Office of Public Sector Information
PART III continued CHAPTER I continued
(5) In sections 44(5), 46(8) and 48(7) of that Act (which also contain provisions relating to the temporary first-year allowances under section 22(3B) and (3C) of that Act), for the words “or (3C)”, in each place where they occur, there shall be substituted “, (3C), (3CA) or (3D)”.
(6) In section 39(2)(a) of that Act (definition of qualifying purpose), for “subsections (2) to (3C)” there shall be substituted “subsections (2) to (3D)”.
(7) In section 43(5) of that Act (provisions relating to joint lessees in cases involving new expenditure), after “(3C)” there shall be inserted “, (3CA) or (3D)”.
(8) In section 76 of that Act (which modifies the effect of section 75 in cases where machinery or plant has not been used before a sale)—
(a) subsection (3) shall cease to have effect; and
(b) in subsection (4), for “, (2B) and (3)” there shall be substituted “and (2B)”.
(9) Subsections (1) and (4) to (8) above have effect in relation to every chargeable period ending on or after 12th May 1998.
(10) Subject to subsection (11) below, subsections (2) and (3) above have effect in relation to expenditure incurred on or after 12th May 1998.
(11) Subsections (2) and (3) above do not have effect—
(a) for the purpose of determining whether any expenditure is expenditure to which section 22 of that Act applies by virtue of subsection (3C) of that section; or
(b) for the purpose of determining whether any expenditure incurred in pursuance of a contract entered into before 12th May 1998 is expenditure to which that Act applies by virtue of subsection (3D) of that section.
Schedule 14 to this Act (which makes provision in relation to the taxation of life policies etc under Chapter II of Part XIII of the Taxes Act 1988) shall have effect.
After section 552 of the Taxes Act 1988 (duty of insurers to provide certain information) there shall be inserted—
(1) 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.
(2) 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—
(a) policies of life insurance;
(b) contracts for life annuities; or
(c) capital redemption policies.
(3) This section applies to an overseas insurer—
(a) if the condition in subsection (4) below is satisfied on the designated day; or
(b) where that condition is not satisfied on that day, if it has subsequently become satisfied.
(4) The condition mentioned in subsection (3) above is that—
(a) 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
(b) the total amount or value of the gross premiums paid under those relevant insurances is £1 million or more.
(5) In this section “relevant insurance” means any policy of life insurance, contract for a life annuity or capital redemption policy in relation to which this Chapter has effect and in the case of which—
(a) the holder is resident in the United Kingdom;
(b) the obligations of the insurer are obligations of a person not resident in the United Kingdom; and
(c) those obligations are not attributable to a branch or agency of that person’s in the United Kingdom.
(6) 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.
(7) A person shall not be a tax representative unless—
(a) if he is an individual, he is resident in the United Kingdom and has a fixed place of residence there, or
(b) if he is not an individual, he has a business establishment in the United Kingdom,
and, in either case, he satisfies such other requirements (if any) as are prescribed in regulations made for the purpose by the Board.
(8) A person shall not be an overseas insurer’s tax representative unless—
(a) his nomination by the overseas insurer has been approved by the Board; or
(b) he has been appointed by the Board.
(9) 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—
(a) the making of a nomination by an overseas insurer of a person to be his tax representative;
(b) the information which is to be provided in connection with such a nomination;
(c) the form in which such a nomination is to be made;
(d) the powers and duties of the Board in relation to such a nomination;
(e) the procedure for approving, or refusing to approve, such a nomination, and any time limits applicable to doing so;
(f) the termination, by the overseas insurer or the Board, of a person’s appointment as a tax representative;
(g) 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);
(h) 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;
(j) 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;
(k) appeals to the Special Commissioners against decisions of the Board under this section or regulations under it.
(10) 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.
(11) Section 839 (connected persons) applies for the purposes of this section.
(12) In this section—
“the designated day” means such day as the Board may specify for the purpose in regulations;
“tax representative” means a tax representative under this section.
(1) 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.
(2) For the purposes of this section “the relevant duties” are—
(a) the duties imposed by section 552,
(b) any duties imposed by regulations made under subsection (4A)(a) of that section, and
(c) any duties imposed by regulations made under subsection (4A)(b) of that section by virtue of subsection (4B) of that section,
so far as relating to relevant insurances under which the overseas insurer in question has any obligations.
(3) An overseas insurer’s tax representative shall be personally liable—
(a) in respect of any failure to secure the discharge of the relevant duties, and
(b) in respect of anything done for purposes connected with acting on the overseas insurer’s behalf,
as if the relevant duties were imposed jointly and severally on the tax representative and the overseas insurer.
(4) 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.
(5) 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.
(6) Expressions used in this section and in section 552A have the same meaning in this section as they have in that section.”
(1) After section 553 of the Taxes Act 1988 (non-resident policies and off-shore capital redemption policies) there shall be inserted—
(1) A policy of life insurance which, immediately before the happening of a chargeable event or a relevant event—
(a) is an overseas policy, but
(b) is not a new non-resident policy,
shall, in relation to that event, be treated for the purposes of this Chapter as if it were a new non-resident policy.
(2) A policy of life insurance which, immediately before the happening of a relevant event—
(a) is an overseas policy, and
(b) is a new non-resident policy,
shall, in relation to that event, be taken for the purposes of this Chapter not to be a qualifying policy.
(3) Where a chargeable event happens in relation to a new non-resident policy, section 553(7) shall not have effect in relation to the gain treated as arising in connection with the policy on the happening of the chargeable event.
(4) In this section—
“new non-resident policy” means a new non-resident policy as defined in paragraph 24 of Schedule 15 (and in subsections (2) and (3) above includes a policy treated as such by virtue of subsection (1) above);
“overseas policy” means a policy of life insurance which, by virtue of section 431D(1)(a), forms part of the overseas life assurance business of an insurance company or friendly society;
“relevant event”, in relation to a policy of life insurance, means an event which would be a chargeable event in relation to that policy if the policy were assumed not to be a qualifying policy.
(5) This section applies in relation to chargeable events and relevant events happening on or after 17th March 1998 in relation to policies of life insurance issued in respect of insurances made on or after that date.
(6) A policy of life insurance issued in respect of an insurance made before 17th March 1998 shall be treated for the purposes of this section as issued in respect of one made on or after that date if it is varied on or after that date so as to increase the benefits secured or to extend the term of the insurance; and any exercise of rights conferred by the policy shall be regarded for this purpose as a variation.”
(2) After section 553A of the Taxes Act 1988 there shall be inserted—
(1) A capital redemption policy which immediately before the happening of a chargeable event—
(a) is an overseas policy, but
(b) is not a new offshore capital redemption policy,
shall, in relation to that event, be treated for the purposes of this Chapter as if it were a new offshore capital redemption policy.
(2) In this section—
“new offshore capital redemption policy” has the same meaning as in section 553;
“overseas policy” means a capital redemption policy which, by virtue of section 431D(1)(a), forms part of the overseas life assurance business of an insurance company.
(3) This section applies in relation to capital redemption policies where the contract is made after the coming into force of the first regulations under section 458A in consequence of which capital redemption business forms part of the overseas life assurance business of an insurance company.”
In Chapter II of Part XIII of the Taxes Act 1988 (life policies, life annuities and capital redemption policies) after section 553B (which is inserted by section 88 above) there shall be inserted—
(1) The Treasury may by regulations make provision imposing a yearly charge to tax in relation to personal portfolio bonds (“yearly” being construed for this purpose by reference to years as defined in section 546(4)).
(2) Subject to any provision to the contrary made by the regulations, any charge to tax under this section is in addition to any other charge to tax under this Chapter.
(3) The regulations may make provision with respect to or in connection with all or any of the following—
(a) the method by which the charge to tax, or any relief, allowance or deduction against or in respect of the tax, is to be imposed or given effect;
(b) the person who is to be liable for the tax;
(c) the periods for or in respect of which the tax is to be charged;
(d) the amounts in respect of which, or by reference to which, the tax is to be charged;
(e) the period or periods by reference to which those amounts are to be determined;
(f) the rate or rates at which the tax is to be charged;
(g) any reliefs, allowances or deductions which are to be given or made against or in respect of the tax;
(h) the administration of the tax.
(4) The provision that may be made by the regulations includes provision for imposing the charge to tax by a method which involves—
(a) treating an event described in the regulations as if it were a chargeable event;
(b) treating an amount determined in accordance with the regulations as if it were a gain treated as arising on the happening of a chargeable event;
(c) deeming an amount determined in accordance with the regulations to be income of a person or body of persons (or to be part of the aggregate income of the estate of a deceased person); or
(d) applying section 740, with or without modification, in relation to an amount determined in accordance with the regulations.
(5) The provision that may be made in the regulations includes provision for the amount or amounts in respect of which, or by reference to which, the tax is to be charged for periods beginning after the coming into force of the regulations to be determined in whole or in part by reference to periods beginning or ending, premiums paid, or events happening, before, on or after the day on which the Finance Act 1998 is passed.
(6) The regulations may make provision excluding, or applying (with or without modification), other provisions of this Chapter in relation to policies or contracts which are also personal portfolio bonds.
(7) In this section, “personal portfolio bond” means a policy of life insurance, contract for a life annuity or capital redemption policy under whose terms—
(a) some or all of the benefits are determined by reference to the value of, or the income from, property of any description (whether or not specified in the policy or contract) or fluctuations in, or in an index of, the value of property of any description (whether or not so specified); and
(b) some or all of the property, or such an index, may be selected by, or by a person acting on behalf of, the holder of the policy or contract or a person connected with him (or the holder of the policy or contract and a person connected with him);
but a policy or contract is not a personal portfolio bond if the only property or index which may be so selected is of a description prescribed for this purpose in the regulations.
(8) The regulations may prescribe additional conditions which must be satisfied if a policy or contract is to be a personal portfolio bond.
(9) The regulations—
(a) may make different provision for different cases, different circumstances or different periods; and
(b) may make incidental, consequential, supplemental or transitional provision.
(10) In this section, “holder”, in the case of a policy or contract held by two or more persons, includes a reference to any of those persons.
(11) Section 839 (connected persons) applies for the purposes of this section.”
(1) The repeal by section 30(4) of the [1997 c. 58.] Finance (No. 2) Act 1997 of section 231(2) of the Taxes Act 1988 (payment of tax credit to a company resident in the UK) shall not have effect in relation to any distribution made to a friendly society before 6th April 2004 which is—
(a) a distribution to a friendly society all of whose profits are exempt from corporation tax by virtue of section 460(1) of the Taxes Act 1988 (life or endowment business of friendly society); or
(b) a distribution not falling within paragraph (a) above in relation to which exemption is given under section 460(1) of that Act.
(2) In relation to any distribution falling within paragraph (a) or (b) of subsection (1) above—
(a) paragraph 3 of Schedule 4 to the [1997 c. 58.] Finance (No. 2) Act 1997 (which, from 6th April 1999, repeals certain provisions about claims for tax credits for accounting periods to which self-assessment applies) shall have effect as if the reference in sub-paragraph (2) of that paragraph to 6th April 1999 were a reference to 6th April 2004; and
(b) paragraph 2 of that Schedule (which repeals certain provisions about claims for tax credits for earlier periods) shall have no effect.
(3) In the case of any distribution falling within paragraph (b) of subsection (1) above, paragraph 12 of Schedule 3 to the [1997 c. 58.] Finance (No. 2) Act 1997 (which defers the coming into force of paragraphs 10 and 11 in relation to friendly societies) shall have effect as if the reference in sub-paragraph (2) of that paragraph to 6th April 1999 were a reference to 6th April 2004.
(4) Schedule 8 to the [1997 c. 58.] Finance (No. 2) Act 1997 (repeals), so far as it relates to any repeal referred to in the preceding provisions of this section, shall have effect subject to those provisions.
(1) In Schedule 19AB to the Taxes Act 1988 (provisional repayments with respect to pension business) in paragraph 3 (recovery of excessive repayments) after sub-paragraph (1) there shall be inserted—
“(1ZA) 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.”
(2) The amendment made by subsection (1) above has effect in relation to accounting periods beginning at any time after 1st October 1992 and ending before the day appointed under section 199 of the [1994 c. 9.] Finance Act 1994.
Schedule 15 to this Act (which makes provision in relation to cases where a scheme has been approved for the purposes of Chapter I of Part XIV of the Taxes Act 1988 or an approval for those purposes has ceased to have effect) shall have effect.
(1) In section 596A(4) of the Taxes Act 1988 (charge to tax on benefits under non-approved schemes: amount charged to tax), for paragraph (b) substitute—
“(b) in the case of a non-cash benefit, whichever is the greater of—
(i) the amount which would be chargeable to tax under section 19(1) if the benefit were taxable as an emolument of the employment under Case I of Schedule E, or
(ii) the cash equivalent of the benefit determined in accordance with section 596B.”.
(2) In section 596B(9) of that Act (supplementary provisions: person by whom expenditure incurred on improvement of living accommodation), for paragraph (b) substitute—
“(b) the employer or former employer; or
(c) any person, other than the recipient, who is connected with a person falling within paragraph (a) or (b) above.”.
(3) After section 596B of that Act insert—
(1) This section applies where a person is chargeable to tax under section 596A in any year of assessment on an amount which consists of or includes an amount representing the cash equivalent of the benefit of a loan determined (by virtue of section 596B(1)(a)) in accordance with Part II of Schedule 7.
(2) Where this section applies, the person chargeable is treated as having paid interest on the loan of the same amount as the cash equivalent so determined.
(3) The interest is treated as paid for all the purposes of the Tax Acts (other than those relating to the charge under section 596A) but not so as to make it—
(a) income of the person making the loan, or
(b) relevant loan interest to which section 369 applies (mortgage interest payable under deduction of tax).
(4) The interest is treated as accruing during and paid at the end of the year of assessment or, if different, the period in that year during which the loan is outstanding.”.
(4) This section applies to benefits received in the year 1998-99 and subsequent years of assessment.
(1) After section 638 of the Taxes Act 1988 there shall be inserted the following section—
(1) The Board—
(a) may by regulations restrict their discretion to approve a personal pension scheme; and
(b) shall not approve any such scheme if to do so would be inconsistent with any regulations under this section.
(2) The restrictions that may be imposed by regulations under this section may be imposed by reference to any one or more of the following, that is to say—
(a) the benefits for which the scheme provides;
(b) the investments held for the purposes of the scheme;
(c) the manner in which the scheme is administered;
(d) any other circumstances whatever.
(3) The following provisions of this section apply where—
(a) any regulations are made under this section imposing a restriction (“the new restriction”) on the Board’s discretion to approve a personal pension scheme;
(b) the new restriction did not exist immediately before the making of the regulations; and
(c) that restriction is one imposed by reference to circumstances other than the benefits for which the scheme provides.
(4) Subject to subsections (5) and (6) below, a personal pension scheme which is an approved scheme immediately before the day on which the regulations imposing the new restriction come into force shall cease to be approved at the end of the period of 36 months beginning with that day if, at the end of that period, the scheme—
(a) contains a provision of a prohibited description, or
(b) does not contain every provision which is a provision of a required description.
(5) The Board may by regulations provide that subsection (4) above is not to apply in the case of the inclusion of such provisions of a prohibited description, or in the case of the omission of such provisions of a required description, as may be specified in the regulations.
(6) For the purposes of subsection (4) above—
(a) a provision contained in a scheme shall not be treated as being of a prohibited description to the extent that it authorises the retention of an investment held immediately before the day of the making of the new regulations; and
(b) so much of any provision contained in a scheme as authorises the retention of an investment held immediately before that day shall be disregarded in determining if any provision of the scheme is of a required description.
(7) In this section—
(a) references to a provision of a prohibited description are references to a provision of a description which, by virtue of the new restriction, is a description of provision which, if contained in a personal pension scheme, would prevent the Board from approving it; and
(b) references to a provision of a required description are references to a provision of a description which, by virtue of the new restriction, is a description of provision which must be contained in a personal pension scheme before the Board may approve it.”
(2) Accordingly, in section 631(2) of that Act (power to approve schemes), for “638” there shall be substituted “638A”.
(1) After section 650 of the Taxes Act 1988 (withdrawal of approval) there shall be inserted the following section—
(1) Where any personal pension arrangements cease to be approved arrangements by virtue of the exercise by the Board of their power under section 650(2), tax shall be charged in accordance with this section.
(2) The tax shall be charged under Case VI of Schedule D at the rate of 40 per cent. on an amount equal to the value (taking that value at the relevant time) of the appropriate part of the assets held at that time for the purposes of the relevant scheme.
(3) In subsection (2) above—
“the appropriate part”, in relation to the value of any assets, is so much of those assets as is properly attributable, in accordance with the provisions of the scheme and any just and reasonable apportionment, to the arrangements in question; and
“the relevant time” means the time immediately before the date from which the Board’s approval is withdrawn.
(4) Subject to subsection (5) below, the person liable for the tax charged under this section shall be the scheme administrator for the relevant scheme.
(5) If, in any case where an amount of tax has been charged under this section and has not been paid—
(a) there is at any time no person who, as the scheme administrator for the relevant scheme, may be assessed to that amount of tax, or is liable to pay it,
(b) the scheme administrator for that scheme cannot for the time being be traced,
(c) there has been such a failure by the scheme administrator for that scheme to meet a liability to pay that amount as the Board consider to be a failure of a serious nature, or
(d) it appears to the Board that a liability of the scheme administrator for that scheme to pay that amount of tax is a liability that he will be, or (were there an assessment) would be, unable to meet out of assets held in accordance with the scheme for the purposes of those arrangements,
the Board shall be entitled to assess the unpaid tax on the person who made the arrangements in question as if the tax charged under this section, to the extent that it is unpaid, were assessable under this section on that person, instead of on the scheme administrator.
(6) An assessment to tax made by virtue of subsection (5)(c) above shall not be out of time if it is made within three years after the date on which the tax which the scheme administrator has failed to pay first became due from him.
(7) For the purposes of this section the value of an asset is, subject to subsection (8) below, its market value, construing “market value” in accordance with section 272 of the 1992 Act.
(8) Where an asset held for the purposes of a scheme is a right or interest in respect of any money lent (directly or indirectly) to any person mentioned in subsection (9) below, the value of the asset shall be treated as being the amount owing (including any unpaid interest) on the money lent.
(9) Those persons are—
(a) the person who (whether or not before the making of the loan) made the arrangements in relation to which the Board’s approval has been withdrawn;
(b) any other person who has at any time (whether or not before the making of the loan) made contributions under those arrangements; and
(c) any person connected, at the time of the making of the loan or subsequently, with a person falling within paragraph (a) or (b) above.
(10) In this section “the relevant scheme”, in relation to any personal pension arrangements, means the scheme in accordance with which those arrangements were made.
(11) Section 839 shall apply for the purposes of this section.”
(2) In section 650 of that Act (withdrawal of approval), the following subsection shall be inserted after subsection (5)—
“(6) The power of the Board under this section to withdraw their approval in relation to any arrangements made under a personal pension scheme shall be exercisable for the purposes of section 650A notwithstanding that the time from which the approval is withdrawn is a time from which, by virtue of section 631(4) or 638A(4), the whole scheme ceases to be an approved scheme.”
(3) After section 239A of the [1992 c. 12.] Taxation of Chargeable Gains Act 1992 there shall be inserted—
Finance Act 1998 (C. 36)