Finance Act 1995

Turnover test etc.

4 (1) Section 562 of that Act (conditions for grant of exemption certificate to be satisfied by individuals) shall be amended as follows.

(2) In subsection (1) (applications to which section applies)—

(a) the words “(otherwise than as a partner in a firm)” shall be omitted; and

(b) at the end there shall be inserted “except that, where the application is for the issue of that certificate to that individual as a partner in a firm, this section shall have effect with the omission of subsections (2) to (2B).”

(3) After subsection (2) there shall be inserted the following subsections—

“(2A) The applicant must satisfy the Board, by such evidence as may be prescribed in regulations made by the Board, that the carrying on of the business mentioned in subsection (2) above is likely to involve the receipt, annually in the period to which the certificate would relate, of an aggregate amount by way of relevant payments which is not less than the amount specified in regulations made by the Board as the minimum turnover for the purposes of this subsection.

(2B) In subsection (2A) above “relevant payments” means the following payments, other than so much of them as would fall, as representing the direct cost to any person of any materials, to be disregarded in calculating the amount of any deductions under subsection (4) of section 559, that is to say—

(a) payments from which such deductions would fall to be made if the certificate is not granted; and

(b) payments which would be such payments but for any regulations under subsection (3A) of that section.”

(4) Subsections (3) to (7) (which relate to the period for which an individual has carried on his business) shall cease to have effect.

(5) In subsection (9) (compliance by companies of which the applicant has had control), for “has the meaning given by section 840” there shall be substituted “shall be construed in accordance with section 416(2) to (6)”.

(6) In subsection (11) (persons who have been out of the United Kingdom), for the words from the beginning to the word “Board”, in the second place where it occurs, there shall be substituted—

“(11) Where the applicant states, for the purpose of showing that he has complied with all obligations imposed on him as mentioned in subsection (8) above, that he was not subject to any of one or more obligations in respect of any period ending within the qualifying period—

(a) he must satisfy the Board of that fact by such evidence as may be prescribed in regulations made by the Board; and

(b) if for that purpose he states that he has been outside the United Kingdom for the whole or any part of the qualifying period, he must also satisfy them, by such evidence as may be so prescribed,”.

(7) For subsection (14) (meaning of “qualifying period”) there shall be substituted the following subsections—

“(13A) Subject to subsection (10) above, a person shall not be taken for the purposes of this section to have complied with any such obligation or request as is referred to in subsections (8) to (11) above if there has been a contravention of a requirement as to the time at which, or the period within which, the obligation or request was to be complied with.

(14) In this section “the qualifying period”, in relation to an application for the issue of a certificate under section 561, means the period of three years ending with the date of the application.”

5 Section 563 of that Act (conditions to be satisfied by individuals who are partners) shall cease to have effect.

6 For subsections (3) to (5) of section 564 of that Act there shall be substituted the following subsections—

“(2A) The partners must satisfy the Board, by such evidence as may be prescribed in regulations made by the Board, that the carrying on of the firm’s business is likely to involve the receipt, annually in the period to which the certificate would relate, of an aggregate amount by way of relevant payments which is not less than whichever is the smaller of—

(a) the sum specified in subsection (2B) below; and

(b) the amount specified for the purposes of this paragraph in regulations made by the Board;

and in this subsection “relevant payments” has the meaning given by section 562(2B).

(2B) The sum referred to in subsection (2A)(a) above is the sum of the following amounts, that is to say—

(a) the amount obtained by multiplying the number of partners in the firm who are individuals by the amount specified in regulations as the minimum turnover for the purposes of section 562(2A); and

(b) in respect of each partner in the firm who is a company (other than one to which section 565(2A)(b) would apply), the amount equal to what would have been the minimum turnover for the purposes of section 565(2A) if the application had been for the issue of a certificate to that company.

(3) Subject to subsection (4) below, each of the persons who are partners at the time of the application must have complied, so far as any such charge to income tax or corporation tax is concerned as falls to be computed by reference to the profits or gains of the firm’s business—

(a) with all obligations imposed on him by or under the Tax Acts or the Management Act in respect of periods ending within the qualifying period; and

(b) with all requests to him as such a partner to supply to an inspector accounts of, or other information about, the firm’s business or his share of the profits or gains of that business.

(4) Where a person has failed to comply with such an obligation or request as is referred to in subsection (3) above the firm shall nevertheless be treated, in relation to that partner, as satisfying that condition as regards that obligation or request if the Board are of the opinion that the failure is minor and technical and does not give reason to doubt that the condition mentioned in subsection (5) below will be satisfied.

(5) There must be reason to expect that each of the persons who are from time to time partners in the firm will, in respect of periods ending after the end of the qualifying period, comply with such obligations and requests as are referred to in subsection (3) above.

(6) Subject to subsection (4) above, a person shall not be taken for the purposes of this section to have complied with any such obligation or request as is referred to in subsection (3) above if there has been a contravention of a requirement as to the time at which, or the period within which, the obligation or request was to be complied with.

(7) In this section “the qualifying period”, in relation to an application for the issue of a certificate under section 561, means the period of three years ending with the date of the application.”

7 (1) After subsection (2) of section 565 of that Act there shall be inserted the following subsections—

“(2A) The company must either—

(a) satisfy the Board, by such evidence as may be prescribed in regulations made by them, that the carrying on of its business is likely to involve the receipt, annually in the period to which the certificate would relate, of an aggregate amount by way of relevant payments which is not less than the amount which is the minimum turnover for the purposes of this subsection; or

(b) satisfy the Board that the only persons with shares in the company are companies which are limited by shares and themselves excepted from section 559 by virtue of a certificate which is in force under section 561;

and in this subsection “relevant payments” has the meaning given by section 562(2B).

(2B) The minimum turnover for the purposes of subsection (2A) above is whichever is the smaller of—

(a) the amount obtained by multiplying the amount specified in regulations as the minimum turnover for the purposes of section 562(2A) by the number of persons who are relevant persons in relation to the company; and

(b) the amount specified for the purposes of this paragraph in regulations made by the Board.

(2C) For the purposes of subsection (2B) above a person is a relevant person in relation to the company—

(a) where the company is a close company, if he is a director of the company (within the meaning of Chapter II of Part V) or a beneficial owner of shares in the company; and

(b) in any other case, if he is such a director of the company.”

(2) After subsection (8) of that section there shall be inserted the following subsection—

“(8A) Subject to subsection (4) above, a company shall not be taken for the purposes of this section to have complied with any such obligation or request as is referred to in subsections (3) to (7) above if there has been a contravention of a requirement as to the time at which, or the period within which, the obligation or request was to be complied with.”