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Finance Act 1989

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This is the original version (as it was originally enacted).

71Further charges to tax: borrowing

(1)This section applies where—

(a)a chargeable event (within the meaning of section 69 above) occurs in relation to the trustees of an employee share ownership trust,

(b)at the time the event occurs anything is outstanding in respect of the principal of an amount or amounts borrowed at any time by the trustees, and

(c)the chargeable event is one as regards which section 72(2)(b) below applies.

(2)In the following provisions of this section—

(a)“the initial chargeable event” means the event referred to in subsection (1)(a) above, and

(b)“the total outstanding amount” means the total amount outstanding, at the time the initial chargeable event occurs, in respect of the principal of an amount or amounts borrowed at any time by the trustees.

(3)If any of the total outstanding amount is repaid after the initial chargeable event occurs, a further chargeable event shall occur in relation to the trustees at the end of the year of assessment in which the repayment is made.

(4)In such a case—

(a)the trustees shall be treated as receiving, when the further event occurs, annual profits or gains whose amount is equal to the chargeable amount,

(b)the profits or gains shall be chargeable to tax under Case VI of Schedule D for the year of assessment at the end of which the further event occurs, and

(c)the rate at which the tax is chargeable shall be a rate equal to the sum of the basic rate and the additional rate for the year of assessment at the end of which the further event occurs.

(5)Subject to subsection (6) below, for the purposes of subsection (4) above the chargeable amount is an amount equal to the aggregate of the total outstanding amount repaid in the year of assessment.

(6)In a case where section 72(2)(b) below had effect in the case of the initial chargeable event, for the purposes of subsection (4) above the chargeable amount is an amount equal to the smaller of—

(a)the aggregate of the total outstanding amount repaid in the year of assessment, and

(b)an amount found by applying the formula A-B-C.

(7)For the purposes of subsection (6) above—

(a)A is the amount which would be the chargeable amount for the initial chargeable event apart from section 72(2) below,

(b)B is the chargeable amount for the initial chargeable event, and

(c)C is the amount (if any) found under subsection (8) below.

(8)If, before the further chargeable event occurs, one or more prior chargeable events have occurred in relation to the trustees by virtue of the prior repayment of any of the total outstanding amount found for the time the initial chargeable event occurs, the amount found under this subsection is an amount equal to the chargeable amount for the prior chargeable event or to the aggregate of the chargeable amounts for the prior chargeable events (as the case may be).

(9)In a case where—

(a)a chargeable event (within the meaning of section 69 above) occurs in relation to the trustees in circumstances mentioned in subsection (1) above,

(b)a sum falls to be included in the total outstanding amount found for the time the event occurs,

(c)another chargeable event (within the meaning of that section) occurs in relation to the trustees in circumstances mentioned in subsection (1) above, and

(d)the same sum or a part of it would (apart from this subsection) fall to be included in the total outstanding amount found for the time the event occurs,

the sum or part (as the case may be) shall not be included in the total outstanding amount found for the time the other chargeable event occurs.

(10)In ascertaining for the purposes of this section whether a repayment is in respect of a particular amount, amounts borrowed earlier shall be taken to be repaid before amounts borrowed later.

(11)Subsections (3) to (7) of section 68 above shall apply where tax is assessed by virtue of this section as they apply where tax is assessed by virtue of that section.

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