Income and Corporation Taxes Act 1988

7 (1) 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.

(2) For the purposes of this paragraph the relevant time is the time specified—

(a) in the valuation produced or certificate given under paragraph 2 above; or

(b) where a valuation has been produced under paragraph 4 above, in that valuation,

as the time by reference to which the values of the assets and liabilities are determined.

(3) Where a percentage has been so specified—

(a) section 592(2) shall apply only to that percentage of any income derived in the relevant period from the assets held for the purposes of the scheme;

(b) section 592(3) shall apply only to that percentage of any underwriting commissions applied in the relevant period for the purposes of the scheme;

(c) section 56 shall by virtue of subsection (3)(b) of that section not apply only to that percentage of any profits or gains arising to the scheme in the relevant period; and

(d) section 149B(1)(g) of the 1979 Act (capital gains tax exemption) shall apply only to that percentage of any gain accruing on the disposal in the relevant period of any of those assets.

(4) 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).

(5) Section 715(1)(k) shall not apply.

(6) 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.

(7) 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.

(8) 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).

(9) In sub-paragraphs (4) to (8) above expressions which also appear in sections 710 to 728 have the same meanings as in those sections.

(10) 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.