Section 93.
1Schedule 4 to the Taxes Act 1988 (deep discount securities) shall be amended as mentioned in the following provisions of this Schedule.
2(1)Paragraph 1 shall be amended as follows.
(2)The following paragraph shall be inserted after sub-paragraph (1)(d)—
“(dd)“a deep discount security” also means any redeemable security which has been issued by a public body (at whatever time) at a deep discount, other than—
(i)a security such as is mentioned in paragraph (d)(ii) above;
(ii)a security falling within sub-paragraph (5), (6) or (7) below;”.
(3)In sub-paragraph (1)(g) after the words “the company” there shall be inserted the words “or the public body”.
(4)The following shall be inserted at the end of sub-paragraph (2)—
“This sub-paragraph applies only in the case of securities issued by a company.”
(5)The following sub-paragraphs shall be inserted after sub-paragraph (3)—
“(4)For the purposes of this Schedule a public body is any of the following which is not a company—
(a)a government, whether of the United Kingdom or elsewhere;
(b)a public or local authority, whether in the United Kingdom or elsewhere.
(5)A security falls within this sub-paragraph if it is a gilt-edged security and—
(a)it was issued before 14th March 1989, or
(b)it was issued on or after that date but was issued under the same prospectus as any gilt-edged security issued before that date.
(6)A security falls within this sub-paragraph if it is a gilt-edged security and—
(a)it was issued under a prospectus under which no securities were issued before 14th March 1989,
(b)it was issued otherwise than on the occasion of the original issue under the prospectus, and
(c)all the securities issued on the occasion of the original issue under the prospectus are gilt-edged securities which are not deep discount securities.
(7)A security falls within this sub-paragraph if it is not a gilt-edged security and was issued (at whatever time) under the same prospectus as any other security which was issued before the security in question and which is not a deep discount security.
(8)For the purposes of this Schedule “gilt-edged security” has the same meaning as it has for the purposes of the 1979 Act.”
3The following sub-paragraph shall be inserted after paragraph 4(7)—
“(8)In the case of a deep discount security issued by a public body, this paragraph applies where a disposal is made on or after 14th March 1989 (whatever the date of acquisition).”
4In paragraph 11(1) after the words “deep discount security” there shall be inserted the words “issued by a company”.
5The following paragraph shall be inserted after paragraph 11—
“11A. Where any deep discount security issued by a public body is redeemed before the redemption date by the body which issued it, paragraph 4 above shall have effect subject to paragraph 11(2) above (ignoring the words following paragraph (b)).”
6The following sub-paragraph shall be inserted after paragraph 13(2)—
“(3)Every public body which issues deep discount securities on or after 1st August 1989 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.”
7The following shall be inserted after paragraph 14—
15(1)In a case where—
(a)paragraph 4 above would apply (apart from this paragraph) to a disposal of a security, and
(b)immediately before the disposal was made the security was held for the purposes of an exempt approved scheme (within the meaning of Chapter I of Part XIV),
that paragraph shall not apply to the disposal.
(2)Sub-paragraph (1) above shall not apply unless the disposal is made on or after 14th March 1989.
16(1)In a case where—
(a)a security is the subject of a transfer which falls within section 129(3), and
(b)the transfer constitutes a disposal to which (apart from this paragraph) paragraph 4 above would apply,
that paragraph shall not apply to the disposal.
(2)Sub-paragraph (1) above shall not apply unless the disposal is made on or after 14th March 1989.
17(1)Where on the disposal by trustees of a deep discount security an amount is treated as income chargeable to tax by virtue of paragraph 4(1) above, the rate at which it is chargeable shall be a rate equal to the sum of the basic rate and the additional rate for the year of assessment in which the disposal is made.
(2)Where the trustees are trustees of a scheme to which section 469 applies, sub-paragraph (1) above shall not apply if or to the extent that the amount is treated as income in the accounts of the scheme.
(3)Sub-paragraph (1) above shall not apply unless the disposal is made on or after 14th March 1989.
18(1)An underwriting member of Lloyd’s shall be treated for the purposes of this Schedule 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.
(2)Sub-paragraph (1) above applies where a disposal is made on or after 14th March 1989 (whatever the date of acquisition).
(3)Where a security forms part of a premiums trust fund at the end of 31st December of any relevant year, for the purposes of this Schedule the trustees of the fund shall be deemed to dispose of the security at that time; and for this purpose relevant years are 1989 and subsequent years.
(4)Where a security forms part of a premiums trust fund at the beginning of 1st January of any relevant year, for the purposes of this Schedule the trustees of the fund shall be deemed to acquire the security at that time; and for this purpose relevant years are 1990 and subsequent years.
(5)Sub-paragraph (6) below applies where the following state of affairs exists at the beginning of 1st January of any year or the end of 31st December of any year—
(a)securities have been transferred by the trustees of a premiums trust fund in pursuance of an arrangement mentioned in section 129(1) or (2),
(b)the transfer was made to enable another person to fulfil a contract or to make a transfer,
(c)securities have not been transferred in return, and
(d)section 129(3) applies to the transfer made by the trustees.
(6)The securities transferred by the trustees shall be treated for the purposes of sub-paragraphs (3) and (4) above as if they formed part of the premiums trust fund at the beginning of 1st January concerned or the end of 31st December concerned (as the case may be).
(7)Paragraph 7 above shall have effect subject to sub-paragraph (3) above.
(8)Paragraph 7(2) above shall not apply where—
(a)the deceased was an underwriting member of Lloyd’s who died on or after 14th March 1989, and
(b)immediately before his death the security concerned formed 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 deceased’s business or any part of it was carried on, to be kept in connection with the business.
(9)In a case where an amount treated as income chargeable to tax by virtue of paragraph 4(1) above constitutes profits or gains mentioned in section 450(1)—
(a)section 450(1)(b) shall apply; and
(b)paragraph 4(1)(b) above shall not apply.
(10)For the purpose of computing income tax for the year 1987–88 sub-paragraph (9) above shall have effect as if—
(a)the reference to section 450(1) were to paragraph 2 of Schedule 16 to the [1973 c. 51.] Finance Act 1973, and
(b)the reference to section 450(1)(b) were to paragraph 2(b) of that Schedule.
(11)In this paragraph “business” and “premiums trust fund” have the meanings given by section 457.
19(1)In a case where—
(a)securities have been issued by a public body under a prospectus under which no securities were issued before 14th March 1989,
(b)some of the securities issued under the prospectus are gilt-edged securities which are would-be deep discount securities,
(c)some of the securities issued under the prospectus are gilt-edged securities which are not would-be deep discount securities, and
(d)there is a time when the aggregate nominal value of the securities falling within paragraph (b) above (at that time) exceeds the aggregate nominal value of the securities falling within paragraph (c) above (at that time),
sub-paragraph (2) below shall apply in relation to any gilt-edged security which has been or is issued under the prospectus at any time (whether before, at or after the time mentioned in paragraph (d) above).
(2)As regards any event occurring in relation to the security after the time mentioned in sub-paragraph (1)(d) above, paragraphs 4, 7, 8, 11A, 12 and 14 to 18 above shall have effect as if—
(a)the security were a deep discount security,
(b)it had been issued as such (whatever the time it was issued), and
(c)it had been acquired as such (whatever the time it was acquired).
(3)For the purposes of sub-paragraph (1) above a would-be deep discount security is a security which would be a deep discount security apart from paragraph 1(6) above.
(4)For the purposes of sub-paragraph (2) above events, in relation to a security, include anything constituting a disposal for the purposes of the 1979 Act, the death of a person competent to dispose of the security, a disposal mentioned in paragraph 18(3) above, and an acquisition mentioned in paragraph 18(4) above.
20(1)In a case where—
(a)all the securities issued by a public body on the occasion of the original issue under a particular prospectus (whatever the time of the issue) are neither gilt-edged securities nor deep discount securities,
(b)some of the securities issued under the prospectus are not gilt-edged securities but are new would-be deep discount securities, and
(c)there is a time when the aggregate nominal value of the securities falling within paragraph (b) above (at that time) exceeds the aggregate nominal value of the securities which (looking at the state of affairs at that time) have been issued under the prospectus and are neither gilt-edged securities nor new would-be deep discount securities,
sub-paragraph (2) below shall apply in relation to any security which is not a gilt-edged security but which has been or is issued under the prospectus at any time (whether before, at or after the time mentioned in paragraph (c) above).
(2)As regards any event occurring in relation to the security after the time mentioned in sub-paragraph (1)(c) above, paragraphs 4, 7, 8, 11A, 12 and 14 to 18 above shall have effect as if—
(a)the security were a deep discount security,
(b)it had been issued as such (whatever the time it was issued), and
(c)it had been acquired as such (whatever the time it was acquired).
(3)For the purposes of sub-paragraph (1) above a new would-be deep discount security is a security which—
(a)would be a deep discount security apart from paragraph 1(7) above, and
(b)was issued on or after 14th March 1989.
(4)For the purposes of sub-paragraph (2) above events, in relation to a security, include anything constituting a disposal for the purposes of the 1979 Act, the death of a person competent to dispose of the security, a disposal mentioned in paragraph 18(3) above, and an acquisition mentioned in paragraph 18(4) above.”