policy; and
either interest at a commercial rate is payable on the sum lent or the sum is lent to a full-time employee of the body issuing the policy for the purpose of assisting him in the purchase or improvement of a dwelling-house to be used as his only or main residence.
Where section 540(3) or 542(3) ceases to apply to an assigned policy or assigned contract by virtue of paragraph (c) of subsection (3) above, the lending of the sum concerned shall be regarded for the purposes of the Income Tax Acts (other than that paragraph) as taking place immediately after the time at which section 540(3) or, as the case may be, 542(3) ceases so to apply.
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Subject to subsection (2) below, in this Chapter “chargeable event” means, in relation to a capital redemption policy, any of the following—
the maturity of the policy, except where the sums payable on maturity are annual payments chargeable to tax under Schedule D;
the surrender in whole of the rights conferred by the policy;
the assignment for money or money’s worth of those rights; and
an excess of the reckonable aggregate value mentioned in subsection (2) of section 546 over the allowable aggregate amount mentioned in subsection (3) of that section, being an excess occurring at the end of any year (as defined in subsection (4) of that section), except, if it ends with another chargeable event, the final year.
Subsection (4) of section 540 shall apply for the purposes of this section as it applies for purposes of that section.
The provisions of section 541, except subsection (3), shall, so far as appropriate and subject to subsection (4) below, apply to capital redemption policies as they apply to policies of life assurance.
Where a chargeable event happens in relation to a capital redemption policy which has previously been assigned for money or money’s worth, section 541 shall have effect in relation thereto as if, for the references to the total amount previously paid under the policy by way of premiums, there were substituted references to the amount or value of the consideration given for the last such assignment, plus the total amount of the premiums paid under the policy since that assignment.
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For the purposes of sections 540, 542 and 545, there shall be calculated as at the end of each year— and the appropriate portion of any payment shall be one-twentieth for the year in which it is made, increased by a further one-twentieth for each of the subsequent years, up to a maximum of nineteen, but excluding therefrom any such one-twentieth for any year before that first year.
the value, as at the time of surrender or assignment, of any part of or share in the rights conferred by the policy or contract which has been assigned or surrendered during the period ending with the end of that year and beginning with the commencement of the first year which falls wholly after 13th March 1975; and
the appropriate portion of any payment made up to the end of that period by way of premium or as a lump sum consideration;
The reckonable aggregate value referred to in those sections shall be—
the sum of the values calculated under subsection (1) above; less
the sum of the values so calculated for a previous year and brought into account on the previous happening of a chargeable event.
In this section “year” means the 12 months beginning with the making of the insurance or contract and any subsequent period of 12 months; except that—
death, the maturity of the policy or the surrender of the rights conferred by the policy or contract shall be treated as ending the final year; and
if the final year would by virtue of paragraph (a) above begin and end in the same year of assessment, the final year and the year preceding it shall together be one year.
There shall be disregarded for the purposes of this section any amount which was treated under section 72(9) of the Finance Act 1984 as an additional premium.
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Where under section 541, 543 or 545 a gain is to be treated as arising in connection with any policy or contract—
if, immediately before the happening of the chargeable event in question, the rights conferred by the policy or contract were vested in an individual as beneficial owner, or were held on trusts created by an individual (including trusts arising under section 11 of the Married Women’s Property Act 1882, section 2 of the Married Women’s Policies of Assurance (Scotland) Act 1880 or section 4 of the Law Reform (Husband and Wife) Act (Northern Ireland) 1964 or as security for a debt owed by an individual, the amount of the gain shall be deemed to form part of that individual’s total income for the year in which the event happened;
if, immediately before the happening of that event, those rights were in the beneficial ownership of a close company, or were held on trusts created, or as security for a debt owed, by a close company, then, for the purposes of Chapter III of Part XI—
the amount of the gain shall be deemed to form part of the company’s income for the accounting period in which the event happened, and
the company’s distributable income (but not its estate or trading income) for that period shall be treated as increased by the amount of the gain;
if, immediately before the happening of that event, those rights were vested in personal representatives, within the meaning of Part XVI, the amount of the gain shall be deemed for the purposes of that Part to be part of the aggregate income of the estate of the deceased.
Nothing in subsection (1) above shall apply to any amount which is chargeable to tax apart from that subsection.
Where, immediately before the happening of a chargeable event, the rights conferred by any policy or contract were vested beneficially in two or more persons, or were held on trusts created, or as security for a debt owed, by two or more persons, subsection (1)(a) and (b) above shall have effect in relation to each of those persons as if he had been the sole owner, settlor or debtor, but with references to the amount of the gain construed as references to the part of it proportionate to his share in the rights at the time of the event or, as the case may require, when the trusts were created.
References in subsections (1) and (3) above to the rights conferred by a policy or contract are, in the case of an assignment of a share only in any rights, references to that share.
Subject to subsections (6) and (7) below and section 550, where by virtue of subsection (1) above, a sum is included in an individual’s total income—
no assessment shall be made on him in respect of income tax at the basic rate on that sum but he shall be treated as having paid income tax at the basic rate on that sum or, if his total income is reduced by any deductions, on so much of that sum as is part of his total income as so reduced;
no repayment shall be made of the income tax treated by virtue of paragraph (a) above as having been paid; and
the sum so included shall be treated for the purposes of sections 348 and 349(1) as not brought into charge to income tax.
Where under section 543 a gain is to be treated as arising in connection with a contract for a life annuity made after 26th March 1974—
this section shall have effect, in relation to the gain, as if subsection (5) were omitted; and
the gain shall be chargeable to tax under Case VI of Schedule D; but
any relief under section 550 shall be computed as if this subsection had not been enacted.
Where under section 541 or 543 a gain is to be treated as arising in connection with a policy issued by a friendly society in the course of tax exempt life or endowment business, this section shall have effect in relation to the gain as if subsection (5) were omitted, but any relief under section 550 shall be computed as if this subsection had not been enacted.
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Where— then, subject to subsection (3) below, the same results shall follow under this Chapter as if at the time the sum was lent there had been a surrender of part of the rights conferred by the policy or contract and the sum had been paid as consideration for the surrender.
under section 547 a gain arising in connection with a policy or contract would be treated as forming part of an individual’s total income; and
the policy was issued in respect of an insurance made after 26th March 1974 or the contract was made after that date; and
any sum is at any time after the making of the insurance or contract lent to or at the direction of that individual by or by arrangement with the body issuing the policy or, as the case may be, the body with which the contract was made;
If the whole or any part of the sum is repaid the repayment shall be treated, for the purpose of computing any gain arising on the happening, at the end of the final year, of a chargeable event, as a payment of a premium or lump sum consideration.
Subsections (1) and (2) above do not apply in relation—
to a policy if—
it is a qualifying policy; and
either interest at a commercial rate is payable on the sum lent or the sum is lent to a full-time employee of the body issuing the policy for the purpose of assisting him in the purchase or improvement of a dwelling used or to be used as his only or main residence;
to a contract if and to the extent that interest on the sum lent is eligible for relief under section 353 by virtue of section 365.
In this section “final year” has the same meaning as in section 546.
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Subject to subsection (2) below, where such an excess as is mentioned in section 541(1)(a) or (b) or 543(1)(a)— a corresponding deficiency occurring at the end of the final year shall be allowable as a deduction from his total income for that year of assessment, so far as it does not exceed the total amount treated as a gain by virtue of section 541(1)(d) or 543(1)(c) on the previous happenings of chargeable events.
would be treated as a gain arising in connection with a policy or contract, and
would form part of an individual’s total income for the year of assessment in which the final year ends,
Except where the deficiency mentioned in subsection (1) above occurs in connection with a contract for a life annuity made after 26th March 1974, the deduction allowable under that subsection shall be made only for the purposes of ascertaining the individual’s excess liability, that is to say, the excess (if any) of his liability to income tax over what it would be if all income tax were chargeable at the basic rate to the exclusion of any higher rate.
In this section “final year” has the same meaning as in section 546.
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The following provisions of this section shall have effect for the purposes of giving relief, on a claim in that behalf being made by him to the Board, in respect of any increase in an individual’s liability to tax which is attributable to one or more amounts being included in his total income for a year of assessment by virtue of section 547(1)(a).
Where one amount only is so included, there shall be computed— and the relief shall consist of a reduction or repayment of tax equal to the difference between the two amounts of tax so computed, or, if tax would not be chargeable on a calculation by reference to the appropriate fraction, of a reduction or repayment of the tax equal to the tax computed under paragraph (a) above.
the tax which would be chargeable in respect of the amount if relief under this section were not available and it constituted the highest part of the claimant’s total income for the year, and
the tax (if any) which would be chargeable in respect of the amount if calculated, in accordance with subsection (3) below, by reference to its appropriate fraction;
In subsection (2) above “appropriate fraction” means, in relation to any amount, such a sum as bears thereto the same proportion as that borne by one to the number of complete years for which the policy or contract has run before the happening of the chargeable event; and the computation required by paragraph (b) of that subsection shall be made by applying to the amount in question such rate or rates of income tax, other than the basic rate, as would apply if it were reduced to that fraction and, as so reduced, still constituted the highest part of the claimant’s total income for the year.
For the purposes of subsection (3) above the number of years for which a policy of life insurance has run before the happening of a chargeable event shall be calculated, where appropriate, from the issue of the earliest related policy, meaning, any policy in relation to which the policy is a new policy within the meaning of paragraph 17 of Schedule 15, any policy in relation to which that policy is such a policy, and so on.
Where a chargeable event on the happening of which an amount is included in an individual’s total income by virtue of section 547(1)(a) follows the happening of another chargeable event in relation to the same policy or contract, and each of those events is such an excess as is mentioned in section 540(1)(a)(v), 542(1) or 545(1)(d), subsections (3) and (4) above shall have effect in relation to that amount as if the number of complete years referred to in subsection (3) were the number of complete years elapsing between that other event (or, if more than one, the last of them) and the first-mentioned event.
Where by virtue of section 547(1)(a) two or more amounts are included in an individual’s total income for any year of assessment, subsections (2) and (3) above shall apply as if they together constituted a single amount, but with the approporiate fraction of the whole determined by adding together the appropriate fractions of the individual amounts.
A provision of this section requiring tax to be calculated as if an amount constituted the highest part of a claimant’s total income shall apply notwithstanding any other provision of the Income Tax Acts directing any other amount to be treated as the highest part thereof, but, for the purposes of this section, a claimant’s total income shall be deemed not to include any amount in respect of which he is chargeable to tax under section 34, 35, 36 or 148.
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Where— the individual shall be entitled to recover from the trustees, to the extent of any sums, or to the value of any benefits, received by them by reason of the event, an amount equal to that (if any) by which the tax with which he is chargeable for the year of assessment in question, reduced by the amount of any relief available under section 550 in respect of the amount so included, exceeds the tax with which he would have been chargeable for the year if that amount had not been so included.
an amount is included in an individual’s income by virtue of section 547(1)(a), and
the rights or share in question were held immediately before the happening of the chargeable event on trust,
Where, for the purposes of relief under section 550, two or more amounts are to be treated as one, the reduction required by subsection (1) above on account of the relief available in respect of any of them shall consist of a proportionate part of the relief available in respect of their aggregate.
An individual may require the Board to certify any amount recoverable by him by virtue of this section, and the certificate shall be conclusive evidence of the amount.
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Where a chargeable event . . . has happened in relation to any policy or contract, the body by or with whom the policy or contract was issued, entered into or effected shall—
unless satisfied that no gain is to be treated as arising by reason of the event, deliver to the appropriate policy holder before the end of the relevant three month period a certificate specifying the information described in subsection (5) below; and
if the condition in paragraph (a) or (b) of subsection (2) below is satisfied, deliver to the inspector before the end of the relevant three month period a certificate specifying the information described in subsection (5) below together with the name and address of the appropriate policy holder.
as may be required for computing the gain to be treated as arising by virtue of this Chapter—
the surrender value of the policy, or the sum payable, or other benefits to be conferred, by the body in question by reason of the event;
the amount or value of any relevant capital payments;
the amounts previously paid under the policy or contract by way of premiums, or otherwise by way of consideration for an annuity; and
the capital element in any payment previously made on account of an annuity;
the number of years relevant for computing the appropriate fraction of the gain for the purposes of section 550(3).
For the purposes of this section—
the condition in this paragraph is that the event is an assignment for money or money’s worth of the whole of the rights conferred by the policy or contract; or
the condition in this paragraph is that the amount of the gain, or the aggregate amount of the gain and any gains connected with it, exceeds one half of the basic rate limit for the relevant year of assessment.
If, in the case of every certificate which a body delivers under subsection (1)(a) above which relates to a gain attributable to a year of assessment . . . , the body also delivers to the inspector— a certificate specifying the same information as the certificate under subsection (1)(a) together with the name and address of the appropriate policy holder, the body shall be taken to have complied with the requirements of subsection (1)(b) above in relation to that year of assessment . . . so far as relating to the chargeable events to which the certificates relate.
before the end of the relevant three month period for the purposes of subsection (1)(b) above,
by a means prescribed by the Board for the purposes of this subsection under section 552ZA(5), and
in a form so prescribed in the case of that means,
Where a certificate is not required to be delivered under subsection (1)(b) above in the case of any chargeable event—
the inspector may by notice require the body to deliver to him a copy of any certificate that the body was required to deliver under subsection (1)(a) above which relates to the chargeable event; and
it shall be the duty of the body to deliver such a copy within 30 days of receipt of the notice.
The information to be given to the appropriate policy holder pursuant to subsection (1)(a) above or the inspector pursuant to subsection (1)(b) above is—
any unique identifying designation given to the policy or contract;
the nature of the chargeable event and—
the date on which it happened; and
if it is a chargeable event by virtue of . . . section 514(1) of ITTOIA 2005 (chargeable events where transaction-related calculations show gains), the date on which the insurance year ends;
if the event is the assignment of all the rights conferred by the policy or contract, such of the following as may be required for computing the amount of the gain to be treated as arising by virtue of . . . Chapter 9 of Part 4 of ITTOIA 2005—
. . . the amount or value of any capital sums of a kind referred to in section 492(1)(b) to (e) of ITTOIA 2005;
the amounts previously paid under the policy or contract by way of premiums or otherwise by way of consideration for an annuity;
. . . the amount of so much of any payment previously made on account of an annuity as is exempt under section 717 of ITTOIA 2005;
the value of any previously assigned parts of or shares in the rights conferred by the policy or contract;
. . . the total of the amounts of gains treated as arising on previous chargeable events within section 509(1) or 514(1) of ITTOIA 2005;
except where paragraph (c) above applies, the amount of the gain treated as arising by reason of the event;
the number of years relevant for computing the annual equivalent of the amount of the gain for the purposes of subsection (1) of section 536 of ITTOIA 2005 (top slicing relieved liability: one chargeable event), apart from subsections (6) and (8) of that section;
on the assumption that section 465 of ITTOIA 2005 (person liable: individuals) has effect in relation to the gain —
whether an individual would fall to be treated as having paid income tax at the basic rate on the amount of the gain in accordance with section 530 of that Act; and
if so, except in a case where paragraph (c) above applies, the amount of such tax that would fall to be so treated as paid.
For the purposes of subsection (1)(a) above, the relevant three month period is whichever of the following periods ends the latest—
the period of three months following the happening of the chargeable event;
if the event is a surrender or assignment which is a chargeable event by virtue of . . . section 514(1) of ITTOIA 2005 . . . , the period of three months following the end of the insurance year in which the event happens;
if the event is a death or an assignment of the whole of the rights or a surrender or assignment which is a chargeable event by virtue of . . . section 514(1) of ITTOIA 2005 . . . , the period of three months beginning with receipt of written notification of the event.
For the purposes of subsection (1)(b) above, the relevant three month period is whichever of the following periods ends the latest—
the period of three months following the end of the year of assessment . . . in which the event happened;
if the event is a surrender or assignment which is a chargeable event by virtue of section 514(1) of ITTOIA 2005, the period of three months following the end of the insurance year in which the event happens;
if the event is a death or an assignment, the period of three months beginning with receipt of written notification of the event;
if a certificate under subsection (1)(b) above would not be required in respect of the event apart from the happening of another event, and that other event is one of those mentioned in paragraph (c) above, the period of three months beginning with receipt of written notification of that other event.
For the purposes of this section the cases where a gain is connected with another gain are those cases where—
both gains arise in connection with policies or contracts containing obligations which, immediately before the chargeable event, were obligations of the same body;
the policy holder of those policies or contracts is the same;
both gains are attributable to the same year of assessment . . . ;
the terms of the policies or contracts are the same, apart from any difference in their maturity dates; and
the policies or contracts were issued in respect of insurances made, or were entered into or effected, on the same date.
For the purposes of this section, the year of assessment . . . to which a gain is attributable is—
in the case of a gain treated as arising by virtue of subsection (1) of section 514 of ITTOIA 2005, the year of assessment which includes the end of the insurance year mentioned in subsection (3) and (4) of that section; or
in any other case, the year of assessment . . . in which happens the chargeable event by reason of which the gain is treated as arising.
In this section—
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This section is supplemented by section 552ZA.
For the purposes of this section—
section 491(2) of ITTOIA 2005 is taken to have effect as if, in the definition of “PG”, the words from “but” to the end were omitted, and
no account is to be taken of the effect of section 465B or 541A of that Act.
For the purposes of this section no account is to be taken of the effect of sections 528 and 528A of ITTOIA 2005.
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If, in the case of a substitution of policies falling within paragraph 25(1) or (3) of Schedule 15, the new policy is a qualifying policy, section 540 shall have effect with the following modifications—
the surrender of the rights conferred by the old policy shall not be a chargeable event (within the meaning of that section); and
the new policy shall be treated as having been issued in respect of an insurance made on the day referred to in paragraph 26 of that Schedule.
If at any time neither the conditions in sub-paragraph (3) nor those in sub-paragraph (4) of paragraph 24 of Schedule 15 are fulfilled with respect to a new non-resident policy which has previously become a qualifying policy, then, from that time onwards, this Chapter shall apply in relation to the policy as if it were not a qualifying policy.
Subject to subsection (5) below, on the happening of a chargeable event in relation to a new non-resident policy or a new offshore capital redemption policy, the amount which, apart from this subsection, would by virtue of section 541 be treated as a gain arising in connection with the policy shall be reduced by multiplying it by the fraction— where— A is the number of days on which the policy holder was resident in the United Kingdom in the period for which the policy has run before the happening of the chargeable event; and B is the number of days in that period.
The calculation of the number of days in the period referred to in subsection (3) above shall be made in like manner as is provided in section 550(4), substituting a reference to the number of days for the reference to the number of years.
If, on the happening of the chargeable event referred to in subsection (3) above or at any time during the period referred to in that subsection, the policy is or was held by a trustee resident outside the United Kingdom or by two or more trustees any of whom is or was so resident, no reduction shall be made under that subsection unless—
the policy was issued in respect of an insurance made on or before 19th March 1985; and
on that date the policy was held by a trustee who was so resident or, as the case may be, by two or more trustees any of whom was so resident.
Subject to subsection (7) below, where, under section 541, a gain (reduced in accordance with subsection (3) above) is to be treated as arising in connection with a new non-resident policy or a new offshore capital redemption policy— but any relief under section 550 shall be computed as if this subsection had not been enacted.
section 547 shall have effect, in relation to the gain, as if subsection (5) were omitted; and
the gain shall be chargeable to tax under Case VI of Schedule D;
Paragraphs (a) and (b) of subsection (6) above do not apply to a gain arising in connection with a new non-resident policy if the conditions in either sub-paragraph (3) or sub-paragraph (4) of paragraph 24 of Schedule 15 are fulfilled at all times between the date on which the policy was issued and the date on which the gain is treated as arising.
Where a claim is made under section 550 in respect of the amount of a gain treated as arising in connection with a new non-resident policy or a new offshore capital redemption policy (with or without other amounts), the “appropriate fraction” which, in accordance with subsection (2) of that section, is to be applied to that amount shall be modified by deducting from the number of complete years referred to in subsection (3) of that section any complete years during which the policy holder was not resident in the United Kingdom.
Subsection (5) of section 550 shall not apply in relation to a new non-resident policy or a new offshore capital redemption policy.
In this section—
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Where— the payments made by way of loan shall be treated for tax purposes as annual payments falling within Case III of Schedule D, or, if they are made to a person residing in the United Kingdom and the contract or arrangements were made outside the United Kingdom, as income from a possession out of the United Kingdom and, for income tax, as falling within section 65(1).
under any contract or arrangements made on or after 7th April 1949, provision is made for the making to any person, at intervals until the happening of an event or contingency dependent on human life, of payments by way of loan; and
under the contract or arrangements, the loans are secured upon a policy of life assurance which assures moneys payable on the happening of such an event or contingency and need not be repaid until the policy moneys become payable; and
the amount of the moneys payable on the happening of the event or contingency is made by the policy to increase by reference to the length of a period ending on the happening of that event or contingency;
The amount of the moneys payable under a policy of life assurance shall not be deemed for the purposes of this section to be made to increase by reference to the length of a period ending on the happening of an event or contingency dependent on human life by reason only that those moneys are to increase from time to time if profits are made by the person liable under the policy.
This section shall not apply to any payments by way of loan if the Board are satisfied as respects those payments that it is not one of the objects of the contract or arrangements under which the payments are made that the recipient of them should enjoy the advantages which would, apart from any question of liability to tax, be enjoyed by a person in receipt of payments of the same amounts paid at the same times by way of annuity.
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This section supplements section 552 and shall be construed as one with it.
Where the obligations under any policy or contract of the body that issued, entered into or effected it (“the original insurer”) are at any time the obligations of another body (“the transferee”) to whom there has been a transfer of the whole or any part of a business previously carried on by the original insurer, section 552 shall have effect in relation to that time, except where the chargeable event— as if the policy or contract had been issued, entered into or effected by the transferee.
happened before the transfer, and
in the case of a death or an assignment, is an event of which the notification mentioned in subsection (6) or (7) of that section was given before the transfer,
Where, in consequence of . . . section 514(1) of ITTOIA 2005, paragraph (a) or (b) of section 552(1) requires certificates to be delivered in respect of two or more surrenders, happening in the same year, of part of or a share in the rights conferred by the policy or contract, a single certificate may be delivered under the paragraph in question in respect of all those surrenders (and may treat them as if they together constituted a single surrender) unless between the happening of the first and the happening of the last of them there has been—
an assignment of part of or a share in the rights conferred by the policy or contract; or
an assignment, otherwise than for money or money’s worth, of the whole of the rights conferred by the policy or contract.
Where the appropriate policy holder is two or more persons—
section 552(1)(a) requires a certificate to be delivered to each of them; but
nothing in section 552 or this section requires a body to deliver a certificate under subsection (1)(a) of that section to any person whose address has not been provided to the body (or to another body, at a time when the obligations under the policy or contract were obligations of that other body).
A certificate under section 552(1)(b) or (3)— and different forms, or different means of delivery, may be prescribed for different cases or different purposes.
shall be in a form prescribed for the purpose by the Board; and
shall be delivered by any means prescribed for the purpose by the Board;
The Board may by regulations make such provision as they think fit for securing that they are able—
to ascertain whether there has been or is likely to be any contravention of the requirements of section 552 or this section; and
to verify any certificate under that section.
Regulations under subsection (6) above may include, in particular, provisions requiring persons to whom premiums under any policy are or have at any time been payable—
to supply information to the Board; and
to make available books, documents and other records for inspection on behalf of the Board.
Regulations under subsection (6) above may—
make different provision for different cases; and
contain such supplementary, incidental, consequential or transitional provision as appears to the Board to be appropriate.
The Commissioners for Her Majesty's Revenue and Customs may make regulations—
requiring relevant persons—
to provide prescribed information to persons who apply for the issue of qualifying policies or who are, or may be, required to make statements under paragraph B3(2) of Schedule 15;
to provide to an officer of Revenue and Customs prescribed information about qualifying policies which have been issued by them or in relation to which they are or have been a relevant transferee;
making such provision (not falling within paragraph (a)) as the Commissioners think fit for securing that an officer of Revenue and Customs is able—
to ascertain whether there has been or is likely to be any contravention of the requirements of the regulations or of paragraph B3(2) of Schedule 15;
to verify any information provided to an officer of Revenue and Customs as required by the regulations.
The provision that may be made by virtue of subsection (1)(b) includes, in particular, provision requiring relevant persons to make available books, documents and other records for inspection by or on behalf of an officer of Revenue and Customs.
The regulations may—
make different provision for different cases or circumstances, and
contain incidental, supplementary, consequential, transitional, transitory or saving provision.
In this section—
For the purposes of this section a person (“X”) is at any time a “relevant transferee” in relation to a qualifying policy if the obligations under the policy of its issuer are at that time the obligations of X as a result of there having been a transfer to X of the whole or any part of a business previously carried on by the issuer.
This section has effect for the purpose of securing that, where it applies to an overseas insurer, another person is the overseas insurer’s tax representative.
In this section “overseas insurer” means a person who is not resident in the United Kingdom who carries on a business which consists of or includes the effecting and carrying out of—
policies of life insurance;
contracts for life annuities; or
capital redemption policies.
This section applies to an overseas insurer—
if the condition in subsection (4) below is satisfied on the designated day; or
where that condition is not satisfied on that day, if it has subsequently become satisfied.
The condition mentioned in subsection (3) above is that—
there are in force relevant insurances the obligations under which are obligations of the overseas insurer in question or of an overseas insurer connected with him; and
the total amount or value of the gross premiums paid under those relevant insurances is £1 million or more.
In this section “relevant insurance” means any policy of life insurance, contract for a life annuity or capital redemption policy . . . in the case of which—
the holder is resident in the United Kingdom;
the obligations of the insurer are obligations of a person not resident in the United Kingdom; and
those obligations are not attributable to a branch or agency of that person’s in the United Kingdom.
Before the expiration of the period of three months following the day on which this section first applies to an overseas insurer, the overseas insurer must nominate to the Board a person to be his tax representative.
A person shall not be a tax representative unless— and, in either case, he satisfies such other requirements (if any) as are prescribed in regulations made for the purpose by the Board.
if he is an individual, he is resident in the United Kingdom and has a fixed place of residence there, or
if he is not an individual, he has a business establishment in the United Kingdom,
A person shall not be an overseas insurer’s tax representative unless—
his nomination by the overseas insurer has been approved by the Board; or
he has been appointed by the Board.
The Board may by regulations make provision supplementing this section; and the provision that may be made by any such regulations includes provision with respect to—
the making of a nomination by an overseas insurer of a person to be his tax representative;
the information which is to be provided in connection with such a nomination;
the form in which such a nomination is to be made;
the powers and duties of the Board in relation to such a nomination;
the procedure for approving, or refusing to approve, such a nomination, and any time limits applicable to doing so;
the termination, by the overseas insurer or the Board, of a person’s appointment as a tax representative;
the appointment by the Board of a person as the tax representative of an overseas insurer (including the circumstances in which such an appointment may be made);
the nomination by the overseas insurer, or the appointment by the Board, of a person to be the tax representative of an overseas insurer in place of a person ceasing to be his tax representative;
circumstances in which an overseas insurer to whom this section applies may, with the Board’s agreement, be released (subject to any conditions imposed by the Board) from the requirement that there must be a tax representative;
appeals to the tribunal against decisions of the Board under this section or regulations under it.
The provision that may be made by regulations under subsection (9) above also includes provision for or in connection with the making of other arrangements between the Board and an overseas insurer for the purpose of securing the discharge by or on behalf of the overseas insurer of the relevant duties, within the meaning of section 552B.
Section 1122 of CTA 2010 (connected persons) applies for the purposes of this section.
In this section—
It shall be the duty of an overseas insurer’s tax representative to secure (where appropriate by acting on the overseas insurer’s behalf) that the relevant duties are discharged by or on behalf of the overseas insurer.
For the purposes of this section “the relevant duties” are— so far as relating to relevant insurances under which the overseas insurer in question has any obligations.
the duties imposed by section 552,
the duties imposed by section 552ZA(2), (4) or (5), . . .
any duties imposed by regulations made under subsection (6) of section 552ZA by virtue of subsection (7) of that section, and
any duties imposed by regulations under section 552ZB,
An overseas insurer’s tax representative shall be personally liable— as if the relevant duties were imposed jointly and severally on the tax representative and the overseas insurer.
in respect of any failure to secure the discharge of the relevant duties, and
in respect of anything done for purposes connected with acting on the overseas insurer’s behalf,
In the application of this section in relation to any particular tax representative, it is immaterial whether any particular relevant duty arose before or after his appointment.
This section has effect in relation to relevant duties relating to chargeable events happening on or after the day by which section 552A(6) requires the nomination of the overseas insurer’s first tax representative to be made.
In subsection (5) “chargeable event” has the same meaning as in section 552 (see subsection (10) of that section).
Expressions used in this section and in section 552A have the same meaning in this section as they have in that section.
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Where a person who is an entertainer or sportsman of a prescribed description performs an activity of a prescribed description in the United Kingdom (“a relevant activity”), this Chapter shall apply if he is not resident in the United Kingdom in the year of assessment in which the relevant activity is performed.
Where a payment is made (to whatever person) and it has a connection of a prescribed kind with the relevant activity, the person by whom it is made shall on making it deduct out of it a sum representing income tax and shall account to the Board for the sum.
Where a transfer is made (to whatever person) and it has a connection of a prescribed kind with the relevant activity, the person by whom it is made shall account to the Board for a sum representing income tax.
The sums mentioned in subsections (2) and (3) above shall be such as are calculated in accordance with prescribed rules but shall in no case exceed the relevant proportion of the payment concerned or of the value of what is transferred, as the case may be; and “relevant proportion” here means a proportion equal to the basic rate of income tax for the year of assessment in which the payment or, as the case may be, the transfer is made.
In this Chapter—
references to a payment include references to a payment by way of loan of money; and
references to a transfer do not include references to a transfer of money but, subject to that, include references to a temporary transfer (as by way of loan) and to a transfer of a right (whether or not a right to receive money).
This section shall not apply to payments or transfers of such a kind as may be prescribed.
Regulations may—
make provision enabling the Board to serve notices requiring persons who make payments or transfers to which subsection (2) or (3) above applies to furnish to the Board particulars of a prescribed kind in respect of payments or transfers;
make provision requiring persons who make payments or transfers to which subsection (2) or (3) above applies to make, at prescribed times and for prescribed periods, returns to the Board containing prescribed information about payments or transfers and the income tax for which those persons are accountable in respect of them;
make provision for the collection and recovery of such income tax, provision for assessments and claims to be made in respect of it, and provision for the payment of interest on it;
adapt, or modify the effect of, any enactment relating to income tax for the purpose of making any such provision as is mentioned in paragraphs (a) to (c) above.
Where in accordance with subsections (2) to (7) above a person pays a sum to the Board, they shall treat it as having been paid on account of a liability of another person to income tax or corporation tax; and the liability and the other person shall be such as are found in accordance with prescribed rules.
Where the sum exceeds the liability concerned, the Board shall pay such of the sum as is appropriate to the other person mentioned in subsection (8) above.
Where no liability is found as mentioned in subsection (8) above, the Board shall pay the sum to the person to whom the payment or transfer to which subsection (2) or (3) above applies, and which gave rise to the payment of the sum concerned to the Board, was made.
In construing references to a sum in subsections (8) to (10) above, anything representing interest shall be ignored.
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Where a payment is made (to whatever person) and it has a connection of the prescribed kind with the relevant activity, the activity shall be treated for the purposes of the Tax Acts as performed in the course of a trade, profession or vocation exercised by the entertainer or sportsman within the United Kingdom, to the extent that (apart from this subsection) it would not be so treated. This subsection shall not apply where the relevant activity is performed in the course of an office or employment.
Where a payment is made to a person who fulfils a prescribed description but is not the entertainer or sportsman and the payment has a connection of the prescribed kind with the relevant activity—
the entertainer or sportsman shall be treated for the purposes of the Tax Acts as the person to whom the payment is made; and
the payment shall be treated for those purposes as made to him in the course of a trade, profession or vocation exercised by him within the United Kingdom (whether or not he would be treated as exercising such a trade, profession or vocation apart from this paragraph).
Regulations may provide—
for the deduction, in computing any profits or gains of the entertainer or sportsman arising from the payment, of expenses incurred by other persons in relation to the payment;
that any liability to tax (whether of the entertainer or sportsman or of another person) which would, apart from subsection (2) above, arise in relation to the payment shall not arise or shall arise only to a prescribed extent.
References in this section to a payment include references to a transfer.
This section shall not apply unless the payment or transfer is one to which section 555(2) or (3) applies, and subsections (2) and (3) above shall not apply in such circumstances as may be prescribed.
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Where income tax is chargeable under Case I or II of Schedule D on the profits or gains arising from payment (made to whatever person) and the payments have a connection of the prescribed kind with relevant activities of the entertainer or sportsman, such tax shall be charged—
as if those payments were received in the course of one trade, profession or vocation exercised by the entertainer or sportsman within the United Kingdom separately from any other trade, profession or vocation exercised by him; and
for each year of assessment, on the full amount of the profits or gains arising in the year from those payments.
Regulations may—
provide for the apportionment of profits or gains between different trades, professions or vocations of the entertainer or sportsman;
provide for the apportionment between different years of assessment of the profits or gains arising from relevant activities of the entertainer or sportsman;
provide for losses sustained in any trade, profession or vocation of the entertainer or sportsman to be deducted from or set off against the profits or gains of another trade, profession or vocation of the entertainer or sportsman;
provide that prescribed provisions of the Tax Acts about losses, or about expenditure, shall not apply (or shall apply with prescribed modifications) in prescribed circumstances relating to the entertainer or sportsman.
References in subsection (2)(a) and (c) above to a trade, profession or vocation of the entertainer or sportsman include references to that first mentioned in subsection (1)(a) above as well as to any other exercised by him.
References in this section to a payment include references to a transfer.
This section shall not apply in the case of a payment or transfer unless it is one to which section 555(2) or (3) applies.
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Subsection (1) above shall not apply to any payment made under the contract in question if the person to whom it is made or, if it is made to a nominee, each of the following persons, that is to say, the nominee, the person who nominated him and the person for whose labour (or, where that person is a company, for whose employees' or officers' labour) the payment is made, is excepted from this section in relation to those payments by virtue of section 561.
Subsection (2) above does not apply to so much of any payment made under the contract in question to a person falling within subsection (4) of section 561 as exceeds, or in aggregate with other payments specified in regulations made under subsection (5) of that section exceeds, the limit prescribed by those regulations.
On making a payment to which this section applies the contractor shall deduct from it a sum equal to 27 per cent. of so much of the payment as is not shown to represent the direct cost to any other person of materials used or to be used in carrying out the construction operations to which the contract under which the payment is to be made relates; and the sum so deducted shall be paid to the Board and shall be treated for the purposes of income tax or, as the case may be, corporation tax—
as not diminishing the payment; but
subject to subsection (5) below, as being income tax or, as the case may be, corporation tax paid in respect of the profits or gains of the trade, profession or vocation of the person for whose (or for whose employees' or officers') labour the contractor makes the payment.
Where a sum deducted and paid to the Board under subsection (4) above is more than sufficient to discharge the liability to income tax of the person referred to in paragraph (b) of that subsection in respect of the profits or gains mentioned in that paragraph, so much of the excess as is required to discharge any liability of that person for Class 4 contributions shall be treated as being, for the purposes of the Social Security Act, Class 4 contributions paid in respect of the profits or gains so mentioned.
References in section 1(1) of the Preferential Payments (Bankruptcies and Arrangements) Act (Northern Ireland) 1964 to sums due on account of tax deductions for any period shall be construed as including references to any amounts due from any person in respect of deductions required to be made by him under this section.
For the purposes of this Chapter a payment (including a payment by way of loan) that has the effect of discharging an obligation under a contract relating to construction operations shall be taken to be made under the contract; and if— the payment shall for those purposes be taken to be made to the first-mentioned person.
the obligation is to make a payment to a person within subsection (1)(i) to (iii) above, but
the payment discharging that obligation is made to a person not within those paragraphs,
In this section—
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For the purposes of this Chapter a party to a contract relating to construction operations is a sub-contractor if, under the contract—
he is under a duty to the contractor to carry out the operations, or to furnish his own labour (that is to say, in the case of a company, the labour of employees or officers of the company) or the labour of others in the carrying out of the operations or to arrange for the labour of others to be furnished in the carrying out of the operations; or
he is answerable to the contractor for the carrying out of the operations by others, whether under a contract or under other arrangements made or to be made by him.
This subsection applies to the following persons, that is to say—
any person carrying on a business which includes construction operations;
any local authority;
any development corporation or new town commission;
the Commission for the New Towns;
the Housing Corporation, a housing association, a housing trust, the Scottish Special Housing Association, and the Northern Ireland Housing Executive;
a person carrying on a business at any time if— and in paragraph (f) “period of account” means a period for which an account is made up in relation to the business in question.
his average annual expenditure on construction operations in the period of three years ending with the end of the last period of account before that time exceeds £250,000, or
where he was not carrying on the business at the beginning of that period of three years, one-third of his total expenditure on construction operations for the part of that period during which he has been carrying on the business exceeds £250,000;
Where section 559(1)(b) begins to apply to any person in any period of account by virtue of his falling within subsection (2)(f) above, it shall continue to apply to him until he satisfies the Board that his expenditure on construction operations has been less than £250,000 in each of three successive years beginning in or after that period of account.
Where the whole or part of a trade is transferred by a company (“the transferor”) to another company (“the transferee”) and section 343 has effect in relation to the transfer, then in determining for the purposes of this section the amount of expenditure incurred by the transferee—
the whole or, as the case may be, a proportionate part of any expenditure incurred by the transferor at a time before the transfer shall be treated as if it had been incurred at that time by the transferee; and
where only a part of the trade is transferred the expenditure shall be apportioned in such manner as appears to the Board, or on appeal to the Commissioners, to be just and reasonable.
In this section—
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Subject to the provisions of regulations under subsection (5) below or section 566(2), a person is excepted from section 559 in relation to payments made under a contract if a certificate under this section has been issued to that person and is in force when the payment is made, but—
where the certificate has been issued to a person who becomes a partner in a firm, that person is not excepted in relation to payments made under contracts under which the firm or, where a person has nominated the firm to receive payments, the person who has nominated the firm is a sub-contractor; and
where a certificate has been issued to a person as a partner in a firm, that person is excepted in relation only to payments made under contracts under which the firm or, where a person has nominated the firm to receive payments, the person who has nominated the firm, is a sub-contractor.
If the Board are satisfied, on the application of an individual or a company, that— the Board shall issue to that individual or company a certificate excepting that individual or company (or, in a case falling within paragraph (b) above, that individual or company as a partner in the firm specified in the certificate) from section 559.
where the application is for the issue of a certificate to an individual (otherwise than as a partner in a firm), he satisfies the conditions set out in section 562;
where the application is for the issue of a certificate to a person as a partner in a firm, that person satisfies the conditions set out in section 563 if he is an individual or, if a company, the conditions set out in section 565 and, in either case, the firm itself satisfies the conditions set out in section 564;
where the application is for the issue of a certificate to a company, the company satisfies the conditions set out in section 565 and, if the Board have given a direction under subsection (4) below, each of the persons to whom any of the conditions set out in section 562 applies in accordance with the direction satisfies the conditions which so apply to him,
References in subsection (2) above to an individual, a company or a firm satisfying conditions set out in section 562, 563, 564 or 565 include, in relation to a condition which may, by virtue of a provision of that section, be treated as being satisfied, references to that individual, company or firm being treated as satisfying that condition.
This subsection applies to the holder of a certificate in force under this section if it was issued to him on the basis—
that the condition in subsection (3) of section 562 was inapplicable to him by reason of paragraph (b) of that subsection; or
that he satisfied that condition by virtue of subsection (7) of that section.
The Board may make regulations securing that a person to whom subsection (4) above applies shall not be excepted from subsection (1) above in relation to a payment to the extent that the amount of the payment, or the aggregate amount of the payment and such other payments as may be prescribed by the regulations, exceeds a limit so prescribed.
Where it appears to the Board, on an application made under subsection (2) above by a company, that the company— the Board may direct that the conditions set out in section 562 or such of them as are specified in the direction shall apply to the directors of the company and, if the company is a close company, to the persons who are the beneficial owners of shares in the company or to such of those directors or persons as are so specified as if each of them were an applicant for a certificate under this section (not being a certificate to the holder of which section 561(4) would apply). In this subsection “director” has the same meaning as in Chapter II of Part V.
was incorporated on a date within the period of three years ending with the date of the application; or
has not carried on business continuously throughout that period; or
has carried on business continuously throughout that period but the business has not at all times in that period consisted of or included the carrying out of construction operations; or
does not at the date of the application hold a certificate which is then in force under this section;
Where it appears to the Board that there has been a change in the control of a company holding or applying for a certificate, the Board may make any such direction as is referred to in subsection (6) above.
The Board may at any time cancel a certificate which has been issued to a person and is in force under this section if it appears to them that— and may by notice require that person to deliver the certificate to the Board within the time specified in the notice. Section 840 shall apply for the purposes of paragraph (d) above.
it was issued on information which was false;
if an application for the issue of a certificate under this section to that person were made at that time, the Board would refuse to issue a certificate;
that person has permitted the certificate to be misused; or
in the case of a certificate issued to a company, there has been a change in the control of the company and information with respect to that change has not been furnished in accordance with regulations under section 566(2);
A person aggrieved by the refusal of an application for a certificate under this section or the cancellation of such a certificate may, by notice given to the Board within 30 days after the refusal or, as the case may be, cancellation, appeal to the General Commissioners or, if he so elects in the notice, to the Special Commissioners; and the jurisdiction of the Commissioners on such an appeal shall include jurisdiction to review any relevant decision taken by the Board in the exercise of their functions under this section.
If any person, for the purpose of obtaining a certificate under this section— he shall be liable on summary conviction to a fine not exceeding £5,000.
makes any statement, or furnishes any document, which he knows to be false in a material particular; or
recklessly makes any statement, or furnishes any document, which is false in a material particular,
A person to whom a certificate is issued under this section or a voucher is given as required by regulations under section 566(2)(j) shall take all reasonable steps to ensure its safety; and any person who, without lawful authority or lawful excuse— shall be liable on summary conviction to a fine not exceeding £5,000.
disposes of any such certificate or voucher or any form supplied by the Board in connection with regulations made by virtue of section 566(2)(e); or
possesses such a certificate, voucher or form or any document purporting to be such a certificate, voucher or form,
Notwithstanding any enactment prescribing the period within which summary proceedings may be commenced, proceedings for an offence under subsection (10) or (11) above may be commenced at any time within three years from the commission of the offence.
Without prejudice to section 843(3), this section shall come into force on 6th April 1988 to the exclusion of the provisions of section 70 of the Finance (No.2) Act 1975 which are re-enacted in this section, but any offence committed before that date shall not be punishable under this section and neither this subsection nor any other provision of this Act shall prevent any such offence from being punishable as if this Act had not been passed.
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In the case of an application for the issue of a certificate under section 561 to an individual (otherwise than as a partner in a firm) the following conditions are required to be satisfied by that individual.
The applicant must be carrying on a business in the United Kingdom which satisfies the following conditions, that is to say—
the business consists of or includes the carrying out of construction operations or the furnishing or arranging for the furnishing of labour in carrying out construction operations;
the business is, to a substantial extent, carried on by means of an account with a bank;
the business is carried on with proper records and in particular with records which are proper having regard to the obligations referred to in subsections (8) to (12) below; and
the business is carried on from proper premises and with proper equipment, stock and other facilities.
Unless the applicant— he must throughout the period of three years ending with the date of his application for a certificate under section 561, have been employed in the United Kingdom as the holder of an office or employment or as a person carrying on a trade, profession or vocation.
is the holder of a certificate in force under section 561 (other than a holder to whom section 561(4) applies), or
supplies the Board with a guarantee by such person, for such amount and in such form as may be prescribed in regulations made by the Board,
The applicant must not be receiving full-time education or full-time training.
An applicant shall be treated as satisfying the condition in subsection (3) above if—
he satisfies the Board that he has been employed as mentioned in that subsection throughout a period of three years beginning not more than six years before the date of his application and ending on a date before that date;
he satisfies the Board either—
that he has not been so employed throughout the whole of the period between those dates, or
that he has not been so employed during any part of that period other than a part for which he specifies he has been so employed; and
where the applicant states that he has been outside the United Kingdom for the whole or part of the period mentioned in paragraph (b) above, he satisfies the Board of that fact by such evidence as may be prescribed in regulations made by the Board.
The Board may for the purposes of subsections (3) and (5) above treat a person as having been employed as mentioned in subsection (3) above throughout a period of three years if during a period of three years he has been so employed except for a period or periods not exceeding six months or six months in aggregate.
If the applicant satisfies the Board that he has during any period within six years before the date of his application attended a school or other establishment for the purpose of receiving full-time education or full-time training, this section shall have effect as if that period were one during which he was employed as mentioned in subsection (3) above.
The applicant must, subject to subsection (10) below, have complied with all obligations imposed on him by or under the Tax Acts or the Management Act in respect of periods ending within the qualifying period and with all requests to supply to an inspector accounts of, or other information about, any business of his in respect of periods so ending.
An applicant who at any time in the qualifying period had control of a company shall be taken not to satisfy the condition in subsection (8) above unless the company has satisfied that condition in relation to periods ending at a time within that period when he had control of it; and for this purpose “control” has the meaning given by section 840.
An applicant or company that has failed to comply with such an obligation or request as is referred to in subsection (8) above shall nevertheless be treated as satisfying that condition as regards that obligation or request if the Board are of the opinion that the failure is minor and technical and does not give reason to doubt that the conditions mentioned in subsection (13) below will be satisfied.
An applicant who must satisfy the Board under subsection (5) above that he has been outside the United Kingdom for the whole or part of the period mentioned in subsection (5)(b) above must also satisfy them by such evidence as may be prescribed in regulations made by the Board that he has complied with any obligations imposed under the tax laws of any country in which he was living during that period which are comparable to the obligations mentioned in subsection (8) above.
The applicant must, if any contribution has at any time during the qualifying period become due from him under Part I of the Social Security Act 1975 or Part I of the Social Security (Northern Ireland) Act 1975, have paid the contribution when it became due.
There must be reason to expect that the applicant will, in respect of periods ending after the end of the qualifying period, comply with such obligations as are referred to in subsections (8) to (12) above and with such requests as are referred to in subsection (8) above.
In this section “the qualifying period” means—
in relation to a person who is within subsection (5) above, the period starting at the beginning of the last period of three years before his application throughout which he has been employed as mentioned in subsection (3) above (or is by virtue of subsection (6) above treated as having been so employed) and ending on the date of his application; and
in the case of any other person, the period of three years ending with the date of his application.
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In the case of an application for the issue of a certificate under section 561 to an individual who is a partner in a firm, the following conditions are required to be satisfied by that individual.
The partner, unless he is the holder of a certificate in force under section 561 (other than a holder to whom section 561(4) applies), must throughout the period of three years ending with the date of his application for a certificate under section 561 have been employed in the United Kingdom as the holder of an office or employment or as a person carrying on a trade, profession or vocation.
A partner who has not fulfilled the condition in subsection (2) above shall nevertheless be treated as satisfying that condition if—
he satisfies the Board that he has been employed as mentioned in that subsection throughout a period of three years beginning not more than six years before the date of his application and ending on a date before that date;
he satisfies the Board either—
that he has not been so employed throughout the whole of the period between those dates, or
that he has not been so employed during any part of that period other than a part for which he specifies he has been so employed; and
where the partner states that he has been outside the United Kingdom for the whole or part of the period mentioned in paragraph (b) above, he satisfies the Board of that fact by such evidence as may be prescribed in regulations made by the Board.
The Board may for the purposes of this paragraph treat a person as having been employed as mentioned in subsection (2) above throughout a period of three years if during a period of three years he has been so employed except for a period or periods not exceeding six months or six months in aggregate.
The partner must, subject to subsection (6) below, have complied with all obligations imposed on him by or under the Income Tax Acts or the Management Act in respect of periods ending within the qualifying period and with all requests to supply to an inspector accounts of, or other information about, any business of his in respect of periods so ending.
A partner who has failed to comply with such an obligation or request as is referred to in subsection (5) above shall nevertheless be treated as satisfying that condition as regards that obligation or request if the Board are of the opinion that the failure is minor and technical and does not give reason to doubt that the conditions mentioned in subsection (9) below will be satisfied.
A partner who must satisfy the Board under subsection (3) above that he has been outside the United Kingdom for the whole or part of the period mentioned in subsection (3)(b) above must also satisfy them by such evidence as may be prescribed in regulations made by the Board that he has complied with any obligations imposed under the tax laws of any country in which he was living during that period which are comparable to the obligations mentioned in subsection (5) above.
The partner must, if any contribution has at any time during the qualifying period become due from him under Part I of the Social Security Act 1975 or Part I of the Social Security (Northern Ireland) Act 1975, have paid the contribution when it became due.
There must be reason to expect that the partner will, in respect of periods ending after the end of the qualifying period, comply with such obligations as are referred to in subsections (5) to (8) above and with such requests as are referred to in subsection (5) above.
In this section “the qualifying period” means—
in relation to a person who is within subsection (3) above, the period starting at the beginning of the last period of three years before his application throughout which he has been employed as mentioned in subsection (2) above (or is by virtue of subsection (4) above treated as having been so employed) and ending on the date of his application, and
in the case of any other person, the period of three years ending with the date of his application.
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In the case of an application for the issue of a certificate under section 561 to an individual or a company as a partner in a firm the following conditions are required to be satisfied by the firm.
The firm’s business must be carried on in the United Kingdom and must satisfy the conditions mentioned in section 562(2)(a) to (d).
Subject to subsection (4) below, any income tax or corporation tax which became due from any partner in the firm in respect of the firm’s business at any time in the period of three years ending with the date of the application for a certificate under section 561 must have been paid when the tax was demanded.
Where the obligation referred to in subsection (3) above has not been complied with in the case of any firm, the firm shall nevertheless be treated as satisfying that condition as regards that tax if the Board are of the opinion that the failure is minor and technical and does not give reason to doubt that the conditions mentioned in subsection (5) below will be satisfied.
There must be reason to expect that income tax or corporation tax becoming due in respect of the firm’s business in respect of periods ending after the end of the period referred to in subsection (3) above will be paid when it is demanded.
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In the case of an application for the issue of a certificate under section 561 to a company (whether as a partner in a firm or otherwise), the following conditions are required to be satisfied by the company.
The company must be carrying on (whether or not in partnership) a business in the United Kingdom and that business must satisfy the conditions mentioned in section 562(2)(a) to (d).
The company must, subject to subsection (4) below, have complied with all obligations imposed on it by or under the Tax Acts or the Management Act in respect of periods ending within the qualifying period and with all requests to supply to an inspector accounts of, or other information about, the business of the company in respect of periods so ending.
A company which has failed to comply with such an obligation or request as is referred to in subsection (3) above shall nevertheless be treated as satisfying this condition as regards that obligation or request if the Board are of the opinion that the failure is minor and technical and does not give reason to doubt that the conditions mentioned in subsection (8) below will be satisfied.
The company must, if any contribution has at any time during the qualifying period become due from the company under Part I of the Social Security Act 1975 or Part I of the Social Security (Northern Ireland) Act 1975 have paid the contribution when it became due.
The company must have complied with any obligations imposed on it by the following provisions of the Companies Act 1985, in so far as those obligations fell to be complied with within the qualifying period, that is to say—
sections 227 and 241 (contents, laying and delivery of annual accounts);
section 287 (registered office and notification of changes therein);
section 288(2) (return of directors and secretary and notification of changes therein);
sections 363, 364 and 365 (annual returns);
section 691 (registration of constitutional documents and list of directors and secretary of oversea company);
section 692 (notification of changes in constitution or directors or secretary of oversea company);
section 693 (oversea company to state its name and country of incorporation);
section 699 (obligations of companies incorporated in Channel Islands or Isle of Man);
Chapter II of Part XXIII (accounts of oversea company).
The company must have complied with any obligations imposed on it by the following provisions of the Companies (Northern Ireland) Order 1986, in so far as those obligations fell to be complied with within the qualifying period, that is to say—
Articles 235, 247 and 249 (annual accounts, documents included in annual accounts and laying and delivery of accounts);
Article 295 (registered office and notification of changes therein);
Article 296(2) (return of directors and secretary and notification of changes therein);
Articles 371, 372 and 373 (annual returns);
Article 641 (registration of constitutional documents and list of directors and secretary of oversea company);
Article 642 (notification of changes in constitution or directors or secretary of oversea company);
Article 643 (oversea company to state its name and country of incorporation);
Article 649 (accounts of oversea company).
There must be reason to expect that the company will, in respect of periods ending after the end of the qualifying period, comply with all such obligations as are referred to in subsections (2) to (7) above and with such requests as are referred to in subsection (3) above.
In this section “qualifying period” means the period of three years ending with the date of the company’s application for a certificate under section 561.
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The Board shall make regulations with respect to the collection and recovery, whether by assessment or otherwise, of sums required to be deducted from any payments under section 559 and for the giving of receipts by persons receiving the payments to persons making them; and those regulations may include any matters with respect to which regulations may be made under section 203.
The Board may make regulations— and any such regulations may make different provision for different circumstances. Section 840 shall apply for the purposes of paragraph (d) above.
prescribing the period for which certificates under section 561 are to be issued and the form of such certificates;
providing for the renewal of such certificates;
providing for the issue, renewal or cancellation of such certificates or the giving of directions under section 561(6) by inspectors on behalf of the Board;
requiring the furnishing of information with respect to changes in the control of a company holding or applying for such a certificate;
requiring the production of such certificates to such persons and in such circumstances as may be specified in the regulations and providing for the completion and return to the Board of forms certifying such production;
requiring the surrender to the Board of such certificates in such circumstances as may be specified in the regulations;
requiring persons who make payments under contracts relating to construction operations to keep such records and to make to the Board such returns relating to payments so made by them as may be specified in the regulations, and requiring persons who hold such certificates to keep such records relating to payments so made to them as may be so specified;
with respect to the production, copying and removal of, and the making of extracts from, any records kept by virtue of any such requirement as is referred to in paragraph (g) above and with respect to rights of access to or copies of any such records which are removed;
requiring vouchers for payments made under contracts relating to construction operations to persons who hold such certificates to be obtained by the person making, and given by the person receiving, the payment, prescribing the form of the vouchers, and requiring their production or surrender to the Board in such circumstances as may be specified in the regulations; and
excluding payments from the operation of section 561 where, in such circumstances as may be specified in the regulations, the requirements of regulations relating to the production of certificates or the obtaining, production or surrender of vouchers have not been complied with;
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In this Chapter “construction operations” means operations of any description specified in subsection (2) below, not being operations of any description specified in subsection (3) below; and references to construction operations shall be taken—
except where the context otherwise requires, as including references to the work of individuals participating in the carrying out of such operations; and
except in the case of offshore installations, as not including references to operations carried out or to be carried out otherwise than in the United Kingdom.
The following operations are, subject to subsection (3) below, construction operations for the purposes of this Chapter—
construction, alteration, repair, extension, demolition or dismantling of buildings or structures (whether permanent or not), including offshore installations;
construction, alteration, repair, extension or demolition of any works forming, or to form, part of the land, including (without prejudice to the foregoing) walls, roadworks, power-lines, telecommunication apparatus, aircraft runways, docks and harbours, railways, inland waterways, pipe-lines, reservoirs, water-mains, wells, sewers, industrial plant and installations for purposes of land drainage, coast protection or defence;
installation in any building or structure of systems of heating, lighting, air-conditioning, ventilation, power supply, drainage, sanitation, water supply or fire protection;
internal cleaning of buildings and structures, so far as carried out in the course of their construction, alteration, repair, extension or restoration;
operations which form an integral part of, or are preparatory to, or are for rendering complete, such operations as are previously described in this subsection, including site clearance, earth-moving, excavation, tunnelling and boring, laying of foundations, erection of scaffolding, site restoration, landscaping and the provision of roadways and other access works;
painting or decorating the internal or external surfaces of any building or structure.
The following operations are not construction operations for the purposes of this Chapter—
drilling for, or extraction of, oil or natural gas;
extraction (whether by underground or surface working) of minerals; tunnelling or boring, or construction of underground works, for this purpose;
manufacture of building or engineering components or equipment, materials, plant or machinery, or delivery of any of these things to site;
manufacture of components for systems of heating, lighting, air-conditioning, ventilation, power supply, drainage, sanitation, water supply or fire protection, or delivery of any of these things to site;
the professional work of architects or surveyors, or of consultants in building, engineering, interior or exterior decoration or in the laying-out of landscape;
the making, installation and repair of artistic works, being sculptures, murals and other works which are wholly artistic in nature;
signwriting and erecting, installing and repairing signboards and advertisements;
the installation of seating, blinds and shutters;
the installation of security systems, including burglar alarms, closed circuit television and public address systems.
In this section “offshore installations” means installations which are maintained, or are intended to be established, for underwater exploitation or exploration to which the Mineral Workings (Offshore Installations) Act 1971 applies.
The Treasury may by order—
include in subsection (2) above any description of operations as to which they are satisfied that it is a normal activity of the construction industry and that its inclusion in that subsection is necessary for achieving the object of section 559;
include in subsection (3) above any description of operations as to which they are satisfied that it cannot properly be considered a normal activity of the construction industry and ought to be excluded from subsection (2) above.
An order under subsection (5) above shall not have effect unless a draft of the instrument containing it has been laid before and approved by a resolution of the House of Commons.
Notwithstanding anything contained in . . . section 33 of ITTOIA 2005or section 53 of CTA 2009 (no deduction for capital expenditure) but subject to the following provisions of this Chapter, where a person pays, wholly and exclusively for the purposes of a trade in respect of which he is chargeable under Part 2 of ITTOIA 2005 or Part 3 of CTA 2009, a contribution in furtherance of a scheme which is for the time being certified by the Secretary of State under this section, the contribution shall, in so far as it is paid in furtherance of the primary object of the scheme, be allowed to be deducted as an expense in computing the profits of that trade.
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The Secretary of State shall certify a scheme under this section if he is satisfied—
that the primary object of the scheme is the elimination of redundant works or machinery or plant from use in an industry in the United Kingdom; and
that the scheme is in the national interest and in the interests of that industry as a whole; and
that such number of persons engaged in that industry as are substantially representative of the industry are liable to pay contributions in furtherance of the primary object of the scheme by agreement between them and the body of persons carrying out the scheme.
The Secretary of State shall cancel any certificate granted under this section if he ceases to be satisfied as to any of the matters referred to in subsection (2) above.
The Secretary of State may at any time require the body of persons carrying out a scheme certified under this section to produce any books or documents of whatever nature relating to the scheme and, if the requirement is not complied with, he may cancel the certificate.
In this section and in section 569 “contribution”, in relation to a scheme, does not include a sum paid by a person by way of loan or subscription of share capital, or in consideration of the transfer of assets to him, or by way of a penalty for contravening or failing to comply with the scheme.
In the event of the repayment, whether directly or by way of distribution of assets on a winding up or otherwise, of a contribution or any part of a contribution which has been allowed to be deducted under section 568, the deduction of the contribution, or so much of it as has been repaid, shall be deemed to be an unauthorised deduction in respect of which an assessment shall be made, and, notwithstanding the provisions of the Tax Acts requiring assessments to be made within six years after the end of the chargeable period to which they relate, any such assessment and any consequential assessment may be made at any time within three years after the end of the chargeable period in which the repayment was made.
For the purposes of this section, a sum received by any person by way of repayment of contributions shall be deemed to be by way of repayment of the last contribution paid by him, and, if the sum exceeds the amount of that contribution, by way of repayment of the penultimate contribution so paid, and so on.
Subject to the provisions of this section, where, under any scheme which is for the time being certified or has at any time been certified by the Secretary of State under section 568, any payment (not being a payment made by way of repayment of contributions) is made to a person carrying on a trade to which the scheme relates, that payment shall be treated for the purposes of the Tax Acts as a trading receipt of the trade, and shall accordingly be taken into account in computing the profits of the trade for those purposes.
Where . . . the payments which have been made under such a scheme in respect of a trade (not being payments made by way of repayment of contributions) have been made wholly or partly in respect of damage in respect of which no relief may be given under the Tax Acts, and a claim is made to that effect, then, subject to and in accordance with the provisions of Schedule 21— and paragraph 6 of that Schedule applies for the purposes of this subsection as it applies for the purposes of that Schedule.
relief shall be given in respect of those payments by reducing the amounts which are to be treated as trading receipts of the trade under subsection (1) above; but
where such relief is given, section 568 shall, in relation to contributions subsequently paid under the scheme in respect of the trade, have effect subject to the modifications specified in Part III of that Schedule,
The provisions of this section and Schedule 21 shall apply in relation to any payment made to a person who has ceased to carry on a trade to which any such scheme as is mentioned in subsection (1) above relates as they apply in relation to payments made to a person carrying on such a trade, subject to the modification that so much of that payment as falls to be treated as a trading receipt by virtue of those provisions shall be deemed for the purposes of those provisions to have been made to him on the last day on which he was engaged in carrying on the trade.
In determining for the purposes of this section and of Schedule 21— no regard shall be had to any event which, by virtue of section 18 of ITTOIA 2005 or section 41 of CTA 2009 (company starting or ceasing to be within charge to corporation tax) is to be treated as effecting a cessation of trading.
whether any trade has ceased to be carried on; or
whether any contribution is paid in respect of a trade in respect of which a payment has been made; or
whether any payment is made in respect of a trade in respect of which a contribution has been paid,
Where any certificate granted with respect to a scheme under section 568 is cancelled by the Secretary of State, and any deductible contributions paid in furtherance of the scheme have not been repaid at the expiration of one year from the cancellation, the body of persons carrying out the scheme shall, for the chargeable period in which that year expires, be charged to tax . . . upon the aggregate amount of the deductible contributions which have not been repaid at that time.
The charge to tax under subsection (1) above shall not be made if the total amount of any contributions, other than deductible contributions, which have been paid under the scheme and have not been repaid before that time is greater than the available resources of the scheme, and shall not in any case be made upon an amount greater than the excess, if any, of those resources over that total amount.
An amount charged to income tax under subsection (1) above is treated for income tax purposes as an amount of income.
In subsection (2) above “the available resources”, in relation to any scheme, means a sum representing the total funds held for the purposes of the scheme at the expiration of one year from the cancellation of the certificate plus a sum representing any funds held for the purposes of the scheme which, during that year, have been applied otherwise than in accordance with the provisions of the scheme as in force when the certificate was granted.
So far as relating to corporation tax, the charge to tax under subsection (1) has effect as an application of the charge to corporation tax on income.
Where the body of persons carrying out a scheme are charged to tax by virtue of subsection (1) above, and, after the expiration of one year from the cancellation of the certificate, any deductible contribution paid in furtherance of the scheme is repaid, the amount upon which the charge is made shall on the making of a claim be reduced by the amount repaid, and all such repayments of tax shall be made as are necessary to give effect to the provisions of this subsection.
In this section “contribution” includes a part of a contribution, and “deductible contribution” means a contribution allowed to be deducted under section 568, any reduction under Part III of Schedule 21 being left out of account.
For the purposes of this section, a sum received by any person by way of repayment of contributions shall be deemed to be by way of repayment of the last contribution paid by him, and, if the sum exceeds the amount of that contribution, by way of repayment of the penultimate contribution so paid, and so on.
Sections 569 to 571 and Schedule 21 shall, subject to the adaptations specified in subsection (2) below, apply in relation to a statutory redundancy scheme as they apply in relation to a scheme certified under section 568.
The adaptations referred to above are as follows, that is to say—
for any reference to a contribution allowed to be deducted under section 568 there shall be substituted a reference to a contribution allowed to be deducted under any provision of the Tax Acts other than that section;
any provision that section 568 shall, in relation to contributions, have effect subject to modifications, shall be construed as a provision that so much of any provision of the Tax Acts other than that section as authorises the deduction of contributions shall, in relation to the contributions in question, have effect subject to the modifications in question;
for any reference to the cancellation of a certificate with respect to a scheme there shall be substituted a reference to the scheme ceasing to have effect; and
for any reference to the provisions of the scheme as in force when the certificate was granted there shall be substituted a reference to the provisions of the scheme as in force when the contributions were first paid thereunder.
In this section “statutory redundancy scheme” means a scheme for the elimination or reduction of redundant works, machinery or plant, or for other similar purposes, to which effect is given by or under any Act, whether passed before or after this Act.
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Subsection (2) below has effect where a company which has subscribed for shares in a qualifying trading company incurs an allowable loss (for the purpose of corporation tax on chargeable gains) on the disposal of the shares in any accounting period and the company disposing of the shares—
is an investment company on the date of the disposal and either—
has been an investment company for a continuous period of six years ending on that date; or
has been an investment company for a shorter continuous period ending on that date and has not before the beginning of that period been a trading company or an excluded company; and
was not associated with, or a member of the same group as, the qualifying trading company at any time in the period beginning with the date when it subscribed for the shares and ending with the date of the disposal.
The company disposing of the shares may, within two years after the end of the accounting period in which the loss was incurred, make a claim requiring that the loss be set off for the purposes of corporation tax against income— and, subject to any relief for an earlier loss, the income of any of those periods shall then be treated as reduced by the amount of the loss or by so much of it as cannot be relieved under this subsection against income of a later accounting period.
of that accounting period; and
if the company was then an investment company and the claim so requires, of preceding accounting periods ending within the time specified in subsection (3) below;
The time referred to in subsection (2) above is the period of 12 months ending immediately before the accounting period in which the loss is incurred; but the amount of the reduction which may be made under that subsection in the income of an accounting period falling partly before that time shall not exceed a part of that income proportionate to the part of the accounting period falling within that time.
Relief under subsection (2) above shall be given before any deduction for charges on income, expenses of management or other amounts which can be deducted from or set against or treated as reducing profits of any description; and where relief is given under that subsection in respect of the amount of a loss no deduction shall be made in respect of that amount for the purposes of corporation tax on chargeable gains.
For the purposes of subsection (1)(b) above companies are associated with each other if one controls the other or both are under the control of the same person or persons; and section 416(2) to (6) shall apply for the purposes of this subsection.
For the purposes of this section a company subscribes for shares in another company if they are issued to it by that other company in consideration of money or money’s worth.
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Where an individual who has subscribed for shares in a qualifying trading company incurs an allowable loss (for capital gains tax purposes) on the disposal of the shares in any year of assessment, he may, by notice given within two years after that year, make a claim for relief from income tax on an amount of his income equal to the amount of the loss; and where such relief is given in respect of the amount of a loss no deduction shall be made in respect of that amount under the 1979 Act.
The following provisions shall have effect as respects relief under this section—
relief may, by notice given within two years after a year of assessment, be claimed for that year in respect of a loss incurred in the preceding year of assessment so far as relief under this section in respect of that loss has not already been given in that year, and relief claimed by virtue of this paragraph shall be given in priority to any relief in respect of a loss incurred in the year for which the relief is claimed;
a claim for relief may require it to be given only by reference to the income of the individual without extending to the income of his spouse;
subject to paragraph (b) above, relief shall be given by treating the loss as reducing first the earned income of the individual, then his other income, then the earned income of his spouse and then his spouse’s other income;
the relief shall be given in priority to relief under section 380 or 381.
For the purposes of this section—
an individual subscribes for shares if they are issued to him by the company in consideration of money or money’s worth; and
an individual shall be treated as having subscribed for shares if his spouse did so and transferred them to him by a transaction inter vivos.
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Sections 573 and 574 do not apply unless the disposal is—
by way of a bargain made at arm’s length for full consideration; or
by way of a distribution in the course of dissolving or winding up the company; or
a deemed disposal under section 22(2) of the 1979 Act (claim that value of asset has become negligible).
Where a person disposes of shares (“the new shares”) which by virtue of section 78 of the 1979 Act (reorganisation etc. treated as not involving disposal) are identified with other shares (“the old shares”) previously held by him, relief shall not be given under section 573 or 574 on the disposal of the new shares unless— but in a case within paragraph (b) above the amount of relief under section 573 or 574 on the disposal of the new shares shall not exceed the amount or value of the new consideration taken into account as a deduction in computing the loss incurred on their disposal.
relief under section 573 or 574 could (or if this section had been in force could) have been given on a disposal of the old shares if he had incurred an allowable loss in disposing of them as mentioned in subsection (1)(a) above on the occasion of the disposal that would have occurred but for section 78 of the 1979 Act; or
he gave new consideration for the new shares;
Where the shares are the subject of an exchange or arrangement of the kind mentioned in section 85 or 86 of the 1979 Act (company reconstructions etc.) which by reason of section 87 of that Act involves a disposal of the shares, section 573 or 574 shall not apply to any allowable loss incurred on the disposal.
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Where a person holds shares in a company which constitute a holding and comprise— any question whether a disposal by him of shares forming part of the holding is of qualifying shares shall be determined by treating that and any previous disposal by him out of the holding as relating to shares acquired later rather than earlier; and if a disposal by him is of qualifying shares forming part of a holding and he makes a claim under section 573 or 574 in respect of a loss incurred on their disposal, the amount of relief under that section on the disposal shall not exceed the sums that would be allowed as deductions in computing the loss if the shares had not been part of the holding.
shares for which he has subscribed (“qualifying shares”); and
shares which he has acquired otherwise than by subscription,
Where a claim is made under section 573 or 574 in respect of a loss accruing on the disposal of shares, section 26 of the 1979 Act (value-shifting) shall have effect in relation to the disposal as if for the references in subsections (1)(b) and (4) to a tax-free benefit there were substituted references to any benefit whether tax-free or not.
There shall be made all such adjustments of corporation tax on chargeable gains or capital gains tax, whether by way of assessment or by way of discharge or repayment of tax, as may be required in consequence of relief being given under section 573 or 574 in respect of an allowable loss or in consequence of the whole or part of such a loss in respect of which a claim is made not being relieved under that section.
For the purposes of sections 573 to 575 and this section a qualifying trading company is a company none of whose shares have at any time in the relevant period been quoted on a recognised stock exchange and which—
either—
is a trading company on the date of the disposal; or
has ceased to be a trading company at a time which is not more than three years before that date and has not since that time been an excluded company or an investment company; and
either—
has been a trading company for a continuous period of six years ending on that date or at that time; or
has been a trading company for a shorter continuous period ending on that date or at that time and has not before the beginning of that period been an excluded company or an investment company; and
has been resident in the United Kingdom throughout the period from its incorporation until that date.
In sections 573 to 575 and this section—
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Subject to the provisions of this section—
no deduction shall be made in computing profits or gains chargeable to tax under Schedule A or Schedule D for any expenses incurred in providing business entertainment, and such expenses shall not be included in computing any expenses of management in respect of which relief may be given under the Tax Acts;
no deduction for expenses so incurred shall be made from emoluments chargeable to tax under Schedule E; and
for the purposes of Chapter II of Part I of the 1968 Act and Chapter I of Part III of the Finance Act 1971, the use of any asset for providing business entertainment shall be treated as use otherwise than for the purposes of trade.
Subsection (1) above shall not apply to expenses incurred in, or the use of an asset for, the provision by a person carrying on a trade in the United Kingdom (“a United Kingdom trader”), or by a member of his staff, of entertainment for an overseas customer of that person, being entertainment of a kind and on a scale which is reasonable having regard to all the circumstances.
The expenses to which paragraph (a) of subsection (1) above applies include, in the case of any person, any sums paid by him to, or on behalf of, or placed by him at the disposal of a member of his staff exclusively for the purpose of defraying expenses incurred or to be incurred by him in providing business entertainment, but where— paragraph (b) of that subsection shall not preclude the deduction of any expenses defrayed out of that sum.
any such sum falls to be included in his emoluments chargeable to tax under Schedule E; and
the deduction or inclusion of that sum as mentioned in that paragraph falls to be disallowed in whole or in part by virtue of this section;
Where by virtue of subsection (2) above a person claims to deduct or include any expenses as mentioned in paragraph (a) or (b) of subsection (1) above or claims any allowance under the provisions mentioned in paragraph (c) of that subsection he shall, if the inspector so requires, furnish particulars of the entertainment in question and of the person for whom it was provided.
For the purposes of this section “business entertainment” means entertainment (including hospitality of any kind) provided by a person, or by a member of his staff, in connection with a trade carried on by that person, but does not include anything provided by him for bona fide members of his staff unless its provision for them is incidental to its provision also for others.
For the purposes of this section “overseas customer” means, in relation to any United Kingdom trader—
any person who is not ordinarily resident nor carrying on a trade in the United Kingdom and avails himself, or may be expected to avail himself, in the course of a trade carried on by him outside the United Kingdom, of any goods, services or facilities which it is the trade of the United Kingdom trader to provide; and
any person who is not ordinarily resident in the United Kingdom and is acting, in relation to such goods, services or facilities, on behalf of an overseas customer within paragraph (a) above or on behalf of any government or public authority of a country outside the United Kingdom.
In this section—
any reference to expenses incurred in, or to the use of an asset for, providing entertainment includes a reference to expenses incurred in, or to the use of an asset for, providing anything incidental thereto;
references to a trade include references to any business, profession or vocation; and
references to the members of a person’s staff are references to persons employed by that person, directors of a company or persons engaged in the management of a company being for this purpose deemed to be persons employed by it.
This section shall apply in relation to the provision of a gift as it applies in relation to the provision of entertainment, except that it shall not by virtue of this subsection apply in relation to the provision for any person of a gift consisting of an article incorporating a conspicuous advertisement for the donor, being an article—
which is not food, drink, tobacco or a token or voucher exchangeable for goods; and
the cost of which to the donor, taken together with the cost to him of any other such articles given by him to that person in the same year, does not exceed £10.
Subsection (8) above shall not preclude the deduction, in computing profits or gains under Case I or II of Schedule D, of expenditure incurred in making a gift to a body of persons or trust established for charitable purposes only; and for the purposes of this subsection the Historic Buildings and Monuments Commission for England and the Trustees of the National Heritage Memorial Fund shall each be treated as such a body of persons.
Nothing in this section shall be taken as precluding the deduction of expenses incurred in, or any claim for capital allowances in respect of the use of an asset for, the provision by any person of anything which it is his trade to provide, and which is provided by him in the ordinary course of that trade for payment or, with the object of advertising to the public generally, gratuitously.
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Where, under any enactment relating to the giving of financial assistance for the provision, maintenance or improvement of housing accommodation or other residential accommodation, a payment is made to a person by way of grant or other contribution towards expenses incurred, or to be incurred, by that or any other person, the payment shall not be treated as a receipt in computing income for any tax purpose.
Subsection (1) above shall not apply to a payment in so far as it is made in respect of an expense giving rise to a deduction in computing income for any tax purpose.
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Any redundancy payment, and the corresponding amount of any other employer’s payment, shall be exempt from income tax under Schedule E.
Where a redundancy payment or other employer’s payment is made in respect of employment wholly in a trade, profession or vocation carried on by the employer, and within the charge to tax, the amount of the redundancy payment or the corresponding amount of the other employer’s payment shall (if not otherwise so allowable) be allowable as a deduction in computing for the purposes of Schedule D the profits or gains or losses of the trade, profession or vocation, but—
if it is so allowed by virtue of this section the amount of the rebate recoverable shall (if it is not otherwise to be so treated) be treated as a receipt to be brought into account in computing those profits or gains; and
if the employer’s payment was made after the discontinuance of the trade, profession or vocation the net amount so deductible shall be treated as if it were a payment made on the last day on which the trade, profession or vocation was carried on.
Where a redundancy payment or other employer’s payment is made in respect of employment wholly in a business carried on by the employer and expenses of management of the business are eligible for relief under section 75 or 76—
the amount by which the redundancy payment, or the corresponding amount of the other employer’s payment, exceeds the recoverable rebate shall (if not otherwise so allowable) be allowable as expenses of management eligible for relief under that section, and
if the employer’s payment was made after the discontinuance of the business the net amount so allowable shall be treated as if it were expenses of management incurred on the last day on which the business was carried on.
Where a redundancy payment or other employer’s payment is made in respect of employment wholly in maintaining or managing property the expenses of maintaining or managing which were eligible for relief under the provisions of section 25(1) or 28—
the amount by which the redundancy payment or the corresponding amount of the other employer’s payment exceeds the recoverable rebate shall (if not otherwise allowable under those provisions) be treated for the purposes of those provisions as a payment made by the employer in respect of the maintenance or management of the property, or of such part of it as he may elect; and
if the employer’s payment was made after the latest time when it could be taken into account for the purposes of relief under those provisions as a payment in respect of the maintenance or management of the property or any part of it, it shall be treated as having been made at that time.
Relief shall not be given under subsections (2), (3) and (4) above, or otherwise, more than once in respect of any employer’s payment, and if the employee was being employed in such a way that different parts of his remuneration fell for tax purposes to be treated in different ways—
the amount by which the redundancy payment or the corresponding amount of the other employer’s payment exceeds the recoverable rebate shall be apportioned to the different capacities in which the employee was employed; and
subsections (2), (3) and (4) above shall apply separately to the employment in those capacities, and by reference to the apportioned part of that amount, instead of by reference to the full amount of the employer’s payment, and the full amount of the rebate.
Where the Minister pays a sum under section 106 of the Employment Protection (Consolidation) Act 1978 or section 42 of the Contracts of Employment and Redundancy Payments Act (Northern Ireland) 1965 in respect of an employer’s payment this section shall apply as if—
that sum had been paid on account of that redundancy or other employer’s payment, and
so far as the employer has reimbursed the Minister, it had been so paid by the employer.
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In section 579—
“redundancy payment”, “employer’s payment” and “rebate” have the same meaning as in the Employment Protection (Consolidation) Act 1978 (“the 1978 Act”) or Part III of the Contracts of Employment and Redundancy Payments Act (Northern Ireland) 1965 (“the 1965 Act”);
references to the corresponding amount of an employer’s payment (other than a redundancy payment) are references to the amount of that employer’s payment so far as not in excess of the amount of the relevant redundancy payment (and so that, where in consequence of section 104(2) of the 1978 Act or section 40(2) of the 1965 Act there is no relevant redundancy payment, the corresponding amount of an employer’s payment is nil);
“the Minister” in relation to the 1978 Act means the Secretary of State and in relation to the 1965 Act means the Department of Health and Social Services.
For the purposes of subsection (1) above “relevant redundancy payment” shall be construed in accordance with paragraph 8 of Schedule 6 to the 1978 Act or paragraph 8 of Schedule 6 to the 1965 Act.
In section 579(1) the reference to tax under Schedule E does not include a reference to tax under section 148 and accordingly payments exempted by section 579(1) may be taken into account under section 148.
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If the Treasury direct that this section shall apply to any securities issued by a local authority and expressed in a currency other than sterling, interest on those securities—
shall be paid without deduction of income tax, and
so long as the beneficial owner is not resident in the United Kingdom, shall be exempt from income tax (but not corporation tax).
Where for repayment of the principal amount due under the securities there is an option between sterling and one or more currencies other than sterling, that subsection shall be applicable to the securities if the option is exercisable only by the holder of the securities, and shall not be applicable to the securities in any other case.
Where any income of any person is by virtue of any provision of the Income Tax Acts to be deemed to be income of any other person, that income shall not be exempt from tax by virtue of this section by reason of the first-mentioned person not being resident in the United Kingdom.
This section shall have effect in relation to any securities issued by or loan made to a statutory corporation as it has effect in relation to any securities issued by a local authority, the references to the beneficial owner or holder of the securities being for this purpose read, in the case of such a loan, as references to the person for the time being entitled to repayment or eventual repayment of the loan.
In subsection (4) above “statutory corporation” means — but, save as is provided by paragraph (b) above, does not include any company within the meaning of the Companies Act 1985 or the Companies (Northern Ireland) Order 1986.
a corporation incorporated by an Act; or
any other corporation, being a corporation to which functions in respect of the carrying on of an undertaking are entrusted by an Act or by an order made under or confirmed by an Act;
In relation to securities issued before 6th April 1982 subsections (1) and (2) above shall have effect with the substitution for references to sterling of references to a currency of a country which at the time of the issue was specified in Schedule 1 to the Exchange Control Act 1947.
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Where any funding bonds are issued to a creditor in respect of any liability to pay interest on any debt to which this section applies—
the issue of the bonds shall be treated for all the purposes of the Tax Acts as if it were the payment of an amount of that interest equal to the value of the bonds at the time of their issue, and
the redemption of the bonds shall not be treated for those purposes as the payment of any amount of that interest.
Where an issue of bonds is treated by virtue of subsection (1) above as if it were the payment of an amount of interest, and any person by or through whom the bonds are issued would be required by virtue of any provision of the Tax Acts to deduct income tax from that amount of interest if it had been actually paid by or through him, the following provisions shall have effect—
subject to paragraph (b) below, any such person—
shall retain bonds the value of which at the time of their issue is equal to income tax on that amount of interest at the basic rate for the year of assessment in which the bonds are issued, and
shall be acquitted in respect of any such retention in the same way as if he had deducted such tax from the interest, and
shall be chargeable with that tax accordingly, but may tender the bonds retained in satisfaction thereof;
where the Board are satisfied that it is impracticable to retain bonds on account of income tax under paragraph (a) above—
they may relieve any such person from the obligation to retain bonds and account for income tax under that paragraph, on his furnishing to them a statement of the names and addresses of the persons to whom the bonds have been issued and the amount of the bonds issued to each such person; and
tax in respect of the amount of interest treated by virtue of this section as having been paid by the issue of the bonds shall be charged under Case VI of Schedule D for the chargeable period in which the bonds are issued on the persons receiving or entitled to the bonds.
This section applies to any debt incurred, whether in respect of any money borrowed or otherwise, by any government, public authority or public institution whatsoever, or by any body corporate whatsoever.
For the purposes of this section “funding bonds” includes any bonds, stocks, shares, securities or certificates of indebtedness.
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the security or income is issued, made payable or paid in the United Kingdom or in sterling; or
the Bank maintains an office or other place of business in the United Kingdom.
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Where a person is chargeable to tax by reference to the amount of any income arising in a territory outside the United Kingdom (“overseas income”), then for the purposes of tax this section shall apply to the overseas income in so far as—
he is prevented from transferring the amount of the overseas income to the United Kingdom, either by the laws of that territory or any executive action of its government or by the impossibility of obtaining foreign currency in that territory; and
he has not realised the overseas income outside that territory for a consideration in sterling or a consideration in some other currency which he is not prevented from transferring to the United Kingdom. Overseas income to which this section applies is referred to below as unremittable.
Subject to subsection (3) below, where a person so chargeable gives notice of his desire to be assessed in accordance with this subsection, then, in the first instance, account shall not be taken of the overseas income to the extent to which he shows to the satisfaction of the Board that the following conditions are satisfied with respect to it, that is to say— and tax shall be assessed and charged on all persons concerned and for all periods accordingly; but, on the Board ceasing, as respects any part of the income, to be satisfied that those conditions are satisfied, such assessments, reductions of assessments and repayments of tax shall be made as may be necessary to take account of it, and of any tax payable in respect of it under the law of the territory where it arises, according to their value at the date when, in the opinion of the Board, those conditions cease to be satisfied with respect to it, and may be so made at any time not later than six years after that date.
that it is unremittable; and
that subsection (1)(a) above would continue to apply notwithstanding any reasonable endeavours on his part,
Where the tax chargeable is corporation tax, subsection (2) above shall have effect as if—
for the word “assessed” in the second place where it occurs, there were substituted “assessable”;
for the words from “on the Board ceasing” to “take account” there were substituted “on the said conditions ceasing to be satisfied as respects any part of the income, it shall be treated as income arising on the date when those conditions cease to be satisfied with respect to it and account shall be taken”; and
for the words from “the date” onwards there were substituted “that date”.
Where a company becomes chargeable to corporation tax in respect of income from any source by virtue of subsections (2) and (3) above after it has ceased to possess that source of income, the income shall be chargeable under Case VI of Schedule D.
Where under an agreement entered into under arrangements made by the Secretary of State in pursuance of section 11 of the Export Guarantees and Overseas Investment Act 1978 any payment is made by the Export Credit Guarantee Department in respect of any income which cannot be transferred to the United Kingdom, then, to the extent of the payment, the income shall be treated as income with respect to which the conditions mentioned in subsection (2) above are not satisfied (and accordingly cannot cease to be satisfied).
Any notice under subsection (2) above shall be delivered to the inspector before an assessment made by reference to that income otherwise than in accordance with that subsection has become final and conclusive; and there shall be made all such assessments, reductions of assessments or repayments of tax as may be required by reason of any such notice.
In the case of the death of a person who, if he had not died, would, under subsection (2) above, have become chargeable to any income tax, the tax which would have been so chargeable shall be assessed and charged upon his executors or administrators, and shall be a debt due from and payable out of his estate.
Subject to subsections (2) and (3) above, the amount of any unremittable overseas income shall be determined by reference to the generally recognised market value in the United Kingdom (if any), or, in the absence of any such value, according to the official rate of exchange of the territory where the income arises.
Any appeal against an assessment which involves a question as to the operation of this section shall be made to the Special Commissioners and not to the General Commissioners.
This section shall have effect as respects any accounting period in which the conditions in subsection (2) above cease to be satisfied in relation to any income, being an accounting period ending on or before such day, not being earlier than 31st March 1992, as the Treasury may by order appoint for the purposes of this section, with the omission of subsections (3) and (4).
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A person charged or chargeable for any year of assessment in respect of income from any source with tax which (apart from this section) falls to be computed under Case IV or V of Schedule D, or under Case III of Schedule E, on the amount of income received in the United Kingdom in the basis year for that year of assessment, may by making a claim require that the following provisions of this section shall apply, on showing that the following conditions are satisfied, that is to say—
that of the income so received all or part arose before the basis year but he was unable to transfer it to the United Kingdom before that year; and
subject to subsection (2) below, that that inability was due to the laws of the territory where the income arose, or to executive action of its government, or to the impossibility of obtaining foreign currency in that territory; and
that the inability was not due to any want of reasonable endeavours on his part.
For the purposes of this section, where in any year of assessment a person is granted a pension or increase of pension retrospectively, the amount paid in respect of any previous year of assessment by virtue of the grant shall be treated as income arising in that previous year, whenever it is paid, and he shall be treated as having possessed the source of income from the time as from which the grant has effect; and subsection (1)(b) above shall not apply in relation to any amount so paid, except as respects the period after it becomes payable.
Where a person claims that the provisions of this section shall apply for any year of assessment as respects the income from any source, then for the purposes of income tax—
there shall be deducted from the income received in the United Kingdom in the basis year for that year the amount as respects which the conditions in paragraphs (a), (b) and (c) of subsection (1) above are satisfied, so far as applicable; but
the part (if any) of that amount arising in each previous year of assessment shall be treated as if it were income received in the United Kingdom in the basis year for that previous year.
Nothing in this section shall alter the year which is to be taken as the basis year for computing tax chargeable for any year of assessment under Case IV or V of Schedule D, and where under subsection (3)(b) above income is treated as received in the United Kingdom in a year which is the basis year for two years of assessment, it shall not by reason thereof be taken into account except in the year in which it arose.
Where— tax shall not be chargeable for either of those years of assessment on the amount referred to in paragraph (a) of subsection (3) above (without however being charged a second time by virtue of paragraph (b) of that subsection).
a person makes a claim under this section for any year of assessment as respects income from any source chargeable under Case IV or V of Schedule D, and
that year is the basis year for computing the tax with which he is chargeable on the income from that source both for that and for the succeeding year of assessment,
No claim under this section shall be made in respect of any income more than six years after the end of the year of assessment in which the income is received in the United Kingdom.
There shall be made all such adjustments, whether by way of repayment of tax, assessment or otherwise, as may be necessary to give effect to this section, and notwithstanding anything in the Income Tax Acts, any adjustment to give effect to a claim under this section may be made at any time.
A person’s executors or administrators may make any claim under this section which he might have made, if he had not died, and after a person’s death—
any tax paid by him and repayable by virtue of a claim under this section (whoever made the claim) shall be repaid to his executors or administrators; and
any additional tax chargeable by virtue of such a claim shall be assessed and charged upon his executors or administrators and shall be a debt due from and payable out of his estate.
In this section “basis year” means— and any reference in this section to a source of income includes a part of a source.
in relation to tax chargeable for any year of assessment under Case IV or V of Schedule D in respect of income from any source, the year by reference to which the amount of the income chargeable finally falls to be computed; and
in relation to tax chargeable for any year of assessment under Case III of Schedule E, that year of assessment;
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In computing the amount of the profits or gains of any person for any tax purpose, no sum shall be deducted in respect of any payment made by him to which this section applies.
No payment to which this section applies shall be included in computing the expenses of management in respect of which relief may be given under section 75 or 76.
Subject to subsections (4) and (5) below, this section applies to any payment made by any person under any contract or arrangement under which that person is, in the event of war damage, entitled or eligible, either absolutely or conditionally, to or for any form of indemnification, whether total or partial, and whether by way of a money payment or not, in respect of that war damage.
Where the payment is made in respect of the right or eligibility mentioned in subsection (3) above and also in respect of other matters, the deduction or inclusion of so much of the payment as is properly attributable to the other matters shall not be disallowed by virtue only of subsection (1) or (2) above.
This section shall not apply to any payment made under any contract of marine insurance, or any contract of insurance of an aircraft, or any contract of insurance of goods in transit.
In this section “war damage” means loss or damage arising from action taken by an enemy of Her Majesty, or action taken in combating such an enemy or in repelling an imagined attack by such an enemy, or action taken in anticipation of or in consequence of an attack by such an enemy.
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In computing the amount of the profits or gains, or total income, of any person for any tax purpose, no sum shall be deducted in respect of any payment made by him to which this section applies.
No payment to which this section applies shall be included in computing—
the expenses of management in respect of which relief may be given under section 75 or 76; or
the expenses of management or supervision in respect of which relief may be given under section 121.
Subject to subsections (4) and (5) below, this section applies—
to any payments by way of benefit made by any person to, or to the personal representatives or dependants of, any employees of his on account of their incapacity, retirement or death owing to war injuries, whether sustained in the United Kingdom or elsewhere; and
to any payments made by any person by way of premium or contribution under any policy, agreement, scheme or arrangement providing for the payment of benefits to, or to the personal representatives or dependants of, any employees of his on account of their incapacity, retirement or death owing to such war injuries.
This section shall not apply to any payment (whether by way of benefit or by way of premium or contribution) which is payable under any policy, agreement, scheme or arrangement made before 3rd September 1939, except to the extent that the amount of the payment is increased by any variation of the terms of that policy, agreement, scheme or arrangement made on or after that date.
This section shall not apply to any payment by way of benefit if, in the opinion of the Board, that payment was made under an established practice which was such that the same or a greater payment would have been made if the incapacity, retirement or death had not been due to war injuries.
Where a person makes a payment by way of benefit to which this section applies and, in the opinion of the Board, there is an established practice under which a smaller payment would have been made if the incapacity, retirement or death had not been due to war injuries, the deduction or inclusion of an amount equal to that smaller payment shall not be disallowed by virtue only of subsection (1) or (2) above.
Where a person makes a payment to which this section applies by way of premium or contribution, and the policy, agreement, scheme or arrangement provides for the payment of any benefit in the event of incapacity, retirement or death not due to war injuries, the deduction or inclusion of so much of the payment of premium or contribution as, in the opinion of the Board, is properly attributable to benefit payable in the event of incapacity, retirement or death not due to war injuries shall not be disallowed by virtue only of subsection (1) or (2) above.
In this section “war injuries” means physical injuries—
caused by— either by the enemy or in combating the enemy or in repelling an imagined attack by the enemy; or
the discharge of any missile (including liquids and gas);
the use of any weapon, explosive or other noxious thing; or
the doing of any other injurious act,
caused by the impact on any person or property of any enemy aircraft, or any aircraft belonging to, or held by any person on behalf of, or for the benefit of, Her Majesty or any allied power, or any part of, or anything dropped from, any such aircraft.
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Where, on or after 6th April 1987, a person (in this section referred to as the “employer”) incurs expenditure in paying or reimbursing relevant expenses incurred in connection with a qualifying course of training which— the employee shall not thereby be regarded as receiving any emolument which forms part of his income for any purpose of Schedule E.
is undertaken by a person (in this section referred to as the “employee”) who is the holder or past holder of any office or employment under the employer; and
is undertaken with a view to retraining the employee,
Section 589 shall have effect to determine for the purposes of this section—
what is a qualifying course of training;
whether such a course is undertaken by an employee with a view to retraining; and
what are relevant expenses in relation to such a course.
Subject to subsection (4) below, where— then, if and so far as that expenditure would not, apart from this subsection, be so deductible, it shall be deductible in computing for the purposes of Schedule D the profits or gains of the trade, profession or vocation of the employer for the purposes of which the employee is or was employed.
an employer incurs expenditure in paying or reimbursing relevant expenses as mentioned in subsection (1) above; and
that subsection has effect in relation to the income of the employee for the purposes of Schedule E;
If the employer carries on a business, the expenses of management of which are eligible for relief under section 75, subsection (3) above shall have effect as if for the words from “in computing” onwards there were substituted “as expenses of management for the purposes of section 75”.
In any case where— an assessment under section 29(3) of the Management Act of an amount due in consequence of the failure referred to above may be made at any time not later than six years after the end of the chargeable period in which the failure occurred.
an employee’s liability to tax for any year of assessment is determined (by assessment or otherwise) on the assumption that subsection (1) above applies in his case and, subsequently, there is a failure to comply with any provision of section 589(3) and (4); or
an employer’s liability to tax for any year is determined (by assessment or otherwise) on the assumption that, by virtue only of subsection (3) above (or subsections (3) and (4) above), he is entitled to a deduction on account of any expenditure and, subsequently, there is such a failure as is referred to in paragraph (a) above;
Where an event occurs by reason of which there is a failure to comply with any provision of section 589(3) and (4), the employer of the employee concerned shall within 60 days of coming to know of the event give a notice to the inspector containing particulars of the event.
If the inspector has reason to believe that an employer has not given a notice which he is required to give under subsection (6) above in respect of any event, the inspector may by notice require the employer to furnish him within such time (not less that 60 days) as may be specified in the notice with such information relating to the event as the inspector may reasonably require for the purposes of this section.
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Subject to subsection (2) below, a course is a qualifying course of training if—
it provides a course of training designed to impart or improve skills or knowledge relevant to, and intended to be used in the course of, gainful employment (including self-employment) of any description; and
the course is entirely devoted to the teaching or practical application of the skills or knowledge (or to both such teaching and practical application); and
the duration of the course does not exceed one year; and
all teaching and practical application forming part of the course takes place within the United Kingdom.
A course shall not be regarded as a qualifying course of training in relation to a particular employee unless—
he attends the course on a full-time or substantially full-time basis; and
he is employed by the employer full-time throughout the period of two years ending at the time when he begins to undertake the course or, if it is earlier, at the time he ceases to be employed by him; and
the opportunity to undertake the course, on similar terms as to payment or reimbursement of relevant expenses, is available either generally to holders or past holders of offices or employment under the employer or to a particular class or classes of such holders or past holders.
An employee shall not be regarded as undertaking a course with a view to retraining unless—
he begins to undertake the course of training while he is employed by the employer or within the period of one year after he ceases to be so employed; and
he ceases to be employed by the employer not later than the end of the period of two years beginning at the end of the qualifying course of training.
An employee shall not be regarded as having undertaken a course with a view to retraining if, any time within the period of two years beginning at the time when he ceased to be employed as mentioned in subsection (3)(b) above, he is again employed by the employer.
Where an employee undertakes a qualifying course of training, the relevant expenses consist of—
fees for attendance at the course;
fees for any examination which is taken during or at the conclusion of the course;
the cost of any books which are essential for a person attending the course, and
travelling expenses falling within subsection (6) below.
The travelling expenses referred to in subsection (5)(d) above are those which would be deductible under section 198—
on the assumption that attendance at the course is one of the duties of the employee’s office or employment; and
if the employee has in fact ceased to be employed by the employer, on the assumption that he continues to be employed by him.
Any reference in this section to an employee being employed by an employer is a reference to the employee holding office or employment under the employer.
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Subject to section 591, the Board shall not approve any retirement benefits scheme for the purposes of this Chapter unless the scheme satisfies all of the conditions set out in subsection (2) below.
The conditions are—
that the scheme is bona fide established for the sole purpose of providing relevant benefits in respect of service as an employee, being benefits payable to, or to the widow, children or dependants or personal representatives of, the employee;
that the scheme is recognised by the employer and employees to whom it relates, and that every employee who is, or has a right to be, a member of the scheme has been given written particulars of all essential features of the scheme which concern him;
that there is a person resident in the United Kingdom who will be responsible for the discharge of all duties imposed on the administrator of the scheme under this Chapter;
that the employer is a contributor to the scheme;
that the scheme is established in connection with some trade or undertaking carried on in the United Kingdom by a person resident in the United Kingdom;
that in no circumstances, whether during the subsistence of the scheme or later, can any amount be paid by way of repayment of an employee’s contributions under the scheme.
Subject to subsection (1) above, the Board shall approve a retirement benefits scheme for the purposes of this Chapter if the scheme satisfies all the conditions of this subsection, that is to say—
that any benefit for an employee is a pension on retirement at a specified age not earlier than 60 or, if the employee is a woman, 55, and not later than 70, which does not exceed one-sixtieth of the employee’s final remuneration for each year of service up to a maximum of 40;
that any benefit for any widow of an employee is a pension payable on his death after retirement such that the amount payable to the widow by way of pension does not exceed two-thirds of any pension or pensions payable to the employee;
that no other benefits are payable under the scheme;
that no pension is capable in whole or in part of surrender, commutation or assignment, except in so far as the scheme allows an employee on retirement to obtain, by commutation of his pension, a lump sum or sums not exceeding in all three-eightieths of his final remuneration (disregarding any excess of that remuneration over the permitted maximum) for each year of service up to a maximum of 40. In paragraph (d) above “the permitted maximum” means £100,000 or such other sum as may for the time being be specified in an order made by the Treasury.
The conditions set out in subsections (2) and (3) above are in this Chapter referred to as “the prescribed conditions”.
If in the opinion of the Board the facts concerning any scheme or its administration cease to warrant the continuance of their approval of the scheme, they may at any time by notice to the administrator withdraw their approval on such grounds, and from such date (which shall not be earlier than the date when those facts first ceased to warrant the continuance of their approval or 17th March 1987, whichever is the later), as may be specified in the notice.
Where an alteration has been made in a retirement benefits scheme, no approval given as regards the scheme before the alteration shall apply after the date of the alteration unless the alteration has been approved by the Board.
For the purpose of determining whether a retirement benefits scheme, so far as it relates to a particular class or description of employees, satisfies or continues to satisfy the prescribed conditions—
that scheme shall be considered in conjunction with any other retirement benefits scheme or schemes relating to employees of that class or description, and
if those conditions are satisfied in the case of both or all of those schemes taken together, they shall be taken to be satisfied in the case of each of them, but otherwise those conditions shall be taken to be satisfied in the case of none of them.
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The Board may, if they think fit having regard to the facts of a particular case, and subject to such conditions, if any, as they think proper to attach to the approval, approve a retirement benefits scheme for the purposes of this Chapter notwithstanding that it does not satisfy one or more of the prescribed conditions; but this subsection has effect subject to subsection (5) below.
The Board may in particular approve by virtue of this section a scheme—
which exceeds the limits imposed by the prescribed conditions as respects benefits for less than 40 years; or
which provides pensions for the widows of employees on death in service, or for the children or dependants of employees; or
which provides on death in service a lump sum of up to four times the employee’s final remuneration (exclusive of any refunds of contributions); or
which allows benefits to be payable on retirement within ten years of the specified age, or on earlier incapacity; or
which provides for the return in certain contingencies of employees' contributions; or
which relates to a trade or undertaking carried on only partly in the United Kingdom and by a person not resident in the United Kingdom; or
which provides in certain contingencies for securing relevant benefits (but no other benefits) by means of an annuity contract approved by the Board and made with an insurance company of the employee’s choice; or
to which the employer is not a contributor and which provides benefits additional to those provided by a scheme to which he is a contributor.
In subsection (2)(g) above “insurance company” means a company to which Part II of the Insurance Companies Act 1982 applies.
In applying this section to a scheme which was in existence on 6th April 1980, the Board shall exercise their discretion, in such cases as appear to them to be appropriate, so as to preserve—
benefits earned or rights arising out of service before 6th April 1980; and
any rights to death-in-service benefits conferred by rules of the scheme in force on 26th February 1970.
The Board shall not approve a scheme by virtue of this section if to do so would be inconsistent with regulations made for the purposes of this section.
Regulations made for the purposes of this section may restrict the Board’s discretion to approve a scheme by reference to the benefits provided by the scheme, the investments held for the purposes of the scheme, the manner in which the scheme is administered or any other circumstances whatever.
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This section has effect as respects— and any scheme which is for the time being within paragraph (a) or (b) above is in this Chapter referred to as an “exempt approved scheme”.
any approved scheme which is shown to the satisfaction of the Board to be established under irrevocable trusts; or
any other approved scheme as respects which the Board, having regard to any special circumstances, direct that this section shall apply;
Exemption from income tax shall, on a claim being made in that behalf, be allowed in respect of income derived from investments or deposits if, or to such extent as the Board are satisfied that, it is income from investments or deposits held for the purposes of the scheme.
Exemption from income tax shall, on a claim being made in that behalf, be allowed in respect of underwriting commissions if, or to such extent as the Board are satisfied that, the underwriting commissions are applied for the purposes of the schemes and would, but for this subsection, be chargeable to tax under Case VI of Schedule D.
Any sum paid by an employer by way of contribution under the scheme shall, for the purposes of Case I or II of Schedule D and of sections 75 and 76, be allowed to be deducted as an expense, or expense of management, incurred in the chargeable period in which the sum is paid.
The amount of an employer’s contributions which may be deducted under subsection (4) above shall not exceed the amount contributed by him under the scheme in respect of employees in a trade or undertaking in respect of the profits of which the employer is assessable to tax (that is to say, to United Kingdom income tax or corporation tax).
A sum not paid by way of ordinary annual contribution shall for the purposes of subsection (4) above be treated, as the Board may direct, either as an expense incurred in the chargeable period in which the sum is paid, or as an expense to be spread over such period of years as the Board think proper.
Any contribution paid under the scheme by an employee shall, in assessing tax under Schedule E, be allowed to be deducted as an expense incurred in the year of assessment in which the contribution is paid.
The amount allowed to be deducted by virtue of subsection (7) above in respect of contributions paid by an employee in a year of assessment (whether under a single scheme or under two or more schemes) shall not exceed 15 per cent., or such higher percentage as the Board may in a particular case prescribe, of his remuneration for that year.
Relief shall not be given under section 266 or 273 in respect of any payment in respect of which an allowance can be made under subsection (7) above.
Subsection (2) of section 468 and subsection (3) of section 469 shall not apply to any authorised unit trust which is also an exempt approved scheme if the employer is not a contributor to the exempt approved scheme and that scheme provides benefits additional to those provided by another exempt approved scheme to which he is a contributor.
Nothing in this section shall be construed as affording relief in respect of any sums to be brought into account under section 438.
This section has effect only as respects income arising or contributions paid at a time when the scheme is an exempt approved scheme.
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Relief under section 592(7) shall be given in accordance with subsections (2) and (3) below in such cases and subject to such conditions as the Board may prescribe by regulations under section 612(3) in respect of schemes—
to which employees, but not their employers, are contributors; and
which provide benefits additional to benefits provided by schemes to which their employers are contributors.
An employee who is entitled to relief under section 592(7) in respect of a contribution may deduct from the contribution when he pays it, and may retain, an amount equal to income tax at the basic rate on the contribution.
The administrator of the scheme—
shall accept the amount paid after the deduction in discharge of the employee’s liability to the same extent as if the deduction had not been made; and
may recover an amount equal to the deduction from the Board.
Regulations under subsection (3) of section 612 may, without prejudice to the generality of that subsection—
provide for the manner in which claims for the recovery of a sum under subsection (3)(b) above may be made;
provide for the giving of such information, in such form, as may be prescribed by or under the regulations;
provide for the inspection by persons authorised by the Board of books, documents and other records.
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Any contribution paid by any officer or employee under a statutory scheme established under a public general Act shall, in assessing tax under Schedule E, be allowed to be deducted as an expense incurred in the year of assessment in which the contribution is paid; and relief shall not be given under section 266 or 273 in respect of any contribution allowable as a deduction under this section.
The amount allowed to be deducted by virtue of subsection (1) above in respect of contributions paid by a person in a year of assessment (whether under a single scheme or under two or more schemes) shall not exceed 15 per cent., or such higher percentage as the Board may in a particular case prescribe, of his remuneration for that year.
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Subject to the provisions of this Chapter, where, pursuant to a retirement benefits scheme, the employer in any year of assessment pays a sum with a view to the provision of any relevant benefits for any employee of that employer, then (whether or not the accrual of the benefits is dependent on any contingency)—
the sum paid, if not otherwise chargeable to income tax as income of the employee, shall be deemed for all purposes of the Income Tax Acts to be income of that employee for that year of assessment and assessable to tax under Schedule E; and
where the payment is made under such an insurance or contract as is mentioned in section 266, relief, if not otherwise allowable, shall be given to that employee under that section in respect of the payment to the extent, if any, to which such relief would have been allowable to him if the payment had been made by him and the insurance or contract under which the payment is made had been made with him.
Subject to the provisions of this Chapter, where— then (whether or not the accrual of the benefits is dependent on any contingency) an amount equal to the cost, estimated in accordance with subsection (3) below, of securing the provision by a third person of the benefits or, as the case may be, of the benefits so far as not already secured by the payment of such sums as are mentioned in subsection (1) above, shall be deemed for all purposes of the Income Tax Acts to be income of the employee for the year or years of assessment specified in subsection (3) below and assessable to income tax under Schedule E.
the circumstances in which any relevant benefits under a retirement benefits scheme are to accrue are not such as will render the benefits assessable to income tax under Schedule E as emoluments of the employee in respect of whom the benefits are paid, and
the provision of those benefits is not, or is not fully, secured by the payment of sums by the employer with a view to the provision of those benefits,
The cost referred to in subsection (2) above shall be estimated either— as may be more appropriate in the circumstances of the case.
as an annual sum payable in each year of assessment in which the scheme in question is in force or the employee is serving, up to and including the year of assessment in which the benefits accrue or there ceases to be any possibility of the accrual thereof, or
as a single sum payable in the year of assessment in which falls the date when the employee acquired the right to the relevant benefits, or the date when he acquired the right to any increase in the relevant benefits;
Where the employer pays any sum as mentioned in subsection (1) above in relation to more than one employee, the sum so paid shall, for the purpose of that subsection, be apportioned among those employees by reference to the separate sums which would have had to be paid to secure the separate benefits to be provided for them respectively, and the part of the sum apportioned to each of them shall be deemed for that purpose to have been paid separately in relation to that one of them.
Any reference in this section to the provision for an employee of relevant benefits includes a reference to the provision of benefits payable to that employee’s wife or widow, children, dependants or personal representatives.
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Neither subsection (1) nor subsection (2) of section 595 shall apply where the retirement benefits scheme in question is—
an approved scheme, or
a statutory scheme, or
a scheme set up by a government outside the United Kingdom for the benefit, or primarily for the benefit of, its employees.
Neither subsection (1) nor subsection (2) of section 595 shall apply for any year of assessment—
where the employee performs the duties of his employment in such circumstances that no tax is chargeable under Case I or II of Schedule E in respect of the emoluments of his employment (or would be so chargeable were there such emoluments), or
where the emoluments from the employment are foreign emoluments within the meaning of section 192 and the Board are satisfied, on a claim made by the employee, that the retirement benefits scheme in question corresponds to such a scheme as is mentioned in paragraph (a), (b) or (c) of subsection (1) above.
Where, in respect of the provision for an employee of any relevant benefits— the Board shall give relief in respect of tax on that sum by repayment or otherwise as may be appropriate; and if the employee satisfies the Board as mentioned above in relation to some particular part, but not the whole, of the benefits, the Board may give such relief as may seem to them just and reasonable.
a sum has been deemed to be income of his by virtue either of subsection (1) or subsection (2) of section 595, and
subsequently, the employee proves to the satisfaction of the Board that— and makes application for relief under this subsection within six years from the time when that event occurred,
no payment in respect of, or in substitution for, the benefits has been made, and
some event has occurred by reason of which no such payment will be made,
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Subject to subsection (2) below, all pensions paid under any scheme which is approved or is being considered for approval under this Chapter shall be charged to tax under Schedule E, and section 203 shall apply accordingly.
As respects any scheme which is approved or is being considered for approval under this Chapter, the Board may direct that, until such date as the Board may specify, pensions under the scheme shall be charged to tax as annual payments under Case III of Schedule D, and tax shall be deductible under sections 348 and 349 accordingly.
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Subject to the provisions of this section, tax shall be charged under this section on any repayment to an employee during his lifetime of any contributions (including interest on contributions, if any) if the payment is made under—
a scheme which is or has at any time been an exempt approved scheme, or
a statutory scheme established under a public general Act.
Where any payment is chargeable to tax under this section, the administrator of the scheme shall be charged to income tax under Case VI of Schedule D and, subject to subsection (3) below, the rate of tax shall be 10 per cent.
The Treasury may by order from time to time increase or decrease the rate of tax under subsection (2) above.
The tax shall be charged on the amount paid or, if the rules permit the administrator to deduct the tax before payment, on the amount before deduction of tax, and the amount so charged to tax shall not be treated as income for any other purpose of the Tax Acts.
Subsection (1)(a) above shall not apply in relation to a contribution made after the scheme ceases to be an exempt approved scheme (unless it again becomes an exempt approved scheme).
This section shall not apply where the employee’s employment was carried on outside the United Kingdom.
In relation to a statutory scheme, “employee” in this section includes any officer.
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Where a scheme to which this section applies contains a rule allowing, in special circumstances, a payment in commutation of an employee’s entire pension, and any pension is commuted, whether wholly or not, under the rule, tax shall be charged on the amount by which the sum receivable exceeds— whichever gives the lesser amount chargeable to tax.
the largest sum which would have been receivable in commutation of any part of the pension if the scheme had secured that the aggregate value of the relevant benefits payable to an employee on or after retirement, excluding any pension which was not commutable, could not exceed three-eightieths of his final remuneration (disregarding any excess of that remuneration over the permitted maximum) for each year of service up to a maximim of 40; or
the largest sum which would have been receivable in commutation of any part of the pension under any rule of the scheme authorising the commutation of part (but not the whole) of the pension, or which would have been so receivable but for those special circumstances;
This section applies to—
a scheme which is or has at any time been an approved scheme, or
a statutory scheme established under a public general Act.
Where any amount is chargeable to tax under this section the administrator of the scheme shall be charged to income tax under Case VI of Schedule D on that amount, and section 598(2), (3) and (4) shall apply as they apply to tax chargeable under that section.
This section shall not apply where the employee’s employment was carried on outside the United Kingdom.
In relation to a statutory scheme, “employee” in this section includes any officer.
In applying paragraph (a) or (b) of subsection (1) above—
the same considerations shall be taken into account, including the provisions of any other relevant scheme, as would have been taken into account by the Board in applying section 590; and
where the scheme has ceased to be an approved scheme, account shall only be taken of the rules in force when the scheme was last an approved scheme.
Where the pension has been secured by means of an annuity contract with an insurance company and the sum receivable is payable under that contract by the insurance company, the references to the administrator of the scheme in subsection (3) above and in section 598(2) and (4) as applied by that subsection are to be read as references to the insurance company.
In subsection (7) above “insurance company” means—
a person authorised under section 3 or 4 of the Insurance Companies Act 1982 to carry on long term business and acting through a branch or agency in the United Kingdom; or
a society registered as a friendly society under the Friendly Societies Act 1974 or the Friendly Societies Act (Northern Ireland) 1970.
In relation to payments made under schemes approved or established before 17th March 1987 to employees who became members before that date, subsection (1)(a) above shall have effect with the omission of the words “(disregarding any excess of that remuneration over the permitted maximum)”.
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This section applies to any payment to or for the benefit of an employee, otherwise than in course of payment of a pension, being a payment made out of funds which are or have been held for the purposes of a scheme which is or has at any time been approved for the purposes of—
this Chapter;
Chapter II of Part II of the Finance Act 1970; or
section 208 or Chapter II of Part IX of the 1970 Act.
If the payment— the employee (whether or not he is the recipient of the payment) shall be chargeable to tax on the amount of the payment under Schedule E for the year of assessment in which the payment is made.
is not expressly authorised by the rules of the scheme, or
is made at a time when the scheme is not approved for the purposes of any of the enactments mentioned in subsection (1) above, and would not have been expressly authorised by the rules of the scheme when it was last so approved,
Any payment chargeable to tax under this section shall not be chargeable to tax under section 598 or 599 or under the Regulations mentioned in paragraph 8 of Schedule 3 to the Finance Act 1971.
References in this section to any payment include references to any transfer of assets or other transfer of money’s worth.
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Subsection (2) below applies where a payment is made to an employer out of funds which are or have been held for the purposes of a scheme which is or has at any time been an exempt approved scheme and whether or not the payment is made in pursuance of Schedule 22.
An amount equal to 40 per cent. of the payment shall be recoverable by the Board from the employer.
Subsection (2) above does not apply to any payment—
to the extent that, if this section had not been enacted, the employer would have been exempt, or entitled to claim exemption, from income tax or corporation tax in respect of the payment; or
made before the scheme became an exempt approved scheme; or
of any prescribed description; or
made in pursuance of the winding-up of the scheme where the winding-up commenced on or before 18th March 1986; or
made in pursuance of an application which —
was made to the Board on or before that date and was not withdrawn before the making of the payment, and
sought the Board’s assurance that the payment would not lead to a withdrawal of approval under section 19(3) of the Finance Act 1970;
Subsection (2) above does not apply where the employer is a charity (within the meaning of section 506).
Where any payment is made or becomes due to an employer out of funds which are or have been held for the purposes of a scheme which is or has at any time been an exempt approved scheme then—
if the scheme relates to a trade, profession or vocation carried on by the employer, the payment shall be treated for the purposes of the Tax Acts as a receipt of that trade, profession or vocation receivable when the payment falls due or on the last day on which the trade, profession or vocation is carried on by the employer, whichever is the earlier;
if the scheme does not relate to such a trade, profession or vocation, the employer shall be charged to tax on the amount of the payment under Case VI of Schedule D. This subsection shall not apply to a payment which fell due before the scheme became an exempt approved scheme or to a payment to which subsection (2) above applies or would apply but for subsection (3)(a) or (4) above.
In this section—
references to any payment include references to any transfer of assets or other transfer of money’s worth; and
“prescribed” means prescribed by regulations made by the Treasury.
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In relation to an amount recoverable as mentioned in section 601(2), the Treasury may by regulations make any of the provisions mentioned in subsection (2) below; and for this purpose the amount shall be treated as if it were—
an amount of income tax chargeable on the employer under Case VI of Schedule D for the year of assessment in which the payment is made; or
where the employer is a company, an amount of corporation tax chargeable on the company for the accounting period in which the payment is made.
The provisions are—
provision requiring the administrator of the scheme or the employer (or both) to furnish to the Board, in respect of the amount recoverable and of the payment concerned, information of a prescribed kind;
provision enabling the Board to serve a notice or notices requiring the administrator or employer (or both) to furnish to the Board, in respect of the amount and payment, particulars of a prescribed kind;
provision requiring the administrator to deduct out of the payment the amount recoverable and to account to the Board for it;
provision as to circumstances in which the employer may be assessed in respect of the amount recoverable;
provision that, in a case where the employer has been assessed in respect of an amount recoverable but has not paid it (or part of it) within a prescribed period, the administrator may be assessed and charged (in the employer’s name) in respect of the amount (or part unpaid);
provision that, in a case where the amount recoverable (or part of it) has been recovered from the administrator by virtue of an assessment in the employer’s name, the administrator is entitled to recover from the employer a sum equal to the amount (or part);
provision enabling the employer or administrator (as the case may be) to appeal against an assessment made on him in respect of the amount recoverable;
provision as to when any sum in respect of the amount recoverable is payable to the Board by the administrator or employer and provision requiring interest to be paid on any sum so payable;
provision that an amount paid to the Board by the adminstrator shall be treated as paid on account of the employer’s liability under section 601(2).
For the purpose of giving effect to any provision mentioned in subsection (2)(c) to (j) above, regulations under this section may include provision applying (with or without modifications) provisions of the enactments relating to income tax and corporation tax.
Subject to any provision of regulations under this section—
a payment to which section 601(2) applies shall not be treated as a profit or gain brought into charge to income tax or corporation tax and shall not be treated as part of the employer’s income for any purpose of this Act; and
the amount recoverable shall not be subject to any exemption or reduction (by way of relief, set-off or otherwise) or be available for set-off against other tax.
If the employer is a company and a payment to which section 601(1) and (2) applies is made at a time not otherwise within an accounting period of the company, an accounting period of the company shall for the purposes of subsection (1)(b) above be treated as beginning immediately before the payment is made.
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An application for the approval for the purposes of this Chapter of any retirement benefits scheme shall be made in writing by the administrator of the scheme to the Board before the end of the first year of assessment for which approval is required, and shall be accompanied by—
two copies of the instrument or other document constituting the scheme; and
two copies of the rules of the scheme and, except where the application is being sought on the setting up of the scheme, two copies of the accounts of the scheme for the last year for which such accounts have been made up; and
such other information and particulars (including copies of any actuarial report or advice given to the administrator or employer in connection with the setting up of the scheme) as the Board may consider relevant.
The form in which an application for approval is to be made, or in which any information is to be given, in pursuance of this section may be prescribed by the Board.
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In the case of every approved scheme, the administrator of the scheme, and every employer who pays contributions under the scheme, shall, within 30 days from the date of a notice from the inspector requiring them so to do —
furnish to the inspector a return containing such particulars of contributions paid under the scheme as the notice may require;
prepare and deliver to the inspector a return containing particulars of all payments under the scheme, being —
payments by way of return of contributions (including interest on contributions, if any);
payments by way of commutation of, or in lieu of, pensions, or other lump sum payments;
other payments made to an employer;
furnish to the inspector a copy of the accounts of the scheme up to the last date previous to the notice to which such accounts have been made up together with such other information and particulars (including copies of any actuarial report or advice given to the administrator or employer in connection with the conduct of the scheme during the period to which the accounts relate) as the inspector considers relevant.
Where benefits provided for an employee under an approved scheme or a statutory scheme have been secured by means of an annuity contract with an insurance company (within the meaning given by section 599(8)), the insurance company shall, within 30 days from the date of a notice from the inspector requiring it to do so, prepare and deliver to the inspector a return containing particulars of—
any payments under the contract by way of commutation of, or in lieu of, a pension, or any other lump sum payments under the contract; and
any payments made under the contract to the employer.
It shall be the duty of every employer—
if there subsists in relation to any of his employees a retirement benefits scheme to which he contributes and which is neither an approved scheme nor a statutory scheme, to deliver particulars of that scheme to the Board within three months beginning with the date on which the scheme first comes into operation in relation to any of his employees, and
when required to do so by notice given by the Board, to furnish within the time limited by the notice such particulars as the Board may require with regard to—
any retirement benefits scheme relating to the employer which is neither an approved scheme nor a statutory scheme; and
the employees of his to whom any such scheme relates.
It shall be the duty of the administrator of a retirement benefits scheme which is neither an approved scheme nor a statutory scheme, when required to do so by notice given by the Board, to furnish within the time limited by the notice such particulars as the Board may require with regard to the scheme.
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If the administrator of a retirement benefits scheme defaults or cannot be traced or dies, the employer shall be responsible in his place for the discharge of all duties imposed on the administrator under this Chapter and shall be liable for any tax due from him in his capacity as administrator. This subsection does not apply if the employer is not a contributor to the scheme.
No liability incurred under this Chapter by the administrator of a scheme, or by an employer, shall be affected by the termination of the scheme or by it ceasing to be an approved scheme, or to be an exempt approved scheme.
References in this section to the employer include, where the employer is resident outside the United Kingdom, references to any branch or agent of the employer in the United Kingdom, and in this subsection “branch or agent” has the meaning given by section 118(1) of the Management Act.
This section does not apply for the purposes of sections 602 and 603 and Schedule 22.
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The Board may, if they think fit, and subject to such conditions as they think proper to attach to the approval, approve a pilots' benefit fund for the purposes of this Chapter as if it were a retirement benefits scheme and notwithstanding that it does not satisfy one or more of the conditions set out in section 590(2) and (3).
If a fund is approved by virtue of this section—
sections 592, 597 to 600 and 604 to 606 shall have effect in relation to the fund with the modifications specified in subsection (3) below;
pensions paid out of the fund and any sums chargeable to tax in connection with the fund under section 600 shall be treated for the purposes of the Income Tax Acts as earned income; and
Chapter III of this Part shall have effect as if a member of the fund were the holder of a pensionable office or employment and his earnings as a pilot (estimated in accordance with the provisions of Case II of Schedule D) were remuneration from such an office or employment.
The modifications referred to in subsection (2)(a) above are as follows—
in section 592, for the references in subsection (7) to an employee and Schedule E there shall be substituted respectively references to a member of the fund and Schedule D, and subsections (4) to (6), and in subsection (7) the words from “incurred” onwards, shall be omitted;
in sections 597 to 606 (except sections 601 to 603)—
for references to an employee there shall be substituted references to a member or former member of the fund;
in section 599(1)(a) for the reference to a year of service there shall be substituted a reference to a year as a pilot licensed by a pilotage authority or authorised by a competent harbour authority;
section 606(1) and (3) and so much of any other provision as applies to an employer shall be omitted; and
in section 600, for references to Schedule E there shall be substituted references to Case VI of Schedule D.
In this section “pilots' benefit fund” means a fund established under section 15(1)(i) of the Pilotage Act 1983 or any scheme supplementing or replacing any such fund.
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This section applies to any fund which immediately before 6th April 1980 was an approved superannuation fund for the purposes of section 208 of the 1970 Act if—
it has not been approved under this Chapter (or under Chapter II of Part II of the Finance Act 1970); and
no sum has been paid to it by way of contribution since 5th April 1980.
Subject to subsection (3) below, exemption from income tax shall, on a claim being made in that behalf, be allowed to a fund to which this section applies in respect of— if, or to such extent as the Board are satisfied that, the income, commissions, profits or gains are applied for the purposes of the fund.
income derived from investments or deposits of the fund;
any underwriting commissions which apart from this subsection would be chargeable to tax under Case VI of Schedule D; and
any profits or gains which (apart from this subsection) would be chargeable to tax under Case VI of Schedule D by virtue of section 56(1)(a) and (2);
No claim under subsection (2) above shall be allowed unless the Board are satisfied that the terms on which benefits are payable from the fund have not been altered since 5th April 1980.
An annuity paid out of a fund to which this section applies shall be charged to tax under Schedule E and section 203 shall apply accordingly.
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This section applies to any amendment of a retirement benefits scheme proposed in connection with an application for the Board’s approval for the purposes of this Chapter which is needed in order to ensure that approval is so given, or designed to enhance the benefits under the scheme up to the limits suitable in a scheme for which approval is sought.
A provision, however expressed, designed to preclude any amendment of a scheme which would have prejudiced its approval under section 208 or 222 of the 1970 Act shall not prevent any amendment to which this section applies.
In the case of a scheme which contains no powers of amendment, the administrator of the scheme may, with the consent of all the members of the scheme, and of the employer (or of each of the employers), make any amendment to which this section applies.
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In this Chapter “retirement benefits scheme” means, subject to the provisions of this section, a scheme for the provision of benefits consisting of or including relevant benefits, but does not include any national scheme providing such benefits.
References in this Chapter to a scheme include references to a deed, agreement, series of agreements, or other arrangements providing for relevant benefits notwithstanding that it relates or they relate only to—
a small number of employees, or to a single employee, or
the payment of a pension starting immediately on the making of the arrangements.
The Board may, if they think fit, treat a retirement benefits scheme relating to employees of two or more different classes or descriptions as being for the purposes of this Chapter two or more separate retirement benefits schemes relating respectively to such one or more of those classes or descriptions of those employees as the Board think fit.
For the purposes of this section, and of any other provision of this Chapter—
employees may be regarded as belonging to different classes or descriptions if they are employed by different employers; and
a particular class or description of employee may consist of a single employee, or any number of employees, however small.
Without prejudice to subsections (3) and (4) above, the Board may continue to treat as two different schemes, for the purposes of this Chapter, any retirement benefits scheme which, in pursuance of paragraph 5 of Schedule 3 to the Finance Act 1971 (schemes in existence before 5th April 1973), they treated, immediately before the coming into force of this Chapter, as two separate schemes for the purposes of Chapter II of Part II of the Finance Act 1970.
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In this Chapter, except where the context otherwise requires—
Any reference in this Chapter to the provision of relevant benefits, or of a pension, for employees of an employer includes a reference to the provision of relevant benefits or a pension by means of a contract between the administrator or the employer or the employee and a third person; and any reference to pensions or contributions paid, or payments made, under a scheme includes a reference to pensions or contributions paid, or payments made, under such a contract entered into for the purposes of the scheme.
The Board may make regulations generally for the purpose of carrying the preceding provisions of this Chapter into effect.
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A claim under this subsection shall be made to the Board.
The salary of a Member of the House of Commons shall, for all the purposes of the Income Tax Acts, be treated as reduced by the amounts deducted in pursuance of section 4 of the House of Commons Members' Fund Act 2016; but a Member shall not by reason of any such deduction be entitled to relief under any other provision of the Income Tax Acts.
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The . . . trustees of— shall be entitled to exemption from income tax in respect of all income derived from that Fund or any investment of that Fund.
the House of Commons Members’ Fund specified in section 1 of the 2016 Act;
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Any interest or dividends received by the person in whom is vested any of the Family Pension Funds mentioned in section 273 of the Government of India Act 1935, and having effect as a scheme made under section 2 of the Overseas Pensions Act 1973, on sums forming part of that fund shall be exempt from income tax.
Income derived from investments or deposits of any fund referred to in section 648, 649, 650 or 651 of ITEPA 2003 shall not be charged to income tax, and any income tax deducted from any such income shall be repaid by the Board to the persons entitled to receive the income.
The reference in subsection (2) above to interest on sums forming part of a fund include references to any amount which is treated as income by virtue of Chapter 8 of Part 4 of ITTOIA 2005 (profits from deeply discounted securities) and derives from any investment forming part of that fund.
In respect of income derived from investments or deposits of the Overseas Service Pensions Fund established pursuant to section 7(1) of the Overseas Aid Act 1966, the Board shall give by way of repayment such relief from income tax as is necessary to secure that the income is exempt to the like extent (if any) as if it were income of a person ... and not resident in the United Kingdom.
In respect of dividends and other income derived from investments, deposits or other property of a superannuation fund to which section 615(3) applies the Board shall give by way of repayment such relief from income tax as is necessary to secure that the income is exempt to the like extent (if any) as if it were income of a person ... not resident in the United Kingdom.
A claim under this section shall be made to the Board.
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a pension paid under the authority of the Pensions (India, Pakistan and Burma) Act 1955 (which has effect, by virtue of subsection (3) of section 2 of the Overseas Pensions Act 1973, as a scheme made under that section);
a pension paid out of any fund established in the United Kingdom by the government of any country which is, or forms part of, a country to which this paragraph applies, an associated state, a colony, a protectorate, a protected state or a United Kingdom trust territory, or by a government constituted for two or more such countries, if the fund was established for the sole purpose of providing pensions, whether contributory or not, payable in respect of service under that government;
a pension paid out of the fund formed under the Overseas Superannuation Scheme (formerly known as the Colonial Superannuation Scheme);
a pension paid under section 1 of the Overseas Pensions Act 1973, whether or not paid out of a fund established under a scheme made under that section;
so much of any pension paid to or in respect of any person— as may be certified by the Secretary of State to be attributable to the employment of that person in the public services of an overseas territory;
under an order made under section 2 of the Overseas Service Act 1958 and having effect as if it were a scheme under section 2 of the Overseas Pensions Act 1973 or under a pension scheme originally provided and maintained under such an order and having such effect, or
under section 4(2) of the Overseas Service Act 1958, which has effect as if it were a scheme under section 2 of the Overseas Pensions Act 1973,
a pension paid out of the fund established under the name “the Central African Pension Fund” by section 24 of the Federation of Rhodesia and Nyasaland (Dissolution) Order in Council 1963;
a pension paid out of the Overseas Service Pensions Fund established under section 7(1) of the Overseas Aid Act 1966.
Where an annuity is paid from a superannuation fund to which this subsection applies to a person who is not resident in the United Kingdom, income tax shall not be deducted from any payment of the annuity or accounted for under Chapter 6 of Part 15 of ITA 2007 (deduction from annual payments and patent royalties) by the trustees or other persons having the control of the fund.
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Subsection (3) above applies to any superannuation fund which— and for the purposes of this subsection duties performed in the United Kingdom the performance of which is merely incidental to the performance of other duties outside the United Kingdom shall be treated as performed outside the United Kingdom .
is bona fide established under irrevocable trusts in connection with some trade or undertaking carried on wholly or partly outside the United Kingdom;
has for its sole purpose (subject to any enactment or Northern Ireland legislation requiring or allowing provision for the value of any rights to be transferred between schemes or between members of the same scheme) the provision of superannuation benefits in respect of persons’ employment in the trade or undertaking wholly outside the United Kingdom; . . .
is recognised by the employer and employed persons in the trade or undertaking; and
meets the benefit accrual condition (see subsection (6A));
For the purposes of this section—
The benefit accrual condition is—
that, in the case of any money purchase arrangement relating to a member of the fund that is not a cash balance arrangement, no contributions are made under the arrangement on or after 6 April 2017;
that, in the case of any cash balance arrangement relating to a member of the fund, there is no increase on or after 6 April 2017 in the value of any person's rights under the arrangement;
that, in the case of any defined benefits arrangement relating to a member of the fund, there is no increase on or after 6 April 2017 in the value of any person's rights under the arrangement; and
that, in the case of any arrangement relating to a member of the fund that is neither a money purchase arrangement nor a defined benefits arrangement—
no contributions are made under the arrangement on or after 6 April 2017, and
there is no increase on or after 6 April 2017 in the value of any person's rights under the arrangement.
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references to a government constituted for two or more countries include references to any authority established for the purpose of providing or administering services which are common to, or relate to matters of common interest to, two or more countries;
any reference to employment in the public services of an overseas territory shall be construed as if it occurred in the Overseas Development and Cooperation Act 1980 and section 10(2) of that Act shall apply accordingly; and
any reference to an enactment or order having effect as if it were a scheme constituted under section 2 of the Overseas Pensions Act 1973 includes a reference to a scheme made under that section and certified by the Secretary of State for the purpose of the 1970 Act or this Act to correspond to that enactment or order.
For the purposes of subsection (6A)(b)—
whether there is an increase in the value of a person's rights is to be determined by reference to whether there is an increase in the amount that would, on the valuation assumptions, be available for the provision of benefits under the arrangement to or in respect of the person (and, if there is, the amount of the increase), but
in the case of rights that accrued to a person before 6 April 2017, ignore increases in the value of the rights if in no tax year do they exceed the relevant percentage.
For the purposes of subsection (6A)(c)—
whether there is an increase in the value of a person's rights is to be determined by reference to whether there is an increase in the benefits amount as defined by paragraph 14(7) of Schedule 18 to the Finance Act 2011, but
in the case of rights that accrued to a person before 6 April 2017, ignore increases in the value of the rights if in no tax year do they exceed the relevant percentage.
For the purposes of subsection (6A)(d)(ii), regulations made by the Commissioners for Her Majesty's Revenue and Customs may make provision— and regulations under this subsection may make provision having effect in relation to times before the regulations are made.
for determining whether there is an increase in the value of a person's rights,
for determining the amount of any increase, and
for ignoring the whole or part of any increase;
In this section, “relevant percentage”, in relation to a tax year, means—
where, on 20 March 2017, the rules of the fund include provision for the value of the rights of a person to increase during the tax year at an annual rate specified in those rules, that rate, or
in any other case, the percentage by which the consumer prices index for September in the previous tax year is higher than it was for the September in the tax year before that (or, if greater, 0%).
The Commissioners for Her Majesty's Revenue and Customs may by regulations make provision—
so as to change, or modify the effect of, the benefit accrual condition;
as to the matters to be taken into account in determining whether the benefit accrual condition is met;
for a superannuation fund to be treated to any extent as meeting or not meeting the benefit accrual condition.
Provision under subsection (6D) or (6F) may be made by amending this section.
For the purposes of this section, a person shall be taken to be employed in the public service of an overseas territory at any time when—
he is employed in any capacity under the government of that territory, or under any municipal or other local authority in it,
he is employed, in circumstances not falling within paragraph (a) above, by a body corporate established for any public purpose in that territory by an enactment of a legislature empowered to make laws for that territory, or
he is the holder of a public office in that territory in circumstances not falling within either paragraph (a) or (b).
For the purposes of subsection (9), references to the government of an overseas territory include references to a government constituted for two or more overseas territories, and to any authority established for the purpose of providing or administering services which are common to, or relate to matters of common interest to, two or more such territories.
Where the conditions in subsection (6)(a) to (c) are met in the case of a superannuation fund (“the actual fund”)—
any disqualifying contributions made under an arrangement relating to a member of the actual fund are treated for the purposes of the Income Tax Acts as instead made under an arrangement relating to the member under a separate superannuation fund (“the shadow fund” for the actual fund),
any disqualifying increase in the value of a person's rights under an arrangement relating to a member of the actual fund is treated for the purposes of the Income Tax Acts as instead being an increase under an arrangement relating to the member under the shadow fund for the actual fund, and
any reference in this or any other Act (including the reference in subsection (3) and any reference enacted after the coming into force of this subsection) to a fund, or superannuation fund, to which subsection (3) applies does not include so much of the actual fund as—
represents any contribution treated as made under, or any increase in the value of any rights treated as an increase under, the shadow fund of the actual fund or the shadow fund of any other superannuation fund, or
arises, or (directly or indirectly) derives, from anything within sub-paragraph (i) or this sub-paragraph.
For the purposes of subsection (11) a contribution, or an increase in the value of any rights, is “disqualifying” if it would (ignoring that subsection) cause the benefit accrual condition not to be met in the case of the actual fund.
For the purposes of the provisions of this section relating to the benefit accrual condition, where there is a recognised transfer—
any transfer of sums or assets to the recipient fund by the recognised transfer is to be categorised as not being “a contribution” to the recipient fund, and
any increase in the value of rights under the recipient fund that occurs at the time of the recognised transfer is to be treated as not being an increase in that value if the increase is solely a result of the transfer effected by the recognised transfer.
For the purposes of subsection (13), where there is a transfer such that sums or assets held for the purposes of, or representing accrued rights under, an arrangement relating to a member of a superannuation fund (“the transferor fund”) are transferred so as to become held for the purposes of, or to represent rights under, an arrangement relating to that person as a member of another superannuation fund, the transfer is a “recognised transfer” if—
the conditions in subsection (6)(a) to (c) are met in the case of each of the funds, and
none of the sums and assets transferred—
represents any contribution treated as made under, or any increase in the value of any rights treated as an increase under, the shadow fund of the transferor fund or the shadow fund of any other superannuation fund, or
arises, or (directly or indirectly) derives, from anything within sub-paragraph (i) or this sub-paragraph.
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If and so long as provision is made by double taxation relief arrangements for a pension of a description specified in subsection (2) below to be exempt from tax in the United Kingdom and, by reason of Her Majesty’s Government in the United Kingdom having assumed responsibility for the pension, payments in respect of it are made under section 1 of the Overseas Pensions Act 1973, then, to the extent that those payments are made to, or to the widow or widower of, an existing pensioner, the provision made under the arrangements shall apply in relation to the pension, exclusive of any statutory increases in it, as if it continued to be paid by the government which had responsibility for it before that responsibility was assumed by Her Majesty’s Government in the United Kingdom.
The pensions referred to in subsection (1) above are pensions paid by—
the Government of Malawi for services rendered to that Government or to the Government of the Federation of Rhodesia and Nyasaland in the discharge of governmental functions;
the Government of Trinidad and Tobago in respect of services rendered to that Government in the discharge of governmental functions;
the Government of the Republic of Zambia for services rendered to that Government or to the Government of Northern Rhodesia or to the Government of the Federation of Rhodesia and Nyasaland in the discharge of governmental functions.
If— then, if and so long as the pension is received by that person or, where that person is an existing pensioner, by his or her widow or widower, the provisions of this Act shall apply in relation to it, exclusive of any statutory increases in it, as if it continued to be paid by the government or other body or fund which had responsibility for it before that responsibility was assumed by Her Majesty’s Government in the United Kingdom.
immediately before 6th April 1973 a person resident in the United Kingdom was entitled to receive a pension as or as the widow or widower of an existing pensioner, and
by reason of Her Majesty’s Government in the United Kingdom having assumed responsibility for the pension, payments in respect of it are made under section 1 of the Overseas Pensions Act 1973,
In this section— and in this subsection “pension” has the same meaning as in section 1 of the Overseas Pensions Act 1973.
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Payments of benefit under Chapters I to III of Part II of the Social Security Act 1975, Part II of the Social Security Pensions Act 1975, Chapters I to III of Part II of the Social Security (Northern Ireland) Act 1975 or Part III of the Social Security Pensions (Northern Ireland) Order 1975, except— shall be charged to income tax under Schedule E.
sickness benefit, invalidity benefit, attendance allowance, mobility allowance, severe disablement allowance, maternity allowance, widow’s payments, child’s special allowance and guardian’s allowance; and
so much of any benefit as is attributable to an increase in respect of a child,
The following payments shall not be treated as income for any purpose of the Income Tax Acts—
payments of income support, family credit or housing benefit under the Social Security Act 1986 or the Social Security (Northern Ireland) Order 1986 other than payments of income support which are taxable by virtue of section 151;
payments of child benefit; and
payments excepted by subsection (1) above from the charge to tax imposed by that subsection.
Subject to subsection (4) and (5) below, no relief or deduction shall be given or allowed in respect of any contribution paid by any person under—
Part I of the Social Security Act 1975, or
Part I of the Social Security (Northern Ireland) Act 1975.
Subsection (3) above shall not apply to any secondary Class I contributions within the meaning of the Social Security Act 1975 or the Social Security (Northern Ireland) Act 1975 which is allowable as a deduction in computing profits or gains, in computing expenses of management under section 75 or under that section as applied by section 76 or in computing expenses of management or supervision under section 121.
An individual making a claim in that behalf shall be entitled, in computing his total income for any year of assessment, to deduct one-half of any amount (as finally settled) which is determined under subsection (2) of section 9 of the Social Security Act 1975 or of the Social Security (Northern Ireland) Act 1975 and which he is liable to pay in respect of that year by way of Class 4 contributions under either of those sections.
Until such day as may be appointed by the Secretary of State by order made by statutory instrument, subsection (1)(a) above shall have effect with the omission of the words “widow’s payments”.
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Nothing in this Chapter shall apply in relation to—
a contract made or trust scheme established on or after 4th January 1988; or
a person by whom contributions are first paid on or after that date under a trust scheme established before that date.
Subject to subsection (4) below, the terms of a contract made, or the rules of a trust scheme established, on or after 17th March 1987 and before 4th January 1988 and approved by the Board under section 620 shall have effect (notwithstanding anything in them to the contrary) as if they did not allow the payment to the individual by whom the contract is made, or an individual paying contributions under the scheme, of a lump sum exceeding £150,000 or such other sum as may for the time being be specified in an order under section 635(4).
Subject to subsection (5) below, the rules of a trust scheme established before 17th March 1987 and approved by the Board under section 620 shall have effect (notwithstanding anything in them to the contrary) as if they did not allow the payment to any person first paying contributions under the scheme on or after 17th March 1987 of a lump sum such as is mentioned in subsection (2) above.
Subsection (2) above shall not apply— and where notice is given to the Board under this subsection, the contract or scheme shall, with effect from the date with effect from which it was approved, cease to be approved.
to a contract if, before the end of January 1988, the persons by and to whom premiums are payable under it jointly give notice to the Board that subsection (2) is not to apply; or
to a scheme if, before the end of January 1988, the trustees or other persons having the management of the scheme give notice to the Board that subsection (2) is not to apply;
Subsection (3) above shall not apply in the case of any person paying contributions under a scheme if, before the end of January 1988, he and the trustees or other persons having the management of the scheme jointly give notice to the Board that subsection (3) is not to apply; and where notice is given to the Board, the scheme shall cease to be approved in relation to the contributor with effect from the date on which he first paid a contribution under it or (if later) the date with effect from which it was approved.
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Where in any year of assessment an individual is (or would but for an insufficiency of profits or gains be) chargeable to income tax in respect of relevant earnings from any trade, profession, vocation, office or employment carried on or held by him, and pays a qualifying premium, then—
relief from income tax shall be given under this section in respect of that qualifying premium, but only on a claim made for the purpose, and where relief is to be so given, the amount of that premium shall, subject to the provisions of this section, be deducted from or set off against his relevant earnings for the year of assessment in which the premium is paid; and
any annuity payable to the same or another individual shall be treated as earned income of the annuitant to the extent to which it is payable in return for any amount on which relief is so given. Paragraph (b) above applies only in relation to the annuitant to whom the annuity is made payable by the terms of the annuity contract under which it is paid.
Subject to the provisions of this section and section 626, the amount which may be deducted or set off in any year of assessment (whether in respect of one or more qualifying premiums, and whether or not including premiums in respect of a contract approved under section 621) shall not be more than 17½ per cent. of the individual’s net relevant earnings for that year.
Subject to the provisions of this section, the amount which may be deducted or set off in any year of assessment in respect of qualifying premiums paid under a contract approved under section 621 (whether in respect of one or more such premiums) shall not be more than 5 per cent. of the individual’s net relevant earnings for that year.
An individual who pays a qualifying premium in a year of assessment (whether or not a year for which he has relevant earnings) may before the end of that year elect that the premium shall be treated as paid— and where an election is made under this subsection in respect of a premium the other provisions of this Chapter shall have effect as if the premium had been paid in the year specified in the election and not in the year in which it was actually paid.
in the last preceding year of assessment; or
if he had no net relevant earnings in the year referred to in paragraph (a) above, in the last preceding year of assessment but one;
Where relief under this section for any year of assessment is claimed and allowed (whether or not relief then falls to be given for that year), and afterwards there is made any assessment, alteration of an assessment, or other adjustment of the claimant’s liability to tax, there shall be made also such adjustments, if any, as are consequential thereon in the relief allowed or given under this section for that or any subsequent year of assessment.
Where relief under this section is claimed and allowed for any year of assessment in respect of any payment, relief shall not be given in respect of it under any other provision of the Income Tax Acts for the same or a later year of assessment nor (in the case of a payment under an annuity contract) in respect of any other premium or consideration for an annuity under the same contract; and references in the Income Tax Acts to relief in respect of life assurance premiums shall not be taken to include relief under this section.
If any person, for the purpose of obtaining for himself or any other person any relief from or repayment of tax under this section, knowingly makes any false statement or false representation, he shall be liable to a penalty not exceeding £500.
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In this Chapter “qualifying premium” means, subject to subsection (5) below, a premium or other consideration paid by an individual—
under an annuity contract for the time being approved by the Board under this section as having for its main object the provision for the individual of a life annuity in old age, or
under a contract for the time being approved under section 621.
Subject to subsection (3) and (4) below, the Board shall not approve a contract under this section unless it appears to them to satisfy the conditions that it is made by the individual with a person lawfully carrying on in the United Kingdom the business of granting annuities on human life, and that it does not— and that it does include provision securing that no annuity payable under it shall be capable in whole or in part of surrender, commutation or assignment.
provide for the payment by that person during the life of the individual of any sum except sums payable by way of annuity to the individual; or
provide for the annuity payable to the individual to commence before he attains the age of 60 or after he attains the age of 75; or
provide for the payment by that person of any other sums except sums payable by way of annuity to the individual’s widow or widower and any sums which, in the event of no annuity becoming payable either to the individual or to a widow or widower, are payable by way of return of premiums, by way of reasonable interest on premiums or by way of bonuses out of profits; or
provide for the annuity, if any, payable to a widow or widower of the individual to be of a greater annual amount than that paid or payable to the individual; or
provide for the payment of any annuity otherwise than for the life of the annuitant;
A contract shall not be treated as not satisfying the requirements of subsection (2) above by reason only that it—
gives the individual the right to receive, by way of commutation of part of the annuity payable to him, a lump sum not exceeding three times the annual amount of the remaining part of the annuity, taking, where the annual amount is or may be different in different years, the initial annual amount, and
makes any such right depend on the exercise by the individual of an election at or before the time when the annuity first becomes payable to him.
The Board may, if they think fit, and subject to any conditions they think proper to impose, approve, under this section, a contract otherwise satisfying the preceding conditions, notwithstanding that the contract provides for one or more of the following matters—
for the payment after the individual’s death of an annuity to a dependant not the widow or widower of the individual;
for the payment to the individual of an annuity commencing before he attains the age of 60, if the annuity is payable on his becoming incapable through infirmity of body or mind of carrying on his own occupation or any occupation of a similar nature for which he is trained or fitted;
if the individual’s occupation is one in which persons customarily retire before attaining the age of 60, for the annuity to commence before he attains that age;
for the annuity payable to any person to continue for a term certain (not exceeding ten years), notwithstanding his death within that term, or for the annuity payable to any person to terminate, or be suspended, on marriage (or re-marriage) or in other circumstances;
in the case of an annuity which is to continue for a term certain, for the annuity to be assignable by will, and in the event of any person dying entitled to it, for it to be assignable by his personal representatives in the distribution of the estate so as to give effect to a testamentary disposition, or to the rights of those entitled on intestacy, or to an appropriation of it to a legacy or to a share or interest in the estate.
Subject to section 621(5), section 619 and subsections (1) to (4) above shall apply in relation to a contribution under a trust scheme approved by the Board as they apply in relation to a premium under an annuity contract so approved, with the modification that, for the condition as to the person with whom the contract is made, there shall be substituted a condition that the scheme— and with the necessary adaptations of other references to the contract or the person with whom it is made.
is established under the law of any part of, and administered in, the United Kingdom; and
is established for the benefit of individuals engaged in or connected with a particular occupation (or one or other of a group of occupations), and for the purpose of providing retirement annuities for them, with or without subsidiary benefits for their families or dependants; and
is so established under irrevocable trusts by a body of persons comprising or representing a substantial proportion of the individuals so engaged in the United Kingdom, or of those so engaged in England, Wales, Scotland or Northern Ireland;
Exemption from income tax shall be allowed in respect of income derived from investments or deposits of any fund maintained for the purpose mentioned in subsection (5)(b) above under a scheme for the time being approved under that subsection.
The Board may at any time, by notice given to the persons by and to whom premiums are payable under any contract for the time being approved under this section, or to the trustees or other persons having the management of any scheme so approved, withdraw that approval on such grounds and from such date as may be specified in the notice.
Nothing in sections 4 and 6 of the Policies of Assurance Act 1867 (obligations of assurance companies in respect of notices of assignment of policies of life assurance) shall be taken to apply to any contract approved under this section.
For the purposes of any provision applying this subsection “approved annuities” means—
annuities under contracts approved by the Board under this section, being annuities payable wholly in return for premiums or other consideration paid by a person who (when the premiums or other consideration are or is payable) is, or would but for an insufficiency of profits or gains be, chargeable to tax in respect of relevant earnings from a trade, profession, vocation, office or employment carried on or held by him; and
annuities or lump sums under approved personal pension arrangements within the meaning of Chapter IV of this Part.
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The Board may approve under this section—
a contract the main object of which is the provision of an annuity for the wife or husband of the individual, or for any one or more dependants of the individual,
a contract the sole object of which is the provision of a lump sum on the death of the individual before he attains the age of 75.
The Board shall not approve the contract unless it appears to them that it is made by the individual with a person lawfully carrying on in the United Kingdom the business of granting annuities on human life.
The Board shall not approve a contract under subsection (1)(a) above unless it appears to them to satisfy all the following conditions, that is to say—
that any annuity payable to the wife or husband or dependant of the individual commences on the death of the individual,
that any annuity payable to the individual commences at a time after the individual attains the age of 60, and, unless the individual’s annuity is one to commence on the death of a person to whom an annuity would be payable under the contract if that person survived the individual, cannot commence after the time when the individual attains the age of 75;
that the contract does not provide for the payment by the person contracting with the individual of any sum, other than any annuity payable to the individual’s wife or husband or dependant, or to the individual, except, in the event of no annuity becoming payable under the contract, any sums payable by way of return of premiums, by way of reasonable interest on premiums or by way of bonuses out of profits;
that the contract does not provide for the payment of any annuity otherwise than for the life of the annuitant;
that the contract does include provision securing that no annuity payable under it shall be capable in whole or in part of surrender, commutation or assignment.
The Board may, if they think fit, and subject to any conditions that they think proper to impose, approve a contract under subsection (1)(a) above notwithstanding that, in one or more respects, they are not satisfied that the contract complies with the provisions of paragraphs (a) to (e) of subsection (3) above.
The main purpose of a trust scheme, or part of a trust scheme, within section 620(5) may be to provide annuities for the wives, husbands and dependants of the individuals, or lump sums payable on death and in that case—
approval of the trust scheme shall be subject to subsections (1) to (4) above with any necessary modifications, and not subject to section 620(2) to (4);
the provisions of this Chapter shall apply to the scheme or part of the scheme when duly approved as they apply to a contract approved under this section; and
section 620(6) shall apply to any duly approved trust scheme, or part of a trust scheme.
Except as otherwise provided in this Chapter (and in particular except in section 620), any reference in the Tax Acts to a contract or scheme approved under that section shall include a reference to a contract or scheme approved under this section.
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The Board may, if they think fit, and subject to any conditions they think proper to impose, approve an annuity contract under section 620 notwithstanding that the contract provides that the individual by whom it is made—
may agree with the person with whom it is made that a sum representing the value of the individual’s accrued rights under it should be applied as the premium or other consideration either under another annuity contract made between them and approved by the Board under section 620, or under personal pension arrangements made between them and approved by the Board under Chapter IV of this Part; or
may require the person with whom it is made to pay such a sum to such other person as the individual may specify, to be applied by that other person as the premium or other consideration either under an annuity contract made beween the individual and him and approved by the Board under section 620, or under personal pension arrangements made between the individual and him and approved by the Board under Chapter IV of this Part.
References in subsection (1) above to the individual by whom the contract is made include references to any widow, widower or dependant having accrued rights under the contract.
Where in pursuance of any such provision as is mentioned in subsection (1) above of an annuity contract approved under section 620, or of a corresponding provision of a contract approved under section 621(1)(a), a sum representing the value of accrued rights under one contract (“the original contract”) is paid by way of premium or other consideration under another contract (“the substituted contract”), any annuity payable under the substituted contract shall be treated as earned income of the annuitant to the same extent that an annuity payable under the original contract would have been so treated.
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For the purposes of this Chapter, a married woman’s relevant earnings shall not be treated as her husband’s relevant earnings, notwithstanding that her income chargeable to tax is treated as his income.
Subject to subsection (1) above, “relevant earnings”, in relation to any individual, means, for the purposes of this Chapter, any income of his chargeable to tax for the year of assessment in question, being either— but does not include any remuneration as director of a company whose income consists wholly or mainly of investment income (construed in accordance with paragraph 7 of Schedule 19), being a company of which he is a controlling director.
income arising in respect of remuneration from an office or employment held by him other than a pensionable office or employment; or
income from any property which is attached to or forms part of the emoluments of any such office or employment held by him; or
income which is chargeable under Schedule B or Schedule D and is immediately derived by him from the carrying on or exercise by him of his trade, profession or vocation either as an individual or, in the case of a partnership, as a partner personally acting therein; or
income treated as earned income by virtue of section 529;
For the purposes of this Chapter, an office or employment is a pensionable office or employment if, and only if, service in it is service to which a sponsored superannuation scheme relates (not being a scheme under which the benefits provided in respect of that service are limited to a lump sum payable on the termination of the service through death or disability before the age of 75 or some lower age); but references to a pensionable office or employment apply whether or not the duties are performed wholly or partly in the United Kingdom or the holder is chargeable to tax in respect of it.
Service in an office or employment shall not for the purposes of subsection (3) above be treated as service to which a sponsored superannuation scheme relates by reason only of the fact that the holder of the office or employment might (though he does not) participate in the scheme by exercising or refraining from exercising an option open to him by virtue of that service.
For the purposes of relief under section 619, an individual’s relevant earnings are those earnings before giving effect to any capital allowances, other than deductions allowable in computing profits or gains, but after taking into account the amounts on which charges fall to be made under any of the Capital Allowances Acts; and references to income in the following provisions of this section (other than references to total income) shall be construed similarly.
Subject to the following provisions of this section “net relevant earnings” means, in relation to an individual, the amount of his relevant earnings for the year of assessment in question, less the amount of any deductions falling to be made from the relevant earnings in computing for the purposes of income tax his total income for that year, being—
deductions which but for section 74(m), (p) or (q) could be made in computing his profits or gains; or
deductions in respect of relief under Schedule 9 of the Finance Act 1981 (stock relief); or
deductions in respect of losses or capital allowances arising from activities profits or gains of which would be included in computing relevant earnings of the individual or of the individual’s wife or husband.
Where in any year of assessment for which an individual claims and is allowed relief under section 619— the amount of the deduction made from that other income shall be treated as reducing the individual’s net relevant earnings for subsequent years of assessment (being deducted as far as may be from those of the immediately following year, whether or not he claims or is entitled to claim relief under this section for that year, and so far as it cannot be so deducted, then from those of the next year, and so on).
there falls to be made in computing the total income of the individual or that of his wife or her husband a deduction in respect of any such loss or allowance of the individual as is mentioned in subsection (6)(c) above; and
the deduction or part of it falls to be so made from income other than relevant earnings,
An individual’s net relevant earnings for any year of assessment are to be computed without regard to any relief which falls to be given for that year under section 619 either to that individual or to that individual’s wife or husband.
An individual’s relevant earnings, in the case of partnership profits, shall be taken to be his share of the partnership income, estimated in accordance with the Income Tax Acts, but the amount to be included in respect of those earnings in arriving at his net relevant earnings shall be his share of that income after making therefrom all such deductions (if any) in respect of payments made by the partnership or of relief given to the partnership under Schedule 9 of the Finance Act 1981 (stock relief) or in respect of capital allowances falling to be made to the partnership as would be made in computing the tax payable in respect of that income.
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In section 623 “a sponsored superannuation scheme” means a scheme or arrangement— being a scheme or arrangement under which any part of the cost of the provision so made is or has been borne otherwise than by those persons by reason of their service (whether it is the cost or part of the cost of the benefits provided, or of paying premiums or other sums in order to provide those benefits, or of administering or instituting the scheme or arrangement).
relating to service in particular offices or employments, and
having for its object or one of its objects to make provision in respect of persons serving in those offices or employments against future retirement or partial retirement, against future termination of service through death or disability, or against similar matters,
For the purposes of subsection (1) above a person shall be treated as bearing by reason of his service the cost of any payment made or agreed to be made in respect of his service, if that payment or the agreement to make it is treated under the Income Tax Acts as increasing his income, or would be so treated if he were chargeable to tax under Case I of Schedule E in respect of his emoluments from that service.
In section 623 “controlling director” means a director of a company, the directors of which have a controlling interest in the company, who is the beneficial owner of, or able either directly or through the medium of other companies or by any other indirect means to control, more than 5 per cent. of the ordinary share capital of the company; and for the purposes of this definition—
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Where—
in any year of assessment an individual is (or would but for an insufficiency of profits or gains be) chargeable to income tax in respect of relevant earnings from any trade, profession, vocation, office or employment carried on or held by him, but
there is unused relief for that year, that is to say, an amount which could have been deducted from or set off against the individual’s relevant earnings for that year under subsection (1) of section 619 if— then, subject to section 655(1)(b), relief may be given under that section, up to the amount of the unused relief, in respect of so much of any qualifying premium or premiums paid by the individual in any of the next six years of assessment as exceeds the maximum applying for that year under subsection (2) of that section.
he had paid a qualifying premium in that year; or
the qualifying premium or premiums paid by him in that year had been greater;
Relief by virtue of this section shall be given for an earlier year rather than a later year, the unused relief taken into account in giving relief for any year being deducted from that available for giving relief in subsequent years and unused relief derived from an earlier year being exhausted before unused relief derived from a later year.
Where a relevant assessment to tax in respect of a year of assessment becomes final and conclusive more than six years after the end of that year and there is an amount of unused relief for that year which results from the making of the assessment— and to the extent to which relief in respect of any premium or premiums is given by virtue of this subsection it shall not be given by virtue of subsection (1) above.
that amount shall not be available for giving relief by virtue of this section for any of the six years following that year, but
the individual may, within the period of six months beginning with the date on which the assessment becomes final and conclusive, elect that relief shall be given under section 619, up to that amount, in respect of so much of any qualifying premium or premiums paid by him within that period as exceeds the maximum applying under subsection (2) of that section for the year of assessment in which they were paid;
In this section “a relevant assessment to tax” means an assessment on the individual’s relevant earnings or on the profits or gains of a partnership from which the individual derives relevant earnings.
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Where for any year of assessment an individual— the individual may, subject to subsection (2) below, elect that there shall be treated as paid in that year any qualifying premium paid by him in the next year of assessment but two.
is chargeable to income tax in respect of relevant earnings derived from Lloyd’s underwriting activities; and
there is an amount of unused relief attributable to those earnings,
An election under this section shall not have effect in relation to so much of any qualifying premium as exceeds the amount of unused relief referred to in subsection (1)(b) above.
Any election under this section shall be made before the end of the year of assessment in which the premium is paid.
Where an election is made under this section the provisions of this Chapter, other than section 619(4), shall have effect as if the premium or, as the case may be, the part of the premium in question had been paid in the year specified in the election and not in the year in which it was actually paid.
In this section—
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Where a person (“the former partner”) has ceased to be a member of a partnership on retirement, because of age or ill-health or on death and, under— annual payments are made for the benefit of the former partner or his widow or a dependant of his and are for the purposes of income tax income of the person for whose benefit they are made, the payments shall be treated as earned income of that person, except to the extent that they exceed the limit specified in subsection (2) below.
the partnership agreement; or
an agreement replacing the partnership agreement or supplementing it or supplementing an agreement replacing it; or
an agreement made with an individual who acquires the whole or part of the business carried on by the partnership;
The limit mentioned in subsection (1) above is 50 per cent. of the average of the amounts which, in the best three of the relevant years of assessment, were the former partner’s shares of the relevant profits or gains; and for this purpose— but where, in any of the relevant years, the circumstances were such that any of the profits or gains of a partnership were not assessable to income tax, paragraphs (a), (b) and (d) above shall apply as they would apply had those profits or gains been so assessable.
the former partner’s share in any year of the relevant profits or gains is, subject to subsection (3) below, so much of the relevant profits or gains as fell to be included in a return of his income for that year; and
the relevant profits or gains are the profits or gains of any trade, profession or vocation on which the partnership or any other partnership of which the former partner was a member was assessed to income tax; and
the relevant years of assessment are the last seven years of assessment in which he was required to devote substantially the whole of his time to acting as a partner in the partnership or those partnerships; and
the best three of the relevant years of assessment are those three of them in which the amounts of his shares of the relevant profits were highest;
If the retail prices index for the month of December in the last of the seven years referred to in paragraph (c) of subsection (2) above is higher than it was for the month of December in any of the other years referred to in that paragraph, the amount which, for that other year, was the former partner’s share of the relevant profits or gains shall be treated for the purposes of that subsection as increased by the same percentage as the percentage increase in that index.
If the retail prices index for the month of December preceding a year of assessment after that in which the former partner ceased to be a member of the partnership is higher than it was for the month of December in the year of assessment in which he ceased to be such a member, the amount which under subsection (2) above is the limit for the first-mentioned year of assessment shall be treated as increased by the same percentage as the percentage increase in that index.
Where the former partner ceased to be a member of the partnership before the year 1974-75, subsection (4) above shall have effect as if he had ceased to be a member in that year.
For the purposes of this Chapter so much of any salary which— as is equal to the difference between a Member’s pensionable salary and the salary which (in accordance with any such resolution as is mentioned in subsection (3)(a) below) is payable to him as a Member holding that qualifying office shall be treated as remuneration from the office of Member and not from the qualifying office.
is payable to the holder of a qualifying office who is also a Member of the House of Commons, and
is payable for a period in respect of which the holder is not a participant in relation to that office in arrangements contained in the Parliamentary pension scheme but is a participant in relation to his membership of the House of Commons in any such arrangements, or for any part of such a period,
In this section— and without prejudice to the power conferred by virtue of paragraph 13 of Schedule 1 to that Act, regulations under section 2 of that Act may make provision specifying the circumstances in which a person is to be regarded for the purposes of this section as being or not being a participant in relation to his Membership of the House of Commons, or in relation to any office, in arrangements contained in the Parliamentary pension scheme.
In subsection (2) above “a Member’s ordinary salary”, in relation to any resolution of the House of Commons, means—
if the resolution provides for salary to be paid to Members at different rates according to whether or not they are holders of particular offices, or are in receipt of salaries or pensions as the holders or former holders of particular offices, a Member’s yearly salary at the higher or highest rate; and
in any other case, a Member’s yearly salary at the rate specified in or determined under the resolution.
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An application to the Board for their approval of a personal pension scheme shall be in such form, shall contain such information, and shall be accompanied by such documents, in such form, as the Board may prescribe.
The Board may at their discretion grant or refuse an application for approval of a personal pension scheme, but their discretion shall be subject to the restrictions set out in sections 632 to 638.
The Board shall give notice to the applicant of the grant or refusal of an application; and in the case of a refusal the notice shall state the grounds for the refusal.
If an amendment is made to an approved scheme without being approved by the Board, their approval of the scheme shall cease to have effect.
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The Board shall not approve a personal pension scheme established by any person other than—
a person who is authorised under Chapter III of Part I of the Financial Services Act 1986 to carry on investment business and who carries on business of a kind mentioned in subsection (2) below;
a building society within the meaning of the Building Societies Act 1986;
an institution authorised under the Banking Act 1987;
a recognised bank or licensed institution within the meaning of the Banking Act 1979.
The kinds of business referred to in subsection (1)(a) above are—
issuing insurance policies or annuity contracts;
managing unit trust schemes authorised under section 78(1) of the Financial Services Act 1986.
Subsection (1) above shall not apply in relation to a scheme approved by the Board by virtue of section 620(5) if it was established before 4th January 1988.
The Treasury may by order amend this section as it has effect for the time being.
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The Board shall not approve a personal pension scheme which makes provision for any benefit other than—
the payment of an annuity satisfying the conditions in section 634;
the payment to a member of a lump sum satisfying the conditions in section 635;
the payment after the death of a member of an annuity satisfying the conditions in section 636;
the payment on the death of a member of a lump sum satisfying either the conditions in section 637(1) or those in section 637(2).
Subsection (1) above shall not prevent the approval of a scheme which makes provision for insurance against a risk relating to the non-payment of contributions.
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The annuity must be payable by an authorised insurance company which may be chosen by the member.
Subject to subsection (3) below, the annuity must not commence before the member attains the age of 50 or after he attains the age of 75.
The annuity may commence before the member attains the age of 50 if—
it is payable on his becoming incapable through infirmity of body or mind of carrying on his own occupation or any occupation of a similar nature for which he is trained or fitted; or
the Board are satisfied that his occupation is one in which persons customarily retire before that age.
Subject to subsection (5) below, the annuity must be payable to the member for his life.
The annuity may continue for a term certain not exceeding ten years, notwithstanding the member’s death within that term; and for this purpose an annuity shall be regarded as payable for a term certain notwithstanding that it may terminate, after the death of the member and before expiry of that term, on the happening of any of the following—
the marriage of the annuitant;
his attaining the age of 18;
the later of his attaining that age and ceasing to be in full-time education.
The annuity must not be capable of assignment or surrender, except that an annuity for a term certain may be assigned by will or by the annuitant’s personal representatives in the distribution of his estate so as to give effect to a testamentary disposition, or to the rights of those entitled on an intestacy, or to an appropriation of it to a legacy or to a share or interest in the estate.
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The lump sum must be payable only if the member so elects on or before the date on which an annuity satisfying the conditions in section 634 is first payable to him under the arrangements made in accordance with the scheme.
The lump sum must be payable when that annuity is first payable.
The lump sum must not exceed one quarter of the total value, at the time when the lump sum is paid, of the benefits for the member provided for by the arrangements made by him in accordance with the scheme.
The lump sum must not exceed £150,000 or such other sum as may for the time being be specified in an order made by the Treasury.
The right to payment of the lump sum must not be capable of assignment or surrender.
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The annuity must be payable by an authorised insurance company which may be chosen by the member or by the annuitant.
The annuity must be payable to the surviving spouse of the member, or to a person who was at the member’s death a dependant of his.
The aggregate annual amount (or, if that amount varies, the aggregate of the initial annual amounts) of all annuities to which this section applies and which are payable under the same personal pension arrangements shall not exceed—
where before his death the member was in receipt of an annuity under the arrangements, the annual amount (or, if it varied, the highest annual amount) of that annuity; or
where paragraph (a) does not apply, the highest annual amount of the annuity that would have been payable under the arrangements to the member (ignoring any entitlement of his to commute part of it for a lump sum) if it had vested on the day before his death.
Subject to subsections (5) to (9) below, the annuity must be payable for the life of the annuitant.
Where the annuity is payable to the surviving spouse of the member and at the time of the member’s death the surviving spouse is under the age of 60, the annuity may be deferred to a time not later than—
the time when the surviving spouse attains that age; or
where the member’s annuity is payable to the surviving spouse for a term certain as mentioned in section 634(5) and the surviving spouse attains the age of 60 before the time when the member’s annuity terminates, that time.
The annuity may cease to be payable on the marriage of the annuitant.
Where the annuity is payable to the surviving spouse of the member, it may cease before the death of the surviving spouse if—
the member was survived by one or more dependants under the age of 18 and at the time of the member’s death the surviving spouse was under the age of 45; and
at some time before the surviving spouse attains that age no such dependant remains under the age of 18.
Where the annuity is payable to a person who is under the age of 18 when it is first payable, it must cease to be payable either— unless he was a dependant of the member otherwise than by reason only that he was under the age of 18.
on his attaining that age; or
on the later of his attaining that age and ceasing to be in full-time education,
The annuity may continue for a term certain not exceeding ten years, notwithstanding the original annuitant’s death within that term; and for this purpose an annuity shall be regarded as payable for a term certain notwithstanding that it may terminate, after the death of the original annuitant and before the expiry of that term, on the happening of any of the following—
the marriage of the annuitant to whom it is payable;
his attaining the age of 18;
the later of his attaining that age and ceasing to be in full-time education.
The annuity must not be capable of assignment or surrender, except that an annuity for a term certain may be assigned by will or by the annuitant’s personal representatives in the distribution of his estate so as to give effect to a testamentary disposition, or to the rights of those entitled on an intestacy, or to an appropriation of it to a legacy or to a share or interest in the estate.
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The lump sum—
must be payable by an authorised insurance company; and
must be payable on the death of the member before he attains the age of 75.
The lump sum—
must be payable only if no annuity satisfying the conditions in either section 634 or section 636 has become payable; and
subject to subsection (3) below, must represent no more than the return of contributions together with reasonable interest on contributions or bonuses out of profits.
To the extent that contributions are invested in units under a unit trust scheme, the lump sum referred to in subsection (2) above may represent the sale or redemption price of the units.
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The Board shall not approve a personal pension scheme unless they are satisfied that there is a person resident in the United Kingdom who will be responsible for the management of the scheme.
The Board shall not approve a personal pension scheme unless it makes such provision for the making, acceptance and application of transfer payments as satisfies any requirements imposed by or under regulations made by the Board.
The Board shall not approve a personal pension scheme unless it makes provision, in relation to arrangements made in accordance with the scheme, for ensuring that—
the aggregate amount of the contributions that may be made in a year of assessment by the member and an employer of his under the arrangements, together with the aggregate amounts of such contributions under other approved personal pension arrangements made by that member, does not exceed the permitted maximum for that year; and
any excess is repaid to the member to the extent of his contributions and otherwise to his employer.
In subsection (3) above “the permitted maximum” for a year of assessment means an amount equal to the aggregate of— and references in subsection (3) to contributions by the member do not include references to contributions treated by virtue of section 649(3) as paid by him.
the relevant percentage of the member’s net relevant earnings for the year; and
so much of any relief given under section 639(1) for that year as is given by virtue of section 642;
In subsection (4) above “the relevant percentage” means 17.5 per cent. or, in a case where section 640(2) applies, the relevant percentage there specified.
The Board shall not approve a personal pension scheme which permits the acceptance of contributions other than—
contributions by members;
contributions by employers of members;
minimum contributions paid by the Secretary of State under Part I of the Social Security Act 1986 or by the Department of Health and Social Services for Northern Ireland under Part II of the Social Security (Northern Ireland) Order 1986.
The Board shall not approve a personal pension scheme which permits the acceptance of minimum contributions paid as mentioned in subsection (6)(c) above in respect of an individual’s service—
as director of the company, if his emoluments as such are within section 644(5); or
in an office or employment to which section 645 applies.
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A contribution paid by an individual under approved personal pension arrangements made by him shall, subject to the provisions of this Chapter, be deducted from or set off against any relevant earnings of his for the year of assessment in which the payment is made. Except where subsections (2) to (4) below apply, relief under this subsection in respect of a contribution shall be given only on a claim made for the purpose.
In such cases and subject to such conditions as the Board may prescribe in regulations, relief under subsection (1) above shall be given in accordance with subsections (3) and (4) below.
An individual who is entitled to such relief in respect of a contribution may deduct from the contribution when he pays it, and may retain, an amount equal to income tax at the basic rate on the contribution.
The scheme administrator—
shall accept the amount paid after the deduction in discharge of the individual’s liability to the same extent as if the deduction had not been made; and
may recover an amount equal to the deduction from the Board.
Regulations under this section may make provision for carrying subsections (3) and (4) above into effect and, without prejudice to the generality of that, may provide—
for the manner in which claims for the recovery of a sum under subsection (4)(b) may be made;
for the giving of such information, in such form, as may be prescribed by or under the regulations;
for the inspection by persons authorised by the Board of books, documents and other records.
Where relief under this section for any year of assessment is claimed and allowed (whether or not it then falls to be given for that year), and afterwards an assessment, alteration of an assessment, or other adjustment of the claimant’s liability to tax is made, there shall also be made such consequential adjustments in the relief allowed or given under this section for that or any subsequent year as are appropriate.
Where relief under this section is claimed and allowed for any year of assessment in respect of a contribution, relief shall not be given in respect of it under any other provision of the Income Tax Acts for the same or any subsequent year, nor (in the case of a contribution under an annuity contract) in respect of any other premium or consideration for an annuity under the same contract.
References in the Income Tax Acts to relief in respect of life assurance premiums shall not be taken to include relief under this section.
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The maximum amount that may be deducted or set off in any year of assessment by virtue of section 639(1) shall be 17.5 per cent. of the individual’s net relevant earnings for that year.
In the case of an individual whose age at the beginning of the year of assessment is within a range specified in the first column of the following table, subsection (1) above shall have effect with the substitution for 17.5 per cent. of the relevant percentage specified in the second column. 51 to 55 20 per cent. 56 to 60 22.5 per cent. 61 or more 27.5 per cent.
Without prejudice to subsection (1) above, the maximum amount that may be deducted or set off in any year of assessment in respect of contributions paid by an individual to secure benefits satisfying the conditions in section 637(1) shall be 5 per cent. of the individual’s net relevant earnings for that year.
Where personal pension arrangements are made by an employee whose employer makes contributions under the arrangements, the maximum amount that may be deducted or set off in any year of assessment shall be reduced by the amount of the employer’s contributions in the year.
Any minimum contributions treated by virtue of section 649(3) as paid by the individual in respect of whom they are paid shall be disregarded for the purposes of this section.
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An individual who pays a contribution under approved personal pension arrangements in a year of assessment (whether or not a year for which he has relevant earnings) may elect that the contribution, or part of it, shall be treated as paid—
in the year of assessment preceding that year; or
if he had no net relevant earnings in that preceding year of assessment, in the year of assessment before that.
Where for any year of assessment an individual— the individual may elect that there shall be treated as paid in that year so much of any contributions paid by him under approved personal pension arrangements in the next year of assessment but two as does not exceed the amount of the unused relief.
has relevant earnings as an underwriting member of Lloyd’s or by way of commission calculated by reference to the profits of Lloyd’s underwriting business; and
there is an amount of unused relief attributable to those earnings,
Subject to section 655(2), references in subsection (2) above to an amount of unused relief attributable to the earnings mentioned in subsection (2)(a) are to an amount which could have been deducted from or set off against those earnings under section 639(1) if—
the individual had paid contributions under approved personal pension arrangements in the year of assessment for which he has the earnings; or
any such contributions paid by him in that year had been greater.
An election under this section must be made not later than three months after the end of the year of assessment in which the contributions treated as paid in another year are actually paid.
Where an election is made under this section in respect of a contribution or part of a contribution, the other provisions of this Chapter shall have effect as if the contribution or part had been paid in the year specified in the election and not in the year in which it was actually paid.
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Where— relief may be given under section 639(1), up to the amount of the unused relief, in respect of so much of any contributions paid by him under approved personal pension arrangements in any of the next six years of assessment as exceeds the maximum applying for that year under section 640.
for any year of assessment an individual has relevant earnings from any trade, profession, vocation, office or employment carried on or held by him, and
there is an amount of unused relief for that year,
In this section, references to an amount of unused relief for any year are to an amount which could have been deducted from or set off against the individual’s relevant earnings for that year under section 639(1) if—
the individual had paid contributions under approved personal pension arrangements in that year; or
any such contributions paid by him in that year had been greater.
Relief by virtue of this section shall be given for an earlier year rather than a later year, the unused relief taken into account in giving relief for any year being deducted from that available for giving relief in subsequent years and unused relief derived from an earlier year being exhausted before unused relief derived from a later year.
Where a relevant assessment to tax in respect of a year of assessment becomes final and conclusive more than six years after the end of that year and there is an amount of unused relief for that year which results from the making of the assessment— and to the extent to which relief in respect of any contributions is given by virtue of this subsection it shall not be given by virtue of subsection (1) above.
that amount shall not be available for giving relief by virtue of this section for any of the six years following that year; but
the individual may, within the period of six months beginning with the date on which the assessment becomes final and conclusive, elect that relief shall be given under section 639(1), up to that amount, in respect of so much of any contributions paid by him under approved personal pension arrangements within that period as exceeds the maximum applying under section 640 for the year of assessment in which they are paid;
In this section “a relevant assessment to tax” means an assessment on the individual’s relevant earnings or on the profits or gains of a partnership from which the individual derives relevant earnings.
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Where contributions are paid by an employer under approved personal pension arrangements made by his employee, those contributions shall not be regarded as emoluments of the employment chargeable to tax under Schedule E.
Income derived by a person from investments or deposits held by him for the purposes of an approved personal pension scheme shall be exempt from income tax.
An annuity payable under approved personal pension arrangements shall be treated as earned income of the annuitant.
Subsection (3) above applies only in relation to the annuitant to whom the annuity is made payable by the terms of the arrangements.
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In this Chapter, “relevant earnings”, in relation to an individual, means any income of his which is chargeable to tax for the year of assessment in question and is within subsection (2) below.
Subject to subsections (3) to (5) below, income is within this subsection if it is—
emoluments chargeable under Schedule E from an office or employment held by the individual;
income from any property which is attached to or forms part of the emoluments of an office or employment held by him;
income which is chargeable under Schedule D and is immediately derived by him from the carrying on or exercise by him of his trade, profession or vocation (either as an individual or as a partner acting personally in a partnership);
income treated as earned income by virtue of section 529.
Where section 645 applies to an office or employment held by the individual, neither emoluments from the office or employment nor income from any property which is attached to it or forms part of its emoluments are within subsection (2) above.
The following are not income within subsection (2) above—
anything in respect of which tax is chargeable under Schedule E and which arises from the acquisition or disposal of shares or an interest in shares or from a right to acquire shares;
anything in respect of which tax is chargeable by virtue of section 148.
Emoluments of an individual as director of a company are not income within subsection (2) above if— and section 840 shall apply for the purposes of this subsection.
the income of the company consists wholly or mainly of investment income; and
the individual, either alone or together with any other persons who are or have been at any time directors of the company, controls the company;
For the purposes of subsection (5) above—
For the purposes of this Chapter, a married woman’s relevant earnings shall not be treated as her husband’s relevant earnings, notwithstanding that her income chargeable to tax is treated as his income.
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This section applies to an office or employment held by an individual if—
service in it is service to which a relevant superannuation scheme relates; and
the individual is a participant in the scheme; and
neither subsection (4) nor subsection (5) below applies to his participation in the scheme.
This section applies whether or not the duties of the office or employment are performed wholly or partly in the United Kingdom or the individual is chargeable to tax in respect of it.
In subsection (1) above “a relevant superannuation scheme” means a scheme or arrangement—
the object or one of the objects of which is the provision, in respect of persons serving in particular offices or employments, of relevant benefits within the meaning of section 612; and
which is established by a person other than the individual.
This subsection applies to an individual’s participation in a scheme if the scheme provides no benefits in relation to him other than—
an annuity payable to his surviving spouse or a dependant of his;
a lump sum payable on his death in service.
This subsection applies to an individual’s participation in a scheme if any sums paid pursuant to the scheme with a view to the provision of relevant benefits for him are treated as his income for the purposes of the Income Tax Acts.
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Subject to subsections (3) to (7) below, in this Chapter “net relevant earnings”, in relation to an individual, means the amount of his relevant earnings for the year of assessment in question, less the amount of any deductions within subsection (2) below which fall to be made from the relevant earnings in computing for the purposes of income tax his total income for that year.
Deductions are within this subsection if they are—
deductions which but for section 74(m), (p) or (q) could be made in computing the profits or gains of the individual;
deductions made by virtue of section 198, 201 or 332(3);
deductions in respect of relief under Schedule 9 to the Finance Act 1981 (stock relief);
deductions in respect of losses or capital allowances, being losses or capital allowances arising from activities profits or gains of which would be included in computing relevant earnings of the individual or the individual’s wife or husband.
For the purposes of this section, an individual’s relevant earnings shall be taken to be those earnings before giving effect to any capital allowances, other than deductions allowable in computing profits or gains, but after taking into account the amounts on which charges fall to be made under the 1968 Act (including the enactments which under this Act or the 1970 Act are to be treated as contained in Part I of the 1968 Act); and in subsections (4) and (5) below, references to income (other than references to total income) shall be construed similarly.
In the case of an individual’s partnership profits, the amount to be included in arriving at his net relevant earnings shall be his share of the partnership income (estimated in accordance with the Income Tax Acts) after making from it any such deductions in respect of— as would be made in computing the tax payable in respect of that income.
payments made by the partnership;
relief given to the partnership under Schedule 9 to the Finance Act 1981; or
capital allowances falling to be made to the partnership,
Where, in a year of assessment for which an amount is deducted or set off under section 639(1) against the net relevant earnings of an individual— the amount of the deduction made from that other income shall be treated as reducing the individual’s net relevant earnings for subsequent years of assessment in accordance with subsection (6) below.
a deduction in respect of such a loss or allowance of the individual as is mentioned in subsection (2)(d) above falls to be made in computing the total income of the individual or the individual’s wife or husband; and
the deduction or part of it falls to be so made from income other than relevant earnings;
The deduction shall be made so far as possible from the individual’s net relevant earnings for the first of the subsequent years of assessment (whether or not he is entitled to relief under section 639(1) for that year), and then, so far as it cannot be so made, from those of the next year, and so on.
An individual’s net relevant earnings for any year of assessment shall be computed without regard to any deduction or set off under section 639(1) which falls to be made for that year in respect of the individual or the individual’s wife of husband.
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This section applies to any payment within subsection (2) below which is made—
out of funds which are or have been held for the purposes of a personal pension scheme which is or has at any time been approved; and
to or for the benefit of an individual who has made personal pension arrangements in accordance with the scheme.
A payment is within this subsection if—
it is not expressly authorised by the rules of the scheme; or
it is made at a time when the scheme or the arrangements are not approved and it would not have been expressly authorised by the rules of the scheme or by the arrangements when the scheme, or as the case may be the arrangements, were last so approved.
The individual referred to in subsection (1)(b) above, whether or not he is the recipient of the payment, shall be chargeable to tax under Schedule E on the amount of the payment for the year of assessment in which the payment is made.
This section applies to a transfer of assets or other transfer of money’s worth as it applies to a payment, and in relation to such a transfer the reference in subsection (3) above to the amount of the payment shall be read as a reference to the value of the transfer.
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Where under Part I of the Social Security Act 1986 the Secretary of State pays minimum contributions for the purposes of approved personal pension arrangements, the amount of the employee’s share of those contributions shall, instead of being the amount provided for in that Part, be the grossed-up equivalent of the amount so provided for.
For the purposes of this section—
The employee’s share of minimum contributions paid for a year of assessment by the Secretary of State for the purposes of approved personal pension arrangements shall be treated for the purposes of income tax—
as the income for that year of the individual in respect of whom it is paid; and
as contributions paid in that year by that individual under those arrangements.
The Board may make regulations—
providing for the recovery by the Secretary of State from the Board, in such circumstances as may be prescribed by the regulations, of any increase attributable to this section in the sums paid by the Secretary of State out of the National Insurance Fund;
requiring the Secretary of State to give the Board such information as may be so prescribed about minimum contributions paid by the Secretary of State;
prescribing circumstances in which this section or any provision of it shall not apply;
making such provision as appears to the Board to be necessary or expedient for the purposes of supplementing the provisions of this section.
Any payment received by the Secretary of State by virtue of this section shall be paid into the National Insurance Fund.
In relation to Northern Ireland, this section shall have effect as if—
references to the Secretary of State were references to the Department of Health and Social Services for Northern Ireland;
references to Part I and section 3(3) of the Social Security Act 1986 were references to Part II and Article 5(3) of the Social Security (Northern Ireland) Order 1986; and
references to the National Insurance Fund were references to the Northern Ireland National Insurance Fund.
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If in the opinion of the Board the facts concerning an approved personal pension scheme or its administration or arrangements made in accordance with it do not warrant the continuance of their approval of the scheme, they may at any time by notice given to the scheme administrator withdraw their approval of the scheme.
If in the opinion of the Board the facts concerning any approved personal pension arrangements do not warrant the continuance of their approval in relation to the arrangements, they may at any time by notice given to the individual who made them and to the scheme administrator withdraw their approval in relation to the arrangements.
Without prejudice to the generality of subsection (2) above, the Board may withdraw their approval in relation to any personal pension arrangements if they are of the opinion that securing the provision of benefits under the arrangements was not the sole purpose of the individual in making them.
A notice under subsection (1) or (2) above shall state the grounds on which, and the date from which, approval is withdrawn.
The Board may not withdraw their approval from a date earlier than the date when the facts were first such that they did not warrant the continuance of their approval (so, however, that in a case within subsection (3) above their approval may be withdrawn from the day the arrangements in question were made).
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Where the Board— the person to whom the notice is given may appeal to the Special Commissioners against the refusal or, as the case may be, the withdrawal.
refuse an application by notice under section 631; or
withdraw an approval by notice under section 650;
An appeal under this section shall be made by notice stating the grounds for the appeal and given to the Board before the end of the period of 30 days beginning with the day on which the notice of refusal or withdrawal was given to the appellant.
On an appeal under this section against the withdrawal of an approval, the Special Commissioners may, instead of allowing or dismissing the appeal, order that the withdrawal shall have effect from a date other than that determined by the Board.
The bringing of an appeal under this section shall not affect the validity of the decision appealed against pending the determination of the proceedings.
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An inspector may give a notice to a scheme administrator requiring him to provide the inspector with—
such particulars as the notice may require relating to contributions paid under approved personal pension arrangements made in accordance with the scheme;
such particulars as the notice may require relating to payments by way of return of contributions;
copies of such accounts as the notice may require.
A person to whom a notice is given under this section shall comply with the notice within the period of 30 days beginning with the day on which it is given.
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This section applies to any salary—
payable to the holder of a qualifying office who is also a Member of the House of Commons; and
payable for a period in respect of which the holder is not a participant in relation to that office in arrangements contained in the Parliamentary pension scheme but is a participant in relation to his membership of the House of Commons in any such arrangements, or for any part of such a period.
So much of any salary to which this section applies as is equal to the difference between a Member’s pensionable salary and the salary which (in accordance with any such resolution as is mentioned in subsection (4)(a) below) is payable to him as a Member holding that qualifying office, shall be treated for the purposes of this Chapter as remuneration from the office of Member and not from the qualifying office.
In this section— and, without prejudice to the power conferred by virtue of paragraph 13 of Schedule 1 to that Act, regulations under section 2 of that Act may make provision specifying the circumstances in which a person is to be regarded for the purposes of this section as being or not being a participant in relation to his membership of the House of Commons, or in relation to any office, in arrangements contained in the Parliamentary pension scheme.
In subsection (3) above “a Member’s ordinary salary”, in relation to any resolution of the House of Commons, means—
if the resolution provides for salary to be paid to Members at different rates according to whether or not they are holders of particular offices or are in receipt of salaries or pensions as the holders or former holders of particular offices, a Member’s yearly salary at the higher or highest rate; and
in any other case, a Member’s yearly salary at the rate specified in or determined under the resolution.
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Where approved personal pension arrangements are made by an individual who pays qualifying premiums within the meaning of section 620(1)—
the amount that may be deducted or set off by virtue of section 639(1) in any year of assessment shall be reduced by the amount of any qualifying premiums which are paid in the year by the individual and in respect of which relief is given for the year under section 619(1)(a); and
the relief which, by virtue of section 625, may be given under section 619 by reference to the individual’s unused relief for any year shall be reduced by the amount of any contributions paid by him in that year under the approved personal pension arrangements.
Where an individual elects under section 641 that a contribution or part of a contribution shall be treated as paid in the year of assessment 1984-85, 1985-86 or 1986-87, the payment shall be treated as the payment of a qualifying premium for the purposes of Chapter III of this Part; and in such a case references in section 641 to an amount of unused relief shall be construed in accordance with section 625.
The references in section 642 to unused relief for any year are, for years of assessment before 1987-88, references to unused relief within the meaning of section 625.
The Board shall not grant any application under section 631 so as to approve a scheme with effect from a date earlier than 4th January 1988.
The Board may by regulations make provision for applications for approval of personal pension schemes to be granted provisionally in cases where the applications are made before 1st August 1989, notwithstanding that the Board have not satisfied themselves that the schemes comply with the requirements of sections 632 to 638; and such regulations may, in particular, provide— and may make such supplementary provision as appears to the Board to be necessary or expedient.
for the contents and form of certificates or other documents which the Board may require the applicant to give them before they grant an application provisionally;
for the making of such amendments of the rules of the scheme after the provisional grant of an application as are necessary to enable the scheme to comply with the requirements of sections 632 to 638, and for those amendments to have effect as from the date of approval of the scheme;
for the withdrawal of approval of the scheme as from that date if it does not comply with the requirements of sections 632 to 638 and such amendments as are mentioned in paragraph (b) above are not made;
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Subject to section 657, a purchased life annuity shall, for the purposes of the provisions of the Tax Acts relating to tax on annuities and other annual payments, be treated as containing a capital element and, to the extent of the capital element, as not being an annual payment or in the nature of an annual payment; but the capital element in such an annuity shall be taken into account in computing profits or gains or losses for other purposes of the Tax Acts in any circumstances in which a lump sum payment would be taken into account.
Where, in the case of any purchased life annuity to which this section applies, the amount of any annuity payment (but not the term of the annuity) depends on any contingency other than the duration of a human life or lives—
the capital element shall be determined by reference— and in head (ii) above “term” means the period from the date when the first annuity payment begins to accrue to the date when the last payment becomes payable;
to the amount or value of the payments made or other consideration given for the grant of the annuity (“the purchase price”); and
to the expected term of the annuity, as at the date when the first annuity payment began to accrue, expressed in years (and any odd fraction of a year), and determined by reference to the prescribed tables of mortality;
the capital element in any annuity payment made in respect of a period of 12 months shall be a fraction— of the purchase price, where E is the expected term referred to in paragraph (a)(ii) above;
the capital element in any annuity payment made in respect of a period of less than, or more than, 12 months shall be the amount at (b) above reduced or, as the case may be, increased, in the same proportion as the length of that period bears to a period of 12 months;
subsection (3) below shall not apply but paragraphs (a) and (b) of subsection (4) below shall apply as they apply to that subsection.
Subject to subsection (2) above, in the case of any purchased life annuity to which this section applies—
the capital element shall be determined by reference to the amount or value of the payments made or other consideration given for the grant of the annuity; and
the proportion which the capital element in any annuity payment bears to the total amount of that payment shall be constant for all payments on account of the annuity; and
where neither the term of the annuity nor the amount of any annuity payment depends on any contingency other than the duration of a human life or lives, that proportion shall be the same proportion which the total amount or value of the consideration for the grant of the annuity bears to the actuarial value of the annuity payments as determined in accordance with subsection (4) below; and
where either the term of the annuity or the amount of any annuity payment (but not both) depends on any contingency other than the duration of a human life or lives, that proportion shall be such as may be just, having regard to paragraph (c) above and to the contingencies affecting the annuity; and
where both the term of the annuity and the amount of any annuity payment depend on any contingency other than the duration of a human life or lives, that proportion shall be such as may be just, having regard to subsection (2) above and to the contingencies affecting the annuity.
For the purposes of subsection (3) above—
any entire consideration given for the grant of an annuity and for some other matter shall be apportioned as appears just (but so that a right to a return of premiums or other consideration for an annuity shall not be treated for this purpose as a distinct matter from the annuity);
where it appears that the amount or value of the consideration purporting to be given for the grant of an annuity has affected, or has been affected by, the consideration given for some other matter, the aggregate amount or value of those considerations shall be treated as one entire consideration given for both and shall be apportioned under paragraph (a) above accordingly; and
the actuarial value of any annuity payments shall be taken to be their value as at the date when the first of those payments begins to accrue, that value being determined by reference to the prescribed tables of mortality and without discounting any payment for the time to elapse between that date and the date it is to be made.
Where a person making a payment on account of any life annuity has been notified in the prescribed manner of any decision as to its being or not being a purchased life annuity to which this section applies or as to the amount of the capital element (if any), and has not been notified of any alteration of that decision, the notice shall be conclusive as to those matters for the purpose of determining the amount of income tax which he is entitled or required to deduct from the payment, or for which he is chargeable in respect of it.
Where a person making a payment on account of a purchased life annuity to which this section applies has not been notified in the prescribed manner of the amount of the capital element, the amount of income tax which he is entitled or required to deduct from the payment, or for which he is chargeable in respect of it, shall be the same as if the annuity were not a purchased life annuity to which this section applies.
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For the purposes of section 656—
Section 656 does not apply—
to any annuity which would, apart from that section, be treated for the purposes of the provisions of the Tax Acts relating to tax on annuities and other annual payments as consisting to any extent in the payment or repayment of a capital sum;
to any annuity where the whole or part of the consideration for the grant of the annuity consisted of sums satisfying the conditions for relief under section 266, 273 or 619 or to any annuity payable under a substituted contract within the meaning of section 622(3);
to any annuity purchased in pursuance of any direction in a will, or to provide for an annuity payable by virtue of a will or settlement out of income of property disposed of by the will or settlement (whether with or without resort to capital);
to any annuity purchased under or for the purposes of any sponsored superannuation scheme (as defined in section 624) or any scheme approved under section 620 or in pursuance of any obligation imposed, or offer or invitation made, under or in connection with any such scheme or to any other annuity purchased by any person in recognition of another’s services (or past services) in any office or employment; or
to any annuity payable under approved personal pension arrangements within the meaning of Chapter IV of this Part.
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Any question whether an annuity is a purchased life annuity to which section 656 applies, or what is the capital element in such an annuity, shall be determined by the inspector; but a person aggrieved by the inspector’s decision on any such question may appeal within the prescribed time to the Special Commissioners.
Save as otherwise provided in this Chapter, the procedure to be adopted in giving effect to this Chapter shall be such as may be prescribed.
The Board may make regulations for prescribing anything which is to be prescribed under this Chapter, and the regulations may apply for the purposes of this Chapter or of the regulations any provision of the Income Tax Acts, with or without modifications.
Regulations under subsection (3) above may in particular make provision as to the time limit for making any claim for relief from or repayment of tax under this Chapter and as to all or any of the following matters, that is to say—
as to the information to be furnished in connection with the determination of any question whether an annuity is a purchased life annuity to which section 656 applies or what is the capital element in an annuity, and as to the persons who may be required to furnish any such information;
as to the manner of giving effect to the decision on any such question, and (notwithstanding anything in section 348) as to the making of assessments for the purpose on the person entitled to the annuity; and
as to the extent to which the decision on any such question is to be binding, and the circumstances in which it may be reviewed.
If any person, for the purpose of obtaining for himself or for any other person any relief from or repayment of tax under this Chapter, knowingly makes any false statement or false representation, he shall be liable to a penalty not exceeding £500.
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For the purposes of sections . . . 613(4), 614(3) and (4) . . . — . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
“investments” (or “investment”) includes futures contracts and options contracts, and
income derived from transactions relating to such contracts shall be regarded as income derived from (or income from) such contracts.
For the purposes of subsection (1) above a contract is not prevented from being a futures contract or an options contract by the fact that any party is or may be entitled to receive or liable to make, or entitled to receive and liable to make, only a payment of a sum (as opposed to a transfer of assets other than money) in full settlement of all obligations.
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The exemptions specified below do not apply to income derived from investments, deposits or other property held as a member of a property investment LLP (see section 1004 of ITA 2007).
The exemptions are those provided by— . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . section 613(4) (Parliamentary pension funds), section 614(3) (certain colonial, &c. pension funds), section 614(4) (the Overseas Service Pension Fund), section 614(5) (other pension funds for overseas employees), . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The income to which subsection (1) above applies includes relevant stock lending fees, in relation to any investments, to which any of the provisions listed in subsection (2) above would apply by virtue of section 129B.
Section 659A (treatment of futures and options) applies for the purposes of subsection (1) above.
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Subject to subsection (2) below, any income which by virtue or in consequence of any disposition made, directly or indirectly, by any person (other than a disposition made for valuable and sufficient consideration), is payable to or applicable for the benefit of any other person for a period which cannot exceed six years shall be deemed for all the purposes of the Income Tax Acts to be the income of the person, if living, by whom the disposition was made, and not to be the income of any other person.
Subsection (1) above shall not apply in relation to income which is payable as a covenanted payment to charity.
In this Chapter, unless the context otherwise requires—
For the purposes of subsection (3) above the Trustees of the National Heritage Memorial Fund and the Historic Buildings and Monuments Commission for England shall each be treated as a body of persons established for charitable purposes only.
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Where, by virtue of this Chapter, any income tax becomes chargeable on and is paid by the person by whom a disposition was made, that person shall be entitled— and any certificate so furnished shall be conclusive evidence of the facts appearing thereby.
to recover from any trustee or other person to whom the income is payable by virtue or in consequence of the disposition the amount of the tax so paid; and
for that purpose to require an inspector to furnish to him a certificate specifying the amount of the income in respect of which he has so paid tax and the amount of the tax so paid;
Where any person obtains in respect of any allowance or relief a repayment of income tax in excess of the amount of the repayment to which he would but for the provisions of this Chapter have been entitled, an amount equal to the excess shall be paid by him to the trustee or other person to whom the income is payable by virtue or in consequence of the disposition, or, where there are two or more such persons, shall be apportioned among those persons as the case may require. If any question arises as to the amount of any payment or as to any apportionment to be made under this subsection, that question shall be decided by the General Commissioners whose decision thereon shall be final.
Subject to section 833(3), any income which is deemed by virtue of this Chapter to be the income of any person shall be deemed to be the highest part of his income.
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In the case of any disposition where there is more than one person who made the disposition, this Chapter shall, subject to the provisions of this section, have effect in relation to each person who made the disposition as if he were the only person who had made it.
In the case of any such disposition, references in this Chapter to income payable or applicable by virtue or in consequence of the disposition include, in relation to any person making the disposition, only—
income from property which that person has provided directly or indirectly for the purposes of the disposition (“the settled property”); and
income from property representing the settled property; and
income from so much of any property which represents both the settled property and other property as, on a just apportionment, represents the settled property; and
income provided directly or indirectly by that person.
In this section references to property which represents other property include references to property which represents accumulated income from that other property.
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Where, by virtue or in consequence of any settlement to which this Chapter applies and during the life of the settlor, any income is paid to or for the benefit of a child of the settlor in any year of assessment, the income shall, if at the time of the payment the child was unmarried and below the age of 18, be treated for all the purposes of the Income Tax Acts as the income of the settlor for that year and not as the income of any other person.
Where an offshore income gain (within the meaning of Chapter V of Part XVII) accrues in respect of a disposal of assets made by a person holding them as trustee for a person who would be absolutely entitled as against the trustee but for being an infant, the income which by virtue of section 761(1) is treated as arising by reference to that gain shall for the purposes of this Chapter be deemed to be paid to the infant; and in this subsection, in relation to Scotland, “infant” means pupil or minor.
This Chapter applies to every settlement, wheresoever it was made or entered into, and whether it was made or entered into before or after the passing of this Act, except a settlement made or entered into before 22nd April 1936 which immediately before that date was irrevocable. Paragraph 10 of Schedule 30 shall have effect as respects certain earlier settlements on children.
Income paid to or for the benefit of a child of a settlor shall not be treated as provided in subsection (1) above for any year of assessment in which the aggregate amount of the income paid to or for the benefit of that child, which, but for this subsection, would be so treated by virtue of subsection (1) above, does not exceed £5.
This Chapter shall not apply in relation to any income arising under a settlement in any year of assessment for which the settlor is not chargeable to income tax as a resident in the United Kingdom, and references in this Chapter to income shall be construed accordingly.
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Subject to the provisions of this section, for the purposes of this Chapter—
income which, by virtue or in consequence of a settlement to which this Chapter applies, is so dealt with that it, or assets representing it, will or may become payable or applicable to or for the benefit of a child of the settlor in the future (whether on fulfilment of a condition, or the happening of a contingency, or as the result of the exercise of a power or discretion conferred on any person, or otherwise) shall be deemed to be paid to or for the benefit of that child; and
any income so dealt with which is not required by the settlement to be allocated, at the time when it is so dealt with, to any particular child or children of the settlor shall be deemed to be paid in equal shares to or for the benefit of each of the children to or for the benefit of whom or any of whom the income or assets representing it will or may become payable or applicable.
Where any income is dealt with as mentioned in subsection (1) above by virtue or in consequence of a settlement to which this Chapter applies, being a settlement which, at the time when the income is so dealt with, is an irrevocable settlement—
subsection (1) above shall not apply to that income unless and except to the extent that that income consists of, or represents directly or indirectly, sums paid by the settlor which are allowable as deductions in computing his total income; and
subject to subsection (3) below, any sum whatsoever paid thereafter by virtue or in consequence of the settlement, or any enactment relating thereto, to or for the benefit of a child of the settlor, being a child who at the time of the payment is unmarried and below the age of 18, shall be deemed for the purposes of section 663 to be paid as income.
Subsection (2)(b) above shall not apply if and to the extent that the sum paid as mentioned in that paragraph together with any other sums previously so paid (whether to that child or to any other child who, at the time of the payment, was unmarried and below the age of 18) exceeds the aggregate amount of the income which, by virtue or in consequence of the settlement, has been paid to or for the benefit of a child of the settlor, or dealt with as mentioned in subsection (1) above, since the date when the settlement took effect or the date when it became irrevocable, whichever is the later.
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For the purposes of this Chapter, a settlement shall not be deemed to be irrevocable if its terms provide—
for the payment to the settlor or, during the life of the settlor, to the wife or husband of the settlor for his or her benefit, or for the application for the benefit of the settlor or, during the life of the settlor, of the wife or husband of the settlor, of any income or assets in any circumstances whatsoever during the life of the settlor’s child; or
for the determination of the settlement by the act or on the default of any person; or
for the payment of any penalty by the settlor in the event of his failing to comply with the provisions of the settlement. In this section “the settlor’s child”, in relation to any settlement, means any child of the settlor to or for the benefit of whom any income, or assets representing it, is or are or may be payable or applicable by virtue or in consequence of the settlement.
For the purposes of this Chapter, a settlement shall not be deemed to be revocable by reason only—
that it contains a provision under which any income or assets will or may become payable to or applicable for the benefit of the settlor, or the wife or husband of the settlor, on the bankruptcy of the settlor’s child or in the event of an assignment of or charge on that income or those assets being executed by the settlor’s child; or
that it provides for the determination of the settlement by the act or on the default of any person in such a manner that the determination will not, during the lifetime of the settlor’s child, benefit the settlor or the wife or husband of the settlor; or
in the case of a settlement to which section 33 of the Trustee Act 1925 applies, that it directs income to be held for the benefit of the settlor’s child on protective trusts, unless the trust period is a period less than the life of the child or the settlement specifies some event on the happening of which the child would, if the income were payable during the trust period to him absolutely during that period, be deprived of the right to receive all or part of the income.
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Where interest is paid by the trustees of a settlement to which this Chapter applies there shall be deemed for the purposes of this Chapter to be paid to or for the benefit of a child of the settlor who at the time of the payment is unmarried and below the age of 18 (in addition to any other amount deemed to be so paid) an amount equal to a fraction— of the interest, where— A is the whole of the income arising under the settlement in the year of assessment, less any expenses of the trustees of the settlement paid in that year which, in the absence of any express provision of the settlement, would be properly chargeable to income, and B is such part of A as is paid to or for the benefit of any child of the settlor who is unmarried and below the age of 18.
This section shall not apply to interest in respect of which relief from tax is allowable under any provision of the Income Tax Acts or to interest payable to the settlor or the wife or husband of the settlor (if living with the settlor).
Nothing in this section shall be construed as affecting the liability to tax of the person receiving or entitled to the interest.
For the purpose of this section “income arising under the settlement” has the meaning given by section 681, which for that purpose shall be deemed to apply in relation to settlements to which this Chapter applies as it applies in relation to settlements to which Chapter III of this Part applies.
In this section the reference to the trustees' expenses excludes sums mentioned in section 682(1)(a).
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Where, by virtue of this Chapter, any income tax becomes chargeable on and is paid by the person by whom a settlement was made or entered into, that person shall be entitled— and any certificate so furnished shall be conclusive evidence of the facts appearing thereby.
to recover from any trustee or other person to whom the income is payable by virtue or in consequence of the settlement the amount of the tax so paid; and
for that purpose to require an inspector to furnish to him a certificate specifying the amount of income in respect of which he has so paid tax and the amount of the tax so paid,
Where any person obtains in respect of any allowance or relief a repayment of income tax in excess of the amount of the repayment to which he would but for the provisions of this Chapter have been entitled, an amount equal to the excess shall be paid by him to the trustee or other person to whom the income is payable by virtue or in consequence of the settlement, or, where there are two or more such persons, shall be apportioned among those persons as the case may require. If any question arises as to the amount of any payment or as to any apportionment to be made under this subsection, that question shall be decided by the General Commissioners whose decision thereon shall be final.
Subject to section 833(3), any income which is deemed by virtue of this Chapter to be the income of any person shall be deemed to be the highest part of his income.
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In the case of any settlement where there is more than one settlor, this Chapter shall, subject to the provisions of this section, have effect in relation to each settlor as if he were the only settlor.
In the case of any such settlement, only the following can, for the purposes of this Chapter, be taken into account, in relation to any settlor, as income paid by virtue or in consequence of the settlement to or for the benefit of a child of the settlor, that is to say—
income originating from that settlor; and
in a case in which section 664(2)(b) applies, any sums which are under that paragraph to be deemed to be paid as income.
In applying section 664(2)(b) to any settlor—
the references to sums paid by virtue or in consequence of the settlement or any enactment relating thereto include only sums paid out of property originating from that settlor or income originating from that settlor; and
the reference to income which by virtue or in consequence of the settlement has been paid to or for the benefit of a child of the settlor or dealt with as mentioned in section 664(1) includes only income originating from that settlor.
References in this section to property originating from a settlor are references to—
property which that settlor has provided directly or indirectly for the purposes of the settlement; and
property representing that property; and
so much of any property which represents both property provided as mentioned in paragraph (a) above and other property as, on a just apportionment, represents the property so provided.
References in this section to income originating from a settlor are references to—
income from property originating from that settlor; and
income provided directly or indirectly by that settlor.
In subsections (4) and (5) above—
references to property or income which a settlor has provided directly or indirectly include references to property or income which has been provided directly or indirectly by another person in pursuance of reciprocal arrangements with that settlor but do not include references to property or income which that settlor has provided directly or indirectly in pursuance of reciprocal arrangements with another person; and
references to property which represents other property include references to property which represents accumulated income from that other property.
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If and so long as the terms of any settlement (wherever made) are such that— any sums payable by the settlor or the wife or husband of the settlor by virtue or in consequence of that provision of the settlement in any year of assessment shall be treated for all the purposes of the Income Tax Acts as the income of the settlor for that year and not as the income of any other person.
any person has or may have power, whether immediately or in the future, and whether with or without the consent of any other person, to revoke or otherwise determine the settlement or any provision thereof and, in the event of the exercise of the power, the settlor or the wife or husband of the settlor will or may cease to be liable to make any annual payments payable by virtue or in consequence of any provision of the settlement; or
the settlor or the wife or husband of the settlor may, whether immediately or in the future, cease, on the payment of a penalty, to be liable to make any annual payments payable by virtue or in consequence of any provision of the settlement,
Where any such power as is referred to in subsection (1)(a) above cannot be exercised— from the time when the first of the annual payments so referred to becomes payable, and the like annual payments are payable in each year throughout that period, subsection (1)(a) above shall not apply so long as that power cannot be exercised.
in the case of a covenanted payment to charity (as defined by section 660(3)), within the period of three years, or
in any other case, within the period of six years,
In subsections (1) and (2) above— but the sums to be treated under subsections (1) and (2) above as the income of the settlor for any year of assessment and not as the income of any other person shall, where those subsections would not apply but for paragraph (b) above, be such part only of the sums payable as mentioned in that paragraph by the settlor or the wife or husband of the settlor in that year as corresponds to the diminution mentioned in that paragraph.
the references to a power to revoke or otherwise determine a settlement or any provision thereof shall be deemed to include references to any power to diminish the amount of any payments which are or may be payable under the settlement or any provision thereof and to any power to diminish the amount of any annual payments which the settlor or the wife or husband of the settlor is or may be liable to make by virtue or in consequence of any provision of the settlement;
the references to the settlor or the wife or husband of the settlor ceasing to be liable to make any annual payments payable by virtue or in consequence of any provision of the settlement shall be deemed to include references to a diminution of the amount of any such annual payments which the settlor or the wife or husband of the settlor is or may be liable to make;
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If and so long as the terms of any settlement (wherever made) are such that— any income arising under the settlement from the property comprised in the settlement in any year of assessment or from a corresponding part of that property, or a corresponding part of any such income, as the case may be, shall, subject to subsection (2) below, be treated for all the purposes of the Income Tax Acts as the income of the settlor for that year and not as the income of any other person.
any person has or may have power, whether immediately or in the future, and whether with or without the consent of any other person, to revoke or otherwise determine the settlement or any provision thereof; and
in the event of the exercise of the power, the settlor or the wife or husband of the settlor will or may become beneficially entitled to the whole or any part of the property then comprised in the settlement or of the income arising from the whole or any part of the property so comprised,
Where any such power cannot be exercised within six years from the time when any particular property first becomes comprised in the settlement, subsection (1) above shall not apply to income arising under the settlement from that property, or from property representing that property, so long as the power cannot be exercised.
In subsection (1) above the references to a power to revoke or otherwise determine a settlement or any provision thereof shall be deemed to include references to—
any power to diminish the property comprised in the settlement; and
any power to diminish the amount of any payments which are or may be payable under the settlement or any provision thereof to any person other than the settlor and the wife or husband of the settlor.
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If and so long as the settlor has an interest in any income arising under or property comprised in a settlement (wherever made), any income so arising during the life of the settlor in any year of assessment shall, to the extent to which it is not distributed, be treated for all the purposes of the Income Tax Acts as the income of the settlor for that year and not as the income of any other person except that—
if and so long as that interest is an interest neither in the whole of the income arising under the settlement nor in the whole of the property comprised in the settlement, the amount of income to be treated as the income of the settlor by virtue of this subsection shall be such part of the income which, but for this paragraph, would be so treated as is proportionate to the extent of that interest; and
where it is shown that any amount of the income which is not distributed in any year of assessment consists of income which falls to be treated as the income of the settlor for that year by virtue of section 671 or 672, that amount shall be deducted from the amount of income which, but for this paragraph, would be treated as his for that year by virtue of this subsection.
Subject to subsection (3) below, the settlor shall, for the purpose of subsection (1) above, be deemed to have an interest in income arising under or property comprised in a settlement if any income or property which may at any time arise under or be comprised in that settlement is, or will or may become, payable to or applicable for the benefit of the settlor or the wife or husband of the settlor in any circumstances whatsoever.
The settlor shall not be deemed to have an interest in any income arising under or property comprised in a settlement—
if and so long as that income or property cannot become payable or applicable as mentioned in subsection (2) above except in the event of—
the bankruptcy of some person who is or may become beneficially entitled to that income or property; or
any assignment of or charge on that income or property being made or given by some such person; or
in the case of a marriage settlement, the death of both the parties to the marriage and of all or any of the children of the marriage; or
the death under the age of 25 or some lower age of some person who would be beneficially entitled to that income or property on attaining that age; or
if and so long as some person is alive and under the age of 25 during whose life that income or property cannot become payable or applicable as mentioned in subsection (2) above except in the event of that person becoming bankrupt or assigning or charging his interest in that income or property.
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This section applies to any settlement (wherever made) if and so long as the terms of the settlement are such that any person has or may have power, exercisable at his discretion, whether immediately or in the future, and whether with or without the consent of any person—
to pay or apply to or for the benefit of the settlor or the wife or husband of the settlor the whole or any part of the income or property which may at any time arise under or be comprised in the settlement; or
to secure the payment or application to or for the benefit of the settlor or the wife or husband of the settlor of the whole or any part of that income or property.
Subject to subsections (3) and (4) below, any income arising in any year of assessment under a settlement to which this section applies or, as the case may be, any income so arising from the property comprised in any such settlement or from a corresponding part of that property, or a corresponding part of any such income, shall (so far as it is not so treated apart from this section) be treated for all the purposes of the Income Tax Acts as the income of the settlor for that year and not as the income of any other person.
Where the power mentioned in subsection (1) of this section cannot be exercised within six years from the time when any income or class of income first arises under the settlement or from the time when any particular property first becomes comprised in the settlement, then, so long as the power cannot be exercised, subsection (2) above shall not apply to any income arising under the settlement or, as the case may be, any income of that class or income from that property or property representing that property.
Where, under section 673(3), the settlor is not deemed to have an interest in any income arising under or property comprised in the settlement, subsection (2) above shall not apply to that income or, as the case may be, to income arising from that property.
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Tax chargeable by virtue of section 671, 672, 673 or 674 shall be charged under Case VI of Schedule D.
In computing the liability to income tax of a settlor chargeable by virtue of any of those sections the same deductions and reliefs shall be allowed as would have been allowed if the income treated as his by virtue of that section had been received by him.
Where, by virtue of any of those sections, any income tax becomes chargeable on and is paid by a settlor, he shall be entitled—
to recover from any trustee, or other person to whom income arises under the settlement, the amount of the tax so paid; and
for that purpose to require an inspector to furnish to him a certificate specifying the amount of income in respect of which he has so paid tax and the amount of tax so paid. Any certificate so furnished shall be conclusive evidence of the facts stated therein.
Where any person obtains, in respect of any allowance or relief, a repayment of income tax in excess of the amount of the repayment to which he would, but for section 671, 672, 673 or 674, have been entitled, an amount equal to the excess shall be paid by him to the trustee or other person to whom income arises under the settlement, or, where there are two or more such persons, shall be apportioned among those persons as the case may require. If any question arises as to the amount of any payment or as to any apportionment to be made under this subsection, that question shall be decided by the General Commissioners whose decision thereon shall be final.
Subject to section 833(3), any income which is treated by virtue of section 671, 672, 673 or 674 as income of a settlor shall be deemed for the purpose of this section to be the highest part of his income.
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Where, by virtue or in consequence of any settlement to which this section applies, the settlor pays directly or indirectly in any year of assessment to the trustees of the settlement any sums which would, but for this subsection, be allowable as deductions in computing his total income for that year, those sums shall not be so allowable to the extent to which the aggregate amount thereof falls within the amount of income arising under the settlement in that year which has not been distributed, less—
so much of any income arising under the settlement in that year which has not been distributed as is shown to consist of income which has been treated as the income of the settlor by virtue of section 671, 672 or 674, and
the amount of income so arising in that year which is treated as the income of the settlor by virtue of section 673.
For the purposes of subsection (1) above, any sum paid in any year of assessment by the settlor to any body corporate connected with the settlement in that year shall be treated as if it had been paid to the trustees of the settlement in that year by virtue or in consequence of the settlement.
No relief shall be given under any of the provisions of the Income Tax Acts on account of tax paid in respect of so much of any income arising under a settlement in any year of assessment as is equal to the aggregate amount of any sums paid by the settlor in that year which are not allowable as deductions by virtue of this section.
This section shall apply to any settlement (wherever made) made after 26th April 1938, and where income arising under any settlement (wherever made) made on or before that date is treated as the income of the settlor by virtue of section 671 or 672 but ceases to be so treated by reason of any variation of the terms of the settlement made after that date, or would have been so treated but for such a variation, this section shall apply to that settlement as from the date when the variation takes effect.
In this section, references to sums paid by a settlor include references to sums paid by the wife or husband of the settlor.
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Any capital sum paid directly or indirectly in any year of assessment by the trustees of a settlement to which this section applies to the settlor shall— and so on for each subsequent year up to a maximum of ten subsequent years, taking the reference in paragraph (b) to the year mentioned in paragraph (a) as a reference to that and any other year before the subsequent year in question.
to the extent to which the amount of that sum falls within the amount of income available up to the end of that year, be treated for all the purposes of the Income Tax Acts as the income of the settlor for that year;
to the extent to which the amount of that sum is not by virtue of this subsection treated as his income for that year and falls within the amount of the income available up to the end of the next following year, be treated for those purposes as the income of the settlor for the next following year;
For the purposes of subsection (1) above, the amount of income available up to the end of any year shall, in relation to any capital sum paid as mentioned in that subsection, be taken to be the aggregate amount of income arising under the settlement in that year and any previous year which has not been distributed, less—
the amount of that income taken into account under that subsection in relation to that sum in any previous year or years; and
the amount of any other capital sums paid to the settlor in any year before that sum was paid; and
so much of any income arising under the settlement in that year and any previous year which has not been distributed as is shown to consist of income which has been treated as income of the settlor by virtue of section 671, 672, 674 or 683; and
any income arising under the settlement in that year and any previous year which has been treated as the income of the settlor by virtue of section 673; and
any sums paid by virtue or in consequence of the settlement, to the extent that they are not allowable, by virtue of section 676, as deductions in computing the settlor’s income for that year or any previous year; and
any sums paid by virtue or in consequence of the settlement in that year or any previous year which have been treated as the income of the settlor by virtue of section 664(2)(b); and
any sums included in the income arising under the settlement as amounts which have been or could have been apportioned to a beneficiary as mentioned in section 681(1)(b); and
an amount equal to the sum of tax at the basic rate and tax at the additional rate on—
the aggregate amount of income arising under the settlement in that year and any previous year which has not been distributed, less
the aggregate amount of the income and sums referred to in paragraphs (c), (d), (e), (f) and (g) above.
Where any amount is included in a person’s income by virtue of section 421 in respect of any loan or advance, there shall be a corresponding reduction in the amount (if any) afterwards falling to be so included in respect of it by virtue of this section.
Where the capital sum paid to the settlor is a sum paid by way of loan, then—
if the whole of it is repaid, no part of that sum shall by virtue of subsection (1) above be treated as the settlor’s income for any year of assessment after that in which the repayment occurs; and
if one or more capital sums have previously been paid to him by way of loan and wholly repaid, the amount of that capital sum shall be treated as equal to its excess, if any, over so much of the sum or sums previously paid as has already fallen to be treated as his income by virtue of that subsection.
Where the capital sum paid to the settlor is a sum paid by way of complete repayment of a loan, then, if an amount not less than that sum is thereafter lent by the settlor to the trustees of the settlement, no part of that sum shall by virtue of subsection (1) above be treated as his income for any year of assessment after that in which the further loan is made.
Where the whole or any part of any sum is treated by virtue of this section as income of the settlor for any year, it shall be treated as income of such an amount as, after deduction of both tax at the basic rate and tax at the additional rate for that year, would be equal to that sum or that part of that sum.
Tax chargeable by virtue of this section shall be charged under Case VI of Schedule D; and there shall be set off against the tax charged on any amount treated by virtue of this section as income of the settlor for any year an amount equal to— whichever is the less.
the sum of tax at the basic rate and tax at the additional rate for that year on the amount so treated as his income; or
so much of that sum as is equal to the tax charged,
In computing the liability to income tax of a settlor chargeable by virtue of this section, the same deductions and reliefs shall be allowed as would have been allowed if the amount treated as his income by virtue of this section had been received by him as income.
This section applies to any settlement wherever made, and whether made before or after the passing of this Act, and in this section—
“capital sum” means, subject to subsection (10) below— but does not include any sum which could not have become payable to the settlor except in one of the events specified in section 673(3); and
any sum paid by way of loan or repayment of a loan; and
any other sum paid otherwise than as income, being a sum which is not paid for full consideration in money or money’s worth,
references to sums paid to the settlor include references to sums paid to the wife or husband of the settlor or to the settlor (or the husband or wife of the settlor) jointly with another person.
For the purposes of this section there shall be treated as a capital sum paid to the settlor by the trustees of the settlement any sum which— and which would not apart from this subsection be treated as a capital sum paid to him.
is paid by them to a third party at the settlor’s direction or by virtue of the assignment by him of his right to receive it where the direction or assignment was given or made on or after 6th April 1981; or
is otherwise paid or applied by them for the benefit of the settlor,
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Where— the capital sum shall, in accordance with subsection (2) below, be treated for the purposes of section 677 as having been paid to the settlor by the trustees of the settlement.
a capital sum is paid after 5th April 1981 to the settlor in a year of assessment by any body corporate connected with the settlement in that year; and
an associated payment has been or is made directly or indirectly to that body by the trustees of the settlement,
A capital sum to which subsection (1) above applies shall— and so on for each subsequent year, taking the references in paragraph (b) to the year mentioned in paragraph (a) as references to that and any other year before the subsequent year in question.
to the extent to which the amount of that sum falls within the total of the associated payment or payments made up to the end of the year of assessment in which it is paid, be treated as having been paid to the settlor in that year;
to the extent to which the amount of that sum is not treated as paid to the settlor in that year and falls within the total of the associated payment or payments made up to the end of the next following year (less what was taken into account under this subsection in relation to that sum in the previous year), be treated as having been paid to the settlor in the next following year,
In this section “associated payment”, in relation to any capital sum paid to the settlor by a body corporate, means— being a sum paid or asset transferred in the five years ending or beginning with the date on which the capital sum is paid to the settlor.
any capital sum paid to that body by the trustees of the settlement; and
any other sum paid or asset transferred to that body by those trustees which is not paid or transferred for full consideration in money or money’s worth,
For the purposes of this section any capital sum paid by a body corporate, and any associated payment made to a body corporate, at a time when it is, within the meaning of section 416, associated with another body corporate may be treated as paid by or made to that other body corporate.
In this section “capital sum” has the same meaning as in section 677; and any question whether a capital sum has been paid to the settlor by a body corporate or to a body corporate by the trustees shall be determined in the same way as any question under that section whether a capital sum has been paid to the settlor by the trustees.
Subsection (1) above does not apply to any sum paid to the settlor by way of loan or repayment of a loan if—
the whole of the loan is repaid within 12 months of the date on which it was made; and
the period for which amounts are outstanding in respect of loans made to the settlor by that or any other body corporate connected with the settlement, or by him to that or any other such body, in any period of five years does not exceed 12 months.
Where a capital sum is paid to the settlor in a year of assessment by a body corporate connected with the settlement in that year it shall be assumed until the contrary is shown that an associated payment of an amount not less than that of the capital sum has been made to that body by the trustees of the settlement.
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In the case of any settlement where there is more than one settlor, this Chapter shall, subject to the provisions of this section, have effect in relation to each settlor as if he were the only settlor.
In this Chapter—
references to the property comprised in a settlement include, in relation to any settlor, only property originating from that settlor, and
references to income arising under the settlement include, in relation to any settlor, only income originating from that settlor.
In considering for the purposes of this Chapter, in relation to any settlor, whether any, and if so, how much, of the income arising under the settlement has been distributed, any sums paid partly out of income originating from that settlor and partly out of other income must (so far as not apportioned by the terms of the settlement) be apportioned evenly over all that income.
References in sections 671(1) and 676 to sums payable by virtue or in consequence of any provision of the settlement or sums paid by virtue or in consequence of the settlement include, in relation to any settlor, only sums payable or paid by that settlor.
References in this section to property originating from a settlor are references to—
property which that settlor has provided directly or indirectly for the purposes of the settlement; and
property representing that property; and
so much of any property which represents both property so provided and other property as, on a just apportionment, represents the property so provided.
References in this section to income originating from a settlor are references to—
income from property originating from that settlor; and
so much of any such income of a body corporate as is mentioned in section 681(1)(b) as corresponds to property originating from the settlor which is comprised in the settlement; and
income provided directly or indirectly by that settlor.
In subsections (5) and (6) above—
references to property or income which a settlor has provided directly or indirectly include references to property or income which has been provided directly or indirectly by another person in pursuance of reciprocal arrangements with that settlor, but do not include references to property or income which that settlor has provided directly or indirectly in pursuance of reciprocal arrangements with another person; and
references to property which represents other property include references to property which represents accumulated income from that other property.
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In this Chapter, “income arising under a settlement” includes— but, where the settlor is not domiciled, or not resident, or not ordinarily resident, in the United Kingdom in any year of assessment, does not include income arising under the settlement in that year in respect of which the settlor, if he were actually entitled thereto, would not be chargeable to income tax by deduction or otherwise by reason of his not being so domiciled, resident or ordinarily resident.
any income chargeable to income tax by deduction or otherwise, and any income which would have been so chargeable if it had been received in the United Kingdom by a person domiciled, resident and ordinarily resident in the United Kingdom; and
where the amount of the income of any body corporate has been apportioned under section 423 for any year or period, or could have been so apportioned if the body corporate were incorporated and resident in any part of the United Kingdom, so much of the income of the body corporate for that year or period as is equal to the amount which has been or could have been so apportioned to the trustees of or a beneficiary under the settlement,
Where the income of a body corporate has been, or could have been, apportioned under section 423 any amount of that income which by virtue of subsection (1)(b) above is to be included in the income arising under a settlement shall be increased by such proportion thereof as corresponds to the rate of advance corporation tax applicable to a distribution made at the end of the accounting period to which the apportionment relates.
In subsections (1) and (2) above references to income that could have been apportioned to a person if a body corporate were incorporated and resident in any part of the United Kingdom include references to income that could have been apportioned to that person indirectly through any other body corporate if that other body had also been so incorporated and resident.
In this Chapter— and a person shall be deemed for the purposes of this Chapter to have made a settlement if he has made or entered into the settlement directly or indirectly, and, in particular, but without prejudice to the generality of the preceding words, if he has provided or undertaken to provide funds directly or indirectly for the purpose of the settlement, or has made with any other person a reciprocal arrangement for that other person to make or enter into the settlement.
For the purposes of this Chapter, a body corporate shall be deemed to be connected with a settlement in any year of assessment if at any time in that year—
it is a close company (or only not a close company because it is not resident in the United Kingdom) and the participators then include the trustees of the settlement; or
it is controlled (within the meaning of section 840) by a company falling within paragraph (a) above.
The provisions of this Chapter shall be in addition to and not in derogation of any other provisions of this Act.
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For the purposes of this Chapter, income arising under a settlement in any year of assessment shall be deemed not to have been distributed if and to the extent that it exceeds the aggregate amount of—
the sums, excluding all payments of interest, paid in that year by the trustees of the settlement to any persons (not being a body corporate connected with the settlement and not being the trustees of another settlement made by the settlor or the trustees of the settlement) in such manner that they fall to be treated in that year, otherwise than by virtue of section 677, as the income of those persons for the purposes of income tax, or would fall to be so treated if those persons were domiciled, resident and ordinarily resident in the United Kingdom and the sums had been paid to them there, and
subject to subsections (2) to (5) below, any expenses of the trustees of the settlement paid in that year which, in the absence of any express provision of the settlement, would be properly chargeable to income, in so far as such expenses are not included in the sums mentioned in paragraph (a) above, and
in a case where the trustees of the settlement are trustees for charitable purposes, the amount by which any income arising under the settlement in that year in respect of which exemption from tax may be granted under section 505 exceeds the aggregate amount of any such sums or expenses as are mentioned in paragraphs (a) and (b) above paid in that year which are properly chargeable to that income.
Subsection (1)(b) above shall apply to any interest paid by the trustees of the settlement subject to subsections (3) to (6) below.
If no sums within subsection (1)(a) were paid to any person other than the settlor, or the wife or husband of the settlor, the whole of any interest paid by the trustees of the settlement shall be excluded from subsection (1)(b) above.
If any sum was so paid, there shall be excluded from subsection (1)(b) above a fraction— of any interest paid by the trustees of the settlement where— A is the whole of the income arising under the settlement in the year of assessment, less the sums referred to in subsection (1)(b) above apart from subsections (2), (3) and (5) of this section; and B is so much of the sums within subsection (1)(a) above as is paid to persons other than the settlor, or the wife or husband of the settlor.
Subsections (2) to (4) above shall not apply to interest in respect of which relief from tax is allowable under any provision of the Income Tax Acts or to interest payable to the settlor or the wife or husband of the settlor if living with the settlor.
Nothing in subsections (2) to (5) above shall be construed as affecting the liability to tax of the person receiving or entitled to the interest.
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Where, during the life of the settlor, income arising under a settlement made after 6th April 1965 is, under the settlement and in the events that occur, payable to or applicable for the benefit of any person other than the settlor, then, unless, under the settlement and in those events, the income either— the income shall, for the purposes of excess liability, be treated as the income of the settlor and not as the income of any other person.
consists of annual payments made under a partnership agreement to or for the benefit of a former member, or the widow or dependants of a deceased former member, of the partnership, being payments made under a liability incurred for full consideration; or
is excluded by subsection (3), (6) or (9) below; or
is income arising under a settlement made by one party to a marriage by way of provision for the other after the dissolution or annulment of the marriage, or while they are separated under an order of a court or under a separation agreement or in such circumstances that the separation is likely to be permanent, being income payable to or applicable for the benefit of that other party; or
is income from property of which the settlor has divested himself absolutely by the settlement; or
is income which, by virtue of some provision of the Income Tax Acts not contained in this Chapter, is to be treated for the purposes of those Acts as income of the settlor;
In subsection (1) above “excess liability” means the excess of liability to income tax over what it would be if all income tax were charged at the basic rate to the exclusion of any higher rate.
Subject to subsection (4) below, subsection (1) above shall not apply to so much of an individual’s income as consists of covenanted payments to charity.
If at least £1,000 of an individual’s income for any year of assessment consists of covenanted payments to charity which, in the hands of the charities receiving them, consitute income for which, by virtue of subsection (3) of section 505, relief is not available under subsection (1) of that section, so much of the individual’s income as consists of those payments shall not be excluded from the operation of subsection (1) above by virtue of subsection (3) above.
If, for any chargeable period of a charity— each of the payments which make up the aggregate shall be treated for the purposes of subsection (4) above as apportioned rateably between the part of the aggregate referred to in paragraph (b) above and the remainder.
the income of the charity includes two or more covenanted payments to charity; and
only a part of the aggregate of those payments constitutes income for which, by virtue of subsection (3) of section 505 relief is not available under subsection (1) of that section,
Subsection (1) above shall not apply to income consisting of annual payments made by an individual, in connection with the acquisition by him of the whole or part of a business— being payments made under a liability incurred for full consideration.
to or for the benefit of the individual from whom it is acquired or, if he is dead, to or for the benefit of his widow or dependants, or
if the acquisition was from a partnership, to or for the benefit of a former member, or the widow or dependants of a deceased former member, of that or any preceding partnership, or to or for the benefit of an individual from whom the business or part was acquired by that or any preceding partnership or, if he is dead, to or for the benefit of the widow or dependants of such an individual;
Payments made in respect of any individual under a liability incurred in connection with an acquisition from a partnership shall only be excluded from the operation of subsection (1) above by virtue of subsection (6)(b) above if, and to the extent that, they are made in substitution for, or matched by reductions in, other payments which would themselves be excluded from its operation.
Where the right of a former member of a partnership to payments falling due not more than ten years after he ceased to be a member of that partnership has devolved on his death, subsections (1)(a) and (6) above shall apply to the payments as they would apply if he had not died.
Where for any year of assessment there is made to or for the benefit of a former member, or the widow or a dependant of a deceased former member, of a partnership an annual payment which— any additional annual payment made to or for the benefit of that person shall, notwithstanding that it is not made under a liability incurred for full consideration, be excluded from the operation of subsection (1) above to the extent to which it makes good that shortfall.
is excluded from the operation of subsection (1) above by virtue of paragraph (a) of that subsection or by virtue of subsection (6) above; and
falls short of the limit applying for that year under section 628;
For the purposes of this section—
“former member”, in relation to a partnership, means an individual who has ceased to be a member of that partnership on retirement or death;
a partnership becomes a “preceding partnership” of another if it transfers its business or part of its business to another and one or more individuals are members of both, and any preceding partnership of the transferor by reference to any part of the business transferred shall also become a preceding partnership of the transferee;
“covenanted payments to charity” has the meaning given by section 660(3).
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Where, during the life of the settlor, income arising under a settlement made before 7th April 1965, but after 9th April 1946, is, under the settlement and in the events that occur, payable to or applicable for the benefit of any person other than the settlor, then, unless under the settlement and in those events, the income either— the income shall, for the purposes of excess liability, be treated as the income of the settlor and not as the income of any other person.
is payable to an individual for his own use; or
is applicable for the benefit of an individual named in that behalf in the settlement or of two or more individuals so named; or
is applicable for the benefit of a child or children of an individual named in that behalf in the settlement; or
is income from property of which the settlor has divested himself absolutely by the settlement; or
is income which, by virtue of some provision of the Income Tax Acts not contained in this Chapter, is to be treated for the purposes of those Acts as income of the settlor;
In subsection (1) above “excess liability” means the excess of liability to income tax over what it would be if all income tax were charged at the basic rate to the exclusion of any higher rate.
The exceptions provided for by paragraphs (a), (b) and (c) of subsection (1) above shall not apply where the named individual or individuals or, in the case of paragraph (c), either the named individual or the child or any of the children in question, is in the service of the settlor or accustomed to act as the solicitor or agent of the settlor.
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For the purposes of sections 683 and 684, the settlor shall not be deemed to have divested himself absolutely of any property if that property or any derived property is, or will or may become, in any circumstances whatsoever, payable to or applicable for the benefit of the settlor or, in the case of a settlement made after 6th April 1965, the wife or husband of the settlor.
For those purposes, the settlor shall not be deemed not to have divested himself absolutely of any property by reason only that the property or any derived property may become payable to or applicable for the benefit of the settlor, or, in the case of a settlement made after 6th April 1965, the wife or husband of the settlor, in the event of—
the bankruptcy of some person who is or may become beneficially entitled to the property or any of the derived property; or
an assignment of or charge on the property or any of the derived property being made or given by some such person; or
in the case of a marriage settlement, the death of both parties to the marriage and of all or any of the children of the marriage; or
the death under the age of 25 or some lower age of some person who would be beneficially entitled to the property or the derived property on attaining that age.
In subsections (1) and (2) above “derived property”, in relation to any property, means income from that property or any other property directly or indirectly representing proceeds of, or of income from, that property or any income therefrom.
In sections 683 and 684 and this section “income arising under a settlement”, “settlement” and “settlor” have the meanings assigned to them for the purposes of Chapter III of this Part by section 681.
Section 679 shall have effect in relation to sections 683 and 684 and this section as it has effect in relation to Chapter III of this Part.
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So far as income arising to trustees is income to which this section applies it shall, in addition to being chargeable to income tax at the basic rate, be chargeable at the additional rate.
This section applies to income arising to trustees in any year of assessment so far as it—
is income which is to be accumulated or which is payable at the discretion of the trustees or any other person (whether or not the trustees have power to accumulate it); and
is neither (before being distributed) the income of any person other than the trustees nor treated for any of the purposes of the Income Tax Acts as the income of a settlor; and
is not income arising under a trust established for charitable purposes only or income from investments, deposits or other property held for the purposes of a fund or scheme established for the sole purpose of providing relevant benefits within the meaning of section 612; and
exceeds the income applied in defraying the expenses of the trustees in that year which are properly chargeable to income (or would be so chargeable but for any express provisions of the trust).
This section also applies to sums apportioned to the trustees under section 423 and treated, under 426(2) as applied by subsection (4) below, as income received by the trustees.
Sections 426(1) and (2), 427 and 428 shall, with the omission in section 426(2)(a) of the words following “the apportionment relates”, the substitution of “income” for “total income” and all other necessary modifications, apply to a sum apportioned to trustees as they apply to sums apportioned to an individual; and section 429 shall apply accordingly.
For the purposes of this section sums paid or credited to trustees in any year of assessment in respect of dividends or interest payable in respect of shares in or deposits with or loans to a building society being sums in respect of which the society is required to account for and pay an amount in accordance with regulations under section 476(1) shall be treated as income for that year received by the trustees after deduction of income tax from a corresponding gross amount. In this subsection expressions used in section 476 have the same meanings as in that section.
In this section “trustees” does not include personal representatives; but where personal representatives, on or before the completion of the administration of the estate, pay to trustees any sum representing income which, if personal representatives were trustees within the meaning of this section, would be income to which this section applies, that sum shall be deemed to be paid to the trustees as income and to have borne income tax at the basic rate. This subsection shall be construed as if it were contained in Part XVI.
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Where, in any year of assessment, trustees make a payment to any person in the exercise of a discretion exercisable by them or any person other than the trustees, then, if the sum paid is for all the purposes of the Income Tax Acts income of the person to whom it is paid (but would not be his income apart from the payment), the following provisions of this section shall apply with respect to the payment in lieu of section 348 or 349(1).
The payment shall be treated as a net amount corresponding to a gross amount from which tax has been deducted at a rate equal to the sum of the basic rate and the additional rate in force for the year in which the payment is made; and the sum treated as so deducted shall be treated—
as income tax paid by the person to whom the payment is made; and
so far as not set off under the following provisions of this section, as income tax assessable on the trustees.
The following amounts, so far as not previously allowed, shall be set against the amount assessable (apart from this subsection) on the trustees in pursuance of subsection (2)(b) above— but tax on any income represented by amounts paid or credited as mentioned in section 686(5) shall be taken into account under paragraph (a) above only on production of a certificate from the building society concerned specifying those amounts and stating that an amount representing income tax on that income calculated at the basic rate has been or will be accounted for.
the amount of any tax on income arising to the trustees and charged at the additional as well as at the basic rate in pursuance of section 686;
the amount of tax at the additional rate on any sum treated, under section 426(2) as applied by section 686(4) or under section 249(6), as income of the trustees;
the amount of tax at the basic rate on any amount taken for the purposes of sections 426 to 428 as applied by section 686(4) to be the amount to be excluded from the income of the trustees in accordance with section 427(4);
an amount of tax in respect of income found on a claim made by the trustees to have been available to them for distribution at the end of the year 1972-73, which shall be taken to be two-thirds of the net amount of that income;
the amount of any tax on income arising to the trustees by virtue of section 761(1) and charged at a rate equal to the sum of the basic rate and the additional rate by virtue of section 764; and
the amount of any tax on annual profits or gains treated as received by trustees by virtue of section 714(2) or 716(3) of this Act or paragraph 2(2) or (3) of Schedule 22 to the Finance Act 1985 and charged at a rate equal to the sum of the basic rate and the additional rate by virtue of section 720(5) of this Act or paragraph 8(1) of Schedule 23 to that Act;
the amount of any tax on income which arose to the trustees by virtue of section 38(2) of the Finance Act 1974 (development gains) and charged at a rate equal to the basic rate and the additional rate in pursuance of section 43(1) of that Act;
In this section “trustees” does not include personal representatives within the meaning of section 701(4).
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The provisions of this section shall have effect in relation to the excess amount of the income tax due from any person (“the beneficiary”) to whom, or for whose benefit, any income or any capital may in the discretion of some other person be paid or applied under a trust.
In this section “the excess amount” means so much of the income tax payable in respect of the beneficiary’s income as exceeds what would be the amount thereof if all income tax were chargeable at the basic rate to the exclusion of any higher rate.
If the whole or part of the excess amount of the income tax charged in respect of the income of the beneficiary is not paid before the expiry of six months from the date when it became due and payable, the Board may at any time thereafter, so long as the excess amount or any part thereof remains unpaid, cause to be served on the trustees of the trust a notice that the excess amount or any part thereof remains unpaid.
Where such a notice is served in accordance with the provisions of this section on the trustees of the trust, it shall be the duty of the trustees, as soon as may be, and if necessary from time to time, to pay to the Board in or towards satisfaction of the excess amount or any part thereof from time to time remaining unpaid any income or capital which, by virtue of any exercise of the discretion under the trust, the beneficiary may become entitled to receive or to have applied for his benefit.
Any payments made out of income by trustees on account of tax in respect of which a notice under this section has been served shall be deemed for all the purposes of the Income Tax Acts to represent income paid to the beneficiary.
Any sum which the trustees are liable to pay by virtue of this section shall be recoverable from them as a debt due to the Crown.
Where there are two or more trustees under the trust, a notice under this section shall be deemed to have been validly served upon the trustees if served upon any one of them, but nothing in this section shall render a trustee personally liable for anything done by him in good faith and in ignorance of the fact that such a notice has been served.
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This section applies to any settlement in relation to which a Schedule 4 direction has effect.
The trustees of the settlement may elect that this subsection shall have effect in relation to any year of assessment, and if they do so—
any income arising in that year from the property comprised in the settlement which, apart from this subsection, would be treated by virtue of this Part as income of the settlor shall not be so treated; and
no sum applied in that year out of the property for the purposes mentioned in paragraph 3(1)(a)(i) of Schedule 4 (maintenance etc. of qualifying property) shall be treated for any purposes of the Income Tax Acts as the income of any person—
by virtue of any interest of that person in, or his occupation of, the qualifying property in question; or
by virtue of section 677.
Where income arising from the property comprised in the settlement in a year of assessment for which no election is made under subsection (2) above is treated by virtue of this Part as income of the settlor, paragraph (b) of that subsection shall have effect in relation to any sums in excess of that income which are applied in that year as mentioned in that paragraph.
Any election under subsection (2) above shall be by notice to the Board in such form as the Board may require and shall be made within two years of the end of the year of assessment to which it relates.
Where— subsections (1) to (4) above shall apply as if each of those parts were a separate year of assessment and separate elections may be made accordingly.
for part of a year of assessment a Schedule 4 direction has effect and circumstances obtain by virtue of which income arising from property comprised in the settlement is treated as income of a settlor under this Part; and
for the remainder of that year either no such direction has effect, or no such circumstances obtain, or both,
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This section applies to income arising from settled property in respect of which a Schedule 4 direction has effect if the income— and if that expenditure is (or would apart from the reimbursement be) deductible in computing the profits of a trade carried on by the settlor.
is treated by virtue of this Part as income of the settlor, and
is applied in reimbursing the settlor for expenditure incurred by him for a purpose within paragraph 3(1)(a)(i) of Schedule 4,
Income to which this section applies shall not be treated as reducing the expenditure deductible in computing the profits referred to in subsection (1) above, and shall not be regarded as income of the settlor otherwise than by virtue of this Part.
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If in the case of a settlement in respect of which a Schedule 4 direction has effect— then, unless subsection (6) below applies, income tax shall be charged under this section in respect of the settlement.
any of the property comprised in the settlement (whether capital or income) is applied otherwise than as mentioned in paragraph 3(1)(a)(i) or (ii) of Schedule 4; or
any of that property on ceasing to be comprised in the settlement devolves otherwise than on any such body or charity as is mentioned in paragraph 3(1)(a)(ii) of that Schedule; or
the direction ceases to have effect;
Subject to subsection (3) below, tax chargeable under this section shall be charged at the rate of 30 per cent. on the whole of the income which has arisen in the relevant period from the property comprised in the settlement and has not been applied (or accumulated and then applied) as mentioned in paragraph 3(1)(a)(i) or (ii) of Schedule 4. In this subsection “the relevant period” means, if tax has become chargeable under this section in respect of the settlement on a previous occasion, the period since the last occasion and, in any other case, the period since the settlement took effect.
Tax shall not be chargeable under this section in respect of income which by virtue of Chapters I to IV of this Part is treated as income of the settlor; but where income arising in any year of assessment is exempted by this subsection any sums applied in that year as mentioned in paragraph 3(1)(a)(i) or (ii) of Schedule 4 shall be treated as paid primarily out of that income and only as to the excess, if any, out of income not so exempted.
Tax charged under this section shall be in addition to any tax chargeable apart from this section and—
the persons assessable and chargeable with tax under this section shall be the trustees of the settlement; and
all the provisions of the Income Tax Acts relating to assessments and to the collection and recovery of income tax shall, so far as applicable, apply to the charge, assessment, collection and recovery of tax under this section.
Tax shall also be chargeable in accordance with subsections (1) to (4) above if— but for the purposes of this subsection any acquisition from another such body or charity shall be disregarded.
any of the property comprised in a settlement to which subsection (1) above applies, on ceasing at any time to be comprised in the settlement, devolves on any such body or charity as is referred to in paragraph (b) of that subsection, and
at or before that time an interest under the settlement is or has been acquired for a consideration in money or money’s worth by that or another such body or charity;
Tax shall not be chargeable under this section in respect of a settlement on an occasion when the whole of the property comprised in it is transferred tax-free into another settlement; but on the first occasion on which tax becomes chargeable under this section in respect of a settlement (“the current settlement”) comprising property which was previously comprised in another settlement or settlements and has become comprised in the current settlement as a result of, or of a series of, tax-free transfers, the relevant period for the purposes of subsection (2) above shall, as respects that property, be treated as having begun—
on the last occasion on which tax became chargeable under this section in respect of the other settlement or any of the other settlements; or
if there has been no such occasion, when the other settlement or the first of the other settlements took effect.
For the purposes of subsection (6) above, property is transferred tax-free from one settlement into another if either—
it ceases to be comprised in the first-mentioned settlement and becomes comprised in the other settlement in circumstances such that by virtue of paragraph 9(1) of Schedule 4 there is (or, but for paragraph 9(4), there would be) no charge to capital transfer tax or inheritance tax in respect of the property; or
both immediately before and immediately after the transfer it is property in respect of which a Schedule 4 direction has effect.
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The following provisions of this section shall have effect in relation to a person who, during the period commencing on the death of a deceased person and ending on the completion of the administration of his estate (“the administration period”) or during a part of that period, has a limited interest in the residue of the estate or in a part thereof.
When any sum has been paid during the administration period in respect of that limited interest, the amount of that sum shall, subject to subsection (3) below, be deemed for all tax purposes to have been paid to that person as income for the year of assessment in which that sum was paid or, in the case of a sum paid in respect of an interest that has ceased, for the last year of assessment in which it was subsisting.
On the completion of the administration of the estate—
the aggregate amount of all sums paid before, or payable on, the completion of the administration in respect of that limited interest shall be deemed to have accrued due to that person from day to day during the administration period or the part of that period during which he had that interest, as the case may be, and to have been paid to him as it accrued due; and
the amount deemed to have been paid to that person by virtue of paragraph (a) above in any year of assessment shall be deemed for all tax purposes to have been paid to him as income for that year; and
where the amount which is deemed to have been paid to that person as income for any year by virtue of this subsection is less or greater than the amount deemed to have been paid to him as income for that year by virtue of subsection (2) above, such adjustments shall be made as are provided in section 700.
Any amount which is deemed to have been paid to that person as income for any year by virtue of this section shall—
in the case of a United Kingdom estate, be deemed to be income of such an amount as would after deduction of income tax for that year be equal to the amount deemed to have been so paid, and to be income which has borne income tax at the basic rate; and
in the case of a foreign estate, be deemed to be income of the amount deemed to have been so paid, and shall be chargeable to income tax under Case IV of Schedule D as if it were income arising from securities in a place out of the United Kingdom.
Where— the tax so charged on him shall, on proof of the facts on a claim, be reduced by an amount bearing the same proportion thereto as the amount of the deemed income which has borne United Kingdom income tax, less the tax so borne, bears to the amount of the aggregate income, less the tax so borne.
a person has been charged to income tax for any year by virtue of this section in respect of an amount deemed to have been paid to him as income in respect of an interest in a foreign estate (“the deemed income”), and
any part of the aggregate income of that estate for that year has borne United Kingdom income tax by deduction or otherwise (“the aggregate income”),
Where relief has been given under subsection (5) above, such part of the amount in respect of which he has been charged to income tax as corresponds to the proportion mentioned in that subsection shall, for the purpose of computing his total income, be deemed to represent income of such an amount as would after deduction of income tax be equal to that part of the amount charged.
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The following provisions of this section shall have effect in relation to a person who, during the administration period or during a part of that period, has an absolute interest in the residue of the estate of a deceased person or in a part thereof.
There shall be ascertained in accordance with section 697 the amount of the residuary income of the estate for each whole year of assessment, and for each broken part of a year of assessment, during which— and the amount so ascertained in respect of any year or part of a year or, in the case of a person having an absolute interest in a part of a residue, a proportionate part of that amount, is in this Part referred to as the “residuary income” of that person for that year of assessment.
the administration period was current, and
that person had that interest;
When any sum or sums has or have been paid during the administration period in respect of that absolute interest, the amount of that sum or the aggregate amount of those sums shall, subject to subsection (5) below, be deemed for all tax purposes to have been paid to that person as income to the extent to which, and for the year or years of assessment for which, he would have been treated for those purposes as having received income if he had had a right to receive in each year of assessment— and that sum or the aggregate of those sums had been available for application primarily in or towards satisfaction of those rights as they accrued and had been so applied.
in the case of a United Kingdom estate, his residuary income for that year less income tax at the basic rate for that year; and
in the case of a foreign estate, his residuary income for that year;
In the case of a United Kingdom estate, any amount which is deemed to have been paid to that person as income for any year by virtue of subsection (3) above shall be deemed to be income of such an amount as would, after deduction of income tax for that year, be equal to the amount deemed to have been so paid, and to be income that has borne income tax at the basic rate.
On the completion of the administration of the estate—
the amount of the residuary income of that person for any year of assessment shall be deemed for all tax purposes to have been paid to him as income for that year, and in the case of a United Kingdom estate shall be deemed to have borne income tax at the basic rate; and
where the amount which is deemed to have been paid to that person as income for any year by virtue of this subsection is less or greater than the amount deemed to have been paid to him as income for that year by virtue of subsection (3) above, such adjustments shall be made as are provided in section 700.
In the case of a foreign estate, any amount which is deemed to have been paid to that person as income for any year by virtue of this section shall be deemed to be income of that amount and shall be chargeable to income tax under Case IV of Schedule D as if it were income arising from securities in a place out of the United Kingdom.
Where— the tax so charged on him shall, on proof of the facts on a claim, be reduced by an amount bearing the same proportion thereto as the amount of the deemed income which has borne United Kingdom income tax bears to the amount of the aggregate income.
a person has been charged to income tax for any year by virtue of this section in respect of an amount deemed to have been paid to him as income in respect of an interest in a foreign estate (“the deemed income”), and
any part of the aggregate income of that estate for that year has borne United Kingdom income tax by deduction or otherwise (“the aggregate income”),
For the purposes of any charge to corporation tax under this section, the residuary income of a company shall be computed in the first instance by reference to years of assessment, and the residuary income for any such year shall be apportioned between the accounting periods (if more than one) comprising that year.
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The amount of the residuary income of an estate for any year of assessment shall be ascertained by deducting from the aggregate income of the estate for that year—
the amount of any annual interest, annuity or other annual payment for that year which is a charge on residue and the amount of any payment made in that year in respect of any such expenses incurred by the personal representatives as such in the management of the assets of the estate as, in the absence of any express provision in a will, would be properly chargeable to income, but excluding any such interest, annuity or payment allowed or allowable in computing the aggregate income of the estate; and
the amount of any of the aggregate income of the estate for that year to which a person has on or after assent become entitled by virtue of a specific disposition either for a vested interest during the administration period or for a vested or contingent interest on the completion of the administration.
In the event of its appearing, on the completion of the administration of an estate in the residue of which, or in a part of the residue of which, a person had an absolute interest at the completion of the administration, that the aggregate of the benefits received in respect of that interest does not amount to as much as the aggregate for all years of the residuary income of the person having that interest, his residuary income for each year shall be reduced for the purpose of section 696 by an amount bearing the same proportion thereto as the deficiency bears to the aggregate for all years of his residuary income.
In subsection (2) above “benefits received” in respect of an absolute interest means the following amounts in respect of all sums paid before, or payable on, the completion of the administration in respect of that interest, that is to say—
as regards a sum paid before the completion of the administration, in the case of a United Kingdom estate such an amount as would, after deduction of income tax for the year of assessment in which that sum was paid, be equal to that sum, or in the case of a foreign estate the amount of that sum; and
as regards a sum payable on the completion of the administration, in the case of a United Kingdom estate such an amount as would, after deduction of income tax for the year of assessment in which the administration is completed, be equal to that sum, or in the case of a foreign estate the amount of that sum.
In the application of subsection (2) above to a residue or a part of a residue in which a person other than the person having an absolute interest at the completion of the administration had an absolute interest at any time during the administration period, the aggregates mentioned in that subsection shall be computed in relation to those interests taken together, and the residuary income of that other person also shall be subject to reduction under that subsection.
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Where the personal representatives of a deceased person have as such a right in relation to the estate of another deceased person such that, if that right were vested in them for their own benefit, they would have an absolute or limited interest in the residue of that estate or in a part of that residue, they shall be deemed to have that interest notwithstanding that that right is not vested in them for their own benefit, and any amount deemed to be paid to them as income by virtue of this Part shall be treated as part of the aggregate income of the estate of the person whose personal representatives they are.
Where different persons have successively during the administration period absolute interests in the residue of the estate of a deceased person or in a part of such residue, sums paid during that period in respect of the residue or of that part, as the case may be, shall be treated for the purposes of this Part as having been paid in respect of the interest of the person who first had an absolute interest in that residue or that part up to the amount of— and, as to any balance up to a corresponding amount, in respect of the interest of the person who next had an absolute interest in that residue or part, and so on.
in the case of a United Kingdom estate, the aggregate for all years of that person’s residuary income less income tax at the basic rate; or
in the case of a foreign estate, the aggregate for all years of that person’s residuary income;
Where, upon the exercise of a discretion, any of the income of the residue of the estate of a deceased person for any period (being the administration period or a part of the administration period) would, if the residue had been ascertained at the commencement of that period, be properly payable to any person, or to another in his right, for his benefit, whether directly by the personal representatives or indirectly through a trustee or other person—
the amount of any sum paid pursuant to an exercise of the discretion in favour of that person shall be deemed for all tax purposes to have been paid to that person as income for the year of assessment in which it was paid; and
section 695(4) to (6) shall have effect in relation to an amount which is deemed to have been paid as income by virtue of paragraph (a) above.
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Where any income, having accrued before the death of any person, is taken into account both— then, in ascertaining the excess liability of any person having an absolute interest in the residue of that or any other estate or part thereof, that residuary income shall be treated as reduced by an amount calculated in accordance with the following provisions of this section.
in determining the value of his estate for the purposes of any inheritance tax chargeable on his death; and
in ascertaining for the purposes of this Part the residuary income of his estate for any year of assessment;
In subsection (1) above “excess liability” means the excess of liability to income tax over what it would be if all income tax were chargeable at the basic rate to the exclusion of any higher rate.
The amount of the reduction shall be an amount which, after deduction of income tax for the year of assessment in question, would be equal to the amount of inheritance tax attributable to so much of the income taken into account as mentioned in subsection (1) above as exceeds any liabilities so taken into account.
The amount of any income accruing before the death of any person and taken into account in estimating the value of an estate shall (whether or not the income was valued separately or its amount known at the date of the death) be taken to be the actual amount so accruing less income tax at the basic rate for the year of assessment in which the death occurred.
The amounts agreed between the persons liable for inheritance tax and the Board, or determined in the proceedings between them, as being respectively the value of an estate and the amount of any inheritance tax payable shall be conclusive for the purposes of this section; and evidence of those amounts and of any facts relevant to their computation may be given by the production of a document purporting to be a certificate from the Board.
In this section—
references to liabilities taken into account in ascertaining the amount of the residuary income of an estate include references to liabilities allowed or allowable in computing its aggregate income; and
references to inheritance tax include references to capital transfer tax.
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Where on the completion of the administration of an estate any amount is deemed by virtue of this Part to have been paid to any person as income for any year of assessment and— an assessment may be made upon him for that year and tax charged accordingly or, on a claim being made for the purpose, any relief or additional relief to which he may be entitled shall be allowed accordingly.
that amount is greater than the amount that has previously been deemed to have been paid to him as income for that year by virtue of this Part; or
no amount has previously been so deemed to have been paid to him as income for that year;
Where on the completion of the administration of an estate any amount is deemed by virtue of this Part to have been paid to any person as income for any year of assessment, and that amount is less than the amount that has previously been so deemed to have been paid to him, then—
if an assessment has already been made upon him for that year, such adjustments shall be made in that assessment as may be necessary for the purpose of giving effect to the provisions of this Part which take effect on the completion of the administration, and any tax overpaid shall be repaid; and
if— the relief so given in excess may, if not otherwise made good, be charged under Case VI of Schedule D and recovered from that person accordingly.
any relief has been allowed to him by reference to the amount which has been previously deemed by virtue of this Part to have been paid to him as income for that year, and
the amount of that relief exceeds the amount of relief which could have been given by reference to the amount which, on the completion of the administration, is deemed to have been paid to him as income for that year,
Notwithstanding anything in the Tax Acts, the time within which an assessment may be made for the purposes of this Part, or an assessment may be adjusted for those purposes, or a claim for relief may be made by virtue of this Part, shall not expire before the end of the third year following the year of assessment in which the administration of the estate in question was completed.
An inspector may by notice require any person being or having been a personal representative of a deceased person, or having or having had an absolute or limited interest in the residue of the estate of a deceased person or in a part of such residue, to furnish him within such time as he may direct (not being less than 28 days) with such particulars as he thinks necessary for the purposes of this Part.
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The following provisions of this section shall have effect for the purpose of the interpretation of sections 695 to 700.
A person shall be deemed to have an absolute interest in the residue of the estate of a deceased person, or in a part of such residue, if and so long as the capital of the residue or of that part would, if the residue had been ascertained, be properly payable to him, or to another in his right, for his benefit, or is properly so payable, whether directly by the personal representatives or indirectly through a trustee or other person.
A person shall be deemed to have a limited interest in the residue of the estate of a deceased person, or in a part of such residue, during any period, being a period during which he has not an absolute interest in the residue or in that part, where the income of the residue or of that part for that period would, if the residue had been ascertained at the commencement of that period, be properly payable to him, or to another in his right, for his benefit, whether directly by the personal representatives or indirectly through a trustee or other person.
“Personal representatives” means, in relation to the estate of a deceased person, his personal representatives as defined in relation to England and Wales by section 55 of the Administration of Estates Act 1925, and persons having in relation to the deceased under the law of another country any functions corresponding to the functions for administration purposes under the law of England and Wales of personal representatives as so defined; and references to “personal representatives as such” shall be construed as references to personal representatives in their capacity as having such functions.
“Specific disposition” means a specific devise or bequest made by a testator, and includes the disposition of personal chattels made by section 46 of the Administration of Estates Act 1925 and any disposition having, whether by virtue of any enactment or otherwise, under the law of another country an effect similar to that of a specific devise or bequest under the law of England and Wales. Real estate included (either by a specific or general description) in a residuary gift made by the will of a testator shall be deemed to be a part of the residue of his estate and not to be the subject of a specific disposition.
Subject to subsection (7) below, “charges on residue” means, in relation to the estate of a deceased person, the following liabilities, properly payable thereout and interest payable in respect of those liabilities, that is to say—
funeral, testamentary and administration expenses and debts, and
general legacies, demonstrative legacies, annuities and any sum payable out of residue to which a person is entitled under the law of intestacy of any part of the United Kingdom or any other country, and
any other liabilities of his personal representatives as such.
Where, as between persons interested under a specific disposition or in a general or demonstrative legacy or in an annuity and persons interested in the residue of the estate, any such liabilities as are mentioned in subsection (6) above fall exclusively or primarily upon the property that is the subject of the specific disposition or upon the legacy or annuity, only such part (if any) of those liabilities as falls ultimately upon the residue shall be treated as charges on residue.
References to the aggregate income of the estate of a deceased person for any year of assessment shall be construed as references to the aggregate income from all sources for that year of the personal representatives of the deceased as such, treated as consisting of— but excluding any income from property devolving on the personal representatives otherwise than as assets for payment of the debts of the deceased. This subsection has effect subject to sections 249(5), 421(2), 426(3) and 547(1)(c).
any such income which is chargeable to United Kingdom income tax by deduction or otherwise, such income being computed at the amount on which that tax falls to be borne for that year; and
any such income which would have been so chargeable if it had arisen in the United Kingdom to a person resident and ordinarily resident there, such income being computed at the full amount thereof actually arising during that year, less such deductions as would have been allowable if it had been charged to United Kingdom income tax;
“United Kingdom estate” means, as regards any year of assessment, an estate the income of which comprises only income which either— not being an estate any part of the income of which is income in respect of which the personal representatives are entitled to claim exemption from United Kingdom income tax by reference to the fact that they are not resident, or not ordinarily resident, in the United Kingdom.
has borne United Kingdom income tax by deduction, or
in respect of which the personal representatives are directly assessable to United Kingdom income tax,
“Foreign estate” means, as regards any year of assessment, an estate which is not a United Kingdom estate.
In a case in which different parts of the estate of a deceased person are the subjects respectively of different residuary dispositions, this Part shall have effect in relation to each of those parts with the substitution—
for references to the estate of references to that part of the estate; and
for references to the personal representatives of the deceased as such of references to his personal representatives in their capacity as having the functions referred to in subsection (4) above in relation to that part of the estate.
In this Part—
references to sums paid include references to assets that are transferred or that are appropriated by a personal representative to himself, and to debts that are set off or released;
references to sums payable include references to assets as to which an obligation to transfer or a right of a personal representative to appropriate to himself is subsisting on the completion of the administration and to debts as to which an obligation to release or set off, or a right of a personal representative so to do in his own favour, is then subsisting; and
references to amount shall be construed, in relation to such assets as are referred to in paragraph (a) or (b) above, as references to their value at the date on which they were transferred or appropriated, or at the completion of the administration, as the case may require, and, in relation to such debts as are so referred to, as references to the amount thereof.
In this Part references to the administration period shall be construed in accordance with section 695(1).
In relation to so much of any residuary income for any year of assessment which has borne income tax at a rate equal to the sum of the basic rate and the additional rate for that year, section 696(3) shall have effect with the substitution for paragraph (a) of the following paragraph—;
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any reference to the completion of the administration of an estate shall be construed as a reference to the date at which, after discharge of, or provision for, liabilities falling to be met out of the deceased’s estate (including, without prejudice to the generality of the foregoing, debts, legacies immediately payable, prior rights of surviving spouse on intestacy and legal rights of surviving spouse or children), the free balance held in trust for behoof of the residuary legatees has been ascertained;
for paragraph (b) of section 697(1) the following paragraph shall be substituted—;
“real estate” means heritable estate, and
“charge on residue” shall include, in addition to the liabilities specified in section 701(6), any sums required to meet claims in respect of prior rights by surviving spouse or in respect of legal rights by surviving spouse or children.
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Where— a person is in a position to obtain, or has obtained, a tax advantage, then unless he shows that the transaction or transactions were carried out either for bona fide commercial reasons or in the ordinary course of making or managing investments, and that none of them had as their main object, or one of their main objects, to enable tax advantages to be obtained, this section shall apply to him in respect of that transaction or those transactions.
in any such circumstances as are mentioned in section 704, and
in consequence of a transaction in securities or of the combined effect of two or more such transactions,
For the purposes of this Chapter a tax advantage obtained or obtainable by a person shall be deemed to be obtained or obtainable by him in consequence of a transaction in securities or of the combined effect of two or more such transactions, if it is obtained or obtainable in consequence of the combined effect of the transaction or transactions and the liquidation of a company.
Where this section applies to a person in respect of any transaction or transactions, the tax advantage obtained or obtainable by him in consequence thereof shall be counteracted by such of the following adjustments, that is to say an assessment, the nullifying of a right to repayment or the requiring of the return of a repayment already made (the amount to be returned being chargeable under Case VI of Schedule D and recoverable accordingly), or the computation or recomputation of profits or gains, or liability to tax, on such basis as the Board may specify by notice served on him as being requisite for counteracting the tax advantage so obtained or obtainable.
Where, by virtue of an assessment under subsection (3) above to counteract a tax advantage obtained in circumstances falling within paragraph D or paragraph E of section 704 and consisting of the avoidance of a charge to income tax, income tax has been paid by any person on an amount specified in the assessment and it appears to the Board that, as a result of that payment, it is just and reasonable in the circumstances that an amount should be treated as having been paid by way of advance corporation tax, the Board shall serve a notice under subsection (5) below on every company which appears to them to be concerned in the transaction or transactions in consequence of which the tax advantage was obtained.
A notice under this subsection— but the total amount of advance corporation tax which, by virtue of paragraph (a) above, a notice under this subsection may treat as having been paid shall not exceed the amount specified in accordance with paragraph (b) above.
shall provide that, for the purposes of section 239 (but not for the purposes of entitling any person to a tax credit under section 231), such company or each of such companies as may be specified in the notice is to be treated as having paid, on such date as may be so specified, such amount of advance corporation tax as may be so specified in relation to that company;
shall specify the amount which is equal to income tax at the basic rate on the amount on which income tax has been paid as mentioned in subsection (4) above; and
may contain such supplementary or incidental directions as appear to the Board to be appropriate;
If, in a case falling within subsection (4) above, it does not appear to the Board that any amount should be treated as having been paid by way of advance corporation tax, the Board shall serve on every company which appears to them to be concerned in the transaction or transactions in consequence of which the tax advantage was obtained in a notice informing the company of the Board’s decision that no amount is to be treated as having been paid by way of advance corporation tax.
In the case of a man and his wife living with him (whether or not she is separately assessed to tax), this Chapter shall, subject to subsection (8) below, be treated as applying to him in respect of any transaction or transactions as it would apply if any property, rights or liabilities of the wife were his property, rights or liabilities in relation to which she had acted only as nominee for him, and shall be treated as applying to the wife in respect of any transaction or transactions as it would apply if any property, rights or liabilities of the man were her property, rights or liabilities in relation to which he had acted only as nominee for her.
No adjustment made under subsection (3) above by reference to any transaction or transactions to counteract any tax advantage shall by virtue of subsection (7) above be so made that a person bears more tax than if the transaction or transactions had not had as a consequence that any relief or increased relief from, or repayment or increased repayment of, income tax, or any deduction in computing profits or gains, was obtained or obtainable, or that the way in which receipts accrued was such that the recipient did not pay or bear tax on them.
The Board shall not give a notice under subsection (3) above until they have notified the person in question that they have reason to believe that this section may apply to him in respect of a transaction or transactions specified in the notification; and if within 30 days of the issue of the notification that person, being of opinion that this section does not so apply to him, makes a statutory declaration to that effect stating the facts and circumstances upon which his opinion is based, and sends it to the Board, then subject to subsection (10) below, this section shall not apply to him in respect of the transaction or transactions.
If, when a statutory declaration has been sent to the Board under subsection (9) above, they see reason to take further action in the matter— but any such determination shall not affect the operation of this section in respect of transactions which include that transaction or some or all of those transactions and also include another transaction or other transactions.
the Board shall send to the tribunal a certificate to that effect, together with the statutory declaration, and may also send therewith a counter-statement with reference to the matter;
the tribunal shall take into consideration the declaration and the certificate, and the counter-statement, if any, and shall determine whether there is or is not a prima facie case for proceeding in the matter, and if they determine that there is no such case this section shall not apply to the person in question in respect of the transaction or transactions;
Any notice or notification under subsection (3) or subsection (9) above, or under section 708, concerning the application of this section to a person who has died may be given or issued to his personal representatives, and the provisions of this Chapter relating to the making of a statutory declaration, to rights of appeal and to the giving of information shall be construed accordingly.
This section applies whether the tax advantage in question relates to a chargeable period ending before or after the commencement of this Act, but nothing in this section shall authorise the making of an assessment later than six years after the chargeable period to which the tax advantage relates; and no other provision contained in the Tax Acts shall be construed as limiting the powers conferred by this section.
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Any person to whom notice has been given under section 703(3) may within 30 days by notice to the Board appeal to the Special Commissioners on the grounds that section 703 does not apply to him in respect of the transaction or transactions in question, or that the adjustments directed to be made are inappropriate.
If he or the Board are dissatisfied with the determination of the Special Commissioners he or they may, on giving notice to the clerk to the Special Commissioners within 30 days after the determination, require the appeal to be re-heard by the tribunal, and the Special Commissioners shall transmit to the tribunal any document in their possession which was delivered to them for the purposes of the appeal.
Where notice is given under subsection (2) above, the tribunal shall re-hear and determine the appeal and shall have and exercise the same powers and authorities in relation to the appeal as the Special Commissioners might have and exercise, and the determination of the tribunal thereon shall be final and conclusive.
Section 56 of the Management Act (statement of case for opinion of High Court etc.) shall apply with the necessary modifications in the case of any such rehearing and determination as it applies in the case of appeals to the General or Special Commissioners.
On an appeal under subsections (1) to (3) above the Special Commissioners or the tribunal shall have power to cancel or vary a notice under subsection (3) of section 703 or to vary or quash an assessment made in accordance with such a notice, but the bringing of an appeal or the statement of a case shall not affect the validity of a notice given or of any other thing done in pursuance of that subsection pending the determination of the proceedings.
A company on which a notice has been served under section 703(5) or (6) may within 30 days by notice to the Board appeal to the Special Commissioners on the ground that it is just and reasonable in the circumstances that the company should be treated, for the purposes specified in section 703(6), as having paid an amount of advance corporation tax or, as the case may require, a greater amount of advance corporation tax than is specified in the notice.
Notwithstanding that a company on which a notice has been served as mentioned in subsection (6) above has made no appeal under that subsection, the company— and no agreement under section 54 of the Management Act (settling of appeals by agreement) shall have effect except with the consent of each company which, by virtue of this subsection, would have been entitled to appear and be heard on the appeal if it had been proceeded with.
shall be entitled, to the same extent as the appellant, to receive notice of, and to appear and be heard in, any proceedings arising from the notice referred to in subsection (6) above, whether the proceedings are before the Special Commissioners, by way of further appeal or otherwise;
if it does appear, shall be treated as a party to the proceedings and as having the same rights in respect of those proceedings and any decision made therein as the appellant; and
whether or not it so appears, shall be bound by any order made in any such proceedings;
On an appeal under subsection (6) above, the Special Commissioners—
may cancel or vary any notice served under section 703(5), or
if no such notice was served, may by order make any provision which could have been made by the Board in such a notice.
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a chairman, appointed by the Lord Chancellor, and
two or more persons appointed by the Lord Chancellor as having special knowledge of and experience in financial or commercial matters.
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The following provisions shall have effect where in pursuance of this section a person furnishes to the Board particulars of a transaction or transactions effected or to be effected by him, that is to say— and, subject to the following provisions of this section, if the Board notify him that they are so satisfied, section 703 shall not apply to him in respect of that transaction or those transactions.
if the Board are of opinion that the particulars, or any further information furnished in pursuance of this paragraph, are not sufficient for the purposes of this section, they shall within 30 days of the receipt thereof notify to that person what further information they require for those purposes, and unless that further information is furnished to the Board within 30 days from the notification, or such further time as the Board may allow, they shall not be required to proceed further under this section;
subject to paragraph (a) above, the Board shall within 30 days of the receipt of the particulars, or, where that paragraph has effect, of all further information required, notify that person whether or not they are satisfied that the transaction or transactions as described in the particulars were or will be such that no notice under section 703(3) ought to be given in respect of it or them;
If the particulars, and any further information given under this section with respect to any transaction or transactions, are not such as to make full and accurate disclosure of all facts and considerations relating thereto which are material to be known to the Board, any notification given by the Board under this section shall be void.
In no event shall the giving of a notification under this section with respect to any transaction or transactions prevent section 703 applying to a person in respect of transactions which include that transaction or all or some of those transactions and also include another transaction or other transactions.
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In this Chapter “tax advantage” means a relief or increased relief from, or repayment or increased repayment of, tax, or the avoidance or reduction of a charge to tax or an assessment to tax or the avoidance of a possible assessment thereto, whether the avoidance or reduction is effected by receipts accruing in such a way that the recipient does not pay or bear tax on them, or by a deduction in computing profits or gains.
In this Chapter—
In section 704—
references to profits include references to income, reserves or other assets;
references to distribution include references to transfer or realisation (including application in discharge of liabilities); and
references to the receipt of consideration include references to the receipt of any money or money’s worth.
For the purposes of section 704 an amount received by way of dividend shall be treated as abnormal if the Board, the Special Commissioners or the tribunal, as the case may be, are satisfied—
in the case of a dividend at a fixed rate, that it substantially exceeds the amount which the recipient would have received if the dividend had accrued from day to day and he had been entitled only to so much of the dividend as accrued while he held the securities, so however that an amount shall not be treated as abnormal by virtue only of this paragraph if during the six months beginning with the purchase of the securities the recipient does not sell or otherwise dispose of, or acquire an option to sell, any of those securities or any securities similar to those securities; or
in any case, that it substantially exceeds a normal return on the consideration provided by the recipient for the relevant securities, that is to say, the securities in respect of which the dividend was received and, if those securities are derived from securities previously acquired by the recipient, the securities which were previously acquired.
For the purposes of subsection (4)(a) above securities shall be deemed to be similar if they entitle their holders to the same rights against the same persons as to capital and interest and the same remedies for the enforcement of those rights, notwithstanding any difference in the total nominal amounts of the respective securities or in the form in which they are held or the manner in which they can be transferred, and for those purposes rights guaranteed by the Treasury shall be treated as rights against the Treasury.
For the purposes of subsection (4)(b) above—
if the consideration provided by the recipient for any of the relevant 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 securities, the recipient shall be taken to have provided for those 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 that the recipient first acquired any of the relevant securities and to any dividends and other distributions made in respect of them during that time.
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This section has effect for the interpretation of sections 711 to 728.
“Securities” does not include shares in a company but, subject to subsection (3) below, includes any loan stock or similar security—
whether of the government of the United Kingdom, any other government, any public or local authority in the United Kingdom or elsewhere, or any company or other body; and
whether or not secured, whether or not carrying a right to interest of a fixed amount or at a fixed rate per cent. of the nominal value of the securities, and whether or not in bearer form.
“Securities” does not include—
securities on which the whole of the return is a distribution by virtue of section 209(2)(e)(iv) and (v);
national savings certificates (including Ulster Savings Certificates);
war savings certificates;
certificates of deposit (within the meaning of section 56(5));
any security which fulfils the following conditions, namely, it is redeemable, the amount payable on its redemption exceeds its issue price, and no return other than the amount of that excess is payable on it.
Securities are to be taken to be of the same kind if they are treated as being of the same kind by the practice of a recognised stock exchange or would be so treated if dealt with on such a stock exchange.
“Transfer”, in relation to securities, means transfer by way of sale, exchange, gift or otherwise.
Where an agreement for the transfer of securities is made, they are transferred, and the person to whom they are agreed to be transferred becomes entitled to them, when the agreement is made and not on a later transfer made pursuant to the agreement; and “entitled”, “transfer” and cognate expressions shall be construed accordingly.
A person holds securities—
at a particular time if he is entitled to them at the time;
on a day if he is entitled to them throughout the day or he becomes and does not cease to be entitled to them on the day.
A person acquires securities when he becomes entitled to them.
Where— then, for the purposes of section 715(1)(b) and section 715(2)(b) so far as relating to section 715(1)(b), each of them shall be treated as holding at that time the securities which the other holds as well as those which he actually holds.
one individual holds securities at a particular time, and
any interest on them would, if it became payable at that time, be treated for the purposes of the Tax Acts as part of another individual’s income,
Where in Scotland two or more persons carry on a trade or business in partnership, any partnership dealings shall be treated as dealings by the partners and not by the firm as such and the partners as being entitled to securities held by the firm.
The nominal value of securities is—
where the interest on them is expressed to be payable by reference to a given value, that value; and
in any other case, the price of the securities when they were issued.
Where apart from this subsection the nominal value of securities would be a value (“the foreign value”) expressed in a currency other than sterling, then, for the purposes of section 715, their nominal value on a particular day is the sterling equivalent on that day of the foreign value. For the purposes of this subsection the sterling equivalent of a value on a particular day is the sterling equivalent calculated by reference to the London closing rate of exchange for that day.
Where there is a conversion of securities then,—
the person who was entitled to them immediately before the conversion shall be treated as transferring them on the day of the conversion (if there is no actual transfer); and
the interest period in which the conversion is made shall be treated as ending on the day on which it would have ended had the conversion not been made. In this subsection “conversion” means a conversion within the meaning of section 82 of the 1979 Act.
In relation to an underwriting member of Lloyd's, “business” and “premiums trust fund” have the meanings given by section 457.
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This section has effect for the interpretation of sections 710 and 712 to 728.
An interest payment day, in relation to securities, is a day on which interest on them is payable; and, in a case where a particular payment of interest may be made on one of a number of days, the interest is for the purposes of this subsection payable on the first of those days.
Subject to subsection (4) below, the following are interest periods in relation to securities—
the period beginning with the day following that on which they are issued and ending with the first interest payment day to fall;
the period beginning with the day following one interest payment day and ending with the next to fall.
A period which would (apart from this subsection) be an interest period exceeding 12 months (“a long period”) is not an interest period, but the following shall apply to it—
the period of 12 months beginning with the day on which it begins is an interest period;
each successive period (if any) of 12 months falling within it is an interest period;
any period of it which remains after applying paragraphs (a) and (b) above is an interest period.
Securities are transferred with accrued interest if they are transferred with the right to receive interest payable on— and they are transferred without accrued interest if they are transferred without that right.
the settlement day, if that is an interest payment day; or
the next (or first) interest payment day to fall after the settlement day, in any other case;
Where section 710(13), 715(3), 720(4), 721(1) or 722(1) or (2) applies, the transfer shall be treated as made with accrued interest if the person treated as making the transfer was entitled to receive in respect of the securities interest payable on— and they shall be treated as transferred without accrued interest if he was not so entitled.
the settlement day, if that is an interest payment day; or
the next (or first) interest payment day to fall after that day, in any other case;
The interest applicable to securities for an interest period is, subject to subsection (8) below, the interest payable on them on the interest payment day with which the period ends.
In the case of a period which is an interest period by virtue only of subsection (4) above or section 725(9)—
the interest applicable to securities for the period is the interest payable on them on the interest payment day with which the long or straddling period concerned ends; and
section 713(6) shall have effect as if the references to the period were to the long or straddling period concerned.
“Interest” includes dividends and any other return (however described) except a return consisting of an amount by which the amount payable on a security’s redemption exceeds its issue price.
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This section has effect to determine, for the purposes of sections 711 and 713 to 728, the settlement day in relation to a transfer of securities.
Where the securities are transferred in accordance with the rules of a recognised market, the settlement day is the day on which the transferee agrees to settle or, if he may settle on one of a number of days, the day on which he settles; and, where they are transferred otherwise, subsections (3) to (5) below apply.
Where the consideration for the transfer is money alone, and the transferee agrees to pay the whole of it on or before the next (or first) interest payment day to fall after an agreement for transfer is made, the settlement day is the day on which he agrees to make the payment or, if payment may be made on one of a number of days, or on a number of different days, the latest of them to fall.
Where there is no consideration for the transfer, or the transfer is a transfer by virtue of sections 710(13), 715(3), 717(8), 720(4), 721 and 722, the settlement day is the day on which the securities are transferred.
In any other case, the settlement day is such day as an inspector decides; and the jurisdiction of the General Commissioners or the Special Commissioners on any appeal shall include jurisdiction to review such a decision of the inspector.
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Subject to sections 714 to 728, this section applies whether the securities in question are transferred before, on or after 6th April 1988; and in this section references to a period are references to the interest period in which the settlement day falls.
If securities are transferred with accrued interest—
the transferor shall be treated as entitled to a sum on them in the period of an amount equal to the accrued amount; and
the transferee shall be treated as entitled to relief on them in the period of the same amount.
If securities are transferred without accrued interest—
the transferor shall be treated as entitled to relief on them in the period of an amount equal to the rebate amount; and
the transferee shall be treated as entitled to a sum on them in the period of the same amount.
In subsection (2) above “the accrued amount” means—
if the securities are transferred under an arrangement by virtue of which the transferee accounts to the transferor separately for the consideration for the securities and for gross interest accruing to the settlement day, an amount equal to the amount (if any) of gross interest so accounted for; and
in any other case, an amount equal to the accrued proportion of the interest applicable to the securities for the period.
In subsection (3) above “the rebate amount” means—
if the securities are transferred under an arrangement by virtue of which the transferor accounts to the transferee for gross interest accruing from the settlement day to the next interest payment day, an amount equal to the amount (if any) of gross interest so accounted for; and
in any other case, an amount equal to the rebate proportion of the interest applicable to the securities for the period.
In this section—
the accrued proportion is—
the rebate proportion is— where— A is the number of days in the period up to (and including) the settlement day, and B is the number of days in the period.
For the purposes of subsection (2) above, in a case where the interest on the securities is payable in a currency other than sterling the accrued amount is to be determined as follows—
if subsection (4)(a) above applies and the sterling equivalent of the amount of gross interest there mentioned is shown in an agreement for transfer, the accrued amount is the sterling equivalent so shown;
if subsection (4)(a) applies but paragraph (a) above does not, or if subsection (4)(b) above applies, the accrued amount is the sterling equivalent on the settlement day of the amount found by virtue of subsection (4)(a) or (b) (as the case may be).
For the purposes of subsection (3) above, in a case where the interest on the securities is payable in a currency other than sterling the rebate amount is to be determined as follows—
if subsection (5)(a) above applies and the sterling equivalent of the amount of gross interest there mentioned is shown in an agreement for transfer, the rebate amount is the sterling equivalent so shown;
if subsection (5)(a) applies but paragraph (a) above does not, or if subsection (5)(b) above applies, the rebate amount is the sterling equivalent on the settlement day of the amount found by virtue of subsection (5)(a) or (b) (as the case may be).
For the purposes of subsections (7) and (8) above the sterling equivalent of an amount on a particular day is the sterling equivalent calculated by reference to the London closing rate of exchange for that day.
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Subsection (2) below applies if a person is treated as entitled under section 713 to a sum on securities of a particular kind in an interest period, and either—
he is not treated as entitled under that section to relief on securities of that kind in the period; or
the sum (or total sum) to which he is treated as entitled exceeds the amount (or total amount) of relief to which he is treated as entitled under that section on securities of that kind in the period.
The person shall be treated as receiving on the day the period ends annual profits or gains whose amount is (depending on whether subsection (1)(a) or (1)(b) above applies) equal to the sum (or total sum) to which he is treated as entitled or equal to the amount of the excess; and the profits or gains shall be chargeable to tax under Case VI of Schedule D for the chargeable period in which they are treated as received.
Subsection (4) below applies if a person is treated as entitled under section 713 to relief on securities of a particular kind in an interest period, and either—
he is not treated as entitled under that section to a sum on securities of that kind in the period; or
the amount (or total amount) of relief to which he is treated as entitled exceeds the sum (or total sum) to which he is treated as entitled under that section on securities of that kind in the period.
The person shall be entitled to an allowance whose amount is (depending on whether subsection (3)(a) or (3)(b) above applies) equal to the amount (or total amount) of relief to which he is treated as entitled or equal to the amount of the excess; and subsection (5) below shall apply.
Any amount to which the person is entitled by way of interest which— shall for the purposes of the Tax Acts be treated as reduced by the amount of the allowance; but if the period is one which does not end with an interest payment day, he shall be treated as becoming, in the next interest period, entitled under section 713 to relief on the securities of an amount equal to the amount of the allowance.
falls due on the securities at the end of the interest period, and
is taken into account in computing tax charged for the chargeable period in which the interest period ends,
Where, but for this subsection, a company would by virtue of subsection (2) above be treated as receiving profits or gains on a day which does not fall within an accounting period of the company, the profits or gains shall instead be treated as received by the company on the latest day of the interest period which does so fall.
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Section 713(2)(a) or (3)(a) (as the case may be) does not apply—
if the transferor carries on a trade and the transfer falls to be taken into account for the purposes of the Tax Acts in computing the profits or losses of that trade;
if the transferor is an individual and on no day in the year of assessment in which the interest period ends or the previous year of assessment the nominal value of securities held by him exceeded £5,000;
if the securities transferred form part of the estate of a deceased person, the transferor is that person’s personal representative and on no day in the year of assessment in which the interest period ends or the previous year of assessment the nominal value of securities held by him as the deceased’s personal representative exceeded £5,000;
where—
if the transferor became entitled to any interest on the securities transferred and applied it for charitable purposes only, exemption could be granted under section 505(1)(c) in respect of the interest;
if the transferor became entitled to any interest on the securities transferred and applied it for the purposes mentioned in paragraph (d) of section 505(1), exemption could be granted under that paragraph in respect of the interest;
if the securities transferred are held on a disabled person’s trusts, the transferor is trustee of the settlement and on no day in the year of assessment in which the interest period ends or the previous year of assessment the nominal value of securities held by him as trustee of the settlement exceeded £5,000;
if the transferor does not fulfil the residence requirement for the chargeable period in which the transfer is made and is not a non-resident United Kingdom trader in that period;
if the transferor is not ordinarily resident in the United Kingdom during the chargeable period in which the transfer occurs and, if he became entitled in the period to any interest on the securities transferred, it would not be liable to income tax by virtue of section 47;
if the securities transferred are FOTRA securities, the transferor is not domiciled in the United Kingdom at any time in the chargeable period in which the transfer occurs, and he is either not ordinarily resident in the United Kingdom during that period or a non-resident United Kingdom trader in that period;
if the transferor is an individual who, if he became entitled in the year of assessment in which the transfer occurs to any interest on the securities transferred, would be liable, in respect of the interest, to tax chargeable under Case IV or V of Schedule D and computed on the amount of sums received in the United Kingdom; or
where, if the transferor became entitled to any interest on the securities transferred, exemption could be allowed under section 592(2) in respect of the interest.
Section 713(2)(b) or (3)(b) (as the case may be) does not apply if—
the transferee carries on a trade, and if at the time he acquired the securities he were to transfer them that transfer would fall to be taken into account for the purposes of the Tax Acts in computing the profits or losses of that trade; or
any provision of subsection (1) above except paragraph (a) would apply if “transferor” read “transferee”.
If securities held on charitable trusts cease to be subject to charitable trusts the trustees shall be treated for the purposes of sections 710 to 728 as transferring the securities (in their capacity as charitable trustees) to themselves (in another capacity) at the time when the securities cease to be so subject.
For the purposes of this section a person fulfils the residence requirement for a chargeable period if he is resident in the United Kingdom during any part of the period or is ordinarily resident in the United Kingdom during the period.
For the purposes of this section a person is a non-resident United Kingdom trader in a chargeable period if during any part of it he is (though neither resident during any part of it nor ordinarily resident during it) carrying on a trade in the United Kingdom through a branch or agency and the securities transferred— but the provisions of this subsection relating to the situation of the securities in the United Kingdom do not apply where the person concerned is a company.
were situated in the United Kingdom and used or held for the purposes of the branch or agency at or before the time of the transfer (where the person concerned is a transferor); or
were so situated at the time of the transfer and were acquired for use by or for the purposes of the branch or agency (where the person concerned is a transferee);
In any case where securities are transferred without accrued interest to a person (“the seller”) and a contract is made for the sale by the seller of securities of that kind (“the seller’s contract”) and the seller’s contract or any contract under which the securities are transferred to the seller is one in the case of which section 737 has effect and in relation to which the seller is the dividend manufacturer, then— and for the purposes of sections 710 to 728 the securities which the seller contracts to sell shall not be treated as transferred by him (though treated as transferred to the person to whom he contracts to sell).
where the nominal value of the securities subject to the seller’s contract is greater than or equal to that of the securities transferred, the seller shall not be treated as entitled to any sum to which, but for this subsection, he would be treated as entitled under section 713(3)(b) on the securities transferred;
where the nominal value of the securities subject to the seller’s contract is less than that of the securities transferred, any sum (or the aggregate of any sums) to which he is treated as entitled under section 713(3)(b) on the securities transferred shall be reduced by the amount of any part of the sum (or aggregate) attributable to securities (“relevant securities”) of a nominal value equal to that of the securities subject to the seller’s contract;
In determining for the purposes of subsection (6)(b) above which of the securities transferred are relevant securities, those transferred to the seller earlier must be chosen before those transferred to him later.
For the purposes of this section— and the place where securities are situated shall be determined in accordance with section 18(4) of the 1979 Act.
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This section applies where securities are transferred (whether before or after 6th April 1988) with the right to receive interest (“unrealised interest”) payable on them on an interest payment day falling before the settlement day.
Where the settlement day falls within an interest period, section 714 shall (subject to subsection (5) below) apply as if the transferor were entitled under section 713 to a sum on them in the period of an amount equal to the unrealised interest (in addition to any other sum to which he may be treated as so entitled).
Where the settlement day falls after the end of the last interest period in relation to the securities, the transferor shall be treated as receiving on the settlement day annual profits or gains of an amount equal to the unrealised interest; and the profits or gains shall be chargeable to tax under Case VI of Schedule D for the chargeable period in which they are treated as received.
Where the transferee receives the unrealised interest, and but for this subsection it would be taken into account in computing tax charged for the chargeable period in which the interest is received, it shall for the purposes of the Tax Acts be left out of account.
Section 715 shall apply for the purposes of this section as if—
in subsection (1)—
the reference to section 713(2)(a) or (3)(a) were a reference to subsection (2) or (3) above; and
references to the year of assessment in which the interest period ends were references to the year in which the settlement day falls; and
in subsection (2) the reference to section 713(2)(b) or (3)(b) were a reference to subsection (4) above. Paragraph (b) above does not apply where the securities in question were transferred before 19th March 1986.
Where the unrealised interest is payable in a currency other than sterling its amount is for the purposes of this section the sterling equivalent on the settlement day of the amount it would be apart from this subsection; and for this purpose the sterling equivalent is to be calculated by reference to the London closing rate of exchange for the day.
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This section applies to securities other than securities falling within subsection (2) or (4) below.
Securities fall within this subsection if their terms of issue provide that throughout the period from issue to redemption (whenever redemption might occur) they are to carry interest at a rate which falls into one, and one only, of the following categories—
a fixed rate which is the same throughout the period;
a rate which bears to a standard published base rate the same fixed relationship throughout the period;
a rate which bears to a published index of prices the same fixed relationship throughout the period.
In subsection (2)(c) above “published index of prices” means the retail prices index or any similar general index of prices which is published by, or by an agent of, the government of any territory outside the United Kingdom.
Securities fall within this subsection if they are deep discount securities and the rate of interest for each (or their only) interest period is equal to or less than the yield to maturity.
In subsection (4) above “deep discount securities” and “yield to maturity” have the same meanings as in Schedule 4; and for the purposes of that subsection the rate of interest for an interest period is, in relation to securities, the rate of return (expressed as a percentage) attributable to the interest applicable to them for the interest period.
Subsections (7) to (11) below apply if securities to which this section applies are transferred at any time between the time they are issued and the time they are redeemed.
If the securities are transferred without accrued interest they shall be treated for the purposes of sections 710 to 728 as transferred with accrued interest.
The person entitled to the securities immediately before they are redeemed shall be treated for the purposes of those sections as transferring them with accrued interest on the day they are redeemed.
Where there is a transfer as mentioned in subsection (6) above or by virtue of subsection (8) above, section 713 shall have effect with the omission of subsection (2)(b) and with the substitution for subsections (3) to (6) of the following subsection—.
Subsection (11) below applies where there is a transfer by virtue of subsection (8) above and the settlement day in relation to the transfer falls after the end of a period which would (by virtue of section 711(3) and (4) and apart from this subsection) be the only or last interest period in relation to the securities.
For the purposes of sections 710 to 728 the period beginning with the day following that interest period and ending with the settlement day shall be treated as an interest period in relation to the securities; and section 711(4) shall not apply to it.
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This section applies where, because of any failure to fulfil the obligation to pay interest on securities, the value (on a day mentioned in section 711(7) or (8)(a), as the case may be) of the right to receive the interest payable on them on that day is less than the interest so payable.
Section 711(7) or (8)(a), as the case may be, shall be construed as if the reference to that interest were to an amount equal to that value.
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Where securities are transferred as mentioned in section 716(1) and, because of any failure to fulfil the obligation to pay interest on them, the value (on the day of the transfer) of the right to receive the unrealised interest is less than the amount of the unrealised interest, section 716 shall have effect as modified by subsections (2) to (4) below.
In subsections (2) and (3) for “the unrealised interest” there shall be substituted “amount A”.
For subsection (4) there shall be substituted—.
The following shall be substituted for subsection (6)—
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Where securities are transferred by or to a person as nominee for another person, or as trustee for another person absolutely entitled as against the trustee, or for any person who would be so entitled but for being an infant or other person under disability, or for two or more persons who are or would be jointly so entitled, sections 713, 715 and 716 shall apply as if references to the transferor or the transferee (as the case may be) were to the person or persons for whom the nominee or trustee disposes or acquires.
It is hereby declared that for the purposes of subsection (1) above—
securities are transferred by a person as trustee for another person absolutely entitled as against the trustee if that other person has immediately before the transfer the exclusive right to direct how the securities shall be dealt with, subject only to satisfying any outstanding charge, lien or other right of the trustee to resort to the securities for payment of duty, taxes, costs or other outgoings; and
securities are transferred to a person as trustee for another person so entitled if that other person has that right immediately after the transfer.
An underwriting member of Lloyd’s shall be treated for the purposes of sections 710 to 728 as absolutely entitled as against the trustees to the securities forming part of his premiums trust fund, his special reserve fund (if any) and any other trust fund required or authorised by the rules of Lloyd’s or required by the underwriting agent through whom his business or any part of it is carried on, to be kept in connection with the business.
Where a person who is entitled to securities becomes trustee of them, he shall be treated for the purposes of sections 710 to 728 as transferring them (in a capacity other than trustee) to himself (in his capacity as trustee), or to himself and any other trustees, at the time he becomes trustee.
Annual profits or gains which by virtue of 714(2) or 716(3) are treated as received in a year of assessment by trustees shall be chargeable to income tax at a rate equal to the sum of the basic rate and the additional rate for that year. This subsection does not apply where the profits or gains are treated as received by the investment manager of a common investment fund for the time being designated as mentioned in section 328(1).
In any case where— Chapters II to IV of Part XV shall have effect as if the amount which the trustee is or would be treated as receiving were income (within Chapter II) or income arising under the settlement (within Chapter III or IV).
a trustee of a settlement is treated as receiving annual profits or gains under section 714(2), or
a trustee of a settlement who is resident or domiciled outside the United Kingdom throughout any chargeable period in which an interest period (or part of it) falls would, at the end of the interest period, have been treated under section 714(2) as receiving annual profits or gains or annual profits or gains of a greater amount if he had been resident or domiciled in the United Kingdom during a part of each such chargeable period,
In any case where income of a trustee of a settlement who is resident or domiciled outside the United Kingdom throughout any chargeable period in which an interest period (or part of it) falls consists of interest which— then, for the purposes of Chapters II to IV of Part XV, the interest shall be treated as being reduced by the amount of the allowance or by the additional amount (as the case may be).
falls due at the end of the interest period; and
would have been treated under section 714(5) as reduced by an allowance or an allowance of a greater amount if he had been resident or domiciled in the United Kingdom during a part of each such chargeable period;
In subsections (6) and (7) above—
“settlement” means settlement within the meaning of Chapter II, III or IV of Part XV (as the case may be); and
references to a trustee of a settlement are, where there is no trustee of the settlement, to any person entitled to securities comprised in the settlement.
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Where an individual who is entitled to securities dies, he shall be treated for the purposes of sections 710 to 728 as transferring the securities to his personal representatives immediately before his death.
Where the securities are transferred with accrued interest by the personal representatives to a legatee in the interest period in which the individual died—
section 713 shall not apply to the transfer, and
the transfer of the securities which the individual is treated as making by virtue of subsection (1) above shall be treated as made to the legatee (and not to the personal representatives).
In subsection (2) above “legatee” includes any person taking (whether beneficially or as trustee) under a testamentary disposition or on an intestacy or partial intestacy, including any person taking by virtue of an appropriation by the personal representatives in or towards satisfaction of a legacy or other interest or share in the deceased’s property.
In the case of an individual who dies in an interest period, section 714(2) shall have effect as if the reference to the day the period ends were to the day he dies.
Subsections (1) to (4) above do not apply where the individual concerned is an underwriting member of Lloyd’s and the securities concerned form part of a premiums trust fund, a special reserve fund or any other trust fund required or authorised by the rules of Lloyd’s or required by the underwriting agent through whom the individual’s business or any part of it is carried on, to be kept in connection with the business.
In a case where subsection (5) above applies the deceased’s personal representatives shall be treated for the purposes of sections 710 to 728 as the transferor or transferee in relation to transfers of securities as to which the deceased was the transferor or transferee (as the case may be) in the interest period in which he died.
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Where securities acquired by a person otherwise than as trading stock of a trade carried on by him are appropriated by him for the purposes of the trade as trading stock (whether on the commencement of the trade or otherwise), he shall be treated for the purposes of sections 710 to 728 as transferring them otherwise than in the course of the trade and re-acquiring them in the course of the trade on the day the appropriation is made.
Where securities forming part of the trading stock of a person’s trade are appropriated by him for any other purpose, or are retained by him on his ceasing to carry on the trade, he shall be treated for the purposes of sections 710 to 728 as transferring them in the course of the trade and re-acquiring them otherwise than in the course of the trade on the day the appropriation is made or (as the case may be) he ceases to carry on the trade.
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This section applies where in an interest period a person is treated as entitled to a sum or sums under section 713(2)(a) in respect of a transfer or transfers of securities of a particular kind which are situated outside the United Kingdom.
Subject to subsection (3) below, the amount of any annual profits or gains which the person is treated under section 714 as receiving on the day the period ends in respect of securities of that kind shall be reduced—
if the amount of the sum or aggregate of the sums exceeds the amount of the profits or gains, to nil; or
in any other case, by the amount of the sum or aggregate.
No reduction shall be made unless the person makes a claim and shows that the conditions in subsection (5) below are, so far as applicable, satisfied in the chargeable period in which the profits or gains are treated as received.
The claimant (or his personal representatives) shall be charged to tax under Case VI of Schedule D on the amount of the reduction for the chargeable period in which the conditions in subsection (5) below cease to be satisfied.
The conditions are—
that the claimant was unable to remit the proceeds of the transfer or transfers to the United Kingdom;
that the inability was due to the laws of the territory in which the securities are situated, or to the executive action of its government, or to the impossibility of obtaining foreign currency in that territory; and
that the inability was not due to any want of reasonable endeavours on the part of the claimant.
No claim under this section shall be made in respect of a transfer more than six years after the end of the interest period in which the transfer occurred.
The personal representatives of a deceased person may make any claim which he might have made under this section if he had not died.
For the purposes of this section the place where securities are situated shall be determined in accordance with section 18(4) of the 1979 Act.
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The references in section 715(1)(a) and (2)(a) to computing the profits or losses of a trade shall not be taken as applying to a computation of income for the purposes of section 76(2).
Where an insurance company carrying on life assurance business is treated as receiving annual profits or gains under section 714(2) or 716(3) in respect of securities held as investments in connection with that business, the profits or gains shall be treated for the purposes of section 434(3) to (5) as if they were income from investments held in connection with that business.
Section 713(2)(a) or (3)(a) (as the case may be) shall not apply if the transferor is an insurance company and—
the transfer falls to be taken into account in computing its profits or losses for the purposes of section 436; or
if the company became entitled to any interest on the securities transferred, it would by virtue of section 441(1) be liable, in respect of the interest, to tax computed by reference to the amount of income received in the United Kingdom; or
if the company became entitled to any interest on the securities transferred and applied the interest for the purposes of its foreign life assurance fund, it would by virtue of section 441(2) not be liable to tax in respect of the interest.
Section 713(2)(b) or (3)(b) (as the case may be) shall not apply if subsection (3) above would apply if in that subsection “transferor” read “transferee”.
Where an overseas life insurance company (within the meaning of section 431) is entitled to an allowance under section 714(4), section 714(5) and (6) shall not apply but subsections (6) and (7) below shall apply.
If the company is treated under section 714(2) as receiving annual profits or gains in an accounting period, the profits or gains shall be treated as reduced by any amount (“the deductible amount”) equal to the allowance or aggregate of the allowances, as the case may be, to which the company is entitled under section 714(4) in relation to an interest period or periods ending in the accounting period.
Where the deductible amount exceeds the amount of those annual profits or gains, the company may claim to have the excess treated as reducing any annual profits or gains the company is treated as receiving under section 714(2) in the company’s next accounting period or, if there is still an excess, the one after (and so on for future accounting periods).
Subsections (5) to (7) above do not apply to an overseas life insurance company if, by virtue of arrangements specified in an Order in Council under section 788, no charge to corporation tax under Case III of Schedule D arises under section 445 in respect of any income of the company.
The securities forming part of a premiums trust fund at the beginning of 1st January of any year shall be treated for the purposes of sections 710 to 728 as transferred on that day to the trustees of the fund, and in relation to such a transfer, the settlement day is the day preceding that of the transfer (notwithstanding section 712).
The securities shall be treated as transferred with accrued interest if the trustees are entitled to receive in respect of them interest payable on— and they shall be treated as transferred without accrued interest if they are not so entitled.
the day of the transfer, if that is an interest payment day, or
the next (or first) interest payment day to fall after that day, in any other case;
Subsections (1) and (2) above do not apply as regards securities if the day preceding 1st January concerned is an interest payment day in relation to them.
The securities forming part of a premiums trust fund at the end of 31st December of any year shall be treated for the purposes of sections 710 to 728 as transferred on that day by the trustees of the fund, and in relation to such a transfer, the settlement day is the day of the transfer (notwithstanding section 712).
The securities shall be treated as transferred with accrued interest if the trustees are entitled to receive in respect of them interest payable on the next (or first) interest payment day to fall after the day of the transfer, and they shall be treated as transferred without accrued interest if they are not so entitled.
Subsections (4) and (5) above do not apply as regards securities if 31st December concerned is an interest payment day in relation to them.
Where securities are transferred by or to the trustees of a premiums trust fund, subsections (8) and (9) below shall have effect in relation to the trustees, though not in relation to the transferee or transferor (unless in turn constituting trustees of such a fund).
In subsection (9) below “straddling period” means a period which would (by virtue of section 711(3) and (4) and apart from subsection (9)) be in relation to the securities an interest period beginning on or before and ending after 31st December of any year.
For the purposes of sections 710 to 728 a straddling period is not an interest period, but—
the period beginning with the day on which the straddling period begins and ending with 31st December concerned is an interest period; and
the period beginning with the day following 31st December concerned and ending with the day with which the straddling period ends is an interest period.
Subsections (2) to (5) below apply where securities are transferred and the interest which falls due on them either before the settlement day or at the end of the interest period in which the settlement day falls is subject to the provisions of regulations under section 476(1) but would not on being paid (to whatever person) be a gross payment within the meaning of those regulations (“a gross payment”).
Section 713(4) shall be construed as if the following were substituted for paragraphs (a) and (b)—.
Section 713(5) shall be construed as if the following were substituted for paragraphs (a) and (b)—.
Section 716 shall be construed as if in subsections (2) and (3) “the unrealised interest” read “the grossed up equivalent of the unrealised interest”.
In calculating the grossed up equivalent of interest for the purposes of sections 713(4)(b) and (5)(b) and 716(2) and (3) of this Act (as substituted or amended as mentioned in this section) and section 33A(5)(c) of the 1979 Act, the interest shall be treated as if it would, on being paid, not be a gross payment.
For the purposes of the provisions mentioned in subsection (5) above, the grossed up equivalent of interest is to be calculated by adding to the interest a sum found by applying the formula— where— S is the sum to be found; I is the interest; and R is the basic rate of income tax (expressed as a fraction) for the year of assessment in which the interest is payable.
Where a sum is both interest mentioned in section 714(5), 720(7) or 742(6) and dividends or interest in the case of which section 476(3)(b) or (5)(c) applies—
in calculating the deduction of income tax as mentioned in section 476(3)(b) or (5)(c) any reduction mentioned in section 714(5), 720(7) or 742(6) shall be disregarded; and
the amount which is treated as reduced as mentioned in section 714(5), 720(7) or 742(6) shall be the amount the person concerned is treated as receiving by virtue of section 476(3)(b) or (5)(c) (rather than the interest which falls due).
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The effect of section 129(3) shall be disregarded in construing section 715(1)(a) and (2)(a).
Where securities are transferred in circumstances such that by virtue of section 149B(9) of the 1979 Act (capital gains tax exemption) any disposal and acquisition are disregarded for the purposes of capital gains tax, sections 713(2) and (3) and 716 shall not apply.
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In order to obtain for the purposes of sections 710 to 727 particulars relating to securities, an inspector may by notice require a return under subsection (2) or (3) below.
A member of the Stock Exchange, other than a market maker, may be required to make a return giving, in relation to any transactions effected by him in the course of his business in the period specified in the notice, such particulars as may be so specified. In relation to transactions before 27th October 1986 this subsection shall have effect with the substitution of “jobber” for “market maker”.
A person (other than a member of the Stock Exchange), who acts as an agent or broker in the United Kingdom in transactions in securities, may be required to make a return giving, in relation to any such transactions effected by him in the period specified in the notice, such particulars as may be so specified.
No person shall be required under subsection (2) or (3) above to include in a return particulars of any transaction effected more than three years before the service of the notice requiring him to make the return.
In order to obtain for the purposes of sections 710 to 727 particulars relating to securities, the Board or an inspector may by notice require any person in whose name any securities are registered to state whether or not he is the beneficial owner of those securities and, if he is not the beneficial owner of them or any of them, to furnish the name and address of the person or persons on whose behalf the securities are registered in his name.
In this section “market maker”, in relation to securities, means a person who—
holds himself out at all normal times in compliance with the rules of the Stock Exchange as willing to buy and sell securities of the kind concerned at a price specified by him; and
is recognised as doing so by the Council of the Stock Exchange.
The Board may by regulations provide that—
subsections (2), (3) and (6)(a) above shall have effect as if references to the Stock Exchange were to any recognised investment exchange (within the meaning of the Financial Services Act 1986) or to any of those exchanges specified in the regulations; and
subsection (6)(b) shall have effect as if the reference to the Council of the Stock Exchange were to the investment exchange concerned.
Regulations under subsection (7) above shall apply in relation to transactions effected on or after such day as may be specified in the regulations.
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In relation to corporation tax—
subject to the provisions of the Tax Acts about distributions, interest deemed under subsection (1)(i) above to be the income of the owner shall be chargeable under Case VI of Schedule D, and
subsection (1)(ii) above shall not apply.
The references in subsection (1) above to buying back or re-acquiring the securities shall be deemed to include references to buying or acquiring similar securities, so, however, that where similar securities are bought or acquired, the owner shall be under no greater liability to tax than he would have been under if the original securities had been bought back or re-acquired.
Where any person carrying on a trade which consists wholly or partly in dealing in securities agrees to buy or acquire any securities, and by the same or any collateral agreement— then, if the result of the transaction is that any interest becoming payable in respect of the securities is receivable by him, no account shall be taken of the transaction in computing for any of the purposes of the Tax Acts the profits arising from or loss sustained in the trade.
agrees to sell back or re-transfer the securities, or
acquires an option, which he subsequently exercises, to sell back or re-transfer the securities,
Subsection (4) above shall have effect, subject to any necessary modifications, as if references to selling back or re-transferring the securities included references to selling or transferring similar securities.
This section shall not apply to any income to which section 786(4) applies.
Subsections (1) and (2) above shall not apply where—
the securities are Eurobonds or foreign government stock; and
the owner of the securities carries on a trade which consists wholly or partly in dealing in securities and the person who agrees to buy or acquire the securities carries on such a trade.
Subsection (4) above shall not apply where—
the securities are Eurobonds or foreign government stock; and
the person from whom the person there mentioned agrees to buy or acquire the securities carries on a trade which consists wholly or partly in dealing in securities.
In subsections (7) and (8) above—
For the purposes of this section—
“interest” includes a dividend;
“securities” includes stocks and shares, except securities which are securities for the purposes of sections 710 to 728; and
securities shall be deemed to be similar if they entitle their holders to the same rights against the same persons as to capital and interest and the same remedies for the enforcement of those rights, notwithstanding any difference in the total nominal amounts of the respective securities or in the form in which they are held or the manner in which they can be transferred.
The Board may by notice require any person to furnish them within such time as they may direct (not being less than 28 days), in respect of all securities of which he was the owner at any time during the period specified in the notice, such particulars as they consider necessary for the purposes of this section and for the purpose of discovering whether tax has been borne in respect of the interest on all those securities.
In any case where the owner agrees to sell or transfer before such day as the Board may by order appoint for the purposes of this section or the person referred to in subsection (4) above agreed to buy or acquire before that day—
subsections (1) and (2) above shall not apply if the owner’s agreement to sell or transfer constitutes a transfer to which section 713(2)(a) applies; and
subsection (10)(b) above shall have effect with the omission of the words “except securities which are securities for the purposes of sections 710 to 728”.
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Where in any chargeable period the owner of any securities (“the owner”) sells or transfers the right to receive any interest payable (whether before or after the sale or transfer) in respect of the securities without selling or transferring the securities, then, for all the purposes of the Tax Acts, that interest, whether it would or would not be chargeable to tax apart from the provisions of this section—
shall be deemed to be the income of the owner or, in a case where the owner is not the beneficial owner of the securities and some other person (“a beneficiary”) is beneficially entitled to the income arising from the securities, the income of the beneficiary, and
shall be deemed to be the income of the owner or beneficiary for that chargeable period, and
shall not be deemed to be the income of any other person.
For the purposes of subsection (1) above, in the case of a sale or other realisation the proceeds of which are chargeable to tax under Schedule C or under section 123(3) the interest so deemed to be the income of the owner or beneficiary shall be deemed to be equal in amount to the amount of those proceeds.
Nothing in subsection (1) above shall affect any provision of this Act authorising or requiring the deduction of income tax— but the proceeds of any such subsequent sale or other realisation shall not, for any of the purposes of the Tax Acts, be deemed to be the income of the seller or the person on whose behalf the right is otherwise realised.
from any interest which, under that subsection, is deemed to be the income of the owner or beneficiary, or
from the proceeds of any subsequent sale or other realisation of the right to receive that interest;
Where— then the owner or beneficiary shall be chargeable to tax under Case VI of Schedule D in respect of that interest, but shall be entitled to credit for any tax which that interest is shown to have borne.
the securities are of such a character that the interest payable in respect thereof may be paid without deduction of income tax, and
the owner or beneficiary does not show that the proceeds of any sale or other realisation of the right to receive the interest which is deemed to be his income by virtue of this section have been charged to tax under Schedule C or under section 123(3),
For the purposes of subsection (4) above, in any case where, if the interest had been chargeable under Case IV or Case V of Schedule D, the computation of tax would have been made by reference to the amount received in the United Kingdom, the tax under Case VI shall be computed on the full amount of the sums which have been or will be received in the United Kingdom in the year of assessment or any subsequent year in which the owner remains the owner of the securities.
In relation to corporation tax, subsections (4) and (5) above shall not apply but, subject to the provisions of the Tax Acts about distributions, the owner or beneficary shall, in respect of any interest which is deemed to be his income by virtue of this section, be chargeable to corporation tax under Case VI of Schedule D unless he shows that the proceeds of any sale or other realisation of the right to receive that interest have been charged to tax under Schedule C or under section 123(3).
In this section—
The Board may by notice require any person to furnish them within such time as they may direct (not being less than 28 days), in respect of all securities of which he was the owner at any time during the period specified in the notice, with such particulars as they consider necessary for the purposes of this section and for the purpose of discovering whether—
tax has been borne in respect of the interest on all those securities; or
the proceeds of any sale or other realisation of the right to receive the interest on the securities have been charged to tax under Schedule C or section 123(3).
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In this section “the relevant provisions” means sections 732, 733, 734 and this section.
Subject to subsections (3) to (10) below, the relevant provisions relate to cases of a purchase by a person (“the first buyer”) of any securities and their subsequent sale by him, the result of the transaction being that interest becoming payable in respect of the securities (“the interest”) is receivable by the first buyer.
The relevant provisions do not relate to cases where—
the time elapsing between the purchase by the first buyer and his taking steps to dispose of the securities exceeded six months, or
that time exceeded one month and it is shown to the satisfaction of the Board that the purchase and sale were each effected at the current market price, and that the sale was not effected in pursuance of an agreement or arrangement made before or at the time of the purchase. The jurisdiction of the General Commissioners or Special Commissioners on any appeal shall include jurisdiction to review any relevant decision taken by the Board in the exercise of their functions under this subsection.
The reference in subsection (3) above to the first buyer taking steps to dispose of the securities shall be construed—
if he sold them in the exercise of an option he had acquired, as a reference to his acquisition of the option,
in any other case, as a reference to his selling them.
For the purposes of the relevant provisions, a sale of securities similar to, and of the like nominal amount as, securities previously bought (“the original securities”) shall be equivalent to a sale of the original securities, and subsection (4) above shall apply accordingly; and where the first buyer bought parcels of similar securities at different times a subsequent sale of any of the securities shall, so far as may be, be related to the last to be bought of the parcels, and then to the last but one, and so on.
A person shall be under no greater liability to tax by virtue of subsection (5) above than he would have been under if instead of selling the similar securities he had sold the original securities.
Where at the time when a trade is, or is deemed to be, set up and commenced any securities form part of the trading stock belonging to the trade, those securities shall be treated for the purposes of this section—
as having been sold at that time in the open market by the person to whom they belonged immediately before that time, and
as having been purchased at that time in the open market by the person thereafter engaged in carrying on the trade.
Subject to subsection (7) above, where there is a change in the persons engaged in carrying on a trade which is not a change on which the trade is deemed to be discontinued, the provisions of this section shall apply in relation to the person so engaged after the change as if anything done to or by his predecessor had been done to or by him.
For the purposes of the relevant provisions—
For the purposes of the relevant provisions, securities shall be deemed to be similar if they entitle their holders to the same rights against the same persons as to capital and interest and the same remedies for the enforcement of those rights, notwithstanding any difference in the total nominal amounts of the respective securities or in the form in which they are held or the manner in which they can be transferred; and for the purposes of this subsection, rights guaranteed by the Treasury shall be treated as rights against the Treasury.
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Subject to the provisions of this section, if the first buyer is engaged in carrying on a trade which consists of or comprises dealings in securities, then, in computing for any of the purposes of the Tax Acts the profits arising from or loss sustained in the trade, the price paid by him for the securities shall be reduced by the appropriate amount in respect of the interest, as determined in accordance with section 735.
Subsection (1) above shall not apply if the subsequent sale is carried out by the first buyer after 26th October 1986 in the ordinary course of his business as a market maker in securities of the kind concerned.
Subsection (1) above shall not apply if the purchase of the securities by the first buyer and their resale, or as the case may be the subsequent sale of similar securities, constitute a transaction which is to be left out of account in computing profits or losses by virtue of section 729(4), or a transaction which would fall to be so left out of account apart from section 729(8).
Subsection (1) above shall not apply if the securities are overseas securities bought by the first buyer on a stock exchange outside the United Kingdom in the ordinary course of his trade as a dealer in securities and the following conditions are satisfied, namely—
the interest is brought into account in computing for the purposes of the Tax Acts the profits arising from or loss sustained in the trade, and
where credit against tax would fall to be allowed in respect of the interest under section 788 or 790, the first buyer elects that credit shall not be so allowed. In this subsection “overseas securities” means securities of the government of, or of a body of persons resident in, any country or territory outside the United Kingdom and the Republic of Ireland.
Subsection (1) above shall not apply if the securities are Eurobonds bought by the first buyer in the ordinary course of his trade as a dealer in Eurobonds; and in this subsection “Eurobond” means a security— but, notwithstanding anything in paragraph (d) above, a security is not prevented from being a Eurobond by reason only that it carries a right to convert into a security of another description or to subscribe for further securities (whether of the same description or not).
which is neither preference stock nor preference share capital; and
which is issued in bearer form; and
which carries a right to interest either at a fixed rate or at a rate bearing a fixed relationship to a standard published base rate; and
which does not carry a right to any other form of benefit, whether in the nature of interest, participation in profits or otherwise; and
the interest on which is payable without any deduction in respect of income tax or of any tax of a similar character imposed by the laws of a territory outside the United Kingdom;
For the purposes of subsection (2) above a person is a market maker in securities of a particular kind if he—
holds himself out at all normal times in compliance with the rules of the Stock Exchange as willing to buy and sell securities of that kind at a price specified by him; and
is recognised as doing so by the Council of the Stock Exchange.
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If the first buyer is entitled under any enactment to an exemption from tax which, apart from this subsection, would extend to the interest, then the exemption shall not extend to an amount equal to the appropriate amount in respect of the interest, as determined in accordance with section 735.
If the first buyer is so entitled and any annual payment is payable by him out of the interest, the annual payment shall be deemed as to the whole thereof to be paid out of profits or gains not brought into charge to income tax, and section 349(1) shall apply accordingly.
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If the first buyer carries on a trade not falling within section 732, then in ascertaining whether any or what repayment of income tax is to be made to him under section 380 or 381 by reference to any loss sustained in the trade and the amount of his income for the year of assessment his income for which includes the interest, there shall be left out of account—
the appropriate amount in respect of the interest, as determined in accordance with section 735, and
any tax paid on that amount.
Where the first buyer is a company which does not carry on a trade falling within section 732— shall be disregarded except that, for the purposes of corporation tax on chargeable gains, the appropriate proportion of the net interest receivable by the first buyer as mentioned in section 735(2) shall be treated as if it were a capital distribution within the meaning of section 72(5)(b) of the 1979 Act received in respect of the holding of the securities concerned.
the appropriate amount in respect of the interest, as determined in accordance with section 735(2), and
any tax paid in respect of or deducted from that amount,
In applying references in this section to interest in relation to a qualifying distribution, references to any tax paid on or in respect of an amount shall be construed as references to so much of any related tax credit as is attributable to that amount; and for this purpose “related tax credit”, in relation to an amount, means the tax credit to which the recipient of the distribution of which that amount is a proportion is entitled.
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For the purposes of section 732 the appropriate amount in respect of the interest is the appropriate proportion of the net interest receivable by the first buyer.
For the purposes of sections 733 and 734 the appropriate amount in respect of the interest is the gross amount corresponding with the appropriate proportion of the net interest receivable by the first buyer.
Where the interest receivable by the first buyer was the first interest payment payable in respect of the securities, paragraphs (a) and (b) of subsection (3) above shall have effect with the substitution, for references to the date on which the securities were first quoted as mentioned in paragraph (a), of the beginning of the period for which the interest was payable; except that where the capital amount of the securities was not fully paid at the beginning of that period and one or more instalments of capital were paid during that period—
the interest shall be treated as divided into parts, calculated by reference to the amount of the interest attributable to the capital paid at or before the beginning of that period and the amount thereof attributable to each such instalment, and
treating each of those parts as interest payable for that period or, where the part was calculated by reference to any such instalment, as interest payable for the part of that period beginning with the payment of the instalment, there shall be calculated, in accordance with the preceding provisions of this section, the amount constituting the appropriate proportion of each part, and
the appropriate proportion of the interest for the purposes of this section shall be the proportion thereof constituted by the sum of those amounts.
In relation to securities not listed in the Stock Exchange Daily Official List, subsection (3) above shall have effect with the substitution for the periods therein mentioned of such periods as in the opinion of the Commissioners having jurisdiction in the matter, correspond therewith in the case of the securities in question.
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Subection (2) below applies where a company has, as a dealing company, a holding in another company resident in the United Kingdom (being a body corporate), and— and in relation to any security comprised in the holding, the company having the holding is in subsection (2) below referred to as “the dealing company” and so much of any reduction in the value of the security as is attributable to any distribution falling within paragraph (b) above is in that subsection referred to as “the relevant reduction”.
the holding amounts to, or is an ingredient in a holding amounting to, 10 per cent. of all holdings of the same class in that company, and
a distribution is, or two or more distributions are, made in respect of the holding, and
the value (at any accounting date or immediately before realisation or appropriation) of any security comprised in the holding is materially reduced below the value of the security at the time when it was acquired, and the whole or any part of this reduction is attributable to any distribution falling within paragraph (b) above;
Where this subsection applies, an amount equal to the relevant reduction in the value of a security comprised in the holding—
shall, if and so long as the security is not realised or appropriated as mentioned below, be added to the value of the security for the purposes of any valuation;
shall be treated, on any realisation of the security in the course of trade, as a trading receipt of the dealing company or, in the event of a partial realisation, shall be so treated to an appropriate extent, and
shall be treated as a trading receipt of the dealing company if the security is appropriated in such circumstances that a profit on the sale of the security would no longer form part of the dealing company’s trading profits.
References in this section to a holding in a company refer to a holding of securities by virtue of which the holder may receive distributions made by the company, but so that—
a company’s holdings of different classes in another company shall be treated as separate holdings, and
holdings of securities which differ in the entitlements or obligations they confer or impose shall be regarded as holdings of different classes.
For the purposes of subsection (2) above— and section 839 shall have effect in relation to paragraph (b) above as if, in subsection (7) of that section, after the words “or exercise control of” in each place where they occur there were inserted the words “or to acquire a holding in”.
all a company’s holdings of the same class in another company are to be treated as ingredients constituting a single holding, and
a company’s holding of a particular class shall be treated as an ingredient in a holding amounting to 10 per cent. of all holdings of that class if the aggregate of that holding and other holdings of that class held by connected persons amounts to 10 per cent. of all holdings of that class;
Where this section applies in relation to a distribution which consists of or includes interest to which section 732 applies, any reduction under that section in the price paid for the securities in respect of which the distribution is made shall be adjusted in such manner as seems appropriate to the Board to take account of subsection (2) above.
For the purposes of this section “security” includes a share or other right and a company is a “dealing company” in relation to a holding if a profit on a sale of the holding would be taken into account in computing the company’s trading profits.
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Subject to the provisions of this section, where— section 350(1) and Schedule 16 shall apply as if the payment by the dividend manufacturer were an annual payment made, after due deduction of tax, wholly out of a source other than profits or gains brought into charge to income tax.
under a contract for the sale of securities one of the parties to the contract (“the dividend manufacturer”) is required to pay to the other the amount of a periodical payment of interest on the securities, and
the dividend manufacturer does not satisfy the following condition, that is to say, that he is entitled to that payment of interest either as the registered holder of the securities or from a person from whom the dividend manufacturer purchased them,
Subsection (1) of this section shall not apply where otherwise than by virtue of section 476(5)(a) the interest in question is payable without deduction of tax or where, under the rules of the stock exchange governing the transaction, the payment required to be made in respect of the interest is of the amount of the interest before deduction of tax.
If for any chargeable period the liability to tax of a market maker is determined on the footing that any excess of his payments in respect of interest on securities over his receipts in respect thereof, being payments made or receipts accrued in pursuance of a contract for the sale or purchase of the securities, is to be treated for all the purposes of the Tax Acts as an annual payment made by him, then as respects that chargeable period subsection (1) above shall not apply to him if he sold or purchased the securities in the ordinary course of his business as a market maker in securities of the kind concerned.
Where the dividend manufacturer is resident in the United Kingdom and purchased the securities (otherwise than through a broker) from a person not so resident, then paragraph (b) of subsection (1) above shall have effect as if after the word “say” there were inserted the word “either” and as if for the words from “either as” to the end of the paragraph there were inserted the words “as the registered holder of the securities or that he shows that he acquired the securities, directly or indirectly, from a person who was so entitled to the payment”.
Where the dividend manufacturer in relation to such a contract as is mentioned in paragraph (a) of subsection (1) above is not resident in the United Kingdom, and the sale is effected through a broker, that subsection shall not apply; but unless the broker shows either— section 350(1) shall apply as if the payment through the broker of the amount of the payment of interest were an annual payment by the broker made, after due deduction of tax, wholly out of such a source as is mentioned in subsection (1) above.
that the dividend manufacturer was entitled to the payment of interest as the registered holder of the securities, or
that the dividend manufacturer acquired the securities, directly or indirectly, from a person who was so entitled to the payment,
In this section— and references to a periodical payment of interest include references to a qualifying distribution and any dividend which is not a qualifying distribution.
In the application of this section in a case where the references in subsection (1) above to a periodical payment of interest are construed as references to a qualifying distribution, subsection (2) above shall be omitted.
Where it appears to the Board that by reason of any transaction or transactions a person may by virtue of this section have incurred any liability to tax, the Board may by notice served on him require him, within such time not less than 28 days as may be specified in the notice, to furnish information in his possession with respect to the transaction or any of the transactions, being information as to matters, specified in the notice, which are relevant to the question whether he has incurred any such liability.
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The Board may by regulations provide for all or any of the following—
that section 732(2) shall not apply unless the subsequent sale is carried out in compliance with further conditions specified in the regulations;
that section 732(6) shall have effect as if the reference to the Stock Exchange in paragraph (a) were to any recognised investment exchange or to any of those exchanges specified in the regulations, and as if the reference to the Council of the Stock Exchange in paragraph (b) were to the investment exchange concerned;
that for section 735(3) and (5) (which refer to the Stock Exchange Daily Official List) there shall be substituted such provisions as the Board think fit to take account of recognised investment exchanges. Regulations under this subsection shall apply where the subsequent sale is carried out by the first buyer on or after such day as is specified in the regulations.
The Board may by regulations provide that section 737(6) shall have effect—
as if references to the Stock Exchange in the definition of “broker” and in paragraph (a) of the definition of “market maker” were to any recognised investment exchange or to any of those exchanges specified in the regulations; and
as if the reference to the Council of the Stock Exchange in paragraph (b) of the definition of “market maker” were to the investment exchange concerned.
The Board may by regulations substitute for subsection (3) of section 737 a provision that subsection (1) of that section shall not apply to such persons and in such circumstances as are specified in the substituted provision, and make such incidental and consequential provisions (which may include the amendment of other provisions of section 737) as appear to the Board to be appropriate.
Regulations under subsections (2) and (3) above shall apply where the contract for the sale of securities is made on or after such day as is specified in the regulations.
In this section “recognised investment exchange” means a recognised investment exchange within the meaning of the Financial Services Act 1986.
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Subject to section 747(4)(b), the following provisions of this section shall have effect for the purpose of preventing the avoiding by individuals ordinarily resident in the United Kingdom of liability to income tax by means of transfers of assets by virtue or in consequence of which, either alone or in conjunction with associated operations, income becomes payable to persons resident or domiciled outside the United Kingdom.
Where by virtue or in consequence of any such transfer, either alone or in conjunction with associated operations, such an individual has, within the meaning of this section, power to enjoy, whether forthwith or in the future, any income of a person resident or domiciled outside the United Kingdom which, if it were income of that individual received by him in the United Kingdom, would be chargeable to income tax by deduction or otherwise, that income shall, whether it would or would not have been chargeable to income tax apart from the provisions of this section, be deemed to be income of that individual for all purposes of the Income Tax Acts.
Where, whether before or after any such transfer, such an individual receives or is entitled to receive any capital sum the payment of which is in any way connected with the transfer or any associated operation, any income which, by virtue or in consequence of the transfer, either alone or in conjunction with associated operations, has become the income of a person resident or domiciled outside the United Kingdom shall, whether it would or would not have been chargeable to income tax apart from the provisions of this section, be deemed to be income of that individual for all purposes of the Income Tax Acts.
In subsection (3) above “capital sum” means, subject to subsection (5) below—
any sum paid or payable by way of loan or repayment of a loan, and
any other sum paid or payable otherwise than as income, being a sum which is not paid or payable for full consideration in money or money’s worth.
For the purposes of subsection (3) above, there shall be treated as a capital sum which an individual receives or is entitled to receive any sum which a third person receives or is entitled to receive at the individual’s direction or by virtue of the assignment by him of his right to receive it.
Income shall not by virtue of subsection (3) above be deemed to be that of an individual for any year of assessment by reason only of his having received a sum by way of loan if that sum has been wholly repaid before the beginning of that year.
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This section has effect where—
by virtue or in consequence of a transfer of assets, either alone or in conjunction with associated operations, income becomes payable to a person resident or domiciled outside the United Kingdom; and
an individual ordinarily resident in the United Kingdom who is not liable to tax under section 739 by reference to the transfer receives a benefit provided out of assets which are available for the purpose by virtue or in consequence of the transfer or of any associated operations.
Subject to the provisions of this section, the amount or value of any such benefit as is mentioned in subsection (1) above, if not otherwise chargeable to income tax in the hands of the recipient, shall— and so on for subsequent years, taking the reference in paragraph (b) to the year mentioned in paragraph (a) as a reference to that and any other year before the subsequent year in question.
to the extent to which it falls within the amount of relevant income of years of assessment up to and including the year of assessment in which the benefit is received, be treated for all the purposes of the Income Tax Acts as the income of the individual for that year;
to the extent to which it is not by virtue of this subsection treated as his income for that year and falls within the amount of relevant income of the next following year of assessment, be treated for those purposes as his income for the next following year,
Subject to subsection (7) below and section 744(1), the relevant income of a year of assessment, in relation to an individual, is any income which arises in that year to a person resident or domiciled outside the United Kingdom and which by virtue or in consequence of the transfer or associated operations referred to in subsection (1) above can directly or indirectly be used for providing a benefit for the individual or for enabling a benefit to be provided for him.
Income tax chargeable by virtue of this section shall be charged under Case VI of Schedule D.
An individual who is domiciled outside the United Kingdom shall not, in respect of any benefit not received in the United Kingdom, be chargeable to tax under this section by reference to relevant income which is such that if he had received it he would not, by reason of his being so domiciled, have been chargeable to income tax in respect of it; and subsections (6) to (9) of section 65 shall apply for the purposes of this subsection as they would apply for the purposes of subsection (5) of that section if the benefit were income arising from possessions outside the United Kingdom.
Where— paragraph (b) of that subsection shall apply in relation to any year of assessment (“a year of charge”) after one in which chargeable gains have been so treated as accruing to him as if a part of the amount or value of the benefit corresponding to the amount of those gains had been treated under that subsection as his income for a year of assessment before the year of charge.
the whole or part of the benefit received by an individual in a year of assessment is a capital payment within the meaning of section 80 or 81(2) of the Finance Act 1981 (chargeable gains: non-resident and migrant settlements) (because not falling within the amount of relevant income referred to in paragraph (a) of subsection (2) above); and
chargeable gains are by reason of that payment treated under either of those sections as accruing to him in that or a subsequent year,
This section applies irrespective of when the transfer or associated operations referred to in subsection (1) above took place, but applies only to relevant income arising on or after 10th March 1981.
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that the purpose of avoiding liability to taxation was not the purpose or one of the purposes for which the transfer or associated operations or any of them were effected; or
that the transfer and any associated operations were bona fide commercial transactions and were not designed for the purpose of avoiding liability to taxation. The jurisdiction of the Special Commissioners on any appeal shall include jurisdiction to review any relevant decision taken by the Board in exercise of their functions under this section.
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For the purposes of sections 739 to 741 “an associated operation” means, in relation to any transfer, an operation of any kind effected by any person in relation to any of the assets transferred or any assets representing, whether directly or indirectly, any of the assets transferred, or to the income arising from any such assets, or to any assets representing, whether directly or indirectly, the accumulations of income arising from any such assets.
An individual shall, for the purposes of section 739, be deemed to have power to enjoy income of a person resident or domiciled outside the United Kingdom if—
the income is in fact so dealt with by any person as to be calculated, at some point of time, and whether in the form of income or not, to enure for the benefit of the individual; or
the receipt or accrual of the income operates to increase the value to the individual of any assets held by him or for his benefit; or
the individual receives or is entitled to receive, at any time, any benefit provided or to be provided out of that income or out of moneys which are or will be available for the purpose by reason of the effect or successive effects of the associated operations on that income and on any assets which directly or indirectly represent that income; or
the individual may, in the event of the exercise or successive exercise of one or more powers, by whomsoever exercisable and whether with or without the consent of any other person, become entitled to the beneficial enjoyment of the income; or
the individual is able in any manner whatsoever, and whether directly or indirectly, to control the application of the income.
In determining whether an individual has power to enjoy income within the meaning of subsection (2) above—
regard shall be had to the substantial result and effect of the transfer and any associated operations, and
all benefits which may at any time accrue to the individual (whether or not he has rights at law or in equity in or to those benefits) as a result of the transfer and any associated operations shall be taken into account irrespective of the nature or form of the benefits.
Subsection (5) below applies where a person resident or domiciled outside the United Kingdom throughout any chargeable period in which an interest period (or part of it) falls would, at the end of the interest period, have been treated under section 714(2) as receiving annual profits or gains or annual profits or gains of a greater amount if he had been resident or domiciled in the United Kingdom during a part of each such chargeable period.
Sections 739 to 741 shall have effect as if the amount which the person would be treated as receiving or the additional amount (as the case may be) were income becoming payable to him; and, accordingly, any reference in those sections to income of (or payable or arising to) such a person shall be read as including a reference to such an amount.
Where income of a person resident or domiciled outside the United Kingdom throughout any chargeable period in which an interest period (or part of it) falls consists of interest— then for the purposes of sections 739 to 741, the interest shall be treated as being reduced by the amount of the allowance or by the additional amount (as the case may be).
which falls due at the end of the interest period, and
which would have been treated under section 714(5) as reduced by an allowance or an allowance of a greater amount if he had been resident or domiciled in the United Kingdom during a part of each such chargeable period,
In subsections (4) to (6) above “interest period” has the meaning given by section 711.
For the purposes of sections 739 to 741, any body corporate incorporated outside the United Kingdom shall be treated as if it were resident outside the United Kingdom whether it is so resident or not.
For the purposes of sections 739 to 741—
a reference to an individual shall be deemed to include the wife or husband of the individual;
“assets” includes property or rights of any kind and “transfer”, in relation to rights, includes the creation of those rights;
“benefit” includes a payment of any kind;
references to income of a person resident or domiciled outside the United Kingdom shall, where the amount of the income of a company for any year or period has been apportioned under section 423, include references to so much of the income of the company for that year or period as is equal to the amount so apportioned to that person, and that amount shall be treated as increased by such proportion of itself as corresponds to the rate of advance corporation tax applicable to a distribution made at the end of the accounting period to which the apportionment relates;
references to assets representing any assets, income or accumulations of income include references to shares in or obligations of any company to which, or obligations of any other person to whom, those assets, that income or those accumulations are or have been transferred.
Any amount which by virtue of subsection (9)(d) above is treated as the income of any person for the purposes of sections 739 to 741 shall also be treated for those purposes as payable to that person.
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Income tax at the basic rate shall not be charged by virtue of section 739 in respect of income which has borne tax at the basic rate by deduction or otherwise but, subject to that, income tax so chargeable shall be charged under Case VI of Schedule D.
In computing the liability to income tax of an individual chargeable by virtue of section 739, the same deductions and reliefs shall be allowed as would have been allowed if the income deemed to be his by virtue of that section had actually been received by him.
An individual who is domiciled outside the United Kingdom shall not be chargeable to tax in respect of any income deemed to be his by virtue of that section if he would not, by reason of his being so domiciled, have been chargeable to tax in respect of it if it had in fact been his income.
Where an individual has been charged to income tax on any income deemed to be his by virtue of section 739 and that income is subsequently received by him, it shall be deemed not to form part of his income again for the purposes of the Income Tax Acts.
In any case where an individual has for the purposes of that section power to enjoy income of a person abroad by reason of his receiving any such benefit as is referred to in section 742(2)(c), then notwithstanding anything in subsection (1) above, the individual shall be chargeable to income tax by virtue of section 739 for the year of assessment in which the benefit is received on the whole of the amount or value of that benefit except in so far as it is shown that the benefit derives directly or indirectly from income on which he has already been charged to tax for that or a previous year of assessment.
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No amount of income shall be taken into account more than once in charging tax under the provisions of sections 739 and 740; and where there is a choice as to the persons in relation to whom any amount of income can be so taken into account—
it shall be so taken into account in relation to such of them, and if more than one in such proportions respectively, as appears to the Board to be just and reasonable; and
the jurisdiction of the Special Commissioners on any appeal against an assessment charging tax under those provisions shall include jurisdiction to review any relevant decision taken by the Board under this subsection.
In subsection (1) above references to an amount of income taken into account in charging tax are—
in the case of tax which under section 739 is charged on income, to the amount of that income;
in the case of tax charged under that section by virtue of section 743(5), to an amount of the income out of which the benefit is provided equal to the amount or value of the benefit charged;
in the case of tax charged under section 740, to the amount of relevant income taken into account under subsection (2) of that section in charging the benefit.
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The Board may by notice require any person to furnish them within such time as they may direct (not being less than 28 days) with such particulars as they think necessary for the purposes of this Chapter.
The particulars which a person must furnish under this section, if he is required by such a notice so to do, include particulars—
as to transactions with respect to which he is or was acting on behalf of others;
as to transactions which in the opinion of the Board it is proper that they should investigate for the purposes of this Chapter notwithstanding that, in the opinion of the person to whom the notice is given, no liability to tax arises under this Chapter; and
as to whether the person to whom the notice is given has taken or is taking any, and if so what, part in any, and if so what, transactions of a description specified in the notice.
Notwithstanding anything in subsection (2) above, a solicitor shall not be deemed for the purposes of paragraph (c) of that subsection to have taken part in a transaction by reason only that he has given professional advice to a client in connection with that transaction, and shall not, in relation to anything done by him on behalf of his client, be compellable under this section, except with the consent of his client, to do more than state that he is or was acting on behalf of a client, and give the name and address of the client and also—
in the case of anything done by the solicitor in connection with the transfer of any asset by or to an individual ordinarily resident in the United Kingdom to or by any such body corporate as is mentioned in subsection (4) below, or in connection with any associated operation in relation to any such transfer, the names and addresses of the transferor and the transferee or of the persons concerned in the associated operations, as the case may be;
in the case of anything done by the solicitor in connection with the formation or management of any such body corporate as is mentioned in subsection (4) below, the name and address of the body corporate;
in the case of anything done by the solicitor in connection with the creation, or with the execution of the trusts, of any settlement by virtue or in consequence of which income becomes payable to a person resident or domiciled outside the United Kingdom, the names and addresses of the settlor and of that person.
The bodies corporate mentioned in subsection (3) above are bodies corporate resident or incorporated outside the United Kingdom which are, or if resident in the United Kingdom would be, close companies, but not trading companies (as defined in paragraph 7 of Schedule 19).
Nothing in this section shall impose on any bank the obligation to furnish any particulars of any ordinary banking transactions between the bank and a customer carried out in the ordinary course of banking business, unless the bank has acted or is acting on behalf of the customer in connection with the formation or management of any such body corporate as is mentioned in subsection (4) above or in connection with the creation, or with the execution of the trusts, of any such settlement as is mentioned in subsection (3)(c) above.
In this section “settlement” and “settlor” have the meanings given by section 681(4).
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as if his income included those amounts; and
as if references to an individual included references to any person (and so that in accordance with section 9 those sections then apply for corporation tax as well as for income tax);
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If the Board have reason to believe that in any accounting period a company— and the Board so direct, the provisions of this Chapter shall apply in relation to that accounting period.
is resident outside the United Kingdom, and
is controlled by persons resident in the United Kingdom, and
is subject to a lower level of taxation in the territory in which it is resident,
A company which falls within paragraphs (a) to (c) of subsection (1) above is in this Chapter referred to as a “controlled foreign company”.
Where, by virtue of a direction under subsection (1) above, the provisions of this Chapter apply in relation to an accounting period of a controlled foreign company, the chargeable profits of that company for that period and its creditable tax (if any) for that period shall each be apportioned in accordance with section 752 among the persons (whether resident in the United Kingdom or not) who had an interest in that company at any time during that accounting period.
Where, on such an apportionment of a controlled foreign company’s chargeable profits for an accounting period as is referred to in subsection (3) above, an amount of those profits is apportioned to a company resident in the United Kingdom then, subject to subsection (5) below— and for the purposes of paragraph (a) above “the appropriate rate” means the rate of corporation tax applicable to profits of that accounting period of the resident company in which ends the accounting period of the controlled foreign company to which the direction under subsection (1) above relates or, if there is more than one such rate, the average rate over the whole of that accounting period of the resident company.
a sum equal to corporation tax at the appropriate rate on that apportioned amount of profits, less the portion of the controlled foreign company’s creditable tax for that period (if any) which is apportioned to the resident company, shall be assessed on and recoverable from the resident company as if it were an amount of corporation tax chargeable on that company; and
if, apart from this paragraph, section 739 would deem any sum forming part of the company’s chargeable profits for that accounting period to be the income of an individual for the purposes of the Income Tax Acts, that section shall not apply to such portion of that sum as corresponds to the portion of those chargeable profits which is apportioned to companies which are resident in the United Kingdom and which, by virtue of paragraph (a) above, have a liability to tax in respect thereof;
Tax shall not, by virtue of subsection (4) above, be assessed and recoverable from a company resident in the United Kingdom unless, on the apportionment in question, the aggregate of— is at least 10 per cent. of the total of those chargeable profits.
the amount of the controlled foreign company’s chargeable profits for the accounting period in question which is apportioned to the resident company, and
any amounts of those chargeable profits which are apportioned to persons who are connected or associated with the resident company,
In relation to a company resident outside the United Kingdom—
any reference in this Chapter to its chargeable profits for an accounting period is a reference to the amount which, on the assumptions in Schedule 24, would be the amount of the total profits of the company for that period on which, after allowing for any deductions available against those profits, corporation tax would be chargeable; and
any reference in this Chapter to profits does not include a reference to chargeable gains but otherwise (except as provided by paragraph (a) above) has the same meaning as it has for the purposes of corporation tax.
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No direction may be given under section 747(1) with respect to an accounting period of a controlled foreign company if—
in respect of that period the company pursues, within the meaning of Part 1 of Schedule 25, an acceptable distribution policy; or
throughout that period the company is, within the meaning of Part II of that Schedule, engaged in exempt activities; or
the public quotation condition set out in Part III of that Schedule is fulfilled with respect to that period; or
the chargeable profits of the accounting period do not exceed £20,000 or, if the accounting period is less than 12 months, a proportionately reduced amount.
Without prejudice to any right of appeal, nothing in subsection (1) above prevents the Board from giving a direction with respect to an accounting period after the end of that period but before it is known whether the company has paid such a dividend as establishes that it is pursuing an acceptable distribution policy in respect of the profits arising in that period.
Notwithstanding that none of paragraphs (a) to (d) of subsection (1) above applies to an accounting period of a controlled foreign company, no direction may be given under section 747(1) with respect to that accounting period if it appears to the Board that— and Part IV of Schedule 25 shall have effect with respect to the preceding provisions of this subsection.
in so far as any of the transactions the results of which are reflected in the profits arising in that accounting period, or any two or more of those transactions taken together, achieved a reduction in United Kingdom tax, either the reduction so achieved was minimal or it was not the main purpose or one of the main purposes of that transaction or, as the case may be, of those transactions taken together to achieve that reduction, and
it was not the main reason or, as the case may be, one of the main reasons for the company’s existence in that accounting period to achieve a reduction in United Kingdom tax by a diversion of profits from the United Kingdom,
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Subject to subsections (2) and (4) below, in any accounting period in which a company is resident outside the United Kingdom, it shall be regarded for the purposes of this Chapter as resident in that territory in which, throughout that period, it is liable to tax by reason of domicile, residence or place of management.
If, in the case of any company, there are in any accounting period two or more territories falling within subsection (1) above, the company shall in that accounting period be regarded for the purposes of this Chapter as resident in only one of them, namely—
if, throughout the accounting period, the company’s place of effective management is situated in one of those territories only, in that territory; and
if, throughout the accounting period, the company’s place of effective management is situated in two or more of those territories, in that one of them in which, at the end of the accounting period, the greater amount of the company’s assets is situated; and
if neither paragraph (a) nor paragraph (b) above applies, in that one of the territories falling within subsection (1) above in which, at the end of the accounting period, the greater amount of the company’s assets is situated; and
if paragraph (a) above does not apply and neither paragraph (b) nor paragraph (c) above produces one, and only one, of those territories, in that one of them which may be specified in a direction under section 747(1) relating to that accounting period.
If, in the case of any company, there is in any accounting period no territory falling within subsection (1) above, then, for the purposes of this Chapter, it shall be conclusively presumed that the company is in that accounting period resident in a territory in which it is subject to a lower level of taxation.
In any case where it becomes necessary for the purposes of subsection (2) above to determine in which of two or more territories the greater amount of a company’s assets is situated at the end of an accounting period, account shall be taken only of those assets which, immediately before the end of that period, are situated in those territories and the amount of them shall be determined by reference to their market value at that time.
For the purposes of this Chapter, the following persons have an interest in a controlled foreign company— and for the purposes of paragraph (b) above the definition of “distribution” in Part VI shall be construed without any limitation to companies resident in the United Kingdom.
any person who possesses, or is entitled to acquire, share capital or voting rights in the company,
any person who possesses, or is entitled to acquire, a right to receive or participate in distributions of the company or any amounts payable by the company (in cash or in kind) to loan creditors by way of premium on redemption,
any person who is entitled to secure that income or assets (whether present or future) of the company will be applied directly or indirectly for his benefit, and
any other person who, either alone or together with other persons, has control of the company,
References in subsection (5) above to being entitled to do anything apply where a person is presently entitled to do it at a future date, or will at a future date be entitled to do it; but a person whose entitlement to secure that any income or assets of the company will be applied as mentioned in paragraph (c) of that subsection is contingent upon a default of the company or any other person under any agreement shall not be treated as falling within that paragraph unless the default has occurred.
Without prejudice to subsection (5) above, the Board may, if they think it appropriate, treat a loan creditor of a controlled foreign company as having an interest in the company for the purposes of this Chapter.
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Without prejudice to subsection (3) of section 749, a company which, by virtue of subsection (1) or subsection (2) of that section, is to be regarded as resident in a particular territory outside the United Kingdom shall be considered to be subject to a lower level of taxation in that territory if the amount of tax (“the local tax”) which is paid under the law of that territory in respect of the profits of the company which arise in any accounting period is less than one-half of the corresponding United Kingdom tax on those profits.
For the purposes of this Chapter, the amount of the corresponding United Kingdom tax on the profits arising in an accounting period of a company resident outside the United Kingdom is the amount of corporation tax which, on the assumptions set out in Schedule 24 and subject to subsection (3) below, would be chargeable in respect of the chargeable profits of the company for that accounting period.
In determining the amount of corporation tax which, in accordance with subsection (2) above, would be chargeable in respect of the chargeable profits of an accounting period of a company resident outside the United Kingdom—
it shall be assumed for the purposes of Schedule 24—
that a direction has been given under section 747(1) in respect of that period; and
that the Board have made any declaration which they could have made under sub-paragraph (3) of paragraph 11 of that Schedule and of which they gave notice as mentioned in that sub-paragraph; and
there shall be disregarded so much of any relief from corporation tax in respect of income as would be attributable to the local tax and would fall to be given by virtue of any provision of Part XVIII other than section 810; and
there shall be deducted from what would otherwise be the amount of that corporation tax—
any amount which (on the assumptions set out in Schedule 24) would fall to be set off against corporation tax by virtue of section 7(2); and
any amount of income tax or corporation tax actually charged in respect of any of those chargeable profits.
The references in subsection (3)(c) above to an amount falling to be set off or an amount actually charged do not include so much of any such amount as has been or falls to be repaid to the company whether on the making of a claim or otherwise.
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For the purposes of this Chapter, an accounting period of a company resident outside the United Kingdom shall begin—
whenever the company comes under the control of the persons resident in the United Kingdom;
whenever the company, not being the subject of an earlier direction under section 747(1), commences to carry on business; and
whenever an accounting period of the company ends without the company then ceasing either to carry on business or to have any source of income whatsoever.
For the purposes of this Chapter, an accounting period of a company resident outside the United Kingdom shall end if and at the time when— and for the purposes of paragraph (b) above “liable to tax” means liable to tax by reason of domicile, residence or place of management.
the company ceases to be under the control of persons resident in the United Kingdom; or
the company becomes, or ceases to be, liable to tax in a territory; or
the company ceases to have any source of income whatsoever;
Without prejudice to subsections (1) and (2) above, subsections (3), (5) and (7) of section 12 shall apply for the purposes of this Chapter as they apply for the purposes of corporation tax, but with the omission of so much of those provisons as relates to a company coming or ceasing to be within the charge to corporation tax.
Where it appears to the Board that the beginning or end of any accounting period of a company resident outside the United Kingdom is uncertain, a direction under section 747(1) may specify as an accounting period of the company such period, not exceeding 12 months, as appears to the Board to be appropriate, and that period shall be treated for the purposes of this Chapter as an accounting period of the company unless the direction is subsequently amended under subsection (5) below.
If, on further facts coming to the knowledge of the Board after the making of a direction (including facts emerging on an appeal against notice of the making of the direction), it appears to the Board that any accounting period specified in the direction is not the true accounting period, the Board shall amend the direction so as to specify the true period.
In this Chapter, in relation to an accounting period of a controlled foreign company in respect of which a direction is given under section 747(1), the creditable tax means the aggregate of—
the amount of any relief from corporation tax in respect of income which (on the assumptions set out in Schedule 24 and assuming the company to be liable for corporation tax on the chargeable profits of that accounting period) would fall to be given to the company by virtue of any provision of Part XVIII in respect of foreign tax attributable to any income which is brought into account in determining those chargeable profits; and
any amount which (on those assumptions) would fall to be set off against corporation tax on those chargeable profits by virtue of section 7(2); and
the amount of any income tax or corporation tax actually charged in respect of the chargeable profits of that accounting period, less any of that tax which has been or falls to be repaid to the company, whether on the making of a claim or otherwise.
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Where a direction has been given under section 747(1) in respect of an accounting period of a controlled foreign company, then, subject to subsections (2) and (3) below, the apportionment of the company’s chargeable profits and creditable tax (if any) for that period shall be made among, and according to the respective interests of, the persons who at any time during that period had interests in the company.
In determining for the purposes of this Chapter the respective interests of persons who (in accordance with section 749) have interests in a controlled foreign company, the Board may, if it seems to them just and reasonable to do so, attribute to each of those persons an interest corresponding to his interest in the assets of the company available for distribution among those persons in the event of a winding up or in any other circumstances.
Where the controlled foreign company is not a trading company, the Board may, if it seems to them just and reasonable to do so, treat a loan creditor as having for the purposes of this section an interest in the company to the extent to which the income of the company has been, or is available to be, expended in redemption, repayment or discharge of the loan capital or debt (including any premium thereon) in respect of which he is a loan creditor.
Subject to subsections (5) and (7) below, as between persons each of whom has an unvarying holding of shares of the same class throughout a particular accounting period of a controlled foreign company, the amount of the company’s chargeable profits and creditable tax which is apportioned to each of them by virtue of his holding of those shares shall be in direct proportion to the numbers of shares comprised in their holdings; and similar principles shall apply in relation to an apportionment among other persons each of whom holds an interest of the same description in the controlled foreign company.
Where the same interest in a controlled foreign company is held directly by one person and indirectly by another or others (as in a case where one company has a shareholding in the controlled foreign company and the first company is controlled by a third company or by two or more persons together) then, subject to subsection (6) below, the Board, in apportioning the company’s chargeable profits and creditable tax—
may treat that interest as held solely by a person who holds that interest indirectly or, as the case may be, by two or more persons (the (“holders”) who, taken together, hold that interest indirectly, and
in particular, if that person or one or more of those holders is resident in the United Kingdom, may treat the interest as held solely by that one or, as the case may be, those holders.
In any case where the same interest is held directly by one person and indirectly by another and the circumstances are as set out in any of paragraphs (a) to (c) below, the Board shall treat the interest as held solely by the company which is described in the paragraph concerned as “the assessable company”— and for the purposes of paragraph (c) above a foreign holding company is a company resident outside the United Kingdom which holds directly or indirectly the interest in the controlled foreign company.
where the interest is held directly by a company resident in the United Kingdom, that company is the assessable company; and
where the interest is held directly by a person resident outside the United Kingdom and indirectly by only one company resident in the United Kingdom, that company is the assessable company; and
where the interest is held directly by a person resident outside the United Kingdom and indirectly by two or more companies resident in the United Kingdom, the assessable company is that one of the companies which so holds the interest by virtue of holding directly an interest in a foreign holding company;
Without prejudice to subsection (5) above, in any case where an interest in a controlled foreign company is held in a fiduciary or representative capacity in such circumstances that there is or are an identifiable beneficiary or beneficiaries, the Board may treat the interest as held by that beneficiary or, as the case may be, as apportioned among those beneficiaries; and any such apportionment shall be made on such basis as seems to the Board to be just and reasonable.
Subject to the preceding provisions of this section, the apportionment of the chargeable profits and creditable tax of a controlled foreign company for any accounting period shall be made on such basis as seems to the Board to be just and reasonable.
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Where the Board have given a direction under section 747(1) with respect to an accounting period of a controlled foreign company, notice of the making of the direction shall be given to every company resident in the United Kingdom which appears to the Board to have had an interest in the controlled foreign company at any time during that period.
A notice under subsection (1) above shall— and, in the case of a notice given after the direction concerned has been amended by virtue of section 751(5), the notice shall specify the date of the amendment and (so far as paragraphs (b) and (c) above are concerned) shall relate to the position resulting from the amendment.
specify the date on which the direction was made and the controlled foreign company to which it relates;
specify the accounting period to which the direction relates and the amount of the chargeable profits and creditable tax computed for that period;
specify the reliefs (if any) which it has been assumed that the company has claimed by virtue of paragraph 4(1) of Schedule 24;
specify, in a case where paragraph (d) of subsection (2) of section 749 applies, the territory which, by virtue of that paragraph, was specified in the direction and, in any other case, specify the territory (if any) in which, by virtue of that section, the Board consider that the company is to be regarded as resident for the purposes of this Chapter;
inform the recipient of the notice of the right of appeal conferred on him by subsection (4) below and of the right to give notice under paragraph 4(2) of Schedule 24; and
specify any declaration with respect to the accounting period concerned which was made prior to or at the same time as the notice by virtue of paragraph 11(3) of Schedule 24 or paragraph 3(2) of Schedule 25;
Where, by virtue of section 751(5), the Board have amended a direction so as to specify a revised accounting period, notice of the making of the amendment shall be given to every company which was previously given notice of the making of the direction; and a notice under this subsection—
shall identify the direction which is amended and state the effect of the amendment, including the extent to which the matters specified in the notice of the making of the direction are superseded; and
shall contain the provisions required, by virtue of paragraphs (b) to (f) of subsection (2) above, to be included in a notice under subsection (1) above.
Any company to which notice is given under subsection (1) or subsection (3) above may, by giving notice of appeal to the Board within 60 days of the date of the notice given to the company, appeal to the Special Commissioners against that notice on all or any of the following grounds— and the notice of appeal shall specify the grounds of appeal, but on the hearing of the appeal the Special Commissioners may allow the appellant to put forward any ground not specified in the notice and take it into consideration if satisfied that the omission was not wilful or unreasonable.
that the direction should not have been given or, where the direction has been amended, that the amendment should not have been made;
that the amount of chargeable profits or creditable tax specified in the notice is incorrect;
that the company did not have an interest in the controlled foreign company concerned at any time during the accounting period in question;
that, if the notice specifies a declaration made by virtue of sub-paragraph (3) of paragraph 11 of Schedule 24, the condition for the making of that declaration in sub-paragraph (5) of that paragraph was not fulfilled; and
that, if the notice specifies a declaration made by virtue of paragraph 3(2) of Schedule 25, the condition for the making of that declaration was not fulfilled;
If, after the time at which notice is given under subsection (1) above with respect to an accounting period of a controlled foreign company, the Board make a declaration by virtue of— then, unless the effect of the declaration is such that a notice (which, among other matters, will specify the declaration) will be required to be given under subsection (3) above, the Board shall give notice specifying the declaration to every company which was previously given notice of the making of the direction; and subsection (4) above shall apply in relation to a notice under this subsection as it applies in relation to a notice under subsection (3) above but with the omission of paragraphs (a) to (c).
paragraph 11(3) of Schedule 24; or
paragraph 3(2) of Schedule 25,
If it appears to the inspector that the amount of the chargeable profits or creditable tax specified in a notice under subsection (1) or subsection (3) above is incorrect, he shall give notice of the revised amount to every company to which notice was given under subsection (1) or subsection (3) above and, except where the revised amount results from— any company to which notice is given under this subsection may, by giving notice of appeal to the Board within 60 days of the date of the notice given to the company, appeal to the Special Commissioners against the revised amount specified in the notice.
an appeal under this section, or
a notice given to the Board under paragraph 4(2) of Schedule 24 or by virtue of paragraph 12 of that Schedule,
The jurisdiction of the Special Commissioners on an appeal under this section shall include jurisdiction to review any decision of the Board or the inspector which is relevant to a ground of the appeal.
The Board may make regulations—
as respects the conduct of appeals under this section;
entitling any person who has received, or is connected or associated with a person who has received, a notice under subsection (1) above with respect to a particular accounting period of a controlled foreign company to appear on an appeal brought by another person who has received such a notice; and
with respect to the joinder of appeals brought by different persons with respect to the same direction or the same amount of chargeable profits or creditable tax.
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Subject to the following provisions of this section, the provisions of section 747(4)(a) relating to assessment and recovery of a sum as if it were an amount of corporation tax shall be taken as applying, subject to the provisions of the Taxes Acts, and to any necessary modifications, all enactments applying generally to corporation tax, including those relating to the assessing, collecting and receiving of corporation tax, those conferring or regulating a right of appeal and those concerning administration, penalties, interest on unpaid tax and priority of tax in cases of insolvency under the law of any part of the United Kingdom.
For the purposes of the Taxes Acts, any sum assessable and recoverable under section 747(4)(a) shall be regarded as corporation tax which falls to be assessed for the accounting period in which ends that one of the controlled foreign company’s accounting periods the chargeable profits of which give rise to that sum; and a notice of assessment relating to such a sum shall (in addition to any other matter required to be contained in such a notice) specify separately— but such a notice shall not identify any particular person (other than the person assessed) as having an interest of any description in the controlled foreign company.
the total amount of those chargeable profits and of any creditable tax which has been apportioned to persons falling within each of paragraphs (a) to (d) of subsection (5), or within subsection (7), of section 749, and
where there is more than one class of shares in the controlled foreign company, the total amount apportioned to persons holding shares of each class,
On an appeal against an assessment to tax under section 747(4)(a), the jurisdiction of the Special Commissioners shall include jurisdiction to review any relevant decision taken by the Board under section 752 in connection with the apportionment of chargeable profits or creditable tax.
No appeal may be brought against an assessment to tax under section 747(4)(a) on a ground on which an appeal has or could have been brought under section 753(4) or (6).
Schedule 26 shall have effect with respect to the reliefs which may be claimed by a company resident in the United Kingdom which has a liability for tax in respect of an amount of chargeable profits; and no reliefs other than those provided for by that Schedule shall be allowed against any such liability.
In any case where— the tax assessed on the assessable company or, as the case may be, so much of it as remains unpaid shall be payable by the responsible company upon service of the notice.
the whole or any part of the tax assessed on a company (“the assessable company”) by virtue of section 752(6) is not paid before the date on which it is due and payable in accordance with this Act or, as the case may be, the Management Act; and
the Board serve a notice of liability to tax under this subsection on another company (“the responsible company”) which is resident in the United Kingdom and holds or has held (whether directly or indirectly) the same interest in the controlled foreign company as is or was held by the assessable company,
Where a notice of liability is served under subsection (6) above— shall be payable by the responsible company.
any interest due on the tax assessed on the assessable company and not paid; and
any interest accruing due on that tax after the date of service,
In any case where— that tax and interest may, without prejudice to the right of recovery from the responsible company, be recovered from the assessable company.
a notice of liability is served on the responsible company under subsection (6) above, and
the relevant tax and any interest payable by the responsible company under subsection (7) above is not paid by that company before the expiry of the period of three months beginning on the date of service of the notice,
In this section “the Taxes Acts” has the same meaning as in the Management Act.
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Where it appears to the Board that a company resident outside the United Kingdom (in this section referred to as a (“foreign subsidiary”) may be a controlled foreign company, the Board may, by notice given to any company which appears to them to be a controlling company of the foreign subsidiary, require that company to give to the Board, within such time (not being less than 30 days) as may be specified in the notice, such particulars (which may include details of documents) as may be so specified with respect to any matter concerning the foreign subsidiary, being particulars required by the Board for the purposes of this Chapter as being relevant to the affairs of the controlling company, the foreign subsidiary or any connected or associated company.
In this section “controlling company”, in relation to a foreign subsidiary or any other company, means a company which is resident in the United Kingdom and has, alone or together with other persons so resident, control of the foreign subsidiary or, as the case may be, that other company.
The Board may by notice given to a company which appears to them to be a controlling company in relation to a foreign subsidiary require that company to make available for inspection any relevant books, accounts, or other documents or records whatsoever of the company itself or, subject to subsection (6) below, of any other company, including the foreign subsidiary, in relation to which it appears to the Board to be a controlling company.
In subsection (3) above “relevant” means relevant to—
the computation of any profits of the foreign subsidiary; or
the question whether a direction should be given under section 747(1) with respect to the foreign subsidiary or a connected or associated company or whether any such direction should be amended; or
any question as to the amount of the chargeable profits or creditable tax for any accounting period of the foreign subsidiary or a connected or associated company; or
any question as to the sum which, in accordance with section 747(4)(a), should be assessed on and recoverable from any person.
In subsections (1) and (4) above “connected or associated company” means a controlled foreign company with which the foreign subsidiary or the controlling company is connected or associated.
In any case where— the Board shall direct that the company need not comply with the requirement.
under subsection (3) above a company is by notice required to make available for inspection any books, accounts, documents or records of a company other than itself, and
it appears to the Board, on the application of the company, that the circumstances are such that the requirement ought not to have effect,
If, on an application under subsection (6) above, the Board refuse to give a direction under that subsection, the company concerned may, by notice given to the Board within 30 days after the refusal, appeal to the Special Commissioners who, if satisfied that the requirement in question ought in the circumstances not to have effect, may determine accordingly.
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In this Chapter “trading company” means a company whose business consists wholly or mainly of the carrying on of a trade or trades.
For the purposes of this Chapter—
section 839 applies; and
subsection (10) of section 783 applies as it applies for the purposes of that section.
The following provisions of Part XI apply for the purposes of this Chapter as they apply for the purposes of that Part— but, in the application of subsection (6) of section 416 for the purposes of this Chapter, for the words “five or fewer participators” there shall be substituted the words “persons resident in the United Kingdom”.
section 416; and
section 417(7) to (9);
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This Chapter applies to a disposal by any person of an asset if— and for the purpose of determining whether the asset disposed of falls within paragraph (b) above, section 78 of the 1979 Act (equation of original shares and new holding) shall have effect as it has effect for the purposes of that Act.
at the time of the disposal, the asset constitutes a material interest in an offshore fund which is or has at any material time been a non-qualifying offshore fund; or
at the time of the disposal, the asset constitutes an interest in a company resident in the United Kingdom or in a unit trust scheme, the trustees of which are at that time resident in the United Kingdom and at a material time after 31st December 1984 the company or unit trust scheme was a non-qualifying offshore fund and the asset constituted a material interest in that fund;
Subject to the following provisions of this section and section 758, there is a disposal of an asset for the purposes of this Chapter if there would be such a disposal for the purposes of the 1979 Act.
Notwithstanding anything in paragraph (b) of subsection (1) of section 49 of the 1979 Act (general provisions applicable on death: no deemed disposal by the deceased) where a person dies and the assets of which he was competent to dispose include an asset which is or has at any time been a material interest in a non-qualifying offshore fund, then, for the purposes of this Chapter, other than section 758—
immediately before the acquisition referred to in paragraph (a) of that subsection, that interest shall be deemed to be disposed of by the deceased for such a consideration as is mentioned in that subsection; but
nothing in this subsection affects the determination, in accordance with subsection (1) above, of the question whether that deemed disposal is one to which this Chapter applies.
Subject to subsection (3) above, section 49 of the 1979 Act applies for the purposes of this Chapter as it applies for the purposes of that Act, and the reference in that subsection to the assets of which a deceased person was competent to dispose shall be construed in accordance with subsection (10) of that section.
Notwithstanding anything in section 85 of the 1979 Act (exchange of securities for those in another company) in any case where— then, subsection (3) of section 85 of that Act (which applies provisions of that Act treating transactions as not being disposals and equating original shares with a new holding in certain cases) shall not apply for the purposes of this Chapter.
the company which is company B for the purposes of subsection (1) of that section is or was at a material time a non-qualifying offshore fund and the company which is company A for those purposes is not such a fund, or
under section 86 of that Act (reconstruction or amalgamation involving issue of securities) persons are to be treated, in consequence of an arrangement, as exchanging shares, debentures or other interests in or of an entity which is or was at a material time a non-qualifying offshore fund for assets which do not constitute interests in such a fund;
In any case where, apart from subsection (5) above, section 85(3) of the 1979 Act would apply, the exchange concerned of shares, debentures or other interests in or of a non-qualifying offshore fund shall for the purposes of this Chapter constitute a disposal of interests in the offshore fund for a consideration equal to their market value at the time of the exchange.
For the purposes of this section—
a material time, in relation to the disposal of an asset, is the earliest date on which any relevant consideration was given for the acquisition of the asset or, if that date is earlier than 1st January 1984, any time on or after 1st January 1984; and
“relevant consideration” means consideration which, assuming the application to the disposal of Chapter II of Part II of the 1979 Act, would fall to be taken into account in determining the amount of the gain or loss accruing on the disposal, whether that consideration was given by or on behalf of the person making the disposal or by or on behalf of a predecessor in title of his whose acquisition cost represents, directly or indirectly, the whole or any part of the acquisition cost of the person making the disposal.
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For the purposes of this Chapter, an offshore fund operates equalisation arrangements if, and at a time when, arrangements are in existence which have the result that where— the amount of that distribution which is paid to him (assuming him still to retain that interest) will include a payment of capital which is debited to an account maintained under the arrangements (“the equalisation account”) and which is determined by reference to the income which had accrued to the fund at the date of his acquisition.
a person acquires by way of initial purchase a material interest in the fund at some time during a period relevant to the arrangements; and
the fund makes a distribution for a period which begins before the date of his acquisition of that interest;
For the purposes of this section, a person acquires an interest in an offshore fund by way of initial purchase if—
his acquisition is by way of subscription for or allotment of new shares, units or other interests issued or created by the fund; or
his acquisition is by way of direct purchase from the persons concerned with the management of the fund and their sale to him is made in their capacity as managers of the fund.
Without prejudice to section 757(1), this Chapter applies, subject to the following provisions of this section, to a disposal by any person of an asset if—
at the time of the disposal, the asset constitutes a material interest in an offshore fund which at that time is operating equalisation arrangements; and
the fund is not and has not at any material time (within the meaning of section 757(7)) been a non-qualifying offshore fund; and
the proceeds of the disposal do not fall to be taken into account as a trading receipt.
This Chapter does not, by virtue of subsection (3) above, apply to a disposal if—
it takes place during such a period as is mentioned in subsection (1)(a) above; and
throughout so much of that period as precedes the disposal, the income of the offshore fund concerned has been of such a nature as is referred to in paragraph 3(1) of Schedule 27.
An event which, apart from section 78 of the 1979 Act (reorganisations etc.), would constitute a disposal of an asset shall constitute such a disposal for the purpose of determining whether, by virtue of subsection (3) above, there is a disposal to which this Chapter applies.
The reference in subsection (5) above to section 78 of the 1979 Act includes a reference to that section as applied by section 85 of that Act (exchange of securities) but not as applied by section 82 of that Act (conversion of securities).
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In this Chapter references to a material interest in an offshore fund are references to such an interest in any of the following, namely— and any reference in this Chapter to an offshore fund is a reference to any such company, unit trust scheme or arrangements in which any person has an interest which is a material interest.
a company which is resident outside the United Kingdom;
a unit trust scheme the trustees of which are not resident in the United Kingdom; and
any arrangements which do not fall within paragraph (a) or (b) above, which take effect by virtue of the law of a territory outside the United Kingdom and which, under that law, create rights in the nature of co-ownership (without restricting that expression to its meaning in the law of any part of the United Kingdom);
Subject to the following provisions of this section, a person’s interest in a company, unit trust scheme or arrangements is a material interest if, at the time when he acquired the interest, it could reasonably be expected that, at some time during the period of seven years beginning at the time of his acquisition, he would be able to realise the value of the interest (whether by transfer, surrender or in any other manner).
For the purposes of subsection (2) above, a person is at any time able to realise the value of an interest if at that time he can realise an amount which is reasonably approximate to that portion which the interest represents (directly or indirectly) of the market value at that time of the assets of the company or, as the case may be, of the assets subject to the scheme or arrangements.
For the purposes of subsections (2) and (3) above—
a person is able to realise a particular amount if he is able to obtain that amount either in money or in the form of assets to the value of that amount; and
if at any time an interest in an offshore fund has a market value which is substantially greater than the portion which the interest represents, as mentioned in subsection (3) above, of the market value at that time of the assets concerned, the ability to realise such a market value of the interest shall not be regarded as an ability to realise such an amount as is referred to in that subsection.
An interest in a company, scheme or arrangements is not a material interest if—
it is an interest in respect of any loan capital or debt issued or incurred for money which, in the ordinary course of a business of banking, is lent by a person carrying on that business; or
it is a right arising under a policy of insurance.
Shares in a company falling within subsection (1)(a) above (an (“overseas company”) do not constitute a material interest if—
the shares are held by a company and the holding of them is necessary or desirable for the maintenance and development of a trade carried on by the company or a company associated with it; and
the shares confer at least 10 per cent. of the total voting rights in the overseas company and a right, in the event of a winding-up, to at least 10 per cent. of the assets of that company remaining after the discharge of all liabilities having priority over the shares; and
not more than ten persons hold shares in the overseas company and all the shares in that company confer both voting rights and a right to participate in the assets on a winding-up; and
at the time of its acquisition of the shares, the company had such a reasonable expectation as is referred to in subsection (2) above by reason only of the existence of— and in this paragraph “participators” means the persons holding shares falling within paragraph (c) above.
an arrangement under which, at some time within the period of seven years beginning at the time of acquisition, that company may require the other participators to purchase its shares; or
provisions of either an agreement between the participators or the constitution of the overseas company under which the company will be wound up within a period which is, or is reasonably expected to be, shorter than the period referred to in subsection (2) above; or
both such an arrangement and such provisions;
For the purposes of subsection (6)(a) above, a company is associated with another company if one of them has control of the other within the meaning of section 416 or both of them are under the control, within the meaning of that section, of the same person or persons.
An interest in a company falling within subsection (1)(a) above is not a material interest at any time when the following conditions are satisfied, namely—
that the holder of the interest has the right to have the company wound up; and
that, in the event of a winding up, the holder is, by virtue of the interest and any other interest which he then holds in the same capacity, entitled to more than 50 per cent. of the assets remaining after the discharge of all liabilities having priority over the interest or interests concerned.
The market value of any asset for the purposes of this Chapter shall be determined in like manner as it would be determined for the purposes of the 1979 Act except that, in the case of an interest in an offshore fund for which there are separate published buying and selling prices, section 150(4) of that Act (meaning of “market value” in relation to rights of unit holders in a unit trust scheme) shall apply with any necessary modifications for determining the market value of the interest for the purposes of this Chapter.
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For the purposes of this Chapter, an offshore fund is a non-qualifying fund except during an account period of the fund in respect of which the fund is certified by the Board as a distributing fund.
An offshore fund shall not be certified as a distributing fund in respect of any account period unless, with respect to that period, the fund pursues a full distribution policy, within the meaning of Part I of Schedule 27.
Subject to Part II of that Schedule, an offshore fund shall not be certified as a distributing fund in respect of any account period if, at any time in that period—
more than 5 per cent. by value of the assets of the fund consists of interests in other offshore funds; or
subject to subsections (4) and (5) below, more than 10 per cent. by value of the assets of the fund consists of interests in a single company; or
the assets of the fund include more than 10 per cent. of the issued share capital of any company or of any class of that share capital; or
subject to subsection (6) below, there is more than one class of material interest in the offshore fund and they do not all receive proper distribution benefits, within the meaning of subsection (7) below.
For the purposes of subsection (3)(b) above, in any account period the value, expressed as a percentage of the value of all the assets of an offshore fund, of that portion of the assets of the fund which consists of an interest in a single company shall be determined as at the most recent occasion (whether in that account period or an earlier one) on which the fund acquired an interest in that company for consideration in money or money’s worth; but for this purpose there shall be disregarded any occasion—
on which the interest acquired constituted the “new holding” for the purposes of section 78 of the 1979 Act (equation of original shares and new holding), including that section as applied by any later provision of Chapter II of Part IV of that Act (reorganisation of share capital etc.); and
on which no consideration fell to be given for the interest acquired, other than the interest which constituted the “original shares” for the purposes of that section.
Except for the purpose of determining the total value of the assets of an offshore fund, an interest in a company shall be disregarded for the purposes of subsection (3)(b) above if—
the company carries on (in the United Kingdom or elsewhere) a banking business providing current or deposit account facilities in any currency for members of the public and bodies corporate; and
the interest consists of a current or deposit account provided in the normal course of the company’s banking business.
There shall be disregarded for the purposes of subsection (3)(d) above any interests in an offshore fund—
which are held solely by persons employed or engaged in or about the management of the assets of the fund; and
which carry no right or expectation to participate, directly or indirectly, in any of the profits of the fund; and
which, on a winding up or on redemption, carry no right to receive anything other than the return of the price paid for the interests.
If in any account period of an offshore fund there is more than one class of material interests in the fund, the classes of interest do not, for the purposes of subsection (3)(d) above, all receive proper distribution benefits unless, were each class of interests and the assets which that class represents interests in and assets of a separate offshore fund, each of those separate funds would, with respect to that period, pursue a full distribution policy, within the meaning of Part I of Schedule 27.
For the purposes of this Chapter, an account period of an offshore fund shall begin—
whenever the fund begins to carry on its activities; and
whenever an account period of the fund ends without the fund then ceasing to carry on its activities.
For the purposes of this Chapter, an account period of an offshore fund shall end on the first occurrence of any of the following—
the expiration of 12 months from the beginning of the period;
an accounting date of the fund or, if there is a period for which the fund does not make up accounts, the end of that period; and
the fund ceasing to carry on its activities.
For the purposes of this Chapter—
an account period of an offshore fund which is a company falling within section 759(1)(a) shall end if, and at the time when, the company ceases to be resident outside the United Kingdom; and
an account period of an offshore fund which is a unit trust scheme falling within section 759(1)(b) shall end if, and at the time when, the trustees of the scheme become resident in the United Kingdom.
The provisions of Part III of Schedule 27 shall have effect with respect to the procedure for and in connection with the certification of an offshore fund as a distributing fund, and the supplementary provisions in Part IV of that Schedule shall have effect.
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If a disposal to which this Chapter applies gives rise in accordance with section 758 and Schedule 28 to an offshore income gain, then, subject to the provisions of this section, the amount of that gain shall be treated for all the purposes of the Tax Acts as—
income arising at the time of the disposal to the person making the disposal, and
constituting profits or gains chargeable to tax under Case VI of Schedule D for the chargeable period in which the disposal is made.
Subject to subsection (3) below, sections 2 and 12 of the 1979 Act (persons chargeable to tax in respect of chargeable gains) and section 11(2)(b) shall have effect in relation to income tax or corporation tax in respect of offshore income gains as they have effect in relation to capital gains tax or corporation tax in respect of chargeable gains.
In the application of section 12 of the 1979 Act in accordance with subsection (2) above, paragraphs (a) and (b) of subsection (1) of that section (which define the assets on the disposal of which chargeable gains are taxable) shall have effect with the omission of the words “situated in the United Kingdom and”.
In a case where section 12 of the 1979 Act has effect as modified by subsection (3) above, section 11 shall have effect as if, in subsection (2)(b), the words “situated in the United Kingdom” were omitted.
In the case of individuals resident or ordinarily resident but not domiciled in the United Kingdom, section 14 of the 1979 Act (which provides for taxation on a remittance basis) shall have effect in relation to income tax chargeable by virtue of subsection (1) above on an offshore income gain as it has effect in relation to capital gains tax in respect of gains accruing to such individuals from the disposal of assets situated outside the United Kingdom.
A charity shall be exempt from tax in respect of an offshore income gain if the gain is applicable and applied for charitable purposes; but if property held on charitable trusts ceases to be subject to charitable trusts and that property represents directly or indirectly an offshore income gain, the trustees shall be treated as if they had disposed of and immediately reacquired that property for a consideration equal to its market value, any gain (calculated in accordance with Schedule 28) accruing being treated as an offshore income gain not accruing to a charity. In this subsection “charity” has the same meaning as in section 506 and “market value” has the same meaning as in the 1979 Act.
In any case where— subsection (1) above shall not apply in relation to any offshore income gain to which the disposal gives rise.
a disposal to which this Chapter applies is a disposal of settled property, within the meaning of the 1979 Act, and
for the purposes of the 1979 Act, the general administration of the trusts is ordinarily carried on outside the United Kingdom and the trustees or a majority of them for the time being are not resident or not ordinarily resident in the United Kingdom,
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Section 15 of the 1979 Act (chargeable gains accruing to certain non-resident companies) shall have effect in relation to offshore income gains subject to the following modifications—
for any reference to a chargeable gain there shall be substituted a reference to an offshore income gain;
for the reference in subsection (7) to capital gains tax there shall be substituted a reference to income tax or corporation tax; and
paragraphs (b) and (c) of subsection (5) and subsection (8) shall be omitted.
Subject to subsections (3) and (4) below, sections 80 to 84 of the Finance Act 1981 (gains of non-resident settlements) shall have effect in relation to offshore income gains subject to the following modifications—
for any reference to chargeable gains, other than the reference in section 80(5), there shall be substituted a reference to offshore income gains;
in section 80(2) for the words “tax under section 4(1) of the Capital Gains Tax Act 1979” there shall be substituted the words “income tax by virtue of section 761 of the Taxes Act”;
in section 80(6) the reference to tax shall be construed as a reference to income tax or corporation tax; and
sections 80(8) and 83(6) shall be omitted.
In section 80(5) of the Finance Act 1981, both as it applies apart from subsection (2) above and as applied by subsection (2) above, the reference to chargeable gains shall be construed as including a reference to offshore income gains.
If, in any year of assessment— subsection (4) of that section (gains attributed in proportion to capital payments received) shall have effect as if it required offshore income gains to be attributed before chargeable gains.
under subsection (3) of section 80 of the Finance Act 1981, as it applies apart from subsection (2) above, a chargeable gain falls to be attributed to a beneficiary, and
under that subsection, as applied by subsection (2) above, an offshore income gain also falls to be attributed to him,
Subject to subsection (6) below, for the purpose of determining whether an individual ordinarily resident in the United Kingdom has a liability for income tax in respect of an offshore income gain which arises on a disposal to which this Chapter applies where the disposal is made by a person resident or domiciled outside the United Kingdom—
sections 739 and 740 shall apply as if the offshore income gain arising to the person resident or domiciled outside the United Kingdom constituted income becoming payable to him, and
any reference in those sections to income of (or payable or arising to) such a person accordingly includes a reference to the offshore income gain arising to him by reason of the disposal to which this Chapter applies.
To the extent that an offshore income gain is treated, by virtue of subsection (1) or subsection (2) above, as having accrued to any person resident or ordinarily resident in the United Kingdom, that gain shall not be deemed to be the income of any individual for the purposes of section 739 or 740 or any provision of Part XV.
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The provisions of this section apply where a disposal to which this Chapter applies gives rise to an offshore income gain; and, if that disposal also constitutes the disposal of the interest concerned for the purposes of the 1979 Act, then that disposal is in the following provisions of this section referred to as “the 1979 Act disposal”.
So far as relates to an offshore income gain which arises on a material disposal (within the meaning of Part I of Schedule 28), subsections (3) and (4) below shall have effect in relation to the 1979 Act disposal in substitution for section 31(1) of that Act (deduction of consideration chargeable to tax on income).
Subject to the following provisions of this section, in the computation under Chapter II of Part II of the 1979 Act of any gain accruing on the 1979 Act disposal, a sum equal to the offshore income gain shall be deducted from the sum which would otherwise constitute the amount or value of the consideration for the disposal.
Where the 1979 Act disposal is of such a nature that, by virtue of section 35 of that Act (part disposals) an apportionment falls to be made of certain expenditure, no deduction shall be made by virtue of subsection (3) above in determining, for the purposes of the fraction in subsection (2) of that section, the amount or value of the consideration for the disposal.
If the 1979 Act disposal forms part of a transfer to which section 123 of that Act applies (roll-over relief on transfer of business in exchange wholly or partly for shares) then, for the purposes of subsection (4) of that section (determination of the amount of the deduction from the gain on the old assets) “B” in the fraction in that subsection (the value of the whole of the consideration received by the transferor in exchange for the business) shall be taken to be what it would be if the value of the consideration other than shares so received by the transferor were reduced by a sum equal to the offshore income gain.
Where the disposal to which this Chapter applies constitutes such a disposal by virtue of section 757(6) or 758(5), the 1979 Act shall have effect as if an amount equal to the offshore income gain to which the disposal gives rise were given (by the person making the exchange concerned) as consideration for the new holding, within the meaning of section 79 of that Act (consideration given or received for new holding on a reorganisation).
In any case where— then, for the purposes of the Tax Acts, the amount of the first distribution falling within paragraph (b) above shall be taken to be reduced or, as the case may be, extinguished by deducting therefrom an amount equal to the offshore income gain referred to in paragraph (c) above and, if that amount exceeds the amount of that first distribution, the balance shall be set against the second and, where necessary, any later distribution falling within paragraph (b) above, until the balance is exhausted.
a disposal to which this Chapter applies by virtue of subsection (3) of section 758 is made otherwise than to the offshore fund concerned or the persons referred to in subsection (2)(b) of that section; and
subsequently, a distribution which is referable to the asset disposed of is paid either to the person who made the disposal or to a person connected with him; and
the disposal gives rise (in accordance with Part II of Schedule 28) to an offshore income gain;
Section 839 shall apply for the purposes of subsection (7)(b) above.
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Subject to the provisions of this section, all transactions of the following classes shall be unlawful unless carried out with the consent of the Treasury, that is to say—
for a body corporate resident in the United Kingdom to cease to be so resident; or
for the trade or business or any part of the trade or business of a body corporate so resident to be transferred from that body corporate to a person not so resident; or
for a body corporate so resident to cause or permit a body corporate not so resident over which it has control to create or issue any shares or debentures; or
except for the purpose of enabling a person to be qualified to act as a director, for a body corporate so resident to transfer to any person, or cause or permit to be transferred to any person, any shares or debentures of a body corporate not so resident over which it has control, being shares or debentures which it owns or in which it has an interest.
Nothing in subsection (1)(c) above shall apply to the giving to the bankers of the body corporate not resident in the United Kingdom of any security for the payment of any sum due or to become due from it to them by reason of any transaction entered into with it by them in the ordinary course of their business as bankers.
Nothing in subsection (1)(c) above shall apply to the giving by the body corporate not resident in the United Kingdom to an insurance company of any security for the payment of any sum due or to become due from that body corporate to that company by reason of any transaction entered into with that body corporate by that company in the ordinary course of that company’s business by way of investment of its funds.
Any consent granted by the Treasury under this section—
may be given either specially (that is to say, so as to apply only to specified transactions of or relating to a specified body corporate) or generally (that is to say, so as not only so to apply); and
may, if given generally, be revoked by the Treasury; and
may in any case be absolute or conditional; and
shall be published in such a way as to give any person entitled to the benefit of it an adequate opportunity of getting to know of it, unless in the opinion of the Treasury publication is not necessary for that purpose.
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Any person who, whether within or outside the United Kingdom, does or is a party to the doing of any act which to his knowledge amounts to or results in, or forms part of a series of acts which together amount to or result in, or will amount to or result in, something which is unlawful under section 765(1) shall be guilty of an offence under this section.
In any proceedings in respect of such an offence against a director of the body corporate in question (that is to say, the body corporate which is or was resident in the United Kingdom) or against any person who was purporting to act in that capacity—
it shall be presumed that he was a party to every act of that body corporate unless he proves that it was done without his consent or connivance; and
it shall, unless the contrary is proved, be presumed that any act which in fact amounted to or resulted in, or formed part of a series of acts which together amounted to or resulted in or would amount to or result in, something which is unlawful under section 765(1) was to his knowledge such an act.
Any person who is guilty of an offence under this section shall be liable on conviction on indictment— and proceedings in respect of such an offence alleged to have been committed by a person may be taken before the appropriate court in the United Kingdom having jurisdiction in the place where that person is for the time being.
to imprisonment for not more than two years or to a fine, or to both; or
where the person in question is a body corporate which is or was resident in the United Kingdom, to a fine not exceeding an amount equal to three times the corporation tax, capital gains tax and income tax paid or payable which is attributable to the income, profits or gains (including chargeable gains) arising in the 36 months immediately preceding the commission of the offence, or £10,000, whichever is the greater;
No proceedings for an offence under this section shall be instituted, in England or Wales, except by or with the consent of the Attorney General, or in Northern Ireland, except by or with the consent of the Attorney General for Northern Ireland.
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A body corporate shall be deemed for the purposes of sections 765 and 766 to be resident or not to be resident in the United Kingdom according as the central management and control of its trade or business is or is not exercised in the United Kingdom.
If it is shown that it has been established as between the Crown and a body corporate for any income tax or corporation tax purpose that the body corporate was resident or ordinarily resident in the United Kingdom for any year of assesment or other period, it shall be presumed, except so far as the contrary is proved, that that body corporate was resident in the United Kingdom for the purposes of sections 765 and 766 at the beginning of that year of assesment or other period and that it continued to be so resident at all times thereafter.
Where the functions of a body corporate consist wholly or mainly in the holding of investments or other property, the holding of the investments or property shall be deemed for the purposes of this section and sections 765 and 766 to be a business carried on by the body corporate.
Notwithstanding anything in the preceding provisions of this section or in sections 765 and 766, in no event shall a mere transfer of assets by a body corporate not resulting in a substantial change in the character or extent of the trade or business of that body corporate be treated for the purposes of sections 765 and 766 as a transfer of part of its trade or business.
In this section and in sections 765 and 766— and a body corporate shall not be deemed for the purposes of this section and sections 765 and 766 to cease to be resident in the United Kingdom by reason only that it ceases to exist.
This section and sections 765 and 766 shall come into force on 6th April 1988 to the exclusion of section 482 of the 1970 Act (which is re-enacted by those sections); but any offence committed before 6th April 1988 shall not be punishable under section 766 and neither this subsection nor any other provision of this Act shall prevent any such offence from being punishable as if this Act had not been passed.
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If— no relief shall be given under section 393 by setting a loss incurred by the company in an accounting period beginning before the change of ownership against any income or other profits of an accounting period ending after the change of ownership.
within any period of three years there is both a change in the ownership of a company and (either earlier or later in that period, or at the same time) a major change in the nature or conduct of a trade carried on by the company, or
at any time after the scale of the activities in a trade carried on by a company has become small or negligible, and before any considerable revival of the trade, there is a change in the ownership of the company,
In applying this section to the accounting period in which the change of ownership occurs, the part ending with the change of ownership, and the part after, shall be treated as two separate accounting periods, and the profits or losses of the accounting period shall be apportioned to the two parts.
The apportionment under subsection (2) above shall be on a time basis according to the respective lengths of those parts except that if it appears that that method would work unreasonably or unjustly such other method shall be used as appears just and reasonable.
In subsection (1) above “major change in the nature or conduct of a trade” includes— and this section applies even if the change is the result of a gradual process which began outside the period of three years mentioned in subsection (1)(a) above.
a major change in the type of property dealt in, or services or facilities provided, in the trade; or
a major change in customers, outlets or markets of the trade;
In relation to any relief available under section 343 to a successor company, subsection (1) above shall apply as if any loss sustained by a predecessor company had been sustained by a successor company and as if the references to a trade included references to the trade as carried on by a predecessor company.
Where relief in respect of a company’s losses has been restricted under this section then, notwithstanding section 87(3) of the 1968 Act, in applying the provisions of that Act about balancing charges to the company by reference to any event after the change of ownership of the company, any allowance or deduction falling to be made in taxing the company’s trade for any chargeable period before the change of ownership shall be disregarded unless the profits or gains of that chargeable period or of any subsequent chargeable period before the change of ownership were sufficient to give effect to the allowance or deduction.
In applying subsection (6) above it shall be assumed that any profits or gains are applied in giving effect to any such allowance or deduction in preference to being set off against any loss which is not attributable to such an allowance or deduction.
Where the operation of this section depends on circumstances or events at a time after the change of ownership (but not more than three years after), an assessment to give effect to the provisions of this section shall not be out of time if made within six years from that time, or the latest of those times.
Any person in whose name any shares, stock or securities of a company are registered shall, if required by notice by an inspector given for the purposes of this section, state whether or not he is the beneficial owner of those shares or securities and, if not the beneficial owner of those shares or securities of any of them, shall furnish the name and address of the person or persons on whose behalf those shares, stock or securities are registered in his name.
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For the purposes of section 768 there is a change in the ownership of a company—
if a single person acquires more than half the ordinary share capital of the company; or
if two or more persons each acquire a holding of 5 per cent. or more of the ordinary share capital of the company, and those holdings together amount to more than half the ordinary share capital of the company; or
if two or more persons each acquire a holding of the ordinary share capital of the company, and the holdings together amount to more than half the ordinary share capital of the company, but disregarding a holding of less that 5 per cent. unless it is an addition to an existing holding and the two holdings together amount to 5 per cent. or more of the ordinary share capital of the company.
In applying subsection (1) above—
the circumstances at any two points of time with not more than three years between may be compared, and a holder at the later time may be regarded as having acquired whatever he did not hold at the earlier time, irrespective of what he has acquired or disposed of in between;
to allow for any issue of shares or other reorganisation of capital, the comparison may be made in terms of percentage holdings of the total ordinary share capital at the respective times, so that a person whose percentage holding is greater at the later time may be regarded as having acquired a percentage holding equal to the increase;
to decide for the purposes of subsection (1)(b) or (c) above if any person has acquired a holding of at least 5 per cent., or a holding which makes at least 5 per cent. when added to an existing holding, acquisitions by, and holdings of, two or more persons who are connected persons within the meaning of section 839 shall be aggregated as if they were acquisitions by, and holdings of, one and the same person;
any acquisition of shares under the will or on the intestacy of a deceased person and, if it is shown that the gift is unsolicited and made without regard to the provisions of section 768, any gift of shares, shall be left out of account.
Where, because persons, whether company members or not, possess extraordinary rights or powers under the articles of association or under any other document regulating the company, ownership of the ordinary share capital may not be an appropriate test of whether there has been a major change in the persons for whose benefit the losses may ultimately enure, then, in considering whether there has been a change in the ownership of the company for the purposes of section 768, holdings of all kinds of share capital, including preference shares, or of any particular category of share capital, or voting power or any other special kind of power, may be taken into account instead of ordinary share capital.
Where section 768 has operated to restrict relief by reference to a change of ownership taking place at any time, no transaction or circumstances before that time shall be taken into account in determining whether there is any subsequent change of ownership.
A change in the ownership of a company shall be disregarded for the purposes of section 768 if—
immediately before the change the company is the 75 per cent. subsidiary of another company, and
(although there is a change in the direct ownership of the company) that other company continues after the change to own the first-mentioned company as a 75 per cent. subsidiary.
If there is a change in the ownership of a company which has a 75 per cent. subsidiary (whether owned directly or indirectly) then, unless under subsection (5) above that change in ownership is to be disregarded, section 768 shall apply as if there had also been a change in the ownership of that 75 per cent. subsidiary.
For the purposes of this section—
references to ownership shall be construed as references to beneficial ownership, and references to acquisition shall be construed accordingly;
a company shall be deemed to be a 75 per cent. subsidiary of another company if and so long as not less than three-quarters of its ordinary share capital is owned by that other company, whether directly or through another company or other companies, or partly directly and partly through another company or other companies;
the amount of ordinary share capital of one company owned by a second company through another company or other companies or partly directly and partly through another company or other companies, shall be determined in accordance with subsections (5) to (10) of section 838; and
“shares” includes stock.
If any acquisition of ordinary share capital or other property or rights taken into account in determining that there has been a change of ownership of a company was made in pursuance of a contract of sale or option or other contract, or the acquisition was made by a person holding such a contract, then the time when the change in the ownership of the company took place shall be determined as if the acquisition had been made when the contract was made with the holder or when the benefit of it was assigned to him so that, in the case of a person exercising an option to purchase shares, he shall be regarded as having purchased the shares when he acquired the option.
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Subject to the provisions of this section and section 771, where any property is sold and—
the buyer is a body of persons over whom the seller has control or the seller is a body of persons over whom the buyer has control or both the buyer and the seller are bodies of persons over whom the same person or persons has or have control; and
the property is sold at a price (“the actual price”) which is either— then, in computing for tax purposes the income, profits or losses of the seller where the actual price was less than the arm’s length price, and of the buyer where the actual price was greater than the arm’s length price, the like consequences shall ensue as would have ensued if the property had been sold for the arm’s length price.
less than the price which it might have been expected to fetch if the parties to the transaction had been independent persons dealing at arm’s length (“the arm’s length price”), or
greater than the arm’s length price,
Subsection (1) above shall not apply—
in any case where—
the actual price is less than the arm’s length price, and
the buyer is resident in the United Kingdom and is carrying on a trade there, and
the price of the property falls to be taken into account as a deduction in computing the profits or gains or losses of that trade for tax purposes; or
in any case where—
the actual price is greater than the arm’s length price, and
the seller is resident in the United Kingdom and is carrying on a trade there, and
the price of the property falls to be taken into account as a trading receipt in computing the profits or gains or losses of that trade for tax purposes; or
in relation to any transaction in relation to which section 493(1) or (3) applies; or
in relation to any other sale, unless the Board so direct.
Where a direction is given under subsection (2)(d) above all such adjustments shall be made, whether by assessment, repayment of tax or otherwise, as are necessary to give effect to the direction.
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For the purposes of this section a company is a petroleum company if—
its activities include any relevant activities; or
it is associated with a company whose activities include any relevant activities and its own activities include the ownership, operation or management of ships or pipelines (as defined in section 65 of the Pipelines Act 1962) used for transporting or conveying petroleum or petroleum products.
“Relevant activities” means any of the following—
the acquisition or disposal of petroleum or of rights to acquire or dispose of petroleum;
the importation into or exportation from the United Kingdom of petroleum products or the acquisition or disposal of rights to such importation or exportation;
the acquisition otherwise than for importation into the United Kingdom of petroleum products outside the United Kingdom or the disposal outside the United Kingdom of petroleum products not exported from the United Kingdom by the company making the disposal;
the refining or processing of crude petroleum; and
the extraction of petroleum, either under rights authorising it or under contractual or other arrangements with persons by whom such rights are exercisable.
Section 770(2) shall have effect with the omission of paragraphs (a) and (b) in any case where—
either party to the transaction is a petroleum company or both are petroleum companies; and
the activities of either or both are or include activities—
the profits from which are or would be chargeable to overseas tax for which credit could be given under section 790 or in pursuance of arrangements having effect by virtue of section 788; or
which are exploration or exploitation activities within the meaning of section 830; and
the transaction is part of such activities or is connected with them.
Where both the buyer and the seller are resident in the United Kingdom and the Board, in pursuance of this section, direct that section 770(1) is to apply to the computation of the income, profits or losses of the one, the direction may extend the application of that subsection to the computation of the income, profits or losses of the other, and where it does so adjustments shall be made under section 770(3) accordingly.
Where any property is sold and either the buyer or the seller is a petroleum company or both are petroleum companies, then if— section 770 shall apply in relation to the sale as if in subsection (1) of that section paragraph (a) were omitted.
the sale is part of a transaction or series of transactions (whether or not between the same persons) and its terms are affected by those of the remainder of the transaction or transactions; or
what is sold is petroleum extracted under rights exercisable by a company other than the buyer, and not less than 20 per cent. of that company’s ordinary share capital was at the time of the sale owned directly or indirectly by one or more of the following, that is to say, the buyer and any companies associated with the buyer;
Where a petroleum company was a party to a sale of property, then, in determining for the purposes of section 770 what price the property might have been expected to fetch had the parties to the transaction been independent persons dealing at arm’s length and what consequences would have ensued in computing the income, profits or losses of the seller or the buyer for tax purposes if the property had been sold for that price, it shall be assumed—
that the terms of the transaction would have been such as might have been expected to secure both to the buyer and to the seller a reasonable profit from transactions of the same kind carried out on similar terms over a reasonable period; and
that the seller would not have been compelled by law or by executive action of any government to demand a price fixed by law or such action or a price not less than one so fixed; and
that, if the transaction was part of a transaction or series of transactions (whether or not between the same persons), its terms would not have been affected by those of the remainder of the transaction or transactions; and
in a case where the whole of the property sold is not delivered by the seller within 12 months after the date of the sale— and no regard shall be had to the terms of similar transactions which were capable of being varied. In this subsection “calendar month” means a month of the calendar year and “material time”, in relation to a calendar month, means noon on the middle day of the month which, in the case of a month containing an even number of days, shall be taken to be the last day of the first half of the month.
that such part of the property as is delivered within that time would have fetched a price equal to that which it might have been expected to fetch if sold under a contract for the sale of that part and of no other property, being a contract made at the date of the sale; and
that such part of the property not so delivered as is delivered in any calendar month would have fetched a price equal to that which it might have been expected to fetch if sold under a contract for the sale of that part and of no other property, being a contract made at the material time in that month;
In this section—
For the purposes of this section—
two companies are associated with one another if one is under the control of the other or both are under the control of the same person or persons, and “control” has the meaning given by section 840;
any question whether ordinary share capital is owned by a company directly or indirectly shall be determined as for the purposes of section 838;
rights are exercisable by a company if they are exercisable by that company alone or jointly with another company or companies.
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The Board may, by notice given to any body corporate, require it to give to the Board, within such time (not being less than 30 days) as may be specified in the notice, such particulars (which may include details of relevant documents) as may be so specified of any related transaction which appears to the Board—
to be, or to be connected with, a transaction with respect to which the Board might give a direction under section 770; or
to be relevant for determining whether such a direction could or should be given in any case; or
to be relevant for determining for the purposes of that section what price any property sold would have fetched had the sale been one between independent persons dealing at arm’s length.
For the purposes of a notice under subsection (1) above, a transaction is a related transaction if, but only if, it is one to which the body corporate to which the notice is given, or a body corporate associated with that body, was a party; and for the purposes of this subsection two bodies corporate are associated with one another if one is under the control of the other or both are under the control of the same person or persons.
Where, in the case of a transaction with respect to which it appears to the Board that a direction under section 770 might be given— the Board may, by notice given to the parent body, require it to make available for inspection any books, accounts or other documents or records whatsoever of the parent body or, subject to subsection (4) below, of any body of persons over which it has control which relate to that transaction, to any other transaction (of whatever nature) in the same assets, or to transactions (of whatever nature) in assets similar to those to which the first-mentioned transaction related.
one of the parties is a body corporate resident outside the United Kingdom and a 51 per cent. subsidiary of a body corporate (“the parent body”) resident in the United Kingdom; and
the other party is, or is a 51 per cent. subsidiary of, the parent body,
If, in a case in which under subsection (3) above the parent body is by notice required to make available for inspection any books, accounts, documents or records of a body of persons resident outside the United Kingdom over which the parent body has control, it appears to the Board, on the application of the parent body, that the circumstances are such that the requirement ought not to have effect, the Board shall direct that the parent body need not comply with the requirement.
If, on an application under subsection (4) above, the Board refuse to give a direction under that subsection, the parent body may, by notice given to the Board within 30 days after the refusal, appeal to the Special Commissioners who, if satisfied that the requirement in question ought in the circumstances not to have effect, may determine accordingly.
Where it appears to the Board that a body of persons may be a party to a transaction or transactions with respect to which a direction under section 770 might be given, then, for the purpose of assisting the Board to determine whether such a direction should be given, an inspector specifically authorised in that behalf by the Board may, at any reasonable time, on production if so required of his authority—
enter any premises used in connection with the relevant trade carried on by that body of persons (that is to say, the trade in the course of which the transaction or transactions were effected),
inspect there any books, accounts or other documents or records whatsoever relating to that trade which he considers it necessary for him to inspect for that purpose, and
require any such books, accounts or other documents or records to be produced to him there for inspection.
An inspector’s authority for entering any premises under subsection (6) above shall state the name of the inspector and the name of the body of persons carrying on the trade in connection with which the premises are used.
If and so far as the question in dispute on an appeal to the General Commissioners or, in Northern Ireland, to a county court against an assessment to tax arises from a direction of the Board under section 770 the question shall be referred to and determined by the Special Commissioners.
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Nothing in sections 770 and 771 shall be construed as affecting the operation of any of the provisions of the 1968 Act or of Chapter I of Part III of the Finance Act 1971.
In sections 770 and 772— and, for the purposes of this section, a sale shall be deemed to take place at the time of completion or when possession is given, whichever is the earlier.
In determining for the purposes of sections 770 and 771 whether any person (alone or with others) has control over a body of persons—
there shall be attributed to him any rights or powers of a nominee for him, that is to say, any rights or powers which another possesses on his behalf or may be required to exercise on his direction or behalf;
there may also be attributed to him any rights or powers of a person with whom he is connected (within the meaning of section 839 but omitting subsections (5) to (7) and the exception in subsection (4)), including any rights or powers of a nominee for such a person, that is to say, any rights or powers which another possesses on behalf of such a person or may be required to exercise on his direction or behalf.
Sections 770, 771, except subsection (5)(b), and 772 and this section shall, with the necessary adaptations, have effect in relation to lettings and hirings of property, grants and transfers of rights, interests or licences and the giving of business facilities of whatever kind as they have effect in relation to sales, and the references in those sections to sales, sellers, buyers and prices shall be deemed to be extended accordingly.
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Subject to the provisions of this section, where— and the depreciation or payment is not brought into account in computing the profits or gains of the non-dealing company, that company shall be deemed to have received on the last day of the period income of an amount equal to the amount of the deduction and shall be chargeable in respect thereof under Case VI of Schedule D.
a dealing company becomes entitled to a deduction, in computing the profits or gains of the company for tax purposes for any period, in respect of the depreciation in the value of any right subsisting against an associated company, being a non-dealing company; or
a dealing company makes any payment to such an associated company, being a payment in respect of which the dealing company is entitled to a deduction in computing its profits or gains for tax purposes for any period;
Where the non-dealing company is carrying on a trade, the income referred to in subsection (1) above shall, if the company so elects, not be so chargeable but shall be deemed to have been a receipt of the trade, or, if the company is carrying on more than one trade, to have been a receipt of such one of the trades as the company may choose.
Where the non-dealing company is carrying on, or was formed to carry on a trade, then if— subsection (1) above shall not apply in so far as the expenditure proved abortive.
either—
the right subsisting against it was a right to the repayment of moneys lent for meeting expenditure which has proved (in whole or in part) abortive, or
the payment to the company was made for meeting such expenditure, and
that expenditure is such that the company is not entitled in respect of it to any allowance or deduction in computing losses or gains,
For the purposes of this section—
“company” includes any body corporate;
“dealing company” means a company dealing in securities, land or buildings and includes any company whose profits on the sale of securities, land or buildings are part of its trading profits;
“non-dealing company” means any company which is not a dealing company;
two or more companies shall be treated as associated companies if one has control of the other or others, or any person has control of both or all of them;
references to a company (“the first company”) having control of another company (“the second company”) shall be construed as references to the first company having control of the second company either by itself or in conjunction with any person having control over the first company, and “control” has the meaning given by section 840;
“securities” includes shares and stock.
Where it appears to the Board that by reason of any transaction or transactions a person may by virtue of this section have incurred any liability to tax, the Board may by notice served on him require him, within such time not less than 28 days as may be specified in the notice, to furnish information in his possession with respect to the transaction or any of the transactions, being information as to matters, specified in the notice, which are relevant to the question whether he has incurred any such liability to tax.
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Subject to subsection (7) below, this section has effect where—
transactions or arrangements are effected or made to exploit the earning capacity of an individual in any occupation by putting some other person in a position to enjoy all or any part of the profits or gains or other income, or of the receipts, derived from the individual’s activities in that occupation, or anything derived directly or indirectly from any such income or receipts; and
as part of, or in connection with, or in consequence of, the transactions or arrangements any capital amount is obtained by the individual for himself or for any other person; and
the main object or one of the main objects of the transactions was the avoidance or reduction of liability to income tax.
Any such capital amount shall for all the purposes of the Income Tax Acts be treated as being earned income of the individual which arises when the capital amount is receivable, and which is chargeable to tax under Case VI of Schedule D.
In this section—
references to any occupation are references to any activities of any of the kinds pursued in any profession or vocation, irrespective of whether the individual is engaged in a profession or vocation, or is employed by or holds office under some other person; and
references in subsection (1) above to income or receipts include references to payments for any description of copyright or licence or franchise or other right deriving its value from the activities, including past activities, of the individual.
This section shall not apply to a capital amount obtained from the disposal— in so far as the value of what is disposed of, at the time of disposal, is attributable to the value of the profession or vocation as a going concern, or as the case may be to the value of the company’s business, as a going concern.
of assets (including any goodwill) of a profession or vocation, or of a share in a partnership which is carrying on a profession or vocation, or
of shares in a company,
If the value of the profession, vocation or business as a going concern is derived to a material extent from prospective income or receipts derived directly or indirectly from the individual’s activities in the occupation, and for which, when all capital amounts are disregarded, the individual will not have received full consideration, whether as a partner in a partnership or as an employee or otherwise, subsection (4) above shall not exempt the part of the capital amount so derived.
In subsections (4) and (5) above references to the company’s business include references to the business of any other company in which it holds shares directly or indirectly.
Where on any occasion an individual obtains a capital amount consisting of any property or right which derives substantially the whole of its value from the activities of the individual, or (as in the case where the individual acquires a stock option and subsequently exercises the stock option) there are two or more occasions on which an individual obtains a capital amount consisting of any such property or right, then—
tax under this section shall not be charged on any such occasion, but
without prejudice to the generality of the provisions of this section or section 777, tax under this section shall be charged on the occasion when the capital amount, or any such capital amount, is sold or otherwise realised, and shall be so charged by reference to the proceeds of sale or the realised value.
For the purposes of subsection (1)(b) above the cases where an individual obtains any capital amount for some other person include cases where the individual has put some other person in a position to receive the capital amount by providing that other person with something of value derived, directly or indirectly, from the individual’s activities in the occupation.
This section shall apply to all persons, whether resident in the United Kingdom or not, if the occupation of the individual is carried on wholly or partly in the United Kingdom.
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This section is enacted to prevent the avoidance of tax by persons concerned with land or the development of land.
Where this section applies, the whole of any such gain shall for all the purposes of the Tax Acts be treated—
as being income which arises when the gain is realised, and which constitutes profits or gains chargeable to tax under Case VI of Schedule D for the chargeable period in which the gain is realised; and
subject to the following provisions of this section, as being income of the person by whom the gain is realised.
For the purposes of this section—
land is disposed of if, by any one or more transactions, or by any arrangement or scheme, whether concerning the land or property deriving its value from the land, the property in the land, or control over the land, is effectually disposed of; and
references in subsection (2) above to the acquisition or development of property with the sole or main object of realising the gain from disposing of the land shall be construed accordingly.
For those purposes—
where, whether by a premature sale or otherwise, a person directly or indirectly transmits the opportunity of making a gain to another person, that other person’s gain is obtained for him by the first-mentioned person; and
any number of transactions may be regarded as constituting a single arrangement or scheme if a common purpose can be discerned in them, or if there is other sufficient evidence of a common purpose.
For the purposes of this section, such method of computing a gain shall be adopted as is just and reasonable in the circumstances, taking into account the value of what is obtained for disposing of the land, and allowing only such expenses as are attributable to the land disposed of; and in applying this subsection—
where a freehold is acquired and the reversion is retained on disposal, account may be taken of the way in which the profits or gains under Case I of Schedule D of a person dealing in land are computed in such a case; or
account may be taken of the adjustments to be made in computing such profits or gains under subsections (2) and (3) of section 99. In the application of this subsection to Scotland, “freehold” means the estate or interest of the proprietor of the dominium utile or, in the case of property other than feudal property, of the owner, and “reversion” means the interest of the landlord in property subject to a lease.
Subsection (2)(c) above shall not apply to so much of any gain as is fairly attributable to the period, if any, before the intention to develop the land was formed, and which would not fall under paragraph (a) or (b) of that subsection; and in applying this subsection account shall be taken of the treatment under Case I of Schedule D of a person who appropriates land as trading stock.
If all or any part of the gain accruing to any person is derived from value, or an opportunity of realising a gain, provided directly or indirectly by some other person, whether or not put at the disposal of the first-mentioned person, subsection (3)(b) above shall apply to the gain, or that part of it, with the substitution of that other person for the person by whom the gain was realised.
This section shall not apply to a gain accruing to an individual which by virtue of sections 101 to 105 of the 1979 Act (private residences) is exempt from capital gains tax, or which would be so exempt but for the provisions of section 103(3) of that Act (residences acquired partly with a view to making a gain).
Where—
there is a disposal of shares in—
a company which holds land as trading stock; or
a company which owns directly or indirectly 90 per cent. or more of the ordinary share capital of another company which holds land as trading stock; and
all the land so held is disposed of— then this section shall not by virtue of subsection (2)(i) above apply to any gain to the holder of shares as being a gain on property deriving value from that land (but without prejudice to any liability under subsection (2)(ii) above).
in the normal course of its trade by the company which held it, and
so as to procure that all opportunity of profit in respect of the land arises to that company,
Where a person who considers that paragraph (a) or (c) of subsection (2) above may apply as respects a gain of a capital nature which that person has obtained from the disposal of land, or which he would obtain from a proposed disposal of land, supplies to the inspector to whom he makes his return of income written particulars showing how the gain has arisen or would arise—
the inspector shall, within 30 days from his receipt of the particulars, notify that person whether or not he is satisfied that, in the circumstances as described in the particulars, the gain will not, or would not, be chargeable to tax on that person under this section; and
if the inspector notifies that person that he is so satisfied, the gain shall not be chargeable on that person under this section.
If the particulars given under this section with respect to the gain are not such as to make full and accurate disclosure of all facts and considerations relating thereto which are material to be known to the inspector, any notification given by the inspector under subsection (11) above shall be void.
In this section—
references to the land include references to all or any part of the land, and “land” includes buildings, and any estate or interest in land or buildings;
references to property deriving its value from land include— and for the purposes of this section any question whether a person is connected with another shall be determined in accordance with section 839.
any shareholding in a company, or any partnership interest, or any interest in settled property, deriving its value directly or indirectly from land, and
any option, consent or embargo affecting the disposition of land;
This section shall apply to all persons, whether resident in the United Kingdom or not, if all or any part of the land in question is situated in the United Kingdom.
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This section has effect to supplement sections 775 and 776, and those sections and this section are together referred to as the relevant provisions.
In applying the relevant provisions account shall be taken of any method, however indirect, by which— and accordingly the occasion of the transfer or transmission of any property or right, however indirect, and the occasion when the value of any property or right is enhanced, may be an occasion when, under sections 775 and 776, tax becomes chargeable.
any property or right is transferred or transmitted; or
the value of any property or right is enhanced or diminished;
Subsection (2) above applies in particular—
to sales, contracts and other transactions made otherwise than for full consideration or for more than full consideration; and
to any method by which any property or right, or the control of any property or right, is transferred or transmitted by assigning share capital or other rights in a company or any partnership or interest in settled property; and
to the creation of any option or consent or embargo affecting the disposition of any property or right, and to the consideration given for the option, or for the giving of the consent or the release of the embargo; and
to the disposal of any property or right on the winding up, dissolution or termination of any company, partnership or trust.
In ascertaining for the purposes of the relevant provisions the intentions of any person, the objects and powers of any company, partners or trustees, as set out in any memorandum, articles of association or other document, shall not be conclusive.
In order to ascertain whether and to what extent the value of any property or right is derived from any other property or right, value may be traced through any number of companies, partnerships and trusts, and the property held by any company, partnership or trust shall be attributed to the shareholders, partners or beneficiaries at each stage in such manner as is appropriate in the circumstances.
In applying the relevant provisions—
any expenditure or receipt or consideration or other amount may be apportioned by such method as is just and reasonable in the circumstances;
all such valuations shall be made as are appropriate to give effect to sections 775 and 776.
For the purposes of the relevant provisions (and in particular for the purpose of the reference in section 775 to an individual putting some other person in a position to enjoy income or receipts) partners, or the trustees of settled property, or personal representatives, may be regarded as persons distinct from the individuals or other persons who are for the time being partners or trustees or personal representatives.
Where a person is assessed to tax under the relevant provisions in respect of consideration receivable by another person— and for the purposes of paragraph (a) above the Board or an inspector shall on request furnish a certificate specifying the amount of income in respect of which tax has been paid, and the amount of tax so paid; and the certificate shall be conclusive evidence of any facts stated in it. For the purposes of this subsection any income which a person is treated as having by virtue of sections 775 and 776 shall, subject to section 833(3), be treated as the highest part of his income.
he shall be entitled to recover from that other person any part of that tax which he has paid; and
if any part of that tax remains unpaid at the expiration of six months from the date when it became due and payable, it shall be recoverable from that other person as though he were the person assessed, but without prejudice to the right to recover it from the person actually assessed;
If it appears to the Board that any person entitled to any consideration or other amount taxable under sections 775 and 776 is not resident in the United Kingdom, the Board may direct that section 349(1) shall apply to any payment forming part of that amount as if it were an annual payment charged with tax under Case III of Schedule D, but without prejudice to the final determination of the liability of that person, including any liability under subsection (8)(b) above.
Sections 775 and 776 have effect subject to Part XV and to any other provision of the Tax Acts deeming income to belong to a particular person.
Where under section 776(2)(c) any person is charged to tax on the realisation of a gain, and the computation of the gain proceeded on the footing that the land or some other property was appropriated at any time as trading stock, that land or other property shall be treated on that footing also for the purposes of section 122 of the 1979 Act (property becoming or ceasing to be stock in trade).
Where under section 775(1)(b) or 776(8) the person charged to tax is a person other than the person for whom the capital amount was obtained or the person by whom the gain was realised, and the tax has been paid, then, for the purposes of sections 31 and 33 of the 1979 Act (profits taxable as income excluded from tax on capital gains), the person for whom the capital amount was obtained or the person by whom the gain was realised shall be regarded as having been charged to that tax.
For the purposes of the relevant provisions— and any amount in money or money’s worth shall not be regarded as having become receivable by some person until that person can effectively enjoy or dispose of it.
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The Board or an inspector may by notice require any person to furnish them within such time as the Board or the inspector may direct (not being less than 30 days) with such particulars as the Board or the inspector think necessary for the purposes of sections 775 and 776.
The particulars which a person must furnish under this section, if he is required by a notice from the Board or the inspector so to do, include particulars—
as to transactions or arrangements with respect to which he is or was acting on behalf of others;
as to transactions or arrangements which in the opinion of the Board or the inspector should properly be investigated for the purposes of sections 775 and 776 notwithstanding that, in the opinion of the person to whom the notice is given, no liability to tax arises under those sections; and
as to whether the person to whom the notice is given has taken or is taking any, and if so what, part in any, and if so what, transactions or arrangements of a description specified in the notice.
Notwithstanding anything in subsection (2) above, a solicitor—
shall not be deemed for the purposes of paragraph (c) of that subsection to have taken part in any transaction or arrangement by reason only that he has given professional advice to a client in connection with the transaction or arrangement, and
shall not, in relation to anything done by him on behalf of a client, be compellable under this section, except with the consent of his client, to do more than state that he is or was acting on behalf of a client, and give the name and address of his client.
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If land or any estate or interest in land is transferred from one person to another and— the transferor, or any person who is associated with the transferor, becomes liable at the time of the transfer or subsequently to pay any rent under a lease of the land or any part of the land, this section shall apply to all rent due under the lease from the transferor, or from any person who is associated with the transferor.
as a result of a lease of the land or any part of the land granted at that time or subsequently by the transferee to the transferor, or
as a result of any other transaction or series of transactions affecting the land or any estate or interest in the land,
If— then this section shall apply to all such payments under the rentcharge or other transaction due from the transferor, or from any person who is associated with the transferor.
land or any estate or interest in land is transferred from one person to another, and
as a result of any transaction or series of transactions affecting the land or any estate or interest in the land, the transferor, or any person who is associated with the transferor, becomes liable at the time of the transfer or subsequently to make any payment (other than rent under a lease) for which any relevant tax relief is available, being a payment by way of rentcharge on the land or any part of the land or a payment in any other way connected with the land,
The references in subsections (1) and (2) above to the transfer of an estate or interest in land include references to— and in relation to any such transaction or series of transactions any person who is an owner before the carrying out of the transaction or transactions, and is not the sole owner thereafter, shall be regarded for the purposes of this section as a transferor.
the granting of a lease or any other transaction involving the creation of a new estate or interest in the land;
the transfer of the lessee’s interest under a lease by surrender or forfeiture of the lease; and
any transaction or series of transactions affecting land or an estate or interest in land, such that some person is the owner, or one of the owners, before and after the carrying out of the transaction or transactions, but another person becomes or ceases to become one of the owners;
A deduction by way of any relevant tax relief, being a deduction in respect of rent or of any other payment to which this section applies, shall not exceed the commercial rent for the period for which the rent or other payment is made of the land in respect of which that payment is made.
If— that part of the first-mentioned payment may be carried forward and treated for the purposes of any such deduction by way of tax relief as if it were made at the time when the next of those subsequent payments was made, and so made for the period for which that subsequent payment was made.
under subsection (4) above part of a payment which would otherwise be allowable as a deduction by way of any relevant tax relief is not so allowable, and
one or more subsequent payments are made by the transferor, or a person who is associated with the transferor, under the lease or other transaction,
For the purposes of subsection (4) above—
if more than one payment is made for the same period the payments shall be taken together;
if payments are made for periods which overlap, the payments shall be apportioned, and the apportioned payments which belong to the common part of the overlapping periods shall be taken together;
the preceding references to payments include references to parts of payments which under subsection (5) above are treated as if made at a time subsequent to that at which they were made, and to the extent that a part of a payment so carried forward under that subsection is not so allowable as a deduction by way of tax relief, it may again be carried forward under that subsection;
so much of any payment as is in respect of services or the use of assets or rates usually borne by the tenant shall be excluded, and in determining the amount to be so excluded provisions in any lease or agreement fixing the payments or parts of payments which are in respect of services or the use of assets may be overridden.
A payment made for a period all of which falls more than one year after the payment is made shall be treated for the purposes of this section as made for that period of one year beginning with the date on which the payment was made, and a payment for a period part of which falls after the end of that year shall be treated for those purposes as if a corresponding part of the payment was made for that year (and no part for any later period).
For the purpose of making a comparison under subsection (4) above between a payment consisting of rent under a lease (“the actual lease”), or such payments taken together, and the commercial rent of the land, “commercial rent” shall mean the rent which might be expected to be paid under a lease of the land negotiated in the open market at the time when the actual lease was created, being a lease which is of the same duration as the actual lease, which is, as respects liability for maintenance and repairs, subject to the terms and conditions of the actual lease and which provides for rent payable at uniform intervals and—
at a uniform rate, or
if the rent payable under the actual lease is rent at a progressive rate (and such that the amount of rent payable for any year is never less than the amount payable for any previous year), a rent which progresses by gradations proportionate to those provided by the actual lease.
For the purpose of making a comparison under subsection (4) above between a payment which does not consist of rent under a lease (or such a payment taken together with other payments) and the commercial rent of the land, “commercial rent” shall mean the rent which might be expected to be paid under a tenant’s repairing lease negotiated in the open market at the time when the transaction was effected under which the payment or payments became due, being—
where the period over which payments are to be made under that transaction is not less than 200 years, or the obligation to make such payments is perpetual, a lease for 200 years; and
where that period is less than 200 years, a lease which is of the same duration as that period.
In this section references to rent under a lease include references to rent which the person entitled to the lease is under subsection (4), (5) or (6) of section 37 or under section 87 treated, for any purpose, as paying in respect of land comprised in the lease, and such rent shall be treated for the purposes of this section as having been paid from day to day as it has become due.
For the purposes of this section the following persons shall be deemed to be associated with one another, that is—
the transferor in any such transaction as is described in subsection (1) or (2) above, and the transferor in another such transaction, if those two persons are acting in concert, or if the two transactions are in any way reciprocal, and any person who is an associate of either of those associated transferors;
any two or more bodies corporate participating in, or incorporated for the purposes of, a scheme for the reconstruction of any body or bodies corporate or for the amalgamation of any two or more bodies corporate;
any persons who are associates as defined in section 783(10).
In this section—
For the purposes of this section the following are deductions by way of relevant tax relief, that is to say—
a deduction in computing profits or gains chargeable under Schedule A allowable by virtue of sections 25, 26 and 28 to 31 and Schedule 1;
a deduction in computing profits or gains or losses of a trade, profession or vocation for the purposes of tax;
a deduction in computing profits or gains chargeable under Case VI of Schedule D, or in computing any loss for which relief is allowable under section 392 or 396;
allowance of a payment under section 75 or 76;
a deduction from emoluments to be assessed under Schedule E made in pursuance of section 198(1) or allowable in computing losses in an employment for tax purposes;
a deduction allowable for tax purposes in computing profits or gains or losses arising from woodlands.
This section shall not apply if the transfer described in subsection (1) or (2) above was on or before 14th April 1964.
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If, in any case where a person (“the lessee”) who is a lessee of land under a lease having not more than 50 years to run (“the original lease”) is entitled in respect of the rent under the lease to a deduction by way of tax relief which is a relevant tax relief for the purposes of section 779— then, subject to the following provisions of this section, the provisions of this Act providing for deductions or allowances by way of tax relief in respect of payments of rent shall apply in relation to the rent under the new lease, and for the purposes of the Tax Acts a proportion of the consideration received by the lessee shall be treated not as a capital receipt but in accordance with subsection (3) below.
the lessee assigns the original lease to another person, or surrenders it to his landlord, for a consideration which apart from this section would not be taxable otherwise than as capital in the hands of the lessee, and
there is granted or assigned to the lessee another lease (“the new lease”) of or including the whole or any part of the land which was the subject of the original lease for a term not exceeding 15 years;
For the purposes of this section— and in any case where a rentcharge payable by the lessee is secured on the whole or any part of the property which is the subject of the new lease, the rent payable under the new lease shall be treated for the purposes of paragraphs (a) and (b) above as equal to the aggregate of the rentcharge and the rent payable under the terms of that lease.
if the aggregate of the rent payable under the new lease in respect of any rental period ending on a date falling before the 15th anniversary of the date on which the term of the new lease begins is greater than the aggregate of the rent payable under the new lease in respect of the period of equal duration beginning on the day following that date, then unless the term of the new lease would be treated as ending on an earlier date by virtue of paragraph (b) below, that term shall be treated as ending on that date;
if under the terms of the new lease — then, unless the term of the new lease would be treated as ending on an earlier date by virtue of paragraph (a) above, that term shall be treated as ending on the earliest date with effect from which, in exercise of that power, the lessor or the lessee could determine the new lease or, as the case may be, the lessee could so vary his obligations;
the lessor or the lessee has power to determine the new lease at a time before the expiry of the term for which it was granted, or
the lessee has power to vary his obligations under the new lease so as to reduce the rent which he would otherwise have to pay or in any other manner beneficial to him,
Subject to the following provisions of this section, the proportion of the consideration received by the lessee as mentioned in subsection (1) above, or of any instalment of that consideration, which for the purposes of the Tax Acts is to be treated not as a capital receipt but in accordance with this subsection shall be determined by the formula— where N is the term of the new lease expressed in years or, if that term is less than a year, where N is 1; and that proportion shall be treated for the purposes of the Tax Acts— as a receipt of a trade, profession or vocation, if the rent payable by the lessee under the new lease is allowable as a deduction in computing profits or gains or losses of a trade, profession or vocation for the purposes of tax and if the consideration is received by the lessee in the course of that trade, profession or vocation; and in any other case, as a profit or gain chargeable under Case VI of Schedule D.
In any case where the property which is the subject of the new lease does not include the whole of the property which was the subject of the original lease, the consideration received by the lessee shall be treated for the purposes of subsection (3) above as reduced to that portion of the consideration which is reasonably attributable to such part of the property which was the subject of the original lease as consists of, or is included in, the property which is the subject of the new lease.
Schedule 2 shall have effect for the purposes of giving relief, on a claim being made in that behalf, from any increase in an individual’s liability to income tax which is attributable to any amount being treated, by virtue of subsection (3) above, as an income receipt for a single year of assessment rather than as a series of such receipts during the term of the new lease; and in the application of that Schedule by virtue of this subsection for the definitions of “chargeable sum” and “relevant period” there shall be substituted the following definitions—
Where by agreement with his landlord, the lessee varies the terms of the original lease in such a manner that, in return for such a consideration as is specified in subsection (1)(a) above, the lessee undertakes to pay, during a period ending not later than 15 years after the date on which the consideration, or if the consideration is paid in instalments, the last such instalment, is paid to the lessee, a rent greater than that payable under the original lease, he shall be treated for the purposes of this section—
as having surrendered the original lease for that consideration, and
as having been granted a new lease for a term not exceeding 15 years but otherwise on the terms of the original lease as so varied.
References in this section to the lessee (other than in subsection (1)(a) above) include references to a person who is a partner or associate of the lessee or an associate of a partner of the lessee; and for the purposes of this section the expression “associate” shall be construed in accordance with 783(10).
Subject to subsection (7) above, expressions used in this section have the meanings assigned to them by section 24, and in subsection (2)(a) above “rental period” means a period in respect of which a payment of rent falls to be made, and for the purposes of that subsection, in a case where the rental period is a quarter or a month, each such period shall be treated as of equal duration.
The preceding provisions of this section shall not apply if the lessee had, before 22nd June 1971, a right enforceable at law or in equity to the grant of the new lease, but in any case where, apart from this subsection, those provisions would apply, no part of the rent paid under the new lease shall be treated as a payment of capital, and the provisions of this Act providing for deductions or allowances by way of tax relief in respect of payments of rent shall apply accordingly.
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Subject to section 782, where—
a deduction by way of tax relief which is one of the kinds listed in subsection (4) below is allowable in respect of a payment made under a lease of an asset of any description, and
before, at or after the time when the payment is made, either— the person obtaining that sum shall be charged under Case VI of Schedule D for the chargeable period in which the sum is obtained with tax on an amount equal to the amount of the payment in respect of which tax relief is so allowed.
the person who made the payment has obtained or obtains a capital sum in respect of the lessee’s interest in the lease, or
the lessor’s interest in the lease, or any other interest in the asset, has belonged to an associate of the person who made the payment, and that associate has obtained a capital sum in respect of that interest,
A person shall not be assessed to tax under subsection (1) above on any amount to the extent to which it exceeds the capital sum by reference to which he is so assessed.
Subsection (1) above shall not apply to payments under a lease created on or before 14th April 1964.
The kinds of deductions by way of tax relief to which subsection (1) above applies are as follows—
a deduction in computing profits or gains or losses of a trade, profession or vocation for the purposes of tax;
a deduction in computing profits or gains chargeable under Case VI of Schedule D, or in computing any loss for which relief is allowable under section 392 or 396;
allowance of a payment under section 75 or 76;
a deduction from emoluments to be assessed under Schedule E made in pursuance of section 198(1) or allowable in computing losses in an employment for tax purposes;
a deduction allowable for tax purposes in computing profits or gains or losses arising from woodlands.
Where— for the reference in subsection (2) above to the amount of the capital sum there shall be substituted a reference to that amount after deducting the amount of the payment in respect of which a deduction is not allowed for that reason.
the deduction by way of tax relief mentioned in subsection (1)(a) above is a deduction in computing, for income tax purposes, profits or gains or losses of a trade, profession or vocation, or arising from woodlands, and
any part of the payments made under the lease by the person obtaining the capital sum is a payment in respect of which a deduction is not allowed for the reason that the whole or any part of the period in which the payment would fall to be allowed is not a period on the profits or gains of which income tax falls to be computed in respect of the trade, profession or vocation,
So far as in respect of a capital sum any part of a payment allowed as a deduction by way of tax relief of a kind to which this section applies is taken into account in making an assessment under subsection (1) above, that part of the payment shall be left out of account in determining whether any and if so what amount should be assessed by reference to any other capital sum; and the order in which this subsection is applied shall be the order in which the capital sums are obtained.
There shall be made all such adjustments of tax, whether by way of making assessments or by repayment of tax, as are required after the making of any such payment as is described in subsection (1) above to give effect to the charge under that subsection in respect of a sum obtained before the making of the payment.
Notwithstanding anything in the Tax Acts limiting the time within which an assessment may be made or a claim for relief may be admitted any such adjustment may be made, by making an assessment or otherwise, at any time not more than six years from the end of the chargeable period in which the payment was made.
This section shall not apply if the capital sum obtained in respect of the lessee’s interest in a lease constituting a hire-purchase agreement for machinery or plant is a sum which is required to be brought into account as the whole or part of the disposal value of the machinery or plant under section 45(2) of the Finance Act 1971.
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This section shall apply, and section 781 shall not apply, to payments—
which are allowable by way of deductions in computing the profits or gains or losses of a trade, and
which are made under a lease of an asset which at any time before the creation of the lease was used for the purposes— and when so used was owned by the person carrying on the trade in which it was being used.
of that trade; or
of another trade carried on by the person who at that time or later was carrying on the first-mentioned trade;
Subject to the following provisions of this section, the deduction allowable in computing the profits or gains or losses of the trade for the purposes of tax as respects any such payment shall not exceed the commercial rent of the asset for the period for which the payment was made.
If under subsection (2) above part of a payment which would otherwise be allowable as a deduction is not so allowable, and one or more subsequent payments are made by the same person under the same lease, that part of the first-mentioned payment may be carried forward and treated for the purposes of computing the profits or gains or losses of the trade for the purposes of tax as if it were made at the time when the next of those subsequent payments was made, and so made for the period for which that subsequent payment was made.
For the purposes of subsection (2) above— and to the extent that a part of a payment carried forward under subsection (3) above is not allowable as a deduction it may again be carried forward under that subsection.
if more than one payment is made for the same period the payments shall be taken together;
if the payments are made for periods which overlap, the payments shall be apportioned, and the apportioned payments which belong to the common part of the overlapping periods shall be taken together;
the preceding references to payments include references to parts of payments which under subsection (3) above are treated as if made at a time subsequent to that at which they were made;
A payment made for a period all of which falls more than one year after the payment is made shall be treated for the purposes of this section as made for that period of one year beginning with the date on which the payment is made, and a payment for a period part of which falls after the end of that year shall be treated for those purposes as if a corresponding part of the payment was made for that year (and no part for any later period).
For the purpose of making a comparison under subsection (2) above between a payment, or payments taken together, and the commercial rent of the asset, “commercial rent” shall mean the rent which might at the relevant time be expected to be paid under a lease of the asset for the remainder of the anticipated normal working life of the asset, being a rent payable at uniform intervals and at a uniform rate which would afford a reasonable return for its market value at the relevant time, having regard to the terms and conditions of the lease; and in this subsection—
If the asset is used at the same time partly for the purposes of the trade and partly for other purposes the commercial rent as defined in subsection (6) above shall be determined by reference to what would be paid for such a partial use of the asset.
This section shall not apply in relation to payments made under a lease created on or before 14th April 1964.
In this section references to the person carrying on a trade are references to the person carrying on the trade for the time being, and where at any time a person succeeds to a trade which until that time was carried on by another person, and by virtue of section 113 or 337(1) the trade is to be treated as discontinued, the trade shall, nonetheless, be treated as the same trade for the purposes of this section.
In this section references to a trade include references to a profession or vocation.
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References in section 781 to a sum obtained in respect of the lessee’s interest in a lease of an asset, or in respect of any other interest in an asset include—
in the case of a lessee’s interest, references to sums representing the consideration in money or money’s worth obtained on a surrender of the rights to the lessor, or on an assignment of the lease, or on creating a sublease or any other interest out of the lease; and
references to any insurance moneys payable in respect of the asset, so far as payable to the owner of the interest in the asset.
Such references also include references to sums representing money or money’s worth obtained by the person entitled to the interest by a transaction or series of transactions disposing of the asset, or of an interest in the asset, and in particular transactions which comprise arrangements under which the rights of the lessee under a lease of the asset are merged in any way with the rights of the lessor, or with any other rights as respects the asset, so far as the money or money’s worth so obtained is attributable to the rights of the lessee under the lease.
References in section 781 to sums obtained in respect of any interest in an asset include references to money or money’s worth so obtained in any transaction (including a transaction of the kind described in subsection (1) or (2) above) by way of consideration received by a person who is an associate of the person entitled to the interest in the asset.
If an interest in the asset is disposed of by any person to a person who is his associate, the person disposing of the interest shall (unless in fact he obtains a greater sum) be treated for the purposes of section 781 as having obtained in respect of the interest— whichever is the greater.
the value of the interest in the open market; or
the value of the interest to the person to whom it is, in effect, transferred;
For the purposes of subsections (3) and (4) above a disposition may be direct or indirect and may be effected by any such transaction as is described in subsection (2) above.
For the purposes of sections 781 and 784 and this section any sum obtained by any persons carrying on a trade, profession or vocation in partnership in respect of an interest in an asset which is and continues to be used for the purposes of the trade, profession or vocation shall be regarded as apportionable between them in the shares in which they are then entitled to the profits of the trade, profession or vocation.
Subject to subsection (6) above, for those purposes a sum obtained by persons jointly entitled to an interest in an asset shall be apportionable according to their respective interests in the rights.
For those purposes, any payment in respect of which a deduction is allowable by way of tax relief which is made by persons carrying on a trade, profession or vocation in partnership shall be apportioned in such manner as may be just.
Where under this section any sum or payment falls to be apportioned and, at the time of the apportionment, it appears that it is material as respects the liability to tax (for whatever period) of two or more persons, any question which arises as to the manner in which the sum or payment is to be apportioned shall be determined, for the purposes of tax of all those persons— and any such Commissioners shall determine the question in like manner as if it were an appeal, except that all those persons shall be entitled to appear and be heard by the Commissioners who are to make the determination or to make representations to them in writing.
in a case where the same body of General Commissioners have jurisdiction with respect to all those persons, by those Commissioners unless all those persons agree that it shall be determined by the Special Commissioners;
in a case where different bodies of Commissioners have jurisdiction with respect to those persons, by such of those bodies as the Board may direct unless all those persons agree that it shall be determined by the Special Commissioners; and
in any other case, by the Special Commissioners;
For the purposes of this section and in construing the expressions “associate” and “associated” in section 781 and this section, the following persons shall be deemed to be associated with each other, that is to say—
any individual and that individual’s husband or wife, and any relative, or husband or wife of a relative, of that individual or that individual’s husband or wife (“relative” meaning, for this purpose, brother, sister, ancestor or lineal descendant);
any person in his capacity of trustee of a settlement and any individual who in relation to the settlement is a settlor, and any person associated with that individual (“settlement” and “settlor” having, for this purpose, the meanings given by section 670(2));
any person and a body of persons of which that person, or persons associated with him, or that person and persons associated with him, has or have control;
any two or more bodies of persons associated with the same person by virtue of paragraph (c) above;
in relation to a disposal by joint owners, the joint owners and any person associated with any of them.
In subsection (10) above “body of persons” includes a partnership and “control” has the meaning given by section 840.
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In the application of section 781 to a lease which constitutes a hire-purchase agreement, for the reference in subsection (2) of that section to the amount of the capital sum there shall, where that capital sum was obtained in respect of the lessee’s interest in the lease constituting the hire-purchase agreement, be substituted references to the amount of the capital sum (adjusted, if necessary, under subsection (5) of that section) after deducting any capital expenditure which was incurred by the person obtaining the capital sum in providing the lessee’s interest.
In subsection (1) above “capital expenditure which was incurred by the person obtaining the capital sum in providing the lessee’s interest” means—
so much of any payment made under the lease by the person obtaining the capital sum (or, where the capital sum was obtained by the personal representatives of a deceased person, so made by that deceased person) as is not a payment in respect of which a deduction is allowable by way of tax relief which is one of the kinds listed in subsection (4) of section 781, plus
where the lessee’s interest was assigned to the person obtaining the capital sum, any capital payment made by that person as consideration for the assignment.
If the amount to be deducted in pursuance of subsection (1) above exceeds the amount of the capital sum from which it is to be deducted, no charge shall arise under section 781(1) in respect of the capital sum.
If the capital sum represents the consideration for part only of the lessee’s interest in the lease which constitutes a hire-purchase agreement, the amount to be deducted under subsection (1) above shall be such proportion of the capital expenditure which is still unallowed as is reasonable having regard to the degree to which the capital expenditure has contributed to the value of what is disposed of in return for the capital sum.
If more than one capital sum is, or is to be regarded as, obtained by the same person in respect of the lessee’s interest in the lease which constitutes a hire-purchase agreement, then, so far as in respect of one of those capital sums any deduction is made in respect of capital expenditure in pursuance of subsection (1) above that capital expenditure shall be left out of account in applying subsections (1) and (3) above to any other such capital sum; and the order in which this subsection is applied shall be the order in which the capital sums are obtained.
In this section—
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This section applies as respects any transaction effected with reference to the lending of money or the giving of credit, or the varying of the terms on which money is lent or credit is given, or which is effected with a view to enabling or facilitating any such arrangement concerning the lending of money or the giving of credit.
Subsection (1) above has effect whether the transaction is effected between the lender or creditor and the borrower or debtor, or between either of them and a person connected with the other or between a person connected with one and a person connected with the other.
If the transaction provides for the payment of any annuity or other annual payment, not being interest, being a payment chargeable to tax under Case III of Schedule D, the payment shall be treated for all the purposes of the Tax Acts as if it were a payment of annual interest.
If the transaction is one by which the owner of any securities or other property carrying a right to income (“the owner”) agrees to sell or transfer the property (“the relevant property”), and by the same or any collateral agreement— then, without prejudice to the liability of any other person, the owner shall be chargeable to tax under Case VI of Schedule D on an amount equal to any income which arises from the relevant property at any time before the repayment of the loan or the termination of the credit.
the purchaser or transferee (“the buyer”), or a person connected with him, agrees that at a later date he will sell or transfer the same or any other property to the owner or a person connected with him; or
the owner or a person connected with him acquires an option which he subsequently exercises, to buy or acquire the same or any other property from the buyer or a person connected with the buyer;
If under the transaction a person assigns, surrenders or otherwise agrees to waive or forego income arising from any property (without a sale or transfer of the property) then, without prejudice to the liability of any other person, he shall be chargeable to tax under Case VI of Schedule D on a sum equal to the amount of income assigned, surrendered, waived or foregone.
If credit is given for the purchase price of any property, and the rights attaching to the property are such that, during the subsistence of the debt, the purchaser’s rights to income from the property are suspended or restricted, he shall be treated for the purposes of subsection (5) above as if he had surrendered a right to income of an amount equivalent to the income which he has in effect foregone by obtaining the credit.
The amount of any income payable subject to deduction of income tax shall be taken for the purposes of subsection (5) above as the amount before deduction of tax.
References in this section to connected persons shall be construed in accordance with section 839.
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Relief shall not be given to any person under any provision of the Tax Acts in respect of any payment of interest if a scheme has been effected or arrangements have been made (whether before or after the time when the payment is made) such that the sole or main benefit that might be expected to accrue to that person from the transaction under which the interest is paid was the obtaining of a reduction in tax liability by means of any such relief.
In this section “relief” means relief by way of deduction in computing profits or gains or deduction or set off against income or total profits.
Where the relief is claimed by virtue of section 403(7) any question under this section as to what benefit might be expected to accrue from the transaction in question shall be determined by reference to the claimant company and the surrendering company taken together.
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If Her Majesty by Order in Council declares that arrangements specified in the Order have been made with the government of any territory outside the United Kingdom with a view to affording relief from double taxation in relation to— and that it is expedient that those arrangements should have effect, then those arrangements shall have effect in accordance with subsection (3) below.
income tax,
corporation tax in respect of income or chargeable gains, and
any taxes of a similar character to those taxes imposed by the laws of that territory,
Without prejudice to the generality of subsection (1) above, if it appears to Her Majesty to be appropriate, the arrangements specified in an Order in Council under this section may include provisions with respect to the exchange of information necessary for carrying out the domestic laws of the United Kingdom and the laws of the territory to which the arrangements relate concerning taxes covered by the arrangements including, in particular, provisions about the prevention of fiscal evasion with respect to those taxes; and where arrangements do include any such provisions, the declaration in the Order in Council shall state that fact.
Subject to the provisions of this Part, the arrangements shall, notwithstanding anything in any enactment, have effect in relation to income tax and corporation tax in so far as they provide—
for relief from income tax, or from corporation tax in respect of income or chargeable gains; or
for charging the income arising from sources, or chargeable gains accruing on the disposal of assets, in the United Kingdom to persons not resident in the United Kingdom; or
for determining the income or chargeable gains to be attributed—
to persons not resident in the United Kingdom and their agencies, branches or establishments in the United Kingdom; or
to persons resident in the United Kingdom who have special relationships with persons not so resident; or
for conferring on persons not resident in the United Kingdom the right to a tax credit under section 231 in respect of qualifying distributions made to them by companies which are so resident.
The provisions of Chapter II of this Part shall apply where arrangements which have effect by virtue of this section provide that tax payable under the laws of the territory concerned shall be allowed as a credit against tax payable in the United Kingdom.
For the purposes of this section and, subject to section 795(3), Chapter II of this Part in its application to relief under this section, any amount of tax which would have been payable under the law of a territory outside the United Kingdom but for a relief to which this subsection applies given under the law of that territory shall be treated as having been payable; and references in this section and that Chapter to double taxation, to tax payable or chargeable, or to tax not chargeable directly or by deduction shall be construed accordingly. This subsection applies—
to any relief given with a view to promoting industrial, commercial, scientific, educational or other development in a territory outside the United Kingdom, being a relief with respect to which provision is made in the arrangements in question for double taxation relief; and
to any relief provided under and in accordance with the arrangements, where the latter expressly contemplate that the relief is to fall within this subsection.
Except in the case of a claim for an allowance by way of credit in accordance with Chapter II of this Part, a claim for relief under subsection (3)(a) above shall be made to the Board.
Where— any such assessments may be made as are necessary to ensure that the total amount of the income or chargeable gains is assessed, and the proper credit, if any, is given in respect thereof, and, where the income is, or the chargeable gains are, entrusted to any person in the United Kingdom for payment, any such assessment may be made on the recipient of the income or gains, and, in the case of an assessment in respect of income, may be assessed under Case VI of Schedule D.
under any arrangements which have effect by virtue of this section, relief may be given, either in the United Kingdom or in the territory with the government of which the arrangements are made, in respect of any income or chargeable gains, and
it appears that the assessment to income tax or corporation tax made in respect of the income or chargeable gains is not made in respect of the full amount thereof, or is incorrect having regard to the credit, if any, which falls to be given under the arrangements,
Any arrangements to which effect is given under this section may include provision for relief from tax for periods before the passing of this Act, or before the making of the arrangements, and provisions as to income or chargeable gains which is or are not subject to double taxation, and the preceding provisions of this section shall have effect accordingly.
Any Order in Council made under this section revoking an earlier such Order in Council may contain such transitional provisions as appear to Her Majesty to be necessary or expedient.
Before any Order in Council proposed to be made under this section is submitted to Her Majesty in Council, a draft of the Order shall be laid before the House of Commons, and the Order shall not be so submitted unless an Address is presented to Her Majesty by that House praying that the Order be made.
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Notwithstanding section 793(2), any arrangements made in relation to the profits tax under section 347 of the Income Tax Act 1952 or any earlier enactment corresponding to that section shall, except in so far as arrangements made after the passing of the Finance Act 1965 provide otherwise, have effect in relation to corporation tax and income and gains chargeable to corporation tax as they are expressed to have effect in relation to the profits tax and profits chargeable to the profits tax, with the substitution of accounting periods for chargeable accounting periods (and not as they had effect in relation to income tax).
In so far as any arrangements made before 30th March 1971 provide for the exemption of any income from surtax they shall have effect, unless otherwise modified by subsequent arrangements, as if they provided for that income to bear income tax at the basic rate and to be disregarded for the purpose of computing total income, except in so far as the computation affects the matters mentioned in section 835(5).
Any reference in the Tax Acts (including this Part) to arrangements under or by virtue of section 788 includes a reference to arrangements having effect by virtue of this section.
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To the extent appearing from the following provisions of this section, relief from income tax and corporation tax in respect of income and chargeable gains shall be given in respect of tax payable under the law of any territory outside the United Kingdom by allowing that tax as a credit against income tax or corporation tax, notwithstanding that there are not for the time being in force any arrangements under section 788 providing for such relief.
Relief under subsection (1) above is referred to in this Part as “unilateral relief”.
Unilateral relief shall be such relief as would fall to be given under Chapter II of this Part if arrangements with the government of the territory in question containing the provisions specified in subsections (4) to (10) below were in force by virtue of section 788, but subject to any particular provision made with respect to unilateral relief in that Chapter; and any expression in that Chapter which imports a reference to relief under arrangements for the time being having effect by virtue of that section shall be deemed to import also a reference to unilateral relief.
Credit for tax paid under the law of the territory outside the United Kingdom and computed by reference to income arising or any chargeable gain accruing in that territory shall be allowed against any United Kingdom income tax or corporation tax computed by reference to that income or gain (profits from, or remuneration for, personal or professional services performed in that territory being deemed for this purpose to be income arising in that territory).
Subsection (4) above shall have effect subject to the following modifications, that is to say—
where the territory is the Isle of Man or any of the Channel Islands, the limitation to income or gains arising in the territory shall not apply;
where arrangements with the government of the territory are for the time being in force by virtue of section 788, credit for tax paid under the law of the territory shall not be allowed by virtue of subsection (4) above in the case of any income or gains if any credit for that tax is allowable under those arrangements in respect of that income or those gains; and
credit shall not be allowed by virtue of subsection (4) above for overseas tax on a dividend paid by a company resident in the territory unless—
the overseas tax is directly charged on the dividend, whether by charge to tax, deduction of tax at source or otherwise, and the whole of it represents tax which neither the company nor the recipient would have borne if the dividend had not been paid; or
the dividend is paid to a company within subsection (6) below; or
the dividend is paid to a company to which section 802(1) applies and is a dividend of the kind described in that subsection.
Where a dividend paid by a company resident in the territory is paid to a company resident in the United Kingdom which either directly or indirectly controls, or is a subsidiary of a company which directly or indirectly controls— any tax in respect of its profits paid under the law of the territory by the company paying the dividend shall be taken into account in considering whether any, and if so what, credit is to be allowed in respect of the dividend. In this subsection references to one company being a subsidiary of another are to be construed in accordance with section 792(2).
not less than 10 per cent. of the voting power in the company paying the dividend; or
less than 10 per cent. of the voting power in the company paying the dividend if— and the company receiving the dividend shows that the conditions specified in subsection (7) below are satisfied;
it has been reduced below that percentage on or after 1st April 1972; or
it has been acquired on or after that date in exchange for voting power in another company in respect of which relief under this subsection by virtue of paragraph (a) above was due prior to the exchange;
The conditions referred to in subsection (6)(b) above are as follows—
that the reduction below the 10 per cent. limit (and any further reduction) or, as the case may be, the exchange (and any reduction thereafter) could not have been prevented by any reasonable endeavours on the part of the company receiving the dividend and was due to a cause or causes not reasonably foreseeable by it when control of the relevant voting power was acquired; and
no reasonable endeavours on the part of that company could have restored or, as the case may be, increased the voting power to not less than 10 per cent.
In subsection (7) above references to the company receiving the dividend include references—
to any company of which it is a subsidiary within the meaning of section 792(2); and
where prior to the reduction or exchange the voting power in question was controlled otherwise than directly by the company receiving the dividend, to each other company relevant for determining whether that voting power was controlled as required by subsection (6)(a) above.
In subsection (7) above “the relevant voting power” means the voting power by virtue of which relief was due under subsection (6)(a) above prior to the reduction or exchange or, where control of the whole of that voting power was not acquired at the same time, that part of the voting power of which control was last acquired.
In any case in which relief in respect of a dividend is due by virtue of subsection (6)(b) above, there shall be taken into account, as if it were tax payable under the law of the territory in which the company paying the dividend is resident, any tax that would be so taken into account under section 801 if the company paying the dividend and the company receiving it were related to each other within the meaning of section 801(5).
Where— any such assessments may be made as are necessary to ensure that the total amount of the income or chargeable gain is assessed, and the proper credit, if any, is given in respect thereof, and, where the income is, or the chargeable gain is, entrusted to any person in the United Kingdom for payment, any such assessment may be made on the recipient of the income or gain, and, in the case of an assessment in respect of income, may be assessed under Case VI of Schedule D.
unilateral relief may by given in respect of any income or chargeable gain, and
it appears that the assessment to income tax or corporation tax made in respect of the income or chargeable gain is not made in respect of the full amount thereof, or is incorrect having regard to the credit, if any, which falls to be given by way of unilateral relief,
In this section and in Chapter II of this Part in its application to unilateral relief, references to tax payable or paid under the law of a territory outside the United Kingdom include only references— but for this purpose tax under the law of any such territory shall not be treated as not corresponding to income tax or corporation tax by reason only that it is payable under the law of a province, state or other part of a country, or is levied by or on behalf of a municipality or other local body.
to taxes which are charged on income and which correspond to United Kingdom income tax, and
to taxes which are charged on income or chargeable gains and which correspond to United Kingdom corporation tax;
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for securing that relief from taxation imposed by the laws of the territory to which any such arrangements relate does not enure for the benefit of persons not entitled to such relief; and
for authorising, in cases where tax deductible from any payment has, in order to comply with any such arrangements, not been deducted, and it is discovered that the arrangements did not apply to that payment, the recovery of the tax by assessment on the person entitled to the payment or by deduction from subsequent payments.
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For the purposes of this Chapter one company is a subsidiary of another if the other company controls, directly or indirectly, not less than 50 per cent. of the voting power in the first company.
Any reference in this Chapter to foreign tax shall be construed in relation to credit to be allowed under any arrangements as a reference only to tax chargeable under the laws of the territory with the government of which the arrangements were made.
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Subject to the provisions of this Chapter, where under any arrangements credit is to be allowed against any of the United Kingdom taxes chargeable in respect of any income or chargeable gain, the amount of the United Kingdom taxes so chargeable shall be reduced by the amount of the credit.
Nothing in subsection (1) above authorises the allowance of credit against any United Kingdom tax against which credit is not allowable under the arrangements.
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Subject to subsection (2) below, credit shall not be allowed under any arrangements against any of the United Kingdom taxes for any chargeable period unless the person in respect of whose income or chargeable gains the United Kingdom tax is chargeable is resident in the United Kingdom for that period.
Credit may be allowed by way of unilateral relief—
for tax paid under the law of the Isle of Man or any of the Channel Islands, if the person in question is, for the chargeable period in question, resident either in the United Kingdom or in the Isle of Man or any of the Channel Islands, as the case may be;
for tax paid under the law of any territory and computed by reference to income from an office or employment the duties of which are performed wholly or mainly in that territory, against income tax chargeable under Schedule E and computed by reference to that income, if the person in question is for the year of assessment in question resident either in the United Kingdom or that territory; and
for tax paid under the law of any territory in respect of interest on a loan where the following conditions are fulfilled, namely—
that the person in question is a company which, for the chargeable period in question, carries on a banking business in the United Kingdom through a branch or agency;
that the loan was made by the company through the branch or agency in the United Kingdom;
that the territory under whose law the tax was paid is not one in which the company is liable to tax by reason of domicile, residence or place of management; and
that the amount of relief claimed does not exceed (or is by the claim expressly limited to) that which would have been available if the branch or agency had been a company resident in the United Kingdom and the loan had been made by it in the course of its banking business.
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Where credit for foreign tax falls under any arrangements to be allowed in respect of any income and income tax is payable by reference to the amount received in the United Kingdom, the amount received shall be treated for the purposes of income tax as increased by the amount of the foreign tax in respect of the income, including in the case of a dividend any underlying tax which under the arrangements is to be taken into account in considering whether any and if so what credit is to be allowed in respect of the dividend.
Where credit for foreign tax falls under any arrangements to be allowed in respect of any income or gain and subsection (1) above does not apply, then, in computing the amount of the income or gain for the purposes of income tax or corporation tax—
no deduction shall be made for foreign tax, whether in respect of the same or any other income or gain; and
the amount of the income shall, in the case of a dividend, be treated as increased by any underlying tax which, under the arrangements, is to be taken into account in considering whether any and if so what credit is to be allowed in respect of the dividend.
The amount of any income or gain shall not be treated as increased under this section by reference to any foreign tax which, although not payable, falls to be taken into account for the purposes of section 788(5).
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The amount of the credit for foreign tax which, under any arrangements, is to be allowed to a person against income tax for any year of assessment shall not exceed the difference between the amounts of income tax which would be borne by him for the year (no credit being allowed for foreign tax)—
if he were charged to tax on his total income for the year, computed in accordance with section 795; and
if he were charged to tax on the same income, computed in the same way, but excluding the income in respect of which the credit is to be allowed.
Where credit for foreign tax is to be allowed in respect of income from more than one source, subsection (1) above shall be applied successively to the income from each source, but so that on each successive application, paragraph (a) shall apply to the total income exclusive of the income to which the subsection has already been applied.
Without prejudice to subsections (1) and (2) above, the total credit for foreign tax to be allowed to a person against income tax for any year of assessment under all arrangements having effect by virtue of section 788 shall not exceed the total income tax payable by him for that year of assessment, less any income tax which he is entitled to charge against any other person.
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The amount of the credit for foreign tax which under any arrangements is to be allowed against corporation tax in respect of any income or chargeable gain (“the relevant income or gain”) shall not exceed the corporation tax attributable to the relevant income or gain, determined in accordance with subsections (2) and (3) below.
Subject to subsection (3) below, the amount of corporation tax attributable to the relevant income or gain shall be treated as equal to such proportion of the amount of that income or gain as corresponds to the rate of corporation tax payable by the company (before any credit under this Part) on its income or chargeable gains for the accounting period in which the income arises or the gain accrues (“the relevant accounting period”).
Where in the relevant accounting period there is any deduction to be made for charges on income, expenses of management or other amounts which can be deducted from or set against or treated as reducing profits of more than one description—
the company may for the purposes of this section allocate the deduction in such amounts and to such of its profits for that period as it thinks fit; and
the amount of the relevant income or gain shall be treated for the purposes of subsection (2) above as reduced or, as the case may be, extinguished by so much (if any) of the deduction as is allocated to it.
Where in accordance with section 239 any advance corporation tax falls to be set against the company’s liability to corporation tax on its profits (within the meaning of that section) for the relevant accounting period— and section 239(2) shall have effect in relation only to so much of the profits of the company chargeable to corporation tax for that period as does not include the relevant income or gain.
so far as that liability relates to the relevant income or gain, it shall be taken to be reduced by the amount of the credit for foreign tax attributable to that income or gain, as determined in accordance with subsections (2) and (3) above; and
the amount of advance corporation tax which may be set against that liability, so far as it relates to the relevant income or gain, shall not exceed whichever is the lower of the limits specified in subsection (5) below;
In relation to an amount of income or gain in respect of which the company’s liability to corporation tax is taken to be reduced as mentioned in paragraph (a) of subsection (4) above, the limits referred to in paragraph (b) of that subsection are—
the limit which would apply under section 239(2) if that amount of income or gain were the company’s only income or gain for the relevant accounting period; and
the amount of corporation tax for which, after taking account of that reduction, the company is liable in respect of that amount of income or gain.
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This section applies in a case where— and for the purpose only of determining whether the condition in paragraph (b) above is fulfilled in a case where the lender has in fact incurred no expenditure related to the earning of the foreign loan interest, it shall be assumed that he has incurred such expenditure.
in any chargeable period the profits of any person (“the lender”) which are brought into charge to income tax or corporation tax include an amount computed in accordance with section 795 in respect of interest (“foreign loan interest”) on a loan made to a person resident outside the United Kingdom; and
in determining the liability of the lender to income tax or corporation tax, expenditure related to the earning of the foreign loan interest is deductible in computing the profits referred to in paragraph (a) above; and
the lender is entitled in accordance with this Chapter to credit for foreign tax chargeable on or by reference to the foreign loan interest;
In subsection (1) above “interest”, in relation to a loan, includes any introductory or other fee or charge which is payable in accordance with the terms on which the loan is made or is otherwise payable in connection with the making of the loan; and any reference in this section to foreign loan interest shall be construed accordingly.
If in a case where this section applies the foreign tax referred to in subsection (1)(c) above is or includes an amount of spared tax, then for the purposes of income tax or corporation tax the amount which apart from this subsection would be the amount of the foreign loan interest shall be treated as increased by so much of the spared tax as does not exceed the permitted amount, as defined in subsection (4) below; but nothing in this subsection prejudices the operation of section 795 in relation to foreign tax which is not spared tax.
In this section “spared tax” means foreign tax which although not payable falls to be taken into account for the purposes of credit by virtue of section 788(5); and the permitted amount, in relation to spared tax which is referable to the whole or any part of the foreign loan interest, is an amount which does not exceed—
15 per cent. of the interest to which the spared tax is referable, computed without regard to any increase under subsection (3) above; or
if it is less, the amount of that spared tax for which, in accordance with any arrangements applicable to the case in question, credit falls to be given as mentioned in subsection (1)(c) above.
If in a case where this section applies—
the foreign tax referred to in subsection (1)(c) above is or includes an amount of tax which is not spared tax; and
the amount of tax exceeds— then, for the purposes of income tax or corporation tax, the amount which, apart from this subsection, would be the amount of the foreign loan interest shall be treated as reduced by a sum equal to the excess.
the amount of the credit which, by virtue of this Chapter (but disregarding subsection (6) below), is allowed for that foreign tax against income tax or corporation tax; or
if it is less, 15 per cent. of the foreign loan interest, computed without regard to any increase or reduction under this section,
Where this section applies, the amount of the credit for foreign tax referred to in subsection (1)(c) above which, in accordance with this Chapter, is to be allowed against income tax or corporation tax—
shall be limited by treating the amount of the foreign loan interest (as increased or reduced under subsection (3) or (5) above) as reduced (or further reduced) for the purposes of this Chapter by an amount equal to so much of the lender’s financial expenditure in relation to the loan concerned as is properly attributable to the period for which the interest is paid; and
shall not exceed 15 per cent. of the foreign loan interest, computed without regard to paragraph (a) above or to any increase under subsection (3) above or any reduction under subsection (5) above.
For the purposes of this section the lender’s financial expenditure in relation to a loan is the aggregate of—
the financial expenses (consisting of interest or similar sums) incurred by the lender in or in connection with the provision of the loan, so far as those expenses consist of payments which either are charges on income for the purposes of corporation tax or are deductible in computing profits of the lender which are brought into charge to income tax or corporation tax; and
where the loan is financed by the issue of securities at a discount by the lender, so much of the amount of the discount as either constitutes such a charge as is mentioned in paragraph (a) above or is deductible as mentioned in that paragraph; and
so much as it is just and reasonable to attribute to the loan of any interest or other return foregone by a person connected or associated with the lender in connection with the provision of funds to the lender, either interest free or in other circumstances more favourable to the lender than if the parties were at arm’s length; and
any other sum, whether paid by way of refund of tax or interest or by way of commission, which—
is paid by the lender or a person connected or associated with him;
is paid directly or indirectly to the borrower or a person connected or associated with him;
is deductible as mentioned in paragraph (a) above;
would not, apart from this paragraph, be taken into account in determining the amount of the foreign loan interest; and
it is reasonable to regard as referable to the loan or the foreign loan interest (or both).
In a case where the amount of the lender’s financial expenditure in relation to a loan is not readily ascertainable, that amount shall be taken, subject to subsection (9) below, to be such sum as it is just and reasonable to attribute to the financing of the loan, having regard, in particular, to any market rates of interest by reference to which the rate of interest on the loan is determined.
The Board may by regulations supplement subsection (8) above— and any such regulations may make different provision for different cases.
by specifying matters to be taken into account in determining such a just and reasonable attribution as is referred to in that subsection; and
by making provision with respect to the determination of market rates of interest for the purposes of that subsection;
For the purposes of this section—
section 839 applies; and
subsection (10) of section 783 applies as it applies for the purposes of that section.
Where the loan on which the foreign loan interest is payable was made pursuant to an agreement entered into before 1st April 1987, this section shall have effect subject to the following modifications in relation to interest payable before 1st April 1989— but subject to that, this section applies whether the loan was made before or after the passing of this Act.
in subsection (1) in paragraph (a) the words “in a territory” shall be inserted after “resident” and the words following paragraph (c) shall be omitted;
subsection (2) shall be omitted;
in subsection (5) for paragraph (b) there shall be substituted—and
for subsections (6) to (10) there shall be substituted—;
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Where in the case of any dividend arrangements provide for underlying tax to be taken into account in considering whether any and if so what credit is to be allowed against the United Kingdom taxes in respect of the dividend, the tax to be taken into account by virtue of that provision shall be so much of the foreign tax borne on the relevant profits by the body corporate paying the dividend as is properly attributable to the proportion of the relevant profits represented by the dividend.
Where under the foreign tax law the dividend has been increased for tax purposes by an amount to be set off against the recipient’s own tax under that law or, to the extent that it exceeds his own tax thereunder, paid to him, then, from the amount of the underlying tax to be taken into account under subsection (1) above there is to be subtracted the amount of that increase.
For the purposes of subsection (1) above the relevant profits, subject to subsection (4) below, are—
if the dividend is paid for a specified period, the profits of that period;
if the dividend is not paid for a specified period, but is paid out of specified profits, those profits; and
if the dividend is paid neither for a specified period nor out of specified profits, the profits of the last period for which accounts of the body corporate were made up which ended before the dividend became payable.
If, in a case falling under paragraph (a) or (c) of subsection (3) above, the total dividend exceeds the profits available for distribution of the period mentioned in that paragraph the relevant profits shall be the profits of that period plus so much of the profits available for distribution of preceding periods (other than profits previously distributed or previously treated as relevant profits for the purposes of this section or section 506 of the 1970 Act) as is equal to the excess; and for the purposes of this subsection the profits of the most recent preceding period shall first be taken into account, then the profits of the next most recent preceding period, and so on.
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arrangements provide, in relation to dividends of some classes but not in relation to dividends of other classes, that underlying tax is to be taken into account in considering whether any, and if so what, credit is to be allowed against the United Kingdom taxes in respect of the dividends; and
a dividend is paid which is not of a class in relation to which the arrangements so provide;
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Where a company resident outside the United Kingdom (“the overseas company”) pays a dividend to a company resident in the United Kingdom (“the United Kingdom company”) and the overseas company is related to the United Kingdom company, then for the purpose of allowing credit under any arrangements against corporation tax in respect of the dividend, there shall be taken into account, as if it were tax payable under the law of the territory in which the overseas company is resident—
any United Kingdom income tax or corporation tax payable by the overseas company in respect of its profits; and
any tax which, under the law of any other territory, is payable by the overseas company in respect of its profits.
Where the overseas company has received a dividend from a third company and the third company is related to the overseas company, then, subject to subsection (4) below, there shall be treated for the purposes of subsection (1) above as tax paid by the overseas company in respect of its profits any underlying tax payable by the third company, to the extent that it would be taken into account under this Part if the dividend had been paid by a company resident outside the United Kingdom to a company resident in the United Kingdom and arrangements had provided for underlying tax to be taken into account.
Where the third company has received a dividend from a fourth company and the fourth company is related to the third company, then, subject to subsection (4) below, tax payable by the fourth company shall similarly be treated for the purposes of subsection (2) above as tax paid by the third company; and so on for successive companies each of which is related to the one before.
Subsections (2) and (3) above are subject to the following limitations—
no tax shall be taken into account in respect of a dividend paid by a company resident in the United Kingdom except United Kingdom corporation tax and any tax for which that company is entitled to credit under this Part; and
no tax shall be taken into account in respect of a dividend paid by a company resident outside the United Kingdom to another such company unless it could have been taken into account under the other provisions of this Part had the other company been resident in the United Kingdom.
For the purposes of this section a company is related to another company if that other company— not less than 10 per cent. of the voting power in the first-mentioned company.
controls directly or indirectly, or
is a subsidiary of a company which controls directly or indirectly,
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Subject to subsection (2) below, where— then, in respect of dividends referable to that business which are paid to the company by companies resident in that territory, any tax payable by those companies in respect of their profits under the law of that or any other territory outside the United Kingdom, and any United Kingdom income tax or corporation tax so payable, shall, in considering whether any and if so what credit is to be allowed under any arrangements, be taken into account as tax so payable under the law of the first-mentioned territory is taken into account in a case falling within section 799.
a company resident in the United Kingdom is charged to tax under Case I of Schedule D in respect of any insurance business carried on by it, and
that business or any part of it is carried on through a branch or agency in a territory outside the United Kingdom,
For the purposes of subsection (2) above the relevant fraction, in relation to any overseas territory, is— where— A is the company’s local premium income in the financial year so far as referable to the business referred to in subsection (1) above; B is the company’s total premium income in the financial year so far as referable to that business;
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This section applies in a case where—
a bank or a company connected with a bank makes a claim for an allowance by way of credit in accordance with this Chapter; and
the claim relates to underlying tax on a dividend paid by the overseas company, within the meaning of section 801; and
that underlying tax is or includes tax payable under the law of a territory outside the United Kingdom on or by reference to interest on a loan made in the course of its business by that overseas company or by such third, fourth or successive company as is referred to in subsection (2) or (3) of that section; and
if the company which made the loan had been resident in the United Kingdom, then, in determining its liability to corporation tax, expenditure related to the earning of the interest on the loan would be deductible in computing the profits of the company brought into charge to tax.
In a case where this section applies, the amount of the credit for that part of the foreign tax which consists of the tax referred to in subsection (1)(c) above shall not exceed an amount determined under subsection (3) below.
The amount referred to in subsection (2) above is a sum equal to corporation tax, at the rate in force at the time the foreign tax referred to in paragraph (c) of subsection (1) above was chargeable, on so much of the interest on the loan as exceeds the amount of the lender’s relevant expenditure which is properly attributable to the period for which that interest is paid.
In subsection (3) above—
“interest”, subject to subsection (5) below, has the meaning assigned to it by section 798(2); and
“the lender’s relevant expenditure” means the amount which, if the company referred to in subsection (1)(d) above were resident in the United Kingdom (and liable to tax accordingly) would be its financial expenditure in relation to the loan, as determined in accordance with section 798(6) to (10).
If, in accordance with subsection (6) or subsection (8) below, the amount of the dividend would be treated for the purposes of corporation tax as increased or reduced by any amount, then the amount which, apart from this subsection, would be the amount of the interest referred to in subsection (3) above shall be taken to be increased or reduced by the same amount as the dividend is so treated as increased or reduced.
If, in a case where this section applies, the underlying tax is or includes an amount of spared tax, then, for the purposes of corporation tax, the amount which apart from this subsection would be the amount of the dividend shall be treated as increased by an amount equal to so much of that spared tax as does not exceed the permitted amount; but nothing in this subsection prejudices the operation of section 795 in relation to foreign tax which is not spared tax.
In this section—
“spared tax” has the same meaning as in section 798; and
the permitted amount, in relation to spared tax which is referable to the whole or any part of the interest referred to in subsection (1)(c) above, is an amount which does not exceed—
15 per cent. of the interest to which that spared tax is referable; or
if it is less, the amount of that spared tax which under any arrangements is to be taken into account for the purpose of allowing credit against corporation tax in respect of the dividend concerned.
If, in a case where this section applies— then, for the purposes of corporation tax, the amount which would apart from this subsection be the amount of the dividend shall be treated as reduced by a sum equal to the excess.
the underlying tax is or includes an amount of tax which is not spared tax, and
that amount of tax exceeds 15 per cent. of the interest to which it is referable,
Where this section applies, the amount of the credit referred to in paragraph (a) of subsection (1) above which is referable to the underlying tax payable as mentioned in paragraph (c) of that subsection shall not exceed 15 per cent. of so much of the interest referred to in that paragraph as is included in the relevant profits of the company paying the dividend; and for the purposes of this subsection—
“relevant profits” has the same meaning as, by virtue of section 799, it has for the purposes of the computation of underlying tax; and
the amount of the interest shall be determined without making any deduction in respect of any foreign tax.
In subsection (1) above “bank” means a company carrying on, in the United Kingdom or elsewhere— and section 839 applies for the purposes of subsection (1) above.
a banking business; or
another business which includes the making of loans where the circumstances of the business are such that, in determining the liability of the company to corporation tax, expenditure related to the earning of the interest on those loans is deductible in computing the profits brought into charge to tax;
Where the loan referred to in subsection (1)(c) was made pursuant to an agreement entered into before 1st April 1987, subsections (2) to (5) above shall not apply in relation to tax payable as mentioned in subsection (1)(c) above by reference to interest payable before 1st April 1989, but subject to that, this section applies whenever the loan referred to in subsection (1)(c) was made.
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Subject to the provisions of this section, credit for overseas tax paid in respect of any income arising in the years of commencement shall be allowed under this Part against United Kingdom income tax chargeable for any year of assessment in respect of that income if it would have been so allowed but for the fact that credit for that overseas tax had been allowed against the United Kingdom income tax chargeable in respect of that income for a previous year of assessment.
The amount of credit to be allowed in respect of any income by virtue of this section for any year of assessment shall not exceed the difference between—
the total credit allowable against income tax in respect of that income under this Part (including this section) for all years of assessment for which credit is so allowable; and
the amount of credit which was in fact so allowed in respect of that income for any earlier year or years of assessment.
The total credit so allowable in respect of any income for all those years of assessment shall be taken to be the amount of the overseas tax charged on that income, adjusted where the number of the United Kingdom periods of assessment exceeds the number of foreign periods of assessment, in the proportion which the former number bears to the latter, a period for which part only of the income is charged to tax being counted not as one period but as a fraction equal to the proportion which that part of the income bears to the whole of the income.
Where the same income is charged to different overseas taxes for different foreign periods of assessment, subsection (3) above, so far as it relates to the adjustment of overseas tax, shall be applied separately to each of the overseas taxes, and the total credit allowable shall be the aggregate of those taxes after the making of any adjustments in accordance with that subsection as so applied.
Where credit against income tax for any year of assessment is allowed by virtue of subsection (1) above in respect of any income (“the original income”) and subsequently by reason of the enactments relating to cessations, income arising in a non-basis period from the same source as the original income is not assessed to income tax, then if the amount of credit allowed against income tax in respect of the original income under this Part (including this section) for all years of assessment for which credit is so allowable exceeds the aggregate of the following amounts— the person chargeable in respect of income (if any) from the same source in the year of assessment following the non-basis period shall be treated as having received in that year a payment chargeable under Case VI of Schedule D of an amount such that income tax thereon at the basic rate is equal to the excess.
the amount of the credit against income tax which would have been allowed apart from subsection (1) above for all those years in respect of the original income; and
the amount of the overseas tax for which, under this Part, credit would have been allowable against income tax in respect of income arising in the non-basis period from the same source as the original income,
Any payment which a person is treated by virtue of subsection (5) above as having received shall not on that account constitute income of his for any of the purposes of the Income Tax Acts other than that subsection and in particular no part thereof shall constitute profits or gains brought into charge to income tax for the purposes of section 348.
Any claim for relief by way of credit under subsection (1) above against income tax for any year of assessment shall be made within six years of the end of that year or, where there is more than one year of assessment in respect of which such relief may be given, within six years of the end of the later of them.
In this section—
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Subject to subsection (2) below and section 804(7), any claim for an allowance under any arrangements by way of credit for foreign tax in respect of any income or chargeable gain shall be made not later than six years from the end of the chargeable period for which the income or the gain falls to be charged to income tax or corporation tax, or would fall to be so charged if any income tax or corporation tax were chargeable in respect of the income or gain.
Where the amount of any credit given under the arrangements is rendered excessive or insufficient by reason of any adjustment of the amount of any tax payable either in the United Kingdom or under the laws of any other territory, nothing in the Tax Acts limiting the time for the making of assessments or claims for relief shall apply to any assessment or claim to which the adjustment gives rise, being an assessment or claim made not later than six years from the time when all such assessments, adjustments and other determinations have been made, whether in the United Kingdom or elsewhere, as are material in determining whether any and if so what credit falls to be given.
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In any case where— credit of an amount equal to the relevant proportion of the profits or gains shall be allowed against any United Kingdom income tax or corporation tax computed by reference to the profits or gains, and shall be treated as if it were allowed under section 790(4). In this subsection the relevant proportion is the rate of tax to which the person is or would be liable as mentioned in paragraph (c) above.
a person is treated under section 714(2) as receiving annual profits or gains on the day an interest period ends; and
assuming that, in the chargeable period in which the day falls, he were to become entitled to any interest on the securities concerned, he would be liable in respect of the interest to tax chargeable under Case IV or V of Schedule D; and
he is liable under the law of a territory outside the United Kingdom to tax in respect of interest payable on the securities at the end of the interest period or he would be so liable if he were entitled to that interest,
In any case where— then the amount of that credit shall be a proportion of the amount it would be apart from this subsection, and the proportion is to be found by applying the formula— where— I is the amount of the interest; and R is the amount by which it is treated as reduced.
a person is entitled to credit against United Kingdom tax under section 790(4) or any corresponding provision of arrangements under section 788; and
the tax is computed by reference to income consisting of interest which falls due on securities at the end of an interest period and which is treated as reduced by virtue of section 714(5);
Where the person entitled to the credit is an individual, subsection (2) above does not apply unless the interest arises from securities to which the person either became or ceased to be entitled during the interest period.
Where section 811(1) applies to any income and, if credit were allowable in respect of it the credit would be reduced by virtue of subsection (2) above, section 811(1) shall have effect in relation to the income as if the reference to any sum paid in respect of tax on it were a reference to the amount which would be the amount of the credit if it were allowable and subsection (2) above applied.
Sections 710 and 711 shall apply for the interpretation of this section.
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In any case where—
a payment made by trustees falls to be treated as a net amount in accordance with section 687(2) and the income arising under the trust includes any taxed overseas income, and
the trustees certify that— then the person to whom the payment was made may claim that the payment, up to the amount so certified, shall be treated for the purposes of this Part as income received by him from that source and so received in the year in which the payment was made.
the income out of which the payment was made was or included taxed overseas income of an amount and from a source stated in the certificate, and
that amount arose to them not earlier than six years before the end of the year of assessment in which the payment was made;
In subsection (1) above “taxed overseas income”, in relation to any trust, means income in respect of which the trustees are entitled to credit for overseas tax under this Part.
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Where— he may, in claiming the relief in respect of that income, claim a postponement under this section of the relevant capital allowances operating to reduce that income for the purposes of tax for any chargeable period.
a person chargeable to tax under Schedule D in respect of a trade is liable to overseas tax in respect of any income arising from the trade, being overseas tax for which relief may be given by way of credit, repayment or set off under the preceding provisions of this Part, and
the conditions specified in subsection (2) below are satisfied,
The conditions are—
that the law under which the overseas tax is chargeable provides for deductions or allowances to be given corresponding to capital allowances, but on a different basis such that they operate to reduce the income in question (if at all) to a less extent than the capital allowances to which the claim relates, but are calculated to operate to a greater extent than the corresponding capital allowances to reduce income arising subsequently; and
that the relief falling to be so given in respect of the income in question is less than it would be if the capital allowances to which the claim relates operated to reduce the income to the same extent only as the deductions or allowances so provided for.
Where a person claims a postponement under this section of capital allowances for any chargeable period, then—
for the purposes of making the assessment for that period, the amount of those allowances shall be reduced by such amount as may be necessary to secure that they operate to reduce the income only to the extent mentioned in subsection (2)(b) above (or such less amount as the claimant may require); and
for the purpose of making the assessment for the following period that amount shall be added to the amount of the allowances for that period, and shall be deemed to be part of those allowances or, if there are no such allowances for that period, shall be deemed to be the allowances for that period.
For the purposes of any claim under this section—
there shall be taken into account such only of the relevant capital allowances, and the deductions or allowances operating to reduce the income in question for purposes of the overseas tax, as are calculated to give relief in respect of the same expenditure or the same assets; and
no account shall be taken of expenditure incurred or treated for the purposes of Chapter I of Part III of the Finance Act 1971 as incurred on or after 27th October 1970.
In this section “overseas tax” means tax chargeable under the laws of any territory outside the United Kingdom, and “relevant capital allowances”, in relation to any trade, means capital allowances falling to be made in taxing the trade.
This section applies (with any necessary adaptations) in relation to a profession, employment, vocation or office, and in relation to the occupation of woodlands the profits or gains of which are assessable under Schedule D, as it applies in relation to a trade.
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For the purposes of the Tax Acts, the amount of any income arising in any place outside the United Kingdom shall, subject to subsection (2) below, be treated as reduced by any sum which has been paid in respect of tax on that income in the place where the income has arisen (that is to say, tax payable under the law of a territory outside the United Kingdom).
Subsection (1) above— and this section has effect subject to section 795(2).
shall not apply to income the tax on which is to be computed by reference to the amount of income received in the United Kingdom; and
shall not affect section 278(3); and
shall not affect the liability to tax of an overseas life insurance company for any accounting period for which a charge to corporation tax under Case III of Schedule D arises under section 445 in respect of any of its income from the investments of its life assurance fund (excluding the pension fund and general annuity fund, if any) or for which such a charge would arise if there were such income;
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Where— the recipient company shall be liable to a fine for the violation of the provisions of section 812 equal to twice the amount of the excess or the additional amount, as the case may be.
section 812 applies so as to withdraw the entitlement of a company to claim to have a tax credit in respect of a qualifying distribution set against the income tax chargeable on its income and to have the excess of the credit over that income tax paid to it; and
the company (“the recipient company”) has either had that excess paid to it, or has received an additional amount in accordance with arrangements made under Regulation 2(1) of the Double Taxation Relief (Taxes on Income) (General) (Dividend) Regulations 1973;
Any fine payable under subsection (1) above— and any such fine is referred to below as “the recoverable amount”.
shall be payable to the Board;
shall be treated as having become payable at the date when the excess or additional amount was paid to the recipient company; and
may be recovered in accordance with subsections (3) to (7) below;
The recoverable amount may be assessed and recovered as if it were unpaid tax and section 30 of the Management Act (recovery of overpayment of tax etc.) shall apply accordingly.
Any amount which may be assessed and recovered as if it were unpaid tax by virtue of this section shall carry interest at the rate of 9 per cent. per annum from the date when it was payable in accordance with subsection (1) above until the date it is paid.
It is hereby declared that this section applies to a recoverable amount which is paid without the making of an assessment (but is paid after it is due) and that, where the recoverable amount is charged by any assessment (whether or not any part of it has been paid when the assessment is made), this section applies in relation to interest running before, as well as after, the making of the assessment.
Where the recoverable amount is not paid by the recipient company within six months from the date on which it became payable—
the recoverable amount may at any time within six years from the date on which it became payable be assessed and recovered as if it were unpaid tax due from any person who— and section 30 of the Management Act shall apply accordingly; and
is or was at any time prior to the expiration of that six year period connected with the recipient company, or
would have been connected on the assumption that all the facts and circumstances relating to the recipient company at the time the excess or additional amount, as the case may be, was paid continued to apply for six years thereafter,
as respects its accounting periods beginning with that in which the excess or additional amount referred to in subsection (1) above was paid and ending with that following that in which the recoverable amount is paid in accordance with the provisions of this section, the company which made the qualifying distribution in respect of which the recipient company received the excess or additional amount shall not be entitled—
to set any advance corporation tax paid by it against its liability to corporation tax for such periods in accordance with section 239; nor
to surrender the benefit of the whole or any part of any amount of advance corporation tax to a subsidiary in accordance with section 240 in such periods.
Where a recoverable amount is assessed and recovered from a person connected with the recipient company in accordance with subsection (6)(a) above, that person shall be liable for the interest payable in accordance with subsection (4) above, and until the interest is so paid, subsection (6)(b) above shall apply as if the words “the interest due in accordance with subsection (4) above is paid” were substituted for the words “the recoverable amount is paid in accordance with the provisions of this section”.
Interest payable under this section shall be paid without any deduction of income tax and shall not be allowed as a deduction in computing any income, profits or losses for any tax purposes.
Where under the law in force in a territory outside the United Kingdom interest is payable subject to a deduction in respect of taxation and such deduction applies to an amount of interest paid in accordance with subsection (4) above, the reference to the rate of 9 per cent. per annum in that subsection shall be deemed to be a reference to such rate of interest as after such deduction shall be equal to the rate of 9 per cent. per annum.
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In any case where arrangements are made, whether before or after the coming into force of this section, as a result of which interest is paid or a discount is allowed by or through a person who is resident in the United Kingdom, or carries on business in the United Kingdom through a branch or agency, and it is reasonable to suppose that, if such payment or allowance had not been made, a qualifying distribution would have been made by that person, or by another company resident in the United Kingdom to a company which has, or is an associated company of a company which has, a qualifying presence in a unitary state at the time when the payment or allowance is made, then—
no person who receives that payment or allowance shall be entitled to relief from income tax or corporation tax thereon by virtue of arrangements having effect under section 788(1); and
the payment or allowance shall not be allowed as a deduction in computing any income, profits or losses for any tax purposes.
Without prejudice to the generality of subsection (1) above, where a payment or allowance is not of itself a payment or allowance to which that subsection applies, but is made in conjunction with other payments of whatever nature and taken together with those payments has substantially similar effect to a distribution, then, for the purposes of subsection (1) above it shall be treated as a payment or allowance within that subsection.
Any company which has received such a payment of interest as is referred to in subsection (1) above, from which income tax has not been deducted by the person making the payment, and has a qualifying presence in a unitary state at the time of the payment, shall be treated for the purposes of section 813 as a company—
from which the entitlement to claim payment of the excess of a tax credit over the income tax chargeable on its income has been withdrawn by section 812(1), and
which has had paid to it such an excess in an amount equal to the income tax which should have been deducted from the payment of interest.
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Where under the law in force in any territory outside the United Kingdom provision is made for the allowance, in respect of the payment of United Kingdom income tax or corporation tax, of relief from tax payable under that law, the obligation as to secrecy imposed by the Tax Acts upon persons employed in relation to Inland Revenue shall not prevent the disclosure to the authorised officer of the government of the territory in question of such facts as may be necessary to enable the proper relief to be given under that law. Section 790(12) shall apply for the interpretation of this subsection as it applies for the interpretation of that section.
Where any arrangements have effect by virtue of section 788, the obligation as to secrecy imposed by any enactment shall not prevent the Board, or any authorised officer of the Board, from disclosing to any authorised officer of the government with which the arrangements are made such information as is required to be disclosed under the arrangements.
Where a person beneficially entitled to income from any securities as defined by section 24 of the Management Act (information as to income from securities) is resident in a territory to which arrangements having effect under section 788 with respect to income tax or corporation tax relate, section 24(3) of that Act shall not exempt any bank from the duty of disclosing to the Board particulars relating to the income of that person.
The obligation as to secrecy imposed by any enactments with regard to income tax or corporation tax shall not prevent the disclosure, to any authorised officer of any country to which a declaration made under section 514 of the 1970 Act (agreements about shipping etc.) relates, of such facts as may be necessary to enable relief to be duly given in accordance with the arrangements specified in the declaration.
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In arriving at the amount of profits or gains for tax purposes—
no other deductions shall be made than such as are expressly enumerated in the Tax Acts; and
no deduction shall be made on account of any annuity or other annual payment (not being interest) to be paid out of such profits or gains in regard that a proportionate part of income tax is allowed to be deducted on making any such payment.
In arriving at the amount of profits or gains from any property described in the Tax Acts, or from any office or employment, no deduction shall be made on account of diminution of capital employed, or of loss sustained, in any trade or in any profession, employment or vocation.
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It is hereby declared that any provision made before or after the passing of this Act, whether orally or in writing, for the payment of interest “less tax”, or using words to that effect, is to be construed, in relation to interest payable without deduction of tax, as if the words “less tax”, or the equivalent words, were not included.
In relation to interest on which the recipient is chargeable to tax under Case III of Schedule D, and which is payable without deduction of tax, any provision, made before or after the passing of this Act, whether orally or in writing, and however worded, for the payment of interest at such a rate (“the gross rate”) as shall, after the deduction of income tax, be equal to a stated rate, shall be construed as if it were a provision requiring the payment of interest at the gross rate.
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Where any provision, however worded, contained in an instrument (of whatever nature) made on or after 3rd September 1939 or in a will or codicil taking effect on or after that date provides for the payment, whether periodically or otherwise— it shall have effect as follows.
of a stated amount free of income tax other than surtax; or
of an amount which, after deduction of income tax at the standard rate, is equal to a stated amount;
If it is such a provision as is mentioned in subsection (1)(a) above it shall have effect as if it provided for the payment of the stated amount free of income tax other than such as exceeds the amount to which the person to whom the payment is made would be liable if all income tax were charged at the basic rate to the exclusion of any higher rate.
If it is such a provision as is mentioned in subsection (1)(b) above it shall have effect as if it provided for the payment of an amount which after deduction of income tax at the basic rate is equal to the stated amount.
Any instrument however worded conferring on any person a right to receive a dividend or interest the amount of which depends on the standard rate of income tax shall have effect as if instead of referring to the standard rate it referred to the basic rate.
Any reference in a statutory instrument made under the Tax Acts to the standard rate of income tax shall have effect as if it were a reference to the basic rate.
In order to ensure the collection in due time of income tax which may be granted for any year commencing on 6th April, all such provisions contained in the Income Tax Acts as were in force on the preceding day shall have full force and effect with respect to tax which may be so granted, in the same manner as if that tax had been actually granted by Act of Parliament and those provisions had been applied thereto by the Act.
Where, in any year of assessment or accounting period, any half-yearly or quarterly payments (or half-periodic or quarterly payments) have been made on account of any interest, dividends or other annual profits or gains, previously to the passing of the Act imposing income or corporation tax for that year or period, and tax has not been charged thereon or deducted therefrom or has not been charged thereon or deducted therefrom at the rate ultimately imposed for that year or period—
the amount not so charged or deducted shall be charged in respect of those payments to income tax under Chapter 2 of Part 4 of ITTOIA 2005 (interest) or shall be charged to corporation tax. . . . . . ; and
the agents entrusted with the payment of the interest, dividends or other annual profits or gains shall furnish to the Board a list containing the names and addresses of the persons to whom payments have been made and the amount of those payments, upon a requisition made by the Board in that behalf.
Any person liable to pay any rent, interest or annuity, or to make any other annual payment—
shall be authorised— on the occasion of the next payment of the rent, interest or annuity or making of the other annual payment after the passing of the Act so imposing the tax, in addition to any other deduction which he may be by law authorised to make; and
to make any deduction on account of income tax for any year of assessment which he has failed to make previously to the passing of the Act imposing the tax for that year, or
to make up any deficiency in any such deduction which has been so made,
shall also be entitled, if there is no future payment from which the deduction may be made, to recover the sum which might have been deducted as if it were a debt due from the person as against whom the deduction could originally have been made if the Act imposing the tax for the year had been in force.
Subsection (2) above shall apply with respect to— as it applies with respect to any rent, interest, annuity or other annual payment.
any payment to which section 906 of ITA 2007 applies (certain royalties etc where usual place of abode of owner is abroad), and
any royalty or other sum paid in respect of the user of a patent; . . .
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In this section “interest” and “dividends” do not include any interest or dividend which is a distribution.
If in any year of assessment (“the year”) a resolution having statutory effect under the Provisional Collection of Taxes Act 1968 provides for the charging of income tax at a lower rate less than that charged for the previous year, the following provisions of this section shall have effect with respect to deductions in respect of income tax by any body corporate, from payments of interest (not being a distribution) on any of its securities.
Any deduction which was made before the expiration of one month from the passing of the resolution and which would, if the tax had been renewed at the rate imposed for the previous year, have been a legal deduction, shall be deemed to be a deduction rendered legal by section 2 of the Provisional Collection of Taxes Act 1968 and that section shall, subject to this section, apply accordingly.
Any over-deduction to be made good under that section may be made good by a reduction of the amount of tax deducted from the next payment of like nature made on the security in question after the passing of the Act imposing the tax for the year.
Any amount made good under section 2 of the Provisional Collection of Taxes Act 1968 shall— irrespective, in either case, of whether or not he is the person who was entitled to the payment, or to the security at the date when the original deduction was made.
in the case of an over-deduction which is made good under subsection (3) above, enure to the benefit of the person entitled to the payment on the occasion of which the over-deduction is made good; and
in any other case, enure to the benefit of the person entitled to the security in question at the date when the amount is made good,
Subsection (3) above shall not authorise the retention of any part of the amount over-deducted for more than one year from the passing of the Act imposing the tax for the year.
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is entitled to claim relief from income tax (other than relief in respect of life insurance premiums), by repayment or otherwise, in respect of—
any amount which is paid or borne by him out of his income or which is allowable or may be deducted from his income; or
any reduction of an assessment relating to his income or any part of his income; or
any adjustment or set-off with regard to a loss; and
claims that relief for any year of assessment,
Subject to the following provisions of this section, a repayment made by the Board or an officer of the Board of any of the following, namely— shall be increased under this section by an amount (a “repayment supplement”) equal to interest on the amount repaid at the rate applicable under section 178 of the Finance Act 1989 for the period (if any) between the relevant time and the date on which the order for the repayment is issued.
an amount paid on account of income tax under section 59A of the Management Act;
any income tax paid by or on behalf of an individual for a year of assessment;
a penalty payable under any paragraph of Schedule 56 to the Finance Act 2009 in respect of an amount falling within any of the following items of the Table in paragraph 1 of that Schedule—
item 1, 12, 18 or 19; or
insofar as the tax falls within item 1, item 17, 23 or 24; and
a penalty incurred by an individual under any of the provisions of that Act the Finance Act 2009 or Schedules 24 to 26 to the Finance Act 2021,
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For the purposes of subsection (1) above—
if the repayment is— the relevant time is the date of the payment that is being repaid;
the repayment of an amount paid in accordance with the requirements of section 59A of the Management Act on account of income tax for a year of assessment, or
the repayment of income tax for such a year which is not income tax deducted at source (other than a repayment within paragraph (ac)),
if the repayment is a payment made by the Board under section 375(8), the relevant time is—
if the interest payment was made in the year 1996-97 or a subsequent year of assessment, the 31st January next following that year;
if the interest payment was made in an earlier year of assessment, the 5th April next following that year;
if the repayment is of income tax deducted at source for a year of assessment, the relevant time is the 31st January next following that year; and
if the repayment is a repayment as a result of a claim for relief under any of the provisions mentioned in subsection (2C) above, the relevant time is the 31st January next following the year that is the later year in relation to the claim;
if the repayment is a repayment as a result of a claim under section 496B of ITA 2007 (relief for payments by discretionary trust taxable as employment income), the relevant time is the 31 January next following the end of the tax year to which the claim relates;
if the repayment is a payment falling within subsection (2D)(b), the relevant time is 31 January next following the end of the tax year in which the entitlement to relief arose;
if the repayment is of a penalty or surcharge, the relevant time is the date on which the penalty or surcharge was paid.
For the purposes of subsection (3) above, where a repayment in respect of income tax for a year of assessment is made to any person, that repayment—
shall be attributed first to so much of any payment made by him under section 59B of the Management Act as is a payment in respect of income tax for that year;
in so far as it exceeds the amount (if any) to which it is attributable under paragraph (a) above, shall be attributed in two equal parts to each of the payments made by him under section 59A of the Management Act on account of income tax for that year;
in so far as it exceeds the amounts (if any) to which it is attributable under paragraphs (a) and (b) above, shall be attributed to income tax deducted at source for that year; and
in so far as it is attributable to a payment made in instalments shall be attributed to a later instalment before being attributed to an earlier one.
Subsection (1) above shall apply to a repayment made in consequence of a claim under section 228 of the Income Tax Act 1952 (relief in respect of income accumulated under trusts) as if the repayment were of income tax paid by the claimant for the year of assessment in which the contingency mentioned in that section happened.
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the repayment shall for the purposes of this subsection be attributable to such of the years in question, and in such proportions, as may be determined in accordance with regulations made under and for the purposes of this subsection by the Board; and
subsections (1) and (3) above shall have effect in relation to so much of the repayment as is by virtue of paragraph (a) above attributed to any particular year of assessment as if in subsection (1) the words “of not less than £25” were omitted.
Subsection (1) above shall apply to a payment made by the Board under section 375(8) (payment of amount which borrower would have been able to deduct from interest payment under section 369(1)) as if the payment were a repayment falling within that subsection.
... The Treasury may by order from time to time increase or decrease the rate of interest by reference to which—
repayment supplements are calculated under subsection (1) above; and
repayment supplements are calculated under section 47 of the Finance (No. 2) Act 1975.
Subsection (1) above shall apply to a repayment made by the Board as a result of a claim for relief under— as if it were a repayment falling within that subsection.
paragraph 2 of Schedule 1B to the Management Act (carry back of loss relief),
paragraph 3 of that Schedule (relief for fluctuating profits of farming etc.), or
Schedule 4A to this Act (relief for fluctuating profits of creative artists etc.),
A repayment supplement shall not be payable under this section in respect of a repayment or payment made in consequence of an order or judgment of a court having power to allow interest on the repayment or payment, or in respect of a repayment of a post-war credit within the meaning of the Income Tax (Repayment of Post-War Credits) Act 1959.
Subsection (1) shall apply—
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to a payment made under paragraph 6(1) of Schedule 14 (payment where entitlement to life assurance premium relief has not been given by deduction) as if the payment were a repayment of income tax paid for the tax year in which the entitlement to relief arose.
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Subsections (1) to (7) above shall apply in relation to . . . the trustees of a settlement , scheme administrators of registered pension schemes sub-scheme administrators of sub-schemes which form part of a split scheme pursuant to the Registered Pensions (Splitting of Schemes) Regulations 2006 or personal representatives ... as they apply in relation to an individual.
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In this section any reference to income tax deducted at source for a year of assessment is a reference to— but does not include a reference to amounts which, in that year, are deducted at source under PAYE regulations in respect of previous years.
income tax deducted or treated as deducted from any income, or treated as paid on any income, in respect of that year, . . .
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This section applies to the following payments made to a company in connection with any accounting period for which the company was resident in the United Kingdom (“the relevant accounting period”), that is to say—
a repayment of corporation tax paid by the company for that accounting period (including advance corporation tax paid in respect of distributions made by the company in that accounting period . . . ); or
a repayment of income tax in respect of a payment received by the company in that accounting period on which the company bore income tax by deduction; . . .
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Subject to the following provisions of this section, where a payment . . . to which this section applies is made by the Board or an inspector after the end of the 12 months beginning with the material date, the payment shall be increased under this section by an amount (a “repayment supplement”) equal to interest on the amount paid at the rate applicable under section 178 of the Finance Act 1989 for each complete tax month contained in the period (if any) beginning with the relevant date and ending at the end of the tax month in which the order for the payment is issued.
For the purposes of subsection (2) above— and where a payment to which this section applies is a repayment of corporation tax paid by a company on different dates, the payment shall as far as possible be treated for the purposes of this subsection as a repayment of tax paid on a later rather than an earlier date among those dates.
if the payment is a repayment of corporation tax that was paid on or after the first anniversary of the material date, the relevant date is the anniversary of the material date that occurs next after the date on which that tax was paid;
in any other case, the relevant date is the first anniversary of the material date;
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For the purposes of this section—
a repayment of corporation tax made in consequence of a claim by a company under section 239(3) to have the whole or any part of an amount of surplus advance corporation tax arising in the case of any accounting period treated as if it were advance corporation tax paid in respect of distributions made by the company in any earlier accounting period shall be treated as a repayment of corporation tax paid for the accounting period in the case of which that amount of surplus advance corporation tax arose; and
a repayment of income tax or corporation tax made on a claim under subsection (4) of section 419 shall be treated as if it were a repayment of corporation tax paid for the accounting period in which the repayment of, or of the part in question of, the loan or advance mentioned in that subsection was made; and
a repayment of corporation tax or income tax falling to be made as a result of a claim under section 393A(1) to have the whole or any part of a loss incurred in an accounting period set off against profits of an earlier accounting period (“the earlier period”)—
shall, in a case where the earlier period falls wholly within the period of twelve months immediately preceding the accounting period in which the loss was incurred, be treated as a repayment of tax paid for the earlier period; and
in any other case, shall be treated as a repayment of tax paid for the accounting period in which the loss is incurred; and
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. . . The Treasury may by order from time to time increase or decrease the rate of interest by reference to which repayment supplements are calculated under subsection (2) above.
A repayment supplement shall not be payable under this section in respect of a payment made in consequence of an order or judgment of a court having power to allow interest on the payment.
A repayment supplement paid under this section shall be disregarded for all purposes of income tax and corporation tax.
In this section—
This section has effect subject to section 826(8).
In any case where— then, from the material date until the order for repayment or payment is issued, the repayment or payment shall carry interest at the rate which, under section 89 of the Management Act, is for the time being the prescribed rate for the purposes of this section.
a repayment falls to be made of corporation tax paid by a company for an accounting period which ends after the appointed day; or
a repayment of income tax falls to be made in respect of a payment received by a company in such an accounting period; or
a repayment falls to be made under sections 246N and 246Q of advance corporation tax paid by a company in respect of distributions made by it in such an accounting period; or
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a payment of R&D tax credit falls to be made to a company under Chapter 2 or 7 of Part 13 of CTA 2009 in respect of an accounting period; or
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a payment of land remediation tax credit or life assurance company tax credit falls to be made to a company under Part 14 of CTA 2009 in respect of an accounting period; or
a payment of film tax credit falls to be made to a company, or
a payment of television tax credit falls to be made to a company; or
a payment of video game tax credit falls to be made to a company; or
a payment of theatre tax credit falls to be made to a company; or
a payment of orchestra tax credit falls to be made to a company; or
a payment of museums and galleries exhibition tax credit falls to be made to a company; or
a payment of first-year tax credit falls to be made to a company under Schedule A1 to the Capital Allowances Act,
Subject to section 826A(2), in relation to corporation tax paid by a company for an accounting period, the material date for the purposes of this section is the date on which corporation tax was paid or, if it is later, the date on which corporation tax for that accounting period became (or, as the case may be, would have become) due and payable in accordance with section 59D of the Management Act (payment of corporation tax).
In relation to a repayment of income tax falling within subsection (1)(b) above . . . , the material date is the day after the end of the accounting period in which the payment referred to in subsection (1)(b) above . . . was received by the company.
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For the purposes of this section a repayment of tax made on a claim under section 458 of CTA 2010 shall be treated as if it were a repayment of corporation tax for the accounting period in which the event giving rise to entitlement to relief under that section occurred but, in relation to such a repayment of tax, the material date for the purposes of this section is—
the date when the entitlement to relief in respect of the repayment accrued, that is to say— or
where the repayment , or the release or writing off, of the loan or advance (or part thereof) occurred on or after the day mentioned in section 458(4) of CTA 2010, the date nine months after the end of that accounting period; and
in any other case, the date nine months after the end of the accounting period in which the loan or advance was made;
if it is later, the date on which the tax which is to be repaid was in fact paid.
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In relation to a payment of R&D tax credit falling within subsection (1)(d) above the material date is whichever is the later of—
the filing date for the company’s company tax return for the accounting period for which the R&D tax credit is claimed, and
the date on which the company tax return or amended company tax return containing the claim for payment of the R&D tax credit is delivered to the Inland Revenue. For this purpose “the filing date”, in relation to a company tax return, has the same meaning as in Schedule 18 to the Finance Act 1998.
Where a repayment of corporation tax is a repayment of tax paid by a company on different dates, the repayment shall so far as possible be treated for the purposes of this section as a repayment of tax paid on a later rather than an earlier date among those dates.
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there is in any accounting period of a company (“the later period”) an amount of surplus advance corporation tax, as defined in section 239(3); and
pursuant to a claim under section 239(3), the whole or any part of that amount is treated for the purposes of section 239 as discharging liability for an amount of corporation tax for an earlier accounting period (“the earlier period”); and
a repayment falls to be made of corporation tax made for the earlier period,
In relation to a payment of land remediation tax credit or life assurance company tax credit falling within subsection (1)(e) above the material date is whichever is the later of—
the filing date for the company’s company tax return for the accounting period for which the land remediation tax credit or the life assurance company tax credit is claimed, and
the date on which the company tax return or amended company tax return containing the claim for payment of the land remediation tax credit or the life assurance company tax credit is delivered to the Inland Revenue. For this purpose “the filing date”, in relation to a company tax return, has the same meaning as in Schedule 18 to the Finance Act 1998.
In consequence of the preceding provisions of this section, no repayment supplement (within the meaning of section 825) shall be paid in respect of any repayment of tax or payment of tax credit where the relevant accounting period (within the meaning of that section) ends after the appointed day.
In relation to a payment of film tax credit , television tax credit , video game tax credit , theatre tax credit , orchestra tax credit or museums and galleries exhibition tax credit the material date is whichever is the later of— For this purpose “the filing date”, in relation to a company tax return, has the same meaning as in Schedule 18 to the Finance Act 1998.
the filing date for the company's company tax return for the accounting period for which the tax credit is payable, and
the date on which the company tax return or amended company tax return containing the claim for payment is delivered to an officer of Revenue and Customs.
In this section “the appointed day” means such day or days, not being earlier than 31st March 1992, as the Treasury may by order appoint for the purposes of this section.
In relation to a payment of first-year tax credit falling within subsection (1)(g) above the material date is whichever is the later of— For this purpose “the filing date”, in relation to a company tax return, has the same meaning as in Schedule 18 to the Finance Act 1998.
the filing date for the company's company tax return for the accounting period for which the tax credit is claimed, and
the date on which the company tax return or amended company tax return containing the claim for payment of the tax credit is delivered to the Commissioners for Her Majesty's Revenue and Customs.
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In any case where— then, in determining the amount of interest (if any) payable under this section on the repayment referred to in paragraph (c) above, no account shall be taken of so much of the amount of that repayment as falls to be made as a result of the claim under section 37 of CTA 2010, except so far as concerns interest for any time after the date on which any corporation tax for the later period became (or, as the case may be, would have become) due and payable, as mentioned in subsection (7D) below.
a company carrying on a trade incurs a loss in the trade in an accounting period (“the later period”),
as a result of a claim under section 37 of CTA 2010, the whole or any part of that loss is relieved(whether under section 37 or 42 of that Act) for the purposes of corporation tax against profits (of whatever description) of an earlier accounting period (“the earlier period”) which does not fall wholly within the period of twelve months immediately preceding the later period, and
a repayment falls to be made of corporation tax paid for the earlier period or of income tax in respect of a payment received by the company in that accounting period,
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In any case where— then, in determining the amount of interest (if any) payable under this section on the repayment referred to in paragraph (c) above, no account shall be taken of so much of the amount of that repayment as falls to be made as a result of the claim under section 45F, except so far as concerns interest for any time after the date on which any corporation tax for the terminal period became (or, as the case may be, would have become) due and payable, as mentioned in subsection (7D) below).
a company ceases to carry on a trade in an accounting period (“the terminal period”),
as a result of a claim under section 45F of CTA 2010, the whole or any part of a loss made in the trade is relieved for the purposes of corporation tax against profits (of whatever description) of an earlier accounting period (“the earlier period”) which does not fall wholly within the period of 12 months immediately preceding the terminal period, and
a repayment falls to be made of corporation tax paid for the earlier period or of income tax in respect of a payment received by the company in that accounting period,
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Subject to subsection (7BC) below, in any case where— then, in determining the amount of interest (if any) payable under this section on the repayment referred to in paragraph (c) above, no account shall be taken of so much of the amount of the repayment as falls to be made as a result of the claim under section 806G, except so far as concerns interest for any time after the date on which any corporation tax for the later period became due and payable (as mentioned in subsection (7D) below).
within the meaning of section 806D, any relievable underlying tax or relievable withholding tax arises in an accounting period of a company (“the later period”),
pursuant to a claim under section 806G, the whole or any part of that tax is treated as mentioned in section 806D(4)(c) or (5)(c) in relation to the single related dividend or the single unrelated dividend arising in an earlier accounting period (“the earlier period”), and
a repayment falls to be made of corporation tax paid for the earlier period or of income tax in respect of a payment received by the company in that period,
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In a case where— then, in determining the amount of interest (if any) payable under this section on the repayment referred to in paragraph (c) above, no account shall be taken of so much of the amount of the repayment as falls to be made as a result of the claim under section 389(1) or 459(1)(b) of CTA 2009 except so far as concerns interest for any time after the date on which any corporation tax for the later period became (or, as the case may be, would have become) due and payable, as mentioned in subsection (7D) below.
there is for an accounting period of a company (“the later period”) a non-trading deficit on the company’s loan relationships,
as a result of a claim under section 389(1) or 459(1)(b) of CTA 2009 the whole or part of the deficit for the later period is set off against profits of an earlier accounting period (“the earlier period”), and
a repayment falls to be made of corporation tax for the earlier period or of income tax in respect of a payment received by the company in that accounting period,
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In subsections (7), (7A), (7AA), (7B) , (7BB) and (7C) above, any reference to the date on which corporation tax for an accounting period became, or would have become, due and payable shall be construed on the basis that corporation tax for an accounting period becomes due and payable on the day following the expiry of nine months from the end of the accounting period.
The power conferred by section 59E of the Management Act (alteration of date on which corporation tax becomes due and payable) does not include power to make provision in relation to subsection (7), (7A), (7AA) (7B), (7BB), (7C) or (7D) above the effect of which would be to change the meaning of references in subsection (7), (7A), (7AA) (7B) , (7BB) or (7C) above to the date on which corporation tax for an accounting period became, or would have become, due and payable (as mentioned in subsection (7D) above).
Where— the interest that ought not to have been paid may be recovered from the company as if it were interest charged under Part IX of the Management Act (interest on overdue tax).
interest has been paid to a company under subsection (1)(a) , (d), (e) (f), (fa), (fb) , (fc) , (fd) or (fe) above,
there is— other than a change which in whole or in part corrects an error made by the Board or an officer of the Board, and
a change in the company’s assessed liability to corporation tax, or
a change in the amount of the R&D tax credit . . . , land remediation tax credit or life assurance company tax creditor film tax creditor television tax credit or video game tax creditor theatre tax creditor orchestra tax creditor museums and galleries exhibition tax creditor first-year tax credit under Schedule A1 to the Capital Allowances Act payable to the company (which does not result in a change falling within sub-paragraph (i)),
as a result only of that change (and, in particular, not as a result of any error in the calculation of the interest), it appears to an officer of the Board that the interest ought not to have been paid, either at all or to any extent,
For the purposes of subsection (8A) above, the cases where there is a change in a company’s assessed liability to corporation tax are those cases where— whether or not any previous assessment or determination has been made.
an assessment, or an amendment of an assessment, of the amount of corporation tax payable by the company for the accounting period in question is made, or
a determination of that amount is made under paragraph 36 or 37 of Schedule 18 to the Finance Act 1998 (which until superseded by a self-assessment under that Schedule has effect as if it were one),
For the purposes of subsection (8A)(b) above, the cases where there is a change in the amount of the R&D tax credit . . . , the land remediation tax credit or the life assurance company tax creditor film tax creditor television tax credit or video game tax creditor theatre tax creditor orchestra tax creditor museums and galleries exhibition tax creditor first-year tax credit under Schedule A1 to the Capital Allowances Act payable to the company are those cases where an assessment, or an amendment to an assessment, is made to recover an amount of R&D tax credit . . . , land remediation tax credit or life assurance company tax creditor film tax creditor television tax credit or video game tax creditor theatre tax creditor orchestra tax creditor museums and galleries exhibition tax creditor first-year tax credit under Schedule A1 to the Capital Allowances Act paid to the company for the accounting period in question.
In subsection (8A)(b) above “error” includes—
any computational error; and
the allowance of a claim or election which ought not to have been allowed.
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Where, under Chapter II of Part I of the Finance Act 1985 (value added tax), a person is liable to make a payment by way of— the payment shall not be allowed as a deduction in computing any income, profits or losses for any tax purposes.
penalty under any of sections 13 to 17; or
interest under section 18; or
surcharge under section 19;
A sum paid to any person by way of supplement under section 20 of the Finance Act 1985 (VAT repayment supplements) shall be disregarded for all purposes of corporation tax and income tax.
The Treasury may by regulations make provision applying section 826, with such modifications as may be prescribed, for the purpose of conferring on companies of such descriptions as may be prescribed a right to interest— and for treating any such interest for the purposes, or prescribed purposes, of the Tax Acts as interest under section 826(1)(a) on a repayment of corporation tax.
on such payments made by them in respect of corporation tax as may be prescribed,
at the rate applicable under section 178 of the Finance Act 1989, and
for such period as may be prescribed,
The Treasury may by regulations make provision modifying section 826(2) in relation to companies of such description as may be prescribed.
Subsections (1) and (2) above do not apply in relation to companies in relation to which section 826(2) is modified or otherwise affected by regulations under section 59E of the Management Act (alteration of date on which corporation tax becomes due and payable) in relation to the accounting period to which the corporation tax in question relates.
Where the Treasury make regulations under subsection (2) above in relation to companies of any description, they may also make regulations modifying section 59DA(2) of the Management Act in relation to those companies, or any description of such companies, by varying the date before which the claim there mentioned may not be made.
Regulations under this section—
may make different provision in relation to different cases or circumstances or in relation to companies or accounting periods of different descriptions;
may make such supplementary, incidental, consequential or transitional provision as appears to the Treasury to be necessary or expedient.
Regulations under this section may not make provision in relation to accounting periods ending before the day appointed under section 199 of the Finance Act 1994 for the purposes of Chapter III of Part IV of that Act (corporation tax self-assessment).
In this section “prescribed” means prescribed by regulations made under this section.
. . . Any power of the Treasury or the Board to make any order or regulations under this Act . . . shall be exercisable by statutory instrument.
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Subject to subsection (4) below and to any other provision to the contrary, any statutory instrument containing any order or regulations made by the Treasury or the Board . . . shall be subject to annulment in pursuance of a resolution of the House of Commons.
Subsection (3) above shall not apply in relation to an order or regulations made under section . . . . . . . . . . . . . . . . . . . . . 590C(6). . . . . . . . . or paragraph 7 of Schedule 14 . . . or—
if any other Parliamentary procedure is expressly provided;
if the order in question is an order appointing a day for the purposes of any provision of the Tax Acts, being a day as from which the provision will have effect, with or without amendments, or will cease to have effect.
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Subject to subsections (2) and (3) below, all the provisions of the Income Tax Acts relating to the assessment, charge, deduction and payment of income tax shall apply in relation to public offices and departments of the Crown.
Nothing in those provisions of the Income Tax Acts shall require the payment by any such office or department of any tax which would be ultimately borne by the Crown.
Subsection (1) above shall not apply to public offices and departments of any country, state, province or colony within section 320(3)(b) or (c) and nothing in subsection (1) above shall exempt any government from taxation to which it is liable in connection with any office or department by virtue of section 25 of the Finance Act 1925 (liability in respect of trading operations of Dominion governments and others).
No letters patent granted or to be granted by the Crown to any person, city, borough or town corporate of any liberty, privilege or exemption from subsidies, tolls, taxes, assessments or aids, and no statute which grants any salary, annuity or pension to any person free of any taxes, deductions or assessments, shall be construed or taken to exempt any person, city, borough or town corporate, or any inhabitant of any city, borough or town corporate, from income tax, and all non-obstantes in any such letters patent or statute made or to be made to the contrary effect shall be void.
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“exploration or exploitation activities” means activities carried on in connection with the exploration or exploitation of so much of the seabed and subsoil and their natural resources as is situated in the United Kingdom or a designated area;
“exploration or exploitation rights” means rights to assets to be produced by exploration or exploitation activities or to interests in or to the benefit of such assets; and
“designated area” means an area designated by Order in Council under section 1(7) of the Continental Shelf Act 1964.
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In this Act, except so far as the context otherwise requires—
“the Corporation Tax Acts” means the enactments relating to the taxation of the income and chargeable gains of companies and of company distributions (including provisions relating also to income tax); and
“the Income Tax Acts” means the enactments relating to income tax, including any provisions of the Corporation Tax Acts which relate to income tax.
In this Act “the Tax Acts”, except so far as the context otherwise requires, means this Act and all other provisions of the Income Tax Acts and the Corporation Tax Acts.
In this Act—
Section 1 of the Family Law Reform Act 1987, the paragraph inserted in Schedule 1 to the Interpretation Act 1978 by paragraph 73 of Schedule 2 to that Act and section 1(3) of the Law Reform (Parent and Child) (Scotland) Act 1986 (legal equality of illegitimate children) shall be disregarded in construing references in this Act to a child or to children (however expressed).
This Act, so far as it relates to capital gains tax, shall be construed as one with the 1992 Act.
Any reference in this Act to a section, Part or Schedule is a reference to that section, Part or Schedule of or to this Act, unless the context otherwise requires.
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In the Tax Acts, except in so far as the context otherwise requires— and a source of income is within the charge to corporation tax or income tax if that tax is chargeable on the income arising from it, or would be so chargeable if there were any such income, and references to a person, or to income, being within the charge to tax, shall be similarly construed.
The definition of “company” is subject to section 468, and does not apply in the following provisions of this Act, that is to say— Chapter I of Part XVII; sections 774 to 777; section 839; paragraph 15 of Schedule 3; (and also does not apply where the context otherwise requires because some other definition of “company” applies).
Except so far as the context otherwise requires, in the Tax Acts, and in any enactment passed after 12th March 1970 which by any express provision is to be construed as one with the Tax Acts, the Corporation Tax Acts or the Income Tax Acts, “tax”, where neither income tax nor corporation tax is specified, means either of those taxes.
Subsection (3) above is without prejudice to the provisions of section 9 which apply income tax law for certain purposes of corporation tax, and accordingly the employment of “income tax” rather than “tax” in any provision of the Tax Acts is not a conclusive indication that that provision is not applied to corporation tax by that section.
In the Tax Acts any reference to a child, however expressed, shall be construed as including a reference to an adopted child. This subsection does not apply for the purposes of paragraph 10 of Schedule 30.
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In the Income Tax Acts references to profits or gains shall not include references to chargeable gains.
References in the Income Tax Acts to the retail prices index are references to the general index of retail prices (for all items) published by the Department of Employment; and if that index is not published for a month which is relevant for the purposes of any provision of those Acts that provision shall be construed as referring to any substituted index or index figures published by that Department.
For the purposes of any provision of the Income Tax Acts (other than section 550 or Schedule 2) requiring income of any description to be treated as the highest part of a person’s income, his income shall be calculated without regard to—
any payment chargeable to tax by virtue of section 148; or
any amount included in his total income by virtue of section 547(1)(a); or
any chargeable sum as defined in paragraph 2 of Schedule 2.
Subject to subsections (5) and (6) below, in the Income Tax Acts “earned income” means, in relation to any individual—
any income arising in respect of —
any remuneration from any office or employment held by the individual, or
any pension, superannuation or other allowance, deferred pay or compensation for loss of office, given in respect of the past services of the individual or of the husband or parent of the individual in any office or employment, or given to the individual in respect of past services of any deceased person, whether the individual or husband or parent of the individual shall have contributed to such pension, superannuation allowance or deferred pay or not; and
any income from any property which is attached to or forms part of the emoluments of any office or employment held by the individual; and
any income which is charged under Schedule A, B or D and is immediately derived by the individual from the carrying on or exercise by him of his trade, profession or vocation, either as an individual or, in the case of a partnership, as a partner personally acting in the partnership. In cases where the income of a wife is deemed to be income of the husband, any reference in this subsection to the individual includes either the husband or the wife.
Without prejudice to the generality of the provisions of subsection (4) above, in the Income Tax Acts, except so far as is otherwise expressly provided, “earned income” also includes, in relation to any individual—
any income arising in respect of Civil List pensions granted under the Civil List Act 1837 as amended by any subsequent enactment; and
any annuity, pension or annual payment to which section 58(2) or 133 applies; and
any payments chargeable to income tax under Schedule E by virtue of section 150, 151 or 617;
any sum payable by way of annuity to an individual by virtue of a scheme under section 27 of the Agriculture Act 1967 (grants for relinquishing occupation of uncommercial agricultural units), unless the annuity was granted to the individual by reason of his having relinquished occupation before attaining the age of 55; and
income which is earned income by virtue of section 529.
The provisions of this section are without prejudice to any other provision of the Income Tax Acts directing income to be treated as earned income.
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For the purposes of the Corporation Tax Acts, except in so far as the context otherwise requires—
Section 6(4) shall also apply for the purposes of the following provisions of this Act, that is to say— Chapter II of Part X, except section 395; sections 75 and 76; section 490; sections 768 and 769; and also for sections 73 and 74 of the 1968 Act.
For all the purposes of the Corporation Tax Acts dividends shall be treated as paid on the date when they become due and payable, except in so far as section 468(1) makes other provision as to amounts treated under that section as dividends.
Except as otherwise provided by the Corporation Tax Acts, any apportionment to different periods which falls to be made under those Acts shall be made on a time basis according to the respective lengths of those periods.
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In the Income Tax Acts “total income”, in relation to any person, means the total income of that person from all sources estimated in accordance with the provisions of the Income Tax Acts.
Any person who, on his own behalf or on behalf of another person, delivers a statement of the amount of his or that other person’s total income shall observe the rules and directions contained in section 836.
Where deductions reduce a person’s total income and the order in which they are made or in which income of different descriptions is reduced thereby may affect his liability to income tax the deductions shall be made and treated as reducing income in accordance with subsections (4) and (5) below.
Subject to any express provisions of the Income Tax Acts, any deductions allowable in computing a person’s total income or to be made from a person’s total income shall be treated as reducing income of different descriptions in the order which will result in the greatest reduction of his liability to income tax.
Deductions from total income under Chapter I of Part VII shall be made after any other deductions and shall not affect the amount to be taken as a person’s total income for the purposes of section 257(5) or 274 nor the amount determining whether a person is entitled to relief under section 263 or by how much relief under that section is reduced.
In estimating the total income of any person— notwithstanding that the income or sums, as the case may be, accrued or will accrue in whole or in part before or after that year.
any income which is chargeable with income tax by way of deduction at the basic rate in force for any year or which for the purposes of Schedule F comprises an amount equal to a tax credit calculated by reference to the rate of advance corporation tax in force for any year shall be deemed to be income of that year; and
any deductions which are allowable on account of sums payable under deduction of income tax at the basic rate in force for any year out of the property or profits of that person shall be allowed as deductions in respect of that year;
Where an assessment has become final and conclusive for the purposes of income tax for any year of assessment—
that assessment shall also be final and conclusive in estimating total income; and
no allowance or adjustment of liability, on the ground of diminution of income or loss, shall be taken into account in estimating total income unless that allowance or adjustment has previously been made on an application under the special provisions of the Income Tax Acts relating thereto.
Subsection (7) above shall apply in relation to— as it applies in relation to allowances or adjustments on the ground of diminution of income or loss.
any relief under section 353;
any relief by reason of the operation of an election for the herd basis under Schedule 5; and
any allowance under Part I of the 1968 Act or Chapter I of Part III of the Finance Act 1971 to be given by way of discharge or repayment of tax and to be available or available primarily against a specified class of income (that is to say, any capital allowance to which section 71 of the 1968 Act applies, or as provided by section 532 of this Act, any capital allowance to which section 528(2) of this Act applies);
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For the purposes of, and subject to, the provisions of the Tax Acts which apply this section, the annual value of land shall be taken to be the rent which might reasonably be expected to be obtained on a letting from year to year if the tenant undertook to pay all usual tenant’s rates and taxes, and if the landlord undertook to bear the costs of the repairs and insurance, and the other expenses, if any, necessary for maintaining the subject of the valuation in a state to command that rent.
Section 23 of the General Rate Act 1967 (adjustment of gross value by reference to provision of or payment for services etc.) shall apply for the purpose of subsection (1) above, and in relation to land in Scotland or Northern Ireland shall apply as if it extended to the whole of the United Kingdom.
Where any question arises as to the annual value of land it shall be determined by the General Commissioners and those Commissioners shall hear and determine the question in like manner as an appeal.
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For the purposes of the Tax Acts a body corporate shall be deemed to be—
a “51 per cent. subsidiary” of another body corporate if and so long as more than 50 per cent. of its ordinary share capital is owned directly or indirectly by that other body corporate;
a “75 per cent. subsidiary” of another body corporate if and so long as not less than 75 per cent. of its ordinary share capital is owned directly or indirectly by that other body corporate;
a “90 per cent. subsidiary” of another body corporate if and so long as not less than 90 per cent. of its ordinary share capital is owned directly by that other body corporate.
In subsection (1)(a) and (b) above “owned directly or indirectly” by a body corporate means owned, whether directly or through another body corporate or other bodies corporate or partly directly and partly through another body corporate or other bodies corporate.
In this section references to ownership shall be construed as references to beneficial ownership.
For the purposes of this section the amount of ordinary share capital of one body corporate owned by a second body corporate through another body corporate or other bodies corporate, or partly directly and partly through another body corporate or other bodies corporate, shall be determined in accordance with the following provisions of this section.
Where, in the case of a number of bodies corporate, the first directly owns ordinary share capital of the second and the second directly owns ordinary share capital of the third, then for the purposes of this section, the first shall be deemed to own ordinary share capital of the third through the second, and, if the third directly owns ordinary share capital of a fourth, the first shall be deemed to own ordinary share capital of the fourth through the second and third, and the second shall be deemed to own ordinary share capital of the fourth through the third and so on.
In this section—
any number of bodies corporate of which the first directly owns ordinary share capital of the next and the next directly owns ordinary share capital of the next but one, and so on, and, if they are more than three, any three or more of them, are referred to as “a series”;
in any series—
that body corporate which owns ordinary share capital of another through the remainder is referred to as the “first owner”;
that other body corporate the ordinary share capital of which is so owned is referred to as “the last owned body corporate”;
the remainder, if one only, is referred to as “an intermediary” and, if more than one, are referred to as “a chain of intermediaries”;
a body corporate in a series which directly owns ordinary share capital of another body corporate in the series is referred to as “an owner”; and
any two bodies corporate in a series of which one owns ordinary share capital of the other directly, and not through one or more of the other bodies corporate in the series, are referred to as being directly related to one another.
Where every owner in a series owns the whole of the ordinary share capital of the body corporate to which it is directly related, the first owner shall be deemed to own through the intermediary or chain of intermediaries the whole of the ordinary share capital of the last owned body corporate.
Where one of the owners in a series owns a fraction of the ordinary share capital of the body corporate to which it is directly related, and every other owner in the series owns the whole of the ordinary share capital of the body corporate to which it is directly related, the first owner shall be deemed to own that fraction of the ordinary share capital of the last owned body corporate through the intermediary or chain of intermediaries.
Where— the first owner shall be deemed to own through the intermediary or chain of intermediaries such fraction of the ordinary share capital of the last owned body corporate as results from the multiplication of those fractions.
each of two or more of the owners in a series owns a fraction, and every other owner in the series owns the whole, of the ordinary share capital of the body corporate to which it is directly related; or
every owner in a series owns a fraction of the ordinary share capital of the body corporate to which it is directly related;
Where the first owner in any series owns a fraction of the ordinary share capital of the last owned body corporate in that series through the intermediary or chain of intermediaries in that series, and also owns another fraction or other fractions of the ordinary share capital of the last owned body corporate, either— then, for the purpose of ascertaining the amount of the ordinary share capital of the last owned body corporate owned by the first owner, all those fractions shall be aggregated and the first owner shall be deemed to own the sum of those fractions.
directly, or
through an intermediary or intermediaries which is not a member or are not members of that series, or
through a chain or chains of intermediaries of which one or some or all are not members of that series, or
in a case where the series consists of more than three bodies corporate, through an intermediary or intermediaries which is a member or are members of the series, or through a chain or chains of intermediaries consisting of some but not all of the bodies corporate of which the chain of intermediaries in the series consists;
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For the purposes of, and subject to, the provisions of the Tax Acts which apply this section, any question whether a person is connected with another shall be determined in accordance with the following provisions of this section (any provision that one person is connected with another being taken to mean that they are connected with one another).
A person is connected with an individual if that person is the individual’s wife or husband, or is a relative, or the wife or husband of a relative, of the individual or of the individual’s wife or husband.
A person, in his capacity as trustee of a settlement, is connected with any individual who in relation to the settlement is a settlor, with any person who is connected with such an individual and with a body corporate which, under section 681 is deemed to be connected with that settlement (“settlement” and “settlor” having for the purposes of this subsection the meanings given by subsection (4) of that section).
Except in relation to acquisitions or disposals of partnership assets pursuant to bona fide commercial arrangements, a person is connected with any person with whom he is in partnership, and with the wife or husband or relative of any individual with whom he is in partnership.
A company is connected with another company—
if the same person has control of both, or a person has control of one and persons connected with him, or he and persons connected with him, have control of the other; or
if a group of two or more persons has control of each company, and the groups either consist of the same persons or could be regarded as consisting of the same persons by treating (in one or more cases) a member of either group as replaced by a person with whom he is connected.
A company is connected with another person if that person has control of it or if that person and persons connected with him together have control of it.
Any two or more persons acting together to secure or exercise control of a company shall be treated in relation to that company as connected with one another and with any person acting on the directions of any of them to secure or exercise control of the company.
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by means of the holding of shares or the possession of voting power in or in relation to that or any other body corporate; or
by virtue of any powers conferred by the articles of association or other document regulating that or any other body corporate,
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In the Tax Acts “recognised stock exchange” means—
the Stock Exchange; and
any such stock exchange outside the United Kingdom as is for the time being designated for the purposes of this section as a recognised stock exchange by order made by the Board.
An order made by the Board under this section—
may designate a stock exchange by name, or by reference to any class or description of stock exchanges including a class or description framed by reference to any authority or approval given in a country outside the United Kingdom;
may contain such transitional and other supplemental provisions as appear to the Board to be necessary or expedient;
may be varied or revoked by a subsequent order so made.
The Board may by regulations make provision securing that enactments in the Tax Acts containing references to the Stock Exchange have effect, for such purposes and subject to such modifications as may be prescribed by the regulations, in relation to all other recognised investment exchanges (within the meaning of the Financial Services Act 1986), or in relation to such of those exchanges as may be prescribed.
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In the Tax Acts “investment trust” means, as respects any accounting period, a company which is not a close company and which is approved for the purposes of this section for that accounting period by the Board, and the Board shall not approve any company unless it is shown to their satisfaction—
that the company’s income is derived wholly or mainly from shares or securities; and
subject to subsection (2) below, that no holding in a company, other than an investment trust or a company which would qualify as an investment trust but for paragraph (c) below, represents more than 15 per cent. by value of the investing company’s investments; and
that the shares or securities of the company are quoted on the Stock Exchange; and
that the distribution as dividend of surpluses arising from the realisation of investments is prohibited by the company’s memorandum or articles of association; and
that the company does not retain in respect of any accounting period more than 15 per cent. of the income it derives from shares and securities.
Subsection (1)(b) above shall not apply— so long as no addition is made to the holding.
to a holding in a company acquired before 6th April 1965 which on that date represented not more than 25 per cent. by value of the investing company’s investments; or
to a holding in a company which, when it was acquired, represented not more than 15 per cent. by value of the investing company’s investments;
For the purposes of subsection (2) above—
“holding” means the shares or securities (whether of one class or more than one class) held in any one company; and
an addition is made to a holding whenever the investing company acquires shares or securities of that one company, otherwise than by being allotted shares or securities without becoming liable to give any consideration, and if an addition is made to a holding that holding is acquired when the addition or latest addition is made to the holding; and
where in connection with a scheme of reconstruction or amalgamation, a company issues shares or securities to persons holding shares or securities in a second company in respect of and in proportion to (or as nearly as may be in proportion to) their holdings in the second company, without those persons becoming liable to give any consideration, a holding of the shares or securities in the second company and a corresponding holding of the shares or securities so issued shall be regarded as the same holding.
In this section “company” and “shares” shall be construed in accordance with sections 64, 93 and 155(1) of the 1979 Act.
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Except as otherwise provided by the following provisions of this section, this Act shall come into force in relation to tax for the year 1988-89 and subsequent years of assessment, and for companies’ accounting periods ending after 5th April 1988.
Except as otherwise provided by the following provisions of this section, such of the provisions of this Act as relate to capital gains tax (including the provisions of Part XVIII as applied to capital gains tax by section 277 of the 1992 Act) shall come into force in relation to that tax for the year 1988-89 and subsequent years of assessment.
The following provisions of this Act, that is to say— shall come into force for all purposes on 6th April 1988 to the exclusion of the corresponding enactments repealed by this Act.
so much of any provision as authorises the making of any Order in Council or regulations or other instrument;
so much of any provision as relates to the making of a return, the furnishing of a certificate or the giving of any other information, including any such provision which imposes a duty on the Board or an officer of the Board as well as any such provision which imposes a duty on any other person;
so much of any provision as imposes any penalty;
except where the tax concerned is all tax for years of assessment before the year 1988-89 or accounting periods ending before 6th April 1988, so much of any other provision as confers any power or imposes any duty the exercise or performance of which operates or may operate in relation to tax for more than one chargeable period,
This section has effect except as otherwise provided by any other provision of this Act, and in particular except as provided by sections 96, 380 to 384, 393, . . ., 400, 703 . . . .
Schedule 29, which makes amendments to other enactments consequential on the passing of this Act, shall have effect.
Schedule 29, section 843 and this section are without prejudice to the provisions of the Interpretation Act 1978 as respects the effect of repeals.
Schedule 30 which contains savings and transitional provisions shall have effect.
The enactments mentioned in Schedule 31 are hereby repealed to the extent specified in the third column of that Schedule.
Subject to subsection (6) below, section 843(3), Schedule 30 and to any other provision of this Act by which any provision is brought into force to the exclusion of the corresponding enactments repealed by this Act, those repeals shall come into force in accordance with subsections (1) and (2) of section 843.
No provision mentioned in subsection (5) above shall be taken as bringing a repeal into force except to the extent that the repealed enactment is being superseded.
This Act may be cited as the Income and Corporation Taxes Act 1988.
The provisions of this Schedule have effect for supplementing section 11AA as regards the determination of the profits attributable to a permanent establishment in the United Kingdom of a company that is not resident in the United Kingdom (“the non-resident company”). In this Schedule “the separate enterprise principle” means the principle in section 11AA(2) (read with subsection (3) of that section).
In accordance with the separate enterprise principle, transactions between the permanent establishment and any other part of the non-resident company are treated as taking place on such terms as would have been agreed between parties dealing at arm’s length.
Section 11AA(4) (general provision as to allowable deductions) applies whether or not the expenses are incurred by, or reimbursed by, the permanent establishment. The amount of expenses to be taken into account under section 11AA(4) is the actual cost to the non-resident company.
No deduction is allowed in respect of royalties paid, or other similar payments made, by the permanent establishment to any other part of the non-resident company in respect of the use of intangible assets held by the company. This does not prevent a deduction in respect of any contribution by the permanent establishment to the costs of creation of an intangible asset. In this paragraph “intangible asset” has the meaning it has for accounting purposes, and includes any intellectual property (as defined in paragraph 2(2) of Schedule 29 to the Finance Act 2002).
No deduction is allowed in respect of payments of interest or other financing costs by the permanent establishment to any other part of the non-resident company, except as provided by sub-paragraph (2). The restriction in sub-paragraph (1) above does not apply to interest or other costs of financing that are payable in respect of borrowing by the permanent establishment in the ordinary course of a financial business carried on by it. In sub-paragraph (2) “financial business” means any of the following—
This paragraph applies where the non-resident company provides the permanent establishment with goods or services. If the goods or services are of a kind that the company supplies, in the ordinary course of its business, to third parties dealing with it at arm’s length, the matter is dealt with as a transaction to which the separate enterprise principle applies. If not, the matter is dealt with as an expense incurred by the non-resident company for the purposes of the permanent establishment.
The provisions of this Part of this Schedule have effect where the non-resident company is a bank. Nothing in this Part of this Schedule shall be read as preventing the application of principles similar to those provided for in this Part in applying the separate enterprise principle to a non-resident company that is not a bank.
In accordance with the separate enterprise principle, transfers of loans and other financial assets between the permanent establishment and any other part of the company are recognised only if they would have taken place between independent enterprises. Such a transfer is not recognised where it cannot reasonably be considered that it is carried out for valid commercial reasons. For this purpose the obtaining of a tax advantage is not a valid commercial reason.
In accordance with the separate enterprise principle, loans and other financial assets, and profits arising from them, are attributed to a permanent establishment to the extent that they can reasonably be regarded as having been generated by the activities of the permanent establishment. The following provisions have effect as regards the factors to be taken into account. Particular account shall be taken of the extent to which the permanent establishment is responsible for— Account may also be taken of the extent to which the permanent establishment is responsible for— References in this paragraph to a financial asset include any financial risk in relation to a loan, or potential loan, that is capable of giving rise to fees or other receipts and for which the holding of capital is required (or would be required if the transaction were between parties at arm’s length).
This paragraph applies where a permanent establishment— In such a case, in accordance with the separate enterprise principle— shall be that appropriate in the case of an agent acting at arm’s length, taking into account the risks and costs borne by the establishment.
The provisions of this Schedule supplement section 13AB (corporation tax: the non-corporate distribution rate).
A “non-corporate distribution” means a distribution made by a company to a recipient who is not a company. A distribution made to a partnership is treated as made to the partners notwithstanding that the partnership is regarded as a legal person, or as a body corporate, under the law of the country or territory under which it is formed.
A company’s underlying rate of corporation tax for an accounting period is determined as follows: Step One Take the company’s basic profits for the accounting period (“BP”). Step Two Find the amount of corporation tax chargeable on those profits apart from section 13AB (“CT”). Step Three The company’s underlying rate of corporation tax is the percentage determined as follows— In determining CT— But take no account of any other relief that is given by reducing the amount or rate of tax payable (as opposed to the amount of the profits chargeable to tax).
Where in an accounting period the total amount of the distributions made (or treated as made) by a company does not exceed the amount of its basic profits, the amount of the company’s basic profits matched with non-corporate distributions is equal to the total amount of the non-corporate distributions made (or treated as made) by the company in that period.
Where in an accounting period the total amount of the distributions made (or treated as made) by a company exceeds its basic profits, the amount of the company’s basic profits for that period matched with non-corporate distributions is— where— NCD is the total amount of the non-corporate distributions made (or treated as made) by the company in that period; D is the total amount of all the distributions made (or treated as made) by the company in that period; and BP is the amount of the company’s basic profits for that period.
This Part of this Schedule provides for the allocation to other companies of any amount by which the total amount of the non-corporate distributions made (or treated as made) by a company (the “distributing company”) in an accounting period (the “distribution period”) exceeds the amount of the company’s basic profits for that period that are matched under paragraph 5. That amount is referred to in this Schedule as “excess NCDs”. A company to which an amount of excess NCDs is allocated (a “recipient company”) is treated as if it had made a non-corporate distribution of that amount in the period to which it is allocated.
If at the end of the distribution period the distributing company is a member of a group, excess NCDs must be allocated, so far as possible, to the other group companies. The allocation must be made in accordance with the following rules. Excess NCDs may not be allocated to a recipient company unless it has available profits for the accounting period to which they are to be allocated. The amount of a recipient company’s available profits for an accounting period is given by: where— BP is the amount of that company’s basic profits for that accounting period, and NCD is the total amount of non-corporate distributions made (or treated as made) by that company in that period. The maximum amount of excess NCDs that may be allocated to an accounting period of a recipient company is: where— NCD is the total amount of the non-corporate distributions made (or treated as made) by the distributing company in the distribution period; D is the total amount of all the distributions made (or treated as made) by that company in that period; and AP is the amount of the recipient company’s available profits for that period. In determining the amount of a company’s available profits at any time account shall only be taken of excess NCDs allocated to it by virtue of an allocation made before that time that remains (or so far as it remains) effective.
Excess NCDs falling to be allocated to another company under paragraph 7 (allocation to other group companies) may be allocated to any accounting period identified by this paragraph as a corresponding accounting period. If there is more than one such period, excess NCDs must be allocated to the first to the full extent possible before any allocation is made to the second, and so on. The accounting period of a recipient company that includes the last day of the distribution period is its first corresponding accounting period. Unless that accounting period is shorter than the distribution period, it is the recipient company’s only corresponding accounting period. If the first corresponding accounting period is shorter than the distribution period, any subsequent accounting period of the recipient company beginning before the end of the period specified in sub-paragraph (4) is a corresponding accounting period. The period referred to in sub-paragraph (3) is a period—
This paragraph applies where a company (“company A”) ceases to be a member of the same group as another company (“company B”) but the companies remain under the control of the same person or persons. This is referred to below as “degrouping”. If at the end of any accounting period of company A ending on or after the degrouping but no more than two years after the degrouping— the provisions of sub-paragraphs (3) to (5) below apply. The end of the accounting period when the above conditions are met is referred to in those provisions as “the relevant time”. Company B and any other companies in the same group as that company at the relevant time (the “B group”) shall be treated for the purposes of allocating the excess NCDs as if they were members of the same group as company A. Any excess NCDs remaining after any allocation made by virtue of sub-paragraph (3) must be allocated— This allocation is not subject to the restrictions in paragraph 7 on the amount that may be allocated to another company. If there is more than one company answering the description in sub-paragraph (4)(a), the excess NCDs shall be apportioned between them according to the amount of their basic profits for the accounting period to which the amount falls to be allocated. In this paragraph “control” shall be construed in accordance with section 416(2) to (6).
The basic rule is that the allocation of excess NCDs to another company must be made by the distributing company with the agreement of the recipient company. If excess NCDs are not so allocated within nine months after— they may be allocated at any time thereafter by an officer of the Board. An allocation under sub-paragraph (1) or (2) may be varied— Any such variation may in turn be varied as mentioned in paragraph (a) or (b). No allocation or variation of an allocation of excess NCDs may be made after the end of the period of one year after whichever of the following last occurs— If circumstances arise as a result of which the tax affairs of any such company for any such period are reopened, an allocation or variation of an allocation may (and shall if necessary) be made at any time before the end of the period of one year after the tax affairs of the company are again finally determined. For the purposes of sub-paragraphs (4) and (5) the tax affairs of a company for a period are finally determined when the amounts are conclusively determined within the meaning of paragraph 88 of Schedule 18 to the Finance Act 1998 (c. 36) (company tax returns: conclusiveness of amounts stated in return). References in this paragraph to variation of an allocation include reducing the amount allocated to nil.
This paragraph applies where an amount of excess NCDs allocated to another company in accordance with this Part of this Schedule later proves to be excessive. The excess shall revert to the distributing company. If allocations to two or more companies are involved, the amounts shall revert in the opposite order to that in which the allocations were made. In the case of allocations made at the same time, the amounts reverting to the distributing company shall be in proportion to the original allocations.
The provisions of this Part of this Schedule as to the allocation of excess NCDs to other companies apply, with any necessary modifications, to companies that are not resident in the United Kingdom as they apply to companies that are so resident. In particular, references to the company’s basic profits and accounting periods shall be read in relation to a company that is not resident in the United Kingdom as references to what would have been the case if the company had been resident in the United Kingdom at all material times.
Any excess NCDs not allocated to another company under Part 2 shall be carried forward by the distributing company. That company shall be treated as if it had made a non-corporate distribution of the amount carried forward (in addition to any distributions actually made by it) in its next accounting period. Where an allocation is made under paragraph 9(4) references in this paragraph to the distributing company shall be read as references to the company to which that allocation is made (which is treated by virtue of paragraph 6(3) as having made a distribution in the accounting period to which the allocation is made).
For the purposes of section 13AB and this Schedule a company and all its 51% subsidiaries form a group, and if any of those subsidiaries have 51% subsidiaries the group includes them and their 51% subsidiaries, and so on. The question whether a company is a 51% subsidiary shall be determined in accordance with section 838, subject to the following provisions. A company (“company A”) shall be treated for the purposes of this Schedule as if it were a 51% subsidiary of another company (“company B”) if company B has rights to, or in fact receives, more than 50% of the distributions made by company A. For the purposes of this paragraph a company shall be treated as not being the owner—
Section 13AB and this Schedule apply in relation to an accounting period of a company in which it ceases to be a member of the group as if there were two accounting periods, one ending immediately before the company ceases to be a member of the group and the other consisting of the remainder of the period. For this purpose a company ceases to be in a group if it and another company cease to be in the same group, whether as a result it is no longer in a group, becomes a member of another group or continues to be in the same group as one or more other companies.
For the purposes of section 13AB and this Schedule, a non-corporate distribution made by a company otherwise than in an accounting period of the company shall be treated as made in the next accounting period of the company.
For the purposes of section 13AB and this Schedule a holding company that is not otherwise carrying on a business shall be deemed to be carrying on a business and to be within the charge to corporation tax. For this purpose “a holding company” means a company that has one or more 51% subsidiaries from which it receives or has received one or more distributions.
In section 13AB and this Schedule—
This Schedule forms part of the SIP code (see section 488 of ITEPA 2003 (approved share incentive plans)). Accordingly, expressions used in this Schedule and contained in the index at the end of Schedule 2 to that Act (approved share incentive plans) have the meaning indicated by that index. References in this Schedule to deductions are to deductions by a company in calculating for the purposes of corporation tax the profits of a trade carried on by it. Sub-paragraph (3) is subject to paragraph 13 (application of provisions to expenses of management of companies with investment business etc.).
Where, under an approved share incentive plan, shares are awarded to employees as free or matching shares by reason of their employment with a company, a deduction is allowed under this paragraph to that company. Any such deduction— Except as provided by sub-paragraph (1), no deduction may be made by the company or any associated company in respect of the provision of those shares. This is subject to paragraphs 7 and 8 (deductions for costs of setting up, and contributions to running expenses of, plan). Where the shares are awarded under a group plan, the market value of the shares at the time they are acquired by the trustees shall for the purposes of this paragraph be taken to be the relevant proportion of the total market value of the shares included in the award. For the purposes of sub-paragraph (4) “the relevant proportion” means the proportion that the number of shares in the award awarded to the employees of the company concerned bears to the total number of shares in the award. In determining the market value of any shares for the purposes of this paragraph, if shares have been acquired by the trustees on different days it shall be assumed that those acquired on an earlier day are awarded to employees under the plan before those acquired by the trustees on a later day. If a deduction is made under this paragraph by a company, no deduction may be made by any other company under this paragraph in respect of the provision of the shares. This paragraph has effect subject to paragraph 4 (cases in which no deduction is allowed).
Where under an approved share incentive plan— a deduction is allowed under this paragraph to that company. Any such deduction— Except as provided by sub-paragraph (1), no deduction may be made by that company or any associated company in respect of the provision of those shares. This is subject to paragraphs 7 and 8 (deductions for costs of setting up, and contributions to running expenses of, plan). If a deduction is made under this paragraph by a company, no deduction may be made by any other company under this paragraph in respect of the provision of the shares. This paragraph has effect subject to paragraph 4 (cases in which no deduction is allowed).
No deduction is allowed under paragraph 2 or 3 (deductions for providing free or matching shares or for additional expenses in providing partnership shares) in the following cases. No deduction is allowed in respect of shares awarded to an individual under the plan unless, at the time of the award, any earnings from the required employment are (or would be) chargeable earnings. In sub-paragraph (2)— In sub-paragraph (3), the reference to any of the charging provisions of Chapter 4 or 5 of Part 2 of that Act has the same meaning as it has in the employment income Parts of ITEPA 2003 (see sections 14(3) and 20(3) of that Act). No deduction is allowed in respect of shares that are liable to depreciate substantially in value for reasons that do not apply generally to shares in the company. No deduction is allowed if a deduction has been made— in respect of the provision of the same shares for this or another trust. Sub-paragraph (6) applies whatever the nature or purpose of the other trust and whatever the basis on which the deduction was made. For the purposes of determining whether the same shares have been provided to more than one trust, if shares have been acquired by the trustees of the plan trust on different days it shall be assumed that those acquired on an earlier day are awarded under the plan before those acquired by the trustees on a later day. No deduction is allowed in respect of the award of shares acquired by the trustees by virtue of a payment in respect of which a deduction has been made under paragraph 9 (deduction for contribution to plan trust) or 10(3) (further deduction where deduction under paragraph 9 withdrawn).
No deduction is allowed for expenses in providing shares that are acquired on behalf of individuals under an approved share incentive plan as dividend shares. This is subject to paragraph 8 (deductions for contributions to running expenses of plan).
This paragraph applies if any of a participant’s plan shares are forfeited. The shares are treated for the purposes of this Schedule as acquired by the trustees— No deduction is allowed under paragraph 2 or 3 (deductions for providing free or matching shares or for additional expenses in providing partnership shares) in respect of any subsequent award of those shares under the plan.
A deduction is allowed under this paragraph for expenses incurred by a company in establishing a share incentive plan which is approved by the Inland Revenue. No deduction may be made under this paragraph if— before the Inland Revenue approve the plan. If Inland Revenue approval of the plan is given more than nine months after the end of the period of account in which the expenses are incurred, the expenses are treated for the purposes of this paragraph as deductible for the period in which the approval is given. No other deduction is allowed in respect of expenses for which a deduction is allowed under this paragraph.
Nothing in this Schedule affects any deduction for expenses incurred by a company in contributing to the expenses of the trustees in operating an approved share incentive plan. For this purpose the expenses of the trustees in operating the plan— In sub-paragraph (2)(a) “incidental acquisition costs” means any fees, commission, stamp duty and similar incidental costs attributable to the acquisition of the shares.
A deduction is allowed to a company under this paragraph where— The condition in this sub-paragraph is that, at the end of the period of 12 months beginning with the date of the acquisition, the trustees hold shares in the company for the plan trust that— For the purposes of sub-paragraph (2), shares that have been appropriated to, and acquired on behalf of, an individual under the plan shall continue to be treated as held by the trustees of the plan trust for the beneficiaries of that trust until such time as they cease to be subject to the plan (within the meaning of the SIP code). A deduction allowed under this paragraph— No other deduction is allowed for any amount in respect of which a deduction has been made under this paragraph (except as specified in paragraph 10).
The Inland Revenue may by notice direct that the benefit of a deduction made under paragraph 9 is withdrawn where— The effect of a direction under sub-paragraph (1)(a) or (b) is that the amount of the deduction is treated as a trading receipt of the company for the period of account in which the direction is given. However, where— a further deduction is allowed under this sub-paragraph to the company which made the payment. A deduction under sub-paragraph (3)— No other deduction is allowed in respect of any amount for which a deduction has been made under sub-paragraph (3). Sub-paragraph (8) applies where— In sub-paragraph (6) “required employment” and “chargeable earnings”, in relation to an individual, have the same meanings as they have in paragraph 4(2) (cases in which no deduction is allowed). An amount equal to the appropriate proportion of the deduction is treated as a trading receipt of the company for the period of account in which the shares are so awarded. For the purposes of sub-paragraph (8), the appropriate proportion of the deduction is the proportion which the number of shares awarded to the individual bears to the total number of shares acquired by virtue of the payment. For the purposes of this paragraph, where shares are acquired by the trustees on different days, it shall be assumed that those acquired on an earlier day are awarded to employees under the plan before those acquired by the trustees on a later day.
If approval of a share incentive plan is withdrawn the Inland Revenue may by notice to a company direct that the benefit of— in relation to the plan is also withdrawn. The effect of the direction is that the aggregate amount of the deductions is treated as a trading receipt of that company for the period of account in which the Inland Revenue give notice of the withdrawal of approval.
This paragraph applies where the company has issued a plan termination notice under paragraph 89 of Schedule 2 to ITEPA 2003 (termination of plan). In a case where— an amount equal to the appropriate proportion of the deduction is treated as a trading receipt of the company for the period of account in which the plan termination notice is given. For the purposes of sub-paragraph (2), the appropriate proportion of the deduction is the proportion which the number of shares acquired by virtue of the payment and not awarded as specified in sub-paragraph (2)(c) bears to the total number of shares so acquired.
The provisions of this Schedule apply in relation to— in accordance with the following provisions. The provisions of this Schedule which allow a deduction in calculating the profits of a trade apply— Paragraph 11(2) applies as if the reference to a trading receipt for the period of account in which the Inland Revenue give notice of the withdrawal of approval were a reference to profits or gains chargeable to tax under Case VI of Schedule D arising when the Inland Revenue give notice of the withdrawal.
This Schedule enables an individual (“the taxpayer”) to make a claim (an “averaging claim”) if his profits from a qualifying trade, profession or vocation (his “relevant profits”) fluctuate from one tax year to the next.
A trade, profession or vocation is a “qualifying trade, profession or vocation” if the taxpayer’s profits from it— In sub-paragraph (1) “qualifying creative works” means— created by the taxpayer personally or, where the trade, profession or vocation is carried on by the taxpayer in partnership, by one or more of the partners personally.
An averaging claim may be made if the taxpayer has been carrying on the qualifying trade, profession or vocation in two consecutive tax years and either— For the purposes of paragraph 4 (years in respect of which averaging claim may be made) an averaging claim relates to both of the years involved.
An averaging claim may not be made in relation to a tax year if an averaging claim in respect of the same qualifying trade, profession or vocation has already been made in relation to a later tax year. An averaging claim may not be made in relation to a tax year in which— An averaging claim may be made in relation to a tax year which was the later year on a previous averaging claim.
An averaging claim must be made not later than twelve months after the 31st January next following the end of the later of the tax years to which it relates. This is subject to paragraph 10(2) (extended time limit where profits adjusted for some other reason).
Where the taxpayer is entitled to make, and makes, an averaging claim, the amount taken to be his profits from the qualifying trade, profession or vocation for each of the tax years to which the claim relates is adjusted in accordance with this paragraph. If— the amount of the adjusted profits for each of the years to which the claim relates is the average of the relevant profits for the two years. If the taxpayer’s relevant profits for one of the years amount to more than 70%, but less than 75%, of his relevant profits for the other year, the amount of the profits in each of the years is calculated as follows, so as to reduce the variation between them. Step 1 The amount of the adjustment is given by the formula— where— D is the difference between the taxpayer’s relevant profits for the two tax years, and P is the taxpayer’s relevant profits for the year in which those profits are higher. Step 2 Add the amount of the adjustment to the taxpayer’s relevant profits for the year in which those profits are lower. The result is the amount of the adjusted profits for that year. Step 3 Subtract the amount of the adjustment from the taxpayer’s relevant profits for the year in which those profits are higher. The result is the amount of the adjusted profits for that year Subject to the following provisions of this Schedule, the adjusted profits are taken to be the taxpayer’s relevant profits for the years to which the claim relates for all the purposes of the Income Tax Acts, including the further application of this Schedule.
An averaging claim relating to two tax years (“the earlier year” and “the later year”) is given effect in the later year. In so far as the claim involves an adjustment to the profits for the earlier year it is treated as a claim for the amount of the difference between— That claim is given effect in the later year by increasing the amount referred to in section 59B(1)(b) of the Management Act (aggregate amount of payments on account made by the taxpayer) or, as the case may require, by increasing the amount of tax payable. Where effect falls to be given to two or more associated claims, amounts A and B above shall each be determined on the assumption that effect could have been, and had been, given to the other claim or claims in relation to the earlier year. Where this paragraph applies twice in relation to the same tax year, the increase or reduction in the amount of tax payable for that year as a result of the earlier application shall be disregarded in determining amounts A and B above for the purposes of the later application.
A claim by the taxpayer for relief under any other provision of the Income Tax Acts for either of the years to which an averaging claim relates (“the other claim”)— If the other claim is made by being included in a return, the reference in sub-paragraph (1)(b) to amending or revoking the claim shall be read as a reference to amending the return by amending or omitting the claim.
This paragraph applies where— The claim or amendment is given effect in the later year. In so far as the claim or amendment relates to income of the earlier year, the amount claimed, or (as the case may be) the increase or reduction in the amount claimed, shall be equal to the difference between— That claim or amendment is given effect in the later year by increasing the amount referred to in section 59B(1)(b) of the Management Act (aggregate amount of payments on account made by the taxpayer) or, as the case may require, by increasing the amount of tax payable. Where effect falls to be given to two or more associated claims, amounts A and B above shall each be determined on the assumption that effect could have been, and had been, given to the other claim or claims in relation to the earlier year. In this paragraph “amend” includes revoke and “amendment” has a corresponding meaning.
If after the taxpayer has made an averaging claim, his relevant profits in either or both of the tax years to which the claim relates are adjusted for some other reason— A further averaging claim is not out of time provided it is made not later than twelve months after the 31st January next following the tax year in which the adjustment for the other reason is made.
References in this Schedule to the taxpayer’s profits from a qualifying trade, profession or vocation are to profits before making deductions for losses sustained in any tax year. If the taxpayer sustains a loss in the qualifying trade, profession or vocation in any tax year, the profits of that year for the purposes of this Schedule are nil. This shall not be read as preventing the taxpayer from obtaining relief under the Income Tax Acts for a loss sustained by him in that or any other tax year.
In this Schedule any reference to the amount in which a person is chargeable to tax is a reference to the amount in which he is so chargeable after taking into account any relief or allowance for which a claim is made.
In this Schedule any reference to a claim includes a reference to an election or notice. For the purposes of this Schedule, two or more claims made by the same person are associated with each other if each of them is any of the following— and the same tax year is the earlier year in relation to each of those claims. In sub-paragraph (2)—
In this Schedule a “tax year” means a year of assessment.
Subject to sub-paragraph (2) below, profits and gains arising from a transaction to which this Schedule applies (including those which, apart from this sub-paragraph, would be taken to be of a capital nature) shall be treated, when realised— Sub-paragraph (1) above does not apply to— . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . For the purposes of this Schedule the profits and gains arising from a transaction to which this Schedule applies are to be taken to be realised at the time when the disposal comprised in the transaction takes place. For the purposes of sections 392 . . . any loss in a transaction to which this Schedule applies is to be taken to be sustained at the time when, in accordance with sub-paragraph (4) above, any profits or gains arising from that transaction would have been realised. Subject to sub-paragraph (7) below, the following, namely— shall not be brought into account for the purposes of income tax . . . or capital gains tax except by virtue of this Schedule and, in the case of losses, section 392 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
This Schedule applies to a transaction if— For the purposes of this Schedule two or more related transactions are transactions designed to produce a guaranteed return if, taking the transactions together, it would be reasonable to assume, from either or both of— that their main purpose, or one of their main purposes, is or was the production of a guaranteed return from one or more disposals of futures or options. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
For the purposes of this Schedule a guaranteed return is produced from one or more disposals of futures or options wherever (taking all the disposals together where there is more than one) risks from fluctuations in the underlying subject matter are so eliminated or reduced as to produce a return from the disposal or disposals— For the purposes of sub-paragraph (1) above the cases where risks from fluctuations in the underlying subject matter are eliminated or reduced shall be deemed to include any case where the main reason, or one of the main reasons, for the choice of that subject matter is— In this paragraph the references, in relation to a disposal of futures or options, to the underlying subject matter are references to or to the value of the commodities, currencies, shares, stock or securities, interest rates, indices or other matters to which, or to the value of which, those futures or options are referable.
For the purposes of this Schedule a disposal is a disposal of futures or options if it consists in— Subject to sub-paragraph (4) below, any question for the purposes of this Schedule as to whether there is a disposal falling within sub-paragraph (1)(a) to (c) above, or as to when such a disposal is made, shall be determined, on the assumptions specified in sub-paragraph (3) below, in accordance with— and references in this Schedule to entering into a transaction are references, in relation to a transaction consisting in a disposal, to the making of the disposal. Those assumptions are— Subject to sub-paragraph (5) below, where— the disposal consisting in the grant of the option shall be deemed for the purposes of this Schedule to be a disposal made on the first occasion after the grant of the option when one of the other transactions which is a disposal but is not itself the grant of an option is entered into. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Nothing in sub-paragraph (4) above affects so much of sub-paragraph (2) above as (by applying section 144(2) or 144A(2) of the 1992 Act (cases where options are exercised))— In this paragraph—
This paragraph applies where for the purposes of this Schedule— This Schedule shall have effect in relation to the parties to the future or option as if the transaction specified in sub-paragraph (3) below— That transaction is a disposal of the future or option which— That amount is the amount which that party to the future or option might reasonably have been expected to pay, in a transaction at arm’s length entered into at the relevant time, for the release of his obligations and liabilities under the future or option. Where, in a case in which a transaction is deemed to take place by virtue of sub-paragraph (2)(b) above (“the deemed transaction")— amounts taken into account or allowable as deductions in computing those profits or gains, or that loss, shall not be excluded by virtue of section 37 or 39 of the 1992 Act (exclusion of amounts taken into account or allowable for the purposes of the taxation of income and profits) from any computation made for the purposes of that Act, but paragraph 1(6) above shall be given effect to in relation to the 1992 Act in accordance with sub-paragraphs (6) to (10) below. Where there are profits or gains arising to any person (“the taxpayer") from the deemed transaction, an increase equal to the amount of those profits or gains shall be made in the amount that would otherwise be taken for the purposes of the 1992 Act to be— but any increase made by virtue of paragraph (b) above in the amount of any consideration shall be disregarded in computing the amount of any indexation allowance. Where there is a loss for any person (“the taxpayer") in the deemed transaction— That occasion is— For the purposes of sub-paragraphs (6) and (7) above, where in any case there is a deemed disposal of an option by the person who granted it, any determination— shall be made as if that disposal and the disposal by which the option was granted were a single transaction. In sub-paragraph (8) above— . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . In this paragraph— and references in this paragraph to a future running to delivery are references to the discharge by performance of the obligations owed under the commodity or financial futures contract in question to the party to the future whose rights are in relation to its underlying subject matter. Sub-paragraph (3) of paragraph 3 above applies for the purposes of sub-paragraph (11) above as it applies for the purposes of that paragraph.
In this Schedule references to the return from one or more disposals are references to the return on investment represented either— For the purposes of the references in sub-paragraph (1) above to the total net profits and gains from any two or more disposals, it shall be assumed that profits and gains realised, and losses sustained, by persons who are associated with each other are all realised or sustained by the same person. For the purposes of sub-paragraph (2) above persons are associated with each other in relation to any two or more disposals made in pursuance of the same scheme or arrangements if— In this paragraph—
For the purposes of this Schedule two or more transactions are related if all of them are entered into in pursuance of the same scheme or arrangements. Nothing in this Schedule shall be construed as preventing transactions with different parties, or transactions with parties different from the parties to the scheme or arrangements in pursuance of which they are entered into, from being related transactions. For the purposes of this paragraph the cases in which any two or more transactions are to be taken to be entered into in pursuance of the same scheme or arrangements shall include any case in which it would be reasonable to assume, from either or both of— that neither of them or, as the case may be, none of them would have been entered into independently of the other or others. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . In this paragraph “scheme or arrangements” includes schemes, arrangements and understandings of any kind, whether or not legally enforceable.
Where any profits or gains are treated, in accordance with paragraph 1 above, as income arising to trustees for any year of assessment, the relevant part of that income shall be treated for the purposes of the Tax Acts as if it were income to which section 686 applies (income taxable at the rate applicable to trusts). In sub-paragraph (1) above the reference to the relevant part of any income is a reference to so much (if any) of that income as— Subsection (6) of section 686 (meaning of “trustees” etc.) shall apply for the purposes of this paragraph as it applies for the purposes of that section.
For the purpose of determining whether an individual ordinarily resident in the United Kingdom has a liability for income tax in respect of any profit or gain which— sections 739 and 740 (transfer of assets abroad) shall have effect as if that profit or gain, when realised, constituted income becoming payable to the person resident or domiciled outside the United Kingdom.
is realised by a person resident or domiciled outside the United Kingdom, and
arises from a transaction to which this Schedule applies,
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
In this Schedule— References in this Schedule to the borrower or lender under an approved stock lending arrangement include any person acting as the nominee of the borrower or lender.
This paragraph applies where in connection with an approved stock lending arrangement— Where this paragraph applies— This paragraph does not apply unless the amount of the rebate interest is identified as such by the parties separately from any fee or other amount payable in connection with the arrangement.
In this Schedule—
This paragraph applies where the van mentioned in section 159AA(1)— Subject to paragraphs 2 and 3 below, the cash equivalent of the benefit is—
Subject to paragraph 3 below, where paragraph 1 above applies and for any part of the year concerned— the cash equivalent of the benefit is the amount ascertained under paragraph 1 above (the full amount) reduced by an amount which bears to the full amount the same proportion as the number of excluded days in the year bears to 365. For the purposes of sub-paragraph (1) above a van is to be treated as being unavailable on any day if— For the purposes of sub-paragraph (1) above an excluded day is a day on which the van falls within paragraph (a) or (b) of that sub-paragraph.
Where paragraph 1 above applies and in the year concerned the employee is required, as a condition of the van being available for his private use, to pay any amount of money (whether by way of deduction from his emoluments or otherwise) for that use, then— In sub-paragraph (1) above— If the van is a shared van (within the meaning given by Part II of this Schedule) for part of the year concerned, the reference in sub-paragraph (2) above to the year shall be construed as a reference to the part of the year when the van is not a shared van.
This Part of this Schedule applies to a van for a year if it is a shared van for any period in the year. A van is a shared van for a period if the period is one throughout which the van is available concurrently to more than one employee of the same employer. A van is also a shared van for a period if— But if the van is available to one employee only for a period exceeding 30 days (an exclusive period)— If a van would (apart from this sub-paragraph) be treated as shared during part of a day it shall be treated as shared throughout the day.
This paragraph applies where for any year this Part of this Schedule— For the purposes of this paragraph a participating employee is an employee to whom— but an employee is not a participating employee unless he makes private use of the van, or (if more than one is involved) he makes private use of at least one of them, at least once while it is a shared van. In sub-paragraph (2) above— This paragraph shall apply to each participating employee in the same way, irrespective of— Where this paragraph applies— The figure found for a participating employee shall be taken to be the cash equivalent of the benefit to him in the year of—
Subject to sub-paragraph (2) below, the basic value of a van for a year is— Where for any part of the year— its basic value is the amount ascertained under sub-paragraph (1) above (the full value) reduced by an amount which bears to the full value the same proportion as the number of excluded days in the year bears to 365. For the purposes of sub-paragraph (2) above a van is to be treated as being incapable of use on any day if the day falls within a period, of 30 days or more, throughout which the van is incapable of being used at all. For the purposes of sub-paragraph (2) above an excluded day is a day on which the van falls within paragraph (a) or (b) of that sub-paragraph.
Where (apart from this paragraph) the figure found under paragraph 5 above for a participating employee for a year would exceed £500, the figure for the employee for the year shall be taken to be £500.
In a case where— the figure found for the employee for the year shall be taken to be the alternative figure found under this paragraph. The alternative figure is a figure found by— For the purposes of sub-paragraph (2)(a) above a relevant day is a day which falls in the year and during which (or part of which) the employee, or a member of his family or household, makes private use of the van concerned while it is a shared van. For the purposes of section 95 of the Taxes Management Act 1970 (incorrect return etc.) a claim under this paragraph shall be taken to be a claim for relief.
Where this Part of this Schedule applies and in the year concerned a participating employee is required, as a condition of the van or vans being available for his private use, to pay any amount of money (whether by way of deduction from his emoluments or otherwise) for that use, then— For the purposes of this paragraph the relevant sum shall be found by— Any reference in this paragraph to a van being available for the employee’s private use includes a reference to the van being available for the private use of others being members of his family or household.
This paragraph applies where— Once the different cash equivalents are so found, the employee shall be charged to tax as if the van concerned were different vans, one having a cash equivalent found under Part I of this Schedule and the other having (or counting towards) a cash equivalent found under Part II of this Schedule.
In a case where— the cash equivalent of the benefit of the vans to him in the year shall be £500.
the cash equivalent of the benefit of vans to an employee in a year would (apart from this paragraph) total more than £500, and
no more than one of the vans is available to him for his private use, or the private use of others being members of his family or household, at any one time in the year,
For the purposes of this Schedule a van is available to an employee at a particular time if it is then made available, by reason of his employment and without any transfer of the property in it, either to him or to others being members of his family or household.
For the purposes of section 161B(1) a loan “on ordinary commercial terms” means a loan—
made by a person (“the lender”) in the ordinary course of a business carried on by him which includes—
the lending of money, or
the supplying of goods or services on credit, and
in relation to which the requirements of paragraph 2, 3 or 4 below are met.
This paragraph applies to any loan and the relevant time for the purposes of this paragraph is the time the loan was made. The requirements of this paragraph are— For the purposes of this paragraph a loan is comparable to another loan if it is made for the same or similar purposes and on the same terms and conditions. The relevant loans for the purposes of sub-paragraph (2)(b) are— In determining for the purposes of this paragraph whether any loans made by any person before 1st June 1994 are made on the same terms or conditions, or held on the same terms, there shall be left out of account any amounts, by way of fees, commission or other incidental expenses, incurred for the purpose of obtaining any of those loans by the persons to whom they are made.
This paragraph applies to a loan that has been varied before 6th April 2000 and the relevant time for the purposes of this paragraph is the time of the variation. The requirements of this paragraph are— The relevant loans for the purposes of sub-paragraph (2)(a) are—
The requirements of this paragraph apply to a loan that has been varied on or after 6th April 2000 and the relevant time for the purposes of this paragraph is the time of the variation. The first requirement is that at the relevant time members of the public that had loans from the lender for similar purposes had a right to vary their loans on the same terms and conditions as applied in relation to the variation of the loan in question. The second requirement is that any existing loans so varied and the loan in question as varied are held on the same terms. The third requirement is that if those terms differ from the terms applicable immediately after the relevant time, they were imposed in the ordinary course of the lender’s business. The fourth requirement is that a substantial proportion of the relevant loans were made to members of the public. The relevant loans for the purposes of sub-paragraph (5) are—
Amounts incurred by the person to whom a loan is made— shall be left out of account in determining for the purposes of paragraph 3 or 4 whether rights to vary loans are exercisable on the same terms and conditions or loans are held on the same terms.
on penalties or interest or similar amounts incurred as a result of varying the loan, and
on fees, commission or other incidental expenses, incurred for the purpose of obtaining the loan,
For the purposes of this Schedule a “member of the public” means a member of the public at large with whom the lender deals at arm’s length.
Where by reason of a person’s employment— the employee shall not thereby be regarded as receiving emoluments of the employment for any purpose of Case I or Case II of Schedule E. Sub-paragraph (1) above shall have effect subject to Part V of this Schedule.
This paragraph applies where— The payment or benefit shall be treated as not being emoluments of the employment for any purpose of Case III of Schedule E.
Expenses are not qualifying removal expenses unless they are eligible removal expenses and the conditions set out in this paragraph and paragraph 5 below are fulfilled. The expenses must be reasonably incurred by the employee in connection with a change of his residence. The expenses must be incurred on or before the relevant day.
A benefit is not a qualifying removal benefit unless it is an eligible removal benefit and the conditions set out in this paragraph and paragraph 5 below are fulfilled. The benefit must be reasonably provided in connection with a change of the employee’s residence. The benefit must be provided on or before the relevant day.
The change of residence mentioned in paragraphs 3(2) and 4(2) above must result from— The change must be made wholly or mainly to allow the employee to have his residence within a reasonable daily travelling distance of— and any reference in this sub-paragraph to the place where the employee performs, or is to perform, duties of his employment is to the place where he normally performs, or is normally to perform, those duties. The employee’s former residence must not be within a reasonable daily travelling distance of the place mentioned in sub-paragraph (2) above.
Subject to sub-paragraph (2) below, the relevant day, in relation to a particular change of residence, is the day on which the relevant year ends; and for the purposes of this sub-paragraph the relevant year is the year of assessment next following the year of assessment in which— If it appears reasonable to the Board to do so, having regard to all the circumstances of a particular change of residence, they may direct that in relation to that change the relevant day is a day which—
Expenses are eligible removal expenses if they fall into one of the following categories— and paragraphs 8 to 14 below apply for the purpose of interpreting the preceding provisions of this paragraph.
expenses of disposal,
expenses of acquisition,
expenses of abortive acquisition,
expenses of transporting belongings,
travelling and subsistence expenses,
bridging loan expenses, and
duplicate expenses;
Expenses fall within paragraph 7(a) above if (and only if)— Expenses fall within this sub-paragraph if they consist of one of the following— The reference in this paragraph to the employee having an interest in his former residence includes a reference to— and references to the disposal or intended disposal of the employee’s interest in his former residence shall be construed accordingly. For the purposes of this paragraph a loan relates to a residence if the loan was raised to obtain an interest in the residence, or an interest in the residence forms security for the loan, or both.
Expenses fall within paragraph 7(b) above if (and only if) the employee acquires an interest in his new residence and the expenses consist of one of the following— References in this paragraph to the employee acquiring an interest in his new residence include references to— References in this paragraph to a loan are to a loan raised by the employee, by one or more members of the employee’s family or household or by the employee and one or more members of his family or household. The reference in this paragraph to a utility for use by the employee includes a reference to a utility for use by the employee and one or more members of his family or household. For the purposes of this paragraph an appropriate registry is any of the following— and an appropriate register is any register under the management and control of the Keeper of the Registers of Scotland.
Expenses fall within paragraph 7(c) above if (and only if)—
they are incurred with a view to the acquisition of an interest in a residence, the interest is not acquired, but (if it were) the residence would be the employee’s new residence,
they would fall within paragraph 7(b) above if the interest were acquired, and
the interest is not acquired because of circumstances outside the control of the person seeking to acquire the interest, or because that person reasonably declines to proceed.
Expenses fall within paragraph 7(d) above if (and only if) they consist of one of the following— For the purposes of this paragraph transporting includes— For the purposes of this paragraph domestic belongings are those of the employee and of members of his family or household.
Expenses fall within paragraph 7(e) above if (and only if) they consist of one of the following— For the purposes of this paragraph— For the purposes of this paragraph the material time is the beginning of the year of assessment in which— In a case where— the expenses or, as the case may be, the part of them in respect of which the deduction is allowable shall be treated as not falling within paragraph 7(e) above.
Expenses fall within paragraph 7(f) above if (and only if)— Interest falls within this sub-paragraph if it is payable by the employee in respect of a loan raised by him and the reason, or one of the reasons, for the loan being raised is that a period elapses between— Interest on so much of the loan as exceeds the market value of the employee’s interest in his former residence (taken at the time his interest in his new residence is acquired) shall be regarded as not falling within sub-paragraph (2) above. Interest on so much of the loan as is not used for any of the following purposes shall also be regarded as not falling within sub-paragraph (2) above— For the purposes of this paragraph a loan relates to a residence if the loan was raised to obtain an interest in the residence, or an interest in the residence forms security for the loan, or both. References in this paragraph to the employee having, disposing of or acquiring an interest in a residence include references to— and references to the employee’s interest shall be construed accordingly. The reference in this paragraph to interest payable by the employee includes a reference to interest payable by one or more members of the employee’s family or household or by the employee and one or more members of his family or household. References in this paragraph to a loan raised by the employee include references to a loan raised by one or more members of the employee’s family or household or by the employee and one or more members of his family or household.
Expenses fall within paragraph 7(g) above if (and only if)— In arriving at the total of the expenses any amount mentioned in sub-paragraph (3) below shall be deducted from what would be the total apart from this sub-paragraph; and accordingly an amount equal to the aggregate of such amounts shall not be treated as eligible removal expenses. The amount is any amount obtained in respect of the sale of the replaced goods. References in this paragraph to the employee having, disposing of or acquiring an interest in a residence include references to—
The Treasury may make regulations amending the preceding provisions of this Part of this Schedule so as to secure that expenses that would not be eligible removal expenses (apart from the regulations) are such expenses. Any such regulations may include such supplementary, incidental or consequential provisions as appear to the Treasury to be necessary or expedient; and such provisions may be made by way of amendment to other Parts of this Schedule, or otherwise. Any such regulations shall have effect as regards any change of an employee’s residence which results from— and in this sub-paragraph “the specified day” means the day specified in the regulations for the purposes of this sub-paragraph.
Benefits are eligible removal benefits if they fall into one of the following categories— and paragraphs 17 to 22 below apply for the purpose of interpreting the preceding provisions of this paragraph.
benefits in respect of disposal,
benefits in respect of acquisition,
benefits in respect of abortive acquisition,
benefits in respect of the transporting of belongings,
travelling and subsistence benefits, and
benefits in respect of the new residence;
A benefit falls within paragraph 16(a) above if (and only if)— A benefit falls within this sub-paragraph if it consists of one of the following— Sub-paragraphs (3) and (4) of paragraph 8 above apply for the purposes of this paragraph as they apply for the purposes of that.
A benefit falls within paragraph 16(b) above if (and only if) the employee acquires an interest in his new residence and the benefit consists of one of the following— Sub-paragraphs (2) to (4) of paragraph 9 above apply for the purposes of this paragraph as they apply for the purposes of that.
A benefit falls within paragraph 16(c) above if (and only if)—
it is provided with a view to the acquisition of an interest in a residence, the interest is not acquired, but (if it were) the residence would be the employee’s new residence,
it would fall within paragraph 16(b) above if the interest were acquired, and
the interest is not acquired because of circumstances outside the control of the person seeking to acquire the interest, or because that person reasonably declines to proceed.
A benefit falls within paragraph 16(d) above if (and only if) it consists of one of the following— Sub-paragraphs (2) and (3) of paragraph 11 above apply for the purposes of this paragraph as they apply for the purposes of that.
A benefit falls within paragraph 16(e) above if (and only if) it consists of one of the following— Where (apart from this sub-paragraph) a car or van would constitute a facility for the purposes of sub-paragraph (1) above, it shall not do so if the car or van— Sub-paragraphs (2) and (3) of paragraph 12 above apply for the purposes of this paragraph as they apply for the purposes of that. In this paragraph “car”, “van” and “private use” have the same meanings as in Chapter II of this Part of this Act. Section 168(6) applies for the purposes of this paragraph as it applies for the purposes of Chapter II of this Part of this Act. For the purposes of this paragraph a relevant time is any time falling on or before the day which is the relevant day (within the meaning given by paragraph 6 above) in relation to the change of residence concerned. In a case where— the benefit shall, subject to sub-paragraph (8) below, be treated as not falling within paragraph 16(e) above. Where a deduction is allowed as mentioned in sub-paragraph (7) above in respect of part only of the cost of the benefit, the extent to which the benefit is treated as falling within paragraph 16(e) above shall be determined on a just and reasonable basis.
A benefit falls within paragraph 16(f) above if (and only if)— Sub-paragraph (4) of paragraph 14 above applies for the purposes of this paragraph as it applies for the purposes of that.
The Treasury may make regulations amending the preceding provisions of this Part of this Schedule so as to secure that a benefit that would not be an eligible removal benefit (apart from the regulations) is such a benefit. Any such regulations may include such supplementary, incidental or consequential provisions as appear to the Treasury to be necessary or expedient; and such provisions may be made by way of amendment to other Parts of this Schedule, or otherwise. Sub-paragraph (3) of paragraph 15 above applies to regulations made under this paragraph as it applies to regulations made under that.
In a case where, by reason of the employee’s employment and in connection with a particular change of residence— paragraph 1(1) above shall apply only to the extent that the total value to the employee, found under sub-paragraph (2) below, does not exceed the qualifying limit. The total value to the employee is the total of the following— Subject to sub-paragraphs (4) to (8) below, for the purposes of sub-paragraph (2)(b) above the amount represented by a benefit is the amount which would be the cash equivalent of the benefit under Chapter II of this Part of this Act if the benefit were chargeable under the appropriate provision of that Chapter. In the case of a benefit which— for the purposes of sub-paragraph (2)(b) above the amount represented by the benefit is the amount which, if the benefit were so chargeable, would be the value to the employee of the accommodation for the period in which the accommodation is provided, less the appropriate sum. For the purposes of sub-paragraph (4) above the value to the employee of accommodation in any period shall be determined in accordance with section 145, and the reference in that sub-paragraph to the appropriate sum is to the total of— In the case of a benefit which— for the purposes of sub-paragraph (2)(b) above the amount represented by the benefit is the total of the amounts mentioned in sub-paragraph (7) below. The amounts referred to in sub-paragraph (6) above are— For the purposes of sub-paragraph (7) above the additional value to the employee of accommodation in any period shall be determined in accordance with section 146, and the reference in that sub-paragraph to the appropriate sum is to the total of— The qualifying limit, as regards any change of residence, is £8,000. The Treasury may by order substitute for the sum for the time being specified in sub-paragraph (9) above a sum of a greater amount. Any such substitution shall have effect as regards any change of an employee’s residence which results from— and in this sub-paragraph “the specified day” means the day specified in the order for the purposes of this sub-paragraph.
In this Schedule—
references to the residence of the employee are to his sole or main residence,
references to the former residence of the employee are to his sole or main residence before the change,
references to the new residence of the employee are to his sole or main residence after the change, and
references to an interest in a residence are, in the case of a building, references to an estate or interest in the land concerned.
For the purposes of this Schedule a person is not a member of another person’s family or household unless the former is—
the latter’s spouse, son, daughter, parent, servant, dependant or guest, or
the spouse of a son or daughter of the latter.
In this Schedule references to employment include references to any office, and related expressions shall be construed accordingly.
References in this Schedule to subsistence are to food, drink and temporary living accommodation.
This Schedule applies to any payment made, or any benefit provided, in connection with a change of an employee’s residence which results from—
the employee becoming employed by an employer on or after 6th April 1993,
an alteration, with effect from a time falling on or after 6th April 1993, of the duties of the employee’s employment, or
an alteration, with effect from a time falling on or after 6th April 1993, of the place where the employee is normally to perform the duties of his employment.
The provisions of this Schedule apply for the purposes of section 198(1A)(b)(ii) (qualifying travelling expenses: exclusion of ordinary commuting and private travel). In this Schedule “employment” includes an office and “employee” includes an office-holder.
“Ordinary commuting” means travel between— and a place which is a permanent workplace in relation to the employment. “Private travel” means travel between— In sub-paragraphs (1)(b) and (2) “workplace” means a place at which the employee’s attendance is necessary in the performance of the duties of the employment.
Travel between any two places that is for practical purposes substantially ordinary commuting or private travel is treated as ordinary commuting or private travel.
For the purposes of paragraph 2, subject to the following provisions of this Schedule—
A place is not regarded as a temporary workplace if the employee’s attendance is in the course of a period of continuous work at that place— or if the employee’s attendance is at a time when it is reasonable to assume that it will be in the course of such a period. A “period of continuous work" at a place means a period over which, looking at the whole period and considering all the duties of the employment, the duties of the employment fall to be performed to a significant extent at that place. An actual or contemplated modification of the place at which the duties of the employment fall to be performed is disregarded for the purposes of this paragraph if it does not have, or would not have, any substantial effect on the employee’s journey, or expenses of travelling, to and from the place where the duties fall to be performed.
A place which the employee regularly attends in the performance of the duties of the employment— is treated as a permanent, and not a temporary, workplace.
which forms the base from which the duties of the employment are performed, or
is the place at which the tasks to be carried out in the performance of those duties are allocated,
An employee is treated as having a permanent workplace consisting of an area if the following conditions are met. The conditions are that—
In this Schedule any reference to a claim is to a claim under section 240(1A). In this Schedule “the relevant accounting period of the surrendering company” means, in relation to a claim by the surrendering company, the accounting period referred to in section 240(1).
Surrenders to different subsidiaries or to the same subsidiary at different times shall be treated as made by separate claims (however the claims are presented). Where a surrendering company makes more than one claim at the same time, the claims shall be treated as made in such sequence as the surrendering company at that time elects or as, in default of such an election, an officer of the Board determines.
A claim must specify— The amount specified in compliance with sub-paragraph (1)(a) above must be an amount which is quantified at the time when the claim is made.
A claim by the surrendering company must be made within the period of six years from the end of the relevant accounting period of the surrendering company.
Where a claim could be made by being included in a company tax return, or an amendment of such a return, it must be so made. The provisions of Part VII of Schedule 18 to the Finance Act 1998 (general provisions as to claims and elections) do not apply to the making of claims.
A claim not included in a return or an amendment of a return must be made to an officer of the Board and must be supported by such documents as the officer may require. The claim shall be made in such form as the Board may determine. The form of claim shall provide for a declaration to the effect that all the particulars given in the form are correctly stated to the best of the information and belief of the person making the claim.
A claim shall not be withdrawn except by a notice given to an officer of the Board in such form as the Board may determine. A notice withdrawing a claim must specify— A notice withdrawing a claim must be accompanied by a notice signifying the consent required by section 240(5A). Where a claim included in a return is withdrawn and the withdrawal could be made by an amendment of the return, it must be so made.
Where— claim A shall be treated as being withdrawn before claim B is treated as made.
a claim (“claim A”) is withdrawn, and
at the time when claim A is withdrawn, another claim (“claim B”) is made,
Subject to sub-paragraph (3) below, a claim shall not be withdrawn after the earlier of— In this paragraph “relevant accounting period of the subsidiary” means, in relation to a claim, any period in which a distribution is treated under section 240(2) as made by virtue of the claim. In the circumstances given by sub-paragraph (4) below, a claim may be withdrawn at any time before the end of the period of six years from the end of the relevant accounting period of the surrendering company. The circumstances are that— For the purposes of sub-paragraph (4) above, advance corporation tax is finally dealt with to the subsidiary’s advantage if—
Nothing in the Management Act shall be read as allowing a claim to be amended.
Where— the claim must be accompanied by an assessment (a self-assessment) of the corporation tax due as a result of the claim. The tax shall be treated as due and payable, in accordance with section 59D of the Management Act, on the day following the expiry of nine months from the end of the relevant accounting period. The standard provisions about enquiries into self-assessments (given by paragraph 14 below) apply to self-assessments provided under this paragraph.
Where— the claim must be accompanied by an assessment (a self-assessment) of the corporation tax due as a result of the claim. The tax shall be treated as due and payable, in accordance with section 59D of the Management Act, on the day following the expiry of nine months from the end of the later accounting period. The standard provisions about enquiries into self-assessments (given by paragraph 14 below) apply to self-assessments provided under this paragraph. For the purposes of sub-paragraph (1)(a) above, advance corporation tax which was in fact paid in the relevant accounting period of the surrendering company shall be treated as set against the liability of the company to corporation tax for the later accounting period after any other advance corporation tax available to be so treated.
Sub-paragraph (3) below applies where— Sub-paragraph (3) below also applies where— The subsidiary must, before the end of the period of three months beginning with the day on which it becomes aware of the true facts, provide an officer of the Board with an assessment (a self-assessment) of the amount of corporation tax which was due for the relevant accounting period on the basis of the true facts. The tax shall be treated as due and payable, in accordance with section 59D of the Management Act, on the day following the expiry of nine months from the end of the relevant accounting period of the subsidiary. The standard provisions about enquiries into self-assessments (given by paragraph 14 below) apply to self-assessments provided under this paragraph. For the purposes of this paragraph it shall be assumed that advance corporation tax actually paid (or correctly treated as paid) by the subsidiary has been set against the subsidiary’s liability to corporation tax before any advance corporation tax incorrectly treated as paid by the subsidiary.
The standard provisions about enquiries into self-assessments . . . are as follows. An officer of the Board may, at any time before the end of the period of one year beginning with the day on which the self-assessment is received, give notice of his intention to enquire into the self-assessment. The officer’s enquiries shall end on such day as he by notice— At any time in the period of 30 days beginning with the day on which the enquiries end, the company may amend its self-assessment so as to make good any deficiency or eliminate any excess in the amount of tax contained in the self-assessment. At any time in the period of 30 days beginning immediately after the period mentioned in sub-paragraph (4) above, the officer may by notice to the company amend the company’s self-assessment so as to make good any deficiency or eliminate any excess in the amount of tax contained in the self-assessment. The provisions of the Management Act apply to an amendment of a self-assessment under sub-paragraph (5) above as they apply to an amendment of a company tax return under paragraph 34(2) of Schedule 18 to the Finance Act 1998. At any time before a notice is given under sub-paragraph (3) above, the company may apply for a direction that the officer shall give such a notice within such period as may be specified in the direction. Subject to sub-paragraph (9) below, an application under sub-paragraph (7) above shall be heard and determined in the same way as an appeal . . . . The Commissioners hearing an application under sub-paragraph (7) above shall give the direction applied for unless they are satisfied that the officer has reasonable grounds for not giving the notice.
Where— the surrendering company shall be entitled by notice to claim repayment of that amount. Where— the subsidiary shall be entitled by notice to claim repayment of that amount. In this paragraph “relevant accounting period of the subsidiary” has the same meaning as in paragraph 9.
Paragraphs 2 to 5 below apply where at any time in a year of assessment— In those paragraphs— If the partners have the same total income for the year—
Subject to paragraph 3 below, the lower-earning partner shall not be entitled to a children’s tax credit for the year in respect of a relevant child.
This paragraph applies if no part of either partner’s income for the year falls within section 1(2)(b). If the lower-earning partner makes a claim for a children’s tax credit for the year in respect of a relevant child— If a relevant child is a qualifying baby the reference in sub-paragraph (2)(b) above to the amount mentioned in section 257AA(2) is to the higher amount applicable by virtue of subsection (2A) of that section. If the partners make an election under this sub-paragraph—
This paragraph applies where— Where the other partner would not, by virtue of paragraph 2 or 3 above, be entitled to a children’s tax credit for the year in respect of a relevant child— In any other case, the difference between Amount A and Amount B shall be added to the amount by reference to which children’s tax credit would otherwise be calculated for the other partner in respect of a relevant child. A notice under this paragraph—
This paragraph applies to elections under paragraph 3 above. An election— Subject to sub-paragraph (4) below, an election must be made before the first year of assessment for which it is to have effect and on the basis of assumptions about the partners’ incomes for that year. An election may be made, on the basis of such assumptions, at a time during the first year for which it is to have effect if— An election may be withdrawn— A withdrawal shall have effect for the year of assessment in which it is given and subsequent years. If the higher-earning partner for one year of assessment (Year 1) is the lower-earning partner for the next year (Year 2), an election having effect for Year 1 shall not have effect for Year 2 or subsequent years.
This paragraph applies to a child for a year of assessment if— The persons in relation to whom the child is a qualifying child are referred to in this paragraph as the taxpayers. None of the taxpayers shall be entitled to a children’s tax credit for the year of assessment by virtue of the residence of any child to whom this paragraph applies except in accordance with the following provisions of this paragraph. If a taxpayer claims a children’s tax credit for the year of assessment by virtue of the residence of any child to whom this paragraph applies, for the amount mentioned in section 257AA(2) (before any reduction) there shall be substituted his allotted proportion of that amount. If the child is a qualifying baby the reference in sub-paragraph (4) above to the amount mentioned in section 257AA(2) is to the higher amount applicable by virtue of subsection (2A) of that section. A taxpayer’s allotted proportion is— For the purposes of sub-paragraph (5) above— Where a person— for the amount mentioned in section 257AA(2) (before any reduction) there shall be substituted the aggregate of his allotted proportions of that amount (not exceeding 100 per cent.). Where sub-paragraph (7) above applies in relation to a person, and any child in respect of which a proportion has been, or could have been, allotted to that person is a qualifying baby, the reference in that sub-paragraph to the amount mentioned in section 257AA(2) is to the higher amount applicable by virtue of subsection (2A) of that section. Where— the Board may direct that the claim shall be dealt with, and the assignment shall be made, by a specified body of Commissioners which could be directed under sub-paragraph (6)(c) above to make the assignment; and where a direction is given no other body of Commissioners shall have jurisdiction to determine the claim. For the purposes of any assignment to a taxpayer under sub-paragraph (5)(b) above—
This paragraph applies where a child is a relevant child for the purposes of paragraphs 2 to 5 above in a year of assessment and— Where this paragraph applies— Where paragraph 6(4A) or (7A) above applies, the reference in sub-paragraph (2) above to the amount mentioned in section 257AA(2) is to the higher amount applicable by virtue of subsection (2A) of that section.
For the purposes of this paragraph a change of circumstances occurs in relation to a child in a year of assessment if a relevant event takes place in that year and— The following are relevant events— A separation occurs when— In a year of assessment in which a change of circumstances (or more than one) occurs in relation to a child, section 257AA (except subsection (4A)) and paragraphs 2 to 7 above shall apply in relation to the child’s residence as if each of the following were a separate year of assessment— For the purposes of sub-paragraph (4) above the amount specified in section 257AA(2) (before any reduction or substitution) shall be taken to be the result of the following formula— If the child is a qualifying baby the references in sub-paragraph (5) above to the amount specified in section 257AA(2) are to the higher amount applicable by virtue of subsection (2A) of that section. In applying sub-paragraph (4) above a reference in section 257AA or this Schedule to a person’s income for the year shall be taken as a reference to his income for the year and not his income for the period.
This Schedule shall have effect for the purposes of section 326.
A share option linked scheme is a scheme under which periodical contributions are to be made by an individual— In sub-paragraph (1) above, “approved” and “SAYE option scheme” have the same meanings as in the SAYE code (see section 516(4) of ITEPA 2003 (approved SAYE option schemes)).
A relevant European institution is an EEA firm of the kind mentioned in paragraph 5(b) of Schedule 3 to the Financial Services and Markets Act 2000 which has permission under paragraph 15 of that Schedule (as a result of qualifying for authorisation under paragraph 12 of that Schedule) to accept deposits.
The requirements which may be specified under section 326(3)(b), (4)(b) or (5)(b) are such requirements as the Treasury think fit. In particular, the requirements may relate to— The requirements which may be specified under any of the relevant provisions may be different from those specified under any of the other relevant provisions; and the relevant provisions are section 326(3)(b), (4)(b) and (5)(b).
Where a specification has been made under section 326(3)(b), (4)(b) or (5)(b) the Treasury may— No withdrawal under this paragraph shall affect— No withdrawal under this paragraph shall be effective unless the Treasury— and a relevant body is a society or institution authorised (whether unconditionally or subject to conditions being met) to enter into contracts under the scheme concerned.
Where a specification has been made under section 326(3)(b), (4)(b) or (5)(b) the Treasury may— and the Treasury may at any time certify a scheme as fulfilling the requirements obtaining after the variation. No variation and withdrawal under this paragraph shall affect— No variation and withdrawal under this paragraph shall be effective unless the Treasury— and a relevant body is a society or institution authorised (whether unconditionally or subject to conditions being met) to enter into contracts under the scheme concerned.
The Treasury may authorise a society or institution under section 326(7) or (8) as regards schemes generally or as regards a particular scheme or particular schemes. More than one authorisation may be given to the same society or institution.
Where an authorisation has been given under section 326(7) or (8) the Treasury may withdraw the authorisation and stipulate the date on which the withdrawal is to become effective; and the withdrawal shall have effect as regards any contract not entered into before the stipulated date. No withdrawal under this paragraph shall be effective unless the Treasury— A withdrawal of an authorisation shall not affect the Treasury’s power to give another authorisation or other authorisations.
Where an authorisation has been given under section 326(7) the Treasury may— As regards any contract entered into on or after the stipulated date the authorisation shall be treated as having been given under section 326(8) subject to the conditions being met. No variation under this paragraph shall be effective unless the Treasury—
Where an authorisation has been given under section 326(8) the Treasury may withdraw the conditions and stipulate the date on which the withdrawal is to become effective. As regards any contract entered into on or after the stipulated date the authorisation shall be treated as having been given under section 326(7) without any conditions being imposed.
Where an authorisation has been given under section 326(8) the Treasury may vary the conditions and stipulate the date on which the variation is to become effective; and the variation shall have effect as regards any contract entered into on or after the stipulated date. No variation under this paragraph shall be effective unless the Treasury—
If the Treasury act as regards an authorisation under a relevant paragraph, the paragraph concerned shall have effect subject to their power to act later, as regards the same authorisation, under the same or (as the case may be) another relevant paragraph. If the Treasury act later as mentioned in sub-paragraph (1) above that sub-paragraph shall apply again, and so on however many times they act as regards an authorisation. If the Treasury act as regards an authorisation under a relevant paragraph the paragraph concerned shall have effect subject to their power to act later, as regards the same authorisation, under paragraph 8 above. For the purposes of this paragraph the relevant paragraphs are paragraphs 9 to 11 above.
Subject to the following provisions of this Schedule, an individual shall, for any year of assessment, be entitled under this Part of this Schedule to claim relief in respect of an amount equal to the aggregate of the amounts (if any) which, by reference to eligible shares issued to him by venture capital trusts in the course of that year, are amounts on which he is eligible for relief in accordance with sub-paragraph (2) below. The amounts on which an individual shall be taken for the purposes of sub-paragraph (1) above to be eligible for relief shall be any amounts subscribed by him on his own behalf for eligible shares issued by a venture capital trust for raising money. An individual shall not be entitled under this Part of this Schedule to claim relief for any given year of assessment in respect of an amount of more than £200,000. An individual shall not be entitled under this Schedule to claim any relief to which he is eligible by reference to any shares unless he had attained the age of eighteen years before those shares were issued. Where an individual makes a claim for any relief to which he is entitled under this Part of this Schedule for any year of assessment, the amount of his liability for that year to income tax on his total income shall be equal to the amount to which he would be so liable apart from this Part of this Schedule less whichever is the smaller of— In determining for the purposes of sub-paragraph (5) above the amount of income tax to which a person would be liable apart from this Part of this Schedule, no account shall be taken of— . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A person shall not be entitled to be given any relief under this Part of this Schedule by reference to any shares if circumstances have arisen which would have resulted, had that relief already been given, in the withdrawal or reduction of the relief. A person shall not under this Part of this Schedule be eligible for any relief on any amount by reference to any shares unless the shares are both subscribed for and issued for bona fide commercial purposes and not as part of a scheme or arrangement the main purpose of which, or one of the main purposes of which, is the avoidance of tax. An individual is not eligible for relief under this Part of this Schedule by reference to any shares which are treated as issued to him by virtue of section 195(8) of the Finance Act 2003 (tax treatment of disposal by company of its own shares). Where a company which is a venture capital trust issues to any individual eligible shares to which sub-paragraph (10) above applies, it must—
An individual shall not be entitled to relief under this Part of this Schedule in respect of any shares if— References in this paragraph to the making by any person of a loan to any individual or an associate of his include references— In this paragraph—
This paragraph applies, subject to sub-paragraph (5) below, where— If the disposal is made otherwise than by way of a bargain made at arm’s length, any relief given under this Part of this Schedule by reference to the shares which are disposed of shall be withdrawn. Where the disposal was made by way of a bargain made at arm’s length— The amount referred to in sub-paragraph (3) above is an amount equal to tax at the lower rate for the year of assessment for which the relief was given on the amount or value of the consideration which the individual receives for the shares. This paragraph shall not apply in the case of any disposal of shares which is made by a person to his spouse or civil partner at a time when they are living together. Where any eligible shares issued to any individual (“the transferor”), being shares by reference to which any amount of relief under this Part of this Schedule has been given, are transferred to the transferor’s spouse or civil partner (“the transferee”) by a disposal such as is mentioned in sub-paragraph (5) above, this paragraph shall have effect, in relation to any subsequent disposal or other event, as if— Any assessment for withdrawing or reducing relief by reason of a disposal or other event falling within sub-paragraph (6) above shall be made on the transferee. In determining for the purposes of this paragraph any question whether any disposal relates to shares by reference to which any relief under this Part of this Schedule has been given, it shall be assumed, in relation to any disposal by any person of any eligible shares in a venture capital trust, that— Where— any person who, at the time when the withdrawal takes effect, is holding any shares by reference to which relief under this Part of this Schedule has been given shall be deemed for the purposes of this paragraph to have disposed of those shares immediately before that time and otherwise than by way of a bargain made at arm’s length.
Any relief given under this Part of this Schedule which is subsequently found not to have been due shall be withdrawn by the making of an assessment to tax . . . for the year of assessment for which the relief was given. An assessment for withdrawing or reducing relief in pursuance of paragraph 3 above shall also be made as an assessment to tax . . . for the year of assessment for which the relief was given. No assessment for withdrawing or reducing relief given by reference to shares issued to any person shall be made by reason of any event occurring after his death.
Where an event occurs by reason of which any relief under this Part of this Schedule falls to be withdrawn or reduced, the individual to whom the relief was given shall, within 60 days of his coming to know of the event, give a notice to the inspector containing particulars of the event. If the inspector has reason to believe that a person has not given a notice which he is required to give under sub-paragraph (1) above in respect of any event, the inspector may by notice require that person to furnish him within such time (not being less than 60 days) as may be specified in the notice with such information relating to the event as the inspector may reasonably require for the purposes of this Part of this Schedule. No obligation as to secrecy imposed by statute or otherwise shall preclude the inspector from disclosing to a venture capital trust that relief given by reference to a particular number or proportion of its shares has been given or claimed under this Part of this Schedule.
In this Part of this Schedule “eligible shares”, in relation to a company which is a venture capital trust, means new ordinary shares in that trust which, throughout the period of five years beginning with the date on which they are issued, carry no present or future preferential right to dividends or to a company’s assets on its winding up and no present or future . . . right to be redeemed. In this Part of this Schedule “ordinary shares”, in relation to a company, means shares forming part of a company’s ordinary share capital. In this Part of this Schedule references to a disposal of shares shall include references to a disposal of an interest or right in or over the shares.
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This Schedule has effect as respects claims for group relief. Section 42 of the Management Act (procedure for making claims) shall not apply to such claims.
No claim for an accounting period of a company may be made if— Sub-paragraph (1) above shall not apply in the case of a claim made before the end of 2 years from the end of the period. This paragraph applies to the withdrawal of a claim as it applies to the making of a claim.
No claim for an accounting period of a company may be made after the end of 6 years from the end of the period, except under paragraph 5 below. This paragraph applies to the withdrawal of a claim as it applies to the making of a claim.
Where under paragraph 2 or 3 above a claim may not be made after a certain time, it may be made within such further time as the Board may allow.
A claim for an accounting period of a company may be made after the end of 6 years from the end of the period if— No claim for an accounting period of a company may be made under this paragraph after the end of 6 years and 3 months from the end of the period.
A claim shall be made by being included in a return under section 11 of the Management Act (corporation tax return) for the period for which the claim is made. In sub-paragraph (1) above the reference to a claim being included in a return includes a reference to a claim being included by virtue of an amendment of the return. This paragraph applies to the withdrawal of a claim as it applies to the making of a claim.
A claim may be made for less than the full amount available.
A claim, other than one under paragraph 5 above, shall be for an amount which is quantified at the time the claim is made.
A claim under paragraph 5 above shall be expressed to be conditional, as to the amount claimed, on, and only on, the outcome of one or more relevant matters specified in the claim. For the purposes of this paragraph a matter is relevant if it is relevant to the determination of the assessment of the claimant company to corporation tax for the period for which the claim is made.
A claim shall require the consent of the surrendering company. A consortium claim shall require the consent of each member of the consortium in addition to the consent of the surrendering company. Consent to surrender shall be of no effect unless, at or before the time the claim is made, notice of consent is given by the consenting company to the inspector to whom the surrendering company makes its returns under section 11 of the Management Act. Notice of consent to surrender, in the case of consent by the surrendering company, shall be of no effect unless it contains the following particulars— Where notice of the surrendering company’s consent to surrender is given to the inspector after the surrendering company has made a return under section 11 of the Management Act for the period to which the relief being surrendered relates, the notice shall be of no effect unless the surrendering company at the same time amends the return. Where consent to surrender relates to a loss in respect of which relief has been given under section 393(1), notice of consent to surrender, in the case of the surrendering company, shall be of no effect unless, at the same time as giving the notice to the inspector, the company amends its return under section 11 of the Management Act for the period, or, if more than one, each of the periods, in which relief for the loss has been given under section 393(1). For the purposes of sub-paragraph (6) above relief under section 393(1) shall be treated as given for losses incurred in earlier accounting periods before losses incurred in later accounting periods. A claim shall require to be accompanied by a copy of the notice of consent to surrender given for the purposes of this paragraph by the surrendering company. A consortium claim shall in addition require to be accompanied by a copy of the notice of consent to surrender given for the purposes of this paragraph by each member of the consortium.
This paragraph applies in relation to claims under paragraph 5 above. In the case of consent to surrender by the surrendering company, consent which relates to relief which is the subject of more than one claim under paragraph 5 above shall be of no effect unless it specifies an order of priority in relation to the claims.
All such assessments or adjustments of assessments shall be made as may be necessary to give effect to a claim or the withdrawal of a claim. An assessment under this paragraph shall not be out of time if it is made—
This Part of this Schedule applies, in the case of any non-resident company, for the purposes of section 403F (relief in respect of overseas losses of non-resident companies).
An amount meets the equivalence condition if it corresponds (in all material respects) to an amount of a kind that, for the purposes of section 403, could be available for surrender by way of group relief by a company resident in the United Kingdom.
In the case of a non-resident company which is resident in an EEA territory (“the relevant territory”), an amount meets the EEA tax loss condition in relation to the relevant territory in so far as conditions A and B are met. Condition A is that the amount is calculated in accordance with the applicable rules under the law of the relevant territory for determining, in the case of the company, the amount of any loss or other amount eligible for relief from any tax under the relevant territory. Condition B is that, for the purposes of corporation tax, the amount is not attributable to a UK permanent establishment of the company. “UK permanent establishment”, in relation to the company, means any permanent establishment through which it carries on a trade in the United Kingdom. For the meaning of tax under any territory outside the United Kingdom, see paragraph 17.
In the case of a non-resident company which is not resident in any EEA territory but which carries on a trade in an EEA territory (“the relevant territory”) through a permanent establishment, an amount meets the EEA tax loss condition for any period in relation to the relevant territory in so far as conditions A and B are met. Condition A is that the amount is calculated in accordance with the applicable rules under the law of the relevant territory for determining, in the case of the company, the amount of any loss or other amount eligible for relief from any tax under the relevant territory. Condition B is that the amount is not attributable to activities of the company which are made exempt from tax under the relevant territory for the period by any double taxation arrangements. For this purpose, activities of the company are made exempt from tax under the relevant territory for the period by any double taxation arrangements if those arrangements— The effect is that the income and gains (if any) arising for the period from those activities are ignored in calculating the company's profits, income or gains chargeable to tax under the relevant territory for the period. For the purposes of this paragraph, arrangements are double taxation arrangements if they are made with a view to affording relief from double taxation in relation to—
This paragraph applies in the case of a non-resident company— and for the purposes of this paragraph “the EEA territory concerned” means the EEA territory in which the company is resident or (as the case may be) in which it carries on a trade through a permanent establishment. An amount meets the qualifying loss condition in so far as the amount— Paragraph 6 determines whether the amount cannot be given qualifying relief for the current period or any previous period. Paragraph 7 determines whether the amount cannot be given qualifying relief for any period after the current period. Paragraph 8 determines whether the amount has not been given qualifying relief under the law of any territory outside the United Kingdom (other than the EEA territory concerned).
For the purposes of paragraph 5, an amount cannot be given qualifying relief for the current period or any previous period if conditions A and B are met. Condition A is that, for the purposes of any tax under the EEA territory concerned or under any relevant territory, the amount cannot be taken into account in calculating any profits, income or gains which— Condition B is that, for the purposes of any tax under the EEA territory concerned or under any relevant territory, the amount cannot be relieved in the current period or any previous period— An amount is to be regarded for the purposes of this paragraph as meeting conditions A and B if (but only if) every step to secure that the amount is so taken into account or relieved is taken (whether by the company or any other person). In this paragraph “relevant territory” means—
For the purposes of paragraph 5, an amount cannot be given qualifying relief for any period after the current period if conditions A and B are met. Condition A is that, for the purposes of any tax under the EEA territory concerned or under any relevant territory, the amount cannot be taken into account in calculating any profits, income or gains which— Condition B is that, for the purposes of any tax under the EEA territory concerned or under any relevant territory, the amount cannot be relieved in any period after the current period— In determining for the purposes of conditions A and B whether an amount can be so taken into account or relieved, the time at which the determination is to be made is the time immediately after the end of the current period. In this paragraph “relevant territory” means—
For the purposes of paragraph 5, an amount has not been given qualifying relief under the law of any territory outside the United Kingdom (other than the EEA territory concerned) if conditions A and B are met. Condition A is that, for the purposes of any tax under any territory outside the United Kingdom (other than the EEA territory concerned), the amount has not been taken into account in calculating any profits, income or gains which— Condition B is that, for the purposes of any tax under any territory outside the United Kingdom (other than the EEA territory concerned), the amount has not been relieved in any period—
This paragraph applies in the case of a non-resident company (“the relevant company”)— An amount meets the precedence condition in relation to the EEA territory concerned in so far as relief for the amount cannot be given in any other territory outside the United Kingdom which is a qualifying territory in relation to the relevant company. For this purpose a territory is a qualifying territory in relation to the relevant company if— In this paragraph references, in relation to any amount and any territory, to relief being given for the amount in the territory are to relief being given— “The EEA territory concerned” means the EEA territory in which the relevant company is resident or (as the case may be) in which it carries on a trade through a permanent establishment.
This Part of this Schedule applies in the case of any loss or other amount (“the EEA amount”) arising to a non-resident company (“the EEA company”) in any period (“the loss period”) in so far as the EEA amount meets the conditions mentioned in subsection (2)(a) to (d) of section 403F. In this Part of this Schedule “the EEA territory concerned” means the EEA territory in which the EEA company is resident or (as the case may be) in which it carries on a trade through a permanent establishment. In this Part of this Schedule any reference to the appropriate part of the EEA amount is to that amount in so far as it meets the conditions mentioned in subsection (2)(a) to (d) of section 403F.
The EEA amount must, on the relevant assumptions (see sub-paragraph (5)), be recalculated in accordance with the applicable UK tax rules (see paragraph 16). The amount of the EEA amount that is available for surrender by the EEA company by way of group relief is so much of the appropriate part of it as does not exceed the relevant proportion (see sub-paragraph (5)) of the amount given by that recalculation. But if the amount given by that recalculation is an amount of income or other profits, no part of the EEA amount is available for surrender by way of group relief. So far as any part of the EEA amount is available for surrender by the EEA company by way of group relief, the provisions of this Chapter have effect in that case on the basis that the relevant assumptions are made. In this paragraph— “the relevant assumptions” are the assumptions set out in paragraphs 12 to 15, and “the relevant proportion” means the proportion that the appropriate part of the EEA amount bears to the EEA amount.
It is to be assumed that the EEA company is resident in the United Kingdom throughout the loss period. But this does not require it to be assumed— It is to be assumed that the EEA company becomes resident in the United Kingdom (and, accordingly, within the charge to corporation tax) at the beginning of the loss period.
In the case of any trade carried on by the EEA company in the loss period wholly or partly in the EEA territory concerned, it is to be assumed that the trade is carried on wholly or partly in the United Kingdom. In the case of any estate, interest or rights in or over land in the EEA territory concerned which are held by the EEA company, it is to be assumed that the land is in the United Kingdom. For this purpose, the reference to domestic concepts of law in relation to the land in the EEA territory concerned is to be read so as to produce the result that most closely corresponds with that produced for the purpose of calculating the profits of a UK property business under Part 4 of CTA 2009 in relation to land in the United Kingdom.
It is to be assumed that an accounting period of the EEA company begins at the beginning of the loss period. It is to be assumed that the accounting period ends on the earlier of— If an accounting period ends in accordance with sub-paragraph (2)(a), it is to be assumed that a further accounting period begins when the previous one ends. It is to be assumed that the further accounting period ends on the earlier of—
This paragraph applies if, before the beginning of the loss period, the EEA company incurs any capital expenditure on the provision of plant or machinery for the purposes of any activity. It is to be assumed for the purposes of Part 2 of the Capital Allowances Act that the plant or machinery— and section 13 of the Capital Allowances Act (use for qualifying activity of plant or machinery provided for other purposes) is to apply accordingly. This paragraph is to be read as one with Part 2 of the Capital Allowances Act.
For the purposes of this Part of this Schedule references to recalculating the EEA amount in accordance with the applicable UK tax rules are to recalculating it in accordance with any provision made by or under the Corporation Tax Acts— For the purposes of sub-paragraph (1), the Treasury may by regulations provide for the modification of any provision made by or under the Corporation Tax Acts— Regulations under this paragraph may make provision in relation to— Regulations under this paragraph may make— Regulations under this paragraph may make provision having effect before the date on which the regulations are made.
This paragraph applies for the purposes of this Schedule. Any reference to a tax under a territory outside the United Kingdom is a reference to a tax chargeable under the law of that territory which— A tax chargeable under the law of a territory outside the United Kingdom is not to be regarded as failing to correspond to income or corporation tax just because—
This Schedule shall have effect for determining for the purposes of this Chapter the assets of a company which are the assets of its overseas life assurance fund. The Treasury may by order amend any of the following provisions of this Schedule (including any modification of any of those provisions made by paragraph 14A of Schedule 19AC).
Assets of a company at the end of a period of account which— shall be assets of the overseas life assurance fund throughout the period . Where in a period of account assets of a company which were assets of the overseas life assurance fund at the end of the immediately preceding period of account are disposed of by the company, or otherwise cease to be assets of the long-term insurance fund of the company, they shall be assets of the overseas life assurance fund from the beginning of the period until they are disposed of or, as the case may be, they cease to be assets of the long-term insurance fund. Where— they shall be assets of the overseas life assurance fund for the part of the period during which they are assets of the long-term insurance fund.
Where the value of the assets mentioned in paragraph 2(1) above at the end of the period is less than the amount mentioned in paragraph 4 below (or where there are no assets within paragraph 2(1)), assets which— shall become assets of the overseas life assurance fund at the relevant time. In sub-paragraph (1) above “the relevant time” means— Where the value of the assets mentioned in paragraph 2(1) above at the end of the period is greater than the amount mentioned in paragraph 4 below, assets which— shall cease to be assets of the overseas life assurance fund at the end of the period.
Any designation of assets required for the purposes of paragraph 3 above shall be made by a company in accordance with the following provisions of this paragraph. When designating assets for the purposes of paragraph 3(1) above, a company shall not designate an asset falling within any paragraph of sub-paragraph (5) below unless it designates all assets falling within each of the preceding paragraphs of that sub-paragraph. When designating assets for the purposes of paragraph 3(3) above, a company shall not designate an asset falling within any paragraph of sub-paragraph (5) below unless it designates all assets falling within each of the succeeding paragraphs of that sub-paragraph. When an asset falls within more than one paragraph of sub-paragraph (5) below, it shall be taken for the purposes of this paragraph to fall only within the first of them. The categories of assets referred to in sub-paragraphs (2) and (3) above are— but assets linked solely to pension business, life reinsurance business or basic life assurance and general annuity business are not within any paragraph of this sub-paragraph (and may not be designated for the purposes of paragraph 3 above). For the purposes of sub-paragraph (5)(a) above, in determining whether assets are linked solely to overseas life assurance business, assets linked to policies or contracts which, by virtue of regulation 18 or 19 of the Insurance Companies (Overseas Life Assurance Business) (Compliance) Regulations 1995 are to be treated as referring to basic life assurance and general annuity business, shall be treated as linked solely to overseas life assurance business. For the purposes of sub-paragraph (5)(b) above assets are “non-overseas linked assets” if they are linked assets and none of the policies or contracts providing for the benefits concerned are policies or contracts the effecting of which constitutes the carrying on of overseas life assurance business. For the purposes of sub-paragraph (5)(b) above “non-linked liabilities" means liabilities other than liabilities in respect of benefits to be determined by reference to the value of linked assets falling within sub-paragraph (5)(a) above. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
An insurance company carrying on pension business shall for each provisional repayment period in an accounting period be entitled on a claim made in that behalf to a payment (in this Schedule referred to as a “provisional repayment”) of an amount equal , subject to paragraph 2 below, to the aggregate of— or of such lesser amount as may be specified in the claim. For the purposes of this paragraph, a “provisional repayment period” of a company— In the application of subsections (5) to (9) of section 432A for the purpose of determining the amounts to which a company is entitled by way of provisional repayments in the case of any accounting period of the company, the reference in subsection (5) to “the relevant fraction” shall be taken as a reference to the provisional fraction for that accounting period. For the purposes of this paragraph— but this sub-paragraph is subject to paragraph 2 below. In sub-paragraph (1) above “the appropriate portion” means— Paragraphs 57 to 60 of Schedule 18 to the Finance Act 1998 (general provisions as to procedure on claims and elections) do not apply to a claim for a provisional repayment. A claim for a provisional repayment shall be in such form as the Board may determine and the form of claim shall provide for a declaration to the effect that all the particulars given in the form are correctly stated to the best of the knowledge and belief of the person making the claim. A provisional repayment for a provisional repayment period shall be regarded as a payment on account of the amounts (if any) which the company would, apart from this Schedule, be entitled to be . . . repaid in respect of its pension business for the accounting period in which that provisional repayment period falls, in respect of— on a claim such as is mentioned in paragraph 9(2) of Schedule 18 to the Finance Act 1998. . . in respect of that accounting period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . In this paragraph— In any case where— the return which is to be regarded as the latest company tax return in the case of that accounting period shall be that return as it stands amended immediately after the making of that amendment of the self-assessment (or, if the self-assessment has been so amended more than once, that return as it stands amended immediately after the making of the last such amendment) but ignoring amendments which do not give rise to any change in the fraction which, on the basis of the return as it has effect from time to time, would be the relevant fraction for the purposes of section 432A(5) for the accounting period to which the return relates.
This paragraph applies in any case where— and in this paragraph the “substituted provisional fraction” means the different fraction mentioned in paragraph (c) above. Where this paragraph applies— The amount referred to in sub-paragraph (2) above is the amount (if any) by which total entitlement exceeds total past payments, and for this purpose— Expressions used in this paragraph and in paragraph 1 above have the same meaning in this paragraph as they have in that paragraph.
In any case where— the excess, together with the amount of any relevant interest, shall be treated for the purposes of paragraph 52 of Schedule 18 to the Finance Act 1998 as if it were an amount of corporation tax for that accounting period which had been repaid to the insurance company and which ought not to have been so repaid. In its application by sub-paragraph (1) above, section 30 of the Management Act shall have effect as if, instead of the provision made by subsection (5), it provided that an assessment under that section by virtue of sub-paragraph (1) above is not out of time under section 34 of that Act if it is made no later than the end of the accounting period following that in which the assessment mentioned in paragraph (a) of that sub-paragraph is finally determined. For the purposes of sub-paragraph (1)(b) above, the appropriate amount for an accounting period of a company is the amount (if any) which, on the assumptions in sub-paragraphs (1B) and (1C) below and disregarding any provisional repayments, the company would be entitled to be . . . repaid, when its self-assessment for the period becomes final, in respect of its pension business for that accounting period on a claim such as is mentioned in paragraph 9(2) of Schedule 18 to the Finance Act 1998. . . in respect of— The first assumption is that no . . . repayments have been made to the company in respect of— before the company’s self-assessment for the accounting period in question becomes final. The second assumption is that in making any set off under— income tax borne by deduction on income which is not referable to pension business is set off before income tax so borne on income which is referable to pension business. Paragraph 53 of Schedule 18 to the Finance Act 1998 (time limit for recovery of excessive repayments etc.) does not apply to an assessment under paragraph 52 of that Schedule made by virtue of this paragraph. But such an assessment is not out of time under paragraph 46 of that Schedule (general six year time limit for assessments) if it is made not later than the end of the accounting period following that in which the self-assessment mentioned in sub-paragraph (1)(a) above becomes final. In this paragraph, “relevant interest” means interest— In the application of section 87A of the Management Act in relation to an amount assessed to corporation tax under paragraph 52 of Schedule 18 to the Finance Act 1998 by virtue of this paragraph— In determining the amount of any relevant interest, any question whether the excess mentioned in sub-paragraph (1) above (in the following provisions of this paragraph referred to as “the principal”) or any part of it is or was “outstanding” at any time shall be determined in accordance with sub-paragraphs (5) to (8) below. So much of the principal as does not exceed the amount of the last provisional repayment made to the company for the accounting period in question shall be taken to have become outstanding on the date on which that provisional repayment was made. So much (if any) of the principal as— shall be taken to have become outstanding on the date on which that preceding provisional repayment was made; and so on with any remaining portion of the principal and any preceding provisional repayments for that accounting period. So much (if any) of the principal as has become outstanding as mentioned in sub-paragraph (5) or (6) above and has at any time neither been repaid to the Board nor been assessed to corporation tax under paragraph 52 of Schedule 18 to the Finance Act 1998 by virtue of this paragraph shall be taken to remain outstanding at that time (and an amount shall accordingly be taken to cease being outstanding only when it is repaid to the Board or when it is so assessed). For the purposes of sub-paragraph (7) above, any repayment made by the company in respect of an amount . . . repaid to it in respect of— shall be treated as a repayment in respect of the principal, taking an earlier such repayment by the company before a later. In this paragraph “self-assessment” means an assessment included in a company tax return and includes a reference to such an assessment as amended.
The Board may by regulations make provision for the amount of any provisional repayment to which a company would otherwise be entitled for any accounting period ending after the opening transitional date and before the closing transitional date to be reduced by a prescribed percentage. The regulations may require a company claiming a provisional repayment for a provisional repayment period falling within such an accounting period to specify in the claim— The regulations may make provision— The regulations may prescribe for the purposes of sub-paragraph (1) above different percentages for accounting periods ending after different dates. Sub-paragraphs (2) to (4) above are without prejudice to the generality of sub-paragraph (1) above. In this paragraph—
This paragraph applies in relation to an accounting period of an insurance company if— and in this paragraph “transitional accounting period” means an accounting period in relation to which this paragraph applies. An insurance company shall be entitled— (and may do so whether or not the income in question is referable to the company’s pension business). For the purposes of sub-paragraph (2) above, sections 7(2) and 11(3) shall have effect in relation to a transitional accounting period as if the words from “and accordingly” to the end, in each provision, were omitted. A claim under sub-paragraph (2) above may only be made at such time or within such period as the Board may by regulations provide. In the application of this Schedule in relation to a transitional accounting period, paragraph 1 above shall have effect as if the reference in each of sub-paragraphs (7) and (10) to a claim such as is mentioned in section 7(6) or in section 42(5A) of the Management Act were a reference to a claim under paragraph (a) or (b) of sub-paragraph (2) above. If and to the extent that the provisions of section 826, or of section 87A of the Management Act, would not, apart from this sub-paragraph, have effect in relation to a transitional accounting period, they shall be treated as having effect for all purposes in relation to that accounting period; and— If and to the extent that the amendments of section 30 of the Management Act specified in subsections (1) to (4) of section 88 of the Finance (No.2) Act 1987 would not, apart from this sub-paragraph, have effect in relation to a transitional accounting period, they shall be treated as having effect for all purposes in relation to that transitional accounting period. Subsection (7) of section 88 of the Finance (No.2) Act 1987 shall have effect for the purposes of sub-paragraph (7) above as if the reference in paragraph (a) of that subsection to accounting periods ending after the appointed day were a reference to transitional accounting periods. In this paragraph “the commencement day” means the day appointed under section 49 of the Finance Act 1991.
In this Schedule— Any reference in this Schedule to a provisional repayment for an accounting period is a reference to a provisional repayment for a provisional repayment period falling within that accounting period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sub-paragraph (5) below applies in any case where an insurance company— makes the first claim for a provisional repayment for a particular accounting period ending on or after that day. Where this sub-paragraph applies— In this paragraph “the self-assessment appointed day” means the day appointed under section 199 of the Finance Act 1994 for the purposes of Chapter III of Part IV of that Act (self-assessment management provisions).
In their application to a BLAGAB group reinsurer the life assurance provisions of the Corporation Tax Acts shall have effect with the following modifications. In this paragraph “BLAGAB group reinsurer” means an insurance special purpose vehicle which— For the purposes of sub-paragraph (2), an insurance special purpose vehicle meets the BLAGAB group reinsurance conditions if—
This Act shall have effect with the following modifications.
Modify section 76 (expenses of insurance companies) as follows. means— but does not include any of the amounts falling within subsection (4), (5) or (6) below. In subsection (7)— In subsection (8) omit paragraphs (b) and (c). In subsection (12)(a) for “Step 8” insert “ Step 7 ”. “long-term business technical account” means the technical account for life-assurance business included in the IAD accounts, or where the technical account included in the IAD accounts for non-life-insurance business of the company is used for all business, such part of that account as relates to the long-term business of the company;
Modify section 431(2) (interpretative provisions relating to insurance companies) as follows. Insert the following definitions in the appropriate places—, “IAS accounts” means accounts prepared in accordance with international accounting standards; In the definition of “insurance company” at the end insert “ unless it meets the BLAGAB group reinsurer conditions (within the meaning of paragraph 1 of Schedule 19ABA ”. “liabilities” means— technical provisions (item C), and technical provisions for linked liabilities (item D), in the liabilities in the balance sheet format in paragraph 9 of Schedule 9A to the Companies Act 1985 in the IAD accounts or equivalent provisions in the IAS accounts;; “long-term insurance fund” means— the technical account for life assurance business of the company included in the IAD accounts, where the technical account included in the IAD accounts for non-life-insurance business of the company is used for all business, such part of that account as relates to the long-term business of the company, or such part of the income statement as relates to the life assurance business of the company included in the IAS accounts, and references to assets of the long-term insurance fund shall be read as references to assets from which any income or gain is or would be included in that technical account or that part of the technical account or that part of the income statement;. “periodical return” means— in relation to a company preparing IAD accounts, the IAD accounts, and in relation to a company preparing IAS accounts, the IAS accounts; Omit the definition of “period of account”; “value” means the value taken into account for the purposes of IAD accounts or IAS accounts
Modify section 432B (apportionment of receipts brought into account) as follows. In subsection (1) for “sections 432C to 432G” substitute “ sections 432C and 432G ”. In subsection (2) for “sections 432C to 432G” substitute “ sections 432C and 432G ”. Omit subsection (3).
Omit section 432E (section 432B apportionment: participating funds).
Omit section 432F (section 432B apportionment: supplementary provisions).
In section 444AA (transfers of business: deemed periodical returns) in subsection (5) for paragraphs (a) and (b) substitute—.
In section 444ABA (relevant non-transferred assets) in subsection (1) for the definition of BTO substitute—.
Modify section 444ABB (retained assets) as follows. In subsection (1)— In subsection (1A) for paragraphs (a) to (c) substitute—.
Modify section 444ABD (transferor's period of account including transfer) as follows. In subsection (1) for paragraphs (a) and (b) substitute—. In subsection (1E) for “amount” (in the first place) substitute “ value ”.
Modify section 444AC (transfer schemes: reduction of income of transferee) as follows. the amount of the profit or loss for the financial year shown in the balance sheet in the periodical return for the last period of account of the transferor ending before the transfer date, together with— Omit subsection (5).
In a case where the transferor or the transferee is a BLAGAB group reinsurer (or both are), omit section 444AE (transfers of business: FAFTS).
In section 444AEA (transfer schemes: anti-avoidance rule), in subsection (6), in the definition of “surplus-increasing transfer of assets”, for “increases the amount of total surplus shown in line 39 of Form 58” substitute “ gives rise to an amount that increases the profits or reduces the losses shown ”.
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The Finance Act 1989 shall have effect with the following modifications.
Omit section 82B (unappropriated surplus on valuation).
Omit section 82D (treatment of profits: life assurance—adjustment consequent on change in Insurance Prudential Sourcebook).
Omit section 82E (section 82D: treatment of transferors under insurance business transfer schemes).
Omit section 82F (section 82D: treatment of transferees under insurance business transfer schemes).
In section 83 (receipts to be taken into account)—
after paragraph (b) insert—;
after subsection (2) insert—;
omit subsections (2A) to (2E).
In section 83XA (structural assets) in subsection (3)) for the words from “means” to the end substitute “ means assets listed under 1 and 2 in C(II) in Article 6 of the Council Directive of 19th December 1991 on the annual accounts and consolidated accounts of insurance undertakings (No. 91/674/EEC) ”.
Omit section 83YA (changes in value of assets brought into account: non-profit companies).
Omit section 83YB (meaning of “appropriate line 51” amount for purposes of section 83YA).
Omit sections 83YC to 83YF (financing-arrangement-funded transfers).
Modify section 83A (meaning of “brought into account”) as follows. For subsection (2) substitute—. Omit subsections (3) to (4).
Omit section 83B (changes in recognised accounts: attribution of amounts carried forward under section 432F of Taxes Act 1988).
In section 85A (excess adjusted life assurance trade profits) in subsection (8)(a) for “Step 8” substitute “ Step 7 ”.
Omit section 86 (spreading of relief for acquisition expenses).
In section 89 (policy holders' share of profits) omit subsection (6).
TIOPA 2010 shall have effect with the following modifications.
Omit section 102.
In section 103(1) omit the words from “if” to the end.
In its application to an overseas life insurance company this Act shall have effect with the following modifications.
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In subsection (2) of section 11, the following paragraphs shall be treated as inserted after paragraph (a)— The following shall be treated as inserted after paragraph (b) of that subsection “and The following subsection shall be treated as inserted after that subsection— For the purposes of subsection (2)(c) above— . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The following sections shall be treated as inserted after section 11— . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
In section 12(7A), the reference to an insurance business transfer scheme shall be treated as including a reference to a qualifying overseas transfer. In this paragraph “a qualifying overseas transfer” means so much of any transfer of the whole or any part of the business of an overseas life insurance company carried on through a branch or agency in the United Kingdom as takes place in accordance with any authorisation granted outside the United Kingdom for the purposes of Article 11 of the third life insurance Directive. In sub-paragraph (2) above, “the third life insurance directive” means the Council Directive of 10th November 1992 on the co-ordination of laws, regulations and administrative provisions relating to direct life assurance and amending Directives 79/267/EEC and 90/619/EEC (No.92/96/EEC) .
After subsection (3) of section 76 there shall be treated as inserted the following subsection—.
After subsection (11) there shall be treated as inserted the following subsections—.
Where an overseas life insurance company receives a qualifying distribution made by a company resident in the United Kingdom and the distribution (or part of the distribution)— then the recipient shall be treated for the purposes of the Corporation Tax Acts as entitled to such a tax credit in respect of the distribution (or part of the distribution) as it would be entitled to under section 231 if it were resident in the United Kingdom. Where part only of a qualifying distribution would fall within paragraph (ab) of section 11(2) but for the exclusion contained in that paragraph, the tax credit to which the recipient shall be treated as entitled by virtue of sub-paragraph (1) above is the proportionate part of the tax credit to which the recipient would be so treated as entitled in respect of the whole of the distribution. Nothing in this paragraph shall be taken to confer on an overseas life insurance company any entitlement to make a claim under section 231(3).
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . In this paragraph “UK distribution income” means income of an overseas life insurance company which consists of a distribution (or part of a distribution) in respect of which the company is entitled to a tax credit (and which accordingly represents income equal to the aggregate of the amount or value of the distribution (or part) and the amount of that credit).
This paragraph applies to income from the investments of an overseas life insurance company attributable to the basic life assurance and general annuity business of the branch or agency in the United Kingdom through which the company carries on life assurance business. Where, in computing the income to which this paragraph applies, any profits and gains arising from a FOTRA security, or from any loan relationship represented by it, are excluded by virtue of the tax exemption condition of that security, the amount which by virtue of section 76 is to be deductible by way of management expenses shall be reduced in accordance with sub-paragraph (3) below. That amount shall be reduced so that it bears to the amount which would be deductible apart from this sub-paragraph the same proportion as the amount of the income to which this paragraph applies (after applying the provisions of section 154(2) to (7) of the Finance Act 1996) bears to what would be the amount of that income if the tax exemption condition were disregarded. Subsection (8) of section 154 of the Finance Act 1996 (meaning of “FOTRA security” and “tax exemption condition”) shall apply for the purposes of this paragraph as it applies for the purposes of that section.
In subsection (2) of section 431, the following definition shall be treated as substituted for the definition of “investment reserve”— “ “investment reserve”, in relation to an overseas life insurance company, means the excess of the value of the relevant assets over the relevant liabilities, and for the purposes of this definition— relevant assets are such assets of the company’s long-term insurance fund as are— section 11(2)(b) assets; section 11(2)(c) assets; or assets which by virtue of section 11B are attributed to the branch or agency in the United Kingdom through which the company carries on life assurance business; and relevant liabilities are such liabilities of the long-term business as are attributable to the branch or agency; and in a case where section 11C applies, the value of the relevant assets shall be increased by the amount by which the notional value exceeds the section 11C value; and any expression used in this definition to which a meaning is given by section 11A has that meaning;.” In that subsection, the following definition shall be treated as substituted for the definition of “liabilities”— “ “liabilities”, where the company concerned is an overseas life insurance company, does not include excluded liabilities and (subject to that) means— liabilities as estimated for the purposes of the company’s periodical return, or in the case of liabilities not estimated for the purposes of such a periodical return, liabilities as estimated for the purposes of any return equivalent to a periodical return and required to be made by the company under the law of the territory in which the company is resident, or in the case of liabilities not estimated for the purposes of such a periodical return or equivalent return, liabilities as found from the company’s records; and excluded liabilities are any liabilities that have fallen due or been reinsured and any not arising under or in connection with policies or contracts effected as part of the company’s insurance business;”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . In that subsection the following definition shall be inserted at the appropriate place— “UK distribution income” has the meaning given by paragraph 5B(4) of Schedule 19AC; In that subsection, the following definition shall be treated as substituted for the definition of “value” — “ “value”, in relation to assets and where the company concerned is an overseas life insurance company, means— their value as taken into account for the purposes of the company’s periodical return, or where their value is not taken into account for the purposes of such a periodical return, their value as taken into account for the purposes of any return equivalent to a periodical return and required to be made by the company under the law of the territory in which the company is resident, or where their value is not taken into account for the purposes of such a periodical return or equivalent return, their value as found from the company’s records; and the reference in paragraph (c) above to the value of assets as found from the company’s records is a reference to the market value as so found or, where applicable, the current value (within the meaning of the Directive of the Council of the European Communities dated 19th December 1991 No. 91/674/EEC (directive on the annual accounts and consolidated accounts of insurance undertakings)) as so found;”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
In section 431D(1), the words “carried on through a branch or agency in the United Kingdom by an overseas life insurance company” shall be treated as inserted after the words “means life assurance business”.
In subsection (1) of section 432B, the words “or treated as brought into account by virtue of paragraph 1C of Schedule 8A to the Finance Act 1989” shall be treated as inserted after the words ’brought into account, within the meaning of that section,’ . The following words shall be treated as inserted at the end of subsection (2) of that section “ ; but this subsection shall not apply for a period of account in relation to which any provision of paragraph 1C of Schedule 8A to the Finance Act 1989 applies. ” Subsection (3) of section 432B shall have effect as if after the words “with which an account is concerned” there were inserted the words “or in respect of which items are treated as brought into account by virtue of paragraph 1C of Schedule 8A to the Finance Act 1989”; and that subsection and sections 432C to 432E shall have effect as if the reference to relevant business were to relevant business of the branch or agency in the United Kingdom through which the company carries on life assurance business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
In section 434, the following subsections shall be treated as inserted after subsection (1B)— The exclusion from section 11(2)(a), (aa) or (ab) of distributions received from companies resident in the United Kingdom shall not apply in relation to— Paragraph 2 of Schedule F shall not have effect for the purposes of subsection (1C)(a) or (b) above, but this subsection shall not apply in relation to distributions in respect of which an overseas life insurance company is entitled to a tax credit under section 441A. The reference in subsection (1C) above to the life assurance profits of an overseas life insurance company is a reference to the profits of the company— . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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The following section shall be treated as inserted after section 434A—
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In section 440(2)(a), the reference to an insurance business transfer scheme shall be treated as including a reference to a qualifying overseas transfer (within the meaning of paragraph 4A above).
Where the company mentioned in section 440(1) is an overseas life insurance company, section 440 has effect with the following modifications. Subsection (4) shall be treated as if— The following subsection shall be treated as inserted after subsection (4)— The following subsection shall be treated as inserted at the end of the section— For the purposes of this section— and any expression used in this subsection to which a meaning is given by section 11A has that meaning.”. Where one of the companies mentioned in section 440(2) is an overseas life insurance company, section 440(2)(b) shall have effect as if for the words “is within another of those categories” there were substituted “is not within the corresponding category”. Where the transferor company mentioned in section 440(2) is an overseas life insurance company, section 440 shall have effect, as regards the time immediately before the acquisition, with the modifications in sub-paragraphs (2) and (3) above. Where the acquiring company mentioned in section 440(2) is an overseas life insurance company, section 440 shall have effect, as regards the time immediately after the acquisition, with the modifications in sub-paragraphs (2) and (3) above.
In section 440B the following subsection shall be treated as substituted for subsection (3)— Section 440(1) and (2) have effect as if the only categories specified in subsection (4) of that section were— (those expressions having the meanings given by section 440(7)).”. The following subsection shall be treated as substituted for subsection (4) of that section— Section 440A applies as if for paragraphs (a) to (e) of subsection (2) there were substituted—
In section 440A(2), in paragraph (a) the words “UK securities” shall be treated as substituted for the word “securities” in the first place where it occurs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . In paragraphs (d) and (e) of that subsection, the words “UK securities”shall be treated as substituted for the word “securities” The following paragraphs shall be treated as inserted at the end of that subsection— The following subsection shall be treated as inserted after subsection (6) of that section— For the purposes of this section— and any expression used in this subsection to which a meaning is given by section 11A has that meaning.” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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In section 442A the following subsection shall be treated as inserted after subsection (6)— In the case of an overseas life insurance company, the investment return treated as accruing under this section in any accounting period in relation to a policy or contract shall be treated as chargeable profits within section 11(2) of the Taxes Act 1988 where the policy or contract is one which in that accounting period gives rise, or but for the reinsurance arrangement would give rise, to such profits.”.
In sections 444A(1) and 460(10A), the references to an insurance business transfer scheme shall be treated as including references to a qualifying overseas transfer (within the meaning of paragraph 4A above).
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In subsection (1) of section 811, the words “subsections (1A) and (2)”shall be treated as substituted for the words “subsection (2)”. The following subsection shall be treated as inserted after that subsection— In relation to any item of income falling within section 11(2)(ab), the reference in subsection (1) above to any sum which has been paid in respect of tax on that income shall be construed as a reference to the part of that sum which bears to the whole of that sum the same proportion as that item of income bears to the relevant income by reference to which that item of income is, by virtue of section 11C, calculated.” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
In Schedule 19AA, paragraph 5(5)(c) (and the reference to it in paragraph 2(3) of that Schedule) shall be treated as omitted. The following paragraph shall be treated as inserted at the end of that Schedule—
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Section 450.
In this Schedule— “agent”, in relation to a syndicate and a year of assessment, means— References in this Schedule to profits or losses arising to a member of a syndicate are references to profits or losses which— Regulations under this paragraph may make provision with respect to the year of assessment next but one preceding the year of assessment in which they are made.
An inspector may, at any time after the end of the closing year for a year of assessment, by notice in writing to the managing agent require him to deliver to the inspector, on or before the final day determined under sub-paragraph (2) below, a return of the syndicate profit or loss for the year of assessment— The final day for the delivery of any return required by a notice under sub-paragraph (1) above is whichever is the later of— If the managing agent, having been required by a notice under sub-paragraph (1) above to deliver a return, fails to deliver the return on or before the final date for its delivery, he shall be liable to a penalty equal to the prescribed amount multiplied by the number of days on which the failure continues; and in this sub-paragraph “the prescribed amount” means £60 for each fifty members of the syndicate (counting any number of members less than fifty, and any number left over, as fifty). If the managing agent fraudulently or negligently delivers an incorrect return under sub-paragraph (1) above, he shall be liable to a penalty not exceeding the prescribed amount multiplied by the number of members of the syndicate; and in this sub-paragraph “the prescribed amount” means £3,000. In relation to a return required by a notice under sub-paragraph (1) above—
In relation to an underwriting year a managing agent may, by notice in writing at any time during the period of six years beginning with 1st March in the closing year for that year, make a claim to the inspector for the repayment of tax suffered by way of deduction on the syndicate investment income allocated to that year in accordance with the rules or practice of Lloyd’s. The managing agent shall provide such information in support of the claim as the inspector may reasonably require. Where an amount is repaid to the managing agent under this paragraph, he shall apportion the amount repaid between the members of the syndicate in proportion to their interests in that part of the syndicate investment income which has suffered tax by way of deduction and, where there is a syndicate profit available for distribution to the members, shall pay the amount so apportioned to the members’ agent in relation to each member within 90 days of receipt. The provisions of section 824 shall not apply to any repayment of tax made under this paragraph.
An inspector may, at any time after the end of the closing year for that year of assessment, by notice in writing to the members’ agent require him to deliver to the inspector, on or before the final day determined under sub-paragraph (3) below, a return of the member’s profit for the year of assessment in respect of those syndicates in relation to which he is the members’ agent of the member— For the purposes of the return by the members’ agent of the member’s profit— The final day for the delivery of any return required by a notice under sub-paragraph (1) above is whichever is the later of— If the members’ agent, having been required by a notice under sub-paragraph (1) above to deliver a return, fails to deliver the return on or before the final day for its delivery, he shall be liable to a penalty equal to the prescribed amount multiplied by the number of days on which the failure continues; and in this sub-paragraph “the prescribed amount” means £60 for each fifty members for whom he acts and in respect of whom there is such a failure (counting any number of such members less than fifty, and any number left over, as fifty). If the members’ agent fraudulently or negligently delivers an incorrect return under sub-paragraph (1) above, he shall be liable to a penalty not exceeding the prescribed amount multiplied by the number of members for whom he acts and in respect of whose returns there is such fraud or negligence; and in this sub-paragraph “the prescribed amount” means £3,000. In relation to a return required by a notice under sub-paragraph (1) above—
In the case of a member’s profit for a year of assessment, the members’ agent shall, on or before the 1st January next following the end of the closing year for that year, pay to the collector, on account of the member’s liability to tax, the amount stated in his return for that year under paragraph 2B(1)(c) above. Where an amount is paid to the collector under sub-paragraph (1) above for a year of assessment, the following provisions shall apply as between a member and that members’ agent— Where an amount is paid to the collector under sub-paragraph (1) above for a year of assessment, the following provisions shall apply as respects the member’s liability to tax for that year— Any amount which is payable under sub-paragraph (1) above shall carry interest at the rate applicable under section 178 of the Finance Act 1989 from the date when it becomes payable until payment, whether or not that date is a non-business day within the meaning of the Bills of Exchange Act 1882, and section 90 of the Taxes Management Act 1970 shall apply for the purposes of this paragraph as it applies for the purposes of any provision of Part IX of that Act.
If the members’ agent delivers a return in accordance with paragraph 2B above but does not pay to the collector the amount of tax stated in the return in accordance with paragraph 3 above, the inspector may make an assessment on the members’ agent in that amount whether or not it has been paid when the assessment is made. If for a year of assessment the inspector is dissatisfied with a return under paragraph 2B above, or there is no such return, he may make an assessment on the members’ agent to the best of his judgment. Any income tax due under an assessment made by virtue of sub-paragraph (1) or (2) above shall be treated for the purposes of interest on unpaid tax as having been payable at the time when it would have been payable if a correct return had been made.
If the inspector is satisfied that a return under paragraph 2(1) above affords correct and complete information concerning the syndicate profit or loss for a year of assessment, he shall determine that profit or loss accordingly. If for a year of assessment the inspector is dissatisfied with a return under paragraph 2(1) above, or there is no such return, the inspector shall determine the syndicate profit or loss for that year to the best of his judgment. If the inspector discovers that a determination under sub-paragraph (1) or (2) above— he may, by a determination under this sub-paragraph, vary the first-mentioned determination accordingly. Notice of a determination under this paragraph shall be served on the [managing ] agent and shall state the time within which any appeal against the determination may be made under paragraph 5 below. After notice of a determination under this paragraph has been served on the [managing ] agent, the determination shall not be altered except in accordance with the express provisions of the Taxes Acts.
The [managing ] agent may appeal against a determination under paragraph 4 above by a notice of appeal in writing given to the inspector within thirty days after the date of the notice of determination. An appeal under this paragraph shall be to the General Commissioners, except that the [managing ] agent may elect (in accordance with section 46(1) of the Taxes Management Act 1970) to bring the appeal before the Special Commissioners instead of the General Commissioners; and subsections (5) to (5E) of section 31 of that Act shall apply for the purposes of an election under this sub-paragraph as they apply for the purposes of an election under subsection (4) of that section.
Where the [managing ] agent appeals against a determination under paragraph 4 above, then, for the purpose of establishing, in the event of a member of the syndicate appealing against an assessment made on him, the amount of tax the payment of which should, pending the determination of that appeal, be postponed under section 55 of the Taxes Management Act 1970, that section shall apply to the first-mentioned appeal with the modifications specified in sub-paragraph (2) below. The modifications are as follows—
Where a determination of a syndicate profit or loss for a year of assessment is made, varied or modified (whether under the foregoing provisions of this Schedule or on appeal), the inspector may, by notice in writing to the [managing ] agent, require him to make to the inspector, within the specified period, a return apportioning, between the members of the syndicate, the syndicate profit or loss as stated in the determination as so made, varied or modified. If the [managing ] agent, having been required by a notice under sub-paragraph (1) above to deliver a return within the specified period, fails to deliver the return within that period, he shall be liable to a penalty equal to the prescribed amount multiplied by the number of days on which the failure continues; and in this sub-paragraph “the prescribed amount” means £5 for each fifty members of the syndicate (counting any number of members left over as fifty). In this paragraph “the specified period” means such period, not being less than thirty days and beginning with the day following the date of the notice under sub-paragraph (1) above, as may be specified in that notice.
A determination of a syndicate profit or loss for a year of assessment (whether as originally made or as varied or modified) shall, for the purpose of determining the liability to tax of each member of the syndicate, be conclusive against that member that the syndicate profit or loss for that year is as there stated. Where a determination of a syndicate profit or loss for a year of assessment is varied or modified at any time after the issue of a notice of assessment assessing any member of the syndicate to tax— Sub-paragraph (2)(b) above shall not apply in the case of a variation under paragraph 4(3) above which is made later than six years after the end of the closing year.
For the purposes of sections 36, of the Taxes Management Act 1970 (extension of time in cases of [fraudulent or negligent conduct ], anything done or omitted to be done by the [managing ] agent shall be deemed to have been done or omitted to be done by each member of the syndicate.
If it appears to an inspector or the Board that the agent is liable to a penalty under paragraph 2(3)or 7(2)above, the amount appearing to be due may be assessed by the inspector or the Board as if it were tax for the year of assessment in which the failure to make the return occurred; and, subject to the provisions of this paragraph, the provisions of the Taxes Management Act 1970relating to the assessment and collection of tax shall apply accordingly. An amount assessed by way of penalty under paragraph 2(3)or 7(2)above shall be due at the end of the period of thirty days beginning with the date of the issue of the notice of assessment. On an appeal against an assessment of an amount by way of penalty under sub-paragraphs (3)of paragraph 2or sub-paragraph (2)of paragraph 7above, subsections (6)to (8)of section 50of that Act shall not apply but the Commissioners— Where an amount has been assessed by way of penalty under sub-paragraph (3)of paragraph 2or sub-paragraph (2)of paragraph 7above and either no appeal has been brought against that assessment or the amount assessed has been confirmed or varied on appeal— shall be sufficient evidence that the amount mentioned in the certificates is unpaid and is due to the Crown; and any document purporting to be such a certificate as is mentioned in this sub-paragraph shall be deemed to be such a certificate unless the contrary is proved. Section 100of the Taxes Management Act 1970 (procedure for recovery of penalties)shall not apply to a penalty under paragraph 2(3)or 7(2)above.
Interest charged under paragraph 3(4)above shall be treated for the purposes of the enactments mentioned in section 69of the Taxes Management Act 1970 (interest on tax)as if it were tax charged and due and payable under an assessment. References to section 86of that Act in sections 70(2)and 92of that Act (evidence, and remission of interest in certain cases)shall include a reference to paragraph 3(4)above. ]
Section 496A
This Schedule entitles a company carrying on a ring fence trade, on making a claim in respect of an accounting period ending on or after 1st January 2004 but before 1st January 2006, to a supplement (initially of 6%, but variable by Treasury order) in respect of— To qualify, the capital expenditure in question must be incurred on or after 1st January 2004 but before 1st January 2006 in respect of oil and gas exploration and appraisal (as well as satisfying other conditions). Part 2 makes provision about the application and interpretation of this Schedule. Part 3 makes provision about supplement in relation to expenditure incurred by the company— Part 4 makes provision about supplement in relation to losses incurred in carrying on the ring fence trade. There is a limit on the number of accounting periods (6) in respect of which a company may claim supplement. In determining the amount of supplement allowable, reductions fall to be made in respect of—
This Schedule applies in relation to any company which— and in this Schedule any such company is referred to as a “qualifying company”.
carries on a ring fence trade, or
is engaged in oil and gas exploration and appraisal (see section 837B of this Act and section 1003 of ITA 2007) with a view to carrying on a ring fence trade,
In this Schedule, in the case of any qualifying company,— For the purposes of this Schedule a company not within the charge to corporation tax which incurs qualifying E&A expenditure is to be treated as having such accounting periods as it would have if— In the case of an accounting period (a “straddling period”) of any qualifying company beginning before 1st January 2006 and ending on or after that date— are treated as separate accounting periods for the purposes of this Schedule. Special provision is made elsewhere in this Schedule in relation to straddling periods (see paragraphs 16, 18A and 22).
For the purposes of this Schedule, the relevant percentage for any accounting period ending on or after 1st January 2004 is 6%. The Treasury may by order vary the percentage for the time being specified in sub-paragraph (1) for such accounting periods as may be specified in the order.
A company may claim supplement under this Schedule in respect of no more than 6 accounting periods. The accounting periods in respect of which claims are made need not be consecutive.
For the purposes of this Schedule “qualifying E&A expenditure”is any expenditure as respects which the following conditions are satisfied. Condition 1 is that the expenditure is incurred on or after 1st January 2004 but before 1st January 2006. Condition 2 is that, for the purposes of Part 6 of the Capital Allowances Act, the expenditure is qualifying expenditure incurred on research and development consisting of oil and gas exploration and appraisal (see section 437(2)(b) of that Act). Condition 3 is that an allowance under section 441 of that Act is claimed in respect of the expenditure. Condition 4 is that the expenditure is incurred in the course of oil extraction activities. Condition 5 is that—
There is an amount of unrelieved group ring fence profits for an accounting period of a qualifying company (“company Q”) in any case where— An accounting period of company X corresponds to an accounting period of company Q if— Where an accounting period of company X— there is, for the accounting period of company Q, an amount of unrelieved group ring fence profits equal to the whole of company X’s taxable ring fence profits for its accounting period. Where an accounting period of company X falls partly within an accounting period of company Q— This paragraph applies for the purposes of this Schedule.
For the purposes of this Schedule, a company has taxable ring fence profits for an accounting period if it has an amount of ring fence profits which is chargeable to corporation tax for that accounting period after any group relief claimed under Chapter 4 of Part 10.
Where— the company may also claim supplement under this Part of this Schedule (“pre-commencement supplement”) in respect of one or more pre-commencement periods. Any pre-commencement supplement allowed on a claim in respect of a pre-commencement period shall be treated as an allowance under Part 6 of the Capital Allowances Act for the commencement period in respect of qualifying E&A expenditure incurred by the company. The amount of the supplement for any pre-commencement period in respect of which a claim under this paragraph is made is the relevant percentage for that period of the reference amount for that period. If the pre-commencement period is a period of less than twelve months, the amount of the supplement for the period (apart from this sub-paragraph) shall be reduced proportionally. Paragraphs 10 to 13 have effect for the purpose of determining the reference amount for a pre-commencement period.
For the purpose of determining the amount of any pre-commencement supplement, a qualifying company shall be taken to have had, at all times in the pre-commencement periods of the company, a continuing mixed pool of qualifying E&A expenditure and pre-commencement supplement. The pool shall be taken to have consisted of— To allocate qualifying E&A expenditure to the pool for any pre-commencement period, take the following steps— and so much of amount E as remains after making those reductions shall be taken to have been added to the pool in that period. If any pre-commencement supplement is allowed on a claim in respect of a pre-commencement period, the amount of that supplement shall be taken to have been added to the pool in that period.
This paragraph applies in any case where— For the purpose of allocating qualifying E&A expenditure to the pool for each pre-commencement period— In this paragraph “oil licence” has the same meaning as in section 555 of the Capital Allowances Act (see section 552 (1) of that Act).
This paragraph applies if there is an amount of unrelieved group ring fence profits for a pre-commencement period. For the purpose of allocating qualifying E&A expenditure to the pool for that period—
For the purposes of this Part of this Schedule, the reference amount for a pre-commencement period is the amount in the pool at the end of the period—
after the addition to the pool of any qualifying E&A expenditure allocated to the pool for that period in accordance with paragraph 10(3), but
before determining, and adding to the pool, the amount of any pre-commencement supplement claimed in respect of the period.
Any claim for pre-commencement supplement in respect of a pre-commencement period must be made at the same time as, and as if it were part of, the claim under section 441 of the Capital Allowances Act mentioned in paragraph 9(1)(a). Subsection (3) of that section (claim for reduced amount) applies in relation to any such claim.
A qualifying company which incurs a qualifying E&A loss (see paragraph 17) in a post-commencement period may claim supplement under this Part of this Schedule (“post-commencement supplement”) in respect of— Any post-commencement supplement allowed on a claim in respect of a post-commencement period shall be treated for the purposes of the Corporation Tax Acts (other than this Part of this Schedule or sections 321 to 329 of CTA 2010) as if it were a loss— Paragraph 74 of Schedule 18 to the Finance Act 1998 (company tax returns etc: time limit for claims for group relief) shall apply in relation to a claim for post-commencement supplement as it applies in relation to a claim for group relief.
The amount of the post-commencement supplement for any post-commencement period in respect of which a claim under paragraph 15 is made is the relevant percentage for that period of the reference amount for that period. If the post-commencement period is a period of less than twelve months, the amount of the supplement for the period (apart from this sub-paragraph) shall be reduced proportionally. But, if the post-commencement period is the deemed accounting period under paragraph 3(3) ending before 1st January 2006, sub-paragraph (2) has no effect in relation to the amount of the supplement for that period. Paragraphs 19 to 24 have effect for the purpose of determining the reference amount for a post-commencement period.
Where— so much of the loss as falls to be so set off is a “ring fence loss” of the company. In determining for the purposes of this Part of this Schedule how much of a loss incurred in a ring fence trade falls to be set off as mentioned in sub-paragraph (1)(b), it shall be assumed— So much of a ring fence loss as is attributable to qualifying E&A allowances for the period of the loss is a “qualifying E&A loss”. A ring fence loss is attributable to qualifying E&A allowances to the extent that the amount of the ring fence loss does not exceed the amount of the qualifying E&A allowances for the period of the loss. But a claim for post-commencement supplement may include an election for a ring fence loss to be treated— “Qualifying E&A allowances”, in the case of an accounting period, means allowances for that period under Part 6 of the Capital Allowances Act in respect of qualifying E&A expenditure incurred by the company (including any pre-commencement supplement treated under paragraph 9(2) as such an allowance). This paragraph has effect for the purposes of this Part of this Schedule.
So much of a ring fence loss as is not a qualifying E&A loss is a non-qualifying loss. Where— so much of the loss as falls to be so set off is a ring fence loss and that loss is a non-qualifying loss. This paragraph has effect for the purposes of this Part of this Schedule.
This paragraph applies in any case where the period of the loss in which a ring fence loss is incurred is the deemed accounting period under paragraph 3(3) ending before 1st January 2006. The following assumption shall be made for the purpose of calculating the amount of the qualifying E&A loss and the amount of the non-qualifying loss. The assumption is that the loss made in the trade is taken to be the loss incurred in the accounting period beginning before 1st January 2006 and ending on or after that date (disregarding paragraph 3(3)). The amount of the non-qualifying loss (found in accordance with that assumption) is then reduced (but not below nil) by the following amount. The amount is the amount of the ring fence loss in the deemed accounting period beginning on 1st January 2006 determined under section 324 of CTA 2010.
For the purpose of determining the amount of any post-commencement supplement, a qualifying company shall be taken at all times in its post-commencement periods to have— A pool continues even if the amount in it is nil.
The non-qualifying pool consists of the company’s non-qualifying losses, allocated to the pool in accordance with sub-paragraph (2). A non-qualifying loss is allocated to the pool by adding the amount of the non-qualifying loss to the pool in the period of the loss. In the case of a non-qualifying loss incurred in an accounting period ending on or before 31st December 2003, the period of the loss shall be taken for the purposes of sub-paragraph (2) to be the first accounting period of the company that ends on or after 1st January 2004. The amount in the non-qualifying pool is subject to reductions in accordance with the following provisions of this Part of this Schedule. Where a reduction in the amount in the non-qualifying pool falls to be made in any accounting period—
The qualifying pool consists of— The allocation of qualifying E&A losses and post-commencement supplement to the pool is as follows— The amount in the qualifying pool is subject to reductions in accordance with the following provisions of this Part of this Schedule. Where a reduction in the amount in the qualifying pool falls to be made in any accounting period, the reduction is to be made— and references to the amount in the pool shall be construed accordingly.
If one or more ring fence losses are set off under section 393 against any profits of a post-commencement period, reductions shall be made in that period in accordance with this paragraph. The amount in the non-qualifying pool shall be reduced (but not below nil) by setting against it a sum equal to the total amount so set off. If any of that sum remains after being so set against the amount in the non-qualifying pool, the amount in the qualifying pool shall be reduced (but not below nil) by setting against it so much of that sum as so remains. If the post-commencement period is the deemed accounting period under paragraph 3(3) ending before 1st January 2006 (“the deemed accounting period”), the amount of the profits of the deemed accounting period is determined as follows. The amount of the profits of the straddling period is apportioned to the deemed accounting period in proportion to the number of days in the deemed accounting period that fall in the straddling period. The apportioned amount is taken for the purposes of this paragraph to be the amount of the profits of the deemed accounting period. In this paragraph “the straddling period”, in relation to a qualifying company, means an accounting period of the company beginning before 1st January 2006 and ending on or after that date (disregarding paragraph 3(3)).
If there is an amount of unrelieved group ring fence profits for a post-commencement period, reductions shall be made in that period in accordance with this paragraph. In the following provisions of this paragraph, references to the remaining amount in a pool are references to so much (if any) of the amount in the pool as remains after making any reductions that fall to be made in accordance with paragraph 22. The remaining amount in the non-qualifying pool shall be reduced (but not below nil) by setting against it a sum equal to the aggregate of the amounts of unrelieved group ring fence profits for the period. If any of that sum remains after being so set against the remaining amount in the non-qualifying pool, the remaining amount in the qualifying pool shall be reduced (but not below nil) by setting against it so much of that sum as so remains.
For the purposes of this Part of this Schedule the reference amount for a post-commencement period is so much of the amount in the qualifying pool as remains after making any reductions required by paragraph 22 or 23.
This Schedule entitles a company carrying on a ring fence trade, on making a claim in respect of an accounting period beginning on or after 1st January 2006, to a supplement (initially of 6%, but variable by Treasury order) in respect of— Part 2 makes provision about the application and interpretation of this Schedule. Part 3 makes provision about supplement in relation to expenditure incurred by the company— Part 4 makes provision about supplement in relation to losses incurred in carrying on the ring fence trade. There is a limit on the number of accounting periods (6) in respect of which a company may claim supplement. In determining the amount of supplement allowable, reductions fall to be made in respect of—
This Schedule applies in relation to any company which— and in this Schedule any such company is referred to as a “qualifying company”.
carries on a ring fence trade, or
is engaged in any activities with a view to carrying on a ring fence trade,
In this Schedule, in the case of any qualifying company,— For the purposes of this Schedule a company not within the charge to corporation tax which incurs any expenditure is to be treated as having such accounting periods as it would have if— In the case of an accounting period (a “straddling period”) of any qualifying company beginning before 1st January 2006 and ending on or after that date— are treated as separate accounting periods for the purposes of this Schedule. But special provision is made elsewhere in this Schedule in relation to straddling periods (see paragraphs 5, 18 and 21(4) to (6)).
For the purposes of this Schedule, the relevant percentage for any accounting period beginning on or after 1st January 2006 is 6%. The Treasury may by order vary the percentage for the time being specified in sub-paragraph (1) above for such accounting periods as may be specified in the order.
A company may claim supplement under this Schedule in respect of no more than 6 accounting periods. The accounting periods in respect of which claims are made need not be consecutive. A claim for supplement by the company under Schedule 19B (exploration expenditure supplement) in respect of an accounting period is to count for the purposes of this paragraph as a claim for supplement under this Schedule in respect of that accounting period. But, if the company makes a claim for supplement under this Schedule in respect of the deemed accounting period, any claim for supplement by the company under Schedule 19B in respect of the Schedule 19B deemed accounting period is to be ignored for the purposes of this paragraph. For this purpose—
For the purposes of this Schedule, expenditure is “qualifying pre-commencement expenditure” if it meets conditions A to D. Condition A is that the expenditure is incurred on or after 1st January 2006. Condition B is that the expenditure is incurred in the course of oil extraction activities. Condition C is that the expenditure is incurred by a person with a view to carrying on a ring fence trade but before the person sets up and commences the ring fence trade. Condition D is that the expenditure— For the purposes of this paragraph, expenditure incurred by a company is “relevant R&D expenditure incurred by an SME” if— In the case of any qualifying pre-commencement expenditure which is relevant R&D expenditure incurred by an SME, the amount of that expenditure is treated for the purposes of this Schedule as being equal to 150% of its actual amount. In the case of any qualifying pre-commencement expenditure which is relevant R&D expenditure incurred by a large company, the amount of that expenditure is treated for the purposes of this Schedule as being equal to 125% of its actual amount. For this purpose “relevant R&D expenditure incurred by a large company” means qualifying Chapter 5 expenditure as defined by section 1076 of CTA 2009 (R&D tax relief for large companies).
There is an amount of unrelieved group ring fence profits for an accounting period of a qualifying company (“company Q”) if— An accounting period of company X corresponds to an accounting period of company Q if— If an accounting period of company X— there is, for the accounting period of company Q, an amount of unrelieved group ring fence profits equal to the whole of company X's taxable ring fence profits for its accounting period. If an accounting period of company X falls partly within an accounting period of company Q— This paragraph applies for the purposes of this Schedule.
For the purposes of this Schedule, a company has taxable ring fence profits for an accounting period if it has an amount of ring fence profits which is chargeable to corporation tax for that accounting period after any group relief claimed under Chapter 4 of Part 10.
If— the company may claim supplement under this Part of this Schedule (“pre-commencement supplement”) in respect of one or more pre-commencement periods. Any pre-commencement supplement allowed on a claim in respect of a pre-commencement period is to be treated as expenditure— The amount of the supplement for any pre-commencement period in respect of which a claim under this paragraph is made is the relevant percentage for that period of the reference amount for that period. If the pre-commencement period is a period of less than twelve months, the amount of the supplement for the period (apart from this sub-paragraph) is to be reduced proportionally. Paragraphs 10 to 13 have effect for the purpose of determining the reference amount for a pre-commencement period.
For the purpose of determining the amount of any pre-commencement supplement, a qualifying company is to be taken to have had, at all times in the pre-commencement periods of the company, a continuing mixed pool of— The pool is to be taken to have consisted of— To allocate qualifying pre-commencement expenditure to the pool for any pre-commencement period, take the following steps— and so much of amount E as remains after making those reductions is to be taken to have been added to the pool in that period. If any pre-commencement supplement is allowed on a claim in respect of a pre-commencement period, the amount of that supplement is to be taken to have been added to the pool in that period. In this paragraph references to the relevant amount (if any) which the company carries forward under Schedule 19B are to the amount in its mixed pool for the purposes of Part 3 of Schedule 19B immediately before 1st January 2006.
This paragraph applies in the case of the qualifying company if— The relevant assumption is that the company was carrying on the ring fence trade— For the purpose of allocating qualifying pre-commencement expenditure to the pool for each pre-commencement period—
This paragraph applies if there is an amount of unrelieved group ring fence profits for a pre-commencement period. For the purpose of allocating qualifying pre-commencement expenditure to the pool for that period—
For the purposes of this Part of this Schedule, the reference amount for a pre-commencement period is the amount in the pool at the end of the period—
after the addition to the pool of any qualifying pre-commencement expenditure allocated to the pool for that period in accordance with paragraph 10(3), but
before determining, and adding to the pool, the amount of any pre-commencement supplement claimed in respect of the period.
Any claim for pre-commencement supplement in respect of a pre-commencement period must be made as a claim for the commencement period. Paragraph 74 of Schedule 18 to the Finance Act 1998 (company tax returns etc: time limit for claims for group relief) applies in relation to a claim for pre-commencement supplement as it applies in relation to a claim for group relief.
A qualifying company which incurs a ring fence loss (see paragraph 17) in a post-commencement period may claim supplement under this Part of this Schedule (“post-commencement supplement”) in respect of— Any post-commencement supplement allowed on a claim in respect of a post-commencement period is to be treated for the purposes of the Corporation Tax Acts (other than this Part of this Schedule or Part 4 of Schedule 19B) as if it were a loss— Paragraph 74 of Schedule 18 to the Finance Act 1998 (company tax returns etc: time limit for claims for group relief) applies in relation to a claim for post-commencement supplement as it applies in relation to a claim for group relief.
The amount of the post-commencement supplement for any post-commencement period in respect of which a claim under paragraph 15 is made is the relevant percentage for that period of the reference amount for that period. If the post-commencement period is a period of less than twelve months, the amount of the supplement for the period (apart from this sub-paragraph) is to be reduced proportionally. Paragraphs 19 to 23 have effect for the purpose of determining the reference amount for a post-commencement period.
If— so much of the loss as falls to be so set off is a “ring fence loss” of the company. In determining for the purposes of this Part of this Schedule how much of a loss incurred in a ring fence trade falls to be set off as mentioned in sub-paragraph (1)(b), the following assumptions are to be made. The first assumption is that every claim is made that could be made by the company under section 393A to set losses incurred in the ring fence trade against ring fence profits of earlier post-commencement periods. The second assumption is that (where appropriate) section 393B applies in relation to every such claim under section 393A. This paragraph is subject to paragraph 18 (special rule for straddling periods). This paragraph has effect for the purposes of this Part of this Schedule.
This paragraph applies if the period of the loss in which a ring fence loss is incurred is the deemed accounting period under paragraph 3(3) beginning on 1st January 2006 (“the deemed accounting period”). The amount of the ring fence loss in the deemed accounting period is determined as follows. Step 1 Calculate so much of the ring fence loss in the straddling period as, for the purposes of Part 4 of Schedule 19B, is attributable to qualifying E&A allowances for the straddling period. The amount given by this step is “the qualifying Schedule 19B amount”. Step 2 Calculate so much of the ring fence loss in the straddling period as is attributable to allowances for the straddling period under Part 6 of the Capital Allowances Act in respect of relevant expenditure. For the purposes of this step “relevant expenditure” means expenditure incurred by the company on or after 1st January 2006 which, but for that fact, would be qualifying E&A expenditure for the purposes of Schedule 19B. For the purposes of this step a ring fence loss is attributable to those allowances to the extent that the amount of the loss (less the qualifying Schedule 19B amount) does not exceed the amount of those allowances for that period. The amount given by this step is “the amount of the post-1st January 2006 E&A allowances”. Step 3 Deduct the qualifying Schedule 19B amount and the amount of the post-1st January 2006 E&A allowances from the amount of the ring fence loss in the straddling period. Step 4 Apportion the remaining amount of that loss (if any) to the deemed accounting period in proportion to the number of days in the deemed accounting period that fall in the straddling period. The amount given by this step is “the amount of the apportioned loss”. Step 5 The amount of the ring fence loss in the deemed accounting period is the amount of the apportioned loss plus the amount of the post-1st January 2006 E&A allowances. In this paragraph “the straddling period”, in relation to a qualifying company, means an accounting period of the company— disregarding paragraph 3(3). In this paragraph references to the ring fence loss in the straddling period are to that loss determined on the assumption that the straddling period is the period of the loss for the purposes of paragraph 17. This paragraph has effect for the purposes of this Part of this Schedule.
For the purpose of determining the amount of any post-commencement supplement, a qualifying company is to be taken at all times in its post-commencement periods to have a continuing mixed pool (the “ring fence pool”) of— The ring fence pool continues even if the amount in it is nil. For the purpose of determining the amount of any post-commencement supplement, a qualifying company is also to be taken in its post-commencement periods to have a non-qualifying pool consisting of the carried forward non-qualifying Schedule 19B amount. But the non-qualifying pool ceases to exist when the amount in it is reduced to nil. In this paragraph—
The ring fence pool consists of— The allocation of ring fence losses and post-commencement supplement to the pool is as follows— The amount in the ring fence pool is subject to reductions in accordance with the following provisions of this Part of this Schedule. If a reduction in the amount in the ring fence pool falls to be made in any accounting period, the reduction is to be made— and references to the amount in the pool are to be read accordingly. In this paragraph “the carried forward qualifying Schedule 19B amount”, in relation to a qualifying company, means the amount in its qualifying pool for the purposes of Part 4 of Schedule 19B immediately before 1st January 2006.
If one or more ring fence losses are set off under section 393 against any profits of a post-commencement period, reductions are to be made in that period in accordance with this paragraph. If the company has a non-qualifying pool, the amount in the non-qualifying pool is to be reduced (but not below nil) by setting against it a sum equal to the total amount so set off. If— the amount in the ring fence pool is to be reduced (but not below nil) by setting against it so much of that sum as so remains or (as the case may be) a sum equal to the total amount set off as mentioned in sub-paragraph (1). If the post-commencement period is the deemed accounting period under paragraph 3(3) beginning on 1st January 2006 (“the deemed accounting period”), the amount of the profits of the deemed accounting period is determined as follows. The amount of the profits of the straddling period is apportioned to the deemed accounting period in proportion to the number of days in the deemed accounting period that fall in the straddling period. The apportioned amount is taken for the purposes of this paragraph to be the amount of the profits of the deemed accounting period. In this paragraph “the straddling period”, in relation to a qualifying company, means an accounting period of the company— disregarding paragraph 3(3).
If there is an amount of unrelieved group ring fence profits for a post-commencement period, reductions are to be made in that period in accordance with this paragraph. If, after making any reductions that fall to be made in accordance with paragraph 21, the company does not have a non-qualifying pool, the remaining amount in the ring fence pool is to be reduced (but not below nil) by setting against it a sum equal to the aggregate of the amounts of unrelieved group ring fence profits for the period. If, after making any reductions that fall to be made in accordance with paragraph 21, the company has an amount in a non-qualifying pool, the amount in that pool is to be reduced (but not below nil) by setting against it a sum equal to the aggregate of the amounts of unrelieved group ring fence profits for the period. If any of that sum remains after being so set against the amount in the non-qualifying pool, the remaining amount in the ring fence pool is to be reduced (but not below nil) by setting against it so much of that sum as so remains. For the purposes of this paragraph references to the remaining amount in the ring fence pool are references to so much (if any) of the amount in the ring fence pool as remains after making any reductions that fall to be made in accordance with paragraph 21.
For the purposes of this Part of this Schedule the reference amount for a post-commencement period is so much of the amount in the ring fence pool as remains after making any reductions required by paragraph 21 or 22.
In this Schedule— Any power conferred by this Schedule to make regulations includes power to make different provision for different cases or different purposes.
This Schedule applies to any retirement benefits scheme which is for the time being approved under Chapter I of Part XIV. Sub-paragraph (1) above is subject to the following provisions of this paragraph. This Schedule applies to a retirement benefits scheme only if— Any retirement benefits scheme to which this Schedule applies is referred to in this Schedule as an “eligible scheme".
The trustees of an eligible scheme may at any time on or after 1st October 2000 apply to the Board for approval of the scheme under this paragraph. If an application under sub-paragraph (1) above is granted, the eligible scheme shall, as from such date as the Board may specify in granting the application (the “date of the change”),— The date of the change must not be earlier than 6th April 2001. An application under sub-paragraph (1) above shall be in such form, shall contain such information, and shall be accompanied by such documents, in such form, and prepared as at such time, as the Board may prescribe. The Board may at their discretion grant or refuse an application under sub-paragraph (1) above. The Board’s discretion under sub-paragraph (5) above shall be subject to the restrictions set out in sections 632 to 638A and this Schedule. The Board shall give notice to the applicant of the grant or refusal of an application. A notice under sub-paragraph (7) above shall, in the case of a refusal, state the grounds for the refusal. If, at any time after the making of an application under sub-paragraph (1) above, the eligible scheme concerned ceases to be approved under Chapter I of Part XIV otherwise than by virtue of the operation of sub-paragraph (2)(a) above, the scheme shall not, by virtue of that application, become an approved personal pension scheme.
The Board may refuse or withhold approval under paragraph 3 above in the case of an eligible scheme of a prescribed description if or so long as they are not satisfied that prescribed requirements will be fulfilled with respect to— if approval under paragraph 3 above is granted. Regulations may make provision for or in connection with cases where the value mentioned in paragraph (b) of sub-paragraph (1) above exceeds, or exceeds by more than a prescribed percentage, the value mentioned in paragraph (a) of that sub-paragraph. The provision that may be made by virtue of sub-paragraph (2) above includes provision for or in connection with eliminating or reducing any such excess within a prescribed period by one or more prescribed methods. Regulations may make provision for the purposes of this paragraph for or in connection with— The provision that may be made by virtue of sub-paragraph (4)(a) or (b) above includes provision with respect to, or in connection with,— The methods or principles of valuation and the tables that may be prescribed by virtue of sub-paragraph (5) above include methods or principles or, as the case may be, tables published by the Government Actuary for any purposes of the personal pension provisions of this Act.
The Board may give directions for or in connection with— by or in respect of members of a converting scheme. Directions under sub-paragraph (1) above— Any directions under sub-paragraph (1) above must be complied with by— If there is any contravention of, or failure to comply with, directions under sub-paragraph (1) above, the Board may— Sub-paragraph (4) above is without prejudice to any other powers of the Board. In this paragraph— For the purposes of this paragraph, an application is “finally refused” when it has been refused by the Board and— Any directions under this paragraph must be given in writing.
An approved retirement benefits scheme shall be taken to include provisions allowing the making of changes to any provisions of the scheme for the purpose of enabling the scheme to become an eligible scheme, notwithstanding anything to the contrary in any provision of the scheme.
In this Schedule— . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . “dividend manufacturer” has the meaning given by paragraph 2(1) below; “dividend manufacturing regulations” means regulations made by the Treasury under this Schedule; . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . “manufactured dividend” . . . and “manufactured overseas dividend” shall be construed respectively in accordance with paragraphs 2 . . . and 4 below, as shall references to the gross amount thereof; “manufactured interest” means an amount— which is representative of a periodical payment of interest on United Kingdom securities, and which, under a contract or other arrangements for the transfer of the securities, one of the parties is required to pay to the other; . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . “overseas dividend” means any interest, dividend or other annual payment payable in respect of any overseas securities; “overseas dividend manufacturer” has the meaning given by paragraph 4(1) below; “overseas securities” means— shares, stock or other securities issued by a government or public or local authority of a territory outside the United Kingdom or by any other body of persons not resident in the United Kingdom;. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . “overseas tax” means tax under the law of a territory outside the United Kingdom; “overseas tax credit” means any such credit under the law of a territory outside the United Kingdom in respect of overseas tax as corresponds to a tax credit; “prescribed” means prescribed in dividend manufacturing regulations; . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . “securities” includes any loan stock or similar security; “transfer” includes any sale or other disposal; . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . “United Kingdom equities” means shares of any company resident in the United Kingdom; “United Kingdom securities” means securities of the government of the United Kingdom, of any public or local authority in the United Kingdom or of any company or other body resident in the United Kingdom, but does not include . . . United Kingdom equities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
This paragraph applies in any case where, under a contract or other arrangements for the transfer of United Kingdom equities, one of the parties (a “dividend manufacturer”) is required to pay to the other (“the recipient”) an amount (a “manufactured dividend”) which is representative of a dividend on the equities. Sub-paragraphs (1C) to (1E) apply where— For this purpose a dividend is “taxable” if— Where the dividend manufacturer carries on a trade to which the manufactured dividend relates, and neither sub-paragraph (1D) nor (1E) applies, the manufactured dividend is to be treated as an expense of the trade. Where the dividend manufacturer has investment business to which the manufactured dividend relates, the manufactured dividend is to be treated as expenses of management of the business for the purposes of Part 16 of CTA 2009. Where the dividend manufacturer carries on life assurance business to which the manufactured dividend relates, the manufactured dividend is to be treated as if, to the extent that it is referable to basic life assurance and general annuity business, it were an expense payable falling to be brought into account at step 3 of section 76(7). For the purposes of sub-paragraph (1E), the manufactured dividend is to be treated as referable to basic life assurance and general annuity business to the extent that the dividend of which it is representative— Where a manufactured dividend is paid by a dividend manufacturer who is a company resident in the United Kingdom, the Corporation Tax Acts shall have effect— Where a manufactured dividend to which sub-paragraph (2) above does not apply is paid by any person— In its application in relation to a manufactured dividend by virtue of sub-paragraph (2) or (3), Part 9A of CTA 2009 (company distributions) has effect subject to the following modification. The modification is that— . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Where— the dividend manufacturer shall, on paying the manufactured dividend, provide the recipient with a statement in writing setting out the matters specified in sub-paragraph (7) below. Those matters are— The duty imposed by sub-paragraph (6) above shall be enforceable at the suit or instance of the recipient.
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This paragraph applies in any case where, under a contract or other arrangements for the transfer of overseas securities, one of the parties (the “overseas dividend manufacturer”) is required to pay to the other (“the recipient”) an amount representative of an overseas dividend on the overseas securities; and in this Schedule the “manufactured overseas dividend” means any payment which the overseas dividend manufacturer makes in discharge of that requirement. Sub-paragraphs (1C) to (1E) apply where the overseas dividend of which the manufactured overseas dividend is representative is taxable. For this purpose an overseas dividend is “taxable” if— Where the overseas dividend manufacturer carries on a trade to which the manufactured overseas dividend relates, and neither sub-paragraph (1D) nor (1E) applies, the manufactured overseas dividend is to be treated as an expense of the trade. Where the overseas dividend manufacturer has investment business to which the manufactured overseas dividend relates, the manufactured overseas dividend is to be treated as expenses of management of the business for the purposes of Part 16 of CTA 2009. Where the overseas dividend manufacturer carries on life assurance business to which the manufactured overseas dividend relates, the manufactured overseas dividend is to be treated as if, to the extent that it is referable to basic life assurance and general annuity business, it were an expense payable falling to be brought into account at step 3 of section 76(7). For the purposes of sub-paragraph (1E), the manufactured overseas dividend is to be treated as referable to basic life assurance and general annuity business to the extent that the overseas dividend of which it is representative— . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Where a manufactured overseas dividend is paid after deduction of the amount required by section 922(2) of ITA 2007 (amount of income tax to be deducted at source), or where the amount of tax required under section 923 of that Act (income tax to be accounted for and paid) in respect of such a dividend has been accounted for and paid, then for all purposes of the Corporation Tax Acts. . . — For the meaning of references in this paragraph to the relevant amount in relation to an amount deducted under section 922(2) of ITA 2007, see paragraph 4A. In its application in relation to a manufactured overseas dividend by virtue of sub-paragraph (4), Part 9A of CTA 2009 (company distributions) has effect— The modification is that— For the purposes of this paragraph— . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Without prejudice to Chapter 9 of Part 6 of CTA 2009 (manufactured interest), the references in this paragraph to all the purposes of the Corporation Tax Acts do not include the purposes of Part 5 of that Act (loan relationships).
A reference in paragraph 4(4)(a) or (b) to the relevant amount in relation to an amount deducted under section 922(2) of ITA 2007 is— Amount A is— This sub-paragraph applies to a case in which— This sub-paragraph applies to a case in which— In this paragraph “the repurchase price” of the securities means the price at which the payer of the manufactured overseas dividend is entitled or obliged to sell the securities, or similar securities, to the recipient of the manufactured overseas dividend. In this paragraph “the securities” means the securities in respect of which the overseas dividend of which the manufactured overseas dividend is representative is paid. In this paragraph “the relevant net amount” means—
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. . . In any case where (apart from this paragraph)— the payment shall, to the extent of an amount equal to the excess, not be regarded for the purposes of this Schedule as made in discharge of the requirement referred to in paragraph 2(1). . . or 4(1) above, as the case may be, but shall instead to that extent be taken for all purposes of the Corporation Tax Acts to constitute a separate fee for entering into the contract or other arrangements under which it was made, notwithstanding anything in paragraph 2 above or anything in paragraph 4 other than in sub-paragraph (1A). Sub-paragraph (1) above does not apply in the case of the amount of any . . . manufactured overseas dividend which falls in accordance with section 540 of CTA 2009 to be treated for the purposes of Part 5 of that Act as interest under a loan relationship. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . For the purpose of giving relief under any provision of the Corporation Tax Acts in a case falling within paragraph . . . 4(1) above where (apart from this paragraph) the aggregate referred to in sub-paragraph (1)(b) above would be less than the gross amount there mentioned— notwithstanding anything in paragraph . . . 4 above. In this paragraph “relief” means relief by way of—
This paragraph applies in any case where— But this is subject to sub-paragraph (8) below (cases where tax relief is denied apart from this paragraph). The company is not entitled, by virtue of anything in this Schedule or any provision of regulations under it, or otherwise, to any relevant tax relief (see sub-paragraph (10)), to the extent that the relief is in respect of, or referable to, the whole or any part of so much of the manufactured payment as, on a just and reasonable apportionment, is attributable to the unallowable purpose. Arrangements have an unallowable purpose at any time if at that time the purposes for which the company is a party to— include a purpose (“the unallowable purpose”) which is not among the business or other commercial purposes of the company. The business and other commercial purposes of a company do not include the purposes of any part of its activities in respect of which it is not within the charge to corporation tax. Where one of the purposes for which a company is at any time a party to— is a tax avoidance purpose, that purpose shall be taken to be a business or other commercial purpose of the company only where it is not the main purpose, or one of the main purposes, for which the company is party to the arrangements or transaction at that time. One or more transactions are to be regarded as related transactions, in the case of any arrangements, if it would be reasonable to assume, from either or both of— that none of the transactions would have been entered into or effected independently of the arrangements. Transactions are not prevented from being related transactions, in the case of any arrangements, just because the transactions— This paragraph does not apply if, as a result of any of the following provisions— the company in question is not entitled to a relevant tax relief in respect of, or referable to, the whole or any part of the manufactured payment. The reference to section 76 is a reference to that section as it has effect in relation to accounting periods beginning on or after 1st April 2004. Any reference in this paragraph to a manufactured payment falling to be made by a company includes a reference to a manufactured payment which is deemed by or under any provision of the Tax Acts to be made by a company (and references to a transaction, or to a company being party to a transaction, are to be construed accordingly). In this paragraph—
Dividend manufacturing regulations may make provision for— to be treated in prescribed circumstances otherwise than as mentioned in paragraphs 2 and 4 above for the purposes of such provisions of the Corporation Tax Acts as may be prescribed. Dividend manufacturing regulations may provide, in relation to prescribed cases where a person makes or receives the payment of any amount representative of an overseas dividend, or is treated for any purposes of this Schedule or such regulations as a person making or receiving such a payment— Dividend manufacturing regulations may make provision with respect to— by persons by . . . whom manufactured dividends . . . are paid. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dividend manufacturing regulations may— Dividend manufacturing regulations may make different provision for different cases.
The provisions referred to in section 768B(2) for determining whether there is a significant increase in the amount of a company’s capital after a change in the ownership of the company are as follows.
There is a significant increase in the amount of a company’s capital if amount B—
exceeds amount A by at least £1 million; or
is at least twice amount A.
Amount A is the lower of— Find the daily amounts of the company’s capital over the pre-change year. Take the highest of the daily amounts. Find out whether there was in the pre-change year a period of 60 days or more in which there was no daily amount lower than the amount taken. If there was, the amount taken is the highest 60 day minimum amount for the pre-change year. If there was not, take the next highest of the daily amounts and repeat the process in sub-paragraph (4) above; and so on, until the highest 60 day minimum amount for the pre-change year is found. In this Part of this Schedule “the pre-change year” means the period of one year ending immediately before the change in the ownership of the company in question.
Amount B is the highest 60 day minimum amount for the post-change period (finding that amount for that period in the same way as the highest 60 day minimum amount for the pre-change year is found). In this paragraph “the post-change period” means the period of three years beginning with the change in the ownership of the company in question.
The capital of a company consists of the aggregate of— For the purposes of sub-paragraph (1) above— Amounts of capital shall be expressed in sterling and rounded up to the nearest pound.
The amounts in issue referred to in section 768B(4)(c) are—
the amount of any expenses of management referable to the accounting period (within the meaning of Chapter 2 of Part 16 of CTA 2009) being divided, except any such expenses as would (apart from section 768B) be deductible in computing profits otherwise than under section 1219 of CTA 2009 (expenses of management of a company's investment business);
the amount of any charges which are paid in that accounting period wholly and exclusively for the purposes of the company’s business;
the amount of any excess carried forward under section 1223 of CTA 2009 (expenses of management carried forward) to the accounting period being divided;
the amount of any allowances falling to be made for that accounting period by virtue of section 253 of the Capital Allowances Act which would (apart from section 768B) be added to the expenses of management for that accounting period by virtue of section 1233 of CTA 2009 (excess capital allowances);
the amount (if any) of the adjusted non-trading profits or non-trading deficit of the company for that accounting period (other than one within sub-paragraph (dc) below) ;
the amount of any non-trading debit (other than one within sub-paragraph . . . (dd) below) that falls to be brought into account for that accounting period for the purposes of Part 5 of CTA 2009 (loan relationships) in respect of any debtor relationship of the company;
the amount of any non-trading deficit carried forward to that accounting period undersection 457(1) of CTA 2009 (carried forward deficit not set off against profits);
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the amount of any non-trading credits or debits in respect of intangible fixed assets that fall to be brought into account for that period under section 751 of CTA 2009;
the amount of any non-trading loss on intangible fixed assets carried forward to that accounting period under section 753(3) of CTA 2009;
any other amounts by reference to which the profits or losses of that accounting period would (apart from section 768B) be calculated.
For the purposes of paragraph 6(da) above, the amount for any accounting period of the adjusted non-trading profits or non-trading deficit of a company is the amount which, as the case may be, would be— if, in computing that amount, amounts for that period falling within paragraph 6(db) or (dc) above were disregarded.
the amount of the profits arising from the company's loan relationships chargeable under section 299 of CTA 2009 (charge to tax on non-trading profits), or
the amount of the company’s non-trading deficit on those relationships for that period,
Subject to paragraph 8 below, the apportionment required by section 768B(4)(c) shall be made— . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
If it appears that any method of apportionment given by paragraph 7 above would work unreasonably or unjustly for any case for which it is given, such other method shall be used for that case as appears just and reasonable.
This paragraph has effect in a case to which section 768B applies for determining the debits to be brought into account for the purposes of Part 5 of CTA 2009 (loan relationships) for— The debits so brought into account shall not include the debits falling within paragraph 11 below to the extent (if at all) that the aggregate of— exceeds the profits for the accounting period ending with the change in the ownership. The reference in sub-paragraph (2) above to the profits is a reference to profits after making all deductions and giving all reliefs that for the purposes of corporation tax are made or given against the profits, including deductions and reliefs which under any provision are treated as reducing them for those purposes.
This paragraph has effect in any case to which section 768B applies where the non-trading deficit mentioned in paragraph 6(dc) above is apportioned by paragraph 7(b) above to the first part of the accounting period being divided. In any such case, none of that non-trading deficit shall be carried forward to—
This paragraph has effect in a case to which section 768C applies for determining the debits to be brought into account for the purposes of Part 5 of CTA 2009 (loan relationships) for— The debits so brought into account for any such accounting period shall not include the debits falling within paragraph 11 below to the extent (if at all) that the amount of those debits exceeds the modified total profits for the accounting period. The reference in sub-paragraph (2) above to the modified total profits for an accounting period is a reference to the total profits for that period— Where by virtue of sub-paragraph (2) above a debit is to any extent not brought into account for an accounting period, that debit may (to that extent) be brought into account for the next accounting period, but this is subject to the application of sub-paragraphs (1) to (3) above to that next accounting period.
This paragraph has effect in any case to which section 768C applies where the non-trading deficit mentioned in paragraph 13(1)(ec) below is apportioned by paragraph 16(1)(b) below to the first part of the accounting period being divided. In any such case, none of that non-trading deficit shall be carried forward to—
A debit falls within this paragraph if it is a non-trading debit which— . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The debits that fall within this paragraph also include any non-trading debit which— In this paragraph “post-change accounting period” means the accounting period beginning immediately after the change in the ownership of the company or, as the case may be, the relevant company.
Expressions used both in this Part of this Schedule and in Part 5 of CTA 2009 have the same meanings in this Part of this Schedule as in that Chapter.
The amounts in issue referred to in section 768C(3)(c) are— In sub-paragraph (1)(a) above “the relevant provisions of the 1992 Act” means section 8(1) of and Schedule 7A to that Act.
Paragraph 6A above shall apply for the purposes of paragraph 13(1)(ea) above as it applies for the purposes of paragraph 6(da) above.
The apportionment required by section 768C(3)(c) shall be made as follows.
In the case of the amount mentioned in paragraph 13(1)(a) above—
if it does not exceed the amount of the relevant gain, the whole of it shall be apportioned to the second part of the accounting period being divided;
if it exceeds the amount of the relevant gain, the excess shall be apportioned to the first part of the accounting period being divided and the relevant gain shall be apportioned to the second part.
Subject to paragraph 17 below, the apportionment shall be made— . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
If it appears that any method of apportionment given by paragraph 16 above would work unreasonably or unjustly for any case for which it is given, such other method shall be used for that case as appears just and reasonable.
This Schedule applies where— Subject to paragraphs 5A, 5B,10 and 13 below and sections 447(5) and (6) and 694(8) and (9) of CTA 2009, if the actual provision— the profits and losses of the potentially advantaged person or, as the case may be, of each of the potentially advantaged persons shall be computed for tax purposes as if the arm’s length provision had been made or imposed instead of the actual provision. For the purposes of this Schedule the cases in which provision made or imposed as between any two persons is to be taken to differ from the provision that would have been made as between independent enterprises shall include the case in which provision is made or imposed as between any two persons but no provision would have been made as between independent enterprises; and references in this Schedule to the arm’s length provision shall be construed accordingly.
This paragraph applies where— Paragraph 1(2)(a) above shall be construed as requiring account to be taken of all factors, including— but this is subject to the following provisions of this paragraph. In a case where— the fact that it is not part of the first company’s business to make loans generally shall be disregarded in construing sub-paragraph (2) above. Paragraph 1(2)(a) above shall be construed as requiring no account to be taken, in the determination of any of the matters mentioned in sub-paragraph (5) below, of (or of any inference capable of being drawn from) any guarantee provided by a company with which the issuing company has a participatory relationship (see sub-paragraphs (7) and (8) below). The matters are— In this paragraph “special relationship” means any relationship by virtue of which the condition in paragraph 1(1)(b) above is satisfied in the case of the affected persons. In this paragraph any reference to a guarantee includes a reference to a surety and to any other relationship, arrangements, connection or understanding (whether formal or informal) such that the person making the loan to the issuing company has a reasonable expectation that in the event of a default by the issuing company he will be paid by, or out of the assets of, one or more companies. For the purposes of this paragraph, the cases where one company has a “participatory relationship”with another are those where— In this paragraph “security” includes securities not creating or evidencing a charge on assets. For the purposes of this paragraph— shall be treated as if payable or given in respect of a security issued for the advance by the company, and references in this paragraph to a security shall be construed accordingly.
This paragraph applies where the actual provision is made or imposed by means of a series of transactions which include— Paragraph 1(2)(a) above shall be construed as requiring account to be taken of all factors, including— but this is subject to the following provisions of this paragraph. In a case where— the fact that it is not part of the first company’s business to provide guarantees generally shall be disregarded in construing sub-paragraph (2) above. Paragraph 1(2)(a) above shall be construed as requiring no account to be taken, in the determination of any of the matters mentioned in sub-paragraph (5) below, of (or of any inference capable of being drawn from) any guarantee provided by a company with which the issuing company has a participatory relationship. The matters are— The following provisions of paragraph 1A above also apply for the purposes of this paragraph—
This Schedule shall be construed (subject to paragraphs 9 to 11 below and sections 447(5) and (6) and 694(8) and (9) of CTA 2009) in such manner as best secures consistency between— In this paragraph “the OECD model” means— In this paragraph “the transfer pricing guidelines” means—
In this Schedule “transaction” includes arrangements, understandings and mutual practices (whether or not they are, or are intended to be, legally enforceable). References in this Schedule to a series of transactions include references to a number of transactions each entered into (whether or not one after the other) in pursuance of, or in relation to, the same arrangement. A series of transactions shall not be prevented by reason only of one or more of the matters mentioned in sub-paragraph (4) below from being regarded for the purposes of this Schedule as a series of transactions by means of which provision has been made or imposed as between any two persons. Those matters are— In this paragraph, “arrangement” means any scheme or arrangement of any kind (whether or not it is, or is intended to be, legally enforceable).
For the purposes of this Schedule a person is directly participating in the management, control or capital of another person at a particular time if, and only if, that other person is at that time— For the purposes of this Schedule a person (“the potential participant”) is indirectly participating in the management, control or capital of another person at a particular time if, and (subject to paragraphs 4A and 6(4C) below) only if— The rights and powers referred to in sub-paragraph (2)(a) above are— Rights and powers fall within this sub-paragraph to the extent that they— In sub-paragraphs (3)(b) to (d) and (4) above, the references to a person’s rights and powers include references to any rights or powers which he either— In paragraph (d) of sub-paragraph (3) above, the reference to rights and powers which would be attributed to a connected person if he were the potential participant includes a reference to rights and powers which, by applying that paragraph wherever one person is connected with another, would be so attributed to him through a number of persons each of whom is connected with at least one of the others. For the purposes of this paragraph a person (“the potential major participant”) is a major participant in another person’s enterprise at a particular time if at that time— For the purposes of this paragraph the 40 per cent. test is satisfied in the case of each of two persons wherever each of them has interests, rights and powers representing at least 40 per cent. of the holdings, rights and powers in respect of which the pair of them fall to be taken as controlling the subordinate. For the purposes of this paragraph— shall be determined after attributing to each of the persons all the rights and powers attributed to a potential participant for the purposes of sub-paragraph (2)(a) above. References in this paragraph— include references to rights or powers which are exercisable by that person, or (when acquired by that person) will be exercisable, only jointly with one or more other persons. For the purposes of this paragraph two persons are connected with each other if— In sub-paragraph (11) above—
A person (“P”) shall be treated for the purposes of paragraph 1(1)(b)(i) above (but subject to sub-paragraph (7) below) as indirectly participating in the management, control or capital of another (“A”) at the time of the making or imposition of the actual provision if— A person (“Q”) shall be treated for the purposes of paragraph 1(1)(b)(ii) above (but subject to sub-paragraph (7) below) as indirectly participating in the management, control or capital of each of the affected persons at the time of the making or imposition of the actual provision if— It is immaterial for the purposes of sub-paragraph (1)(c) or (2)(c) above whether P or Q and the other persons acting together in relation to the financing arrangements did so at the time of the making or imposition of the actual provision or at some earlier time. In sub-paragraph (1)(d) or (2)(d) “relevant time” means— In determining for the purposes of sub-paragraph (1)(d) or (2)(d) whether P or Q would be taken to have control of another person, the rights and powers of any person (and not just P or Q) shall be taken to include those that would be attributed to that person in determining under paragraph 4 above whether he is indirectly participating in the management, control or capital of the other person. In this paragraph “financing arrangements” means arrangements made for providing or guaranteeing, or otherwise in connection with, any debt, capital or other form of finance. Where the condition in paragraph 1(1)(b) above would not be satisfied but for this paragraph, paragraph 1(2) above applies only to the extent that the actual provision relates to the financing arrangements in question.
To the extent that it applies to provision relating to financing arrangements, this Schedule has effect as if in paragraph 1(1)(b) above the words “or within the period of six months beginning with the day on which the actual provision was made or imposed” were inserted immediately before sub-paragraph (i). In this paragraph “financing arrangements” has the same meaning as in paragraph 4A above.
For the purposes of this Schedule . . . the actual provision confers a potential advantage on a person in relation to United Kingdom taxation wherever, disregarding this Schedule, the effect of making or imposing the actual provision, instead of the arm’s length provision, would be one or both of the following, that is to say— . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . In determining for the purposes of sub-paragraph (1) above the amount that would be taken for tax purposes to be the amount of the profits or losses for a year of assessment in the case of a person who is not resident in the United Kingdom, there shall be left out of account any income of that person which is— For the purposes of sub-paragraph (1) section 209(2)(d) (excessive interest etc treated as distribution) is to be disregarded. For the purposes of sub-paragraph (1), Schedule 15 to FA 2009 (tax treatment of financing costs and income) is to be disregarded.
Paragraph 1(2) above does not apply in computing for any chargeable period the profits and losses of a potentially advantaged person if that person is a company which satisfies the condition in sub-paragraph (2) below. The condition is that— In sub-paragraph (2) above “the pre-qualifying period” means— In this paragraph “dormant” has the same meaning as in section 1169 of the Companies Act 2006.
Paragraph 1(2) above does not apply in computing for any chargeable period the profits and losses of a potentially advantaged person if that person is a small or medium-sized enterprise for that chargeable period (see paragraph 5D below). Exceptions to sub-paragraph (1) above are provided— The first exception is where the small or medium-sized enterprise elects for sub-paragraph (1) above not to apply in relation to the chargeable period. Any such election is irrevocable. The second exception is where, at the time when the actual provision is or was made or imposed,— is a resident (see sub-paragraph (6) below) of a non-qualifying territory (whether or not that person is also a resident of a qualifying territory). For the purposes of sub-paragraph (4) above, a “party to a relevant transaction” is a person who, in a case where the actual provision is or was imposed by means of a series of transactions, is or was a party to one or more of those transactions. In this paragraph “resident”, in relation to a territory,— The definitions of “qualifying territory” and “non-qualifying territory” are in paragraph 5E below.
Paragraph 5B(1) above does not apply as respects any provision made or imposed if— A transfer pricing notice may be given in respect of — A transfer pricing notice may be given only after a notice of enquiry has been given to the potentially advantaged person in respect of his tax return for the chargeable period. A transfer pricing notice must identify the officer of the Board to whom any notice of appeal under this paragraph is to be given. A person to whom a transfer pricing notice is given may appeal against the decision to give the notice, but only on the grounds that the condition in sub-paragraph (1)(a) above is not satisfied. Any such appeal must be brought by giving written notice of appeal to the officer of the Board identified for the purpose in the transfer pricing notice in accordance with sub-paragraph (4) above. The notice of appeal must be given before the end of the period of 30 days beginning with the day on which the transfer pricing notice is given. A person to whom a transfer pricing notice is given may amend his tax return for the purpose of complying with the notice at any time before the end of the period of 90 days beginning with— Where a transfer pricing notice is given in the case of any tax return, no closure notice may be given in relation to that tax return until— So far as relating to any provision made or imposed by or in relation to a person— the tax return required to be made for that period is a return that disregards paragraph 1(2) above. Sub-paragraph (10) above does not prevent a tax return for a period becoming incorrect if, in the case of any provision made or imposed,— In this paragraph—
In this Schedule— In this paragraph— Where any enterprise is in liquidation or administration, the rights of the liquidator or administrator (in that capacity) shall be left out of account when applying Article 3(3)(b) of the Annex in determining for the purposes of this Schedule whether— is a small or medium-sized enterprise. Article 3 of the Annex shall have effect with the omission of paragraph 5 (declaration in good faith where control cannot be determined etc). The first sentence of Article 4(1) of the Annex shall have effect as if the data to apply to— were the data relating to the chargeable period in paragraph 5B(1) above (instead of the period described in that sentence) and calculated on an annual basis. Article 4 of the Annex shall have effect with the omission of the following provisions—
In this Schedule— Condition 1 is that— Condition 2 is that— For the purposes of this paragraph a “non-discrimination provision”, in relation to any arrangement to which section 788 applies, is a provision to the effect that nationals of a state which is a party to those arrangements (a “contracting state”) are not to be subject in any other contracting state to— which is other or more burdensome than the taxation and connected requirements to which nationals of that other state in the same circumstances (in particular with respect to residence) are or may be subjected. In this paragraph, “national”, in relation to a contracting state, includes— A statutory instrument containing regulations under this paragraph shall not be made unless a draft of the instrument has been laid before, and approved by a resolution of, the House of Commons.
This paragraph applies where— Subject to sub-paragraphs (3) to (6) and paragraphs6C, 6D, 7 and 8 below, on the making of a claim by the disadvantaged person for the purposes of this paragraph— A claim made by the disadvantaged person for the purposes of this paragraph— For the purposes of sub-paragraph (3) above a computation shall be taken to have been made in the case of the advantaged person on the basis that the arm’s length provision was made or imposed instead of the actual provision if, and only if— A claim by the disadvantaged person for the purposes of this paragraph shall not be made where— In this sub-paragraph “security” and “guarantee” have the same meaning as in paragraph 1A above. For the purposes of sub-paragraph (4A) above, the cases where one person has a “participatory relationship” with another are those where— Paragraph 4A above applies for the purposes of sub-paragraph (4B) above as it applies for the purposes of paragraph 1(1)(b) above. Subject to section 111(3)(b) of the Finance Act 1998 (which provides for the extension of the period for making a claim), a claim for the purposes of this paragraph shall not be made except within one of the following periods— Subject to section 111(3)(b) of the Finance Act 1998, where— the disadvantaged person shall be entitled, within the period mentioned in sub-paragraph (5)(b) above, to make any such amendment of the claim as may be appropriate in consequence of the determination contained in that notice. In this paragraph—
Paragraph 6(2)(a) above does not affect the credits to be brought into account by the disadvantaged person in respect of— for accounting periods ending on or after the last day of the relevant accounting period of the advantaged person. For the purposes of sub-paragraph (1) above, the relevant accounting period of the advantaged person is the accounting period in which the actual provision was made or imposed. For the purposes of this paragraph “trading stock”, in relation to any trade, has the meaning given by section 174 of ITTOIA 2005 or section 163 of CTA 2009.
This paragraph applies in any case where— Where this paragraph applies, paragraph 6 above shall have effect as if the controlled foreign company were a person on whom a potential advantage in relation to United Kingdom taxation were conferred by the actual provision. In the application of paragraph 6 above by virtue of this paragraph— In this paragraph—
Where paragraph 1A above applies in relation to any provision, this paragraph has effect in relation to that provision. A claim under paragraph 6(2) above may be made in accordance with this paragraph. For the purposes of this Schedule a “paragraph 6C claim” is a claim under paragraph 6(2) above made in accordance with this paragraph. A paragraph 6C claim may be made by— but any such claim made by the advantaged person shall be taken to be made on behalf of the disadvantaged person. A paragraph 6C claim may be made before or after a computation falling within paragraph 6(3)(a) above has been made. A paragraph 6C claim must be made either— but this is subject to section 111(3)(b) of the Finance Act 1998 (extension of period for making a claim). A paragraph 6C claim is not a claim within paragraph 57 or 58 of Schedule 18 to the Finance Act 1998 (company tax returns, assessments and related matters). Accordingly, paragraph 59 of that Schedule (application of Schedule 1A to the Management Act) has effect in relation to a paragraph 6C claim. Where— the affected persons shall be treated as if (instead of the claim actually made) a claim had been made that was consistent with the computation. All such adjustments shall be made (whether by discharge or repayment of tax, the making of assessments or otherwise) as are required to give effect to sub-paragraph (7) above. Sub-paragraph (8) above has effect notwithstanding any limit on the time within which any adjustment may be made. Where— sub-paragraph (11) below applies. Where this sub-paragraph applies, any such amendment of the paragraph 6C claim as may be appropriate in consequence of the determination contained in the relevant notice may be made by— but any such amendment made by the advantaged person shall be taken to be made on behalf of the disadvantaged person. Any such amendment must be made within the period mentioned in paragraph 6(5)(b) above. But that is subject to section 111(3)(b) of the Finance Act 1998 (extension of period for making amendment).
Where— the interest paid under the actual provision, to the extent that it exceeds the amount of interest that would have been payable under the arm’s length provision, shall not be regarded as chargeable under . . . Chapter 2 of Part 4 of ITTOIA 2005or required to be brought into account under Part 5 of CTA 2009 as a non-trading creditand shall not be subject to the provisions of Part 15 of ITA 2007 (deduction of income tax at source).
interest is paid by any person under the actual provision,
paragraph 1(2) above applies in relation to the actual provision,
the amount of interest that would have been payable under the arm’s length provision is less than the amount of interest paid under the actual provision (or there would not have been any interest payable),
the person receiving the interest makes a claim under paragraph 6 above or a paragraph 6C claim,
Subject to sub-paragraph (4) below, where— the assumptions specified in sub-paragraph (2) below shall apply, in the disadvantaged person’s case, as respects any credit for foreign tax which the disadvantaged person has been or may be given in pursuance of any double taxation arrangements or under section 790(1). Those assumptions are— Sub-paragraph (4) below applies if— Where this sub-paragraph applies— Where, in a case in which a claim has been made for the purposes of paragraph 6 above, any adjustment is required to be made for the purpose of giving effect to any of the preceding provisions of this paragraph— References in this paragraph to relevant profits of the disadvantaged person are references to profits arising to the disadvantaged person from the carrying on of the relevant activities.
This paragraph applies where— To the extent that the balancing payments do not in the aggregate exceed the amount of the available compensating adjustment, those payments— In this paragraph “the available compensating adjustment” means the difference between PL1 and PL2 where— PL1 is the profits and losses of the disadvantaged person computed for tax purposes on the basis of the actual provision, and PL2 is the profits and losses of the disadvantaged person as they fall (or would fall) to be computed for tax purposes on a claim under paragraph 6 above, for this purpose taking PL1 or PL2 as a positive amount if it is an amount of profits and as a negative amount if it is an amount of losses.
This paragraph applies in any case where— The disadvantaged person may make an election under this paragraph in respect of the relevant security if the condition in sub-paragraph (3) below is satisfied. The condition is that— An election under this paragraph in respect of the relevant security is an election for the disadvantaged person— Where an election under this paragraph has effect in relation to an accounting period of the advantaged person, the tax mentioned in sub-paragraph (4)(b) above— Any election under this paragraph in respect of the relevant security— For the purposes of this sub-paragraph a security issued in a chargeable period beginning before 1st April 2004 shall be treated as if it had been issued in the chargeable period beginning on that date. An election under this paragraph by a person is of no effect if the Board give that person a notice under this sub-paragraph refusing to accept the election. A notice under sub-paragraph (7) above may be given only after a notice of enquiry in respect of the company tax return containing the election has been given to the disadvantaged person. In this paragraph— The following provisions of paragraph 1A above also apply for the purposes of this paragraph—
This paragraph applies in any case where— To the extent that the balancing payments made by all the guarantor companies do not in the aggregate exceed the amount TR in paragraph 6D(3) above (total reductions within paragraph 6D(1)(c) above), those payments—
This paragraph applies where the following conditions are satisfied— Sub-paragraphs (2) to (8) of paragraph 7B above apply in a case where this paragraph applies as they apply in a case where that paragraph applies, but with the modifications in sub-paragraphs (3) and (4) below. The relevant security is the security in paragraph 1B(1)(a) above. In sub-paragraph (4) (nature of the election)—
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subject to paragraph 10 below, this paragraph applies to provision made or imposed by or in relation to the terms of a sale of oil if— Where this paragraph applies to provision made or imposed by or in relation to the terms of a sale of oil, this Schedule shall have effect as respects that provision as if the buyer, the seller and (if it is not the seller) the producer were all controlled by the same person at the time of the making or imposition of that provision. For the purposes of this paragraph two companies are linked if— For the purposes of this paragraph— In this paragraph “oil” includes any mineral oil or relative hydrocarbon, as well as natural gas.
This Schedule does not apply in relation to provision made or imposed by means of any transaction or deemed transaction in the case of which the price or consideration is determined in accordance with any of subsections (1) to (4) of section 493 (transactions and deemed transactions involving oil treated as made at market value).
This paragraph applies where any person (“the taxpayer") carries on as, or as part of, a trade any activities (“the ring fence trade") which, in accordance with section 492(1) above or section 16(1) of ITTOIA 2005 either— . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Subject to paragraph 10 above and sub-paragraph (4) below, this Schedule shall have effect as respects any provision made or imposed by the taxpayer as between the ring fence trade and any other activities carried on by him as if— This Schedule shall apply in accordance with this paragraph in relation to any provision mentioned in sub-paragraph . . . (3) above only where the effect of its application in relation to that provision is either—
Sub-paragraph (4) applies in so far as— The appeals falling within this sub-paragraph are— . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Where this sub-paragraph applies— In this paragraph—
Nothing in this Schedule shall be construed as affecting— and nothing in this Schedule shall require the profits or losses of any person to be computed for tax purposes as if, in his case, instead of income or losses falling to be brought into account in connection with the taxation of income, there were gains or losses falling to be brought into account in accordance with the 1992 Act. Nothing in sub-paragraph (1) above applies to paragraph 6 above.
In this Schedule— Without prejudice to paragraphs 9(2) and 11(3) above, references in this Schedule to a person controlling a body corporate or a partnership shall be construed in accordance with section 840. In determining for the purposes of this Schedule whether a person has an entitlement, in pursuance of any double taxation arrangements or under section 790(1), to be given credit for foreign tax, any requirement that a claim is made before such a credit is given shall be disregarded. Any adjustments required to be made by virtue of this Schedule may be made by way of discharge or repayment of tax, by the modification of any assessment or otherwise. This Schedule shall have effect as if—
A scheme or arrangement, other than a scheme or arrangement falling within sub-paragraph (3), is a prescribed scheme or arrangement if one or more of paragraphs 2 to 6 apply to it. A scheme or arrangement falling within sub-paragraph (3) is a prescribed scheme or arrangement if one or more of paragraphs 2 to 6 would, on the assumption in sub-paragraph (4), apply to it. A scheme or arrangement falls within this sub-paragraph if its main purpose, or one of its main purposes, is to cause an amount of underlying tax allowable in respect of a dividend paid by a body corporate resident in a territory outside the United Kingdom to be taken into account in the case of a person. The assumption is that the body corporate is resident in the United Kingdom. Nothing in sub-paragraph (4) requires it to be assumed that there is any change in the place or places at which the body corporate carries on its activities.
This paragraph applies to a scheme or arrangement if the scheme or arrangement enables a person who is party to, or concerned in, the scheme or arrangement to pay, in respect of a source of income or chargeable gain, an amount of foreign tax all or part of which is properly attributable to another source of income or chargeable gain (or to more than one such other source).
This paragraph applies to a scheme or arrangement if, under the scheme or arrangement, sub-paragraph (2) is satisfied in relation to a person who has claimed, or is in a position to claim, for a chargeable period an allowance under any arrangements by way of credit for foreign tax (“the claimant”). This sub-paragraph is satisfied if— The foreign tax total is the amount found by—
This paragraph applies to a scheme or arrangement if under the scheme or arrangement— and that action or that failure to act has the effect of increasing a claim made by a person who is party to, or concerned in, the scheme or arrangement for an allowance by way of credit in accordance with this Part or of giving rise to such a claim. The steps mentioned in sub-paragraph (1) are steps that may be made— The steps mentioned in sub-paragraph (1) include—
This paragraph applies to a scheme or arrangement if, under the scheme or arrangement, sub-paragraph (2) is satisfied in relation to a person who has claimed, or is in a position to claim, for a chargeable period an allowance under any arrangements by way of credit for foreign tax. This sub-paragraph is satisfied if amount A is less than amount B. Amount A is the amount of United Kingdom taxes payable by the person in respect of income and chargeable gains arising in the chargeable period. Amount B is the amount of United Kingdom taxes that would be payable by the person in respect of income and chargeable gains arising in the chargeable period if, in determining that amount, the transactions forming part of the scheme or arrangement were disregarded.
This paragraph applies to a scheme or arrangement if the scheme or arrangement includes— A payment made by A is a relevant payment if all or part of it may be brought into account in computing A's income for the purposes of United Kingdom taxes. Consideration given in respect of a payment or payments made by A satisfies the requirements of this sub-paragraph if— In this paragraph references to a payment include references to a transfer of money's worth. Section 839 applies for the purposes of this paragraph.
This Schedule applies, where any shares in or securities of any company (“the relevant company”) are at any time held by another company (“the trust company”), for determining whether and to what extent those shares or securities (“the relevant holding”) are, for the purposes of section 842AA, to be regarded as at that time comprised in the trust company’s qualifying holdings. The relevant holding shall be regarded as comprised in the trust company’s qualifying holdings at any time if— Subject to paragraph 6(3) below, where the requirements of paragraph 6 or 7 below would be satisfied as to only part of the money raised by the issue of the relevant holding and that holding is not otherwise capable of being treated as comprising separate holdings, this Schedule shall have effect in relation to that holding as if it were two holdings consisting of— and section 842AA shall have effect as if the value of the holding were to be apportioned accordingly between the two holdings which are deemed to exist in pursuance of this sub-paragraph.
The requirement of this paragraph is that the relevant company (whether or not it is resident in the United Kingdom) must be an unquoted company. In this paragraph “unquoted company” means a company none of whose shares, stocks, debentures or other securities is marketed to the general public. For the purposes of this paragraph shares, stocks, debentures or other securities are marketed to the general public if they are— In sub-paragraph (3) above “designated” means designated by an order made by the Board for the purposes of that sub-paragraph; and an order made for the purposes of paragraph (b) of that sub-paragraph may designate an exchange by name, or by reference to any class or description of exchanges, including a class or description framed by reference to any authority or approval given in a country outside the United Kingdom. Section 828(1) does not apply to an order made for the purposes of sub-paragraph (3) above. Where a company any shares in or securities of which are included in the qualifying holdings of the trust company ceases at any time while the trust company is approved as a venture capital trust to be an unquoted company, the requirements of this paragraph shall be deemed, in relation to shares or securities acquired by the trust company before that time, to continue to be satisfied for a period of five years after that time.
The requirements of this paragraph are as follows. The relevant company must be one of the following, that is to say— Subject to sub-paragraph (4) below, when the relevant holding was issued and at all times since, a qualifying company (whether or not the same such company at every such time) must have been either— . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The requirements of sub-paragraph (3) above shall not be capable of being satisfied by virtue of paragraph (b) of that sub-paragraph at any time after the end of the period of two years beginning with the issue of the relevant holding unless— The requirements of that sub-paragraph shall also be incapable of being so satisfied at any time after the abandonment, within the period mentioned in sub-paragraph (4) above, of the intention in question. In sub-paragraphs (3) and (4) above, “qualifying company” means the relevant company or any relevant qualifying subsidiary of that company. In determining for the purposes of sub-paragraph (4)(a) above when the intended trade was begun to be carried on by a qualifying company which is a relevant qualifying subsidiary of the relevant company there shall be disregarded any carrying on of the trade by it before it became such a subsidiary of the relevant company. For the purposes of this paragraph a company is the parent company of a trading group if— A business fulfils the requirements of this sub-paragraph if neither the business nor a substantial part of it consists in, or in either of, the following, that is to say— The activities falling within this sub-paragraph are— Activities of a company or of any of its qualifying subsidiaries shall be disregarded for the purposes of sub-paragraphs (6) to (8) above to the extent that they consist in— Activities of a qualifying subsidiary of a company shall also be disregarded for the purposes of sub-paragraphs (6) to (8) above to the extent that they consist in— In sub-paragraph (10) above “mainly trading subsidiary” means a qualifying subsidiary which, apart from purposes (“its insignificant purposes”) which are capable of having no significant effect (other than in relation to incidental matters) on the extent of its activities, exists wholly for the purpose of carrying on one or more qualifying trades.
For the purposes of this Schedule— Subject to sub-paragraphs (3) to (9) below, a trade complies with this paragraph if neither that trade nor a substantial part of it consists in one or more of the following activities, that is to say— For the purposes of sub-paragraph (2)(b) above— For the purposes of this Schedule the activities of a person shall not be taken to fall within paragraph (ed) or (ee) of sub-paragraph (2) above except where that person has an estate or interest in, or is in occupation of, the hotels or comparable establishments or, as the case may be, the nursing homes or residential care homes. In determining for the purposes of this paragraph whether a trade carried on by any person is an ordinary trade of wholesale or retail distribution, regard shall be had to the extent to which it has the following features, that is to say— and for the purposes of this sub-paragraph the features specified in paragraphs (a) to (c) above shall be regarded as indications that the trade is such an ordinary trade and those in paragraphs (d) to (h) above shall be regarded as indications of the contrary. A trade shall not be treated as failing to comply with this paragraph by reason only that it consists to a substantial extent in the receiving of royalties or licence fees if the royalties and licence fees (or all but for a part that is not a substantial part in terms of value) are attributable to the exploitation of relevant intangible assets. For this purpose an intangible asset is a “relevant intangible asset” if the whole or greater part (in terms of value) of it has been created— In the case of a relevant asset that is intellectual property, references in sub-paragraph (6) above to the creation of the asset by a company are to its creation in circumstances in which the right to exploit it vests in the company (whether alone or jointly with others). For the purposes of sub-paragraphs (5) to (6A) above “intangible asset” means any asset which falls to be treated as an intangible asset in accordance with generally accepted accounting practice. For the purposes of sub-paragraph (6) above For the purposes of sub-paragraph (6A) above “intellectual property” means— A trade shall not be treated as failing to comply with this paragraph by reason only of its consisting in letting ships, other than offshore installations or pleasure craft, on charter if— but where any of the requirements mentioned in paragraphs (a) to (d) above are not satisfied in relation to any lettings, the trade shall not thereby be treated as failing to comply with this paragraph if those lettings and any other activity of a kind falling within sub-paragraph (2)(a) to (f) above do not, when taken together, amount to a substantial part of the trade. The conditions are that— but this sub-paragraph shall have effect, in relation to any letting between one company and another where one of those companies is the relevant company and the other is a qualifying subsidiary of that company, or where both companies are qualifying subsidiaries of the relevant company, as if paragraph (c) were omitted. A trade shall not comply with this paragraph unless it is conducted on a commercial basis and with a view to the realisation of profits.
In paragraph 4 above— For the purposes of paragraph 4 above, in the case of a trade carried on by a company, a person has a controlling interest in that trade if— and, in any other case, a person has a controlling interest in a trade if he is entitled to not less than half of the assets used for, or of the income arising from, the trade. For the purposes of sub-paragraph (2) above there shall be attributed to any person any rights or powers of any other person who is an associate of his. References in paragraph 4 above or this paragraph to a trade, except the references in paragraph 4(2)(f) to the trade for which services or facilities are provided, shall be construed without reference to so much of the definition of trade in section 832(1) as relates to adventures or concerns in the nature of trade; and those references in paragraph 4(2)(f) above to a trade shall have effect, in relation to cases in which what is carried on is carried on by a person other than a company, as including references to any business, profession or vocation. In this paragraph— References in paragraph 4 above, in relation to an hotel, to a comparable establishment are references to a guest house, hostel or other establishment the main purpose of maintaining which is the provision of facilities for overnight accommodation (whether with or without catering services). References in this paragraph to an interest in land do not include references to—
For the purposes of this Schedule, a company (“the subsidiary”) is a relevant qualifying subsidiary of the relevant company at any time when it falls within sub-paragraph (2) below. The subsidiary falls within this sub-paragraph if— Sub-paragraphs (4) to (4C) and (5) of paragraph 10 below apply in relation to sub-paragraph (2) of this paragraph as they apply in relation to sub-paragraph (3) of that paragraph, but with the following modification. That modification is that sub-paragraph (5) of that paragraph is to be read as if the words “or (as the case may be) by another subsidiary of that company” were omitted. For the purposes of this paragraph— shall be determined in accordance with paragraphs 1 and 3 of Schedule 18. But in making that determination—
The requirements of this paragraph are that either— For the purposes of this Schedule— In sub-paragraph (2) above, “the trading time” means whichever is applicable of the following— The requirements of this paragraph are not satisfied if either of the following, namely— are carried on, at any time after the issue of the relevant holding, by a person other than the relevant company or a relevant qualifying subsidiary of that company. Sub-paragraph (2AD) below applies where preparations mentioned in sub-paragraph (2AB)(b) above are carried on by the relevant company or a relevant qualifying subsidiary of that company at any time after the issue of the relevant holding. Where this sub-paragraph applies, the requirements of this paragraph are not to be regarded, by virtue of sub-paragraph (2AB) above, as failing to be satisfied by reason only of the carrying on of the trade mentioned in sub-paragraph (2AB)(a) above by a person other than— at any time after the issue of the relevant holding but before the relevant company or any relevant qualifying subsidiary of that company carries on that trade. The requirements of this paragraph are not to be regarded, by virtue of sub-paragraph (2AB) above, as failing to be satisfied by reason only of the carrying on of the trade mentioned in sub-paragraph (2AB)(a) above— The requirements of this paragraph are not to be regarded, by virtue of sub-paragraph (2AB) above, as failing to be satisfied if— the trade mentioned in sub-paragraph (2AB)(a) above ceases to be carried on by the relevant company or a relevant qualifying subsidiary of that company and is subsequently carried on by a person who has not been connected, at any time after the date which is one year before the issue of the relevant holding, with the relevant company. Sub-paragraph (2AF) above applies only if (as the case may be)— is for bona fide commercial reasons and is not part of a scheme or arrangement the main purpose of which or one of the main purposes of which is the avoidance of tax. Sub-paragraph (2) of paragraph 11A below applies for the purposes of sub-paragraphs (2AF) and (2AG) above as it applies for the purpose of that paragraph. For the purposes of this paragraph money shall not be treated as employed otherwise than wholly for the purposes of a trade if the only amount employed for other purposes is an amount which is not a significant amount; and nothing in paragraph 1(3) above shall require any money whose use is disregarded by virtue of this sub-paragraph to be treated as raised by a different holding. References in this paragraph to employing money for the purposes of a trade shall include references to employing it for the purpose of preparing for the carrying on of the trade. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The requirement of this paragraph is that the relevant holding did not, when it was issued, represent an investment in excess of the maximum qualifying investment for the relevant period. Subject to sub-paragraph (4) below, the maximum qualifying investment for any period is exceeded to the extent that the aggregate amount of money raised in that period by the issue to the trust company during that period of shares in or securities of the relevant company exceeds £1 million. Any question for the purposes of this paragraph as to whether any shares in or securities of the relevant company which are for the time being held by the trust company represent an investment in excess of the maximum qualifying investment for any period shall be determined on the assumption, in relation to disposals by the trust company, that, as between shares or securities of the same description, those representing the whole or any part of the excess are disposed of before those which do not. Where— this paragraph shall have effect in relation to the relevant company as if the sum of money for the time being specified in sub-paragraph (2) above were to be divided by the number of companies (including the relevant company) which, at the time when the relevant holding was issued, were members of the partnership or, as the case may be, parties to the joint venture. For the purposes of this paragraph the relevant period is the period beginning with whichever is the earlier of—
The requirement of this paragraph is that the value of the relevant assets— Subject to sub-paragraph (3) below, the reference in sub-paragraph (1) above to the value of the relevant assets is a reference— For the purposes of this paragraph assets of any member of the relevant company’s group that consist in rights against, or in shares in or securities of, another member of the group shall be disregarded. In this paragraph references, in relation to any time, to the relevant company’s group are references to the relevant company and its qualifying subsidiaries at that time.
The requirements of this paragraph are that . . . the relevant company must not be— and arrangements must not be in existence by virtue of which the relevant company could fall within paragraph (a) or (b) above. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subject to the following provisions of this paragraph, a company is a qualifying subsidiary of the relevant company for the purposes of this Schedule if— is a company falling within sub-paragraph (3) below. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The subsidiary falls within this sub-paragraph if— The subsidiary shall not be regarded, at a time when it or any other company is being wound up, as having ceased on that account to be a company falling within sub-paragraph (3) above if . . . — Sub-paragraph (4B) below applies at a time when the subsidiary or any other company is in administration or receivership. The subsidiary shall not be regarded, by reason only of anything done as a consequence of the company concerned being in administration or receivership, as having ceased to be a company falling within sub-paragraph (3) above if— is for bona fide commercial reasons and is not part of a scheme or arrangement the main purpose of which or one of the main purposes of which is the avoidance of tax. Sub-paragraph (2) of paragraph 11A below applies for the purposes of sub-paragraphs (4A) and (4B) above as it applies for the purpose of that paragraph. The subsidiary shall not be regarded, at any time when arrangements are in existence for the disposal by the relevant company, or (as the case may be) by another subsidiary of that company, of all its interest in the subsidiary in question, as having ceased on that account to be a company falling within sub-paragraph (3) above if . . . the disposal is to be for bona fide commercial reasons and is not to be part of a scheme or arrangement the main purpose of which, or one of the main purposes of which, is the avoidance of tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The requirement of this paragraph is that the relevant company must not have a property managing subsidiary which is not a relevant qualifying subsidiary of the relevant company. “Property managing subsidiary” means a qualifying subsidiary of the relevant company whose business consists wholly or mainly in the holding or managing of land or any property deriving its value from land. In sub-paragraph (2) above, “land” and “property deriving its value from land” have the same meaning as in section 776.
The requirement of this paragraph is that there are no securities relating to a guaranteed loan in the relevant holding. For the purposes of this paragraph a security relates to a guaranteed loan if (and only if) there are arrangements for the trust company to be or become entitled, in the event of a failure by any person to comply with— to receive anything (whether directly or indirectly) from a third party. For the purposes of sub-paragraph (2) above it shall be immaterial whether the arrangements apply in all cases of a failure to comply or only in certain such cases. For the purposes of this paragraph “third party” means any person except—
The requirement of this paragraph is that eligible shares represent at least 10 per cent. by value of the totality of the shares in or securities of the relevant company (including the relevant holding) which are held by the trust company. For the purposes of this paragraph the value at any time of any shares in or securities of a company shall be taken (subject to sub-paragraph (4) below) to be their value immediately after— In sub-paragraph (2) above “relevant event”, in relation to any shares in or securities of the relevant company, means— If at any time the value of any shares or securities held by the trust company is less than the amount of the consideration given by the trust company for those shares or securities, it shall be assumed for the purposes of this paragraph that the value of those shares or securities at that time is equal to the amount of that consideration. In this paragraph “eligible shares” has the same meaning as in section 842AA.
This paragraph applies where— An acquisition of shares falls within this sub-paragraph if— For the purposes of sub-paragraph (1)(c) above an approval notification is one which, on an application by either the old company or the new company, is given to the applicant company and states that the Board are satisfied that the exchange of shares under the arrangements— If the requirements of paragraph 3 above were satisfied in relation to the old company and any old shares immediately before the beginning of the period for giving effect to the arrangements, then (to the extent that it would not otherwise be the case) those requirements shall be deemed to be satisfied in relation to the new company and the matching new shares at all times which— For the purposes of paragraph 3 above the period of two years mentioned in sub-paragraph (4) of that paragraph shall be deemed, in the case of any new shares, to expire at the same time as it would have expired (or by virtue of this sub-paragraph would have been deemed to expire) in the case of the matching old shares. Subject to sub-paragraph (7) below, where— those requirements shall be deemed, at all times after that time, to be satisfied to the same extent in relation to the matching new shares. Where there is a time following any exchange under the arrangements of any new shares for any old shares when (apart from the arrangements) the requirements of paragraph 6 above would have ceased under— to be satisfied in relation to those old shares, those requirements shall cease at that time to be satisfied in relation to the matching new shares. For the purposes of paragraph 7 above any new shares acquired under the arrangements shall be deemed to represent an investment which— In determining whether the requirements of paragraph 9 above are satisfied in relation to the old company or the new company at a time in the period for giving effect to the arrangements, both— shall be disregarded. For the purposes of paragraph 10B above the value of the new shares, both immediately after the time of their acquisition and immediately after the time of any subsequent relevant event occurring by virtue of the arrangements, shall be taken to be the same as the value, when last valued in accordance with that paragraph, of the old shares for which they are exchanged. Nothing in this paragraph shall deem any of the requirements of this Schedule to be satisfied in relation to any new shares unless the matching old shares were first issued to the trust company and have been held by that company from the time when they were issued until they are acquired by the new company. References in this paragraph to the period for giving effect to the arrangements are references to the period which— If, at any time after the arrangements first came into existence and before the new company has acquired all the old shares, the arrangements— this paragraph shall not deem any requirement of this Schedule to be satisfied, and sub-paragraph (10) above shall not apply, in the case of any new shares at any time after the arrangements have so ceased. Subject to sub-paragraph (15) below, references in this paragraph, except in the expression “subscriber shares”, to shares in a company include references to any securities of that company. For the purposes of this paragraph, a relevant security of the old company shall not be treated as a security of that company if— In sub-paragraph (15) above “relevant security” means an instrument which is a security for the purposes of this Schedule by reason only of section 842AA(12). For the purposes of this paragraph—
This paragraph applies where— Sub-paragraphs (5) to (8) of paragraph 10C above shall apply in relation to the exchange of convertibles for shares by virtue of the exercise of the right of conversion as if— For the purposes of paragraph 10B above the value of the new shares immediately after the time of their acquisition by the trust company shall be taken to be the same as the value, when last valued in accordance with that paragraph, of the convertibles for which they are exchanged.
None of the requirements of this Schedule shall be regarded, at a time when the relevant company is being wound up, as being, on that account, a requirement that is not satisfied in relation to that company if . . . —
. . . the requirements of this Schedule would be satisfied in relation to that company apart from the winding up; and
. . . the winding up is for bona fide commercial reasons and is not part of a scheme or arrangement the main purpose of which, or one of the main purposes of which, is the avoidance of tax.
A company which is in administration or receivership shall not be regarded as ceasing to comply with paragraph 3(2) or (3) by reason only of anything done as a consequence of its being in administration or receivership. For this purpose— This paragraph applies only if— is for bona fide commercial reasons and is not part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax.
The Treasury may by regulations make provision for cases where— providing that the new shares or securities shall be treated as meeting those requirements. The references in sub-paragraph (1) to an exchange of shares or securities include any form of company reorganisation or other arrangement which involves a holder of shares or securities in a company receiving other shares or securities— The regulations shall specify— The regulations may contain such administrative provisions (including provision for advance clearances) as appear to the Treasury to be necessary or expedient. The regulations may authorise the Board to give notice to any person requiring him to provide such information, specified in the notice, as they may reasonably require in order to determine whether any conditions imposed by the regulations are met. Regulations under this paragraph—
The Treasury may by order amend this Schedule for any or all of the following purposes, that is to say—
to make such modifications of paragraphs 3 to 5 above as they may consider expedient;
to substitute different sums for the sums of money for the time being specified in paragraphs 7(2) and 8(1) above.
Subject to paragraph 10C(15) above, in this Schedule— and references in this Schedule to the issue of any securities, in relation to any security consisting in a liability in respect of an unsecured loan, shall have effect as references to the making of the loan. For the purposes of paragraphs 5(2) and 9 above, the question whether a person controls a company shall be determined in accordance with subsections (2) to (6) of section 416 with the modification given by sub-paragraph (3) below. The modification is that, in determining whether a person controls a company, there shall be disregarded— Section 839 shall apply for the purposes of this Schedule, but as if the reference in subsection (8) to section 416 were a reference to subsections (2) to (6) of section 416 with the modification given by sub-paragraph (3) above. For the purposes of sub-paragraph (3) above— In this paragraph “fixed-rate preference shares” means shares which—