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Finance Act 1995

Status:

This is the original version (as it was originally enacted).

SCHEDULES

Section 2.

SCHEDULE 1Table of rates of duty on wine and made-wine

Part IWine or made-wine of a strength not exceeding 22 per cent.

Description of wine or made-wineRates of duty per hectolitre
£
Wine or made-wine of a strength not exceeding 4 per cent.23.41
Wine or made-wine of a strength exceeding 4 per cent. but not exceeding 5.5 per cent.42.14
Wine or made-wine of a strength exceeding 5.5 per cent. but not exceeding 15 per cent. and not being sparkling140.44
Sparkling wine or sparkling made-wine of a strength exceeding 5.5 per cent. but not exceeding 15 per cent.200.64
Wine or made-wine of a strength exceeding 15 per cent. but not exceeding 22 per cent.200.64

Part IIWine or made-wine of a strength exceeding 22 per cent.

Description of wine or made-wineRates of duty per litre of alcohol in the wine or made-wine
£
Wine or made-wine of a strength exceeding 22 per cent.20.60

Section 5.

SCHEDULE 2Denatured alcohol

The Alcoholic Liquor Duties Act 1979

1In section 4(1) of the [1979 c. 4.] Alcoholic Liquor Duties Act 1979 (interpretation)—

(a)for the definition of “authorised methylator” there shall be substituted the following definition—

“authorised denaturer” means a person authorised under section 75(1) below to denature dutiable alcoholic liquor;

(b)in the definition of “British compounded spirits”, for “methylated spirits” there shall be substituted “denatured alcohol”;

(c)after the definition of “compounder” there shall be inserted the following definition—

“denatured alcohol” means denatured alcohol within the meaning of section 5 of the Finance Act 1995, and references to denaturing a liquor are references to subjecting it to any process by which it becomes denatured alcohol;

(d)for the definition of “licensed methylator” there shall be substituted the following definition—

“licensed denaturer” means a person holding a licence under section 75(2) below;.

2Section 9 of that Act (remission of duty on spirits for methylation) shall cease to have effect.

3In section 10 of that Act (remission of duty on spirits), for “methylated spirits” there shall be substituted “denatured alcohol”.

4In section 24(1)(a) of that Act (restriction on distiller or rectifier carrying on other trades), for “methylated spirits” there shall be substituted “denatured alcohol”.

5In sections 75, 77, 79 and 80 of that Act (which contain provisions regulating methylation)—

(a)for the words “methylate”, “methylates”, “methylator” and “methylators”, wherever they occur, and for the word “methylated”, where it occurs outside the expression “methylated spirits”, there shall be substituted, respectively, “denature”, “denatures”, “denaturer”, “denaturers” and “denatured”;

(b)for the words “methylation” and “methylating”, wherever they occur, there shall be substituted, in each case, “denaturing”;

(c)for the word “spirits”, wherever it occurs outside the expression “methylated spirits”, there shall be substituted “dutiable alcoholic liquor”;

(d)for the words “methylated spirits”, wherever they occur, there shall be substituted “denatured alcohol”.

6In section 77(2) of that Act (provisions supplemental to powers to make regulations), after paragraph (a) there shall be inserted the following paragraph—

(aa)frame any provision of the regulations with respect to the supply, receipt or use of denatured alcohol by reference to matters to be contained from time to time in a notice published in accordance with the regulations by the Commissioners and having effect until withdrawn in accordance with the regulations; and.

7For section 78 of that Act (additional provisions relating to methylated spirits) there shall be substituted the following section—

78Defaults in respect of denatured alcohol.

(1)This subsection applies if, at any time when an account is taken and a balance struck of the quantity of any kind of denatured alcohol in the possession of an authorised or licensed denaturer, there is a difference between—

(a)the quantity (“the actual amount”) of the dutiable alcoholic liquor of any description in the denatured alcohol in his possession; and

(b)the quantity (“the proper amount”) of dutiable alcoholic liquor of that description which, according to any such accounts as are required to be kept by virtue of any regulations under section 77 above, ought to be in the denatured alcohol in his possession.

(2)Subsection (1) above shall not apply if the difference constitutes—

(a)an excess of the actual amount over the proper amount of not more than 1 per cent. of the aggregate of—

(i)the quantity of dutiable alcoholic liquor of the description in question in the balance of dutiable alcoholic liquor struck when an account was last taken; and

(ii)the quantity of dutiable alcoholic liquor of that description which has since been lawfully added to the denaturer’s stock;

or

(b)a deficiency such that the actual amount is less than the proper amount by not more than 2 per cent. of that aggregate.

(3)If, where subsection (1) above applies, the actual amount exceeds the proper amount, the relevant amount of any dutiable alcoholic liquor of the description in question which is in the possession of the denaturer shall be liable to forfeiture; and for this purpose the relevant amount is the amount corresponding to the amount of the excess or such part of that amount as the Commissioners consider appropriate.

(4)If, where subsection (1) above applies, the actual amount is less than the proper amount, the denaturer shall, on demand by the Commissioners, pay on the amount of the deficiency, or on such part of it as the Commissioners may specify in the demand, the duty payable on dutiable alcoholic liquor of the description comprised in the deficiency.

(5)If any person—

(a)supplies to another, in contravention of any regulations under section 77 above, any denatured alcohol containing dutiable alcoholic liquor of any description, or

(b)uses any such denatured alcohol in contravention of any such regulations,

that person shall, on demand by the Commissioners, pay on the amount of dutiable alcoholic liquor of that description comprised, at the time of its supply or use, in the denatured alcohol that is so supplied or used, or on such part of it as the Commissioners may specify, the duty payable on dutiable alcoholic liquor of that description.

(6)Any supply of denatured alcohol to a person who—

(a)by virtue of any regulations under section 77 above is prohibited from receiving it unless authorised to do so by or under the regulations, and

(b)is not so authorised in the case of the denatured alcohol supplied to him,

shall be taken for the purposes of subsection (5) above to be a supply in contravention of those regulations.

(7)A demand made for the purposes of subsection (4) or (5) above shall be combined, as if there had been a default such as is mentioned in that section, with an assessment and notification under section 12 of the [1994 c. 9.] Finance Act 1994 (assessments to excise duty) of the amount of duty due in consequence of the making of the demand.

The Finance Act 1994

8In paragraph 3(1)(d) of Schedule 5 to the Finance Act 1994 (decisions under or for the purposes of section 9 or 10 of the [1979 c. 4.] Alcoholic Liquor Duties Act 1979 to be subject to review and appeal), for “section 9 or 10 (remission of duty on spirits for methylation or” there shall be substituted “section 10 (remission of duty on spirits”.

Section 14.

SCHEDULE 3Amusement Machine Licence Duty

Introductory

1The [1981 c. 63.] Betting and Gaming Duties Act 1981 shall be amended in accordance with paragraphs 2 to 11 below.

Amusement machine licences

2(1)In section 21 (gaming machine licences)—

(a)in subsection (1), for the words “gaming machine” and “for gaming” there shall be substituted, respectively, “amusement machine” and “for play”;

(b)in subsection (2), for “a gaming machine licence” there shall be substituted “an amusement machine licence”; and

(c)in subsection (3), for “A gaming machine licence” there shall be substituted “An amusement machine licence”.

(2)In subsection (3A) of that section (excepted machines), for paragraph (b) there shall be substituted the following paragraphs—

(b)a five-penny machine which is a prize machine without being a gaming machine or which (if it is a gaming machine) is a small-prize machine, or

(c)a thirty-five-penny machine which is not a prize machine.

Amusement machine licence duty

3(1)In subsection (1) of section 22 (duty on gaming machine licences), for “gaming machine” there shall be substituted “amusement machine”.

(2)In subsection (2) of that section (meaning of “small-prize machine”), for “a gaming machine is a small-prize machine if” there shall be substituted “an amusement machine is a small-prize machine if it is a prize machine and”.

Rate of duty

4(1)In subsection (1) of section 23 (determination of rate of duty by reference to Table), for “a gaming machine licence” there shall be substituted “an amusement machine licence”.

(2)In subsection (2) of that section—

(a)in paragraph (b), for “or column 3” there shall be substituted “, column 3 or column 4”; and

(b)in the words after that paragraph, for the words “gaming” and “or the rate in column 3” there shall be substituted, respectively, “amusement” and “, the rate in column 3 or the rate in column 4”.

(3)For the Table in that subsection (as substituted by section 13 of this Act) there shall be substituted the following Table—

TABLE

(1)(2)(3)(4)
Period (in months) for which licence grantedMachines that are not gaming machinesGaming machines that are small-prize machines or are five-penny machines without being small-prize machinesOther machines
£££
13060150
250105275
375155400
495205520
5120250645
6140295755
7160340880
81853901,005
92054351,115
102254801,235
112405101,305
122505351,375

Restrictions on provision of machines

5In section 24 (restrictions on provision of gaming machines)—

(a)for the words “Gaming machines”, “gaming machines” and “gaming machine”, wherever they occur, there shall be substituted, respectively, “Amusement machines”, “amusement machines” and “amusement machine”;

(b)for the word “a”, where it occurs before “gaming machine” in subsection (5)(f), there shall be substituted “an”; and

(c)for the words “for gaming”, wherever they occur, there shall be substituted “for play”.

Meaning of “amusement machine”

6(1)For subsections (1) to (3) of section 25 (meaning of “gaming machine”) there shall be substituted the following subsections—

(1)A machine is an amusement machine for the purposes of this Act if—

(a)the machine is constructed or adapted for the playing of any game (whether a game of chance, a game of skill or a game of chance and skill combined);

(b)the game is one played by means of the machine (whether automatically or by the operation of the machine by the player or players);

(c)a player pays to play the game (except where he has an opportunity to play without payment as a result of having previously played successfully) either by inserting a coin or token into the machine or in some other way;

(d)the machine automatically—

(i)applies some or all of the rules of the game or displays or records scores in the game; and

(ii)determines when a player who has paid to play a game by means of the machine can no longer play without paying again;

and

(e)the machine is a gaming machine, a video machine or a pinball machine.

(1A)A machine constructed or adapted for the playing of a game is a gaming machine for the purposes of this Act if—

(a)it is a prize machine;

(b)the game which is played by means of the machine is a game of chance, a game of chance and skill combined or a pretended game of chance or of chance and skill combined; and

(c)the outcome of the game is determined by the chances inherent in the action of the machine, whether or not provision is made for manipulation of the machine by a player;

and for the purposes of this subsection a game in which the elements of chance can be overcome by skill shall be treated as a game of chance and skill combined if there is an element of chance in the game that cannot be overcome except by superlative skill.

(1B)A machine constructed or adapted for the playing of a game is a video machine for the purposes of this Act if—

(a)a micro-processor is used to control some or all of the machine’s functions; and

(b)the playing of the game involves information or images being communicated or displayed to the player or players by means of any description of screen, other than one consisting only in a blank surface onto which light is projected.

(1C)For the purposes of this Act an amusement machine is a prize machine unless it is constructed or adapted so that a person playing it once and successfully either receives nothing or receives only—

(a)an opportunity, afforded by the automatic action of the machine, to play again (once or more often) without paying, or

(b)a prize, determined by the automatic action of the machine and consisting in either—

(i)money of an amount not exceeding the sum payable to play the machine once, or

(ii)a token which is, or two or more tokens which in the aggregate are, exchangeable for money of an amount not exceeding that sum.

(2)In subsection (4) of that section (machines playable by more than one person), for “a gaming machine” there shall be substituted “a machine of any description”.

(3)For subsections (5) to (9) of that section there shall be substituted the following subsections—

(5)For the purposes of sections 21 to 24 above a machine (the actual machine) in relation to which the number determined in accordance with subsection (5A) below is more than one shall be treated (instead of as one machine) as if it were a number of machines (accountable machines) equal to the number so determined.

(5A)That number is—

(a)except where paragraph (b) below applies, the number of individual playing positions provided on the machine for persons to play simultaneously (whether or not while participating in the same game); and

(b)where—

(i)that machine is a video machine but not a gaming machine, and

(ii)the number of such playing positions is more than the number of different screens used for the communication or display of information or images to any person or persons playing a game by means of the machine,

the number of such screens.

(6)Subsection (5) above does not apply in the case of any machine which is an excepted machine for the purposes of section 21 above or in the case of a pinball machine.

(7)Any question whether the accountable machines are, or are not, machines falling within any of the following descriptions, that is to say—

(a)gaming machines,

(b)prize machines,

(c)small-prize machines, or

(d)five-penny machines,

shall be determined according to whether or not the actual machine is a machine of that description, with the accountable machines being taken to be machines of the same description as the actual machine.

7After section 25 there shall be inserted the following section—

25APower to modify definition of “amusement machine”.

(1)The Treasury may by order modify the provisions of section 25 above—

(a)by adding to the machines for the time being specified in subsection (1)(e) of that section any description of machines which it appears to them, having regard to the use to which the machines are put, to be appropriate for the protection of the revenue so to add to those machines; or

(b)by deleting any description of machines for the time being so specified.

(2)An order under this section may make such incidental, consequential or transitional provision as the Treasury think fit, including provision modifying section 21 or section 25(5A) above for the purpose of—

(a)specifying the circumstances (if any) in which a machine added to section 25(1)(e) above is to be an excepted machine for the purposes of section 21 above; or

(b)determining the number which, in the case of a machine so added, is to be taken into account for the purposes of section 25(5) above.

Supplementary provisions

8(1)In section 26 (supplementary provisions)—

(a)for the words “gaming machine licence duty” in subsection (1) there shall be substituted “amusement machine licence duty”;

(b)for the words “a gaming machine” and “gaming machines”, wherever they occur, there shall be substituted, respectively, “an amusement machine” and “amusement machines”; and

(c)for the words “for gaming”, wherever they occur, there shall be substituted “for play”.

(2)In subsection (2) of that section—

(a)after the definition of “United Kingdom” there shall be inserted the following definitions—

“video machine” has the meaning given by section 25(1B) above;

“prize machine” has the meaning given by section 25(1C) above; and

(b)after the definition of a “five-penny machine” there shall be inserted the following definition—

“thirty-five-penny machine” means an amusement machine which can only be played by the insertion into the machine of coins of an aggregate denomination not exceeding 35p;.

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

(2A)References in sections 21 to 25 above and in this section and Schedule 4 to this Act to a game, in relation to any machine, include references to a game in the nature of a quiz or puzzle and to a game which is played solely by way of a pastime or against the machine, as well as one played wholly or partly against one or more contemporaneous or previous players.

9(1)In sections 31 and 33(2) (protection of officers and savings for prohibitions of gaming etc.), for the words “gaming machine licences”, in each case, there shall be substituted “amusement machine licences”.

(2)In section 32(3) (orders subject to affirmative procedure), for “or 14(3)” there shall be substituted “, 14(3) or 25A”.

(3)In section 33(1) (interpretation), in the definition of “gaming”, the words “(except where it refers to a machine provided for gaming)” shall be omitted.

10In Schedule 3 (bingo duty)—

(a)in paragraph 5(1)(b), for “a gaming machine licence” there shall be substituted “an amusement machine licence”; and

(b)in paragraph 6, for “a gaming machine” there shall be substituted “an amusement machine”.

11(1)In Schedule 4 (supplementary provisions in relation to gaming machine licence duty)—

(a)for the words “gaming machine” and “gaming machines”, wherever they occur, there shall be substituted, respectively, “amusement machine” and “amusement machines”; and

(b)for the indefinite article, wherever it occurs before an expression amended by paragraph (a) above, there shall be substituted “An” or “an”, as the case may require.

(2)In paragraph 1(2) of that Schedule (conditions of exemption for charitable entertainments etc.)—

(a)in paragraph (a), for “of gaming by means of any machine” there shall be substituted “from any amusement machines”; and

(b)in paragraph (b), for “and any other provided for gaming” there shall be substituted “and any other amusement machines provided”.

(3)In paragraph 2(2)(c) of that Schedule (conditions of exemption for pleasure fairs), for “and any other provided for gaming” there shall be substituted “and any other amusement machines provided”.

(4)In paragraph 4 of that Schedule—

(a)for the words “small-prize machines”, wherever they occur, there shall be substituted “relevant machines”; and

(b)after sub-paragraph (7) there shall be inserted the following sub-paragraph—

(7A)An amusement machine is a relevant machine for the purposes of this paragraph unless it is a gaming machine which is not a small-prize machine.; and in relation to the winter period beginning with November 1995, sub-paragraph (4) of that paragraph shall have effect as if the references by virtue of this paragraph to an amusement machine licence included references to a gaming machine licence.

(5)After paragraph 7 of that Schedule there shall be inserted the following paragraph—

Payment of duty by instalments

7A(1)The Commissioners may make and publish arrangements setting out the circumstances in which, and the conditions subject to which, a person to whom an amusement machine licence is granted for a period of twelve months may, at his request and if the Commissioners think fit, be permitted to pay the duty on that licence by regular instalments during the period of the licence, instead of at the time when it is granted.

(2)Arrangements under this paragraph shall provide for the amount of each instalment to be such that the aggregate amount of all the instalments to be paid in respect of any licence is an amount equal to 105 per cent. of what would have been the duty on that licence apart from this paragraph.

(3)Sub-paragraph (4) below applies if a person who has been permitted, in accordance with arrangements under this paragraph, to pay the duty on any amusement machine licence by instalments—

(a)fails to pay any instalment at the time when it becomes due in accordance with the arrangements; and

(b)does not make good that failure within seven days of being required to do so by notice given by the Commissioners.

(4)Where this sub-paragraph applies—

(a)the licence shall be treated as having ceased to be in force as from the time when the instalment became due;

(b)the person to whom the licence was granted shall become liable to any unpaid duty to which he would have been liable under paragraph 11(1C) below if he had surrendered the licence at that time; and

(c)any amusement machines found on the premises to which the licence related shall be liable to forfeiture.

(5)Sections 14 to 16 of the [1994 c. 9.] Finance Act 1994 (review and appeals) shall have effect in relation to any decision of the Commissioners refusing an application for permission to pay duty by instalments in accordance with arrangements under this paragraph as if that decision were a decision of a description specified in Schedule 5 to that Act.

(6)In paragraph 11 of that Schedule (surrender), after sub-paragraph (1B) there shall be inserted the following sub-paragraph—

(1C)Where, in a case where duty is being paid in accordance with arrangements made under paragraph 7A above, the amount of duty actually paid on a licence that is surrendered is less than the amount which would have been paid on that licence if the period for which it was granted had been reduced by the number of complete months in that period which have not expired when the licence is surrendered, the difference between those amounts shall be treated as unpaid duty.

(7)Paragraph 13 of that Schedule (labelling and marking of machines) shall cease to have effect.

(8)In paragraph 14 of that Schedule (power to enter premises), for the words “for gaming” there shall be substituted “for play”.

(9)In paragraph 16 of that Schedule (enforcement), after sub-paragraph (1) there shall be inserted the following sub-paragraph—

(1A)This paragraph does not apply to any contravention or failure to comply with arrangements under paragraph 7A above or to any failure or refusal to comply with a requirement made under or for the purposes of any such arrangements.

(10)In paragraph 17 of that Schedule (warrants etc.)—

(a)in sub-paragraph (1), for the words “for gaming” there shall be substituted “for play”; and

(b)in sub-paragraph (2)(a), for the words from “(including” to “by means of it)” there shall be substituted “(including any machine appearing to the officer to be an amusement machine or to be capable of being used as such)”.

Consequential amendment of the Customs and Excise Management Act 1979

12In section 102(3)(a) of the [1979 c. 2.] Customs and Excise Management Act 1979 (penalty for failure to deliver up a licence), for “a gaming machine licence” there shall be substituted “an amusement machine licence”.

Section 19.

SCHEDULE 4Vehicle Excise and Registration

Part IIntroduction

1In this Schedule “the 1994 Act” means the [1994 c. 22.] Vehicle Excise and Registration Act 1994.

Part IIExemptions

Abolition of certain exemptions

2The following paragraphs of Schedule 2 to the 1994 Act (exempt vehicles) shall be omitted—

(a)paragraph 1 (electrically propelled vehicles);

(b)paragraph 12 (road construction vehicles);

(c)paragraph 13 (road rollers);

(d)paragraph 14 (snow clearing vehicles);

(e)paragraph 15 (gritting vehicles);

(f)paragraph 16 (street cleansing vehicles);

(g)paragraph 17 (tower wagons used solely in connection with street lighting);

(h)paragraph 21 (vehicles used for short journeys between different parts of person’s land).

Exemption for police vehicles

3In Schedule 2 to the 1994 Act the following shall be inserted after paragraph 3—

Police vehicles

3AA vehicle is an exempt vehicle when it is being used for police purposes.

Exemption for vehicles used between different parts of land

4In Schedule 2 to the 1994 Act the following shall be inserted after paragraph 20—

Vehicles used between different parts of land

20AA vehicle is an exempt vehicle if—

(a)it is used only for purposes relating to agriculture, horticulture or forestry,

(b)it is used on public roads only in passing between different areas of land occupied by the same person, and

(c)the distance it travels on public roads in passing between any two such areas does not exceed 1.5 kilometres.

Commencement

5This Part of this Schedule shall come into force on 1st July 1995.

Part IIIRates

General

6(1)In Schedule 1 to the 1994 Act (annual rates of duty) the following paragraph shall be substituted for paragraph 1 (annual rate of duty where no other rate specified)—

1(1)The annual rate of vehicle excise duty applicable to a vehicle in respect of which no other annual rate is specified by this Schedule is—

(a)if it was constructed after 1946, the general rate;

(b)if it was constructed before 1947, the reduced rate.

(2)The general rate is £135.

(3)The reduced rate is 50 per cent. of the general rate.

(4)Where an amount arrived at in accordance with sub-paragraph (3) is an amount—

(a)which is not a multiple of £5, and

(b)which on division by five does not produce a remainder of £2.50,

the rate is the amount arrived at rounded (either up or down) to the nearest amount which is a multiple of £5.

(5)Where an amount arrived at in accordance with sub-paragraph (3) is an amount which on division by five produces a remainder of £2.50, the rate is the amount arrived at increased by £2.50.

(2)The following amendments shall be made in consequence of sub-paragraph (1) above—

(a)in section 13 of the 1994 Act (trade licences) in subsection (3)(b) for “1(b)” there shall be substituted “1(1)(a)”;

(b)in section 13 of the 1994 Act as substituted under paragraph 8 of Schedule 4 to that Act, in subsection (4)(b) for “1(b)” there shall be substituted “1(1)(a)”;

(c)in section 36 of the 1994 Act (additional liability where cheque dishonoured) in subsection (3)(b) for “1(b)” there shall be substituted “1(1)(a)”.

Motorcycles

7(1)Paragraph 2 of Schedule 1 to the 1994 Act (motorcycles) shall be amended as follows.

(2)In sub-paragraph (1) (rate for motorcycles not exceeding 450 kilograms) the following shall be substituted for paragraphs (a) to (c)—

(a)if the cylinder capacity of the engine does not exceed 150 cubic centimetres, 10 per cent. of the general rate specified in paragraph 1(2);

(b)if the vehicle is a motorbicycle and the cylinder capacity of the engine exceeds 150 cubic centimetres but does not exceed 250 cubic centimetres, 25 per cent. of the general rate specified in paragraph 1(2);

(c)in any other case, 40 per cent. of the general rate specified in paragraph 1(2).

(3)The following sub-paragraphs shall be inserted after sub-paragraph (1)—

(1A)Where an amount arrived at in accordance with sub-paragraph (1)(a), (b) or (c) is an amount—

(a)which is not a multiple of £5, and

(b)which on division by five does not produce a remainder of £2.50,

the rate is the amount arrived at rounded (either up or down) to the nearest amount which is a multiple of £5.

(1B)Where an amount arrived at in accordance with sub-paragraph (1)(a), (b) or (c) is an amount which on division by five produces a remainder of £2.50, the rate is the amount arrived at increased by £2.50.

Buses etc.

8In Schedule 1 to the 1994 Act the following shall be substituted for Part III (hackney carriages)—

Part IIIBuses

3(1)The annual rate of vehicle excise duty applicable to a bus is—

(a)if its seating capacity is nine to sixteen, the same as the basic goods vehicle rate;

(b)if its seating capacity is seventeen to thirty-five, 133 per cent. of the basic goods vehicle rate;

(c)if its seating capacity is thirty-six to sixty, 200 per cent. of the basic goods vehicle rate;

(d)if its seating capacity is over sixty, 300 per cent. of the basic goods vehicle rate.

(2)In this paragraph “bus” means a vehicle which—

(a)is a public service vehicle (within the meaning given by section 1 of the [1981 c. 14.] Public Passenger Vehicles Act 1981), and

(b)is not an excepted vehicle.

(3)For the purposes of this paragraph an excepted vehicle is—

(a)a vehicle which has a seating capacity under nine,

(b)a vehicle which is a community bus,

(c)a vehicle used under a permit granted under section 19 of the [1985 c. 67.] Transport Act 1985 (educational and other bodies) and used in circumstances where the requirements mentioned in subsection (2) of that section are met, or

(d)a vehicle used under a permit granted under section 10B of the [1967 c. 37 (N.I.).] Transport Act (Northern Ireland) 1967 (educational and other bodies) and used in circumstances where the requirements mentioned in subsection (2) of that section are met.

(4)In sub-paragraph (3)(b) “community bus” means a vehicle—

(a)used on public roads solely in accordance with a community bus permit (within the meaning given by section 22 of the [1985 c. 67.] Transport Act 1985), and

(b)not used for providing a service under an agreement providing for service subsidies (within the meaning given by section 63(10)(b) of that Act).

(5)For the purposes of this paragraph the seating capacity of a vehicle shall be determined in accordance with regulations made by the Secretary of State.

(6)In sub-paragraph (1) references to the basic goods vehicle rate are to the rate applicable, by virtue of sub-paragraph (1) of paragraph 9, to a rigid goods vehicle which falls within column (3) of the table in that sub-paragraph and has a revenue weight exceeding 3,500 kilograms and not exceeding 7,500 kilograms.

(7)Where an amount arrived at in accordance with sub-paragraph (1)(b), (c) or (d) is an amount—

(a)which is not a multiple of £10, and

(b)which on division by ten does not produce a remainder of £5,

the rate is the amount arrived at rounded (either up or down) to the nearest amount which is a multiple of £10.

(8)Where an amount arrived at in accordance with sub-paragraph (1)(b), (c) or (d) is an amount which on division by ten produces a remainder of £5, the rate is the amount arrived at increased by £5.

Special vehicles

9(1)Part IV of Schedule 1 to the 1994 Act (special machines) shall be amended as follows.

(2)For the heading “SPECIAL MACHINES” there shall be substituted “SPECIAL VEHICLES”.

(3)In paragraph 4(1) (annual rate of £35) for the words “special machine is £35” there shall be substituted “special vehicle is the same as the basic goods vehicle rate”.

(4)In paragraph 4(2) (definition of “special machine”)—

(a)for the words ““special machine” means” there shall be substituted ““special vehicle” means a vehicle which has a revenue weight exceeding 3,500 kilograms and is”;

(b)paragraphs (a), (b) and (f) (tractors, agricultural engines and mowing machines) shall be omitted;

(c)after paragraph (e) there shall be inserted—

(ee)a road roller.

(5)Paragraph 4(3) (definition of “tractor”) shall be omitted.

(6)The following sub-paragraph shall be inserted after sub-paragraph (6) of paragraph 4—

(7)In sub-paragraph (1) the reference to the basic goods vehicle rate is to the rate applicable, by virtue of sub-paragraph (1) of paragraph 9, to a rigid goods vehicle which falls within column (3) of the table in that sub-paragraph and has a revenue weight exceeding 3,500 kilograms and not exceeding 7,500 kilograms.

Special concessionary vehicles

10In Schedule 1 to the 1994 Act the following shall be inserted after Part IV—

Part IVASpecial Concessionary Vehicles

4A(1)The annual rate of vehicle excise duty applicable to a special concessionary vehicle is 25 per cent. of the general rate specified in paragraph 1(2).

(2)Where an amount arrived at in accordance with sub-paragraph (1) is an amount—

(a)which is not a multiple of £5, and

(b)which on division by five does not produce a remainder of £2.50,

the rate is the amount arrived at rounded (either up or down) to the nearest amount which is a multiple of £5.

(3)Where an amount arrived at in accordance with sub-paragraph (1) is an amount which on division by five produces a remainder of £2.50, the rate is the amount arrived at increased by £2.50.

4B(1)A vehicle is a special concessionary vehicle if it is—

(a)an agricultural tractor, or

(b)an off-road tractor.

(2)In sub-paragraph (1) “agricultural tractor” means a tractor used on public roads solely for purposes relating to agriculture, horticulture, forestry or activities falling within sub-paragraph (3).

(3)The activities falling within this sub-paragraph are—

(a)cutting verges bordering public roads;

(b)cutting hedges or trees bordering public roads or bordering verges which border public roads.

(4)In sub-paragraph (1) “off-road tractor” means a tractor which is not an agricultural tractor (within the meaning given by sub-paragraph (2)) and which is—

(a)designed and constructed primarily for use otherwise than on roads, and

(b)incapable by reason of its construction of exceeding a speed of twenty-five miles per hour on the level under its own power.

4C(1)A vehicle is a special concessionary vehicle if it is a light agricultural vehicle.

(2)In sub-paragraph (1) “light agricultural vehicle” means a vehicle which—

(a)has a revenue weight not exceeding 1,000 kilograms,

(b)is designed and constructed so as to seat only the driver,

(c)is designed and constructed primarily for use otherwise than on roads, and

(d)is used solely for purposes relating to agriculture, horticulture or forestry.

4DAn agricultural engine is a special concessionary vehicle.

4EA mowing machine is a special concessionary vehicle.

4F(1)An electrically propelled vehicle is a special concessionary vehicle.

(2)A vehicle is not an electrically propelled vehicle for the purposes of sub-paragraph (1) unless the electrical motive power is derived from—

(a)a source external to the vehicle, or

(b)an electrical storage battery which is not connected to any source of power when the vehicle is in motion.

4GA vehicle is a special concessionary vehicle when it is—

(a)being used,

(b)going to or from the place where it is to be or has been used, or

(c)being kept for use,

for the purpose of clearing snow from public roads by means of a snow plough or similar device (whether or not forming part of the vehicle).

4HA vehicle is a special concessionary vehicle if it is constructed or adapted, and used, solely for the conveyance of machinery for spreading material on roads to deal with frost, ice or snow (with or without articles or material used for the purposes of the machinery).

Recovery vehicles

11(1)Paragraph 5 of Schedule 1 to the 1994 Act (recovery vehicles) shall be amended as follows.

(2)In sub-paragraph (1) (annual rate of duty of £85) for the words “is £85” there shall be substituted is—

(a)if it has a revenue weight exceeding 3,500 kilograms and not exceeding 12,000 kilograms, the same as the basic goods vehicle rate;

(b)if it has a revenue weight exceeding 12,000 kilograms and not exceeding 25,000 kilograms, 300 per cent. of the basic goods vehicle rate;

(c)if it has a revenue weight exceeding 25,000 kilograms, 500 per cent. of the basic goods vehicle rate.

(3)The following sub-paragraphs shall be inserted after sub-paragraph (5)—

(6)In sub-paragraph (1) references to the basic goods vehicle rate are to the rate applicable, by virtue of sub-paragraph (1) of paragraph 9, to a rigid goods vehicle which falls within column (3) of the table in that sub-paragraph and has a revenue weight exceeding 3,500 kilograms and not exceeding 7,500 kilograms.

(7)Where an amount arrived at in accordance with sub-paragraph (1)(b) or (c) is an amount—

(a)which is not a multiple of £10, and

(b)which on division by ten does not produce a remainder of £5,

the rate is the amount arrived at rounded (either up or down) to the nearest amount which is a multiple of £10.

(8)Where an amount arrived at in accordance with sub-paragraph (1)(b) or (c) is an amount which on division by ten produces a remainder of £5, the rate is the amount arrived at increased by £5.

Vehicles used for exceptional loads

12(1)Paragraph 6 of Schedule 1 to the 1994 Act (vehicles used for exceptional loads) shall be amended as follows.

(2)In sub-paragraph (2) (annual rate of duty) for “£5,000” there shall be substituted “the heavy tractive unit rate”.

(3)The following sub-paragraph shall be inserted after sub-paragraph (3)—

(3A)In sub-paragraph (2) the reference to the heavy tractive unit rate is to the rate applicable, by virtue of sub-paragraph (1) of paragraph 11, to a tractive unit which falls within column (3) of the table in that sub-paragraph and has a revenue weight exceeding 38,000 kilograms and not exceeding 44,000 kilograms.

Haulage vehicles

13(1)Paragraph 7 of Schedule 1 to the 1994 Act (haulage vehicles) shall be amended as follows.

(2)In sub-paragraph (1) for paragraphs (a) and (b) (rate of £100 for showmen’s vehicles and of £330 for other haulage vehicles) there shall be substituted—

(a)if it is a showman’s vehicle, the same as the basic goods vehicle rate;

(b)in any other case, the general haulage vehicle rate.

(3)The following sub-paragraphs shall be inserted after sub-paragraph (2)—

(3)In sub-paragraph (1) the reference to the basic goods vehicle rate is to the rate applicable, by virtue of sub-paragraph (1) of paragraph 9, to a rigid goods vehicle which falls within column (3) of the table in that sub-paragraph and has a revenue weight exceeding 3,500 kilograms and not exceeding 7,500 kilograms.

(4)In sub-paragraph (1) the reference to the general haulage vehicle rate is to 75 per cent. of the rate applicable, by virtue of sub-paragraph (1) of paragraph 11, to a tractive unit which falls within column (3) of the table in that sub-paragraph and has a revenue weight exceeding 12,000 kilograms and not exceeding 16,000 kilograms.

(5)Where an amount arrived at in accordance with sub-paragraph (4) is an amount—

(a)which is not a multiple of £10, and

(b)which on division by ten does not produce a remainder of £5,

the rate is the amount arrived at rounded (either up or down) to the nearest amount which is a multiple of £10.

(6)Where an amount arrived at in accordance with sub-paragraph (4) is an amount which on division by ten produces a remainder of £5, the rate is the amount arrived at increased by £5.

Goods vehicles

14(1)Part VIII of Schedule 1 to the 1994 Act (goods vehicles) shall be amended as follows.

(2)Paragraph 8 (basic rate) shall be omitted.

(3)In paragraph 9(1) (rates of duty for rigid goods vehicles)—

(a)at the beginning there shall be inserted “Subject to sub-paragraphs (2) and (3),”;

(b)for the words “a plated gross weight (or, in Northern Ireland, a relevant maximum weight) exceeding 7,500 kilograms” there shall be substituted “a revenue weight exceeding 3,500 kilograms”;

(c)in paragraph (a) for the words “plated gross weight (or relevant maximum weight)” there shall be substituted “revenue weight”.

(4)The following table shall be substituted for the table in paragraph 9(1)—

Revenue weight of vehicle
(1) Exceeding(2) Not Exceeding
Rate
(3) Two axle vehicle(4) Three axle vehicle(5) Four or more axle vehicle
kgskgs£££
3,5007,500150150150
7,50012,000290290290
12,00013,000450470340
13,00014,000630470340
14,00015,000810470340
15,00017,0001,280470340
17,00019,0001,280820340
19,00021,0001,280990340
21,00023,0001,2801,420490
23,00025,0001,2802,160800
25,00027,0001,2802,2601,420
27,00029,0001,2802,2602,240
29,00031,0001,2802,2603,250
31,00044,0001,2802,2604,250

(5)For sub-paragraph (2) of paragraph 9 there shall be substituted the following sub-paragraphs—

(2)The annual rate of vehicle excise duty applicable—

(a)to any rigid goods vehicle which is a showman’s goods vehicle with a revenue weight exceeding 3,500 kilograms but not exceeding 44,000 kilograms, and

(b)to any rigid goods vehicle which is an island goods vehicle with a revenue weight exceeding 3,500 kilograms,

shall be the basic goods vehicle rate.

(3)The annual rate of vehicle excise duty applicable to a rigid goods vehicle which has a revenue weight exceeding 44,000 kilograms and is not an island goods vehicle shall be the heavy tractive unit rate.

(4)In sub-paragraph (2) the reference to the basic goods vehicle rate is to the rate applicable, by virtue of sub-paragraph (1), to a rigid goods vehicle which falls within column (3) of the table in that sub-paragraph and has a revenue weight exceeding 3,500 kilograms and not exceeding 7,500 kilograms.

(5)In sub-paragraph (3) the reference to the heavy tractive unit rate is to the rate applicable, by virtue of sub-paragraph (1) of paragraph 11, to a tractive unit which falls within column (3) of the table in that sub-paragraph and has a revenue weight exceeding 38,000 kilograms and not exceeding 44,000 kilograms.

(6)In paragraph 10(1) (trailer supplement) for the words “plated gross weight (or relevant maximum weight)”—

(a)in the first place where they occur, there shall be substituted “revenue weight”; and

(b)in the second and third places where they occur, there shall be substituted “plated gross weight”.

(7)In paragraph 10(2) (lower rate of trailer supplement)—

(a)the words “(or relevant maximum weight)” shall be omitted; and

(b)for “£135” there shall be substituted “an amount equal to the amount of the general rate specified in paragraph 1(2)”.

(8)In paragraph 10(3) (higher rate of trailer supplement)—

(a)the words “(or relevant maximum weight)” shall be omitted; and

(b)for “£370” there shall be substituted “an amount equal to 275 per cent. of the amount of the general rate specified in paragraph 1(2)”.

(9)In paragraph 10 the following sub-paragraphs shall be inserted after sub-paragraph (3)—

(3A)Where an amount arrived at in accordance with sub-paragraph (3) is an amount—

(a)which is not a multiple of £10, and

(b)which on division by ten does not produce a remainder of £5,

the amount of the trailer supplement is the amount arrived at rounded (either up or down) to the nearest amount which is a multiple of £10.

(3B)Where an amount arrived at in accordance with sub-paragraph (3) is an amount which on division by ten produces a remainder of £5, the amount of the trailer supplement is the amount arrived at increased by £5.

(10)Paragraph 10(4) (reference to paragraph 12) shall be omitted.

(11)In paragraph 11(1) (rates of duty for tractive units)—

(a)at the beginning there shall be inserted “Subject to sub-paragraphs (2) and (3),”;

(b)for the words “a plated train weight (or, in Northern Ireland, a relevant maximum train weight) exceeding 7,500 kilograms” there shall be substituted “a revenue weight exceeding 3,500 kilograms”;

(c)in paragraph (a) for the words “plated train weight (or relevant maximum train weight)” there shall be substituted “revenue weight”.

(12)The following table shall be substituted for the table in paragraph 11(1)—

Revenue weight of tractive unit
(1) Exceeding(2) Not exceeding
Rate for tractive unit with two axles
(3) Any no. of semi-trailer axles(4) 2 or more semi-trailer axles(5) 3 or more semi-trailer axles
Rate for tractive unit with three or more axles
(6) Any no. of semi-trailer axles(7) 2 or more semi-trailer axles(8) 3 or more semi-trailer axles
kgskgs££££££
3,5007,500150150150150150150
7,50012,000290290290290290290
12,00016,000440440440440440440
16,00020,000500440440440440440
20,00023,000780440440440440440
23,00026,0001,150570440570440440
26,00028,0001,1501,0904401,090440440
28,00031,0001,6801,6801,0501,680640440
31,00033,0002,4502,4501,6802,450970440
33,00034,0005,0005,0001,6802,4501,420550
34,00036,0005,0005,0002,7502,4502,030830
36,00038,0005,0005,0003,1002,7302,7301,240
38,00044,0005,0005,0003,1002,7302,7301,240

(13)For sub-paragraph (2) of paragraph 11 there shall be substituted the following sub-paragraphs—

(2)The annual rate of vehicle excise duty applicable—

(a)to any tractive unit which is a showman’s goods vehicle with a revenue weight exceeding 3,500 kilograms but not exceeding 44,000 kilograms, and

(b)to any tractive unit which is an island goods vehicle with a revenue weight exceeding 3,500 kilograms,

shall be the basic goods vehicle rate.

(3)The annual rate of vehicle excise duty applicable to a tractive unit which has a revenue weight exceeding 44,000 kilograms and is not an island goods vehicle shall be the heavy tractive unit rate.

(4)In sub-paragraph (2) the reference to the basic goods vehicle rate is to the rate applicable, by virtue of sub-paragraph (1) of paragraph 9, to a rigid goods vehicle which falls within column (3) of the table in that sub-paragraph and has a revenue weight exceeding 3,500 kilograms and not exceeding 7,500 kilograms.

(5)In sub-paragraph (3) the reference to the heavy tractive unit rate is to the rate applicable, by virtue of sub-paragraph (1), to a tractive unit which falls within column (3) of the table in that sub-paragraph and has a revenue weight exceeding 38,000 kilograms and not exceeding 44,000 kilograms.

(14)Paragraph 12 (farmers' goods vehicles and showmen’s goods vehicles) shall be omitted.

(15)In paragraph 13(1) (regulations for reducing plated weights) for the words from “its plated gross weight” to “weight specified” there shall be substituted “its revenue weight were such lower weight as may be specified”.

(16)In paragraph 14 (vehicles for conveying machines) sub-paragraphs (b) and (c) shall be omitted.

(17)In paragraph 17(1) (meaning of “trailer”)—

(a)at the end of paragraph (a) there shall be inserted “or”;

(b)paragraphs (c) to (e) (road construction vehicles, certain farming implements drawn by farmer’s goods vehicle, and certain trailers used to carry gas for propulsion, excluded from meaning of “trailer”) shall be omitted.

(18)Paragraph 17(2) (interpretation of paragraph 17(1)(e)) shall be omitted.

(19)The following shall be inserted after paragraph 17—

Meaning of “island goods vehicle”

18(1)In this Part “island goods vehicle” means any goods vehicle which—

(a)is kept for use wholly or partly on the roads of one or more small islands; and

(b)is not kept or used on any mainland road, except in a manner authorised by sub-paragraph (2) or (3).

(2)The keeping or use of a goods vehicle on a mainland road is authorised by this sub-paragraph if—

(a)the road is one used for travel between a landing place and premises where vehicles disembarked at that place are loaded or unloaded, or both;

(b)the length of the journey, using that road, from that landing place to those premises is not more than five kilometres;

(c)the vehicle in question is one which was disembarked at that landing place after a journey by sea which began on a small island; and

(d)the loading or unloading of that vehicle is to take place, or has taken place, at those premises.

(3)The keeping or use of a goods vehicle on a mainland road is authorised by this sub-paragraph if—

(a)that vehicle has a revenue weight not exceeding 17,000 kilograms;

(b)that vehicle is normally kept at a base or centre on a small island; and

(c)the only journeys for which that vehicle is used are ones that begin or end at that base or centre.

(4)References in this paragraph to a small island are references to any such island falling within sub-paragraph (5) as may be designated as a small island by an order made by the Secretary of State.

(5)An island falls within this sub-paragraph if—

(a)it has an area of 230,000 hectares or less; and

(b)the absence of a bridge, causeway, tunnel, ford or other way makes it at all times impracticable for road vehicles to be driven under their own power from that island as far as the mainland.

(6)The reference in sub-paragraph (5) to driving a road vehicle as far as the mainland is a reference to driving it as far as any public road in the United Kingdom which is not on an island with an area of 230,000 hectares or less and is not a road connecting two such islands.

(7)In this paragraph—

  • “island” includes anything that is an island only when the tide reaches a certain height;

  • “landing place” means any place at which vehicles are disembarked after sea journeys;

  • “mainland road” means any public road in the United Kingdom, other than one which is on a small island or which connects two such islands; and

  • “road vehicles” means vehicles which are designed or adapted primarily for being driven on roads and which do not have any special features for facilitating their being driven elsewhere;

and references in this paragraph to the loading or unloading of a vehicle include references to the loading or unloading of its trailer or semi-trailer.

Charge at higher rate

15In section 17 of the 1994 Act (exceptions from charge at higher rate) the following provisions shall be omitted—

(a)subsections (3) to (5) (provisions about farmers' goods vehicles);

(b)subsections (6) and (7) (agricultural tractors and farmers' goods vehicles in Northern Ireland).

Commencement

16(1)This Part of this Schedule shall apply in relation to licences taken out on or after 1st July 1995.

(2)This Part of this Schedule shall also apply in relation to any use after 30th June 1995 of a vehicle which—

(a)had a plated gross weight or plated train weight (or, in Northern Ireland, a relevant maximum weight or relevant maximum train weight) on that date, and

(b)at the time when it is used has a confirmed maximum weight which, if that had been its plated gross weight or plated train weight (or relevant maximum weight or relevant maximum train weight) on that date, would have brought it within a description of vehicle to which a higher rate of duty was applicable on that date.

Part IVRates: Supplementary

Introduction

17This Part of this Schedule (which supplements provisions of Part III of this Schedule) makes—

(a)provision for determining the revenue weight of a vehicle, and

(b)consequential amendments.

Issue of vehicle licences

18In section 7(3) of the 1994 Act (matters that may be contained in declarations and particulars to be made or furnished by applicants for licences) for paragraph (b) there shall be substituted—

(b)the vehicle’s revenue weight,

(ba)the place where the vehicle has been or is normally kept, and.

Exchange of licences

19In section 15(4) of the 1994 Act (exchange of licences where higher rate becomes chargeable) at the beginning there shall be inserted “Subject to section 7(5),”.

Exceptions from charge at higher rate

20In section 16 of the 1994 Act (exceptions from charge at higher rate) in each of subsections (2)(b)(i), (4)(b)(i) and (6)(b)(i) for the words “a plated train weight (or, in Northern Ireland, a relevant maximum train weight)” there shall be substituted “a revenue weight”.

Combined road and rail transport

21In section 20 of the 1994 Act (combined road and rail transport) for subsection (3) there shall be substituted the following subsection—

(3)In this section “relevant goods vehicle” means any vehicle the rate of duty applicable to which is provided for in Part VIII of Schedule 1 or which would be such a vehicle if Part VI of that Schedule did not apply to the vehicle.

Relevant higher rate used in calculating penalty

22In section 39 of the 1994 Act (relevant higher rate used in calculating penalty)—

(a)in subsection (2)(a) for the words “plated gross weight or plated train weight (or, in Northern Ireland, a relevant maximum weight or relevant maximum train weight)” there shall be substituted “revenue weight”;

(b)in each of subsections (4)(a) and (5)(a) for the words “plated gross weight or plated train weight (or, in Northern Ireland, relevant maximum weight or relevant maximum train weight)” there shall be substituted “revenue weight”;

(c)in the words after paragraph (b) of each of subsections (4) and (5) for the words “plated gross weight or plated train weight (or relevant maximum weight or relevant maximum train weight)” there shall be substituted “revenue weight”.

Relevant period used in calculating penalty

23In section 40(2) of the 1994 Act (relevant period used in calculating penalty)—

(a)for the words “plated gross weight or a plated train weight (or, in Northern Ireland, a relevant maximum weight or relevant maximum train weight)” there shall be substituted “revenue weight”;

(b)for the words “was plated with (or rated at) the higher weight” there shall be substituted “became a vehicle with a higher revenue weight”.

False or misleading information etc.

24In section 45 of the 1994 Act (false or misleading information) after subsection (3) there shall be inserted the following subsections—

(3A)A person who, in supplying information or producing documents for the purposes of any regulations made under section 61A—

(a)makes a statement which to his knowledge is false or in any material respect misleading or recklessly makes a statement which is false or in any material respect misleading, or

(b)produces or otherwise makes use of a document which to his knowledge is false or in any material respect misleading,

is guilty of an offence.

(3B)A person who—

(a)with intent to deceive, forges, alters or uses a certificate issued by virtue of section 61A;

(b)knowing or believing that it will be used for deception lends such a certificate to another or allows another to alter or use it; or

(c)without reasonable excuse makes or has in his possession any document so closely resembling such a certificate as to be calculated to deceive,

is guilty of an offence.

25In section 60(2) of the 1994 Act (orders subject to annulment), after “section 3(3)” there shall be inserted “, paragraph 18(4) of Schedule 1”.

Meaning of “revenue weight”

26Immediately before section 61 of the 1994 Act there shall be inserted the following section—

60AMeaning of “revenue weight”.

(1)Any reference in this Act to the revenue weight of a vehicle is a reference—

(a)where it has a confirmed maximum weight, to that weight; and

(b)in any other case, to the weight determined in accordance with the following provisions of this section.

(2)For the purposes of this Act a vehicle which does not have a confirmed maximum weight shall have a revenue weight which, subject to the following provisions of this section, is equal to its design weight.

(3)Subject to subsection (4), the design weight of a vehicle is, for the purposes of this section—

(a)in the case of a tractive unit, the weight which is required, by the design and any subsequent adaptations of that vehicle, not to be exceeded by an articulated vehicle which—

(i)consists of the vehicle and any semi-trailer capable of being drawn by it, and

(ii)is in normal use and travelling on a road laden;

and

(b)in the case of any other vehicle, the weight which the vehicle itself is designed or adapted not to exceed when in normal use and travelling on a road laden.

(4)Where, at any time, a vehicle—

(a)does not have a confirmed maximum weight,

(b)has previously had such a weight, and

(c)has not acquired a different design weight by reason of any adaptation made since the most recent occasion on which it had a confirmed maximum weight,

the vehicle’s design weight at that time shall be equal to its confirmed maximum weight on that occasion.

(5)An adaptation reducing the design weight of a vehicle shall be disregarded for the purposes of this section unless it is a permanent adaptation.

(6)For the purposes of this Act where—

(a)a vehicle which does not have a confirmed maximum weight is used on a public road in the United Kingdom, and

(b)at the time when it is so used—

(i)the weight of the vehicle, or

(ii)in the case of a tractive unit used as part of an articulated vehicle consisting of the vehicle and a semi-trailer, the weight of the articulated vehicle,

exceeds what, apart from this subsection, would be the vehicle’s design weight,

it shall be conclusively presumed, as against the person using the vehicle, that the vehicle has been temporarily adapted so as to have a design weight while being so used equal to the actual weight of the vehicle or articulated vehicle at that time.

(7)For the purposes of this Act limitations on the space available on a vehicle for carrying a load shall be disregarded in determining the weight which the vehicle is designed or adapted not to exceed when in normal use and travelling on a road laden.

(8)A vehicle which does not have a confirmed maximum weight shall not at any time be taken to have a revenue weight which is greater than the maximum laden weight at which that vehicle or, as the case may be, an articulated vehicle consisting of that vehicle and a semi-trailer may lawfully be used in Great Britain.

(9)A vehicle has a confirmed maximum weight at any time if at that time—

(a)it has a plated gross weight or a plated train weight; and

(b)that weight is the maximum laden weight at which that vehicle or, as the case may be, an articulated vehicle consisting of that vehicle and a semi-trailer may lawfully be used in Great Britain;

and the confirmed maximum weight of a vehicle with such a weight shall be taken to be the weight referred to in paragraph (a).

(10)Where any vehicle has a special maximum weight in Northern Ireland which is greater than the maximum laden weight at which that vehicle or, as the case may be, an articulated vehicle consisting of that vehicle and a semi-trailer may lawfully be used in Great Britain, this section shall have effect, in relation to that vehicle, as if the references to Great Britain in subsections (8) and (9) were references to Northern Ireland.

(11)For the purposes of this section a vehicle has a special maximum weight in Northern Ireland if an order under Article 29(3) of the [S.I. 1981/154(N.I. 1).] Road Traffic (Northern Ireland) Order 1981 (authorisation of use on roads of vehicles and trailers not complying with regulations) has effect in relation to that vehicle for determining the maximum laden weight at which it may lawfully be used in Northern Ireland or, as the case may be, for determining the maximum laden weight at which an articulated vehicle consisting of that vehicle and a semi-trailer may lawfully be used there.

Interpretation

27(1)In subsection (3) of section 61 of the 1994 Act (meaning of “appropriate plate”)—

(a)the word “and” shall be inserted at the end of paragraph (a); and

(b)paragraph (c) (plated weight determined by reference to section 41 of the [1988 c. 52.] Road Traffic Act 1988) and the word “and” immediately preceding it shall be omitted.

(2)After subsection (3) of that section there shall be inserted the following subsection—

(3A)Where it appears to the Secretary of State that there is a description of document which—

(a)falls to be treated for some or all of the purposes of the [1988 c. 52.] Road Traffic Act 1988 as if it were a plating certificate, or

(b)is issued under the law of any state in the European Economic Area for purposes which are or include purposes corresponding to those for which such a certificate is issued,

he may by regulations provide for references in this section to a plating certificate to have effect as if they included references to a document of that description.

(3)Subsections (4), (5) and (7) of that section (relevant weights in Northern Ireland and definition of “design weight”) shall be omitted.

Certificates as to vehicle weight

28After section 61 of the 1994 Act there shall be inserted the following section—

61ACertificates etc. as to vehicle weight.

(1)The Secretary of State may by regulations make provision—

(a)for the making of an application to the Secretary of State for the issue of a certificate stating the design weight of a vehicle;

(b)for the manner in which any determination of the design weight of any vehicle is to be made on such an application and for the issue of a certificate on the making of such a determination;

(c)for the examination, for the purposes of the determination of the design weight of a vehicle, of that vehicle by such persons, and in such manner, as may be prescribed by the regulations;

(d)for a certificate issued on the making of such a determination to be treated as having conclusive effect for the purposes of this Act as to such matters as may be prescribed by the regulations;

(e)for the Secretary of State to be entitled, in cases prescribed by the regulations, to require the production of such a certificate before making a determination for the purposes of section 7(5); and

(f)for appeals against determinations made in accordance with the regulations.

(2)Regulations under this section may provide for an adaptation of a vehicle—

(a)to be taken into account in determining the design weight of a vehicle in a case to which section 60A(6) does not apply, or

(b)to be treated as permanent for the purposes of section 60A(5),

if, and only if, it is an adaptation with respect to which a certificate has been issued under the regulations.

(3)Regulations under this section may provide that such documents purporting to be plating certificates (within the meaning of Part II of the [1988 c. 52.] Road Traffic Act 1988) as satisfy requirements prescribed by the regulations are to have effect, for some or all of the purposes of this Act, as if they were certificates issued under such regulations.

(4)Without prejudice to the generality of the preceding provisions of this section, regulations under this section may, in relation to—

(a)the examination of a vehicle on an application under the regulations, or

(b)any appeals against determinations made for the purposes of the issue of a certificate in accordance with the regulations,

make provision corresponding to, or applying (with or without modifications), any of the provisions having effect by virtue of so much of sections 49 to 51 of the [1988 c. 52.] Road Traffic Act 1988 as relates to examinations authorised by virtue of, or appeals under, any of those sections.

(5)In this section “design weight” has the same meaning as in section 60A.

Commencement

29Paragraph 16 above shall apply for the purposes of this Part of this Schedule as it applies for the purposes of Part III of this Schedule.

Part VLicences

Applications for licences

30(1)In section 7 of the 1994 Act (issue of vehicle licences)—

(a)in subsection (1) (regulations about applications) for “prescribed by regulations made” there shall be substituted “specified”;

(b)in subsection (2) for “prescribed” there shall be substituted “specified”.

(2)In section 11 of the 1994 Act (issue of trade licences) in subsection (1) (regulations about applications)—

(a)for “prescribed by regulations made” there shall be substituted “specified”;

(b)for “so prescribed” there shall be substituted “prescribed by regulations made by the Secretary of State”.

(3)This paragraph shall apply in relation to applications made after the day on which this Act is passed.

Duration of trade licences

31(1)In section 13 of the 1994 Act (duration of trade licences) in subsection (1) at the end of paragraph (c) there shall be inserted “and ending no later than the relevant date.”

(2)After subsection (1) of that section there shall be inserted—

(1A)In subsection (1)(c) “the relevant date” means—

(a)in relation to a licence taken out for a period beginning with the first day of any of the months February to June in any year, 31st December of that year;

(b)in relation to a licence taken out for a period beginning with the first day of any of the months August to December in any year, 30th June of the following year.

(3)This paragraph shall apply in relation to licences taken out after the day on which this Act is passed.

Payment for licences by cheque

32(1)The following section shall be inserted after section 19 of the 1994 Act—

19APayment for licences by cheque.

(1)The Secretary of State may, if he thinks fit, issue a vehicle licence or a trade licence on receipt of a cheque for the amount of the duty payable on it.

(2)In a case where—

(a)a vehicle licence or a trade licence is issued to a person on receipt of a cheque which is subsequently dishonoured, and

(b)the Secretary of State sends a notice by post to the person informing him that the licence is void as from the time when it was granted,

the licence shall be void as from the time when it was granted.

(3)In a case where—

(a)a vehicle licence or a trade licence is issued to a person on receipt of a cheque which is subsequently dishonoured,

(b)the Secretary of State sends a notice by post to the person requiring him to secure that the duty payable on the licence is paid within such reasonable period as is specified in the notice,

(c)the requirement in the notice is not complied with, and

(d)the Secretary of State sends a further notice by post to the person informing him that the licence is void as from the time when it was granted,

the licence shall be void as from the time when it was granted.

(4)Section 102 of the [1979 c. 2.] Customs and Excise Management Act 1979 (payment for excise licences by cheque) shall not apply in relation to a vehicle licence or a trade licence.

(2)The following section shall be inserted after section 35 of the 1994 Act—

35ADishonoured cheques.

(1)In a case where—

(a)a notice sent as mentioned in section 19A(2)(b) or a further notice sent as mentioned in section 19A(3)(d) requires the person to deliver up the licence within such reasonable period as is specified in the notice, and

(b)the person fails to comply with the requirement within that period,

he shall be liable on summary conviction to a penalty of an amount found under subsection (2).

(2)The amount is whichever is the greater of—

(a)level 3 on the standard scale;

(b)an amount equal to five times the annual rate of duty that was payable on the grant of the licence or would have been so payable if it had been taken out for a period of twelve months.

(3)In section 36 of the 1994 Act (dishonoured cheques: additional liability) in subsection (1) for the words from “102” to “cheque)” there shall be substituted “35A”.

(4)This paragraph shall apply in relation to licences taken out after the day on which this Act is passed.

Part VIRegistration

33In section 21 of the 1994 Act (registration of vehicles) at the beginning of subsections (1) and (2) there shall be inserted “Subject to subsection (3)” and after subsection (2) there shall be inserted—

(3)The Secretary of State may by regulations provide that in such circumstances as may be prescribed by the regulations a vehicle shall not be registered under this section until a fee of such amount as may be so prescribed is paid.

(4)The Secretary of State may by regulations make provision about repayment of any sum paid by way of a fee mentioned in subsection (3), and the regulations may in particular include provision—

(a)that repayment shall be made only if a specified person is satisfied that specified conditions are met or in other specified circumstances;

(b)that repayment shall be made in part only;

(c)that, in the case of partial repayment, the amount repaid shall be a specified sum or determined in a specified manner;

(d)for repayment of different amounts in different circumstances;

and “specified” here means specified in the regulations.

34(1)Section 22 of the 1994 Act (registration regulations) shall be amended as follows.

(2)In subsection (1) the following paragraph shall be inserted after paragraph (d)—

(dd)require a person by whom any vehicle is sold or disposed of to furnish the person to whom it is sold or disposed of with such document relating to the vehicle’s registration as may be prescribed by the regulations, and to do so at such time as may be so prescribed.

(3)The following subsections shall be inserted after subsection (1)—

(1A)The Secretary of State may make regulations providing for the sale of information derived from particulars contained in the register—

(a)to such persons as the Secretary of State thinks fit, and

(b)for such price and on such other terms, and subject to such restrictions, as he thinks fit,

if the information does not identify any person or contain anything enabling any person to be identified.

(1B)Without prejudice to the generality of paragraph (d) of subsection (1) above, regulations under that paragraph may require—

(a)any person there mentioned to furnish particulars to the other person there mentioned or to the Secretary of State or to both;

(b)any person there mentioned who is furnished with particulars in pursuance of the regulations to furnish them to the Secretary of State.

Part VIIOffences

35(1)In section 31 of the 1994 Act (relevant period for purposes of additional liability) in subsection (5)(b) (case where duty or amount equal to duty has been paid) the words “(or an amount equal to the duty due)” shall be omitted.

(2)This paragraph shall apply in relation to offences committed after the day on which this Act is passed.

36(1)The following section shall be inserted after section 32 of the 1994 Act—

32AImmobilisation, removal and disposal of vehicles.

Schedule 2A (which relates to the immobilisation of vehicles as regards which it appears that an offence under section 29(1) is being committed and to their removal and disposal) shall have effect.

(2)The following Schedule shall be inserted after Schedule 2 to the 1994 Act—

SCHEDULE 2AImmobilisation, removal and disposal of vehicles

Immobilisation

1(1)The Secretary of State may make regulations under this Schedule with respect to any case where an authorised person has reason to believe that, on or after such date as may be prescribed, an offence under section 29(1) is being committed as regards a vehicle which is stationary on a public road.

(2)The regulations may provide that the authorised person or a person acting under his direction may—

(a)fix an immobilisation device to the vehicle while it remains in the place where it is stationary, or

(b)move it from that place to another place on the same or another public road and fix an immobilisation device to it in that other place.

(3)The regulations may provide that on any occasion when an immobilisation device is fixed to a vehicle in accordance with the regulations the person fixing the device shall also fix to the vehicle a notice—

(a)indicating that the device has been fixed to the vehicle and warning that no attempt should be made to drive it or otherwise put it in motion until it has been released from the device;

(b)specifying the steps to be taken to secure its release;

(c)giving such other information as may be prescribed.

(4)The regulations may provide that—

(a)a vehicle to which an immobilisation device has been fixed in accordance with the regulations may only be released from the device by or under the direction of an authorised person;

(b)subject to that, such a vehicle shall be released from the device if the first and second requirements specified below are met.

(5)The first requirement is that such charge in respect of the release as may be prescribed is paid in any manner specified in the immobilisation notice.

(6)The second requirement is that—

(a)a vehicle licence is produced in accordance with instructions specified in the immobilisation notice, and the licence is one which is in force for the vehicle concerned at the time the licence is produced, or

(b)where such a licence is not produced, such sum as may be prescribed is paid in any manner specified in the immobilisation notice.

(7)The regulations may provide that they shall not apply in relation to a vehicle if—

(a)a current disabled person’s badge is displayed on the vehicle, or

(b)such other conditions as may be prescribed are fulfilled;

and “disabled person’s badge” here means a badge issued, or having effect as if issued, under any regulations for the time being in force under section 21 of the Chronically Sick and Disabled Persons Act 1970 or any regulations for the [1970 c. 44.] time being in force under section 14 of the [1978 c. 53.] Chronically Sick and Disabled Persons (Northern Ireland) Act 1978.

(8)The regulations may provide that an immobilisation notice shall not be removed or interfered with except by or on the authority of a person falling within a prescribed description.

Offences connected with immobilisation

2(1)The regulations may provide that a person contravening provision made under paragraph 1(8) is guilty of an offence and liable on summary conviction to a fine not exceeding level 2 on the standard scale.

(2)The regulations may provide that a person who, without being authorised to do so in accordance with provision made under paragraph 1, removes or attempts to remove an immobilisation device fixed to a vehicle in accordance with the regulations is guilty of an offence and liable on summary conviction to a fine not exceeding level 3 on the standard scale.

(3)The regulations may provide that where they would apply in relation to a vehicle but for provision made under paragraph 1(7)(a) and the vehicle was not, at the time it was stationary, being used—

(a)in accordance with regulations under section 21 of the [1970 c. 44.] Chronically Sick and Disabled Persons Act 1970 or regulations under section 14 of the [1978 c. 53.] Chronically Sick and Disabled Persons (Northern Ireland) Act 1978, and

(b)in circumstances falling within section 117(1)(b) of the [1984 c. 27.] Road Traffic Regulation Act 1984 or Article 174A(2)(b) of the [S.I. 1981/154 (N.I.1).] Road Traffic (Northern Ireland) Order 1981 (use where a disabled person’s concession would be available),

the person in charge of the vehicle at that time is guilty of an offence and liable on summary conviction to a fine not exceeding level 3 on the standard scale.

(4)The regulations may provide that where—

(a)a person makes a declaration with a view to securing the release of a vehicle from an immobilisation device purported to have been fixed in accordance with the regulations,

(b)the declaration is that the vehicle is or was an exempt vehicle, and

(c)the declaration is to the person’s knowledge either false or in any material respect misleading,

he is guilty of an offence.

(5)The regulations may provide that a person guilty of an offence by virtue of provision made under sub-paragraph (4) is liable—

(a)on summary conviction, to a fine not exceeding the statutory maximum, and

(b)on conviction on indictment, to imprisonment for a term not exceeding two years or to a fine or (except in Scotland) to both.

Removal and disposal of vehicles

3(1)The regulations may make provision as regards a case where—

(a)an immobilisation device is fixed to a vehicle in accordance with the regulations, and

(b)such conditions as may be prescribed are fulfilled.

(2)The regulations may provide that an authorised person, or a person acting under the direction of an authorised person, may remove the vehicle and deliver it into the custody of a person—

(a)who is identified in accordance with prescribed rules, and

(b)who agrees to accept delivery in accordance with arrangements agreed between that person and the Secretary of State;

and the arrangements may include provision as to the payment of a sum to the person into whose custody the vehicle is delivered.

(3)The regulations may provide that the person into whose custody the vehicle is delivered may dispose of it, and in particular provision may be made as to—

(a)the time at which the vehicle may be disposed of;

(b)the manner in which it may be disposed of.

(4)The regulations may make provision allowing a person to take possession of the vehicle if—

(a)he claims it before it is disposed of, and

(b)any prescribed conditions are fulfilled.

(5)The regulations may provide for a sum of an amount arrived at under prescribed rules to be paid to a person if—

(a)he claims after the vehicle’s disposal to be or to have been its owner,

(b)the claim is made within a prescribed time of the disposal, and

(c)any other prescribed conditions are fulfilled.

(6)The regulations may provide that—

(a)the Secretary of State, or

(b)a person into whose custody the vehicle is delivered under the regulations,

may recover from the vehicle’s owner (whether or not a claim is made under provision made under sub-paragraph (4) or (5)) such charges as may be prescribed in respect of all or any of the following, namely, its release, removal, custody and disposal; and “owner” here means the person who was the owner when the immobilisation device was fixed.

(7)The conditions prescribed under sub-paragraph (4) may include conditions as to—

(a)satisfying the person with custody that the claimant is the vehicle’s owner;

(b)the payment of prescribed charges in respect of the vehicle’s release, removal and custody;

(c)the production of a vehicle licence;

(d)payment of a prescribed sum where a vehicle licence is not produced.

(8)Without prejudice to anything in the preceding provisions of this paragraph, the regulations may include provision for purposes corresponding to those of sections 101 and 102 of the [1984 c. 27.] Road Traffic Regulation Act 1984 (disposal and charges) subject to such additions, omissions or other modifications as the Secretary of State thinks fit.

Offences as to securing possession of vehicles

4(1)The regulations may provide that where—

(a)a person makes a declaration with a view to securing possession of a vehicle purported to have been delivered into the custody of a person in accordance with provision made under paragraph 3,

(b)the declaration is that the vehicle is or was an exempt vehicle, and

(c)the declaration is to the person’s knowledge either false or in any material respect misleading,

he is guilty of an offence.

(2)The regulations may provide that a person guilty of such an offence is liable—

(a)on summary conviction, to a fine not exceeding the statutory maximum, and

(b)on conviction on indictment, to imprisonment for a term not exceeding two years or to a fine or (except in Scotland) to both.

Payment of sum where licence not produced

5(1)The regulations may make provision as regards a case where a person pays a prescribed sum in pursuance of provision made under—

(a)paragraph 1(6)(b), or

(b)paragraph 3(7)(d).

(2)The regulations may—

(a)provide for a voucher to be issued in respect of the sum;

(b)provide for setting the sum against the amount of any vehicle excise duty payable in respect of the vehicle concerned;

(c)provide for the refund of any sum;

(d)provide that where a voucher has been issued section 29(1) and any other prescribed provision of this Act shall not apply, as regards the vehicle concerned, in relation to events occurring in a prescribed period.

(3)The regulations may make provision—

(a)as to the information to be provided before a voucher is issued;

(b)as to the contents of vouchers;

(c)specifying conditions subject to which any provision under sub-paragraph (2)(b) to (d) is to have effect.

(4)The regulations may make provision as to any case where a voucher is issued on receipt of a cheque which is subsequently dishonoured, and in particular the regulations may—

(a)provide for a voucher to be void;

(b)provide that, where the sum concerned is set against the amount of any vehicle excise duty, the licence concerned shall be void;

(c)make provision under which a person is required to deliver up a void voucher or void licence.

Offences relating to vouchers

6(1)The regulations may provide that—

(a)a person is guilty of an offence if within such reasonable period as is found in accordance with prescribed rules he fails to deliver up a voucher that is void by virtue of provision made under paragraph 5(4);

(b)a person guilty of such an offence shall be liable on summary conviction to a fine not exceeding level 3 on the standard scale.

(2)The regulations may provide that a person is guilty of an offence if within such reasonable period as is found in accordance with prescribed rules he fails to deliver up a licence that is void by virtue of provision made under paragraph 5(4), and that a person guilty of such an offence shall be liable on summary conviction to a penalty of whichever is the greater of—

(a)level 3 on the standard scale;

(b)an amount equal to five times the annual rate of duty that was payable on the grant of the licence or would have been so payable if it had been taken out for a period of twelve months.

(3)The regulations may provide that where a person is convicted of an offence under provision made by virtue of sub-paragraph (2) he must pay, in addition to any penalty, an amount found in accordance with prescribed rules.

(4)The regulations may provide that if—

(a)a voucher is void by virtue of provision made under paragraph 5(4),

(b)a person seeks to set the sum concerned against the amount of any vehicle excise duty, and

(c)he knows the voucher is void,

he is guilty of an offence and liable on summary conviction to a fine not exceeding level 5 on the standard scale.

(5)The regulations may provide that a person who in connection with—

(a)obtaining a voucher for which provision is made under paragraph 5, or

(b)obtaining a refund of any sum in respect of which such a voucher is issued,

makes a declaration which to his knowledge is either false or in any material respect misleading is guilty of an offence.

(6)The regulations may provide that a person is guilty of an offence if he forges, fraudulently alters, fraudulently uses, fraudulently lends or fraudulently allows to be used by another person a voucher for which provision is made under paragraph 5.

(7)The regulations may provide that a person guilty of an offence under provision made under sub-paragraph (5) or (6) is liable—

(a)on summary conviction, to a fine not exceeding the statutory maximum, and

(b)on conviction on indictment, to imprisonment for a term not exceeding two years or to a fine or (except in Scotland) to both.

Vouchers: general

7Without prejudice to anything in paragraphs 5(4) and 6 the regulations may include provision for purposes corresponding to those of sections 19A and 36 subject to such additions, omissions or other modifications as the Secretary of State thinks fit.

Disputes

8The regulations may make provision about the proceedings to be followed where a dispute occurs as a result of the regulations, and in particular provision may be made—

(a)for an application to be made to a magistrates' court or (in Northern Ireland) a court of summary jurisdiction;

(b)for a court to order a sum to be paid by the Secretary of State.

Authorised persons

9As regards anything falling to be done under the regulations (such as receiving payment of a charge or other sum or issuing a voucher) the regulations may provide that it may be done—

(a)by an authorised person, or

(b)by an authorised person or a person acting under his direction.

Application of provisions

10(1)The regulations may provide that they shall only apply where the authorised person has reason to believe that the offence mentioned in paragraph 1(1) is being committed before such date as may be prescribed.

(2)The regulations may provide that they shall only apply where the vehicle mentioned in paragraph 1(1) is in a prescribed area.

(3)Different dates may be prescribed under paragraph 1(1) or sub-paragraph (1) above in relation to different areas prescribed under sub-paragraph (2) above.

Interpretation

11(1)The regulations may make provision as to the meaning for the purposes of the regulations of “owner” as regards a vehicle.

(2)In particular, the regulations may provide that for the purposes of the regulations—

(a)the owner of a vehicle at a particular time shall be taken to be the person by whom it is then kept;

(b)the person by whom a vehicle is kept at a particular time shall be taken to be the person in whose name it is then registered by virtue of this Act.

12(1)The regulations may make provision as to the meaning in the regulations of “authorised person”.

(2)In particular, the regulations may provide that—

(a)references to an authorised person are to a person authorised by the Secretary of State for the purposes of the regulations;

(b)an authorised person may be a local authority or an employee of a local authority or a member of a police force or some other person;

(c)different persons may be authorised for the purposes of different provisions of the regulations.

13In this Schedule—

(a)references to an immobilisation device are to a device or appliance which is an immobilisation device for the purposes of section 104 of the [1984 c. 27.] Road Traffic Regulation Act 1984 (immobilisation of vehicles illegally parked);

(b)references to an immobilisation notice are to a notice fixed to a vehicle in accordance with the regulations;

(c)“prescribed” means prescribed by regulations made under this Schedule.

37(1)In section 37(2) of the 1994 Act (penalty where duty at higher rate is not paid) the following shall be omitted—

(a)the words “(or, in Scotland, on indictment or on summary conviction)”, and

(b)the words “(or, in Scotland, the statutory maximum)”.

(2)In section 41(1)(b) of the 1994 Act (order in Scotland in case of offence under section 37) the words “182 or” and “183 or” shall be omitted.

(3)This paragraph shall apply in relation to proceedings begun after the day on which this Act is passed.

Part VIIIProceedings

38(1)In section 52 of the 1994 Act (records)—

(a)for the words “section 17(3) of the [1968 c. 70.] Law Reform (Miscellaneous Provisions) (Scotland) Act 1968” in subsection (3)(b) (meaning of “statement” and “document” in Scotland), and

(b)for the words “section 17(4) of the [1968 c. 70.] Law Reform (Miscellaneous Provisions) (Scotland) Act 1968” in subsection (4)(b) (construction of references to a copy of a document in Scotland),

there shall be substituted “Schedule 3 to the [1993 c. 9.] Prisoners and Criminal Proceedings (Scotland) Act 1993.”

(2)This paragraph shall apply in relation to proceedings begun after the day on which this Act is passed.

Part IXTransitionals

Higher rate not to apply

39(1)This paragraph applies where a vehicle licence is taken out—

(a)before 1st July 1995, and

(b)at the rate applicable (at the time it is taken out) under Schedule 1 to the 1994 Act or any provision re-enacted in that Schedule.

(2)While the licence is in force duty shall not, by virtue of any provision contained in Part III or IV of this Schedule other than paragraph 16(2) above, become chargeable under section 15 of the 1994 Act (vehicle used in manner attracting higher rate).

Regulations

40(1)This paragraph applies where regulations to determine the seating capacity of a hackney carriage are made, or have effect as if made, under sub-paragraph (2) of paragraph 3 of Schedule 1 to the 1994 Act (as that paragraph has effect apart from the substitution made by paragraph 8 above).

(2)The regulations shall have effect as if made under sub-paragraph (5) of paragraph 3 of that Schedule (as substituted by paragraph 8 above) to determine the seating capacity of a vehicle.

(3)This paragraph shall apply in relation to licences taken out on or after 1st July 1995.

Part XSpecial Reliefs

Relief where exemption abolished

41(1)This paragraph applies where—

(a)a vehicle licence is taken out for a vehicle on or after 1st July 1995 and before 1st July 1996,

(b)the licence is the first vehicle licence to be taken out for the vehicle on or after 1st July 1995,

(c)the vehicle would be an exempt vehicle apart from paragraph 2 above, and

(d)the amount of vehicle excise duty to be paid on the licence would (apart from this paragraph) exceed £1,000.

(2)In such a case the amount of vehicle excise duty to be paid on the licence shall be £1,000.

(3)This paragraph shall be construed in accordance with the 1994 Act.

Relief where vehicle changes category

42(1)This paragraph applies where paragraph 41 above does not apply and—

(a)a vehicle licence is taken out for a vehicle on or after 1st July 1995 and before 1st July 1996,

(b)the licence is the first vehicle licence to be taken out for the vehicle on or after 1st July 1995,

(c)apart from Part III of this Schedule, the annual rate of vehicle excise duty applicable to the vehicle would be found under any of the provisions falling within sub-paragraph (3) below, and

(d)the new amount of duty exceeds the old amount of duty by more than £1,000.

(2)In such a case the amount of vehicle excise duty to be paid on the licence shall be an amount equal to £1,000 plus the old amount of duty.

(3)The provisions falling within this sub-paragraph are—

(a)paragraph 8(1) and (2)(b) of Schedule 1 to the 1994 Act;

(b)paragraph 8(1) and (2)(c) of that Schedule;

(c)paragraph 8(1) and (2)(d) of that Schedule;

(d)paragraph 12(2) of that Schedule;

(e)paragraph 12(3) to (5) of that Schedule.

(4)For the purposes of this paragraph—

(a)the new amount of duty is the amount of vehicle excise duty payable on the licence apart from this paragraph;

(b)the old amount of duty is the amount of vehicle excise duty that would be payable on the licence if Part III of this Schedule had not been enacted.

(5)This paragraph shall be construed in accordance with the 1994 Act.

Section 34.

SCHEDULE 5Insurance Premium Tax

1Part III of the [1994 c. 9.] Finance Act 1994 (insurance premium tax) shall be amended as provided by this Schedule.

2(1)Section 53 (registration of insurers) shall be amended as follows.

(2)In subsection (5) (Commissioners to cancel registration of person who ceases to receive premiums)—

(a)the word “and” shall be inserted after paragraph (a);

(b)paragraph (c) (person to satisfy Commissioners that no tax is unpaid) and the word “and” immediately preceding it shall be omitted.

(3)The following subsection shall be inserted after subsection (5)—

(5A)In a case where—

(a)the Commissioners are satisfied that a person has ceased to receive, as insurer, premiums in the course of any taxable business, but

(b)he has not notified them under subsection (3) above,

they may cancel his registration with effect from the earliest practicable time after he so ceased.

(4)Sub-paragraph (2) above shall apply in relation to notifications made under section 53(3) on or after the day on which this Act is passed.

3Section 53 shall be further amended by inserting the following subsection after subsection (1)—

(1A)The register kept under this section may contain such information as the Commissioners think is required for the purposes of the care and management of the tax.

4The following section shall be inserted after section 53—

53AInformation required to keep register up to date.

(1)Regulations may make provision requiring a registrable person to notify the Commissioners of particulars which—

(a)are of changes in circumstances relating to the registrable person or any business carried on by him,

(b)appear to the Commissioners to be required for the purpose of keeping the register kept under section 53 above up to date, and

(c)are of a prescribed description.

(2)Regulations may make provision—

(a)as to the time within which a notification is to be made;

(b)as to the form and manner in which a notification is to be made;

(c)requiring a person who has made a notification to notify the Commissioners if any information contained in it is inaccurate.

5(1)Section 59 (review of Commissioners' decisions) shall be amended as follows.

(2)In subsection (1)(d) (review of decision with respect to assessment) for the words “under section 56 above” there shall be substituted “falling within subsection (1A) below”.

(3)The following subsection shall be inserted after subsection (1)—

(1A)An assessment falls within this subsection if it is an assessment under section 56 above in respect of an accounting period in relation to which a return required to be made by virtue of regulations under section 54 above has been made.

(4)This paragraph shall apply in relation to assessments made on or after the day on which this Act is passed.

6In section 73(1) (interpretation) after the entry relating to “conduct” there shall be inserted—

“insurance business” means a business which consists of or includes the provision of insurance;.

7(1)In Schedule 7 (information, powers, etc.) paragraphs 2(1) to (3) and 3(1) to (3) (duty to furnish information and produce documents) shall be amended as follows—

(a)for the words “a taxable business” (in each place where they occur) there shall be substituted “an insurance business”;

(b)for the words “taxable insurance contracts” (in each place where they occur) there shall be substituted “contracts of insurance”;

(c)for the words “taxable insurance contract” (in each place where they occur) there shall be substituted “contract of insurance.”.

(2)This paragraph shall apply in relation to contracts whether entered into before or after the passing of this Act.

8(1)In Schedule 7 the following shall be inserted after paragraph 4—

Order for access to recorded information etc.

4A(1)Where, on an application by an authorised person, a justice of the peace or, in Scotland, a justice (within the meaning of section 462 of the [1975 c. 21.] Criminal Procedure (Scotland) Act 1975) is satisfied that there are reasonable grounds for believing—

(a)that an offence in connection with tax is being, has been or is about to be committed, and

(b)that any recorded information (including any document of any nature whatsoever) which may be required as evidence for the purpose of any proceedings in respect of such an offence is in the possession of any person,

he may make an order under this paragraph.

(2)An order under this paragraph is an order that the person who appears to the justice to be in possession of the recorded information to which the application relates shall—

(a)give an authorised person access to it, and

(b)permit an authorised person to remove and take away any of it which he reasonably considers necessary,

not later than the end of the period of 7 days beginning on the date of the order or the end of such longer period as the order may specify.

(3)The reference in sub-paragraph (2)(a) above to giving an authorised person access to the recorded information to which the application relates includes a reference to permitting the authorised person to take copies of it or to make extracts from it.

(4)Where the recorded information consists of information contained in a computer, an order under this paragraph shall have effect as an order to produce the information in a form in which it is visible and legible and, if the authorised person wishes to remove it, in a form in which it can be removed.

(5)This paragraph is without prejudice to paragraphs 3 and 4 above.

(2)In paragraph 5(1) of Schedule 7 (duty to provide record of anything removed in exercise of power) after the words “paragraph 4” there shall be inserted “or 4A”.

9In paragraph 7 of Schedule 7 (recovery of tax etc.) the following sub-paragraphs shall be substituted for sub-paragraph (8)—

(8)In respect of Scotland, where any tax or any amount recoverable as if it were tax is due and has not been paid, the sheriff, on an application by the Commissioners accompanied by a certificate by the Commissioners—

(a)stating that none of the persons specified in the application has paid the tax or other sum due from him,

(b)stating that payment of the amount due from each such person has been demanded from him, and

(c)specifying the amount due from and unpaid by each such person,

shall grant a summary warrant in a form prescribed by act of sederunt authorising the recovery, by any of the diligences mentioned in sub-paragraph (9) below, of the amount remaining due and unpaid.

(9)The diligences referred to in sub-paragraph (8) above are—

(a)a poinding and sale in accordance with Schedule 5 to the Debtors (Scotland) Act 1987;

(b)an earnings arrestment;

(c)an arrestment and action of furthcoming or sale.

(10)Subject to sub-paragraph (11) below and without prejudice to paragraphs 25 to 34 of Schedule 5 to the [1987 c. 18.] Debtors (Scotland) Act 1987 (expenses of poinding and sale) the sheriff officer’s fees, together with the outlays necessarily incurred by him, in connection with the execution of a summary warrant shall be chargeable against the debtor.

(11)No fee shall be chargeable by the sheriff officer against the debtor for collecting, and accounting to the Commissioners for, sums paid to him by the debtor in respect of the amount owing.

(12)Regulations may make provision for anything which the Commissioners may do under sub-paragraphs (8) to (11) above to be done by an officer of the Commissioners holding such rank as the regulations may specify.

Section 39.

SCHEDULE 6Amendments in connection with charge under Schedule A

The Taxes Act 1988

1Subsection (2) of section 15 of the Taxes Act 1988 (election under paragraph 4 of Schedule A) shall cease to have effect except for the purpose of being applied by virtue of section 9 of that Act for the purposes of corporation tax.

2In section 18(3) of that Act (Cases under Schedule D), in Case I, at the end there shall be inserted “but not contained in Schedule A”.

3Sections 22 and 23 of that Act (assessments to income tax under Schedule A and collection from lessees and agents) shall cease to have effect.

4The following provisions of Part II of that Act shall cease to have effect except for the purpose of being applied by virtue of section 9 of that Act for the purposes of corporation tax, that is to say—

(a)sections 25 and 28 (deductions from rent);

(b)section 29 (sporting rights);

(c)section 31 (supplementary provisions);

(d)section 33 (allowance for excess expenditure in relation to agricultural land);

(e)sections 33A and 33B (rents and receipts received by connected persons and payments made by connected persons);

(f)subsection (5) of section 40 (application of Schedule A rules as to receipts and outgoings on sale of land); and

(g)section 41 (relief for rent not paid).

5(1)Section 26 of that Act (land managed as one estate), except where it is applied for the purposes of corporation tax, shall have effect with the following modifications.

(2)Subsection (1) shall have effect as if—

(a)in paragraph (a), the words “at a full rent (not being a tenant’s repairing lease)” were omitted; and

(b)for the words from “not being” in paragraph (b) to the end of the subsection there were substituted “as if the rent, so far as it relates to that part and would otherwise be treated as being at a lower rate, were at a rate per annum equal to the relevant annual value.”

(3)Subsection (2) shall have effect as if paragraph (a) were omitted.

(4)The following subsection shall be deemed to be inserted after subsection (2)—

(2A)Where subsection (1) above applies, the following rules shall apply in computing the profits or gains on which the owner is charged under Schedule A—

(a)disbursements and expenses relating to any of that part of the estate which comprises land the rent in respect of which is determined under that subsection (“the relevant part of the estate”) shall not be deductible from any receipts which are not so determined except to the extent that—

(i)the amount of the disbursements and expenses exceeds the amount of the rent so determined; and

(ii)the receipts against which the remainder is set are receipts in respect of land comprised in the estate;

(b)any excess for any chargeable period of the disbursements and expenses relating to the relevant part of the estate (including any excess carried forward under this paragraph) over the receipts for that period from which they are deductible in accordance with paragraph (a) above—

(i)shall be disregarded in computing any loss in respect of which relief may be given under section 379A, but

(ii)may be carried forward to the following chargeable period and treated in relation to the later period as if it were a disbursement or expense relating to the relevant part of the estate;

(c)disbursements and expenses relating to any land not comprised in the relevant part of the estate shall be deductible from the deemed receipts in respect of the land which is so comprised to the extent only that the deemed receipts exceed the aggregate of—

(i)the actual disbursements and expenses for that period relating to the relevant part of the estate, and

(ii)any amounts carried forward to that period under paragraph (b) above;

and

(d)any excess of the disbursements and expenses for that period relating to land not comprised in the relevant part of the estate over the amounts from which they are deductible shall be treated for the purposes of section 379A as a loss for that period in the Schedule A business in question.

6(1)Subsection (3)(a) of section 27 of that Act (maintenance funds for historic buildings), except where it is applied for the purposes of corporation tax, shall be construed subject to subsection (2A) of section 26 (as deemed to be inserted by paragraph 5 above) and shall have effect as if—

(a)in the words before sub-paragraph (i), for “rents” there were substituted “receipts”;

(b)in sub-paragraph (i), for the words from “payments” to “section 25” there were substituted “disbursements or expenses of the trustees of the settlement which relate to the other part of the estate and which would be so deductible”; and

(c)for sub-paragraph (ii) there were substituted the following sub-paragraph—

(ii)any disbursements or expenses of the owner of the other part of the estate to the extent to which they cannot be deducted by him in the chargeable period in which they are incurred because of an insufficiency of any receipts for that period from which they are deductible apart from this sub-paragraph.

(2)Subsection (3)(b) of that section shall have effect, except where it is so applied, as if for “under section 33” there were substituted “by virtue of section 379A(2)(b)”.

7Section 30(1) of that Act (expenditure on sea walls), except where it is applied for the purposes of corporation tax, shall have effect as if—

(a)for “for the purposes of sections 25, 28 and 31” there were substituted “for the purpose of computing the profits or gains, or losses, of any Schedule A business carried on in relation to those premises”; and

(b)for “in respect of dilapidation attributable to the year” there were substituted “as an expense of the business for that year”.

8(1)Section 32 of that Act (capital allowances for machinery and plant used in estate management), except where it is applied for the purposes of corporation tax, shall have effect with the following modifications.

(2)Subsection (1) shall have effect as if—

(a)for the words from “entitled” to “arise” there were substituted “for the purposes of a Schedule A business”; and

(b)at the end there were inserted “set up and commenced on or after 6th April 1995 and as if that business were that person’s trade”.

(3)The following subsections shall be deemed to be inserted after that subsection—

(1A)Subsection (1) above and the 1990 Act shall have effect, subject to subsections (1B) and (1C) below—

(a)as if the purposes for which a Schedule A business is to be treated as a trade did not include the purposes of so much of sections 61 and 67(2) of that Act (leased plant or machinery and expenditure on thermal insulation) as makes provision in relation to cases where machinery or plant or, as the case may be, an industrial building or structure has been let otherwise than in the course of a trade; and

(b)as if expenditure which for the purposes of section 61 of that Act is or falls to be treated as expenditure on the provision of machinery or plant first let otherwise than in the course of a trade were to be treated in all cases as expenditure on the provision of machinery or plant which, at the time when it is let or treated as let, is used for purposes which are other than those of a Schedule A business.

(1B)Section 73(2) and (3) of the 1990 Act shall not apply in the case of any allowance or charge by virtue of section 61(1) of that Act where the letting of the machinery or plant is in connection with anything done in the course of the carrying on of a Schedule A business; and in such a case, the allowance or charge shall be made in taxing the business as if the business were the trade of the person carrying on the business and were a trade set up and commenced on or after 6th April 1995.

(1C)Any allowance made by virtue of section 61(1) of the 1990 Act in a case where it applies by virtue of section 67(2) of that Act shall be made as mentioned in subsection (1B) above as if (in so far as it is not otherwise the case)—

(a)the person to whom the allowance is made were carrying on a Schedule A business; and

(b)the letting of the machinery or plant which is deemed under section 67(2) of that Act to have taken place had been a letting in connection with the carrying on of the Schedule A business which is carried on, or treated as carried on, by that person.

(4)Subsections (2) to (6), and in subsection (7), the words from “and, on any assessment” onwards shall be deemed to be omitted.

9(1)Section 34 of that Act (premiums), except where it is applied for the purposes of corporation tax, shall have effect with the following modifications.

(2)Subsection (3) shall have effect as if for the words from “from the rent” onwards there were substituted “as an expense of any Schedule A business carried on by the landlord”.

(3)Subsection (4) shall have effect as if in paragraph (a), for the words from “in computing” to “in lieu of rent” there were substituted “in computing the profits or gains, or losses, of the Schedule A business of which the sum payable in lieu of rent is by virtue of this subsection to be treated as a receipt”.

(4)Subsection (5) shall have effect as if in paragraph (a), for “tax chargeable by virtue of this subsection” there were substituted “the profits or gains, or losses, of the Schedule A business of which that sum is by virtue of this subsection to be treated as a receipt”.

(5)Subsection (6) shall have effect as if for the words from “no charge” onwards there were substituted “no amount shall fall under that subsection to be treated as a receipt of any Schedule A business carried on by the landlord; but that other person shall be taken to have received as income an amount equal to the amount which would otherwise fall to be treated as rent and to be chargeable to tax as if he had received it in consequence of having, on his own account, entered into a transaction falling to be treated as mentioned in paragraph 1(2) of Schedule A.”

10Section 35(2) of that Act (charge on assignment of lease granted at an undervalue), except where it is applied for the purposes of corporation tax, shall have effect as if for the words from “treated as profits or gains” onwards there were substituted “deemed to have been received as income by the assignor and to have been received by him in consequence of his having entered into a transaction falling to be treated as mentioned in paragraph 1(2) of Schedule A.”

11Section 36(1) of that Act (charge on sale of land with a right to a reconveyance), except where it is applied for the purposes of corporation tax, shall have effect as if—

(a)for “the vendor shall be chargeable to tax under Case VI of Schedule D on” there were substituted “the following amount shall be deemed to have been received as income by the vendor and to have been received by him in consequence of his having entered into a transaction falling to be treated as mentioned in paragraph 1(2) of Schedule A, that is to say”; and

(b)for “on that excess” there were substituted “the amount of the excess”.

12(1)Section 37 of that Act (deductions from premiums and rents received), except where it is applied for the purposes of corporation tax, shall have effect with the following modifications.

(2)Subsection (1) shall have effect as if for paragraphs (a) and (b) there were substituted the following paragraphs—

(a)any amount falls to be treated as a receipt of a Schedule A business by virtue of section 34 or 35; or

(b)any amount would fall to be so treated but for the operation of subsection (2) or (3) below;.

(3)Subsection (2) shall have effect as if—

(a)in paragraph (b), for the words from “be” to “any amount” there were substituted “be treated by virtue of section 34 or 35 as receiving any amount as income in the course of carrying on a Schedule A business”; and

(b)for “on which he is so chargeable” there were substituted “which he shall be treated as having so received”.

(4)Subsection (3) shall have effect as if—

(a)for “chargeable under section 34 or 35” there were substituted “treated by virtue of section 34 or 35 as having received any amount as income in the course of carrying on a Schedule A business and falls to be so treated”; and

(b)for “on which he is so chargeable” there were substituted “which he shall be treated as having so received”.

(5)Subsection (4) shall have effect as if for the words from “purposes” to “other premises” there were substituted “purpose, in computing the profits or gains, or losses, of a Schedule A business, of making deductions in respect of the disbursements and expenses of that business”.

13In subsection (6) of section 82 of that Act (rules as to interest paid to non-residents not to apply for the purposes of corporation tax), at the end there shall be inserted “and shall be treated as excluded from the provisions that have effect by virtue of section 21(3) for the computation of the profits or gains, or losses, of a Schedule A business.”

14(1)Subsection (1) of section 87 of that Act (taxable premiums), except where it is applied for the purposes of corporation tax, shall have effect as if for paragraphs (a) and (b) there were substituted the following paragraphs—

(a)any amount falls to be treated as a receipt of a Schedule A business by virtue of section 34 or 35; or

(b)any amount would fall to be so treated but for the operation of section 37(2) or (3);.

(2)After subsection (9) of that section there shall be inserted the following subsection—

(10)This section shall not apply for the computation in accordance with section 21(3) of the amount of any profits or gains to be charged to tax under Schedule A.

15In section 96(11) of that Act (relief for fluctuating profits of farming or market gardening not to apply for corporation tax purposes), after “corporation tax” there shall be inserted “or to any profits or gains chargeable to income tax under Schedule A.”

16(1)In subsection (5) of section 98 of that Act (tied premises)—

(a)in paragraph (a), for “in respect of the rent” there shall be substituted “to tax chargeable under that Schedule”; and

(b)in paragraph (b), for “his total liability (so computed) in respect of the rent” there shall be substituted “the liability so computed”.

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

(9)The references in this section to a trade shall not by virtue of section 21(3) have effect, for the purposes of the computation of profits or gains chargeable to tax under Schedule A, as including a Schedule A business.

17In section 368(3) and (4) of that Act (exclusion of double relief for interest), after “for the purposes of”, in each case, there shall be inserted “Schedule A or”.

18After section 375 of that Act there shall be inserted the following section—

375AOption to deduct interest for the purposes of Schedule A.

(1)If an individual who is a qualifying borrower with respect to any interest on a loan which is relevant loan interest—

(a)is carrying on or proposing to carry on a Schedule A business, and

(b)gives notice to the Board that deductions are to be made in respect of payments of interest on that loan in computing the profits or gains of that business,

then (subject to the following provisions of this section) section 369 shall not apply to any payment of interest on that loan which becomes due or is made on or after such date as may be specified for the purposes of this subsection in the notice.

(2)A notice specifying a date for the purposes of subsection (1) above—

(a)may be given at any time before the end of the period of twenty-two months beginning with the end of the year of assessment in which that date falls, but

(b)once given, shall not be withdrawn.

(3)Where notice is given to the Board under subsection (1) above, the Board shall give notice to the lender and the borrower specifying a date, not being a date before either—

(a)the date specified for the purposes of that subsection, or

(b)the date on which the notice under this subsection is given to the lender,

as the date on or after which payments of interest on the loan are to be treated in relation to the lender as payments of interest to which section 369 does not apply.

(4)Subsections (2) and (3) of section 375 shall have effect in relation to any period between—

(a)the beginning of any date specified for the purposes of subsection (1) above, and

(b)the date specified in that case in the notice given under subsection (3) above,

as they apply, in the case of any relevant loan interest, in relation to the period between the time when the borrower ceases to be a qualifying borrower and the date on which he gives notice of that fact to the lender.

(5)Where a notice under subsection (1) above has taken effect in relation to payments of interest on any loan, section 369 shall not again apply to payments of interest on that loan except where they become due after such time as may be specified in a further notice given by the Board for the purposes of this subsection to the lender and the borrower.

(6)A notice under subsection (5) above shall not specify a time for the purposes of that subsection which falls before the time when the Schedule A business in question is permanently discontinued or, as the case may be, when the proposal to carry it on is finally abandoned.

19(1)In Chapter I of Part X of that Act (loss relief for the purposes of income tax), before section 380, there shall be inserted the following section—

Schedule A losses

379ASchedule A losses.

(1)Subject to the following provisions of this section, where for any year of assessment any person sustains any loss in a Schedule A business carried on by him either solely or in partnership—

(a)the loss shall be carried forward to the following year of assessment and, to the extent that it does not exceed them, set against any profits or gains of that business for the year to which it is carried forward; and

(b)where there are no profits or gains for the following year or the profits or gains for that year are exceeded by the amount of the loss, the loss or, as the case may be, the remainder of it shall be so carried forward to the next following year, and so on.

(2)Subsection (3) below shall apply where a loss is sustained in a Schedule A business for any year of assessment (“the year of the loss”) and one or both of the following conditions is satisfied, that is to say—

(a)the amount of the relevant capital allowances treated as expenses of that business in computing that loss exceeds, by any amount (“the net capital allowances”), the amount of any charges under the 1990 Act which are treated as receipts of that business in computing that loss;

(b)the Schedule A business has been carried on in relation to land that consists of or includes an agricultural estate to which allowable agricultural expenses deducted in computing that loss are attributable;

and the relevant capital allowances for the purposes of this subsection are allowances under the 1990 Act other than the whole or, as the case may be, a proportionate part of any allowances made in accordance with section 32(1B) of this Act in respect of expenditure on the provision of machinery or plant which is let, for the whole or a part of the year in question, to a person who does not use it or uses it for purposes other than those of a trade.

(3)Where the person carrying on the Schedule A business in a case to which this subsection applies makes a claim, in relation to the year of the loss or the year following that year, for relief under this subsection in respect of the loss—

(a)relief from income tax may be given, for the year to which the claim relates, on an amount of that person’s income for that year which is equal to the amount of relief available for that year in respect of the loss; and

(b)the loss which is to be or has been carried forward under subsection (1) above shall be treated as reduced (if necessary to nil) by an amount equal to the amount on which relief is given;

but a claim for relief under this subsection shall not be made after the end of twelve months from the 31st January next following the end of the year to which it relates and shall be accompanied by all such amendments as may be required by virtue of paragraph (b) above of any self-assessment previously made by the claimant under section 9 of the Management Act.

(4)Subject to subsection (5) below, the reference in subsection (3) above to the amount of the relief available for any year in respect of a loss is a reference to whichever is the smallest of the following amounts, that is to say—

(a)the amount of the relievable income for the year to which the claim relates;

(b)the loss sustained in the Schedule A business in the year of the loss; and

(c)the amount which, according to whether one or both of the conditions mentioned in subsection (2) above is satisfied in relation to the year of the loss, is equal—

(i)to the net capital allowances,

(ii)to the amount of the allowable agricultural expenses for the year of the loss, or

(iii)to the sum of the net capital allowances and the amount of those expenses.

(5)Where relief under subsection (3) above is given in respect of a loss in relation to either of the years in relation to which relief may be claimed in respect of that loss, relief shall not be available in respect of the same loss for the other year except, in a case where the relief already given is of an amount determined in accordance with subsection (4)(a) above, to the extent that the smaller of the amounts applicable by virtue of subsection (4)(b) and (c) above exceeds the amount of relief already given.

(6)For the purposes of subsection (4)(a) above the amount of relievable income for any year, in relation to any person, shall be equal to the amount of his income for that year—

(a)after effect has been given to subsection (1) above in relation to any amount carried forward to that year in respect of a loss sustained in any year before the year of the loss, and

(b)in the case of a claim under subsection (3) above in relation to the year of the loss, after effect has been given to any claim under that subsection in respect of a loss sustained in the preceding year.

(7)For the purposes of this section the loss sustained in any Schedule A business shall be computed in like manner as the profits or gains arising or accruing from such a business are computed under the provisions of the Income Tax Acts applicable to Schedule A.

(8)In this section “allowable agricultural expenses”, in relation to an agricultural estate, means any disbursements or expenses attributable to the estate which are deductible in respect of maintenance, repairs, insurance or management of the estate and otherwise than in respect of the interest payable on any loan.

(9)For the purposes of this section the amount of any disbursements or expenses attributable to an agricultural estate shall be determined as if—

(a)disbursements and expenses were to be disregarded to the extent that they would not have been attributable to the estate if it did not include the parts of it used wholly for purposes other than purposes of husbandry, and

(b)disbursements and expenses in respect of parts of the estate used partly for purposes of husbandry and partly for other purposes were to be reduced to an extent corresponding to the extent to which those parts were used for other purposes.

(10)In this section—

  • “agricultural estate” means any land (including any houses or other buildings) which is managed as one estate and which consists of or includes any agricultural land; and

  • “agricultural land” means land, houses or other buildings in the United Kingdom occupied wholly or mainly for the purposes of husbandry.

(2)Where apart from this Act any person who carries on a Schedule A business in the year 1995-96 would have been entitled—

(a)by virtue of Part II of the Taxes Act 1988, to deduct any amount that became due before the beginning of that year from rent received in that year, being rent which is in fact brought into account in computing the profits or gains of that business, or

(b)by virtue of section 392 of that Act, to carry forward to that year the amount of any portion of a loss sustained in any transaction, being a transaction of such a nature that if it occurred in that year it would be treated as a transaction in the course of that Schedule A business,

that amount shall be treated for the purposes of income tax as if it were a loss falling, in accordance with section 379A(1) of that Act, to be carried forward from the previous year to the year 1995-96 and (in so far as not used in giving relief for that year) to subsequent years.

(3)Where—

(a)any person carrying on a Schedule A business in the year 1995-96 would, by virtue of section 355(4) of the Taxes Act 1988 (power to carry forward excess interest), have been entitled, in respect of an amount of interest representing an excess of interest over the income against which relief was available for any previous year, to be given relief against an equivalent amount of income for the year 1995-96 from the letting of any land, caravan or house-boat, and

(b)that business relates to any land, caravan or house-boat in relation to which the condition specified in section 355(1)(b) of that Act would have been fulfilled for the year 1995-96,

that amount shall be treated for the purposes of income tax as if it were a loss falling, in accordance with section 379A(1) of that Act, to be carried forward from the previous year to the year 1995-96 and (in so far as not used in giving relief for that year) to subsequent years.

(4)Section 379A(3) of that Act shall have effect for the purposes of the making of a claim in a case where the year to which the claim relates is the year 1995-96 as if the period for making such a claim ended two years after the end of that year.

20In section 401 of that Act (relief for pre-trading expenditure), after subsection (1A) there shall be inserted the following subsection—

(1B)Except for the purposes of corporation tax, subsection (1) above shall apply in relation to expenditure for the purposes of a Schedule A business as it applies in relation to expenditure for the purposes of a trade; and, accordingly, that subsection shall have effect in relation to expenditure for the purposes of a Schedule A business as if the reference to the computation of the profits or gains for the purposes of Case I or II of Schedule D were a reference to the computation of profits or gains for the purposes of Schedule A.

21(1)Section 503 of that Act (letting of furnished holiday accommodation), except so far as it applies for the purposes of corporation tax, shall have effect with the following modifications.

(2)Subsection (1) shall have effect as if for “380 to 390, 393, 393A(1), 401” there were substituted “379A to 390” and as if the following paragraph were substituted for paragraph (a)—

(a)any Schedule A business, so far as it consists in the commercial letting of furnished holiday accommodation in the United Kingdom, shall be treated as a trade the profits or gains of which are chargeable to tax under Case I of Schedule D; and.

(3)The following subsection shall be deemed to be substituted for subsection (2)—

(2)In its application by virtue of subsection (1) above section 390 shall have effect as if the reference to the trade the profits of which are chargeable to tax under Case I or II of Schedule D were a reference to the Schedule A business so far as it is treated as a trade.

(4)Subsection (5) shall be deemed to be omitted.

22In section 577(9) of that Act (exception in relation to business entertaining expenses for gifts to bodies established for charitable purposes), after “under” there shall be inserted “Schedule A or”.

23Section 579 of that Act (statutory redundancy payments), except so far as it applies for the purposes of corporation tax, shall have effect as if the following subsection were substituted for subsection (4)—

(4)Where a redundancy payment or other employer’s payment is made in respect of employment wholly in a Schedule A business carried on by the employer—

(a)the amount of the redundancy payment or the corresponding amount of the other employer’s payment shall (if not otherwise so allowable) be allowable as a deduction in computing for the purposes of Schedule A the profits or gains or losses of the business; but

(b)if the employer’s payment was made after the discontinuance of the business, the net amount so deductible shall be treated as if it were a payment made on the last day on which the business was carried on.

24Section 588 of that Act (training courses for employees), except so far as it applies for the purposes of corporation tax, shall have effect as if the following subsection were inserted after subsection (4)—

(4A)Subsection (3) above shall have effect where the employee is or was employed for the purposes of a Schedule A business carried on by the employer as if the references to computing for the purposes of Schedule D the profits or gains of a trade, profession or vocation mentioned in that subsection were references to computing for the purposes of Schedule A the profits or gains of that business.

25Section 589A of that Act (counselling services for employees), except so far as it applies for the purposes of corporation tax, shall have effect as if the following subsection were inserted after subsection (9)—

(9A)Subsection (8) above shall have effect where the employee is or was employed for the purposes of a Schedule A business carried on by the employer as if the references to computing for the purposes of Schedule D the profits or gains of the trade, profession or vocation mentioned in that subsection were references to computing for the purposes of Schedule A the profits or gains of that business.

26In section 692(1) of that Act (reimbursement of settlor), for the words from “the profits” onwards there shall be substituted “either the profits of a trade carried on by the settlor or the profits of a Schedule A business so carried on”.

27In section 779(13)(a) of that Act (definition of relevant tax relief for the purposes of anti-avoidance provisions), the words “allowable by virtue of sections 25, 26 and 28 to 31 and Schedule 1” shall be omitted.

28In section 832(1) of that Act (interpretation of the Tax Acts), after the definition of “recognised clearing system” there shall be inserted the following definition—

“Schedule A business” means any business the profits or gains of which are chargeable to income tax under Schedule A, including the business in the course of which any transaction is by virtue of paragraph 1(2) of that Schedule to be treated as entered into;.

The Capital Allowances Act 1990 (c. 1)

29(1)In section 9 of the Capital Allowances Act 1990 (manner of making industrial buildings allowance), in subsection (1), for “mentioned in subsections (2) to (7) below” there shall be substituted “where subsections (2) to (7) below apply”.

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

(1A)In the case of an allowance or charge made to or on a person whose interest in the building or structure is subject to a lease at the relevant time, subsection (1) above shall have effect for the purposes of income tax—

(a)as if any Schedule A business carried on by that person at any time in the chargeable period for which the allowance or charge is made were the trade in the taxing of which the allowance or charge were to be made; or

(b)where that person is not carrying on such a business at any time in that period, as if he were carrying on such a business and the business were the trade in the taxing of which the allowance or charge is to be made;

and this Act shall have effect in each case as if the Schedule A business which is deemed to be a trade for the purposes of this subsection were a trade set up and commenced on or after 6th April 1995.

(1B)In subsection (1A) above “the relevant time”—

(a)in relation to an initial allowance, means the time when the expenditure is incurred or any subsequent time before the building or structure is used for any purpose;

(b)in relation to a writing-down allowance, means the end of the chargeable period for which the allowance is made; and

(c)in relation to a balancing allowance or charge, means the time immediately before the event giving rise to the allowance or charge.

(3)At the beginning of subsections (2), (3), (4) and (6) of that section there shall be inserted, in each case, the words “For the purposes of corporation tax”; and in subsection (6), paragraph (a) and, in paragraph (b), the words “if it is a charge to corporation tax” shall be omitted.

30In subsection (2) of section 15 of that Act of 1990 (method of making allowances and charges in the case of buildings falling temporarily out of use), at the beginning there shall be inserted “For the purposes of corporation tax” and after that subsection there shall be inserted the following subsection—

(2A)For the purposes of income tax any allowance or charge falling to be made to any person in respect of a building or structure during a period while the building or structure—

(a)is temporarily out of use, but

(b)is deemed by virtue of subsection (1) above still to be an industrial building or structure,

shall be made, in a case falling within subsection (2)(a) or (b) above, in accordance with section 9(1A) as if (where section 9(1A) does not otherwise apply) the building or structure were subject to a lease at the relevant time.

31Section 29(1) of that Act of 1990 (commercial letting of furnished holiday accommodation to be treated as trade for the purposes of Part II), except so far as it applies for the purposes of corporation tax, shall have effect as if the following paragraph were substituted for paragraph (a)—

(a)any Schedule A business consisting in the commercial letting of furnished holiday accommodation in the United Kingdom shall be treated as a trade; and.

32In section 67(3) of that Act of 1990 (manner of making allowance in certain cases in respect of expenditure on thermal insulation), for “shall (notwithstanding section 73(2)), be available” there shall be substituted “shall be made to any person for the purposes of income tax in accordance with section 32(1B) and (1C) of the principal Act and, for the purposes of corporation tax, shall be available (notwithstanding section 73(2))”.

33In section 73 of that Act of 1990 (manner of making allowances and charges in respect of machinery and plant), after subsection (3) there shall be inserted the following subsection—

(4)Subsections (2) and (3) above apply subject to the provisions of section 32(1B) of the principal Act.

34(1)In section 92 of that Act of 1990 (manner of making assured tenancy allowances and related charges), at the beginning there shall be inserted the following subsection—

(A1)For the purposes of income tax any allowance or charge made to or on any person under this Part shall be made to or on him in taxing his trade—

(a)as if any Schedule A business carried on by that person were the trade in the taxing of which the allowance or charge were to be made; or

(b)where that person is not carrying on such a business, as if he were carrying on such a business and that business were the trade in the taxing of which the allowance or charge is to be made;

and this Act shall have effect in each case as if the Schedule A business which is deemed to be a trade for the purposes of this subsection were a trade set up and commenced on or after 6th April 1995.

(2)In subsections (1) and (2) of that section, at the beginning there shall be inserted, in each case, the words “For the purposes of corporation tax”; and in subsection (2), paragraph (a) and, in paragraph (b), the words “if it is a charge to corporation tax” shall be omitted.

35(1)After subsection (2) of section 132 of that Act of 1990 (manner of making agricultural buildings allowances and related charges), there shall be inserted the following subsection—

(2A)In the case of an allowance or charge which falls to be made to a person for a chargeable period in which he is not carrying on a trade, subsection (2) above shall have effect for the purposes of income tax—

(a)as if any Schedule A business carried on by that person at that time were the trade in the taxing of which the allowance or charge were to be made; or

(b)where that person is not carrying on such a business at that time, as if he were carrying on such a business and the business were the trade in the taxing of which the allowance or charge is to be made;

and this Act shall have effect in each case as if the Schedule A business which is deemed to be a trade for the purposes of this subsection were a trade set up and commenced on or after 6th April 1995.

(2)In subsections (3) and (4) of that section, at the beginning there shall be inserted, in each case, the words “For the purposes of corporation tax”; and in subsection (4), paragraph (a) and, in paragraph (b), the words “if it is a charge to corporation tax” shall be omitted.

The Taxation of Chargeable Gains Act 1992 (c. 12)

36Section 241(3) of the [1992 c. 12.] Taxation of Chargeable Gains Act 1992 (commercial letting of furnished holiday accommodation to be treated as trade for certain purposes), except so far as it applies for the purposes of corporation tax, shall have effect as if the following paragraph were substituted for paragraph (a)—

(a)any Schedule A business (within the meaning of the Taxes Act) which consists in the commercial letting of furnished holiday accommodation in the United Kingdom shall be treated as a trade; and.

37(1)Schedule 8 to that Act of 1992 (which includes provision excluding from the charge to capital gains tax premiums taxed under Schedule A), except so far as it applies in accordance with section 8 of that Act for the purposes of corporation tax, shall have effect as follows.

(2)In paragraph 5—

(a)in sub-paragraphs (1) and (2), for the words “income tax has become chargeable under section 34 of the Taxes Act on any amount” there shall, in each case, be deemed to be substituted “any amount is brought into account by virtue of section 34 of the Taxes Act as a receipt of a Schedule A business (within the meaning of that Act)”; and

(b)in sub-paragraph (3), for “income tax has become chargeable under section 36 of the Taxes Act (sale of land with right of re-conveyance) on any amount” there shall be deemed to be substituted “any amount is brought into account by virtue of section 36 of the Taxes Act (sale of land with right of re-conveyance) as a receipt of a Schedule A business (within the meaning of that Act)”.

(3)In paragraph 6(2), for the words from “on which tax is paid” onwards there shall be deemed to be substituted “brought into account by virtue of section 35 of the Taxes Act (charge on assignment of a lease granted at an undervalue) as a receipt of a Schedule A business (within the meaning of that Act)”.

(4)In paragraph 7, for the words from “income tax” to “so chargeable” there shall be deemed to be substituted “any amount is brought into account by virtue of section 34(2) and (3) of the Taxes Act as a receipt of a Schedule A business (within the meaning of that Act) which is or is treated as carried on by any person, that person”.

The Finance (No. 2) Act 1992 (c. 48)

38In paragraph 2(1) of Schedule 10 to the [1992 c. 48.] Finance (No. 2) Act 1992 (furnished accommodation), for “under Case I or Case VI of Schedule D (or both those Cases)” there shall be substituted “under Schedule A or Case I of Schedule D (or under both together)”.

Section 42.

SCHEDULE 7Commercially let property: Corporation Tax

1In subsection (6) of section 338 of the Taxes Act 1988 (charges on income), for paragraph (d) and the words after that paragraph (allowance of interest as a charge on income in a case where it would be eligible for relief in the case of an individual) there shall be substituted the following paragraph—

(d)the interest qualifies under section 338A for treatment in accordance with this paragraph as a charge on income.

2After section 338 of that Act there shall be inserted the following section—

338ACharges on income: loans to buy land.

(1)Subject to the following provisions of this section, interest shall qualify for treatment in accordance with section 338(6)(d) as a charge on income if—

(a)at the time when the interest is paid the company in question owns an estate or interest in land, or the property in a caravan or house-boat, in the United Kingdom or the Republic of Ireland;

(b)the interest is paid on a loan to defray money applied—

(i)in purchasing that estate, interest or property, or another estate, interest or property absorbed into, or given up to obtain, that estate, interest or property;

(ii)in improving or developing the land, or buildings on the land; or

(iii)in paying off another loan in a case in which interest on that other loan would have qualified under this section for treatment as a charge on income had the loan not been paid off (and on the assumption, if the loan was free of interest, that it carried interest);

(c)the land, caravan or house-boat—

(i)is occupied by the company and used as the only or main residence of an individual;

(ii)is occupied by the company and used otherwise than as a residence; or

(iii)is, in any period of 52 weeks comprising the time at which the interest is payable, let at a commercial rent for more than 26 weeks and, when not so let, either available for letting at such a rent or occupied and used as mentioned in sub-paragraph (i) or (ii) above;

and

(d)the interest is not interest incurred by overdrawing an account or by debiting the account of any person as the holder of a credit card or under similar arrangements.

(2)Subsections (2) and (7) of section 354 shall have effect in relation to subsection (1) above as they have effect in relation to subsection (1) of that section.

(3)Interest shall qualify under this section for treatment as a charge on income by reference to any land, caravan or house-boat which is being used as the only or main residence of an individual to the extent only that the amount on which it is payable does not exceed the following limit, that is to say, the qualifying maximum for the year of assessment in which the payment is made reduced by the amount on which interest is payable by the company under any earlier loans so far as they—

(a)are loans the interest on which qualifies under this section for treatment as a charge on income; and

(b)fall within subsection (1)(b) above in respect of the same land, caravan or house-boat.

(4)Accordingly—

(a)if the amount on which interest is payable under any loan exceeds the limit specified in subsection (3) above, so much only of the interest that would otherwise qualify under this section shall so qualify as bears to the whole of that interest the same proportion as that part of that amount that does not exceed the limit bears to the whole of that amount; and

(b)if the amount on which interest is payable under the earlier loans mentioned in that subsection is equal to or exceeds the qualifying maximum for the year of assessment in which the interest is paid, none of the interest on the later loan shall qualify under this section for treatment as a charge on income.

(5)Subsections (1A) and (2) of section 355 shall have effect for the purposes of this section in relation to the condition in paragraph (c) of subsection (1) above as they have effect in relation to the condition referred to in section 355(1A)(a).

(6)Interest shall not qualify under this section for treatment as a charge on income by reference to any case in which—

(a)the land, caravan or house-boat is used as the only or main residence of an individual, and

(b)the interest is paid on a home improvement loan,

unless the loan was made before 6th April 1988; and subsections (2B) and (2C) of section 355 shall apply for the purposes of this subsection as they apply for the purposes of subsection (2A) of that section.

(7)Interest shall not qualify by virtue of subsection (1)(b)(i) above for treatment as a charge on income—

(a)where the purchaser has, since 15th April 1969, disposed of an estate or interest in the land, or the property in the caravan or house-boat, in question and it appears that the main purpose of the disposal and purchase was to obtain relief in respect of interest on the loan or to allow interest on the loan to be treated as a charge on income; or

(b)where the purchaser is directly or indirectly purchasing from a person who is connected with him and the price substantially exceeds the value of what is acquired;

and interest shall not qualify by virtue of subsection (1)(b)(ii) above for such treatment where the money spent is received directly or indirectly by a person connected with the person spending it and substantially exceeds the value of the work done.

(8)For the purposes of subsection (7) above one person is connected with another if he is so connected within the terms of section 839.

(9)In this section—

  • “caravan” and “house-boat” have the same meanings as are given to them for the purposes of sections 354 to 366 by subsection (1) of section 367; and

  • “the qualifying maximum” has the same meaning as is given to it for the purposes of sections 356A to 357 by subsection (5) of that section;

and subsections (2) to (4) of section 367 shall apply with the necessary modifications for the determination of any question whether interest qualifies under this section for treatment as a charge on income as they apply for the determination of any question whether interest is eligible for relief under section 353 by virtue of section 354.

(10)References in this section to an estate or interest do not include references—

(a)to a rentcharge or, in Scotland, a superiority or the interest of a creditor in a contract of ground annual; or

(b)to the interest of a chargee or mortgagee or, in Scotland, the interest of a creditor in a charge or security of any kind over land.

Section 51.

SCHEDULE 8Life assurance business

Part IGeneral amendments

Classes of life assurance business

1In section 431(2) of the Taxes Act 1988 (interpretative provisions relating to insurance companies), insert the following at the appropriate places in alphabetical order—

  • “pension business” has the meaning given by section 431B;

  • “life reinsurance business” has the meaning given by section 431C;

  • “overseas life assurance business” has the meaning given by section 431D;

  • “basic life assurance and general annuity business” has the meaning given by section 431F;

  • “reinsurance business” includes retrocession business.

2After section 431A of the Taxes Act 1988 insert—

Classes of life assurance business
431BMeaning of “pension business”.

(1)In this Chapter “pension business” means so much of a company’s life assurance business as is referable to contracts of the following descriptions or to the reinsurance of liabilities under such contracts.

(2)The descriptions of contracts are—

(a)any contract with an individual who is, or would but for an insufficiency of profits or gains be, chargeable to income tax in respect of relevant earnings (as defined in section 623(1) and (2)) from a trade, profession, vocation, office or employment carried on or held by him, being a contract approved by the Board under section 620 or a substituted contract within the meaning of section 622(3);

(b)any contract (including a contract of insurance) entered into for the purposes of, and made with the persons having the management of, an exempt approved scheme as defined in Chapter I of Part XIV, being a contract so framed that the liabilities undertaken by the insurance company under the contract correspond with liabilities against which the contract is intended to secure the scheme;

(c)any contract made under approved personal pension arrangements within the meaning of Chapter IV of Part XIV;

(d)any annuity contract entered into for the purposes of—

(i)a scheme which is approved or is being considered for approval under Chapter I of Part XIV;

(ii)a scheme which is a relevant statutory scheme for the purposes of Chapter I of Part XIV; or

(iii)a fund to which section 608 applies,

being a contract which is made with the persons having the management of the scheme or fund, or those persons and a member of or contributor to the scheme or fund, and by means of which relevant benefits (see subsections (3) and (4) below), and no other benefits, are secured;

(e)any annuity contract which is entered into in substitution for a contract within paragraph (d) above and by means of which relevant benefits (see subsections (3) and (4) below), and no other benefits, are secured;

(f)any contract with the trustees or other persons having the management of a scheme approved under section 620 or, subject to subsection (5) below, of a superannuation fund which was approved under section 208 of the 1970 Act, being a contract which—

(i)was entered into for the purposes only of that scheme or fund or, in the case of a fund part only of which was approved under section 208, for the purposes only of that part of that fund, and

(ii)(in the case of a contract entered into or varied after 1st August 1956) is so framed that the liabilities undertaken by the insurance company under the contract correspond with liabilities against which the contract is intended to secure the scheme or fund (or the relevant part of the fund).

(3)For the purposes of subsection (2)(d) and (e) above “relevant benefits” means relevant benefits as defined by section 612(1) which correspond—

(a)where subsection (2)(d)(i) above applies, or subsection (2)(e) above applies and the contract within subsection (2)(d) was entered into for the purposes of a scheme falling within subsection (2)(d)(i), with benefits that could be provided by a scheme approved under Chapter I of Part XIV;

(b)where subsection (2)(d)(ii) above applies, or subsection (2)(e) above applies and the contract within subsection (2)(d) was entered into for the purposes of a scheme falling within subsection (2)(d)(ii), with benefits that could be provided by a scheme which is a relevant statutory scheme for the purposes of Chapter I of Part XIV;

(c)where subsection (2)(d)(iii) above applies, or subsection (2)(e) above applies and the contract within subsection (2)(d) was entered into for the purposes of a fund falling within subsection (2)(d)(iii), with benefits that could be provided by a fund to which section 608 applies.

(4)For the purposes of subsection (3)(a), (b) or (c) above a hypothetical scheme or fund (rather than any particular scheme or fund), and benefits provided by a scheme or fund directly (rather than by means of an annuity contract), shall be taken.

(5)Subsection (2)(f) above shall not apply to a contract where the fund in question was approved under section 208 of the 1970 Act unless—

(a)immediately before 6th April 1980 premiums paid under the contract with the trustees or other persons having the management of the fund fell within section 323(4) of that Act (premiums referable to pension business); and

(b)the terms on which benefits are payable from the fund have not been altered since that time; and

(c)section 608 applies to the fund.

(6)In subsection (5) above “premium” includes any consideration for an annuity.

431CMeaning of “life reinsurance business”.

(1)In this Chapter “life reinsurance business” means reinsurance of life assurance business other than pension business or business of any description excluded from this section by regulations made by the Board.

(2)Regulations under subsection (1) above may describe the excluded business by reference to any circumstances appearing to the Board to be relevant.

431DMeaning of “overseas life assurance business”.

(1)In this Chapter “overseas life assurance business” means life assurance business, other than pension business or life reinsurance business, which—

(a)in the case of life assurance business other than reinsurance business, is business with a policy holder or annuitant not residing in the United Kingdom, and

(b)in the case of reinsurance business, is—

(i)reinsurance of life assurance business with a policy holder or annuitant not residing in the United Kingdom, or

(ii)reinsurance of business within sub-paragraph (i) above or this sub-paragraph.

(2)Subject to subsections (5) and (7) below, in subsection (1) above the references to life assurance business with a policy holder or annuitant do not include life assurance business with a person who is an individual if—

(a)the policy holder or annuitant is not beneficially entitled to the rights conferred by the policy or contract for the business, or

(b)any benefits under the policy or contract for the business are or will be payable to a person other than the policy holder or annuitant (or his personal representatives) or to a number of persons not including him (or them).

(3)For the purposes of subsection (2) above any nomination by a policy holder or annuitant of an individual or individuals as the recipient or recipients of benefits payable on death shall be disregarded.

(4)Subject to subsections (5) and (7) below, in subsection (1) above the references to life assurance business with a policy holder or annuitant do not include life assurance business with a person who is not an individual.

(5)Subsections (2) and (4) above do not apply if—

(a)the rights conferred by the policy or contract for the business are held subject to a trust,

(b)the settlor does not reside in the United Kingdom, and

(c)each beneficiary is either an individual not residing in the United Kingdom or a charity.

(6)In subsection (5) above—

(a)“settlor” means the person, or (where more than one) each of the persons, by whom the trust was directly or indirectly created (and for this purpose a person shall, in particular, be regarded as having created the trust if he provided or undertook to provide funds directly or indirectly for the purposes of the trust or made with any other person a reciprocal arrangement for that other person to create the trust),

(b)“beneficiary” means any person who is, or will or may become, entitled to any benefit under the trust (including any person who may become so entitled on the exercise of a discretion by the trustees of the trust), and

(c)“charity” means a person or body of persons established for charitable purposes only;

and for the purpose of that subsection an individual who is a trustee (of any trust) shall not be regarded as an individual.

(7)Subsections (2) and (4) above do not apply if the policy or contract for the business was effected solely to provide benefits for or in respect of—

(a)persons all, or all but an insignificant number, of whom are relevant overseas employees, or

(b)spouses, widows, widowers, children or dependants of such persons.

(8)In subsection (7) above “relevant overseas employees” means persons who are not residing in the United Kingdom and are—

(a)employees of the policy holder or annuitant,

(b)employees of a person connected with the policy holder or annuitant, or

(c)employees in respect of whose employment there is established a superannuation fund to which section 615(3) applies;

and section 839 applies for the purposes of this subsection.

431EOverseas life assurance business: regulations.

(1)The Board may by regulations make provision for giving effect to section 431D.

(2)Such regulations may, in particular—

(a)provide that, in such circumstances as may be prescribed, any prescribed issue as to whether business is or is not overseas life assurance business (or overseas life assurance business of a particular kind) shall be determined by reference to such matters (including the giving of certificates or undertakings, the giving or possession of information or the making of declarations) as may be prescribed,

(b)require companies to obtain certificates, undertakings, information or declarations from policy holders or annuitants, or from trustees or other companies, for the purposes of the regulations,

(c)make provision for dealing with cases where any issue such as is mentioned in paragraph (a) above is (for any reason) wrongly determined, including provision allowing for the imposition of charges to tax (with or without limits on time) on the insurance company concerned or on the policy holders or annuitants concerned,

(d)require companies to supply information and make available books, documents and other records for inspection on behalf of the Board, and

(e)make provision (including provision imposing penalties) for contravention of, or non-compliance with, the regulations.

(3)The regulations may—

(a)make different provision for different cases, and

(b)contain such supplementary, incidental, consequential or transitional provision as appears to the Board to be appropriate.

431FMeaning of “basic life assurance and general annuity business”.

In this Chapter “basic life assurance and general annuity business” means life assurance business (including reinsurance business) other than pension business, life reinsurance business or overseas life assurance business..

3In section 432C(2) of the Taxes Act 1988 after “assets of the overseas life assurance fund” insert “or land in the United Kingdom linked to overseas life assurance business”.

4(1)Section 438 of the Taxes Act 1988 is amended as follows.

(2)In subsection (1) for “life assurance fund and separate annuity fund, if any” substitute “long term business fund”.

(3)In subsection (8) for “431(4)(c)” substitute “431B(2)(c)”.

5(1)Section 440 of the Taxes Act 1988 is amended as follows.

(2)In subsection (3) for “paragraphs (a) to (d)” substitute “paragraphs (a) to (e)”.

(3)For subsection (4) substitute—

(4)The categories referred to in subsections (1) to (3) above are—

(a)assets linked solely to pension business;

(b)assets linked solely to life reinsurance business;

(c)assets of the overseas life assurance fund;

(d)assets linked solely to basic life assurance and general annuity business;

(e)assets of the long term business fund not within any of the preceding paragraphs;

(f)other assets..

6In section 440A of the Taxes Act 1988, in subsection (2) for paragraphs (a) and (b) substitute—

(a)so many of the securities as are identified in the company’s records as securities by reference to the value of which there are to be determined benefits provided for under policies or contracts the effecting of all (or all but an insignificant proportion) of which constitutes the carrying on of—

(i)pension business, or

(ii)life reinsurance business, or

(iii)basic life assurance and general annuity business,

shall be treated for the purposes of corporation tax as a separate holding linked solely to that business,.

7In section 76(1)(d) of the Taxes Act 1988 after “pension business” insert “, life reinsurance business”.

8In Schedule 19AA to the Taxes Act 1988, in the closing words of paragraph 5(5) for “pension business or basic life assurance business” substitute “pension business, life reinsurance business or basic life assurance and general annuity business”.

9(1)The [1992 c. 12.] Taxation of Chargeable Gains Act 1992 is amended as follows.

(2)In section 212(2) after “pension business” insert “or life reinsurance business”.

(3)In section 214A(11)(a) for “any pension business or” substitute “any pension business or life reinsurance business of that company or to”.

10(1)Schedule 18 to the Finance Act 1994 is amended as follows.

(2)In paragraph 1(5) for “life assurance fund and separate annuity fund, if any,” substitute “long term business fund”.

(3)In paragraph 1(6) after “pension business” insert “, life reinsurance business”.

(4)In paragraph 4 omit the definition of “life assurance business” and after the definition of “non-life mutual business” insert— and other expressions have the same meaning as in Chapter I of Part XII of the Taxes Act 1988.

Linked assets

11(1)In section 431(2) of the Taxes Act 1988, for the definition of “linked assets” substitute—

“linked assets”, and related expressions, shall be construed in accordance with section 432ZA;.

(2)After section 432 of the Taxes Act 1988 insert—

432ZALinked assets.

(1)In this Chapter “linked assets” means assets of an insurance company which are identified in its records as assets by reference to the value of which benefits provided for under a policy or contract are to be determined.

(2)Linked assets shall be taken—

(a)to be linked to long term business of a particular category if the policies or contracts providing for the benefits concerned are policies or contracts the effecting of which constitutes the carrying on of business of that category; and

(b)to be linked solely to long term business of a particular category if all (or all but an insignificant proportion) of the policies or contracts providing for the benefits concerned are policies or contracts the effecting of which constitutes the carrying on of business of that category.

(3)Where an asset is linked to more than one category of long term business, a part of the asset shall be taken to be linked to each category; and references in this Chapter to assets linked (but not solely linked) to any category of business shall be construed accordingly.

(4)Where subsection (3) above applies, the part of the asset linked to any category of business shall be a proportion determined as follows—

(a)where in the records of the company values are shown for the asset in funds referable to particular categories of business, the proportion shall be determined by reference to those values;

(b)in any other case the proportion shall be equal to the proportion which the total of the linked liabilities of the company referable to that category of business bears to the total of the linked liabilities of the company referable to all the categories of business to which the asset is linked.

(5)For the purposes of sections 432A to 432F—

(a)income arising in any period from assets linked but not solely linked to a category of business,

(b)gains arising in any period from the disposal of such assets, and

(c)increases and decreases in the value of such assets,

shall be treated as arising to that category of business in the proportion which is the mean of the proportions determined under subsection (4) above at the beginning and end of the period.

(6)In this section “linked liabilities” means liabilities in respect of benefits to be determined by reference to the value of linked assets.

(7)In the case of a policy or contract the effecting of which constitutes a class of life assurance business the fact that it also constitutes long term business other than life assurance business shall be disregarded for the purposes of this section unless the benefits to be provided which constitute long term business other than life assurance business are to be determined by reference to the value of assets..

12(1)In the following provisions for “linked solely” substitute “linked”—

(a)section 432C(1), section 432D(1) (twice) and section 432E(3)(a) and (b) and (6)(a) of the Taxes Act 1988;

(b)paragraph 1(5)(b)(i) of Schedule 19AB to the Taxes Act 1988;

(c)paragraph 1(4)(b) of Schedule 18 to the [1994 c. 9.] Finance Act 1994.

(2)The amendments made by paragraph 11 above do not affect the meaning of “linked assets”, and related expressions, in sections 214 and 214A of the [1992 c. 12.] Taxation of Chargeable Gains Act 1992 (transitional provisions relating to changes made in 1990 and 1991).

(3)In section 432 of the Taxes Act 1988 for “class” in each place where it occurs substitute “category”.

13(1)Section 432A of the Taxes Act 1988 is amended as follows.

(2)For subsections (1) to (3) substitute—

(1)This section has effect where in any period an insurance company carries on more than one category of business and it is necessary for the purposes of the Corporation Tax Acts to determine in relation to the period what parts of—

(a)income arising from the assets of the company’s long term business fund, or

(b)gains or losses accruing on the disposal of such assets,

are referable to any category of business.

(2)The categories of business referred to in subsection (1) above are—

(a)pension business;

(b)life reinsurance business;

(c)overseas life assurance business;

(d)basic life assurance and general annuity business which is ordinary life assurance business;

(e)basic life assurance and general annuity business which is industrial assurance business; and

(f)long term business other than life assurance business.

(3)Income arising from, and gains or losses accruing on the disposal of, assets linked to any category of business (apart from overseas life assurance business) shall be referable to that category of business..

(3)In subsections (5) and (6)(b)(i) for “any of the appropriate categories” substitute “any category”.

(4)For subsection (7) substitute—

(7)For the purposes of subsections (5) and (6) above—

(a)income, gains or losses are directly referable to a category of business if referable to that category by virtue of subsection (3) or (4) above, and

(b)assets are directly referable to a category of business if income arising from the assets is, and gains or losses accruing on the disposal of the assets are, so referable by virtue of subsection (3) above..

(5)For subsection (9) substitute—

(9)Where a company carries on overseas life assurance business—

(a)references in this section to liabilities do not include liabilities of that business, and

(b)the appropriate part of the investment reserve as defined by paragraph 4(2)(a) of Schedule 19AA shall be left out of account in determining that reserve for the purposes of this section..

14(1)Section 432C of the Taxes Act 1988 is amended as follows.

(2)In subsection (1) for the words from “life assurance business” to “general annuity business” substitute “pension business, life reinsurance business, basic life assurance and general annuity business or long term business other than life assurance business”.

(3)In subsection (3) for “any of the appropriate categories of business” substitute “any category of business”.

(4)In subsection (4)(b) for “any of the appropriate categories of business” substitute “any category of business”.

(5)In subsection (5), omit paragraph (a).

(6)For subsection (6) substitute—

(6)For the purposes of this section, where a company carries on overseas life assurance business “liabilities” does not include liabilities of that business..

15(1)Section 432D of the Taxes Act 1988 is amended as follows.

(2)In subsection (1) for the words from “life assurance business” to “general annuity business” substitute “pension business, life reinsurance business, basic life assurance and general annuity business or long term business other than life assurance business”.

(3)In subsection (2) for “any of the appropriate categories of business” substitute “any category of business”.

(4)For subsection (3) substitute—

(3)For the purposes of subsection (2) above “the relevant fraction”, in relation to a category of business, is the fraction of which—

(a)the numerator is the mean of the opening and closing liabilities of the relevant business so far as referable to the category, reduced by the mean of the opening and closing values of any assets of the relevant business directly referable to the category; and

(b)the denominator is the mean of the opening and closing liabilities of the relevant business, reduced by the mean of the opening and closing values of any assets of the relevant business directly referable to any category of business.

(4)For the purposes of subsections (2) and (3) above, the part of the amount brought into account as the increase or decrease in the value of assets which is directly referable to a category of business is the part referable to the category by virtue of subsection (1) above and assets are directly referable to a category of business if such part of the amount brought into account as the increase or decrease in the value of assets as is attributable to them is so referable..

Receipts to be brought into account

16(1)For section 83 of the [1989 c. 26.] Finance Act 1989 substitute—

83Receipts to be brought into account.

(1)The following provisions of this section have effect where the profits of an insurance company in respect of its life assurance business are, for the purposes of the Taxes Act 1988, computed in accordance with the provisions of that Act applicable to Case I of Schedule D.

(2)So far as referable to that business, the following items, as brought into account for a period of account (and not otherwise), shall be taken into account as receipts of the period—

(a)the company’s investment income from the assets of its long term business fund, and

(b)any increase in value (whether realised or not) of those assets.

If for any period of account there is a reduction in the value referred to in paragraph (b) above (as brought into account for the period), that reduction shall be taken into account as an expense of that period.

(3)In ascertaining whether or to what extent a company has incurred a loss in respect of that business any amount transferred into the company’s long term business fund from other assets of the company, or otherwise added to that fund, shall be taken into account, in the period in which it is brought into account, as an increase in value of the assets of that fund within subsection (2)(b) above.

This subsection does not apply where, or to the extent that, the amount concerned—

(a)would fall to be taken into account as a receipt apart from this section,

(b)is otherwise taken into account under subsection (2) above, or

(c)is specifically exempted from tax.

83AMeaning of “brought into account”.

(1)In section 83 “brought into account” means brought into account in an account which is recognised for the purposes of that section.

(2)Subject to the following provisions of this section and to any regulations made by the Treasury, the accounts recognised for the purposes of that section are—

(a)a revenue account prepared for the purposes of the Insurance Companies Act 1982 in respect of the whole of the company’s long term business;

(b)any separate revenue account required to be prepared under that Act in respect of a part of that business.

Paragraph (b) above does not include accounts required in respect of internal linked funds.

(3)Where there are prepared any such separate accounts as are mentioned in subsection (2)(b) above, reference shall be made to those accounts rather than to the account for the whole of the business.

(4)If in any such case the total of the items brought into account in the separate accounts is not equal to the total amount brought into account in the account prepared for the whole business, there shall be treated as having been required and prepared a further separate revenue account covering the balance.

(5)Where a company carries on both ordinary long term business and industrial assurance business, the references above to the company’s long term business shall be construed as references to either or both of those businesses, as the case may require..

(2)In section 432B of the Taxes Act 1988—

(a)in subsection (1) for the words from “brought into account” to “1982” substitute “brought into account, within the meaning of that section,”; and

(b)for subsection (2) substitute—

(2)Where for that purpose reference falls to be made to more than one account recognised for the purposes of that section, the provisions of sections 432C to 432F apply separately in relation to each account..

(3)In section 432E(1) of the Taxes Act 1988 for the words from “of the items referred to in subsection (1)” to “paragraph (b))” substitute “to be taken into account in accordance with section 83(2) of the [1989 c. 26.] Finance Act 1989 (that is to say, the aggregate amount to be taken into account as receipts reduced by the aggregate amount to be taken into account as expenses)”.

(4)In section 436(3) of the Taxes Act 1988, after paragraph (a) insert—

(aa)section 83(3) of that Act shall not apply;.

(5)In section 441(4) of the Taxes Act 1988, after paragraph (a) (and before the word “and” following that paragraph) insert—

(aa)section 83(3) of that Act shall not apply,.

(6)In section 65(2) of the Finance (No.2) Act 1992 for paragraph (d) substitute—

(d)section 83(2) of the Finance Act 1989 (amounts to be taken into account as receipts or expenses);.

Supplementary provisions as to apportionment

17(1)In section 432B of the Taxes Act 1988 (apportionment of receipts brought into account)—

(a)in subsections (1) and (2) for “sections 432C to 432E” substitute “sections 432C to 432F”, and

(b)in subsection (3) for “section 432E applies” substitute “sections 432E and 432F apply”.

(2)In section 432E of the Taxes Act 1988 (section 432B apportionment: participating funds)—

(a)in subsection (1), for the words from “shall be” to the end substitute “shall be the amount determined in accordance with subsection (2) below or, if greater, the amount determined in accordance with subsection (3) below.”; and

(b)in subsection (5) at the end insert— References in this subsection to the amount determined in accordance with subsection (3) above are to that amount after making any deduction required by section 432F.

(3)After section 432E of the Taxes Act 1988 insert—

432FSection 432B apportionment: supplementary provisions.

(1)The provisions of this section provide for the reduction of the amount determined in accordance with section 432E(3) (“the subsection (3) figure”) for an accounting period in which that amount exceeds, or would otherwise exceed, the amount determined in accordance with section 432E(2) (“the subsection (2) figure”).

(2)For each category of business in relation to which section 432E falls to be applied there shall be determined for each accounting period the amount (if any) by which the subsection (2) figure, after making any reduction required by section 432E(5), exceeds the subsection (3) figure (“the subsection (2) excess”).

(3)Where there is a subsection (2) excess, the amount shall be carried forward and if in any subsequent accounting period the subsection (3) figure exceeds, or would otherwise exceed, the subsection (2) figure, it shall be reduced by the amount or cumulative amount of subsection (2) excesses so far as not previously used under this subsection.

(4)Where in an accounting period that amount is greater than is required to bring the subsection (3) figure down to the subsection (2) figure, the balance shall be carried forward and aggregated with any subsequent subsection (2) excess for use in subsequent accounting periods..

(4)In section 444A of the Taxes Act 1988 (transfers of business) after subsection (3) insert—

(3A)Any subsection (2) excess (within the meaning of section 432F(2)) which (assuming the transferor had continued to carry on the business transferred after the transfer) would have been available under section 432F(3) or (4) to reduce a subsection (3) figure (within the meaning of section 432F(1)) of the transferor in an accounting period following that which ends with the day on which transfer takes place—

(a)shall, instead, be treated as a subsection (2) excess of the transferee, and

(b)shall be taken into account in the first accounting period of the transferee ending after the date of the transfer (to reduce the subsection (3) figure or, as the case may be, to produce or increase a subsection (2) excess for that period),

in relation to the revenue account of the transferee dealing with or including the business transferred..

(5)In section 444A(5) of the Taxes Act 1988 for “subsection (2) or (3)” substitute “subsection (2), (3) or (3A)”.

Franked investment income: supplementary provisions

18(1)Chapter V of Part VI of the Taxes Act 1988 is amended as follows.

(2)In section 238(1) for the definition of “surplus of franked investment income” substitute—

“surplus of franked investment income” shall be construed in accordance with subsection (1A) below;.

(3)After that subsection insert—

(1A)For the purposes of this Chapter, a company has a surplus of franked investment income in an accounting period if the amount of the franked investment income of the company in that period exceeds the amount of the franked payments made by it in that period.

For the purposes of determining whether a company has such a surplus, or the amount of the surplus, franked investment income that cannot be used to frank distributions of the company shall be disregarded..

(4)For section 238(3) substitute—

(3)References in this Chapter to using franked investment income to frank distributions of a company are to using the income in accordance with section 241(1) and Schedule 13 so as to relieve the company from, or obtain repayment of, advance corporation tax for which the company would otherwise be liable..

(5)In section 241(3) for the words from the beginning to “the excess” substitute “Where a company has a surplus of franked investment income for any accounting period, the surplus”.

(6)In section 241(5) omit the words from “(that is to say,” to “otherwise be liable)”.

(7)In section 242(1)(b) omit “for purposes of section 241(3)”.

(8)In section 242(9)—

(a)omit “by virtue of section 241(5)”, and

(b)for “a company” substitute “the company”.

19(1)Section 434 of the Taxes Act 1988 is amended as follows.

(2)For subsection (1) substitute—

(1)Nothing in section 208 shall prevent franked investment income or foreign income dividends from being taken into account—

(a)in any computation of profits for the purposes of section 89(7) of the Finance Act 1989, or

(b)in any computation for the purposes of section 76(2) of the tax that would have been paid if the company had been charged to tax under Case I of Schedule D in respect of its life assurance business..

(3)For subsection (3) substitute—

(3)The policy holders' share of the franked investment income from investments held in connection with a company’s life assurance business shall not be used under Chapter V of Part VI to frank distributions made by the company; but it may be the subject of a claim under section 242 and shall be treated for that purpose as a surplus of franked investment income additional to any surplus under section 238(1A).

For the purpose of ascertaining whether any surplus or what amount of surplus franked investment income falls to be carried forward under section 241(3), relief under section 242 shall be treated as given against the policy holders' share before other franked investment income..

Computation of losses

20(1)For section 434A of the Taxes Act 1988 substitute—

434AComputation of losses and limitation on relief.

(1)In ascertaining whether or to what extent a company has incurred a loss on its life assurance business profits derived from investments held for the purposes of that business (including franked investment income of, and foreign income dividends arising to, a company resident in the United Kingdom) shall be treated as part of the profits of that business.

(2)Where for any accounting period the loss arising to an insurance company from its life assurance business falls to be computed in accordance with the provisions of this Act applicable to Case I of Schedule D, any loss resulting from the computation shall be reduced (but not below nil) by the aggregate of—

(a)any losses for that period under section 436, 441 or 439B, and

(b)the amount of interest and annuities treated as charges on income in computing for the period otherwise than in accordance with the provisions of this Act applicable to Case I of Schedule D the profits or losses of the company’s life assurance business.

(3)In the case of a company carrying on life assurance business, no relief shall be allowable under—

(a)Chapter II (loss relief) or Chapter IV (group relief) of Part X, or

(b)Chapter II of Part II of the Finance Act 1993 so far as it has effect in relation to losses treated as non-trading losses for the purposes of section 160 of the Finance Act 1994,

against the policy holders' share of the relevant profits for any accounting period.

For the purposes of this subsection “the policy holders' share of the relevant profits” has the same meaning as in section 88 of the Finance Act 1989..

(2)In section 65(2) of the Finance (No. 2) Act 1992, for paragraph (a) substitute—

(a)section 434A(1) of the Taxes Act 1988 (profits derived from investments held for purposes of life assurance business treated as profits of that business in ascertaining loss);.

Treatment of interest and annuities

21(1)After section 434A of the Taxes Act 1988 insert—

434BTreatment of interest and annuities.

(1)Where the profits or losses arising to an insurance company from its life assurance business, or any class of life assurance business, fall to be computed for any purpose in accordance with the provisions of this Act applicable to Case I of Schedule D, section 337(2)(b) shall not prevent the deduction of any interest or annuity payable by the company under a liability of its long term business so far as referable to its life assurance business or any class of that business.

(2)Nothing in subsection (1) above or in section 338(2) shall be construed as preventing any such interest or annuity as is mentioned in subsection (1) above, so far as referable to the company’s basic life assurance and general annuity business, from being treated as a charge on income for the purposes of the computation of the profits or losses of that business otherwise than in accordance with Case I of Schedule D..

(2)In section 88 of the Finance Act 1989, for subsection (3) substitute—

(3)For the purposes of subsection (1) above, the relevant profits of a company for an accounting period are the income and gains of the company’s life assurance business reduced by the aggregate amount of—

(a)expenses of management falling to be deducted under section 76 of the Taxes Act 1988, and

(b)charges on income,

so far as referable to the company’s life assurance business..

Interest on repayment of advance corporation tax

22After section 434B of the Taxes Act 1988 (inserted by paragraph 21 above) insert—

434CInterest on repayment of advance corporation tax.

Section 826(1) applies in a case where a repayment falls to be made of advance corporation tax paid by a company carrying on life assurance business in respect of distributions made by it.

In relation to such a case the material date for the purposes of that section is that specified in subsection (2A) of that section..

Capital allowances

23(1)After section 434C of the Taxes Act 1988 (inserted by paragraph 22 above) insert—

434DCapital allowances: management assets.

(1)This section has effect with respect to the allowances and charges to be made under the 1990 Act in respect of “management assets”, that is, assets provided for use or used for the management of life assurance business carried on by a company.

(2)No allowances or charges shall be made under that Act in respect of expenditure on management assets except under Part II (machinery and plant).

(3)Where the company is charged to tax under section 441 in respect of the profits of its overseas life assurance business for an accounting period—

(a)any allowance falling to be made under Part II of the 1990 Act in respect of expenditure on the provision outside the United Kingdom of machinery or plant for use for the management of that business shall be given effect by treating it as an expense of the business for that period; and

(b)any charge in respect of such expenditure falling to be so made shall be given effect by treating it as a receipt of the business for that period;

and sections 73, 144 and 145 of the 1990 Act do not apply.

(4)Allowances and charges falling to be made under Part II of the 1990 Act in respect of expenditure in respect of management assets not falling within subsection (3) above shall be apportioned between the different classes of life assurance business carried on by the company.

The amount referable to any class of life assurance business shall be the relevant fraction of the amount of the allowance or charge, that is, the fraction of which—

(a)the numerator is the mean of the opening and closing liabilities of the class of life assurance concerned, and

(b)the denominator is the mean of the opening and closing liabilities of all the classes of life assurance business carried on by the company.

(5)Where the company is charged to tax under section 436, 439B or 441 in respect of the profits of its pension business, life reinsurance business or overseas life assurance business for an accounting period—

(a)any allowance falling to be made under Part II of the 1990 Act in respect of expenditure on the provision of machinery or plant for use for the management of that business shall be given effect by treating the relevant proportion of the allowance as an expense of that business for the purpose of calculating the Case VI profit for that period; and

(b)any charge in respect of such expenditure falling to be so made shall be given effect by treating the relevant proportion of the charge as a receipt of that business for that purpose.

(6)Where a company carries on basic life assurance and general annuity business and the profits arising from that business do not fall to be charged to tax in accordance with the provisions applicable to Case I of Schedule D—

(a)allowances falling to be given under Part II of the 1990 Act in respect of expenditure on management assets shall be treated as additional expenses of management within section 76; and

(b)any charge falling to be made under that Part in respect of such assets shall be chargeable to tax under Case VI of Schedule D.

(7)For the purposes of this section the purposes of the management of a business shall be taken to be those purposes expenditure on which would be treated as expenses of management within section 76.

(8)Expenditure to which this section applies shall not be taken into account otherwise than in accordance with this section.

This shall not be construed as preventing any allowance under Part II of the 1990 Act which falls to be given by virtue of this section from being taken into account—

(a)in any computation of profits for the purposes of section 89(7) of the Finance Act 1989, or

(b)in any computation for the purposes of section 76(2) of the tax that would have been paid if the company had been charged to tax under Case I of Schedule D in respect of its life assurance business.

434ECapital allowances: investment assets.

(1)In this section “investment asset” means an asset held by a company for the purposes of its life assurance business otherwise than for the management of that business.

(2)The letting by a company of an investment asset shall be treated for the purposes of section 61 of the 1990 Act (machinery and plant on lease) as a letting otherwise than in the course of a trade.

(3)Any allowance under Part V of the 1990 Act (agricultural buildings, &c.) in respect of an investment asset shall be made by way of discharge or repayment of tax and shall be available primarily against agricultural income and income which is the subject of a balancing charge.

Effect shall be given to any balancing charge under that Part in respect of an investment asset by treating the amount on which the charge is to be made as agricultural income.

(4)Any allowance under the 1990 Act in respect of an investment asset shall be treated as referable to the category or categories of business to which income arising from the asset is or would be referable and shall be apportioned in accordance with section 432A in the same way as such income.

(5)No allowance under the 1990 Act in respect of an investment asset shall be taken into account—

(a)in computing the profits of any class of life assurance business under section 436, 439B or 441, or

(b)where the company is charged to tax in respect of its life assurance business under Case I of Schedule D, in computing the profits of that business.

(6)Where any allowance under the 1990 Act in respect of an investment asset falls to be taken into account (having regard to subsection (5) above), only such allowances as are referable to the company’s basic life assurance and general annuity business shall be given effect under section 145(1) of that Act, and then only against income referable to that business; and section 145(3) shall not apply..

(2)In section 75(4) of the Taxes Act 1988 omit the words “and insurance”.

(3)In section 86 of the Finance Act 1989 (spreading of relief for acquisition expenses), after subsection (5) insert—

(5A)References in this section to expenses of management do not include any amounts treated as additional expenses of management by virtue of section 434D(6)(a) of the Taxes Act 1988 (capital allowances in respect of expenditure on management assets)..

24In Chapter I of Part II of the Capital Allowances Act 1990 (machinery and plant), for section 28 (investment companies and life assurance companies) substitute—

28Investment companies.

(1)This Part and the other provisions of the Corporation Tax Acts relating to allowances or charges under this Part apply with the necessary adaptations in relation to machinery and plant provided for use or used for the purposes of the management of the business of an investment company (as defined in section 130 of the principal Act) as they apply in relation to machinery and plant provided for use or used for the purposes of a trade.

(2)Effect shall be given to allowances and charges falling to be made by virtue of this section as follows—

(a)any allowance falling to be made for any accounting period shall, as far as may be, be given effect by deducting the amount of the allowance from any income for the period of the business, and in so far as effect cannot be so given section 75(4) of the principal Act shall apply; and

(b)effect shall be given to any charge falling to be made under this section by treating the amount on which the charge is to be made as income of the business;

and sections 73, 144 and 145 do not apply.

(3)Except as provided by subsection (2) above, the Corporation Tax Acts apply in relation to allowances or charges falling to be made by virtue of this section as if they were to be made in taxing a trade.

(4)For the purposes of this section the purposes of the management of a business shall be taken to be those purposes expenditure on which would be treated as expenses of management within section 75 of the principal Act.

(5)Corresponding allowances or charges in the case of the same machinery or plant shall not be made under this Part both under this section and in some other way.

(6)Expenditure to which this section applies shall not be taken into account otherwise than under this Part or as provided by section 75(4) of the principal Act..

Treatment of tax-free income

25(1)In the Taxes Act 1988 omit—

(a)section 474(1)(b); and

(b)in section 475(2)(a), the words from “or,” to “life assurance business”.

(2)In section 474 of the Taxes Act 1988, at the end insert—

(3)In this section any reference to insurance business includes a reference to insurance business of any category..

Taxation of pure reinsurance business

26After section 439 of the Taxes Act 1988 insert—

439ATaxation of pure reinsurance business.

If a company does not carry on life assurance business other than reinsurance business, and none of that business is of a type excluded from this section by regulations made by the Board, the profits of that business shall be charged to tax in accordance with Case I of Schedule D and not otherwise..

Life reinsurance business: separate charge on profits

27(1)After section 439A of the Taxes Act 1988 (inserted by paragraph 26 above) insert—

439BLife reinsurance business: separate charge on profits.

(1)Where a company carries on life reinsurance business and the profits arising from that business are not charged to tax in accordance with the provisions applicable to Case I of Schedule D, then, subject as follows, those profits shall be treated as income within Schedule D and be chargeable to tax under Case VI of that Schedule, and for that purpose—

(a)that business shall be treated separately, and

(b)subject to paragraph (a) above, the profits from it shall be computed in accordance with the provisions of this Act applicable to Case I of Schedule D.

(2)Subsection (1) above does not apply to so much of reinsurance business of any description excluded from that subsection by regulations made by the Board.

Regulations under this subsection may describe the excluded business by reference to any circumstances appearing to the Board to be relevant.

(3)In making the computation referred to in subsection (1) above—

(a)sections 82(1), (2) and (4) and 83 of the Finance Act 1989 shall apply with the necessary modifications and in particular with the omission of the words “tax or” in section 82(1)(a),

(b)section 83(3) of that Act shall not apply, and

(c)there may be set off against the profits any loss, to be computed on the same basis as the profits, which has arisen from life reinsurance business in any previous accounting period beginning on or after 1st January 1995.

(4)Section 396 shall not be taken to apply to a loss incurred by a company on life reinsurance business.

(5)Nothing in section 128 or 399(1) shall affect the operation of this section.

(6)Gains accruing to a company which are referable to its life reinsurance business shall not be chargeable gains.

(7)In ascertaining whether or to what extent a company has incurred a loss on its life reinsurance business, franked investment income and foreign income dividends shall be taken into account (notwithstanding anything in section 208) as part of the profits of that business..

(2)In section 444A(3)(a) of the Taxes Act 1988 after “section 436(3)(c)” insert “or 439B(3)(c)”.

(3)In section 724(3) and (4) of the Taxes Act 1988 after “section 436” insert “, 439B”.

Provisions applicable to charge under Case I of Schedule D

28(1)After section 440A of the Taxes Act 1988 insert—

440BModifications where tax charged under Case I of Schedule D.

(1)The following provisions apply where the profits of a company’s life assurance business are charged to tax in accordance with Case I of Schedule D.

(2)Section 438 applies as if in subsections (6), (6B) and (6E) for the reference to any profit arising to the company and computed under section 436 there were substituted a reference to the profit that would arise on a computation under section 436 if the profits of the company’s life assurance business were not charged to tax under Case I of Schedule D.

(3)Section 440(1) and (2) apply as if the only categories set out in subsection (4) of that section were—

(a)assets of the long term business fund, and

(b)other assets.

(4)Section 440A applies as if for paragraphs (a) to (e) of subsection (2) there were substituted—

(a)so many of the securities as are identified in the company’s records as securities by reference to the value of which there are to be determined benefits provided for under policies or contracts the effecting of all (or all but an insignificant proportion) of which constitutes the carrying on of long term business, shall be treated for the purposes of corporation tax as a separate holding linked solely to that business, and

(b)any remaining securities shall be treated for those purposes as a separate holding which is not of the description mentioned in the preceding paragraph..

(5)Section 212(1) of the 1992 Act does not apply, but without prejudice to the bringing into account of any amounts deferred under section 213(1) or 214A(2) of that Act from any accounting period beginning before 1st January 1995..

(2)In section 438 of the Taxes Act 1988, after subsection (8) insert—

(9)In a case where the profits of a company’s life assurance business are charged to tax in accordance with Case I of Schedule D this section has effect with the modification specified in section 440B(2)..

(3)In section 440 of the Taxes Act 1988, after subsection (5) insert—

(6)In a case where the profits of a company’s life assurance business are charged to tax in accordance with Case I of Schedule D this section has effect with the modification specified in section 440B(3)..

(4)In section 440A of the Taxes Act 1988, after subsection (6) insert—

(7)In a case where the profits of a company’s life assurance business are charged to tax in accordance with Case I of Schedule D this section has effect with the modification specified in section 440B(4)..

(5)In section 212 of the Taxation of Chargeable Gains Act 1992, after subsection (7) insert—

(7A)In a case where the profits of a company’s life assurance business are charged to tax in accordance with Case I of Schedule D subsection (1) above has effect subject to section 440B(5) of the Taxes Act..

29In section 438(3) and (3AA) of the Taxes Act 1988 after “taken into account” insert “—(a)” and after “pension business” insert— , or

(b)where the company is charged to tax in respect of its life assurance business under Case I of Schedule D, in computing the profits of that business..

Overseas life assurance business

30In section 441(1) of the Taxes Act 1988 omit the words “resident in the United Kingdom”.

31In section 441A of the Taxes Act 1988 for subsections (3) to (6) substitute—

(3)A company shall be entitled to such a tax credit if and to the extent that regulations made by the Board so provide.

(4)Regulations under subsection (3) above may, in particular, provide for the entitlement of a company to a tax credit, and the amount to which the company is entitled, to be determined by reference to—

(a)the residence of any description of policy holders or annuitants prescribed by the regulations, or

(b)the location of any branch or agency at or through which the policy or contract for any business is effected.

(5)Subsections (2) and (3) of section 431E apply in relation to regulations under subsection (3) above as they apply in relation to regulations under subsection (1) of that section but as if any issue which falls to be decided for the purposes of the regulations under subsection (3) above were an issue such as is mentioned in subsection (2)(a) of that section..

32After section 441A of the Taxes Act 1988 insert—

441BTreatment of UK land.

(1)This section applies to land in the United Kingdom which—

(a)is held by a company as an asset linked to the company’s overseas life assurance business, or

(b)is held by a company which is charged to tax under Case I of Schedule D in respect of its life assurance business as an asset by reference to the value of which benefits under any policy or contract are to be determined, where the policy or contract (or, in the case of a reinsurance contract, the underlying policy or contract) is held by a person not residing in the United Kingdom.

(2)Income arising from land to which this section applies shall be treated for the purposes of this Chapter as referable to basic life assurance and general annuity business.

(3)Where (apart from this subsection) an insurance company would not be carrying on basic life assurance and general annuity business it shall be treated as carrying on such business if any income of the company is treated as referable to such business by subsection (2) above.

(4)A company may be charged to tax by virtue of this section—

(a)notwithstanding section 439A, and

(b)whether or not the income to which subsection (2) above relates is taken into account in computing the profits of the company for the purposes of any charge to tax in accordance with Case I of Schedule D.

(5)In this section “land” has the same meaning as in Schedule 19AA..

33In paragraph 1(2) of Schedule 19AA to the Taxes Act 1988, at the end insert “(including any modification of any of those provisions made by paragraph 14A of Schedule 19AC)”.

Taxation of investment return where risk reinsured

34After section 442 of the Taxes Act 1988 insert—

442ATaxation of investment return where risk reinsured.

(1)Where an insurance company reinsures any risk in respect of a policy or contract attributable to its basic life assurance and general annuity business, the investment return on the policy or contract shall be treated as accruing to the company over the period of the reinsurance arrangement and shall be charged to tax under Case VI of Schedule D.

(2)The Board may make provision by regulations as to the amount of investment return to be treated as accruing in each accounting period during which the reinsurance arrangement is in force.

(3)The regulations may, in particular, provide that the investment return to be treated as accruing to the company in respect of a policy or contract in any accounting period shall be calculated by reference to—

(a)the aggregate of the sums paid by the company to the reinsurer during that accounting period and any earlier accounting periods by way of premium or otherwise;

(b)the aggregate of the sums paid by the reinsurer to the company during that accounting period and any earlier accounting periods by way of commission or otherwise;

(c)the aggregate amount of the net investment return treated as accruing to the company in any earlier accounting periods, that is to say, net of tax at such rate as may be prescribed; and

(d)such percentage rate of return as may be prescribed.

(4)The regulations shall provide that the amount of investment return to be treated as accruing to the company in respect of a policy or contract in the final accounting period during which the policy or contract is in force is the amount, ascertained in accordance with regulations, by which the profit over the whole period during which the policy or contract, and the reinsurance arrangement, were in force exceeds the aggregate of the amounts treated as accruing in earlier accounting periods.

If that profit is less than the aggregate of the amounts treated as accruing in earlier accounting periods, the difference shall go to reduce the amounts treated by virtue of this section as arising in that accounting period from other policies or contracts, and if not fully so relieved may be carried forward and set against any such amounts in subsequent accounting periods.

(5)Regulations under this section—

(a)may exclude from the operation of this section such descriptions of insurance company, such descriptions of policies or contracts and such descriptions of reinsurance arrangements as may be prescribed;

(b)may make such supplementary provision as to the ascertainment of the investment return to be treated as accruing to the company as appears to the Board to be appropriate, including provision requiring payments made during an accounting period to be treated as made on such date or dates as may be prescribed; and

(c)may make different provision for different cases or descriptions of case.

(6)In this section “prescribed” means prescribed by regulations under this section..

Part IIApplication of provisions to overseas life insurance companies

35(1)After paragraph 5 of Schedule 19AC to the Taxes Act 1988 insert—

5A(1)Where an overseas life insurance company receives a qualifying distribution made by a company resident in the United Kingdom and the distribution (or part of the distribution)—

(a)would fall within paragraph (a), (aa) or (ab) of section 11(2) but for the exclusion contained in that paragraph, and

(b)is referable to life assurance business, but not to overseas life assurance business,

then the recipient shall be treated for the purposes of the Corporation Tax Acts as entitled to such a tax credit in respect of the distribution (or part of the distribution) as it would be entitled to under section 231 if it were resident in the United Kingdom.

(2)Where part only of a qualifying distribution would fall within paragraph (ab) of section 11(2) but for the exclusion contained in that paragraph, the tax credit to which the recipient shall be treated as entitled by virtue of sub-paragraph (1) above is the proportionate part of the tax credit to which the recipient would be so treated as entitled in respect of the whole of the distribution.

5B(1)An overseas life insurance company may, on making a claim for the purpose, require that any UK distribution income for an accounting period shall for all or any of the purposes mentioned in sub-paragraph (2) below be treated as if it were a like amount of profits chargeable to corporation tax; and where it does so—

(a)the provisions mentioned in that sub-paragraph shall apply to reduce the amount of the UK distribution income, and

(b)the company shall be entitled to have paid to it the amount of the tax credits comprised in the amount of UK distribution income which is so reduced.

(2)The purposes for which a claim may be made under this paragraph are those of—

(a)the setting of trading losses against total profits under section 393A(1);

(b)the deduction of charges on income under section 338 or paragraph 5 of Schedule 4;

(c)the deduction of expenses of management under section 76;

(d)the setting of certain capital allowances against total profits under section 145(3) of the 1990 Act.

(3)Subsections (3), (4) and (8) of section 242 shall apply for the purposes of a claim under this paragraph as they apply for the purposes of a claim under that section.

(4)In this paragraph “UK distribution income” means income of an overseas life insurance company which consists of a distribution (or part of a distribution) in respect of which the company is entitled to a tax credit (and which accordingly represents income equal to the aggregate of the amount or value of the distribution (or part) and the amount of that credit).

5C(1)This paragraph applies to income from the investments of an overseas life insurance company attributable to the basic life assurance and general annuity business of the branch or agency in the United Kingdom through which the company carries on life assurance business.

(2)Where, in computing the income to which this paragraph applies, any interest on any securities issued by the Treasury is excluded by virtue of a condition of the issue of those securities regulating the treatment of the interest on them for tax purposes, the relief under section 76 shall be reduced so that it bears to the amount of relief which would be granted apart from this sub-paragraph the same proportion as the amount of that income excluding that interest bears to the amount of that income including that interest..

(2)In paragraph 2(1) of Schedule 19AC to the Taxes Act 1988, for “section 444D” substitute “paragraph 5B of Schedule 19AC”.

(3)After paragraph 6(4) of that Schedule insert—

(4A)In that subsection the following definition shall be inserted at the appropriate place—

  • “UK distribution income” has the meaning given by paragraph 5B(4) of Schedule 19AC;.

(4)In section 475(6) of the Taxes Act 1988 for “section 444E(2)” (twice) substitute “paragraph 5C(2) of Schedule 19AC”.

(5)In paragraph 2(2) of Schedule 8A to the Finance Act 1989 for “section 444D(4) of the Taxes Act 1988” substitute “paragraph 5B(4) of that Schedule”.

36In paragraph 5(1) of Schedule 19AC to the Taxes Act 1988, in the notionally inserted subsection (6B)—

(a)for “242” substitute “section 242”, and

(b)for “444D” substitute “paragraph 5B of Schedule 19AC”.

37In paragraph 6 of Schedule 19AC to the Taxes Act 1988, omit sub-paragraphs (3) and (4).

38After paragraph 6 of Schedule 19AC to the Taxes Act 1988 insert—

6AIn section 431D(1), the words “carried on through a branch or agency in the United Kingdom by an overseas life insurance company” shall be treated as inserted after the words “means life assurance business”..

39For paragraph 7 of Schedule 19AC to the Taxes Act 1988 substitute—

7(1)Section 432A has effect as if the references in subsections (3), (6) and (8) to assets were to such of the assets concerned as are—

(a)section 11(2)(b) assets,

(b)section 11(2)(c) assets, or

(c)assets which by virtue of section 11B are attributed to the branch or agency in the United Kingdom through which the company carries on life assurance business;

and as if the references in subsections (6) and (8) to liabilities were to such of the liabilities concerned as are attributable to the branch or agency.

Expressions used in this sub-paragraph to which a meaning is given by section 11A have that meaning.

(2)For the purposes of section 432A as it applies in relation to an overseas life insurance company, income which falls within section 11(2)(aa) or (ab), and chargeable gains or allowable losses which fall within section 11(2)(d) or (e)—

(a)shall not be referable to long term business other than life assurance business; and

(b)shall be apportioned under subsections (5) and (6) of that section separately from other income, gains and losses.

(3)For the purposes of the application of section 432A(6) in relation to such income, gains or losses as are mentioned in sub-paragraph (2) above—

(a)“liabilities” does not includes liabilities of the long term business other than life assurance business;

(b)the value of assets directly referable to any category of business does not include assets directly referable to long term business other than life assurance business; and

(c)the reference in section 432A(6)(b)(ii) to the investment reserve shall be construed as a reference to so much of the investment reserve as is not referable to long term business other than life assurance business..

40(1)Paragraph 8 of Schedule 19AC to the Taxes Act 1988 is amended as follows.

(2)In sub-paragraph (1)—

(a)for “paragraph 1” substitute “paragraph 1C”; and

(b)for “the word “1982”” substitute “the words “brought into account, within the meaning of that section,””.

(3)In sub-paragraph (2) for “paragraph 1(6), (7) or (8)” substitute “any provision of paragraph 1C”.

(4)For sub-paragraph (3) substitute—

(3)Subsection (3) of section 432B shall have effect as if after the words “with which an account is concerned” there were inserted the words “or in respect of which items are treated as brought into account by virtue of paragraph 1C of Schedule 8A to the Finance Act 1989”; and that subsection and sections 432C to 432E shall have effect as if the reference to relevant business were to relevant business of the branch or agency in the United Kingdom through which the company carries on life assurance business..

41In paragraph 9(1) of Schedule 19AC to the Taxes Act 1988 in the notionally inserted section 434(1A)—

(a)after “UK distribution income of” insert “, or foreign income dividends arising to,”; and

(b)for the words from “as part of the profit” to the end substitute—

(a)in any computation of profits for the purposes of section 89(7) of the Finance Act 1989, or

(b)in any computation for the purposes of section 76(2) of the tax that would have been paid if the company had been charged to tax under Case I of Schedule D in respect of its life assurance business..

42After paragraph 9 of Schedule 19AC to the Taxes Act 1988 insert—

9AIn section 434A(1)—

(a)the words “UK distribution income” shall be treated as substituted for “franked investment income”, and

(b)the words “an overseas life insurance company” shall be treated as substituted for “a company resident in the United Kingdom”.

9BIn section 434B the following subsection shall be treated as inserted after subsection (2)—

(3)An overseas life insurance company shall not be entitled to treat as paid out of profits or gains brought into charge to income tax any part of the annuities paid by the company which is referable to its life assurance business..

9CIn its application to an overseas life insurance company section 434D(4) shall have effect as if the references to liabilities were only to such liabilities as are attributable to the branch or agency in the United Kingdom through which the company carries on the business concerned..

43(1)In paragraph 10(1) of Schedule 19AC to the Taxes Act 1988, in the notionally inserted section 438(3A)—

(a)for “subsection (6)” substitute “subsections (6) and (6B)”;

(b)after “UK distribution income of ” insert “, or foreign income dividends arising to,”;

(c)after “taken into account” insert “—(a)”; and

(d)after “pension business” insert— , or

(b)where the company is charged to tax in respect of its life assurance business under Case I of Schedule D, in computing the profits of that business..

(2)In paragraph 10(2) for “subsections (6) and (6A)” substitute “subsections (6), (6A), (6D) and (6E)”.

44After paragraph 10 of Schedule 19AC to the Taxes Act 1988 insert—

10AIn section 439B the following subsection shall be treated as inserted after subsection (7) of that section—

(7A)In ascertaining whether or to what extent the company has incurred a loss on its life reinsurance business, UK distribution income of an overseas life insurance company shall be taken into account (notwithstanding anything in paragraph (a), (aa) or (ab) of section 11(2)) as part of the profits of that business..

10B(1)Where the company mentioned in section 440(1) is an overseas life insurance company, section 440 has effect with the following modifications.

(2)Subsection (4) shall be treated as if—

(a)in paragraphs (a), (b), (d), (e) and (f) the words “UK assets” were substituted for the words “assets”; and

(b)at the end there were inserted—

(g)section 11C assets;

(h)non-UK assets..

(3)The following subsection shall be treated as inserted at the end of the section—

(7)For the purposes of this section—

(a)UK assets are—

(i)section 11(2)(b) assets;

(ii)section 11(2)(c) assets; or

(iii)assets which by virtue of section 11B are attributed to the branch or agency in the United Kingdom through which the company carries on life assurance business;

(b)section 11C assets are assets—

(i)(in a case where section 11C (other than subsection (9)) applies) of the relevant fund, other than UK assets; or

(ii)(in a case where that section including that subsection applies) of the relevant funds, other than UK assets;

(c)non-UK assets are assets which are not UK assets or section 11C assets;

and any expression used in this subsection to which a meaning is given by section 11A has that meaning..

(4)Where one of the companies mentioned in section 440(2) is an overseas life insurance company, section 440(2)(b) shall have effect as if for the words “is within another of those categories” there were substituted “is not within the corresponding category”.

(5)Where the transferor company mentioned in section 440(2) is an overseas life insurance company, section 440 shall have effect, as regards the time immediately before the acquisition, with the modifications in sub-paragraphs (2) and (3) above.

(6)Where the acquiring company mentioned in section 440(2) is an overseas life insurance company, section 440 shall have effect, as regards the time immediately after the acquisition, with the modifications in sub-paragraphs (2) and (3) above.

10C(1)In section 440B the following subsection shall be treated as substituted for subsection (3)—

(3)Section 440(1) and (2) have effect as if the only categories specified in subsection (4) of that section were—

(a)UK assets of the long term business fund,

(b)other UK assets,

(c)section 11C assets, and

(d)non-UK assets,

(those expressions having the meanings given by section 440(7))..

(2)The following subsection shall be treated as substituted for subsection (4) of that section—

(4)Section 440A applies as if for paragraphs (a) to (e) of subsection (2) there were substituted—

(a)so many of the UK securities as are identified in the company’s records as securities by reference to the value of which there are to be determined benefits provided for under policies or contracts the effecting of all (or all but an insignificant proportion) of which constitutes the carrying on of long term business, shall be treated for the purposes of corporation tax as a separate holding linked solely to that business,

(b)any remaining UK securities shall be treated for those purposes as a separate holding which is not of the description mentioned in the preceding paragraph,

(c)the section 11C securities shall be treated for those purposes as a separate holding which is not of any of the descriptions mentioned in the preceding paragraphs, and

(d)the non-UK securities shall be treated for those purposes as a separate holding which is not of any of the descriptions mentioned in the preceding paragraphs....

45(1)Paragraph 11 of Schedule 19AC to the Taxes Act 1988 is amended as follows.

(2)For sub-paragraph (1) substitute—

(1)In section 440A(2), in paragraph (a) the words “UK securities” shall be treated as substituted for the word “securities” in the first place where it occurs..

(3)Omit sub-paragraph (2).

(4)In sub-paragraph (5) renumber the notionally inserted subsection as (6A).

46After paragraph 11 of Schedule 19AC to the Taxes Act 1988 insert—

11A(1)In section 441A, the following subsection shall be treated as inserted after subsection (1)—

(1A)The exclusion from section 11(2)(a), (aa) and (ab) of distributions received from companies resident in the United Kingdom shall not apply in relation to a distribution in respect of any asset of the overseas life assurance fund of an overseas life insurance company..

(2)The following subsection shall be treated as substituted for subsections (2) and (3) of that section—

(3)An overseas life insurance company shall be entitled to a tax credit in respect of a distribution which—

(a)is a distribution in respect of an asset of the company’s overseas life assurance fund, and

(b)is received from a company resident in the United Kingdom,

if and to the extent that regulations made by the Board so provide..

11BIn section 442A the following subsection shall be treated as inserted after subsection (6)—

(7)In the case of an overseas life insurance company, the investment return treated as accruing under this section in any accounting period in relation to a policy or contract shall be treated as chargeable profits within section 11(2) of the Taxes Act 1988 where the policy or contract is one which in that accounting period gives rise, or but for the reinsurance arrangement would give rise, to such profits..

47In paragraph 12(1) of Schedule 19AC to the Taxes Act 1988, for “section 444D” substitute “paragraph 5B of Schedule 19AC”.

48After paragraph 14 of Schedule 19AC to the Taxes Act 1988 insert—

14A(1)In Schedule 19AA, paragraph 5(5)(c) (and the reference to it in paragraph 2(3) of that Schedule) shall be treated as omitted.

(2)The following paragraph shall be treated as inserted at the end of that Schedule—

6In its application to an overseas life insurance company this Schedule shall have effect as if—

(a)the references in paragraphs 2 and 3 to assets of the long term business fund were to such of the assets as are—

(i)section 11(2)(b) assets;

(ii)section 11(2)(c) assets; or

(iii)assets which by virtue of section 11B are attributed to the branch or agency in the United Kingdom through which the company carries on life assurance business; and

(b)the references in paragraphs 2 and 4 to the liabilities of the company’s long term business were to such of those liabilities as are attributable to the branch or agency;

and any expression used in this paragraph to which a meaning is given by section 11A has that meaning...

49(1)Schedule 8A to the [1989 c. 26.] Finance Act 1989 is amended as follows.

(2)For paragraph 1 substitute—

1(1)In their application to an overseas life insurance company sections 83 and 83A of this Act shall have effect with the modifications specified in paragraphs 1A to 1C below.

(2)In those paragraphs—

(a)any reference to the Taxes Act 1988 is a reference to that Act as it has effect in relation to such a company by virtue of Schedule 19AC to that Act; and

(b)any expression to which a meaning is given by section 11A of that Act has that meaning.

1A(1)The reference in section 83(2)(a) to investment income shall be construed as a reference to such of the income concerned as is attributable to the branch or agency in the United Kingdom through which the company carries on life assurance business.

(2)The reference to assets in section 83(2)(b) (as it applies apart from subsection (3) of that section) shall be construed as a reference to such of the assets concerned—

(a)as are—

(i)section 11(2)(b) assets;

(ii)section 11(2)(c) assets; or

(iii)assets which by virtue of section 11B of the Taxes Act 1988 are attributed to the branch or agency; or

(b)as are assets—

(i)(in a case where section 11C of that Act (other than subsection (9)) applies) of the relevant fund, or

(ii)(in a case where that section including that subsection applies) of the relevant funds,

other than assets which fall within paragraph (a) above.

(3)In determining for the purposes of section 83(2) (as it applies apart from subsection (3) of that section) whether there has been any increase or reduction in the value (whether realised or not) of assets—

(a)no regard shall be had to any period of time during which an asset held by the company does not fall within paragraph (a) or (b) of sub-paragraph (2) above; and

(b)in the case of an asset which falls within paragraph (b) of that sub-paragraph, only the specified portion of any increase or reduction in the value of the asset shall be taken into account.

For the purposes of paragraph (b) above the specified portion of any increase or reduction in the value of an asset is found by applying to that increase or reduction the same fraction as would, by virtue of section 11C of the Taxes Act 1988, be applied to any relevant gain accruing to the company on the disposal of the asset.

(4)For the reference in section 83(3) to any amount being transferred into the company’s long term business fund from other assets of the company, or otherwise added to that fund, there shall be substituted a reference to assets becoming assets of the long term business fund used or held for the purposes of the company’s United Kingdom branch or agency, having immediately previously been held by the company otherwise than as assets of that fund or used or held otherwise than for those purposes.

The amount of the increase in value under section 83(2)(b), as it applies in relation to such a transfer, shall be taken to be an amount equal to the value of the assets transferred.

1BThe references in section 83A to the company’s long term business shall be construed as references to the whole of that business or to the whole of that business other than business in respect of which preparation of a revenue account for the purposes of the Insurance Companies Act 1982 is not required.

1C(1)Where for a period of account any investment income referred to in section 83(2)(a) is not otherwise brought into account within the meaning of that section, it shall be treated as brought into account for the period if it arises in the period.

(2)Where for a period of account any increase in value referred to in section 83(2)(b) (as it applies apart from subsection (3) of that section) is not otherwise brought into account within the meaning of that section, it shall be treated as brought into account for the period if it is shown in the company’s records as available to fund one or both of the following for the period, namely, bonuses to policy holders and dividends to shareholders.

(3)Where for a period of account any reduction in value referred to in section 83(2) (as it applies apart from subsection (3) of that section) is not otherwise brought into account within the meaning of that section, it shall be treated as brought into account for the period if it is shown in the company’s records as reducing sums available to fund one or both of the following for the period, namely, bonuses to policy holders and dividends to shareholders.

(4)Where in any period of account any such transfer is made as is mentioned in section 83(3) which is not otherwise brought into account within the meaning of that section, it shall be treated as brought into account for the period in which it is made..

(3)In paragraph 2(7) for the words following paragraph (b) substitute— and in paragraph (b) above “the specified portion” has the same meaning as in paragraph 1A(3)(b) above.

(4)After paragraph 2(7) insert—

(7A)For the purposes of this paragraph any expression to which a meaning is given by section 11A of the Taxes Act 1988 has that meaning..

Part IIISupplementary provisions

Penalties

50In the Table in section 98 of the [1970 c. 9.] Taxes Management Act 1970 (penalties for failure to comply with notice or to furnish information etc.), the entry “regulations under section 431E(1) or 441A(3);” shall be inserted—

(a)in the first column after the entry relating to regulations under section 333 of the Taxes Act 1988, and

(b)in the second column after the entry relating to section 375(5) of that Act.

Miscellaneous

51(1)The Taxes Act 1988 is amended as follows.

(2)Before section 432 insert the heading “Separation of different categories of business”.

(3)In the sidenote to section 432 for “classes” substitute “categories”.

(4)Before section 434 insert the heading “Miscellaneous provisions relating to life assurance business”.

(5)In the sidenote to section 436 for “Annuity business and pension business” substitute “Pension business”.

Commencement

52The amendment made by paragraph 43(2) above shall be deemed always to have had effect.

53(1)The amendments made by paragraph 17 above have effect in relation to accounting periods ending on or after 1st January 1994.

(2)In the first accounting period of a company ending on or after 1st January 1994 in which the subsection (3) figure for any category of business exceeds the subsection (2) figure, the subsection (2) figure shall be treated as increased by an amount not exceeding the amount or aggregate amount of any subsection (2) excesses in relation to that category of business for accounting periods beginning on or after 1st January 1990 and ending before 1st January 1994, but not so as to produce a subsection (2) excess for that period.

For this purpose the subsection (2) excess for an accounting period beginning on or after 1st January 1990 and ending before 1st January 1994 shall be determined without regard to the fact that in any other such accounting period the subsection (3) figure exceeded the subsection (2) figure.

Expressions used in this sub-paragraph have the same meaning as in section 432F of the Taxes Act 1988.

(3)Where a transfer mentioned in section 444A of the Taxes Act 1988 took place at the end of an accounting period of the transferor beginning on or after 1st January 1990 and ending before 1st January 1994, section 444A(3A) shall have effect in relation to the transfer as if it read—

(3A)Any subsection (2) excess (within the meaning of section 432F(2)) of the transferor for an accounting period beginning on or after 1st January 1990 and ending before 1st January 1994 which (assuming the transferor had continued to carry on the business transferred after the transfer) would have been available to increase the subsection (2) figure (within the meaning of section 432F(1)) of the transferor in the first accounting period ending on or after 1st January 1994 in which the subsection (3) figure exceeded the subsection (2) figure—

(a)shall, instead, be treated as a subsection (2) excess of the transferee, and

(b)shall be taken into account to increase the subsection (2) figure of the transferee in its first accounting period ending on or after 1st January 1994 in which the subsection (3) figure exceeds the subsection (2) figure, but not so as to produce a subsection (2) excess for that period,

in relation to the revenue account of the transferee dealing with or including the business transferred.

For this purpose the subsection (2) excess for an accounting period beginning on or after 1st January 1990 and ending before 1st January 1994 shall be determined without regard to the fact that in any other such accounting period the subsection (3) figure exceeded the subsection (2) figure..

54The amendment made by paragraph 22 above applies in relation to distributions made by an insurance company in any accounting period ending after 30th September 1993.

55(1)Subject to sub-paragraphs (2) and (3) below, the amendments made by the following provisions of this Schedule have effect in relation to accounting periods beginning on or after 1st November 1994—

  • paragraph 1 so far as relating to the definition of “overseas life assurance business”,

  • paragraph 2 so far as relating to sections 431D and 431E of the Taxes Act 1988,

  • paragraphs 3, 25, 30 to 33, 37, 38 and 45(1) and (3),

  • paragraph 46 so far as relating to paragraph 11A of Schedule 19AC to the Taxes Act 1988, and

  • paragraphs 48 and 50.

(2)Where the policy or contract for any life assurance business was made before 1st November 1994, the amendments made by this Schedule (and the repeals consequential on those amendments) shall not have effect for determining whether the business is overseas life assurance business.

(3)Where the policy or contract for any life assurance business effected by a company resident in the United Kingdom at or through a branch or agency outside the United Kingdom was made before 29th November 1994, subsections (2) to (8) of section 431D of the Taxes Act 1988 shall not have effect for determining whether the business is overseas life assurance business.

56The amendments made by paragraphs 41(a) and 43(1) above have effect in relation to foreign income dividends paid after 29th November 1994.

57(1)Except as provided by paragraphs 52 to 56 above, and subject to sub-paragraph (2) below, the amendments made by provisions of this Schedule have effect in relation to accounting periods beginning on or after 1st January 1995.

(2)Section 442A of the Taxes Act 1988 does not apply in relation to the reinsurance of a policy or contract where the policy or contract was made, and the reinsurance arrangement effected, before 29th November 1994.

58Any power to make regulations exercisable by virtue of an amendment made by any provision of this Schedule may be exercised so as to make provision having effect in relation to any accounting period in relation to which that provision has effect in accordance with paragraph 55 or 57 above.

Section 53.

SCHEDULE 9Transfer of Life Insurance Business

Consequential amendment of references to sanctioned transfers

1(1)In the enactments specified in sub-paragraph (2) below, for the words “section 49 of the [1982 c. 50.] Insurance Companies Act 1982”, in each place where they occur, there shall be substituted “Part I of Schedule 2C to the Insurance Companies Act 1982”.

(2)The enactments mentioned in sub-paragraph (1) above are—

(a)section 12(7A) of the Taxes Act 1988 (accounting periods);

(b)sections 440(2)(a) and 444A(1) of that Act (transfer of assets or business of insurance company);

(c)section 460(10A) of that Act (transfer of business to friendly society); and

(d)sections 211(1), 213(5), 214(11) and 214A(7) of the [1992 c. 12.] Taxation of Chargeable Gains Act 1992 (transfers of business).

(3)In section 444A(3)(b) of the Taxes Act 1988 (losses treated as losses of transferee)—

(a)after “where” there shall be inserted “the transfer relates to any overseas life assurance business or”; and

(b)for “overseas life assurance” there shall be substituted “such”.

Modification of the Taxes Act 1988 in relation to overseas life insurance companies

2(1)Schedule 19AC to the Taxes Act 1988 (modification of Act in relation to overseas life insurance company) shall be amended as follows.

(2)After paragraph 4 there shall be inserted the following paragraph—

4A(1)In section 12(7A), the reference to a transfer of the whole or part of a company’s long term business in accordance with a scheme sanctioned by a court under Part I of Schedule 2C to the [1982 c. 50.] Insurance Companies Act 1982 shall be treated as including a reference to a qualifying overseas transfer.

(2)In this paragraph “a qualifying overseas transfer” means so much of any transfer of the whole or any part of the business of an overseas life insurance company carried on through a branch or agency in the United Kingdom as takes place in accordance with any authorisation granted outside the United Kingdom for the purposes of Article 11 of the third long term insurance Directive.

(3)In sub-paragraph (2) above “the third long term insurance Directive” has the same meaning as in that Act of 1982.

(3)After the paragraph 10A inserted by Schedule 8 to this Act there shall be inserted the following paragraph—

10AAIn section 440(2)(a), the reference to a transfer of the whole or part of a company’s long term business in accordance with a scheme sanctioned by a court under Part I of Schedule 2C to the [1982 c. 50.] Insurance Companies Act 1982 shall be treated as including a reference to a qualifying overseas transfer (within the meaning of paragraph 4A above).

(4)Before paragraph 12 there shall be inserted the following paragraph—

11CIn sections 444A(1) and 460(10A), the references to a transfer of the whole or part of a company’s long term business in accordance with a scheme sanctioned by a court under Part I of Schedule 2C to the [1982 c. 50.] Insurance Companies Act 1982 shall be treated as including references to a qualifying overseas transfer (within the meaning of paragraph 4A above).

Modification of the Capital Allowances Act 1990

3For subsection (1) of section 152A of the [1990 c. 1.] Capital Allowances Act 1990 (transfer of insurance company business), there shall be substituted the following subsections—

(1)Subject to subsection (1A) below, this section applies where assets are transferred as part of, or in connection with, the transfer (“a relevant transfer”) of the whole or part of the business of an insurance company (“the transferor”) to another company (“the transferee”) if the relevant transfer is—

(a)a transfer, in accordance with a scheme sanctioned by a court under Part I of Schedule 2C to the [1982 c. 50.] Insurance Companies Act 1982, of the whole or part of any long term business of the transferor; or

(b)a qualifying overseas transfer (within the meaning of paragraph 4A of Schedule 19AC to the principal Act).

(1A)This section does not apply in relation to any asset transferred to a company resident outside the United Kingdom unless the asset would fall to be treated, immediately after the relevant transfer, as either—

(a)an asset held for use for the purposes of the management of the whole or any part of so much of any business carried on by that company as is carried on through a branch or agency in the United Kingdom; or

(b)an asset which is otherwise held for the purposes of the whole or any part of so much of any business carried on by that company as is carried on through such a branch or agency.

(1B)In subsection (1) above “insurance company” has the same meaning as in Chapter I of Part XII of the principal Act; and in subsection (1A) above, the reference to the purposes of the management of any business is to be taken as a reference to those purposes expenditure on which falls, in relation to that business, to be treated for the purposes of sections 75 and 76 of the principal Act as expenses of management.

Modification of the Taxation of Chargeable Gains Act 1992

4In subsection (5) of section 213 of the [1992 c. 12.] Taxation of Chargeable Gains Act 1992 (spreading of gains and losses under section 212 where there is a transfer of long term business), at the beginning there shall be inserted “Subject to subsections (5A) to (7) below”; and after that subsection there shall be inserted the following subsection—

(5A)Subsection (5) above shall not apply where the transferee is resident outside the United Kingdom unless the business to which the transfer relates is carried on by the transferee, for a period beginning with the time when the transfer takes effect, through a branch or agency in the United Kingdom.

5In subsection (7) of section 214A of that Act of 1992 (application of transitional provisions where there is a transfer of long term business), at the beginning there shall be inserted “Subject to subsections (7A) and (8) below”; and after that subsection there shall be inserted the following subsection—

(7A)Paragraph (b) of subsection (7) above shall not apply where the transferee is resident outside the United Kingdom unless the business to which the transfer relates is carried on by the transferee, for a period beginning with the time when the transfer takes effect, through a branch or agency in the United Kingdom.

6(1)Schedule 7B to that Act of 1992 (modification of Act in application to overseas life insurance companies) shall be amended as follows.

(2)After paragraph 9 there shall be inserted the following paragraph—

9AIn section 211(1), the reference to a transfer of the whole or part of a company’s long term business in accordance with a scheme sanctioned by a court under Part I of Schedule 2C to the [1982 c. 50.] Insurance Companies Act 1982 shall be treated as including a reference to any qualifying overseas transfer (within the meaning of paragraph 4A of Schedule 19AC to the Taxes Act).

(3)In paragraph 11, after sub-paragraph (1) there shall be inserted the following sub-paragraph—

(1A)In section 213(5), the reference to a transfer of the whole or part of a company’s long term business in accordance with a scheme sanctioned by a court under Part I of Schedule 2C to the [1982 c. 50.] Insurance Companies Act 1982 shall be treated as including a reference to any qualifying overseas transfer (within the meaning of paragraph 4A of Schedule 19AC to the Taxes Act).

(4)In sub-paragraph (1) of paragraph 12, after paragraph (b) of the subsection (12) which, for the purpose of modifying section 214, is set out in that sub-paragraph, there shall be inserted the following paragraph—

(c)the reference in subsection (11) to a transfer of the whole or part of a company’s long term business in accordance with a scheme sanctioned by a court under Part I of Schedule 2C to the [1982 c. 50.] Insurance Companies Act 1982 were to be treated as including a reference to any qualifying overseas transfer (within the meaning of paragraph 4A of Schedule 19AC to the Taxes Act), and the references in that subsection to the business to which the transfer relates were to be construed accordingly;.

(5)In paragraph 13, after sub-paragraph (2) there shall be inserted the following sub-paragraph—

(2A)In subsection (7) of that section, the reference to a transfer of the whole or part of a company’s long term business in accordance with a scheme sanctioned by a court under Part I of Schedule 2C to the [1982 c. 50.] Insurance Companies Act 1982 shall be treated as including a reference to any qualifying overseas transfer (within the meaning of paragraph 4A of Schedule 19AC to the Taxes Act); and the references in that subsection and in subsection (8) of that section to the business to which the transfer relates shall be construed accordingly.

Section 54.

SCHEDULE 10Friendly Societies

Tax exempt life or endowment business

1(1)Section 460 of the Taxes Act 1988 (exemption from tax in respect of life or endowment business) shall be amended as follows.

(2)In paragraph (c) of subsection (2), before sub-paragraph (ai) there shall be inserted the following sub-paragraph—

(zai)where the profits relate to contracts made on or after the day on which the Finance Act 1995 was passed, of the assurance of gross sums under contracts under which the total premiums payable in any period of 12 months exceed £270 or of the granting of annuities of annual amounts exceeding £156;.

(3)In sub-paragraph (ai) of that paragraph, after “passed” there shall be inserted “but before the day on which the Finance Act 1995 was passed”.

(4)In subsection (3), for the words “subsection (2)(c)(ai),” in each place where they occur, there shall be substituted “subsection (2)(c)(zai), (ai),”.

(5)In subsection (4A), for “the Finance Act 1991” there shall be substituted “the Finance Act 1995”.

(6)In subsection (4B), for the words from “variation made” onwards there shall be substituted variation made—

(a)in the period beginning with 25th July 1991 and ending with 31st July 1992, or

(b)in the period beginning with the day on which the Finance Act 1995 was passed and ending with 31st March 1996,

the contract shall, for the purposes of subsection (2)(c) above, be treated, in relation to any profits relating to it as varied, as made at the time of the variation.

Maximum benefits payable to members

2(1)Section 464 of that Act (maximum benefits payable to members) shall be amended as follows.

(2)In subsection (3), before paragraph (za) there shall be inserted the following paragraph—

(zza)contracts under which the total premiums payable in any period of 12 months exceed £270; or.

(3)In paragraph (za) of that subsection, after “contracts” there shall be inserted “made before the day on which the Finance Act 1995 was passed and”.

(4)In subsection (4A), for “the Finance Act 1991” there shall be substituted “the Finance Act 1995”.

(5)In subsection (4B), for the words from “variation made” onwards there shall be substituted variation made—

(a)in the period beginning with 25th July 1991 and ending with 31st July 1992, or

(b)in the period beginning with the day on which the Finance Act 1995 was passed and ending with 31st March 1996,

the contract shall, for the purposes of subsection (3) above, be treated, in relation to times when the contract has effect as varied, as made at the time of the variation.

Qualifying policies

3In paragraph 3 of Schedule 15 to that Act (friendly society policies that are qualifying policies), sub-paragraph (2)(c) (condition limiting consideration for early surrender) shall cease to have effect.

4(1)This paragraph applies to any policy which—

(a)was issued by a friendly society, or a branch of a friendly society, in the course of tax exempt life or endowment business (as defined in section 466 of the Taxes Act 1988); and

(b)was effected by a contract made after 31st August 1987 and before the day on which this Act is passed.

(2)Where—

(a)the amount payable by way of premium under a policy to which this paragraph applies is increased by virtue of a variation made in the period beginning with the day on which this Act is passed and ending with 31st March 1996, and

(b)the variation is not such as to cause a person to become in breach of the limits in section 464 of the Taxes Act 1988,

Schedule 15 to that Act, in its application to the policy, shall have effect, in relation to that variation, with the omission of paragraph 4(3)(a) and the insertion at the end of paragraph 18(2) of the words set out in sub-paragraph (3) below.

(3)Those words are as follows, that is to say, and as if for paragraph 3(2)(b) above there were substituted—

(b)subject to sub-paragraph (4) below, the premiums payable under the policy shall be premiums of equal or rateable amounts payable at yearly or shorter intervals—

(i)over the whole of the term of the policy as from the variation, or

(ii)where premiums are not payable for any period after the person liable to pay them or whose life is insured has attained a specified age, being an age attained at a time not less than ten years after the beginning of the term of the policy, over the whole of the remainder of the period for which premiums are payable.

Section 58.

SCHEDULE 11Personal pensions: income withdrawals

Introductory

1(1)Chapter IV of Part XIV of the Taxes Act 1988 (personal pension schemes) is amended as follows.

(2)The amendments have effect in relation to approvals, of schemes or amendments, given under that Chapter after the passing of this Act.

(3)They do not affect any approval previously given.

Interpretation

2(1)Section 630 (interpretation) is amended as follows.

(2)Make the present provision subsection (1) and insert the following definitions at the appropriate places—

  • “income withdrawal” means a payment of income, under arrangements made in accordance with a personal pension scheme, otherwise than by way of an annuity;

  • “pension date”, in relation to any personal pension arrangements, means the date determined in accordance with the arrangements on which—

    (a)

    an annuity such as is mentioned in section 634 is first payable, or

    (b)

    the member elects to defer the purchase of such an annuity and to make income withdrawals in accordance with section 634A;

and in the definition of “personal pension scheme” after “annuities” insert “, income withdrawals”.

(3)After that subsection insert—

(2)For the purposes of this Chapter the annual amount of the annuity which would have been purchasable by a person on any date shall be calculated by reference to—

(a)the value on that date, determined by or on behalf of the scheme administrator, of the fund from which income withdrawals are to be or have been made by him under the arrangements in question, and

(b)the current published tables of rates of annuities prepared for the purposes of this Chapter by the Government Actuary.

(3)The reference in subsection (2)(a) above to the value of the fund from which income withdrawals are to be or have been made under any personal pension arrangements is to the value of the accrued rights to which the person concerned is entitled conferring prospective entitlement to benefits under those arrangements.

Where a lump sum falls to be paid on the date in question, the reference is to the value of the fund after allowing for that payment.

(4)The Board may make provision by regulations as to the basis on which the tables mentioned in subsection (2)(b) above are to be prepared and the manner in which they are to be applied..

Conditions of approval: benefits that may be provided

3(1)Section 633(1) (conditions of approval: benefits that may be provided) is amended as follows.

(2)In paragraph (a) (annuity to member) after “section 634” insert “or income withdrawals with respect to which the conditions in section 634A are satisfied”.

(3)In paragraph (c) (annuity after death of member) after “section 636” insert “or income withdrawals with respect to which the conditions in section 636A are satisfied”.

(4)In paragraph (d) (lump sum on death of member) for the words from “either” to the end substitute “the conditions in section 637 (death benefit);”.

(5)After that paragraph insert—

(e)the payment on or after the death of a member of a lump sum satisfying the conditions in section 637A (return of contributions)..

Income withdrawals

4After section 634 (annuity to member) insert—

634AIncome withdrawals by member.

(1)Where a member elects to defer the purchase of an annuity such as is mentioned in section 634, income withdrawals may be made by him during the period of deferral, subject as follows.

(2)Income withdrawals must not be made before the member attains the age of 50, unless—

(a)they are available on his becoming incapable through infirmity of body or mind of carrying on his own occupation or any occupation of a similar nature for which he is trained or fitted, or

(b)the Board are satisfied that his occupation is one in which persons customarily retire before that age.

(3)Income withdrawals must not be made after the member attains the age of 75.

(4)The aggregate amount of income withdrawals by a member in each successive period of twelve months beginning with his pension date must be not less than 35 per cent. or more than 100 per cent. of the annual amount of the annuity which would have been purchasable by him on the relevant reference date.

(5)For the purposes of this section the relevant reference date for the first three years is the member’s pension date, and for each succeeding period of three years is the first day of that period.

(6)The right to income withdrawals must not be capable of assignment or surrender..

Lump sum to member

5(1)Section 635 (lump sum to member) is amended as follows.

(2)In subsection (1) (date of election for lump sum), for the words from “the date on which” to the end substitute “his pension date under the arrangements in question”.

(3)In subsection (2) (date of payment of lump sum), for the words “when that annuity is first payable” substitute “on the date which is his pension date under the arrangements in question”.

(4)In subsection (3) (limit on amount of lump sum)—

(a)in paragraph (a) for “the arrangements made by the member in accordance with the scheme” substitute “the arrangements in question”; and

(b)in paragraph (b) for “under the scheme” substitute “under those arrangements”.

Annuity after death of member

6In section 636 (annuity after death of member), in subsection (3) (limit on aggregate annual amount), for “vested” substitute “been purchased”.

Income withdrawals after death of member

7After section 636 (annuity after death of member) insert—

636AIncome withdrawals after death of member.

(1)Where a person entitled to such an annuity as is mentioned in section 636 elects to defer the purchase of the annuity, income withdrawals may be made by him during the period of deferral, subject as follows.

(2)No such deferral may be made, and accordingly income withdrawals may not be made, if the person concerned elects in accordance with section 636(5)(a) to defer the purchase of an annuity.

(3)Income withdrawals must not be made after the person concerned if he had purchased such an annuity as is mentioned in section 636 would have ceased to be entitled to payments under it.

(4)Income withdrawals must not in any event be made after the member would have attained the age of 75 or, if earlier, after the person concerned attains the age of 75.

(5)The aggregate amount of income withdrawals by a person in each successive period of twelve months beginning with the date of the member’s death must be not less than 35 per cent. or more than 100 per cent. of the annual amount of the annuity which would have been purchasable by him on the relevant reference date.

(6)For the purposes of this section the relevant reference date for the first three years is the date of the member’s death, and for each succeeding period of three years is the first day of that period.

(7)The right to income withdrawals must not be capable of assignment or surrender..

Lump sum on death of member

8For section 637 (lump sum on death of member) substitute—

637Death benefit.

The lump sum—

(a)must be payable on the death of the member before he attains the age of 75, and

(b)must be payable by an authorised insurance company.

637AReturn of contributions on or after death of member.

(1)The lump sum must be payable on or after the death of the member and represent no more than the return of contributions together with reasonable interest on contributions or bonuses out of profits, after allowing for any income withdrawals.

To the extent that contributions are invested in units under a unit trust scheme, the lump sum may represent the sale or redemption price of the units.

(2)The lump sum must be payable only if—

(a)no annuity has been purchased by the member under the arrangements in question,

(b)no such annuity as is mentioned in section 636 has been purchased by the person to whom the payment is made, and

(c)the person to whom the payment is made has not elected in accordance with subsection (5)(a) of section 636 to defer the purchase of such an annuity as is mentioned in that section.

(3)Where the member’s death occurs after the date which is his pension date in relation to the arrangements in question, the lump sum must be payable not later than two years after the death..

Other restrictions on approval

9In section 638 (other restrictions on approval), after subsection (7) insert—

(7A)The Board shall not approve a personal pension scheme unless it prohibits, except in such cases as may be prescribed by regulations made by the Board—

(a)the acceptance of further contributions, and

(b)the making of transfer payments,

after the date which is the member’s pension date in relation to the arrangements in question..

Maximum amount of deductions

10In section 640 (maximum amount of deductions), in subsection (3) (maximum amount to secure death benefit) for “section 637(1)” substitute “section 637”.

Treatment of personal pension income

11In section 643 (employer’s contributions and personal pension income, &c.), after subsection (4) insert—

(5)Income withdrawals under approved personal pension arrangements shall be assessable to tax under Schedule E (and section 203 shall apply accordingly) and shall be treated as earned income of the recipient..

Tax charge on return of contributions after pension date

12Omit the heading before section 648A and after that section insert—

648BReturn of contributions after pension date.

(1)Tax shall be charged under this section on any payment to a person under approved personal pension arrangements of such a lump sum as is mentioned in section 637A in a case where the member’s death occurred after his pension date in relation to the arrangement in question.

(2)Where a payment is chargeable to tax under this section, the scheme administrator shall be charged to income tax under Case VI of Schedule D and, subject to subsection (3) below, the rate of tax shall be 35 per cent.

(3)The Treasury may by order from time to time increase or decrease the rate of tax under subsection (2) above.

(4)The tax shall be charged on the amount paid or, if the rules of the scheme permit the scheme administrator to deduct the tax before payment, on the amount before deduction of tax; and the amount so charged to tax shall not be treated as income for any other purpose of the Tax Acts..

Section 65.

SCHEDULE 12Contractual Savings Schemes

Introduction

1In this Schedule references to section 326 are to section 326 of the Taxes Act 1988 (contractual savings schemes).

Curtailment of schemes

2(1)The [1987 c. 22.] [1972 c. 65.] following provisions of section 326, namely—

(a)subsection (2) (schemes governed by regulations made under section 11 of National Debt Act 1972),

(b)subsection (3) (schemes with building societies), and

(c)subsection (4) (schemes with institutions authorised under Banking Act 1987),

shall be amended as mentioned in sub-paragraph (2) below.

(2)In each subsection for the [1987 c. 22.] words “a scheme” (where they first occur) there shall be substituted “a share option linked scheme”.

(3)This paragraph shall apply in relation to schemes not certified as mentioned in section 326(2)(c), (3)(b) or (4)(b) before 1st December 1994.

European institutions

3(1)Section 326 shall be further amended as follows.

(2)In subsection (1) (relief for sums payable in respect of bank deposits etc.) after paragraph (c) there shall be inserted or

(d)in respect of money paid to a relevant European institution,.

(3)In subsection (2) (meaning of certified scheme except in relation to institutions authorised under Banking Act 1987 etc.) after “1987” there shall be inserted “or a relevant European institution”.

(4)The following subsection shall be inserted after subsection (4)—

(5)In this section “certified contractual savings scheme” means, in relation to a relevant European institution, a share option linked scheme—

(a)providing for periodical contributions by individuals for a specified period, and

(b)certified by the Treasury as corresponding to a scheme certified under subsection (2) above, and as qualifying for exemption under this section.

(5)Sub-paragraph (2) above shall apply in relation to schemes established after the day on which this Act is passed.

Certification: Treasury specifications

4(1)Section 326 shall be further amended as follows.

(2)In each of the [1987 c. 22.] following provisions, namely—

(a)subsection (3)(b) (Treasury certification of schemes with building societies),

(b)subsection (4)(b) (Treasury certification of schemes with institutions authorised under Banking Act 1987), and

(c)subsection (5)(b) (inserted by paragraph 3 above),

for the words “corresponding to a scheme certified under subsection (2) above” there shall be substituted “fulfilling such requirements as the Treasury may specify for the purposes of this section”.

(3)This paragraph shall apply in relation to schemes not certified as mentioned in section 326(3)(b), (4)(b) or (5)(b) before such day as the Treasury may by order made by statutory instrument appoint.

Treasury authorisation

5(1)Section 326 shall be further amended by inserting the following subsections after subsection (5) (inserted by paragraph 3 above)—

(6)Any terminal bonus, interest or other sum payable under a scheme shall not be treated as payable under a certified contractual savings scheme for the purposes of this section if—

(a)the contract under which the sum is payable provides for contributions to be made by way of investment in a building society or to be made to an institution authorised under the Banking Act 1987 or to a relevant European institution, and

(b)neither the requirement under subsection (7) below nor that under subsection (8) below is fulfilled.

(7)The requirement under this subsection is that—

(a)when the contract is entered into there is Treasury authorisation for the society or institution concerned to enter into contracts under the scheme, and

(b)the authorisation was given without any conditions being imposed.

(8)The requirement under this subsection is that—

(a)when the contract is entered into there is Treasury authorisation for the society or institution concerned to enter into contracts under the scheme,

(b)the authorisation was given subject to conditions being met, and

(c)the conditions are met when the contract is entered into.

(2)This paragraph shall apply in relation to schemes not certified as mentioned in section 326(3)(b), (4)(b) or (5)(b) before the day appointed under paragraph 4(3) above.

Section 326: supplementary

6(1)Section 326 shall be further amended by inserting the following subsection after subsection (8) (inserted by paragraph 5 above)—

(9)Schedule 15A to this Act (which contains provisions supplementing this section) shall have effect.

(2)The following Schedule shall be inserted after Schedule 15 to the Taxes Act 1988—

SCHEDULE 15ACONTRACTUAL SAVINGS SCHEMES

Introduction

1This Schedule shall have effect for the purposes of section 326.

Share option linked schemes

2(1)A share option linked scheme is a scheme under which periodical contributions are to be made by an individual—

(a)who is eligible to participate in (that is, to obtain and exercise rights under) an approved savings-related share option scheme, and

(b)who is to make the contributions for the purpose of enabling him to participate in that approved scheme.

(2)In sub-paragraph (1) above—

(a)“savings-related share option scheme” has the meaning given by paragraph 1 of Schedule 9, and

(b)“approved” means approved under that Schedule.

Relevant European institutions

3A relevant European institution is an institution which—

(a)is a European authorised institution within the meaning of the [S.I. 1992/3218.] Banking Co-ordination (Second Council Directive) Regulations 1992, and

(b)may accept deposits in the United Kingdom in accordance with those regulations.

Treasury specifications

4(1)The requirements which may be specified under section 326(3)(b), (4)(b) or (5)(b) are such requirements as the Treasury think fit.

(2)In particular, the requirements may relate to—

(a)the descriptions of individuals who may enter into contracts under a scheme;

(b)the contributions to be paid by individuals;

(c)the sums to be paid or repaid to individuals.

(3)The requirements which may be specified under any of the relevant provisions may be different from those specified under any of the other relevant provisions; and the relevant provisions are section 326(3)(b), (4)(b) and (5)(b).

5(1)Where a specification has been made under section 326(3)(b), (4)(b) or (5)(b) the Treasury may—

(a)withdraw the specification and any certification made by reference to the specification, and

(b)stipulate the date on which the withdrawal is to become effective.

(2)No withdrawal under this paragraph shall affect—

(a)the operation of the scheme before the stipulated date, or

(b)any contract entered into before that date.

(3)No withdrawal under this paragraph shall be effective unless the Treasury—

(a)send a notice by post to each relevant body informing it of the withdrawal, and

(b)do so not less than 28 days before the stipulated date;

and a relevant body is a society or institution authorised (whether unconditionally or subject to conditions being met) to enter into contracts under the scheme concerned.

6(1)Where a specification has been made under section 326(3)(b), (4)(b) or (5)(b) the Treasury may—

(a)vary the specification,

(b)withdraw any certification made by reference to the specification obtaining before the variation, and

(c)stipulate the date on which the variation and withdrawal are to become effective;

and the Treasury may at any time certify a scheme as fulfilling the requirements obtaining after the variation.

(2)No variation and withdrawal under this paragraph shall affect—

(a)the operation of the scheme before the stipulated date, or

(b)any contract entered into before that date.

(3)No variation and withdrawal under this paragraph shall be effective unless the Treasury—

(a)send a notice by post to each relevant body informing it of the variation and withdrawal, and

(b)do so not less than 28 days before the stipulated date;

and a relevant body is a society or institution authorised (whether unconditionally or subject to conditions being met) to enter into contracts under the scheme concerned.

Treasury authorisation

7(1)The Treasury may authorise a society or institution under section 326(7) or (8) as regards schemes generally or as regards a particular scheme or particular schemes.

(2)More than one authorisation may be given to the same society or institution.

8(1)Where an authorisation has been given under section 326(7) or (8) the Treasury may withdraw the authorisation and stipulate the date on which the withdrawal is to become effective; and the withdrawal shall have effect as regards any contract not entered into before the stipulated date.

(2)No withdrawal under this paragraph shall be effective unless the Treasury—

(a)send a notice by post to the society or institution concerned informing it of the withdrawal, and

(b)do so not less than 28 days before the stipulated date.

(3)A withdrawal of an authorisation shall not affect the Treasury’s power to give another authorisation or other authorisations.

9(1)Where an authorisation has been given under section 326(7) the Treasury may—

(a)stipulate that the authorisation is to be varied by being treated as given subject to specified conditions being met, and

(b)stipulate the date on which the variation is to become effective.

(2)As regards any contract entered into on or after the stipulated date the authorisation shall be treated as having been given under section 326(8) subject to the conditions being met.

(3)No variation under this paragraph shall be effective unless the Treasury—

(a)send a notice by post to the society or institution concerned informing it of the variation, and

(b)do so not less than 28 days before the stipulated date.

10(1)Where an authorisation has been given under section 326(8) the Treasury may withdraw the conditions and stipulate the date on which the withdrawal is to become effective.

(2)As regards any contract entered into on or after the stipulated date the authorisation shall be treated as having been given under section 326(7) without any conditions being imposed.

11(1)Where an authorisation has been given under section 326(8) the Treasury may vary the conditions and stipulate the date on which the variation is to become effective; and the variation shall have effect as regards any contract entered into on or after the stipulated date.

(2)No variation under this paragraph shall be effective unless the Treasury—

(a)send a notice by post to the society or institution concerned informing it of the variation, and

(b)do so not less than 28 days before the stipulated date.

12(1)If the Treasury act as regards an authorisation under a relevant paragraph, the paragraph concerned shall have effect subject to their power to act later, as regards the same authorisation, under the same or (as the case may be) another relevant paragraph.

(2)If the Treasury act later as mentioned in sub-paragraph (1) above that sub-paragraph shall apply again, and so on however many times they act as regards an authorisation.

(3)If the Treasury act as regards an authorisation under a relevant paragraph the paragraph concerned shall have effect subject to their power to act later, as regards the same authorisation, under paragraph 8 above.

(4)For the purposes of this paragraph the relevant paragraphs are paragraphs 9 to 11 above.

Payments under certain contracts

7(1)Any terminal bonus, interest or other sum payable under a scheme shall not be treated as payable under a certified contractual savings scheme for the purposes of section 326 if—

(a)the scheme is not a share option linked scheme, and

(b)the contract under which the sum is payable is not entered into before 1st December 1994.

(2)Any terminal bonus, interest or other sum payable under a scheme shall not be treated as payable under a certified contractual savings scheme for the purposes of section 326 if—

(a)the contract under which the sum is payable provides for contributions to be made by way of investment in a building society or to be made to an institution authorised under the [1987 c. 22.] Banking Act 1987 or to a relevant European institution,

(b)the scheme is certified as mentioned in section 326(3)(b), (4)(b) or (5)(b) before the day appointed under paragraph 4(3) above, and

(c)the contract is not entered into before that day.

(3)In this paragraph “share option linked scheme” and “relevant European institution” have the same meanings as in section 326.

Transitional

8(1)The Treasury may by regulations provide that at the beginning of the day appointed under paragraph 4(3) above Treasury authorisation shall be treated as given under section 326(7) to any specified relevant body without any conditions being imposed.

(2)The Treasury may by regulations provide that—

(a)at the beginning of the day appointed under paragraph 4(3) above Treasury authorisation shall be treated as given under section 326(8) to any specified relevant body subject to conditions being met;

(b)the conditions as regards a body shall be such as are specified in, or identified by provision contained in, the regulations as regards that body.

(3)Any authorisation treated as given as mentioned in sub-paragraph (1) or (2) above shall be treated as given as regards schemes generally; but this is subject to any provision to the contrary in the regulations.

(4)For the purposes of this paragraph the following are relevant bodies—

(a)any building society;

(b)any institution authorised under the [1987 c. 22.] Banking Act 1987;

(c)any relevant European institution.

(5)In this paragraph—

(a)“relevant European institution” has the same meaning as in section 326;

(b)“specified” means specified in the regulations.

(6)Regulations under this paragraph shall be made by statutory instrument subject to annulment in pursuance of a resolution of the House of Commons.

Section 67.

SCHEDULE 13Enterprise Investment Scheme

Introduction

1The [1992 c. 12.] Taxation of Chargeable Gains Act 1992 shall be amended as mentioned in this Schedule.

Amendments of section 150A

2(1)Section 150A (enterprise investment scheme) shall be amended as mentioned in sub-paragraphs (2) to (4) below; and the amendments made by sub-paragraphs (2) and (3) below shall apply in relation to shares issued on or after 1st January 1994.

(2)The following subsection shall be inserted after subsection (2)—

(2A)Notwithstanding anything in section 16(2), subsection (2) above shall not apply to a disposal on which a loss accrues.

(3)In subsection (3) (reduction of relief) the following paragraph shall be inserted after paragraph (a)—

(aa)the amount of the reduction is not found under section 289A(2)(b) of that Act, and.

(4)The following subsections shall be inserted after subsection (8) (which disapplies provisions about exchanges, reconstructions or amalgamations in certain circumstances)—

(8A)Subsection (8) above shall not have effect to disapply section 135 or 136 where—

(a)the new holding consists of new ordinary shares carrying no present or future preferential right to dividends or to a company’s assets on its winding up and no present or future preferential right to be redeemed,

(b)the new shares are issued on or after 29th November 1994 and after the end of the relevant period, and

(c)the condition in subsection (8B) below is satisfied.

(8B)The condition is that at some time before the issue of the new shares—

(a)the company issuing them issued eligible shares, and

(b)a certificate in relation to those eligible shares was issued by the company for the purposes of subsection (2) of section 306 of the Taxes Act and in accordance with that section.

(8C)In subsection (8A) above—

(a)“new holding” shall be construed in accordance with sections 126, 127, 135 and 136;

(b)“relevant period” means the period found by applying section 312(1A)(a) of the Taxes Act by reference to the company issuing the shares referred to in subsection (8) above and by reference to those shares.

Reduction of relief

3The following section shall be inserted after section 150A—

150BEnterprise investment scheme: reduction of relief.

(1)This section has effect where section 150A(2) applies on a disposal of eligible shares, and before the disposal but on or after 29th November 1994—

(a)value is received in circumstances where relief attributable to the shares is reduced by an amount under section 300(1A)(a) of the Taxes Act,

(b)there is a repayment, redemption, repurchase or payment in circumstances where relief attributable to the shares is reduced by an amount under section 303(1A)(a) of that Act, or

(c)paragraphs (a) and (b) above apply.

(2)If section 150A(2) applies on the disposal but section 150A(3) does not, section 150A(2) shall apply only to so much of the gain as remains after deducting so much of it as is found by multiplying it by the fraction—

(a)whose numerator is equal to the amount by which the relief attributable to the shares is reduced as mentioned in subsection (1) above, and

(b)whose denominator is equal to the amount of the relief attributable to the shares.

(3)If section 150A(2) and (3) apply on the disposal, section 150A(2) shall apply only to so much of the gain as is found by—

(a)taking the part of the gain found under section 150A(3), and

(b)deducting from that part so much of it as is found by multiplying it by the fraction mentioned in subsection (2) above.

(4)Where the relief attributable to the shares is reduced as mentioned in subsection (1) above by more than one amount, the numerator mentioned in subsection (2) above shall be taken to be equal to the aggregate of the amounts.

(5)The denominator mentioned in subsection (2) above shall be found without regard to any reduction mentioned in subsection (1) above.

(6)Subsections (11) and (12) of section 150A apply for the purposes of this section as they apply for the purposes of that section.

Re-investment

4(1)The following section shall be inserted after section 150B—

150CEnterprise investment scheme: re-investment.

Schedule 5B to this Act (which provides relief in respect of re-investment under the enterprise investment scheme) shall have effect.

(2)In section 260, after subsection (6) (no reduction in the case of certain disposals in respect of held-over gains), there shall be inserted the following subsection—

(6A)Subsection (3) above does not apply, so far as any gain accruing in accordance with paragraphs 4 and 5 of Schedule 5B is concerned, in relation to the disposal which constitutes the chargeable event by virtue of which that gain accrues.

(3)The following Schedule shall be inserted after Schedule 5A—

SCHEDULE 5BEnterprise Investment Scheme: Re-investment

Application of Schedule

1(1)This Schedule applies where—

(a)there would (apart from paragraph 2(2)(a) below) be a chargeable gain (“the original gain”) accruing to an individual (“the investor”) at any time (“the accrual time”) on or after 29th November 1994;

(b)the gain is one accruing either on the disposal by the investor of any asset or in accordance with paragraphs 4 and 5 below or paragraphs 4 and 5 of Schedule 5C;

(c)the investor makes a qualifying investment; and

(d)the investor is resident or ordinarily resident in the United Kingdom at the accrual time and the time when he makes the qualifying investment and is not, in relation to the qualifying investment, a person to whom sub-paragraph (4) below applies.

(2)The investor makes a qualifying investment for the purposes of this Schedule if—

(a)he subscribes for any shares to which any relief given to him under Chapter III of Part VII of the Taxes Act is attributable;

(b)those shares are issued at a qualifying time; and

(c)where that time is before the accrual time, those shares are still held by the investor at the accrual time;

and in this Schedule “relevant shares”, in relation to a case to which this Schedule applies, means any of the shares which are acquired by the investor in making the qualifying investment.

(3)In this Schedule “a qualifying time”, in relation to any shares subscribed for by the investor, means—

(a)any time in the period beginning one year before and ending three years after the accrual time, or

(b)any such time before the beginning of that period or after it ends as the Board may by notice allow.

(4)This sub-paragraph applies to the investor in relation to a qualifying investment if—

(a)though resident or ordinarily resident in the United Kingdom at the time when he makes the investment, he is regarded for the purposes of any double taxation relief arrangements as resident in a territory outside the United Kingdom, and

(b)were section 150A to be disregarded, the arrangements would have the effect that he would not be liable in the United Kingdom to tax on a gain arising on a disposal, immediately after their acquisition, of the shares acquired in making that investment.

Postponement of original gain

2(1)On the making of a claim by the investor for the purposes of this Schedule, so much of the investor’s unused qualifying expenditure on relevant shares as—

(a)is specified in the claim, and

(b)does not exceed so much of the original gain as is unmatched,

shall be set against a corresponding amount of the original gain.

(2)Where an amount of qualifying expenditure on any relevant shares is set under this Schedule against the whole or part of the original gain—

(a)so much of that gain as is equal to that amount shall be treated as not having accrued at the accrual time; but

(b)paragraphs 4 and 5 below shall apply for determining the gain that is to be treated as accruing on the occurrence of any chargeable event in relation to any of those relevant shares.

(3)For the purposes of this Schedule—

(a)the investor’s qualifying expenditure on any relevant shares is so much of the amount subscribed by him for the shares as represents the amount in respect of which there is given the relief under section 289A of the Taxes Act which is attributable to those shares; and

(b)that expenditure is unused to the extent that it has not already been set under this Schedule against the whole or any part of a chargeable gain.

(4)For the purposes of this paragraph the original gain is unmatched, in relation to any qualifying expenditure on relevant shares, to the extent that it has not had any other expenditure set against it under this Schedule or Schedule 5C.

Chargeable events

3(1)Subject to the following provisions of this paragraph, there is for the purposes of this Schedule a chargeable event in relation to any relevant shares if, after the making of the qualifying investment—

(a)the investor disposes of those shares otherwise than by way of a disposal within marriage;

(b)those shares are disposed of, otherwise than by way of a disposal to the investor, by a person who acquired them on a disposal made by the investor within marriage;

(c)the investor becomes a non-resident while holding those shares and within the first relevant period;

(d)a person who acquired those shares on a disposal within marriage becomes a non-resident while holding those shares and within the first relevant period;

(e)the company that issued those shares ceases to be a qualifying company within the second relevant period; or

(f)the relief given under section 289A of the Taxes Act in respect of the amount subscribed for those shares is withdrawn or reduced in circumstances not falling within any of paragraphs (a) to (e) above.

(2)For the purposes of sub-paragraph (1) above—

(a)the first relevant period in the case of any relevant shares is the period found by applying section 312(1A)(a) of the Taxes Act by reference to the company that issued the shares and by reference to the shares;

(b)the second relevant period in the case of any shares is the period found by applying section 312(1A)(b) of that Act by reference to the company that issued the shares and by reference to the shares; and

(c)whether a company is a qualifying company at any given time shall be determined in accordance with section 293 of that Act.

(3)For the purposes of this Schedule there shall not be a chargeable event by virtue of sub-paragraph (1)(c) or (d) above in relation to any shares if—

(a)the reason why the person in question becomes a non-resident is that he works in an employment or office all the duties of which are performed outside the United Kingdom, and

(b)he again becomes resident or ordinarily resident in the United Kingdom within the period of three years from the time when he became a non-resident, without having meanwhile disposed of any of those shares;

and accordingly no assessment shall be made by virtue of sub-paragraph (1)(c) or (d) above before the end of that period in a case where the condition in paragraph (a) above is satisfied and the condition in paragraph (b) above may be satisfied.

(4)For the purposes of sub-paragraph (3) above a person shall be taken to have disposed of any shares if and only if there has been such a disposal as would have been a chargeable event in relation to those shares if the person making the disposal had been resident in the United Kingdom.

(5)Where in any case—

(a)the investor or a person who has acquired any relevant shares on a disposal within marriage dies, and

(b)an event occurs at or after the time of the death which (apart from this sub-paragraph) would be a chargeable event in relation to any relevant shares held by the deceased immediately before his death,

that event shall not be chargeable event in relation to the shares so held.

Gain accruing on chargeable event

4(1)On the occurrence of a chargeable event in relation to any relevant shares in relation to which there has not been a previous chargeable event—

(a)a chargeable gain shall be treated as accruing at the time of the event; and

(b)the amount of the gain shall be equal to so much of the original gain as is an amount against which there has under this Schedule been set any expenditure on those shares.

(2)Any question for the purposes of this Schedule as to whether any relevant shares to which a chargeable event relates are shares the expenditure on which has under this Schedule been set against the whole or any part of any gain shall be determined in accordance with the assumptions for which sub-paragraph (3) below provides.

(3)For the purposes of sub-paragraph (2) above it shall be assumed, in relation to any disposal of shares (including a disposal within marriage) that—

(a)as between qualifying shares acquired by the same person on different days, those acquired on an earlier day are disposed of by that person before those acquired on a later day; and

(b)as between qualifying shares acquired by the same person on the same day, those the expenditure on which has been set under this Schedule against the whole or any part of any gain are disposed of by that person only after he has disposed of any other qualifying shares acquired by him on that day.

(4)In sub-paragraph (3) above “qualifying shares” means any shares which—

(a)were subscribed for by a person eligible for relief in respect of those shares under Chapter III of Part VII of the Taxes Act (the enterprise investment scheme), and

(b)are shares in respect of which relief is given under section 289A of that Act in respect of the whole or any part of the amount subscribed.

(5)Where at the time of a chargeable event any relevant shares are treated for the purposes of this Act as represented by assets which consist of or include assets other than those shares—

(a)the expenditure on those shares which was set against the gain in question shall be treated, in determining for the purposes of this paragraph the amount of expenditure on each of those assets which is to be treated as having been set against that gain, as apportioned in such manner as may be just and reasonable between those assets; and

(b)as between different assets treated as representing the same relevant shares, the assumptions for which sub-paragraph (3) above provides shall apply with the necessary modifications in relation to those assets as they would apply in relation to the shares.

Person to whom gain accrues

5(1)The chargeable gain which accrues, in accordance with paragraph 4 above, on the occurrence in relation to any relevant shares of a chargeable event shall be treated as accruing, as the case may be—

(a)to the person who makes the disposal,

(b)to the person who becomes a non-resident,

(c)to the person who holds the shares in question when the company ceases to be a qualifying company, or

(d)to the person who holds the shares in question when the circumstances arise in respect of which the relief is withdrawn or reduced.

(2)Where—

(a)sub-paragraph (1) above provides for the holding of shares at a particular time to be what identifies the person to whom any chargeable gain accrues, and

(b)at that time, some of those shares are held by the investor and others are held by a person to whom the investor has transferred them by a disposal within marriage,

the amount of the chargeable gain accruing by virtue of paragraph 4 above shall be computed separately in relation to the investor and that person without reference to the shares held by the other.

Interpretation

6(1)In this Schedule “non-resident” means a person who is neither resident nor ordinarily resident in the United Kingdom.

(2)In this Schedule references to a disposal within marriage are references to any disposal to which section 58 applies.

(3)Notwithstanding anything in section 288(5), shares shall not for the purposes of this Schedule be treated as issued by reason only of being comprised in a letter of allotment or similar instrument.

(4)Chapter III of Part VII of the Taxes Act shall apply for the purposes of this Schedule to determine whether and to what extent any relief under that Chapter is attributable to any shares.

(5)References in this Schedule to Chapter III of Part VII of the Taxes Act or any provision of that Chapter are to that Chapter or provision as it applies in relation to shares issued on or after 1st January 1994.

(4)This paragraph has effect in relation to gains accruing and events occurring on or after 29th November 1994.

Section 70.

SCHEDULE 14Venture Capital Trusts: Meaning of “qualifying holdings”

Introductory

1(1)This Schedule applies, where any shares in or securities of any company (“the relevant company”) are at any time held by another company (“the trust company”), for determining whether and to what extent those shares or securities (“the relevant holding”) are, for the purposes of section 842AA, to be regarded as at that time comprised in the trust company’s qualifying holdings.

(2)The relevant holding shall be regarded as comprised in the trust company’s qualifying holdings at any time if—

(a)all the requirements of the following provisions of this Schedule are satisfied at that time in relation to the relevant company and the relevant holding; and

(b)the relevant holding consists of shares or securities which were first issued by the relevant company to the trust company and have been held by the trust company ever since.

(3)Subject to paragraph 6(3) below, where the requirements of paragraph 6 or 7 below would be satisfied as to only part of the money raised by the issue of the relevant holding and that holding is not otherwise capable of being treated as comprising separate holdings, this Schedule shall have effect in relation to that holding as if it were two holdings consisting of—

(a)a holding from which that part of the money was raised; and

(b)a holding from which the remainder was raised;

and section 842AA shall have effect as if the value of the holding were to be apportioned accordingly between the two holdings which are deemed to exist in pursuance of this sub-paragraph.

Requirement that company must be unquoted company

2(1)The requirement of this paragraph is that the relevant company (whether or not it is resident in the United Kingdom) must be an unquoted company.

(2)In this paragraph “unquoted company” means a company none of whose shares, stocks, debentures or other securities is marketed to the general public.

(3)For the purposes of this paragraph shares, stocks, debentures or other securities are marketed to the general public if they are—

(a)listed on a recognised stock exchange,

(b)listed on a designated exchange in a country outside the United Kingdom, or

(c)dealt in on the Unlisted Securities Market or dealt in outside the United Kingdom by such means as may be designated.

(4)In sub-paragraph (3) above “designated” means designated by an order made by the Board for the purposes of that sub-paragraph; and an order made for the purposes of paragraph (b) of that sub-paragraph may designate an exchange by name, or by reference to any class or description of exchanges, including a class or description framed by reference to any authority or approval given in a country outside the United Kingdom.

(5)Section 828(1) does not apply to an order made for the purposes of sub-paragraph (3) above.

(6)Where a company any shares in or securities of which are included in the qualifying holdings of the trust company ceases at any time while the trust company is approved as a venture capital trust to be an unquoted company, the requirements of this paragraph shall be deemed, in relation to shares or securities acquired by the trust company before that time, to continue to be satisfied for a period of five years after that time.

Requirements as to company’s business

3(1)The requirements of this paragraph are as follows.

(2)The relevant company must be one of the following, that is to say—

(a)a company which exists wholly for the purpose of carrying on one or more qualifying trades or which so exists apart from purposes capable of having no significant effect (other than in relation to incidental matters) on the extent of the company’s activities;

(b)a company whose business consists entirely in the holding of shares in or securities of, or the making of loans to, one or more qualifying subsidiaries of that company; or

(c)a company whose business consists entirely in—

(i)the holding of such shares or securities, or the making of such loans; and

(ii)the carrying on of one or more qualifying trades.

(3)Subject to sub-paragraph (4) below, the relevant company or a qualifying subsidiary of that company must, when the relevant holding was issued and at all times since, have been either—

(a)carrying on a qualifying trade wholly or mainly in the United Kingdom; or

(b)preparing to carry on a qualifying trade which at the time when the relevant holding was issued it intended to carry on wholly or mainly in the United Kingdom.

(4)The requirements of sub-paragraph (3) above shall not be capable of being satisfied by virtue of paragraph (b) of that sub-paragraph at any time after the end of the period of two years beginning with the issue of the relevant holding unless—

(a)the relevant company or the subsidiary in question began to carry on the intended trade before the end of that period, and

(b)that company or subsidiary has, at all times since the end of that period, been carrying on a qualifying trade wholly or mainly in the United Kingdom.

(5)The requirements of that sub-paragraph shall also be incapable of being so satisfied at any time after the abandonment, within the period mentioned in sub-paragraph (4) above, of the intention in question.

Meaning of “qualifying trade”

4(1)For the purposes of this Schedule—

(a)a trade is a qualifying trade if it is a trade complying with this paragraph; and

(b)the carrying on of any activities of research and development from which it is intended that there will be derived a trade that—

(i)will comply with this paragraph, and

(ii)will be carried on wholly or mainly in the United Kingdom,

shall be treated as the carrying on of a qualifying trade.

(2)Subject to sub-paragraphs (3) to (9) below, a trade complies with this paragraph if neither that trade nor a substantial part of it consists in one or more of the following activities, that is to say—

(a)dealing in land, in commodities or futures or in shares, securities or other financial instruments;

(b)dealing in goods otherwise than in the course of an ordinary trade of wholesale or retail distribution;

(c)banking, insurance, money-lending, debt-factoring, hire-purchase financing or other financial activities;

(d)leasing (including letting ships on charter or other assets on hire) or receiving royalties or licence fees;

(e)providing legal or accountancy services;

(f)providing services or facilities for any such trade carried on by another person (not being a company of which the company providing the services or facilities is a subsidiary) as—

(i)consists, to a substantial extent, in activities within any of paragraphs (a) to (e) above; and

(ii)is a trade in which a controlling interest is held by a person who also has a controlling interest in the trade carried on by the company providing the services or facilities.

(3)For the purposes of sub-paragraph (2)(b) above—

(a)a trade of wholesale distribution is one in which the goods are offered for sale and sold to persons for resale by them, or for processing and resale by them, to members of the general public for their use or consumption;

(b)a trade of retail distribution is one in which the goods are offered for sale and sold to members of the general public for their use or consumption; and

(c)a trade is not an ordinary trade of wholesale or retail distribution if—

(i)it consists, to a substantial extent, in dealing in goods of a kind which are collected or held as an investment, or in that activity and any other activity of a kind falling within sub-paragraph (2)(a) to (f) above, taken together; and

(ii)a substantial proportion of those goods are held by the company for a period which is significantly longer than the period for which a vendor would reasonably be expected to hold them while endeavouring to dispose of them at their market value.

(4)In determining for the purposes of this paragraph whether a trade carried on by any person is an ordinary trade of wholesale or retail distribution, regard shall be had to the extent to which it has the following features, that is to say—

(a)the goods are bought by that person in quantities larger than those in which he sells them;

(b)the goods are bought and sold by that person in different markets;

(c)that person employs staff and incurs expenses in the trade in addition to the cost of the goods and, in the case of a trade carried on by a company, to any remuneration paid to any person connected with it;

(d)there are purchases or sales from or to persons who are connected with that person;

(e)purchases are matched with forward sales or vice versa;

(f)the goods are held by that person for longer than is normal for goods of the kind in question;

(g)the trade is carried on otherwise than at a place or places commonly used for wholesale or retail trade;

(h)that person does not take physical possession of the goods;

and for the purposes of this sub-paragraph the features specified in paragraphs (a) to (c) above shall be regarded as indications that the trade is such an ordinary trade and those in paragraphs (d) to (h) above shall be regarded as indications of the contrary.

(5)A trade shall not be treated as failing to comply with this paragraph by reason only of its consisting, to a substantial extent, in the receiving of royalties or licence fees if—

(a)the company carrying on the trade is engaged in—

(i)the production of films; or

(ii)the production of films and the distribution of films produced by it since the issue of the relevant holding;

and

(b)all royalties and licence fees received by it are in respect of films produced by it since the issue of the relevant holding, in respect of sound recordings in relation to such films or in respect of other products arising from such films.

(6)A trade shall not be treated as failing to comply with this paragraph by reason only of its consisting, to a substantial extent, in the receiving of royalties or licence fees if—

(a)the company carrying on the trade is engaged in research and development; and

(b)all royalties and licence fees received by it are attributable to research and development which it has carried out.

(7)A trade shall not be treated as failing to comply with this paragraph by reason only of its consisting in letting ships, other than oil rigs or pleasure craft, on charter if—

(a)every ship let on charter by the company carrying on the trade is beneficially owned by the company;

(b)every ship beneficially owned by the company is registered in the United Kingdom;

(c)the company is solely responsible for arranging the marketing of the services of its ships; and

(d)the conditions mentioned in sub-paragraph (8) below are satisfied in relation to every letting of a ship on charter by the company;

but where any of the requirements mentioned in paragraphs (a) to (d) above are not satisfied in relation to any lettings, the trade shall not thereby be treated as failing to comply with this paragraph if those lettings and any other activity of a kind falling within sub-paragraph (2) above do not, when taken together, amount to a substantial part of the trade.

(8)The conditions are that—

(a)the letting is for a period not exceeding 12 months and no provision is made at any time (whether in the charterparty or otherwise) for extending it beyond that period otherwise than at the option of the charterer;

(b)during the period of the letting there is no provision in force (whether by virtue of being contained in the charterparty or otherwise) for the grant of a new letting to end, otherwise than at the option of the charterer, more than 12 months after that provision is made;

(c)the letting is by way of a bargain made at arm’s length between the company and a person who is not connected with it;

(d)under the terms of the charter the company is responsible as principal—

(i)for taking, throughout the period of the charter, management decisions in relation to the ship, other than those of a kind generally regarded by persons engaged in trade of the kind in question as matters of husbandry; and

(ii)for defraying all expenses in connection with the ship throughout that period, or substantially all such expenses, other than those directly incidental to a particular voyage or to the employment of the ship during that period;

and

(e)no arrangements exist by virtue of which a person other than the company may be appointed to be responsible for the matters mentioned in paragraph (d) above on behalf of the company;

but this sub-paragraph shall have effect, in relation to any letting between one company and another where one of those companies is the relevant company and the other is a qualifying subsidiary of that company, or where both companies are qualifying subsidiaries of the relevant company, as if paragraph (c) were omitted.

(9)A trade shall not comply with this paragraph unless it is conducted on a commercial basis and with a view to the realisation of profits.

Provisions supplemental to paragraph 4

5(1)In paragraph 4 above—

  • “film” means an original master negative of a film, an original master film disc or an original master film tape;

  • “oil rig” means any ship which is an offshore installation for the purposes of the [1971 c. 61.] Mineral Workings (Offshore Installations) Act 1971;

  • “pleasure craft” means any ship of a kind primarily used for sport or recreation;

  • “research and development” means any activity which is intended to result in a patentable invention (within the meaning of the [1977 c. 37.] Patents Act 1977) or in a computer program; and

  • “sound recording”, in relation to a film, means its sound track, original master audio disc or original master audio tape.

(2)For the purposes of paragraph 4 above, in the case of a trade carried on by a company, a person has a controlling interest in that trade if—

(a)he controls the company;

(b)the company is a close company and he or an associate of his, being a director of the company, either—

(i)is the beneficial owner of more than 30 per cent. of the ordinary share capital of the company, or

(ii)is able, directly or through the medium of other companies or by any other indirect means, to control more than 30 per cent. of that share capital;

or

(c)not less than half of the trade could, in accordance with section 344(2), be regarded as belonging to him for the purposes of section 343;

and, in any other case, a person has a controlling interest in a trade if he is entitled to not less than half of the assets used for, or of the income arising from, the trade.

(3)For the purposes of sub-paragraph (2) above there shall be attributed to any person any rights or powers of any other person who is an associate of his.

(4)References in paragraph 4 above or this paragraph to a trade, except the references in paragraph 4(2)(f) to the trade for which services or facilities are provided, shall be construed without reference to so much of the definition of trade in section 832(1) as relates to adventures or concerns in the nature of trade; and those references in paragraph 4(2)(f) above to a trade shall have effect, in relation to cases in which what is carried on is carried on by a person other than a company, as including references to any business, profession or vocation.

(5)In this paragraph—

  • “associate” has the meaning given in subsections (3) and (4) of section 417, except that in those subsections, as applied for the purposes of this paragraph, “relative” shall not include a brother or sister; and

  • “director” shall be construed in accordance with subsection (5) of that section.

Requirements as to the money raised by the investment in question

6(1)The requirements of this paragraph are that the money raised by the issue of the relevant holding must—

(a)have been employed wholly for the purposes of the trade by reference to which the requirements of paragraph 3(3) above are satisfied; or

(b)be money which the relevant company or a qualifying subsidiary of that company is intending to employ wholly for the purposes of that trade.

(2)The requirements of sub-paragraph (1) above shall not be capable of being satisfied by virtue of paragraph (b) of that sub-paragraph at any time after twelve months have expired from whichever is applicable of the following, that is to say—

(a)in a case where the requirements of sub-paragraph (3) of paragraph 3 above were satisfied in relation to the time when the relevant holding was issued by virtue of paragraph (a) of that sub-paragraph, that time; and

(b)in a case where they were satisfied in relation to that time by virtue of paragraph (b) of that sub-paragraph, the time when the relevant company or, as the case may be, the subsidiary in question began to carry on the intended trade.

(3)For the purposes of this paragraph money shall not be treated as employed otherwise than wholly for the purposes of a trade if the only amount employed for other purposes is an amount which is not a significant amount; and nothing in paragraph 1(3) above shall require any money whose use is disregarded by virtue of this sub-paragraph to be treated as raised by a different holding.

(4)References in this paragraph to employing money for the purposes of a trade shall include references to employing it for the purpose of preparing for the carrying on of the trade.

Requirement imposing a maximum on qualifying investments in the relevant company

7(1)The requirement of this paragraph is that the relevant holding did not, when it was issued, represent an investment in excess of the maximum qualifying investment for the relevant period.

(2)Subject to sub-paragraph (4) below, the maximum qualifying investment for any period is exceeded to the extent that the aggregate amount of money raised in that period by the issue to the trust company during that period of shares in or securities of the relevant company exceeds £1 million.

(3)Any question for the purposes of this paragraph as to whether any shares in or securities of the relevant company which are for the time being held by the trust company represent an investment in excess of the maximum qualifying investment for any period shall be determined on the assumption, in relation to disposals by the trust company, that, as between shares or securities of the same description, those representing the whole or any part of the excess are disposed of before those which do not.

(4)Where—

(a)at the time of the issue of the relevant holding the relevant company or any of its qualifying subsidiaries was a member of a partnership or a party to a joint venture,

(b)the trade by virtue of which the requirements of paragraph 3(3) above are satisfied was at that time being carried on, or to be carried on, by those partners in partnership or by the parties to the joint venture as such, and

(c)the other partners or parties to the joint venture include at least one other company,

this paragraph shall have effect in relation to the relevant company as if the sum of money for the time being specified in sub-paragraph (2) above were to be divided by the number of companies (including the relevant company) which, at the time when the relevant holding was issued, were members of the partnership or, as the case may be, parties to the joint venture.

(5)For the purposes of this paragraph the relevant period is the period beginning with whichever is the earlier of—

(a)the time six months before the issue of the relevant holding; and

(b)the beginning of the year of assessment in which the issue of that holding took place.

Requirement as to the assets of the relevant company

8(1)The requirement of this paragraph is that the value of the relevant assets—

(a)did not exceed £10 million immediately before the issue of the relevant holding; and

(b)did not exceed £11 million immediately afterwards.

(2)Subject to sub-paragraph (3) below, the reference in sub-paragraph (1) above to the value of the relevant assets is a reference—

(a)in relation to a time when the relevant company did not have any qualifying subsidiaries, to the value of the gross assets of that company at that time; and

(b)in relation to any other time, to the aggregate value at that time of the gross assets of all the companies in the relevant company’s group.

(3)For the purposes of this paragraph assets of any member of the relevant company’s group that consist in rights against, or in shares in or securities of, another member of the group shall be disregarded.

(4)In this paragraph references, in relation to any time, to the relevant company’s group are references to the relevant company and its qualifying subsidiaries at that time.

Requirements as to the subsidiaries etc. of the relevant company

9(1)The requirements of this paragraph are that, subject to sub-paragraph (2) below, the relevant company must not be—

(a)a company which controls (whether on its own or together with any person connected with it) any company that is not a qualifying subsidiary of the relevant company; or

(b)a company which is under the control of another company (or of another company and a person connected with the other company);

and arrangements must not be in existence by virtue of which the relevant company could fall within paragraph (a) or (b) above.

(2)A company shall not fall within sub-paragraph (1)(b) above where—

(a)the other company is the trust company or a venture capital trust which is not the trust company; and

(b)the fact that the relevant company is under the control of the other is attributable primarily to a change in the value of any shares in or securities of the relevant company.

Meaning of

10(1)Subject to the following provisions of this paragraph, a company is a qualifying subsidiary of the relevant company for the purposes of this Schedule if—

(a)the company in question (“the subsidiary”), and

(b)where the relevant company has more than one subsidiary, every other subsidiary of the relevant company,

is a company falling within each of sub-paragraphs (2) and (3) below.

(2)The subsidiary falls within this sub-paragraph if—

(a)it is a company in relation to which the requirements of paragraph 3(2)(a) above are satisfied;

(b)it exists wholly for the purpose of holding and managing property used by the relevant company or any of the relevant company’s other subsidiaries for the purposes of—

(i)research and development from which it is intended that a qualifying trade to be carried on by the relevant company or any of its qualifying subsidiaries will be derived, or

(ii)one or more qualifying trades so carried on;

(c)it would exist wholly for such a purpose apart from purposes capable of having no significant effect (other than in relation to incidental matters) on the extent of the company’s activities; or

(d)it has no profits for the purposes of corporation tax and no part of its business consists in the making of investments.

(3)The subsidiary falls within this sub-paragraph if—

(a)the relevant company, or another of its subsidiaries, possesses not less than 90 per cent. of the issued share capital of, and not less than 90 per cent. of the voting power in, the subsidiary;

(b)the relevant company, or another of its subsidiaries, would in the event of a winding up of the subsidiary or in any other circumstances be beneficially entitled to receive not less than 90 per cent. of the assets of the subsidiary which would then be available for distribution to the equity holders of the subsidiary;

(c)the relevant company, or another of its subsidiaries, is beneficially entitled to not less than 90 per cent. of any profits of the subsidiary which are available for distribution to the equity holders of the subsidiary;

(d)no person other than the relevant company or another of its subsidiaries has control of the subsidiary within the meaning of section 840; and

(e)no arrangements are in existence by virtue of which the relevant company could cease to fall within this sub-paragraph.

(4)The subsidiary shall not be regarded, at a time when it is being wound up, as having ceased on that account to be a company falling within sub-paragraphs (2) and (3) above if it is shown—

(a)that it would fall within those sub-paragraphs apart from the winding up; and

(b)that the winding up is for bona fide commercial reasons and not part of a scheme or arrangement the main purpose of which, or one of the main purposes of which, is the avoidance of tax.

(5)The subsidiary shall not be regarded, at any time when arrangements are in existence for the disposal by the relevant company, or (as the case may be) by another subsidiary of that company, of all its interest in the subsidiary in question, as having ceased on that account to be a company falling within sub-paragraphs (2) and (3) above if it is shown that the disposal is to be for bona fide commercial reasons and not part of a scheme or arrangement the main purpose of which, or one of the main purposes of which, is the avoidance of tax.

(6)For the purposes of this paragraph the persons who are equity holders of the subsidiary and the percentage of the assets of the subsidiary to which an equity holder would be entitled shall be determined in accordance with paragraphs 1 and 3 of Schedule 18, taking references in paragraph 3 to the first company as references to an equity holder, and references to a winding up as including references to any other circumstances in which assets of the subsidiary are available for distribution to its equity holders.

Winding up of the relevant company

11None of the requirements of this Schedule shall be regarded, at a time when the relevant company is being wound up, as being, on that account, a requirement that is not satisfied in relation to that company if it is shown—

(a)that the requirements of this Schedule would be satisfied in relation to that company apart from the winding up; and

(b)that the winding up is for bona fide commercial reasons and not part of a scheme or arrangement the main purpose of which, or one of the main purposes of which, is the avoidance of tax.

Power to amend Schedule

12The Treasury may by order amend this Schedule for any or all of the following purposes, that is to say—

(a)to make such modifications of paragraphs 4 and 5 above as they may consider expedient;

(b)to substitute different sums for the sums of money for the time being specified in paragraphs 7(2) and 8(1) above.

General interpretation

13(1)In this Schedule—

  • “debenture” has the meaning given by section 744 of the [1985 c. 6.] Companies Act 1985; and

  • “securities” has the same meaning as in section 842AA;

and references in this Schedule to the issue of any securities, in relation to any security consisting in a liability in respect of an unsecured loan, shall have effect as references to the making of the loan.

(2)Section 839 applies for the purposes of this Schedule.

(3)For the purposes of paragraphs 5(2) and 9 above a person shall be taken to have control of a company if he would be so taken for the purposes of Part XI by virtue of section 416(2) to (6).

Section 71.

SCHEDULE 15Venture Capital Trusts: Relief from Income Tax

Part IRelief on investment

Entitlement to claim relief

1(1)Subject to the following provisions of this Schedule, an individual shall, for any year of assessment, be entitled under this Part of this Schedule to claim relief in respect of an amount equal to the aggregate of the amounts (if any) which, by reference to eligible shares issued to him by venture capital trusts in the course of that year, are amounts on which he is eligible for relief in accordance with sub-paragraph (2) below.

(2)The amounts on which an individual shall be taken for the purposes of sub-paragraph (1) above to be eligible for relief shall be any amounts subscribed by him on his own behalf for eligible shares issued by a venture capital trust for raising money.

(3)An individual shall not be entitled under this Part of this Schedule to claim relief for any given year of assessment in respect of an amount of more than £100,000.

(4)An individual shall not be entitled under this Schedule to claim any relief to which he is eligible by reference to any shares unless he had attained the age of eighteen years before those shares were issued.

(5)Where an individual makes a claim for any relief to which he is entitled under this Part of this Schedule for any year of assessment, the amount of his liability for that year to income tax on his total income shall be equal to the amount to which he would be so liable apart from this Part of this Schedule less whichever is the smaller of—

(a)an amount equal to tax at the lower rate for that year on the amount in respect of which he is entitled to claim relief for that year, and

(b)the amount which reduces his liability to nil.

(6)In determining for the purposes of sub-paragraph (5) above the amount of income tax to which a person would be liable apart from this Part of this Schedule, no account shall be taken of—

(a)any income tax reduction under section 289A,

(b)any income tax reduction under Chapter I of Part VII or under section 347B,

(c)any income tax reduction under section 353(1A),

(d)any income tax reduction under section 54(3A) of the [1989 c. 26.] Finance Act 1989,

(e)any relief by way of a reduction of liability to tax which is given in accordance with any arrangements having effect by virtue of section 788 or by way of a credit under section 790(1), or

(f)any tax at the basic rate on so much of that person’s income as is income the income tax on which he is entitled to charge against any other person or to deduct, retain or satisfy out of any payment.

(7)Where, in the case of any claim for relief under this Part of this Schedule in respect of any shares issued in any year of assessment, effect is given to the claim by repayment of tax, section 824 shall have effect in relation to the repayment as if the time from which the twelve months mentioned in subsections (1)(a) and (3)(a) of that section are to be calculated were the end of the year of assessment in which the shares were issued.

(8)A person shall not be entitled to be given any relief under this Part of this Schedule by reference to any shares if circumstances have arisen which would have resulted, had that relief already been given, in the withdrawal or reduction of the relief.

(9)A person shall not under this Part of this Schedule be eligible for any relief on any amount by reference to any shares unless the shares are both subscribed for and issued for bona fide commercial purposes and not as part of a scheme or arrangement the main purpose of which, or one of the main purposes of which, is the avoidance of tax.

Loan-linked investments

2(1)An individual shall not be entitled to relief under this Part of this Schedule in respect of any shares if—

(a)there is a loan made by any person, at any time in the relevant period, to that individual or any associate of his; and

(b)the loan is one which would not have been made, or would not have been made on the same terms, if that individual had not subscribed for those shares or had not been proposing to do so.

(2)References in this paragraph to the making by any person of a loan to any individual or an associate of his include references—

(a)to the giving by that person of any credit to that individual or any associate of his; and

(b)to the assignment or assignation to that person of any debt due from that individual or any associate of his.

(3)In this paragraph—

  • “associate” has the meaning given in subsections (3) and (4) of section 417, except that in those subsections (as applied for the purposes of this paragraph) “relative” shall not include a brother or sister; and

  • “the relevant period”, in relation to relief under this Part of this Schedule in respect of any shares in a company which is a venture capital trust, means the period beginning with the incorporation of the company (or, if the company was incorporated more than two years before the date on which the shares were issued, beginning two years before that date) and ending five years after the issue of the shares.

Loss of investment relief

3(1)This paragraph applies, subject to sub-paragraph (5) below, where—

(a)an individual who has made any claim for relief under this Part of this Schedule makes any disposal of eligible shares in a venture capital trust, and

(b)that disposal takes place before the end of the period of five years beginning with the issue of those shares to that individual.

(2)If the disposal is made otherwise than by way of a bargain made at arm’s length, any relief given under this Part of this Schedule by reference to the shares which are disposed of shall be withdrawn.

(3)Where the disposal was made by way of a bargain made at arm’s length—

(a)if, apart from this sub-paragraph, the relief given by reference to the shares that are disposed of is greater than the amount mentioned in sub-paragraph (4) below, it shall be reduced by that amount, and

(b)if paragraph (a) above does not apply, any relief given by reference to those shares shall be withdrawn.

(4)The amount referred to in sub-paragraph (3) above is an amount equal to tax at the lower rate for the year of assessment for which the relief was given on the amount or value of the consideration which the individual receives for the shares.

(5)This paragraph shall not apply in the case of any disposal of shares which is made by a married man to his wife or by a married woman to her husband if it is made, in either case, at a time when they are living together.

(6)Where any eligible shares issued to any individual (“the transferor”), being shares by reference to which any amount of relief under this Part of this Schedule has been given, are transferred to the transferor’s spouse (“the transferee”) by a disposal such as is mentioned in sub-paragraph (5) above, this paragraph shall have effect, in relation to any subsequent disposal or other event, as if—

(a)the transferee were the person who had subscribed for the shares,

(b)the shares had been issued to the transferee at the time when they were issued to the transferor,

(c)there had been, in respect of the transferred shares, such a reduction under this Part of this Schedule in the transferee’s liability to income tax as is equal to the actual reduction in respect of those shares of the transferor’s liability, and

(d)that deemed reduction were (notwithstanding the transfer) to be treated for the purposes of this paragraph as an amount of relief given by reference to the shares transferred.

(7)Any assessment for withdrawing or reducing relief by reason of a disposal or other event falling within sub-paragraph (6) above shall be made on the transferee.

(8)In determining for the purposes of this paragraph any question whether any disposal relates to shares by reference to which any relief under this Part of this Schedule has been given, it shall be assumed, in relation to any disposal by any person of any eligible shares in a venture capital trust, that—

(a)as between eligible shares acquired by the same person on different days, those acquired on an earlier day are disposed of by that person before those acquired on a later day; and

(b)as between eligible shares acquired by the same person on the same day, those by reference to which relief under this Part of this Schedule has been given are disposed of by that person only after he has disposed of any other eligible shares acquired by him on that day.

(9)Where—

(a)the approval of any company as a venture capital trust is withdrawn, and

(b)the withdrawal of the approval is not one to which section 842AA(8) applies,

any person who, at the time when the withdrawal takes effect, is holding any shares by reference to which relief under this Part of this Schedule has been given shall be deemed for the purposes of this paragraph to have disposed of those shares immediately before that time and otherwise than by way of a bargain made at arm’s length.

Assessment on withdrawal or reduction of relief

4(1)Any relief given under this Part of this Schedule which is subsequently found not to have been due shall be withdrawn by the making of an assessment to tax under Case VI of Schedule D for the year of assessment for which the relief was given.

(2)An assessment for withdrawing or reducing relief in pursuance of paragraph 3 above shall also be made as an assessment to tax under Case VI of Schedule D for the year of assessment for which the relief was given.

(3)No assessment for withdrawing or reducing relief given by reference to shares issued to any person shall be made by reason of any event occurring after his death.

Provision of information

5(1)Where an event occurs by reason of which any relief under this Part of this Schedule falls to be withdrawn or reduced, the individual to whom the relief was given shall, within 60 days of his coming to know of the event, give a notice to the inspector containing particulars of the event.

(2)If the inspector has reason to believe that a person has not given a notice which he is required to give under sub-paragraph (1) above in respect of any event, the inspector may by notice require that person to furnish him within such time (not being less than 60 days) as may be specified in the notice with such information relating to the event as the inspector may reasonably require for the purposes of this Part of this Schedule.

(3)No obligation as to secrecy imposed by statute or otherwise shall preclude the inspector from disclosing to a venture capital trust that relief given by reference to a particular number or proportion of its shares has been given or claimed under this Part of this Schedule.

Interpretation of Part I

6(1)In this Part of this Schedule “eligible shares”, in relation to a company which is a venture capital trust, means new ordinary shares in that trust which, throughout the period of five years beginning with the date on which they are issued, carry no present or future preferential right to dividends or to a company’s assets on its winding up and no present or future preferential right to be redeemed.

(2)In this Part of this Schedule “ordinary shares”, in relation to a company, means shares forming part of a company’s ordinary share capital.

(3)In this Part of this Schedule references to a disposal of shares shall include references to a disposal of an interest or right in or over the shares.

Part IIRelief on distributions

7(1)A relevant distribution of a venture capital trust shall not be regarded as income for any income tax purposes if the person beneficially entitled to it is a qualifying investor.

(2)For the purposes of this paragraph a person is a qualifying investor, in relation to any distribution, if he is an individual who has attained the age of eighteen years and is beneficially entitled to the distribution—

(a)as the person who himself holds the shares in respect of which the distribution is made, or

(b)as a person with such a beneficial entitlement to the shares as derives from their being held for him, or for his benefit, by a nominee of his.

(3)In this paragraph “relevant distribution”, in relation to a company which is a venture capital trust, means any distribution which—

(a)consists in a dividend (including a capital dividend) which is paid in respect of any ordinary shares in that company which—

(i)were acquired by the person to whom the distribution is made at a time when the company was such a trust, and

(ii)are not shares acquired in excess of the permitted maximum for any year of assessment;

and

(b)is not a dividend paid in respect of profits or gains arising or accruing in any accounting period ending at a time when the company was not such a trust.

Meaning of

8(1)For the purposes of this Part of this Schedule shares in a venture capital trust shall be treated, in relation to any individual, as acquired in excess of the permitted maximum for any year of assessment to the extent that the value of the shares comprised in the relevant acquisitions of that individual for that year exceeds £100,000.

(2)The reference in sub-paragraph (1) above to the relevant acquisitions of an individual for a year of assessment is a reference to all shares which—

(a)are acquired in that year of assessment by that individual or any nominee of his;

(b)are ordinary shares in a company which is a venture capital trust at the time of their acquisition; and

(c)are shares so acquired for bona fide commercial purposes and not as part of a scheme or arrangement the main purpose of which, or one of the main purposes of which, is the avoidance of tax.

(3)Sub-paragraph (4) below applies where—

(a)any ordinary shares in a venture capital trust (“the new shares”) are acquired by any individual in circumstances in which they are required for the purposes of the 1992 Act to be treated as the same assets as any other shares; and

(b)the other shares consist of or include any ordinary shares in a venture capital trust that were, or are treated as, acquired otherwise than in excess of the permitted maximum for any year of assessment.

(4)Where this sub-paragraph applies—

(a)the value of the new shares shall be disregarded in determining whether any other shares acquired in the same year of assessment as the new shares are acquired in excess of the permitted maximum for that year; and

(b)the new shares or, as the case may be, an appropriate proportion of them shall be treated as themselves acquired otherwise than in excess of the permitted maximum.

(5)For the purposes of this paragraph the value of any shares acquired by or on behalf of any individual shall be taken to be their market value (within the meaning of the 1992 Act) at the time of their acquisition.

(6)Where any shares in a venture capital trust are acquired in excess of the permitted maximum for any year of assessment, the shares representing the excess shall be identified for the purposes of this Part of this Schedule—

(a)by treating shares acquired later in the year as comprised in the excess before those acquired earlier in the year;

(b)by treating shares of different descriptions acquired on the same day as acquired within the permitted maximum in the same proportions as are borne by the respective values of the shares comprised in the acquisitions of each description to the total value of all the shares in the trust acquired on that day; and

(c)by applying the rules in section 151A(4) and (5) of the 1992 Act for determining the shares to which any disposal of shares in the trust relates (even one which is not a disposal for the purposes of that Act).

Interpretation of Part II

9(1)In this Part of this Schedule “ordinary shares”, in relation to a company, means shares forming part of the company’s ordinary share capital.

(2)In this Part of this Schedule “nominee”, in relation to any individual, includes the trustees of a bare trust of which that individual is the only beneficiary.

Section 72.

SCHEDULE 16Venture Capital Trusts: Deferred charge on re-investment

Application of Schedule

1(1)This Schedule applies where—

(a)there would (apart from paragraph 2(2)(a) below) be a chargeable gain (“the original gain”) accruing to an individual (“the investor”) at any time (“the accrual time”) on or after 6th April 1995;

(b)that gain is one accruing on the disposal by the investor of any asset or in accordance with paragraphs 4 and 5 of Schedule 5B or paragraphs 4 and 5 below;

(c)the investor makes a qualifying investment; and

(d)the investor is resident or ordinarily resident in the United Kingdom at the accrual time and the time when he makes the qualifying investment and is not, in relation to the qualifying investment, a person to whom sub-paragraph (4) below applies.

(2)The investor makes a qualifying investment for the purposes of this Schedule if—

(a)he subscribes for any shares by reference to which he is given relief under Part I of Schedule 15B to the Taxes Act on any amount;

(b)those shares are issued at a qualifying time; and

(c)where that time is before the accrual time, those shares are still held by the investor at the accrual time;

and in this Schedule “relevant shares”, in relation to a case to which this Schedule applies, means any of the shares in a venture capital trust which are acquired by the investor in making the qualifying investment.

(3)In this Schedule “a qualifying time”, in relation to any shares subscribed for by the investor, means—

(a)any time in the period beginning twelve months before the accrual time and ending twelve months after the accrual time, or

(b)any such time before the beginning of that period or after it ends as the Board may by notice allow.

(4)This sub-paragraph applies to an individual in relation to a qualifying investment if—

(a)though resident or ordinarily resident in the United Kingdom at the time when he makes the investment, he is regarded for the purposes of any double taxation relief arrangements as resident in a territory outside the United Kingdom; and

(b)were section 151A(1) to be disregarded, the arrangements would have the effect that he would not be liable in the United Kingdom to tax on a gain arising on a disposal, immediately after their acquisition, of the shares acquired in making that investment.

The postponement of the original gain

2(1)On the making of a claim by the investor for the purposes of this Schedule, so much of the investor’s unused qualifying expenditure on relevant shares as—

(a)is specified in the claim, and

(b)does not exceed so much of the original gain as is unmatched,

shall be set against a corresponding amount of the original gain.

(2)Where the amount of any qualifying expenditure on any relevant shares is set under this Schedule against the whole or any part of the original gain—

(a)so much of that gain as is equal to that amount shall be treated as not having accrued at the accrual time; but

(b)paragraphs 4 and 5 below shall apply for determining the gain that is to be treated as accruing on the occurrence of any chargeable event in relation to any of those relevant shares.

(3)For the purposes of this Schedule, but subject to the following provisions of this paragraph—

(a)the investor’s qualifying expenditure on any relevant shares is the sum equal to the amount on which he is given relief under Part I of Schedule 15B to the Taxes Act by reference to those shares; and

(b)that expenditure is unused to the extent that it has not already been set under this Schedule against the whole or any part of a chargeable gain.

(4)For the purposes of this paragraph the original gain is unmatched, in relation to any qualifying expenditure on relevant shares, to the extent that it has not had any other amount set against it under this Schedule or Schedule 5B.

Chargeable events

3(1)Subject to the following provisions of this paragraph, there is for the purposes of this Schedule a chargeable event in relation to any relevant shares if, after the making of the qualifying investment—

(a)the investor disposes of those shares otherwise than by way of a disposal within marriage;

(b)those shares are disposed of, otherwise than by way of a disposal to the investor, by a person who acquired them on a disposal made by the investor within marriage;

(c)there is, in a case where those shares fall within section 151B(3)(c), such an actual or deemed exchange of those shares for any non-qualifying holdings as, under section 135 or 136, requires, or but for section 116 would require, those holdings to be treated for the purposes of this Act as the same assets as those shares;

(d)the investor becomes a non-resident while holding those shares and within the relevant period;

(e)a person who acquired those shares on a disposal within marriage becomes a non-resident while holding those shares and within the relevant period;

(f)the company in which those shares are shares has its approval as a venture capital trust withdrawn in a case to which section 842AA(8) of the Taxes Act does not apply; or

(g)the relief given under Part I of Schedule 15B to the Taxes Act by reference to those shares is withdrawn or reduced in circumstances not falling within any of paragraphs (a) to (f) above.

(2)In sub-paragraph (1) above—

  • “non-qualifying holdings” means any shares or securities other than any ordinary shares (within the meaning of section 151A) in a venture capital trust; and

  • “the relevant period”, in relation to any relevant shares, means the period of five years beginning with the time when the investor made the qualifying investment by virtue of which he acquired those shares.

(3)For the purposes of sub-paragraph (1) above there shall not be a chargeable event by virtue of sub-paragraph (1)(d) or (e) above in relation to any shares if—

(a)the reason why the person in question becomes a non-resident is that he works in an employment or office all the duties of which are performed outside the United Kingdom, and

(b)he again becomes resident or ordinarily resident in the United Kingdom within the period of three years from the time when he became a non-resident, without having meanwhile disposed of any of those shares;

and, accordingly, no assessment shall be made by virtue of sub-paragraph (1)(d) or (e) above before the end of that period in any case where the condition in paragraph (a) above is satisfied and the condition in paragraph (b) above may be satisfied.

(4)For the purposes of sub-paragraph (3) above a person shall be taken to have disposed of any shares if and only if there has been such a disposal as would, if the person making the disposal had been resident in the United Kingdom, have been a chargeable event in relation to those shares.

(5)Where in any case—

(a)the investor or a person who has acquired any relevant shares on a disposal within marriage dies, and

(b)an event occurs at or after the time of the death which (apart from this sub-paragraph) would be a chargeable event in relation to any relevant shares held by the deceased immediately before his death,

that event shall not be chargeable event in relation to the shares so held.

(6)Without prejudice to the operation of paragraphs 4 and 5 below in a case falling within sub-paragraph (1)(f) above, the references in this paragraph to a disposal shall not include references to the disposal which by virtue of section 151B(6) is deemed to take place in such a case.

Gain accruing on chargeable event

4(1)On the occurrence of a chargeable event in relation to any relevant shares in relation to which there has not been a previous chargeable event—

(a)a chargeable gain shall be treated as accruing at the time of the event; and

(b)the amount of the gain shall be equal to so much of the original gain as is an amount against which there has under this Schedule been set any expenditure on those shares.

(2)In determining for the purposes of this Schedule any question whether any shares to which a chargeable event relates are shares the expenditure on which has under this Schedule been set against the whole or any part of any gain, the assumptions in sub-paragraph (3) below shall apply and, in a case where the shares are not (within the meaning of section 151B) eligible for relief under section 151A(1), shall apply notwithstanding anything in any of sections 104, 105 and 107.

(3)Those assumptions are that—

(a)as between shares acquired by the same person on different days, those acquired on an earlier day are disposed of by that person before those acquired on a later day; and

(b)as between shares in a company that were acquired on the same day, those the expenditure on which has been set under this Schedule against the whole or any part of any gain are disposed of by that person only after he has disposed of any other shares in that company that were acquired by him on that day.

(4)Where at the time of a chargeable event any relevant shares are treated for the purposes of this Act as represented by assets which consist of or include assets other than the relevant shares—

(a)the expenditure on those shares which was set against the gain in question shall be treated, in determining for the purposes of this paragraph the amount of expenditure on each of those assets which is to be treated as having been set against that gain, as apportioned in such manner as may be just and reasonable between those assets; and

(b)as between different assets treated as representing the same relevant shares, the assumptions mentioned in sub-paragraph (3) above shall apply with the necessary modifications in relation to those assets as they would apply in relation to the shares.

Persons to whom gain accrues

5(1)The chargeable gain which accrues in accordance with paragraph 4 above on the occurrence in relation to any relevant shares of a chargeable event shall be treated as accruing, as the case may be—

(a)to the person who makes the disposal,

(b)to the person who holds the shares in question at the time of the exchange or deemed exchange,

(c)to the person who becomes a non-resident,

(d)to the person who holds the shares in question when the withdrawal of the approval takes effect, or

(e)to the person who holds the shares in question when the circumstances arise in respect of which the relief is withdrawn or reduced.

(2)Where—

(a)sub-paragraph (1) above provides for the holding of shares at a particular time to be what identifies the person to whom any chargeable gain accrues, and

(b)at that time, some of those shares are held by the investor and others are held by a person to whom the investor has transferred them by a disposal within marriage,

the amount of the chargeable gain accruing by virtue of paragraph 4 above shall be computed separately in relation to the investor and that person without reference to the shares held by the other.

Interpretation

6(1)In this Schedule “non-resident” means a person who is neither resident nor ordinarily resident in the United Kingdom.

(2)In this Schedule references to a disposal within marriage are references to any disposal to which section 58 applies.

(3)Notwithstanding anything in section 288(5), shares shall not for the purposes of this Schedule be treated as issued by reason only of being comprised in a letter of allotment or similar instrument.

Section 74.

SCHEDULE 17Settlements: liability of settlor

Part IThe new provisions

1In Part XV of the Taxes Act 1988 (settlements) the following provisions are inserted (in place of sections 660 to 676 and 683 to 685) as Chapter IA—

Chapter IALiability of settlor

Main provisions
660AIncome arising under settlement where settlor retains an interest.

(1)Income arising under a settlement during the life of the settlor shall be treated for all purposes of the Income Tax Acts as the income of the settlor and not as the income of any other person unless the income arises from property in which the settlor has no interest.

(2)Subject to the following provisions of this section, a settlor shall be regarded as having an interest in property if that property or any derived property is, or will or may become, payable to or applicable for the benefit of the settlor or his spouse in any circumstances whatsoever.

(3)The reference in subsection (2) above to the spouse of the settlor does not include—

(a)a person to whom the settlor is not for the time being married but may later marry, or

(b)a spouse from whom the settlor is separated under an order of a court, or under a separation agreement or in such circumstances that the separation is likely to be permanent, or

(c)the widow or widower of the settlor.

(4)A settlor shall not be regarded as having an interest in property by virtue of subsection (2) above if and so long as none of that property, and no derived property, can become payable or applicable as mentioned in that subsection except in the event of—

(a)the bankruptcy of some person who is or may become beneficially entitled to the property or any derived property, or

(b)an assignment of or charge on the property or any derived property being made or given by some such person, or

(c)in the case of a marriage settlement, the death of both parties to the marriage and of all or any of the children of the marriage, or

(d)the death of a child of the settlor who had become beneficially entitled to the property or any derived property at an age not exceeding 25.

(5)A settlor shall not be regarded as having an interest in property by virtue of subsection (2) above if and so long as some person is alive and under the age of 25 during whose life that property, or any derived property, cannot become payable or applicable as mentioned in that subsection except in the event of that person becoming bankrupt or assigning or charging his interest in the property or any derived property.

(6)The reference in subsection (1) above to a settlement does not include an outright gift by one spouse to the other of property from which income arises, unless—

(a)the gift does not carry a right to the whole of that income, or

(b)the property given is wholly or substantially a right to income.

For this purpose a gift is not an outright gift if it is subject to conditions, or if the property given or any derived property is or will or may become, in any circumstances whatsoever, payable to or applicable for the benefit of the donor.

(7)The reference in subsection (1) above to a settlement does not include an irrevocable allocation of pension rights by one spouse to the other in accordance with the terms of a relevant statutory scheme (within the meaning of Chapter I of Part XIV).

(8)Subsection (1) above does not apply to income arising under a settlement made by one party to a marriage by way of provision for the other—

(a)after the dissolution or annulment of the marriage, or

(b)while they are separated under an order of a court, or under a separation agreement or in such circumstances that the separation is likely to be permanent,

being income payable to or applicable for the benefit of that other party.

(9)Subsection (1) above does not apply to income consisting of—

(a)annual payments made by an individual for bona fide commercial reasons in connection with his trade, profession or vocation; or

(b)covenanted payments to charity (as defined by section 347A(7)).

(10)In this section “derived property”, in relation to any property, means income from that property or any other property directly or indirectly representing proceeds of, or of income from, that property or income therefrom.

660BPayments to unmarried minor children of settlor.

(1)Income arising under a settlement which does not fall to be treated as income of the settlor under section 660A but which during the life of the settlor is paid to or for the benefit of an unmarried minor child of the settlor in any year of assessment shall be treated for all the purposes of the Income Tax Acts as the income of the settlor for that year and not as the income of any other person.

(2)Where income arising under a settlement is retained or accumulated by the trustees, any payment whatsoever made thereafter by virtue or in consequence of the settlement, or any enactment relating thereto, to or for the benefit of an unmarried minor child of the settlor shall be deemed for the purposes of subsection (1) above to be a payment of income if or to the extent that there is available retained or accumulated income.

(3)There shall be taken to be available retained or accumulated income at any time when the aggregate amount of the income which has arisen under the settlement since it was made or entered into exceeds the aggregate amount of income so arising which has been—

(a)treated as income of the settlor or a beneficiary, or

(b)paid (whether as income or capital) to or for the benefit of a beneficiary other than an unmarried minor child of the settlor, or

(c)applied in defraying expenses of the trustees which were properly chargeable to income (or would have been so chargeable but for any express provisions of the trust).

(4)Where an offshore income gain (within the meaning of Chapter V of Part XVII) accrues in respect of a disposal of assets made by a trustee holding them for a person who would be absolutely entitled as against the trustee but for being a minor, the income which by virtue of section 761(1) is treated as arising by reference to that gain shall for the purposes of this section be deemed to be paid to that person.

(5)Income paid to or for the benefit of a child of a settlor shall not be treated as provided in subsection (1) above for a year of assessment in which the aggregate amount paid to or for the benefit of that child which but for this subsection would be so treated does not exceed £100.

(6)In this section—

(a)“child” includes a stepchild and an illegitimate child;

(b)“minor” means a person under the age of 18 years, and “minor child” shall be construed accordingly; and

(c)references to payments include payments in money or money’s worth.

660CNature of charge on settlor.

(1)Tax chargeable by virtue of this Chapter shall be charged under Case VI of Schedule D.

(2)In computing the liability to income tax of a settlor chargeable by virtue of this Chapter the same deductions and reliefs shall be allowed as would have been allowed if the income treated as his by virtue of this Chapter had been received by him.

(3)Subject to section 833(3), income which is treated by virtue of this Chapter as income of a settlor shall be deemed for the purposes of this section to be the highest part of his income.

660DAdjustments between settlor and trustees, &c.

(1)Where by virtue of this Chapter income tax becomes chargeable on and is paid by a settlor, he is entitled—

(a)to recover from any trustee, or any other person to whom the income is payable by virtue or in consequence of the settlement, the amount of the tax so paid; and

(b)for that purpose to require an officer of the Board to furnish to him a certificate specifying the amount of income in respect of which he has so paid tax and the amount of tax so paid.

A certificate so furnished is conclusive evidence of the facts stated therein.

(2)Where a person obtains, in respect of an allowance or relief, a repayment of income tax in excess of the amount of the repayment to which he would, but for this Chapter, have been entitled, an amount equal to the excess shall be paid by him to the trustee, or other person to whom the income is payable by virtue or in consequence of the settlement, or, where there are two or more such persons, shall be apportioned among those persons as the case may require.

If any question arises as to the amount of a payment or as to an apportionment to be made under this subsection, that question shall be decided by the General Commissioners whose decision shall be final.

(3)Nothing in this Chapter shall be construed as excluding a charge to tax on the trustees as persons by whom any income is received.

Supplementary provisions
660EApplication to settlements by two or more settlors.

(1)In the case of a settlement where there is more than one settlor, this Chapter shall have effect in relation to each settlor as if he were the only settlor, as follows.

(2)In this Chapter, in relation to a settlor—

(a)references to the property comprised in a settlement include only property originating from that settlor, and

(b)references to income arising under the settlement include only income originating from that settlor.

(3)For the purposes of section 660B there shall be taken into account, in relation to a settlor, as income paid to or for the benefit of a child of the settlor only—

(a)income originating from that settlor, and

(b)in a case in which section 660B(2) applies, payments which are under that provision (as adapted by subsection (4) below) to be deemed to be payments of income.

(4)In applying section 660B(2) to a settlor—

(a)the reference to income arising under the settlement includes only income originating from that settlor; and

(b)the reference to any payment made by virtue or in consequence of the settlement or any enactment relating thereto includes only a payment made out of property originating from that settlor or income originating from that settlor.

(5)References in this section to property originating from a settlor are references to—

(a)property which that settlor has provided directly or indirectly for the purposes of the settlement; and

(b)property representing that property; and

(c)so much of any property which represents both property so provided and other property as, on a just apportionment, represents the property so provided.

(6)References in this section to income originating from a settlor are references to—

(a)income from property originating from that settlor; and

(b)income provided directly or indirectly by that settlor.

(7)In subsections (5) and (6) above—

(a)references to property or income which a settlor has provided directly or indirectly include references to property or income which has been provided directly or indirectly by another person in pursuance of reciprocal arrangements with that settlor, but do not include references to property or income which that settlor has provided directly or indirectly in pursuance of reciprocal arrangements with another person; and

(b)references to property which represents other property include references to property which represents accumulated income from that other property.

660FPower to obtain information.

An officer of the Board may by notice require any party to a settlement to furnish him within such time as he may direct (not being less than 28 days) with such particulars as he thinks necessary for the purposes of this Chapter.

660GMeaning of “settlement” and related expressions.

(1)In this Chapter—

  • “settlement” includes any disposition, trust, covenant, agreement, arrangement or transfer of assets, and

  • “settlor”, in relation to a settlement, means any person by whom the settlement was made.

(2)A person shall be deemed for the purposes of this Chapter to have made a settlement if he has made or entered into the settlement directly or indirectly, and, in particular, but without prejudice to the generality of the preceding words, if he has provided or undertaken to provide funds directly or indirectly for the purpose of the settlement, or has made with any other person a reciprocal arrangement for that other person to make or enter into the settlement.

(3)References in this Chapter to income arising under a settlement include, subject to subsection (4) below, any income chargeable to income tax by deduction or otherwise, and any income which would have been so chargeable if it had been received in the United Kingdom by a person domiciled, resident and ordinarily resident in the United Kingdom.

(4)Where the settlor is not domiciled, or not resident, or not ordinarily resident, in the United Kingdom in a year of assessment, references in this Chapter to income arising under a settlement do not include income arising under the settlement in that year in respect of which the settlor, if he were actually entitled thereto, would not be chargeable to income tax by deduction or otherwise by reason of his not being so domiciled, resident or ordinarily resident.

But where such income is remitted to the United Kingdom in circumstances such that, if the settlor were actually entitled to that income when remitted, he would be chargeable to income tax by reason of his residence in the United Kingdom, it shall be treated for the purposes of this Chapter as arising under the settlement in the year in which it is remitted..

Part IIMinor and consequential amendments of the Taxes Act 1988

2In section 125(3)(a) of the Taxes Act 1988, for the words from “subsection (1)(a)” to the end substitute “section 660A(8) or (9)(a)”.

3In section 339(1)(a) of the Taxes Act 1988, for “section 660(3)” substitute “section 347A(7)”.

4(1)Section 347A of the Taxes Act 1988 (annual payments not a charge on the income of the payer) applies to a payment which is treated by virtue of Chapter IA of Part XV of the Taxes Act 1988 as income of the payer notwithstanding that it is made in pursuance of an obligation which is an existing obligation within the meaning of section 36(3) of the [1988 c. 39.] Finance Act 1988.

(2)In section 347A of the Taxes Act 1988, after subsection (6) add—

(7)In subsection (2)(b) above “a covenanted payment to charity” means a payment made under a covenant made otherwise than for consideration in money or money’s worth in favour of a body of persons or trust established for charitable purposes only whereby the like annual payments (of which the payment in question is one) become payable for a period which may exceed three years and is not capable of earlier termination under any power exercisable without the consent of the persons for the time being entitled to the payments.

(8)For the purposes of subsection (7) above the bodies mentioned in section 507 shall each be treated as a body of persons established for charitable purposes only.

5In section 360A(2)(b) of the Taxes Act 1988, for “section 681(4)” substitute “Chapter IA of Part XV (see section 660G(1) and (2))”.

6In section 417(3)(b) of the Taxes Act 1988, for “section 681(4)” substitute “Chapter IA of Part XV (see section 660G(1) and (2))”.

7In section 505(6) of the Taxes Act 1988, for “section 660(3)” substitute “section 347A(7)”.

8Before section 677 of the Taxes Act 1988 insert the heading—

Chapter IB

Provisions as to capital sums paid to settlor.

9(1)Section 677 of the Taxes Act 1988 is amended as follows.

(2)In subsection (2)(b) after “the amount of” insert “that income taken into account under that subsection in relation to”.

(3)After subsection (2)(f) insert—

(fa)any income arising under the settlement in that year or any previous year which has been treated as income of the settlor by virtue of section 660A or 660B; and.

(4)In subsection (9) after “one of the events specified in section 673(3)” insert “or, in the case of a sum paid on or after 6th April 1995, in one of the events specified in section 660A(4) or on the death under the age of 25 of any such person as is mentioned in section 660A(5)”.

10In section 678 of the Taxes Act 1988, omit subsection (7).

11After section 682 of the Taxes Act 1988 insert—

682ASupplementary provisions.

(1)The provisions of sections 660E to 660G apply for the purposes of this Chapter as they apply for the purposes of Chapter IA.

(2)For the purposes of this Chapter, a body corporate shall be deemed to be connected with a settlement in any year of assessment if at any time in that year—

(a)it is a close company (or only not a close company because it is not resident in the United Kingdom) and the participators then include the trustees of the settlement; or

(b)it is controlled (within the meaning of section 840) by a company falling within paragraph (a) above.

12For the heading before section 686 of the Taxes Act 1988 substitute—

Chapter IC

Liability of trustees.

13In section 686 of the Taxes Act 1988 (liability to income tax at rate applicable to trusts), in subsection (2) (income to which the section applies) for paragraph (b) substitute—

(b)is not, before being distributed, either—

(i)the income of any person other than the trustees, or

(ii)treated for any of the purposes of the Income Tax Acts as the income of a settlor; and.

14(1)Section 687 of the Taxes Act 1988 (payments under discretionary trusts) is amended as follows.

(2)For subsection (1) (cases in which the section applies) substitute—

(1)Where in any year of assessment trustees make a payment to any person in the exercise of a discretion, whether a discretion exercisable by them or by any other person, then if the payment—

(a)is for all the purposes of the Income Tax Acts income of the person to whom it is made (but would not be his income if it were not made to him), or

(b)is treated for those purposes as the income of the settlor by virtue of section 660B,

the following provisions of this section apply with respect to the payment in lieu of section 348 or 349(1)..

(3)In subsection (2)(a) (person credited with having paid tax) after “to whom the payment is made” insert “or, as the case may be, the settlor”.

(4)After subsection (4) add—

(5)References in this section to payments include payments in money or money’s worth..

15Omit section 689 of the Taxes Act 1988 (recovery from trustees of discretionary trusts of higher rate tax due from beneficiaries).

16In section 694(3) of the Taxes Act 1988, for “Chapters I to IV” substitute “Chapter IA”.

17(1)Section 720 of the Taxes Act 1988 is amended as follows.

(2)In subsection (6)—

(a)for “Chapters II to IV” substitute “Chapters IA, IB and IC”; and

(b)for the words from “(within Chapter II)” to the end substitute “arising under the settlement”.

(3)In subsection (7) for “Chapters II to IV” substitute “Chapters IA, IB and IC”.

(4)In subsection (8)(a) for “Chapter II, III or IV of Part XV (as the case may be)” substitute “Chapter IA of Part XV (see section 660G(1) and (2))”.

18In section 745(6) of the Taxes Act 1988, for “section 681(4)” substitute “section 660G(1) and (2)”.

19In section 783(10)(b) of the Taxes Act 1988, for “section 670(2)” substitute “section 660G(1) and (2)”.

20In section 839(3) of the Taxes Act 1988, for subsection (3) substitute—

(3)A person, in his capacity as trustee of a settlement, is connected with—

(a)any individual who in relation to the settlement is a settlor,

(b)any person who is connected with such an individual, and

(c)any body corporate which is connected with that settlement.

In this subsection “settlement” and “settlor” have the same meaning as in Chapter IA of Part XV (see section 660G(1) and (2)).

(3A)For the purpose of subsection (3) above a body corporate is connected with a settlement if—

(a)it is a close company (or only not a close company because it is not resident in the United Kingdom) and the participators include the trustees of the settlement; or

(b)it is controlled (within the meaning of section 840) by a company falling within paragraph (a) above..

Part IIIConsequential amendments of other enactments

Taxes Management Act 1970 (c. 9)

21In section 27(2) of the Taxes Management Act 1970, for “section 681(4)” substitute “section 660G(1) and (2)”.

22In section 31(3) of the Taxes Management Act 1970 (including that provision as proposed to be substituted by paragraph 7 of Schedule 19 to the [1994 c. 9.] Finance Act 1994), for “sections 660 to 685” substitute “sections 660A to 660G or 677 to 682A”.

23In column 1 of the Table in section 98 of the Taxes Management Act 1970, for the references to section 669 and 680 of the Taxes Act 1988 substitute “section 660F”.

Finance Act 1989 (c. 26)

24In section 59(1)(c) of the Finance Act 1989, for “section 660(3)” substitute “section 347A(7)”.

25In section 60 of the Finance Act 1989, omit subsection (3) and in subsection (4) for “subsections (2) and (3)” substitute “subsection (2)”.

Finance Act 1990 (c. 29)

26In section 25(12)(b) of the [1990 c. 29.] Finance Act 1990, for “section 660(3)” substitute “section 347A(7)”.

Taxation of Chargeable Gains Act 1992 (c. 12)

27For section 77 of the Taxation of Chargeable Gains Act 1992 (charge on settlor with interest in settlement), substitute—

77Charge on settlor with interest in settlement.

(1)Where in a year of assessment—

(a)chargeable gains accrue to the trustees of a settlement from the disposal of any or all of the settled property,

(b)after making any deduction provided for by section 2(2) in respect of disposals of the settled property there remains an amount on which the trustees would, disregarding section 3, be chargeable to tax for the year in respect of those gains, and

(c)at any time during the year the settlor has an interest in the settlement,

the trustees shall not be chargeable to tax in respect of those but instead chargeable gains of an amount equal to that referred to in paragraph (b) shall be treated as accruing to the settlor in that year.

(2)Subject to the following provisions of this section, a settlor shall be regarded as having an interest in a settlement if—

(a)any property which may at any time be comprised in the settlement, or any derived property is, or will or may become, payable to or applicable for the benefit of the settlor or his spouse in any circumstances whatsoever, or

(b)the settlor or his spouse enjoys a benefit deriving directly or indirectly from any property which is comprised in the settlement or any derived property.

(3)The references in subsection (2)(a) and (b) above to the spouse of the settlor do not include—

(a)a person to whom the settlor is not for the time being married but may later marry, or

(b)a spouse from whom the settlor is separated under an order of a court, or under a separation agreement or in such circumstances that the separation is likely to be permanent, or

(c)the widow or widower of the settlor.

(4)A settlor shall not be regarded as having an interest in a settlement by virtue of subsection (2)(a) above if and so long as none of the property which may at any time be comprised in the settlement, and no derived property, can become payable or applicable as mentioned in that provision except in the event of—

(a)the bankruptcy of some person who is or may become beneficially entitled to the property or any derived property, or

(b)an assignment of or charge on the property or any derived property being made or given by some such person, or

(c)in the case of a marriage settlement, the death of both parties to the marriage and of all or any of the children of the marriage, or

(d)the death of a child of the settlor who had become beneficially entitled to the property or any derived property at an age not exceeding 25.

(5)A settlor shall not be regarded as having an interest in a settlement by virtue of subsection (2)(a) above if and so long as some person is alive and under the age of 25 during whose life the property or any derived property cannot become payable or applicable as mentioned in that provision except in the event of that person becoming bankrupt or assigning or charging his interest in that property.

(6)This section does not apply—

(a)where the settlor dies during the year; or

(b)in a case where the settlor is regarded as having an interest in the settlement by reason only of—

(i)the fact that property is, or will or may become, payable to or applicable for the benefit of his spouse, or

(ii)the fact that a benefit is enjoyed by his spouse,

where the spouse dies, or the settlor and the spouse cease to be married, during the year.

(7)This section does not apply unless the settlor is, and the trustees are, either resident in the United Kingdom during any part of the year or ordinarily resident in the United Kingdom during the year.

(8)In this section “derived property”, in relation to any property, means income from that property or any other property directly or indirectly representing proceeds of, or of income from, that property or income therefrom..

28In section 78 of the Taxation of Chargeable Gains Act 1992, in subsections (1), (2) and (3), for “section 77(2)” substitute “section 77”.

29(1)Section 79 of the Taxation of Chargeable Gains Act 1992 is amended as follows.

(2)In subsection (2) omit paragraph (b) and the word “and” preceding it.

(3)Omit subsection (4).

(4)In subsection (5)—

(a)for “subsections (3) and (4)” substitute “subsection (3)”; and

(b)in paragraph (a), omit the words “or income” wherever occurring.

30In section 97 of the Taxation of Chargeable Gains Act 1992, in subsection (7) for “section 681(4)” substitute “section 660G(1) and (2)”.

31In section 286 of the Taxation of Chargeable Gains Act 1992, for subsection (3) substitute—

(3)A person, in his capacity as trustee of a settlement, is connected with—

(a)any individual who in relation to the settlement is a settlor,

(b)any person who is connected with such an individual, and

(c)any body corporate which is connected with that settlement.

In this subsection “settlement” and “settlor” have the same meaning as in Chapter IA of Part XV of the Taxes Act (see section 660G(1) and (2) of that Act).

(3A)For the purpose of subsection (3) above a body corporate is connected with a settlement if—

(a)it is a close company (or only not a close company because it is not resident in the United Kingdom) and the participators include the trustees of the settlement; or

(b)it is controlled (within the meaning of section 840 of the Taxes Act) by a company falling within paragraph (a) above..

32In Schedule 1 to the Taxation of Chargeable Gains Act 1992, in paragraph 2(7), for “section 681(4)” substitute “section 660G(1) and (2)”.

Section 75.

SCHEDULE 18Deceased persons' estates

Introductory

1Part XVI of the Taxes Act 1988 shall be amended as follows.

Limited interests in residue

2(1)In section 695 (limited interests in residue), the words “subject to subsection (3) below” in subsection (2) shall be omitted, and the following subsection shall be substituted for subsection (3)—

(3)Where, on the completion of the administration of the estate, there is an amount which remains payable in respect of that limited interest, that amount shall be deemed for all tax purposes to have been paid to that person as income for the year of assessment in which the administration period ends or, in the case of a sum which is deemed to be paid in respect of an interest that ceased before the end of that period, for the last year of assessment in which that interest was subsisting.

(2)This paragraph has effect in relation to any estate the administration of which is completed on or after 6th April 1995.

Absolute interests in residue

3(1)In section 696 (absolute interests in residue), for subsection (3) there shall be substituted the following subsections—

(3)When any sum has been paid during the administration period in respect of that absolute interest, that sum, except so far as it is excluded from the operation of this subsection, shall be deemed for all tax purposes to have been paid to that person as income for the year of assessment in which it was actually paid.

(3A)A payment shall be excluded from the operation of subsection (3) above to the extent (if any) that the aggregate of that sum and all the sums which—

(a)have been paid previously during the administration period in respect of that absolute interest, and

(b)fall under this section to be treated as paid to that person as income,

exceeds the aggregated income entitlement of that person for the year of assessment in which the sum is paid.

(3B)For the purposes of this section the aggregated income entitlement of that person for any year of assessment is the amount which would be the aggregate of the amounts received for that year of assessment and all previous years of assessment in respect of the interest if that person had a right in each year to receive, and had received—

(a)in the case of a United Kingdom estate, his residuary income for that year less income tax at the applicable rate for that year; and

(b)in the case of a foreign estate, his residuary income for that year.

(2)For subsection (5) of that section there shall be substituted the following subsection—

(5)Where, on the completion of the administration of the estate, the aggregate of all the sums which, apart from this subsection—

(a)have been paid during the administration period in respect of that absolute interest, and

(b)fall under this section to be treated as paid to that person as income,

is exceeded by the aggregated income entitlement of that person for the year of assessment in which the administration of the estate is completed, then an amount equal to the amount of the excess shall be treated for the purposes of subsections (3) to (4) above as having been actually paid, immediately before the end of the administration period, in respect of that interest.

(3)Sub-paragraph (1) above has effect, subject to sub-paragraph (4) below, in relation to any payment made on or after 6th April 1995; and sub-paragraph (2) above shall have effect in relation to any estate the administration of which is completed on or after 6th April 1995.

(4)Where any sum is deemed by virtue of subsection (3) of section 696 of the Taxes Act 1988 (as it has effect apart from this Schedule) to have been paid to any person as income for the year 1994-95 or any previous year of assessment, that sum shall be treated for the purposes of subsections (3A) and (5) of that section (as they have effect by virtue of this Schedule) as a sum actually paid in respect of that person’s absolute interest in that year of assessment.

Supplemental provisions relating to section 696

4(1)After subsection (1) of section 697 (calculation of residuary income) there shall be inserted the following subsection—

(1A)For the purpose of ascertaining under subsection (1) above the residuary income of an estate for any year, where the amount of the deductions falling to be made from the aggregate income of the estate for that year (including any falling to be made by virtue of this subsection) exceeds the amount of that income, the excess shall be carried forward and treated for that purpose as an amount falling to be deducted from the aggregate income of the estate for the following year.

(2)In subsection (2) of that section (reduction of residuary income where benefits received are less than aggregate of residuary income), for the words from “his residuary income for” onwards there shall be substituted “section 696 shall have effect as if the amount of the deficiency were to be applied in reducing the amount taken to be his residuary income for the year in which the administration of the estate is completed and, in so far as the deficiency exceeds that income, in reducing the amount taken to be his residuary income for the previous year, and so on.”

(3)Sub-paragraph (1) above has effect for ascertaining the residuary income of an estate for the year 1995-96 or any subsequent year of assessment; and sub-paragraph (2) above has effect in relation to any estate the administration of which is completed on or after 6th April 1995.

Special provisions as to successive interests in residue

5(1)For subsection (2) of section 698 (special provisions as to successive interests in residue) there shall be substituted the following subsections—

(1A)Subsection (1B) below applies where—

(a)successively during the administration period there are different persons with interests in the residue of the estate of a deceased person or in parts of such a residue;

(b)the later interest or, as the case may be, each of the later interests arises or is created on the cessation otherwise than by death of the interest that precedes it; and

(c)the earlier or, as the case may be, earliest interest is a limited interest.

(1B)Where this subsection applies, this Part shall have effect in relation to any payment made in respect of any of the interests referred to in subsection (1A) above—

(a)as if all those interests were the same interest so that none of them is to be treated as having ceased on being succeeded by any of the others;

(b)as if (subject to paragraph (c) below) the interest which is deemed to exist by virtue of paragraph (a) above (“the deemed single interest”) were an interest of—

(i)except in a case to which sub-paragraph (ii) below applies, the person in respect of whose interest or previous interest the payment is made;

(ii)in a case where the person entitled to receive the payment is any other person who has or has had an interest which is deemed to be comprised in the deemed single interest, that other person;

and

(c)in so far as any of the later interests is an absolute interest as if, for the purposes of section 696(3A) to (5)—

(i)the earlier interest or interests had never existed and the absolute interest had always existed;

(ii)the sums (if any) which were deemed in relation to the earlier interest or interests to have been paid as income for any year of assessment to any of the persons entitled thereto were sums previously paid during the administration period in respect of the absolute interest; and

(iii)those sums were sums falling to be treated as sums paid as income to the person entitled to the absolute interest.

(2)Where successively during the administration period there are different persons with absolute interests in the residue of the estate of a deceased person or in parts of such a residue, the aggregate payments and aggregated income entitlement referred to in subsections (3A) and (3B) of section 696 shall be computed for the purposes of that section in relation to an absolute interest subsisting at any time (“the subsequent interest”)—

(a)as if the subsequent interest and any previous absolute interest corresponding to the subsequent interest, or relating to any part of the residue to which the subsequent interest relates, were the same interest; and

(b)as if the residuary income for any year of the person entitled to the previous interest were residuary income of the person entitled to the subsequent interest and any amount deemed to be paid as income to the person entitled to the previous interest were an amount deemed to have been paid to the person entitled to the subsequent interest.

(2)This paragraph has effect in relation to any payment made on or after 6th April 1995 and, so far as it relates to the operation of section 695(3) or 696(5) of the Taxes Act 1988, in relation to any estate the administration of which is completed on or after that date.

Adjustments and information

6After subsection (4) of section 700 (adjustments and information) there shall be inserted the following subsections—

(5)It shall be the duty of a personal representative of a deceased person, if a request to do so is made in writing by a person who has, or has had, an absolute or limited interest in the residue of the estate of the deceased or by a person to whom any of the income of the residue of that estate has been paid in the exercise of any discretion, to furnish the person making the request with a statement in writing setting out—

(a)in respect of every amount which has been, or is treated as having been, actually paid to that person in r