Finance Act 1994

Section 218.

SCHEDULE 20 U.K. Changes for facilitating self-assessment: transitional provisions and savings

Assessment under Cases I and II of Schedule D U.K.

1 (1) Subject to paragraph 3(2) below, this paragraph applies in the case of a trade, profession or vocation set up and commenced before 6th April 1994 and continuing after 5th April 1997. U.K.

(2) The basis period for the year 1996-97 shall be as follows—

(a) where an accounting date falls within the year, the period of twelve months ending with that accounting date; and

(b) in any other case, the period of twelve months ending with 5th April 1997.

(3) Where the basis period for the year 1996-97 is given by paragraph (b) of sub-paragraph (2) above, section 62 of the Taxes Act 1988 shall have effect in relation to the accounting change by virtue of which that paragraph applies as if that change were made in the first year of assessment in which accounts are made up to the new date.

(4) In this paragraph “accounting date” and “the new date” have the same meanings as in section 62 of the Taxes Act 1988.

2 (1) Subject to paragraph 3(2) and (4) below, this paragraph applies in the case of a trade, profession or vocation set up and commenced before 6th April 1994 and continuing after 5th April 1997. U.K.

(2) Subject to sub-paragraph (3) below, sections 60 to 63A of the Taxes Act 1988 shall have effect in relation to the year 1996-97 as if they required income tax under Case I or II of Schedule D to be charged on the appropriate percentage of the aggregate of—

(a) the full amount of the profits or gains of the basis period for that year, and

(b) the full amount of the profits or gains of the relevant period.

(3) Where, in the case of the year 1995-96, the period on the profits or gains of which income tax is chargeable under Case I or II of Schedule D is that year, sub-paragraph (2) above shall have effect as if for the words from “the appropriate percentage” to the end there were substituted the words “the full amount of the profits or gains of that year”.

(4) Section 63A of the Taxes Act 1988 shall have effect as if the amount of profits or gains of the basis period for the year 1997-98 which arise [F1 after the end of—

(a) the basis period for the year 1996-97; or

(b) in the case of a trade or profession carried on by a person in partnership with other persons, the basis period of the partnership for that year,

and (in either case)] before 6th April 1997 were an overlap profit for the purposes of that section.

[F2 (4A) In calculating the amount of the profits or gains of the basis period for the year 1997-98 which arise as mentioned in sub-paragraph (4) above, any deduction of a capital allowance and any addition of a balancing charge shall be ignored.

(4B) Sub-paragraph (4A) above does not apply in the case of a trade or profession carried on by persons who include both an individual and a company.]

(5) In this paragraph—

• “the appropriate percentage” means the following expressed as a percentage, that is, 365 divided by the number of days in the basis period for the year 1996-97 and the relevant period taken together;

• “the relevant period” means the period which—

  (a)

  begins immediately after the end of the period on the profits or gains of which tax is chargeable for the year 1995-96, and

  (b)

  ends immediately before the beginning of the basis period for the year 1996-97.

Textual Amendments

F1 Words in Sch. 20 para. 2(4) inserted (1.5.1995) by 1995 c. 4, s. 122(2)

F2 Sch. 20 para. 2(4A)(4B) inserted (1.5.1995) by 1995 c. 4, s. 122(3)

Modifications etc. (not altering text)

C1 Sch. 20 para. 2(2) modified (1.5.1995) by 1995 c. 4, s. 123, Sch. 22 paras. 1, 13, 14

C2 Sch. 20 para. 2(4) modified (1.5.1995) by 1995 c. 4, s. 123, Sch. 22 paras. 3, 12, 13, 14

Sch. 20 para. 2(4) modified (1.5.1995) by 1995 c. 4, s. 123, Sch. 22 paras. 5, 12

3 (1) In the case of a trade, profession or vocation set up and commenced before 6th April 1994 and ceasing before 6th April 1997, sections 60 to 63 of the Taxes Act 1988 shall have effect as if sections 200 to 205 of this Act had not been enacted. U.K.

(2) If, in the case of a trade, profession or vocation set up and commenced before 6th April 1994 and ceasing on or after 6th April 1997 but before 6th April 1998, an officer of the Board so directs—

(a) paragraphs 1 and 2 above shall not apply, and

(b) sections 60 to 63 of the Taxes Act 1988 shall have effect as if sections 200 to 205 of this Act had not been enacted.

(3) Sub-paragraph (4) below applies where, in the case of a trade, profession or vocation set up and commenced before 6th April 1994 and ceasing on or after 6th April 1998 but before 6th April 1999, the profits or gains arising in the year 1996-97 exceed—

(a) the amount on which income tax has been charged for that year; or

(b) the amount on which income tax would have been charged for that year if no deduction or set-off under section 385 of the Taxes Act 1988 had been allowed.

(4) Notwithstanding anything in sections 60 to 63A of the Taxes Act 1988, if an officer of the Board so directs, income tax for the year 1996-97 shall be charged instead, but subject to any deduction or set-off under section 385 of that Act, on the amount of the profits or gains arising in that year.

(5) All such adjustments shall be made, whether by way of an assessment to tax or a reduction or discharge of such an assessment or otherwise, as may be necessary to give effect to a direction under sub-paragraph (2) or (4) above.

Modifications etc. (not altering text)

C3 Sch. 20 para. 3(2) restricted (31.7.1998) by 1998 c. 36, s. 56(5)(9)

Assessment under Case III of Schedule D U.K.

4 (1) Subject to sub-paragraph (3) below, this paragraph applies in the case of income which— U.K.

(a) is from a source arising before 6th April 1994 and continuing after 5th April 1998, and

(b) is chargeable to tax under Case III of Schedule D.

(2) Section 64 of the Taxes Act 1988 shall have effect in relation to the year 1996-97 as if it required income tax under Case III of Schedule D to be computed on 50 per cent. of the aggregate of—

(a) the full amount of the income arising within that year; and

(b) the full amount of the income arising within the year 1995-96.

(3) This paragraph does not apply if section 66(1)(c) of that Act applied in relation to the year 1995-96.

Modifications etc. (not altering text)

C4 Sch. 20 para. 4(2) modified (1.5.1995) by 1995 c. 4, s. 123, Sch. 22 paras. 9, 13

Sch. 20 para. 4(2) modified (1.5.1995) by 1995 c. 4, s. 123, Sch. 22 paras. 10, 13

5 U.K. In the case of income which—

(a) is from a source arising before 6th April 1994 and ceasing before 6th April 1998, and

(b) is chargeable to tax under Case III of Schedule D,

sections 64, 66 and 67 of the Taxes Act 1988 shall have effect as if section 206 of this Act had not been enacted.

Assessment under Cases IV and V of Schedule D U.K.

6 (1) This paragraph applies in the case of income which— U.K.

(a) is from a source arising before 6th April 1994 and continuing after 5th April 1998, and

(b) is chargeable to tax under Case IV or V of Schedule D.

(2) Subject to sub-paragraph (3) below, section 65 of the Taxes Act 1988 shall have effect in relation to the year 1996-97 as if—

(a) subsection (1) required income tax chargeable under Case IV or V of Schedule D to be computed on 50 per cent. of the aggregate of—

(i) the full amount of the income arising within that year; and

(ii) the full amount of the income arising within the year 1995-96,

subject (in either case) to the deductions and allowances there mentioned in the case of income not received in the United Kingdom;

(b) paragraph (a) of subsection (5) required income tax chargeable under Case IV of Schedule D to be computed on 50 per cent. of the aggregate of—

(i) the full amount, so far as it can be computed, of the sums received in the United Kingdom in that year; and

(ii) the full amount, so far as it can be computed, of the sums received in the United Kingdom in the year 1995-96,

without (in either case) any deduction or abatement; and

(c) paragraph (b) of that subsection required income tax chargeable under Case V of Schedule D to be computed on 50 per cent. of the aggregate of—

(i) the full amount of the actual sums received in the United Kingdom in that year; and

(ii) the full amount of the actual sums received in the United Kingdom in the year 1995-96,

without (in either case) any deduction or abatement other than as there mentioned.

(3) Sub-paragraph (2) above does not apply if section 66(1)(c) of that Act applied in relation to the year 1995-96.

(4) Section 63A of the Taxes Act 1988 (as applied by section 65(3) of that Act) shall have effect as if the amount of profits or gains of the basis period for the year 1997-98 which arise before 6th April 1997 were an overlap profit for the purposes of that section.

Modifications etc. (not altering text)

C5 Sch. 20 para. 6(2)(a) modified (1.5.1995) by 1995 c. 4, s. 123, Sch. 22 paras. 6, 13, 14

Sch. 20 para. 6(2)(a) modified (1.5.1995) by 1995 c. 4, s. 123, Sch. 22 paras. 9, 13

Sch. 20 para. 6(2)(a) modified (1.5.1995) by 1995 c. 5, s. 123, Sch. 22 paras. 10, 13

C6 Sch. 20 para. 6(4) modified (1.5.1995) by 1995 c. 4, s. 123, Sch. 22 paras. 7, 12, 13, 14

7 U.K. In the case of income which—

(a) is from a source arising before 6th April 1994 and ceasing before 6th April 1998, and

(b) is chargeable to tax under Case IV or V of Schedule D,

sections 65 to 68 of that Act shall have effect as if section 207 of this Act and its associated repeals had not been enacted.

Loss relief U.K.

8 U.K. Sections 380(1) and 574(1) of the Taxes Act 1988 (as substituted by sections 209(1) and 210(1) of this Act) shall have effect as respects the years 1994-95 and 1995-96 as if for the words “twelve months from the 31st January next following” there were substituted the words “two years after”.

Capital allowances U.K.

9 (1) This paragraph applies in the case of a trade, profession or vocation set up and commenced before 6th April 1994 and continuing after 5th April 1997. U.K.

(2) Section 140 of the M1 Capital Allowances Act 1990 shall have effect as if the allowances which fall to be made in taxing the trade, profession or vocation for the first period of account ending after 5th April 1997 under the provisions of that Act as they apply for the purposes of income tax included any allowance or part of any allowance—

(a) which falls to be made in taxing the trade, profession or vocation for the year 1996-97, or is carried forward to that year from a previous year of assessment, and

(b) to which full effect cannot be given in the year 1996-97.

Marginal Citations

M1 1990 c.1.

Double taxation relief U.K.

10 (1) Subject to paragraph 12(2) below, this paragraph applies in the case of— U.K.

(a) a trade, profession or vocation set up and commenced before 6th April 1994 and continuing after 5th April 1998; or

(b) income from a source arising before the former date and continuing after the latter date.

(2) Subject to sub-paragraph (3) below, the amount of foreign tax to be taken into account in determining whether and, if so, what credit is allowable under Part XVIII of the Taxes Act 1988 against income tax which, in respect of income from any source, is chargeable under Case I or II of Schedule D for the year 1996-97 shall be the appropriate percentage of the aggregate of—

(a) the amount of foreign tax paid on income from that source arising in the basis period for that year, and

(b) the amount of foreign tax paid on income from that source arising in the relevant period.

(3) Where the period on the profits or gains of which income tax is chargeable under Case I or II of Schedule D for the year 1995-96 is that year, sub-paragraph (2) above shall have effect as if for the words from “the appropriate percentage” to the end there were substituted the words “the amount of foreign tax paid on income arising in that year”.

(4) Where—

(a) the amount of the profits or gains on which income tax is chargeable under Case I or II of Schedule D for the year 1996-97 is given by paragraph 2(2) above, and

(b) that amount includes income from any source in respect of which credit is allowable under Part XVIII of the Taxes Act 1988,

the amount of income from that source to be taken into account in determining what credit is so allowable shall be the appropriate percentage of the aggregate of the full amount of the income of the basis period for that year and the full amount of the income of the relevant period.

(5) [F3 Subject to sub-paragraph (5A) below,] the amount of foreign tax to be taken into account in determining whether and, if so, what credit is allowable under Part XVIII of the Taxes Act 1988 against income tax which, in respect of income from any source, is chargeable for the year 1996-97 under Case IV or V of Schedule D shall be 50 per cent. of the aggregate of—

(a) the amount of foreign tax paid on income from that source arising, or (as the case may require) received in the United Kingdom, in that year; and

(b) the amount of foreign tax paid on income from that source arising, or (as the case may require) received in the United Kingdom, in the year 1995-96.

[F4 (5A) Where the period on the profits or gains of which income tax is chargeable under Case IV or V of Schedule D for the year 1995-96 is that year, sub-paragraph (5) above shall have effect as if for the words from “50 per cent.” to the end there were substituted the words “the amount of foreign tax paid on income arising, or (as the case may require) received in the United Kingdom, in that year”.]

(6) In this paragraph—

• “the appropriate percentage” and “the relevant period” have the same meanings as in paragraph 2 above;

• “double taxation arrangements” means arrangements having effect by virtue of section 788 of the Taxes Act 1988;

• “foreign tax” means tax chargeable under the law of a territory outside the United Kingdom for which credit may be allowed under double taxation arrangements or section 790(1) of that Act.

Textual Amendments

F3 Words in Sch. 20 para. 10(5) inserted (1.5.1995) by 1995 c. 4, s. 122(4)

F4 Sch. 20 para. 10(5A) inserted (1.5.1995) by 1995 c. 4, s. 122(5)

11 (1) Subject to paragraph 12(2) below, this paragraph applies in the case of— U.K.

(a) a trade, profession or vocation set up and commenced before 6th April 1994 and continuing after 5th April 1998; or

(b) income from a source arising before the former date and continuing after the latter date.

(2) Sub-paragraph (3) below applies where—

(a) credit against income tax for the year 1995-96 or any earlier year of assessment is or has been allowed by virtue of subsection (1) of section 804 of the Taxes Act 1988 in respect of any income (“the original income”), and

(b) the source of that income ceases in a subsequent year of assessment (“the subsequent year”).

(3) The following shall be set off one against the other, namely—

(a) the amount of the credit which, under Part XVIII of the Taxes Act 1988 (including section 804), has been allowed against income tax in respect of the original income, and

(b) the aggregate of—

(i) the amount of the credit which, apart from that section, would have been so allowed, and

(ii) the difference between the amount of the credit which, on the assumptions mentioned in sub-paragraph (4) below, would have been allowable under Part XVIII of that Act for the year 1996-97 and the amount of credit which has been so allowed;

and if the amount given by paragraph (a) exceeds that given by paragraph (b) above, the person chargeable in respect of income (if any) arising in the subsequent year from the same source as the original income shall be treated as having received in that year a payment chargeable under Case VI of Schedule D of an amount such that income tax on it at the basic rate is equal to the excess.

(4) The assumptions are—

(a) that the words “the appropriate percentage of” were omitted from paragraph 2(2) above;

(b) that the words “50 per cent. of” were omitted from paragraphs (a), (b) and (c) of paragraph 6(2) above; and

(c) that paragraph 10 above had not been enacted.

(5) Where the period on the income of which income tax is chargeable for the year 1996-97 is that year, sub-paragraph (3) above shall have effect as if for paragraph (b) there were substituted the following paragraph—

“(b) the amount of the credit which, apart from that section, would have been so allowed;”.

(6) Any reference in sub-paragraph (2) or (3) above to section 804 or Part XVIII of the Taxes Act 1988 includes a reference to the corresponding provisions of any earlier enactments.

(7) Any payment which a person is treated by virtue of sub-paragraph (3) above as having received shall not on that account constitute income of his for any of the purposes of the Income Tax Acts other than that sub-paragraph and in particular no part of it shall constitute profits or gains brought into charge to income tax for the purposes of section 348 of the Taxes Act 1988.

12 (1) In the case of— U.K.

(a) a trade, profession or vocation set up and commenced before 6th April 1994 and ceasing before 6th April 1998, being a trade, profession or vocation in respect of which a direction has been given under paragraph 3(2) above, or

(b) income from a source arising before the former date and ceasing before the latter date, being income to which paragraph 7 above applies,

section 804 of the Taxes Act 1988 shall have effect as if section 217 of this Act and its associated repeals had not been enacted.

(2) In the case of a trade, profession or vocation set up and commenced before 6th April 1994 and ceasing on or after 6th April 1998 but before 6th April 1999, being a trade, profession or vocation in respect of which a direction has been given under paragraph 3(4) above—

(a) paragraphs 10 and 11 above shall not apply, and

(b) section 804 of the Taxes Act 1988 shall have effect as if section 217 of this Act and its associated repeals had not been enacted.

13 U.K. Paragraphs 2(2) and 6(2) above shall have effect as if any reference to the full amount of any profits or gains, or the full amount of any income, were a reference to that amount after any reduction which is treated as made by section 811 of the Taxes Act (deduction for foreign tax where no credit allowable).

Supplemental U.K.

14 (1) In this Schedule— U.K.

(a) any reference to a source of income arising before any date (“the earlier date”) and continuing after or ceasing before some other date (“the later date”) is a reference to a source of income arising to any person before the earlier date and continuing to be possessed by that person after, or (as the case may be) ceasing to be possessed by that person before, the later date; and

(b) any reference to a source of income includes a reference to a part of such a source.

(2) Where, as respects income from any source, income tax is to be charged under Case IV or V of Schedule D by reference to the amounts of income received in the United Kingdom, the source shall be treated for the purposes of this Schedule as arising on the date on which the first amount of income is so received.