Statement by Belgium for the Working Session 12

Subject to sub-paragraph (3) below, for the purposes of this Act, wine or made-wine which is for the time being in a closed container is sparkling if, due to the presence of carbon dioxide or any other gas, the pressure in the container, measured at a temperature of 20° C, is not less than 1 bar in excess of atmospheric pressure. For the purposes of this Act, wine or made-wine which is not for the time being in a closed container is sparkling if it has characteristics similar to those of wine or made-wine which has been removed from a closed container and which, before removal, fell within sub-paragraph (1) above. Notwithstanding anything in sub-paragraph (1) above, wine or made-wine which is for the time being in a closed container shall not be regarded as sparkling for the purposes of the rates of duty set out above, if—

For the purposes of this Act, wine or made-wine shall be regarded as having been rendered sparkling if—

In this Schedule "the principal section" means section 27 of this Act Any amount which is credited as interest in respect of a relevant deposit shall, for the purposes of the principal section and (his Schedule, be treated as a payment of interest

In the principal section and in this Schedule "deposit-taker " means any of the following— Where the Treasury makes an order under sub-paragraph (1)(f) above, the order shall have effect from the beginning of the first year of assessment which begins after the date on which the order is made. An order under sub-paragraph (1)(f) above shall be subject to annulment in pursuance of a resolution of the Commons House of Parliament.

In the principal section and in this Schedule " 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 principal section and this Schedule, a deposit is a " relevant deposit" if, but only if— and the deposit is not prevented from being a relevant deposit by sub-paragraph (3) below. A deposit is not a relevant deposit if— A declaration under sub-paragraph (3)(h)(i) shall 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. A deposit-taker shall, on being so required by notice given to him in writing by an inspector, make all declarations which have been made to him under sub-paragraph (3) above 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 sub-paragraph (5) 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 sub-paragraph (3) above— For the purposes of sub-paragraph (3)(f) and (g) above, a deposit is held at a branch of a deposit-taker if it is recorded in his books as a liability of that branch.

Where in relation to any payment of interest (the "payment ") a deposit-taker is liable to account for and pay an amount under the principal section— Sub-paragraph (1)(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 sub-paragraph (1)(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 the principal section shall be a relevant payment for the purposes of Schedule 20 to the Finance Act 1972 (collection of income tax on company payments which are not distributions) whether or not the deposit-taker making the payment is resident in the United Kingdom. Schedule 20 to that Act shall apply in relation to any payment which is a relevant payment by virtue of sub-paragraph (1) above— In relation to any deposit-taker who is not a company Schedule 20 shall have effect as if—

Any deposit denominated in a foreign currency shall not be treated, at any time before 6th April 1986, as a relevant deposit. A certificate of deposit, as defined in section 55(3) of the Finance Act 1968, 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 paragraph 3(3) of this Schedule 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— be treated, for the purposes of paragraph 3(3) of this Schedule, as if it were a qualifying time deposit. A declaration made before 6th July 1984 under section 17(4) of the Taxes Management Act 1970 which contains an undertaking of the kind referred to in sub-paragraph (4) of paragraph 3 of this Schedule shall, at all times before 6th April 1988, be treated as a declaration made for the purposes of that paragraph. 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 121 of the Taxes Act (special rules where source of income ceases) 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. Where a deposit becomes a composite rate deposit on 6th April 1985, section 121 of the Taxes Act shall apply in relation to it 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 120(3) of the Taxes Act 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 sub-paragraphs (5) to (7) above 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 the principal section.

Paragraph 3(3)(h) and (5) of Schedule 8 to the Finance Act 1984

On the disposal by any person of any deep discount security— The amount which represents the accrued income attributable to any period of ownership is the aggregate of the income elements for each income period or part of an income period in the period of ownership. In relation to any security, the income element for any income period shall be determined by applying the formula— where A is the adjusted issue price ; B is the yield to maturity; and C is the amount of interest (if any) attributable to the income period. The income element for any period (the "short period") falling within an income period shall be determined by applying the formula— where I is the income element for the income period in which the short period falls ; P is the number of days in the short period ; and Y is the number of days in that income period. Where— the tax shall be computed on the amounts, if any, received in the United Kingdom in the year of assessment in question in respect of the sum mentioned in sub-paragraph (1)(a) above (any such amounts being treated as income arising when they are received in the United Kingdom). For the purposes of subsection (5) above— In this Schedule— Every company which issues deep discount securities shall cause to be shown on the certificate of each such security the income element for each income period between the date of issue of the security and the redemption date. Sections 52 to 54 of the Taxes Act (deduction of income tax by persons making certain payments) and section 159 of that Act (foreign dividends) shall not apply to so much of the proceeds of redemption of a deep discount security as represents income chargeable to tax under Case III or, as may be, Case IV of Schedule D.

Subject to sub-paragraph (2) and paragraph 8 below, there is a disposal of a deep discount security for the purposes of this Schedule if there would be such a disposal for the purposes of the Capital Gains Tax Act 1979. Notwithstanding anything in section 49(1)(b) of the Act of 1979 (no deemed disposal on death), where the assets of which a deceased person was competent to dispose include any deep discount security that security shall, for the purposes of this Schedule, be deemed to have been disposed of by the deceased immediately before his death.

In computing the corporation tax chargeable for any accounting period of a company which has issued any deep discount security, the income element in respect of that security for any income period ending in or with that accounting period shall be allowed as a deduction against the total profits of the company for the accounting period as reduced by any relief other than group relief. The income element for any income period ending in or with an accounting period of a company which has issued a deep discount security shall be treated for the purposes of the Corporation Tax Acts, other than those of section 248(1) of the Taxes Act (which makes provision, in relation to charges, similar to that made by sub-paragraph (1) above) as a charge on income paid by the company in the accounting period. No income element in respect of any deep discount security shall be so allowed or treated unless— The conditions are that— Where, on redemption of any deep discount security any part of the amount payable on redemption is, by virtue of section 233(2)(d) of the Taxes Act, a distribution of the company for the purposes of the Corporation Tax Acts, sub-paragraphs (1) and (2) above shall not apply to any income element in respect of that security. Without prejudice to its application apart from this paragraph section 38 of the Finance Act 1980 (incidental costs of obtaining loan finance to be deductible in computing profits or gains to be charged under Case I or Case II of Schedule D and to be treated for certain purposes as expenses of management) shall apply in relation to any qualifying security as it applies in relation to loan stock the interest on which is deductible as mentioned in subsection (2) of that section. In sub-paragraph (6) above, " qualifying security " means any deep discount security in respect of which the income elements are deductible under sub-paragraph (1) above in computing the total profits of the company by which the incidental costs in question are incurred. Sub-paragraphs (6) and (7) above shall have effect in relation to expenditure incurred after 13th March 1984. Relief shall not be given under any provision of the Tax Acts in respect of any income element if (at any time) a scheme has been effected or arrangements have been made such that the sole or main benefit that might be expected to accrue to the company from the issue of the security in question is the obtaining of a reduction in tax liability by means of that relief. Subsections (2) and (3) of section 38 of the Finance Act 1976 (restriction of relief for payment of interest) shall apply in relation to sub-paragraph (9) above as they apply in relation to subsection (1) of that section.

Section 15 of the Oil Taxation Act 1975 (oil extraction activities etc. ; charges on income) shall apply in relation to income elements in respect of deep discount securities and paragraph 3 above as it applies in relation to interest and section 248 of the Taxes Act (allowance of charges on income). In the application of section 15 to any deep discount security, subsection (2)(b) shall have effect as if the references to the rate at which interest was payable were references to the aggregate of the rate of interest payable and the amount of any income element in respect of the security for the period in question.

Where a deep discount security issued by a company is at any time beneficially owned by another company which is— sub-paragraphs (1) and (2) of paragraph 3 of this Schedule shall apply to any linked income element with the addition, after the words " the accounting period ", of the words " in which the security is redeemed ". In this paragraph " linked income element" means the income element in respect of the security in question for any income period in which the security is at any time beneficially owned by the other company. For the purposes of this paragraph, two companies shall be deemed to be members of a group of companies if one is a 51 per cent subsidiary of the other or both are 51 per cent, subsidiaries of a third company.

Where a deep discount security issued by a close company is at any time beneficially owned by— sub-paragraphs (1) and (2) of paragraph 3 of this Schedule shall apply to any linked income element with the addition, after the words " the accounting period ", of the words " in which the security is redeemed ". In sub-paragraph (1) above " linked income element" means the income element in respect of the security in question for any income period in which the security is at any time beneficially owned by a person mentioned in that sub-paragraph. Any amount which a close company is allowed, by virtue of paragraph 3(1) of this Schedule, to deduct from its total profits for any accounting period shall be treated for the purposes of paragraph 3A of Schedule 16 to the Finance Act 1972 (apportionment amongst participators of interest paid by close company as if it were income of the company) as if it were interest paid by the company in that period. In this paragraph— In determining whether a person who carries on a business of banking is a participator in a company for the purposes of this paragraph, there shall be disregarded any securities of the company acquired by him in the ordinary course of his business.

Where any deep discount security is redeemed before the redemption date by the company which issued it, the preceding paragraphs shall have effect subject to the provisions of this paragraph. The accrued income attributable to the period between the acquisition of the security by the person who, immediately before its redemption, was the beneficial owner of the security and its redemption shall be the amount paid to him on redemption of the security less the issue price of the security or, in a case where he did not acquire it on its issue, less the aggregate of— The deduction allowed under paragraph 3(1) above in relation to the accounting period in which the deep discount security is redeemed shall be the amount paid by the company on redemption less the aggregate of— Where paragraph 5 or 6 above has applied to the deep discount security at any time, the amount mentioned in sub-paragraph (3)(b) above shall not include any linked income element (within the meaning of that paragraph). Where the aggregate mentioned in sub-paragraph (3) above exceeds the amount paid by the company on redemption of the security, the amount of the excess or, if it is less, the amount mentioned in paragraph (b) of that sub-paragraph shall be treated as income of the company— Where a resolution is passed, an order made or any other act takes place for the winding up of a company which has issued a deep discount security before the security is redeemed, this paragraph shall have effect in relation to any payment made in respect of the security in the course of the winding up as if the payment were made on redemption.

This paragraph applies where— Where this paragraph applies— Where a person would (but for this sub-paragraph) be treated by sub-paragraph (2)(a) above as having, for tie purposes of paragraph 1 of this Schedule, disposed of deep discount securities which are converted into, or exchanged for, other deep discount securities—

Where a disposal of a deep discount security is to be treated for the purposes of capital gains tax as one on which neither a gain nor a loss accrues to the person making the disposal, the consideration for which the person acquiring the security would, apart from this paragraph, be treated for the purposes of capital gains tax as having acquired the security shall be increased by the amount mentioned in paragraph 1(1)(a) of this Schedule.

Where any deep discount security is disposed of and acquired under a contract, the time at which the disposal and acquisition is made is the time at which the contract is made (and not, if different, the time at which the security is transferred). If the contract is conditional (and in particular if it is conditional on the exercise of an option) the time at which the disposal and acquisition is made is the time when the condition is satisfied.

The rules contained in sections 88 and 89 of the Finance Act 1982 (identification, for the purposes of capital gains tax, of securities disposed of) shall apply for the purposes of this Schedule as they apply for the purposes of capital gains tax. In paragraph 1(2) of Schedule 6 to the Finance Act 1983 (exclusion of certain securities from provisions relating to election for pooling for purposes of capital gains tax), there shall be added, after paragraph (a)—; nor.

Section 360(2) of the Taxes Act (exemption for charities from tax on chargeable gains) shall apply in relation to tax chargeable by virtue of paragraph 1 above as it applies in relation to tax on chargeable gains.

In section 254 of the Taxes Act (1osses and charges etc. for which claim to set-off against surplus of franked investment income may be made), the words " or paragraph 3 of Schedule 9 to the Finance Act 1984 " shall be inserted—

In Schedule 10 to the Finance Act 1975 (capital transfer tax: valuation) in paragraph 9 (value transferred on death) at the end of sub-paragraph (1) there shall be added the words and

On the application of a body corporate (in this Schedule referred to as " the grantor ") which has established a share option scheme, the Board shall approve the scheme if they are satisfied that it fulfils the requirements of this Schedule; but shall not approve it if it appears to them that there are features of the scheme 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. 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. Where the provisions of a scheme are approved in pursuance of an application made under this paragraph before 1st January 1985, section 38 of this Act shall apply in relation to any right obtained before 1st July 1985 as if the scheme containing those provisions had always been approved.

If, at any time after the Board have approved a scheme, any of the requirements of this Schedule cease to be satisfied or the grantor fails to provide information requested by the Board under paragraph 14 below, the Board may withdraw the approval with effect from that time or such later time as the Board may specify. 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 the grantor is aggrieved by— it may, by notice in writing given to the Board within thirty 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.

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— Notwithstanding sub-paragraph (1)(a) above, the scheme may provide that a person may exercise rights obtained under it despite having ceased to be a full-time director or qualifying employee. In determining whether a company is a close company for the purposes of sub-paragraph (1) above, section 282(1)(a) of the Taxes Act (exclusion of companies not resident in United Kingdom) and section 283 of that Act (exclusion of certain companies with quoted shares) shall be disregarded. In determining for the purposes of this paragraph whether a person has or has had a material interest in a company, subsection (6) of section 285 of the Taxes Act (interest paid to directors and directors' associates) and paragraph (ii) of the proviso to section 303 (3) of that Act (meaning of " associate ") shall have effect with the substitution for the references in those provisions to 5 per cent, of references to 10 per cent.

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 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 the appropriate limit. The appropriate limit is the greater of— Where there were no relevant emoluments for the preceding year of assessment, sub-paragraph (2) above shall apply with the following paragraph substituted for paragraph (b)—. 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 13 below, such earlier time or times as may be provided in the agreement. For the purposes of sub-paragraph (2) above the relevant emoluments are such of the emoluments of the office or employment by virtue of which the person in question is eligible to participate in the scheme as are liable to be paid under deduction of tax pursuant to section 204 of the Taxes Act (pay-as-you-earn), after deducting from them amounts included by virtue of Chapter II of Part III of the Finance Act 1976.

The scheme must provide for directors and employees to obtain rights to acquire shares (in this Schedule referred to as "scheme shares") which satisfy the requirements of paragraphs 7 to 11 below.

Scheme shares must form part of the ordinary share capital of—

Scheme shares must be—

Scheme shares must be—

In determining for the purposes of paragraph 9(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) above 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 April 1981.

Except where scheme shares are in a company whose ordinary share capital consists of shares of one class only, the majority of the issued shares of the same class must be held by persons other than—

The scheme must not permit any person obtaining rights under it to transfer any of them but may provide that if such a person dies before exercising them, they may be exercised after, but not later than one year after, the date of his death. Where the scheme contains the provision permitted by sub-paragraph (1) above and any rights are exercised— subsection (3) of section 38 of this Act shall apply with the omission of the reference to the conditions mentioned in subsection (4).

The price at which scheme shares may be acquired by the exercise of a right obtained under the scheme 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 tunes as may be provided in the agreement, but the scheme may provide for such variation of the price so stated as may be necessary to take account of any variation in the share capital of which the scheme shares form part.

The Board may by notice in writing require any person to furnish them, within such time as the Board may direct (not being less than thirty days), with such information as the Board think necessary for the performance of their functions under this Schedule, and as the person to whom the notice is addressed has or can reasonably obtain, including in particular information—

In this Schedule— Section 303(3) of the Taxes Act (meaning of "associate") shall have effect in a case where the scheme is a group scheme, with the substitution of a reference to all the participating companies for the first reference to the company in paragraph (ii) of the proviso to that subsection. Section 533 of the Taxes Act (connected persons) shall apply for the purposes of this Schedule. For the purposes of this Schedule 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.

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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.

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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 by virtue of section 99 or section 100 of the Taxes Act (securities held by non-residents), 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— it shall be assumed, for the purpose of any of the following provisions of this Schedule which refer to the first accounting period in respect of which a direction is given under that section, that such a direction has been given for that period (but not for 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 branch or agency 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 in respect of which a direction is given under section 82(1) of this Act and that United Kingdom residence shall be assumed to continue throughout subsequent accounting periods of the company (whether or not a direction is given 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 If, by notice in writing given to the Board at any time not later than the expiry of the time for the making of an appeal under section 88 of this Act 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 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 subsection (3) of section 82 of this Act, more than half of the 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.

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.

In relation to section 256 of the Taxes Act (group income) it shall be assumed— References in sub-paragraph (1) above to dividends or payments received by the 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.

The company shall be assumed not to be a subsidiary to which the benefit of any advance corporation tax may be surrendered under section 92 of the Finance Act 1972.

Without prejudice to the operation of section 252 of the Taxes Act (company reconstructions without change of ownership) in a case where the company is the predecessor, within the meaning of that section, and a company resident in the United Kingdom is the successor, within the meaning of that section, 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 section 252 of the Taxes Act and, accordingly, except in so far as the company is actually within that charge (by carrying on the trade through a branch or agency in the United Kingdom), it shall be assumed that the company can never be the successor, within the meaning of that section, to another company (whether resident in the United Kingdom or not).

Subject to sub-paragraph (2) below, 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-direction period ". This paragraph does not apply in any case where a declaration is made under paragraph 11(3) below specifying an accounting period of the company which begins before, or is the same as, the first pre-direction period in which the company incurred a loss as mentioned in sub-paragraph (1) above. 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-direction 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-direction period was the first accounting period in respect of which a direction was given under section 82(1) of this Act. A claim under sub-paragraph (3) above shall be made by notice in writing given to the Board within sixty days of the date of the notice under subsection (1) or subsection (3) of section 88 of this Act relating to the starting period or within such longer period as the Board may in any particular case allow. For the purposes of a claim under sub-paragraph (3) above, it shall be assumed that Chapter VI of Part II of this Act was in force before the beginning of the first of the pre-direction periods. In determining for the purposes of this paragraph which accounting period of the company is the starting period, no account shall be taken of the effect of any declaration under paragraph 11(3) below.

Subject to paragraphs 11 and 12 below, if, in an accounting period falling before the beginning of the first accounting period in respect of which a direction is given under section 82(1) of this Act, the company incurred any capital expenditure on the provision of machinery or plant for the purposes of its trade, that machinery or plant shall be assumed, for the purposes of section 44 of the Finance Act 1971 (writing-down allowances and balancing adjustments), not to have been brought into use for the purposes of that trade until the beginning of that first accounting period, and paragraph 7 of Schedule 8 to that Act (expenditure treated as equivalent to market value at the time the machinery or plant is brought into use) shall apply accordingly. This paragraph shall be construed as one with Chapter I of Part III of the Finance Act 1971.

This paragraph applies in any case where it appears to the Board that the reason why no direction was given under section 82(1) of this Act in respect of an accounting period which precedes the starting period was that the effect of any allowance which would be assumed for that preceding period by virtue of this Schedule would be such that— In this paragraph " the starting period" means the first accounting period in respect of which a direction is given under section 82(1) of this Act and, in a case where a claim is made under sub-paragraph (3) of paragraph 9 above, no account shall be taken of the effect of that sub-paragraph in determining which accounting period is the starting period for the purposes of this paragraph. If, in a case where this paragraph applies, the Board so declare by notice in writing given to every company to which, in accordance with section 88(1) of this Act, notice of the making of the direction relating to the starting period is required to be given, the chargeable profits of that period and every subsequent accounting period and the corresponding United Kingdom tax for every subsequent accounting period shall be determined (in accordance with the provisions of this Schedule other than this paragraph) on the assumption that the accounting period specified in the declaration was the first accounting period in respect of which a direction was given and, accordingly, as if allowances had been assumed in respect of that accounting period and any subsequent accounting period which precedes the starting period. Nothing in sub-paragraph (3) above affects the operation of paragraph 9(3) above in a case where the accounting period specified in a claim under the said paragraph 9(3) begins before the period specified in a declaration under sub-paragraph (3) above. Subject to sub-paragraph (6) below, the Board shall not make a declaration under sub-paragraph (3) above with respect to an accounting period which precedes the starting period unless the facts are such that— a direction could have been given in respect of that period under section 82(1) of this Act. In its application to a company falling within section 84(3) of this Act, sub-paragraph (5) above shall have effect with the omission of paragraph (a). In this paragraph "allowance" means an allowance under Chapter I of Part I of the Capital Allowances Act 1968 or Chapter I of Part III of the Finance Act 1971.

Notwithstanding anything in the preceding provisions of this Schedule, if it appears that the transaction by which an asset was acquired by the company had as its sole or main purpose the reduction of the amount of the company's chargeable profits or, as the case may be, corresponding United Kingdom tax for any accounting period (by virtue of the assumption of a relevant allowance in respect of that asset), it shall be assumed that no relevant allowance is available to the company in respect of expenditure incurred on the acquisition of that asset. In sub-paragraph (1) above " relevant allowance " means—

For the purposes of the application of section 418 of the Taxes Act (relief for unremittable income) to the company's income it shall be assumed—

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 or, as the case may be, of the excess of it referred to in paragraph (c) above as is specified in the claim shall be set off against the company's liability to tax under section 82(4)(a) of this Act in respect of the chargeable profits apportioned to it. In this paragraph— In this paragraph " relevant allowance " means— In any case where, for the appropriate accounting period, an amount would have been available to the company by way of group relief if a claim had been made under section 264 of the Taxes Act, such a claim may be made for the purposes of this paragraph at any time before the end of the accounting period following that in which the assessment under section 82(4)(a) of this Act is made, notwithstanding that the period of two years referred to in section 264(1)(c) of the Taxes Act has expired. 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. In its application to a claim under this paragraph, section 43 of the Taxes Management Act 1970 (time limit for making claims) shall have effect as if, in subsection (2),—

In any case where— then, on the making of a claim, so much of that advance corporation tax as is specified in the claim and does not exceed the relevant maximum shall be set against the company's liability to tax under section 82(4)(a) of this Act in respect of the chargeable profits apportioned to it, to the extent that that liability has not or could not have been relieved by virtue of paragraph 1 above. So much of any advance corporation tax as, by virtue of this paragraph, is set against the company's liability to tax under section 82(4)(a) of this Act in respect of chargeable profits shall be regarded for the purposes of the Tax Acts as not being surplus advance corporation tax within the meaning of section 85 of the Finance Act 1972. In this paragraph " the appropriate accounting period " has the same meaning as in paragraph 1 above and " the relevant maximum ", in relation to the liability to tax referred to in sub-paragraph (1) above, is the amount of advance corporation tax that would have been payable (apart from section 89 of the Finance Act 1972) in respect of a distribution made at the end of the appropriate accounting period of an amount which, together with the advance corporation tax in respect of it, is equal to—

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 section, in the computation under Chapter II of Part II of the Capital Gains Tax Act 1979 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 means that of which the numerator is the average market value in the direction period of the shares disposed of and the denominator 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 assessed and recoverable 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)(c) above are— A claim for relief under this paragraph shall be made before the expiry of the period of three months beginning— 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 assessed on and recoverable from companies resident in the United Kingdom in accordance with section 82(4)(a) of this Act in respect of the chargeable profits referred to in sub-paragraph (1)(b) above shall be treated for the purposes of Part XVIII of the Taxes Act (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 504 or section 505 of the Taxes Act (1imit on credit) 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 XVIII of that Act in respect of any of the gross attributed tax. Notwithstanding anything in paragraph 4(2) above, in section 503(2)(b) of the Taxes Act (income from dividends treated as increased by underlying tax) 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 82(4)(a) of this Act,— 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 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—

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In section 25(10) of the 1975 Act, after the word " section" there shall be inserted the words " (except subsection (8)) ".

In section 26(2) of the 1975 Act—

In section 45(1) of the 1975 Act, after the words " as domiciled in the United Kingdom " there shall be inserted the words " (and not elsewhere) " ; and section 51(3) of that Act shall cease to have effect.

In section 51(1) of the 1975 Act—

In paragraph 6(6) of Schedule 4 to the 1975 Act, for the words following " including references " there shall be substituted the words "to— or to the amounts on which tax is then chargeable."

In paragraph 14(2) of Schedule 4 to the 1975 Act, for the words "value Of an interest" there shall be substituted the words " net value of an interest ".

In paragraph 19(4) of Schedule 4 to the 1975 Act, the words " to any person " and the words " Of that person " shall cease to have effect.

Paragraph 44 of Schedule 4 to the 1975 Act shall cease to have effect.

In paragraph 1(8) of Schedule 5 to the 1975 Act, for the words "and section 25(3)(d) of this Act" there shall be substituted the words " , sections 22(2) and (3), 24(3) and 25(3)(d) of this Act and sections 93 and 94 ".

In paragraph 4(7) of Schedule 5 to the 1975 Act, after the words " surviving spouse " there shall be inserted the words " (or surviving former spouse) ".

In paragraph 17(3)(b) of Schedule 5 to the 1975 Act, for the words " this Schedule and of Chapter II of Part IV of the Finance Act 1982" there shall be substituted the words " this Part of this Act (except subsection (3) of section 23 and section 20(4) so far as relating to that subsection) ".

In paragraph 22(1) of Schedule 5 to the 1975 Act, for the words " this Schedule " there shall be substituted the words " this Part of this Act ".

Paragraph 24 of Schedule 5 to the 1975 Act shall be amended as follows. In sub-paragraph (1), for paragraph (a) there shall be substituted the following paragraphs—. In sub-paragraph (5), for the words "this Schedule and of Chapter II of Part IV of the Finance Act 1982" there shall be substituted the words " this Part of this Act (except subsection (3) of section 23 and section 20(4) so far as relating to that subsection) ".

In paragraph 4(2)(b) of Schedule 7 to the 1975 Act, for the words " which is, or forms part of, a colony, protectorate, protected state or United Kingdom trust territory " there shall be substituted the words " which, at the time when the fund was established, was, or formed part of, a colony (within the meaning of Schedule 1 to the Interpretation Act 1978), protectorate, protected state or United Kingdom trust territory ".

In paragraph 1(1) of Schedule 10 to the 1975 Act, for the words "a transferor's estate" there shall be substituted the words " a person's estate ".

In paragraph 5(1)(b) of Schedule 10 to the 1975 Act, for the word " by " there shall be substituted the word " for ".

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In paragraph 18(2) of Schedule 6 to the Development Land Tax Act 1976—

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In section 105 of the Finance Act 1976, subsections (3) and (4) shall cease to have effect.

In section 123(2) of the Finance Act 1976, after the words " shall carry interest" there shall be inserted the words " (which shall not constitute income for any tax purposes) ".

In Schedule 15 to the Finance Act 1980—

In section 94(6) of the Finance Act 1982, the Words from " and, in " to the end shall cease to have effect.

In sections 120(1), 121(1) and (2) and 123 of the Finance Act 1982, after the words " for the purposes of this Chapter " there shall be inserted the words " , of sections 93 and 94 above and of sections 81, 82 and 82A of the Finance Act 1976 ".

In sections 122(1) and 124 of the Finance Act 1982, after the Words " for the purposes of this Chapter " there shall be inserted the words " and of sections 93 and 94 above ".

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