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Finance Act 1996

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This version of this Act contains provisions that are prospective.

Changes to legislation:

There are outstanding changes not yet made by the legislation.gov.uk editorial team to Finance Act 1996. Any changes that have already been made by the team appear in the content and are referenced with annotations.

E+W+S+N.I.

Finance Act 1996

1996 CHAPTER 8

An Act to grant certain duties, to alter other duties, and to amend the law relating to the National Debt and the Public Revenue, and to make further provision in connection with Finance.

[29th April 1996]

Most Gracious Sovereign,

We, Your Majesty’s most dutiful and loyal subjects, the Commons of the United Kingdom in Parliament assembled, towards raising the necessary supplies to defray Your Majesty’s public expenses, and making an addition to the public revenue, have freely and voluntarily resolved to give and grant unto Your Majesty the several duties hereinafter mentioned; and do therefore most humbly beseech Your Majesty that it may be enacted, and be it enacted by the Queen’s most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same, as follows:—

Annotations:

Commencement Information

I1Act in force at Royal Assent (29.4.1996) subject to specific provisions as mentioned.

Part IE+W+S+N.I. Excise Duties

Alcoholic liquor dutiesE+W+S+N.I.

1 Spirits: rate of duty.E+W+S+N.I.

(1)In section 5 of the M1Alcoholic Liquor Duties Act 1979 (spirits), for “£20.60” there shall be substituted “ £19.78 ”.

(2)This section shall be deemed to have come into force at 6 o’clock in the evening of 28th November 1995.

Annotations:

Marginal Citations

2 Wine and made-wine: rates.E+W+S+N.I.

(1)In the Table of rates of duty in Schedule 1 to the Alcoholic Liquor Duties Act 1979 (wine and made-wine)—

(a)in Part I of the Table for “200.64”, where it appears as the rate for wine or made-wine of a strength exceeding 15 per cent. but not exceeding 22 per cent., there shall be substituted “ 187.24 ”; and

(b)in Part II of that Table (wine or made-wine of a strength exceeding 22 per cent.), for “20.60” there shall be substituted “ 19.78 ”.

(2)Paragraph (a) of subsection (1) above shall be deemed to have come into force on 1st January 1996 and paragraph (b) shall be deemed to have come into force at 6 o’clock in the evening of 28th November 1995.

3 Cider: rate of duty.E+W+S+N.I.

(1)In subsection (1) of section 62 of the M2Alcoholic Liquor Duties Act 1979 (cider), for “rate of £23.78 per hectolitre” there shall be substituted “ rates shown in subsection (1A) below. ”

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

(1A)The rates at which the duty shall be charged are—

(a)£35.67 per hectolitre in the case of cider of a strength exceeding 7.5 per cent.; and

(b)£23.78 per hectolitre in any other case.

(3)This section shall come into force on 1st October 1996.

Annotations:

Marginal Citations

Hydrocarbon oil dutiesE+W+S+N.I.

4 Rates of duty and rebate.E+W+S+N.I.

(1)In section 6(1) of the M3Hydrocarbon Oil Duties Act 1979, for “£0.3614” (duty on light oil) and “£0.3132” (duty on heavy oil) there shall be substituted “ £0.3912 ” and “ £0.3430 ”, respectively.

(2)In section 8(3) of that Act (duty on road fuel gas), for “£0.3314” there shall be substituted “ £0.2817 ”.

(3)In section 11(1) of that Act (rebate on heavy oil), for “£0.0166” (fuel oil) and “£0.0214” (gas oil) there shall be substituted “ £0.0181 ” and “ £0.0233 ”, respectively.

F1(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F1(5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6)In section 14(1) of that Act (rebate on light oil for use as furnace fuel), for “£0.0166” there shall be substituted “ £0.0181 ”.

(7)Subsections (1) to (3) and (6) above shall be deemed to have come into force at 6 o’clock in the evening of 28th November 1995; and subsection (4) above shall come into force on 15th May 1996.

Annotations:

Amendments (Textual)

F1S. 4(4)(5) repealed (retrospective to 6pm on 7.3.2001) by 2001 c. 9, ss. 2(5), 110, Sch. 33 Pt. 1(1)

Commencement Information

I2S. 4 partly in force at 28.11.1995 see s. 4(7).

Marginal Citations

5 Misuse of rebated kerosene.E+W+S+N.I.

(1)The M4Hydrocarbon Oil Duties Act 1979 shall be amended as mentioned in subsections (2) to (5) below.

(2)In section 11(1) (rebate on heavy oil), for “and 13” there shall be substituted “ 13, 13AA and 13AB ”.

(3)In section 12(2) (restriction on use of rebated heavy oil for road vehicles), after “allowed” there shall be inserted “ (whether under section 11(1) above or 13AA(1) below) ”.

(4)After section 13 there shall be inserted the following sections—

13AA Restrictions on use of rebated kerosene.

(1)If, on the delivery of kerosene for home use, it is intended to use the kerosene as fuel for—

(a)an engine provided for propelling an excepted vehicle, or

(b)an engine which is used neither for propelling a vehicle nor for heating,

a declaration shall be made to that effect and thereupon rebate shall be allowed at the rate for rebated gas oil which is then in force, instead of at the rate then in force under section 11(1)(c) above.

(2)Subject to subsection (3) below, no kerosene on whose delivery for home use a rebate at the rate given by section 11(1)(c) above has been allowed shall—

(a)be used as fuel for an engine provided for propelling an excepted vehicle;

(b)be used as fuel for an engine which is used neither for propelling a vehicle nor for heating; or

(c)be taken into the fuel supply of an engine falling within paragraph (a) or (b) above.

(3)Subsection (2) above does not apply to any quantity of kerosene in respect of which there has been paid to the Commissioners an amount equal to duty on the same quantity of gas oil at the rate for rebated gas oil which is in force at the time of the payment.

(4)A payment under subsection (3) above shall be made in accordance with regulations made under section 24(1) below for the purposes of this section.

(5)For the purposes of this section and section 13AB below—

excepted vehicle” means a vehicle which is an excepted vehicle under any provision of Schedule 1 to this Act; and

kerosene” means heavy oil of which more than 50 per cent. by volume distils at a temperature of 240°C or less.

(6)For the purposes of this section and section 13AB below the rate for rebated gas oil which is in force at any time is the rate of duty which at that time is in force under section 6(1) above in the case of heavy oil as reduced by the rate of rebate allowable at that time under section 11(1)(b) above.

13AB Penalties for misuse of kerosene.

(1)If a person uses kerosene in contravention of section 13AA(2) above—

(a)the Commissioners may recover from him, in respect of the quantity of kerosene used, an amount equal to duty on the same quantity of gas oil at the rate for rebated gas oil which is in force at the time of the contravention;

(b)his use of the kerosene shall attract a penalty under section 9 of the M5Finance Act 1994 (civil penalties); and

(c)if he uses the kerosene with the relevant intent, he shall be guilty of an offence.

(2)If a person is liable for kerosene being taken into a fuel supply of an engine in contravention of section 13AA(2) above—

(a)the Commissioners may recover from him, in respect of the quantity of kerosene taken into the fuel supply, an amount equal to duty on the same quantity of gas oil at the rate for rebated gas oil which is in force at the time of the contravention;

(b)his becoming so liable shall attract a penalty under section 9 of the Finance Act 1994 (civil penalties); and

(c)if he has the relevant intent in relation to the kerosene being taken into the fuel supply, he shall be guilty of an offence.

(3)For the purposes of subsection (2) above, a person is liable for kerosene being taken into a fuel supply of an engine if at the time—

(a)he has the charge of the engine; or

(b)subject to subsection (4) below, he is the owner of the engine.

(4)If a person other than the owner is for the time being entitled to possession of the engine, that other person and not the owner is liable.

(5)If—

(a)a person supplies kerosene having reason to believe that it will be put to a particular use, and

(b)that use is one which, if a payment is not made under subsection (3) of section 13AA above, will contravene subsection (2) of that section,

his supplying the kerosene shall attract a penalty under section 9 of the M6Finance Act 1994 (civil penalties) and, if he makes the supply with the relevant intent, he shall be guilty of an offence.

(6)In this section “the relevant intent” means the intent that the restrictions imposed by section 13AA(2) above shall be contravened.

(7)A person guilty of an offence under this section shall be liable—

(a)on summary conviction, to a penalty of the statutory maximum, or to imprisonment for a term not exceeding 6 months, or to both;

(b)on conviction on indictment, to a penalty of any amount, or to a term of imprisonment not exceeding 7 years, or to both.

(8)Any kerosene falling within subsection (9) or (10) below is liable to forfeiture.

(9)Kerosene falls within this subsection if it is taken into a fuel supply in contravention of section 13AA(2) above.

(10)Kerosene falls within this subsection if—

(a)it has been supplied in circumstances in which there is reason to believe that it will be put to a particular use; and

(b)that use is one which, if payment is not made under subsection (3) of section 13AA above, will contravene subsection (2) of that section.

(5)In section 24 (control of use of duty-free and rebated oil)—

(a)in subsection (1), after “section 13A” there shall be inserted “ section 13AA ”; and

(b)in subsection (2), after “section 12” there shall be inserted “ or section 13AA ”.

(6)This section shall have effect in relation to cases where kerosene is—

(a)used as fuel, or

(b)taken into a fuel supply,

on or after such day as the Commissioners of Customs and Excise may by order made by statutory instrument appoint.

Annotations:

Marginal Citations

6 Mixing of rebated oil.E+W+S+N.I.

(1)The M7Hydrocarbon Oil Duties Act 1979 shall be amended as mentioned in subsections (2) to (4) below.

(2)In section 20 (contaminated or accidentally mixed oil), after subsection (3) there shall be inserted the following subsection—

(4)The power to make a payment to a person under subsection (2) above in relation to oils that have become accidentally mixed does not apply in relation to a mixture in respect of which he is liable to pay duty under section 20AAA below.

(3)After section 20A there shall be inserted the following sections—

20AAA Mixing of rebated oil.

(1)Where—

(a)a mixture which is leaded or unleaded petrol is produced in contravention of Part I of Schedule 2A to this Act, and

(b)the mixture is not produced as a result of approved mixing,

a duty of excise shall be charged on the mixture.

(2)Where—

(a)a mixture of heavy oils is produced in contravention of Part II of Schedule 2A to this Act,

(b)the mixture is not produced as a result of approved mixing, and

(c)the mixture is supplied for use as fuel for a road vehicle or an excepted vehicle,

a duty of excise shall be charged on the mixture.

(3)The person liable to pay the duty charged under subsection (1) above is the person producing the mixture.

(4)The person liable to pay the duty charged under subsection (2) above is the person supplying the mixture.

(5)The Commissioners may exempt a person from liability to pay duty charged under this section in respect of the production or supply of a mixture if they are satisfied—

(a)that the mixture has been produced or (as the case may be) supplied accidentally; and

(b)that, having regard to all the circumstances, the person should be exempted from liability to pay the duty.

(6)Part III of Schedule 2A to this Act makes provision with respect to rates and amounts of duty charged under this section.

(7)In this section—

  • approved mixing” has the meaning given by section 20A(5) above; and

  • excepted vehicle” means a vehicle which is an excepted vehicle under any provision of Schedule 1 to this Act.

20AAB Mixing of rebated oil: supplementary.

(1)A person who—

(a)produces a mixture on which duty is charged under section 20AAA(1) above, or

(b)supplies a mixture on which duty is charged under section 20AAA(2) above,

must notify the Commissioners that he has done so within the period of seven days beginning with the date on which he produced or (as the case may be) supplied the mixture.

(2)A person is not required to give a notification under subsection (1) above if, before he produced or (as the case may be) supplied the mixture, he notified the Commissioners that he proposed to do so.

(3)Notification under subsection (1) or (2) above must be given in such form and in such manner, and must contain such particulars, as the Commissioners may direct.

(4)Subject to subsection (7) below, where it appears to the Commissioners—

(a)that a person has produced or supplied a mixture on which duty is charged under section 20AAA above, and

(b)that he is the person liable to pay the duty,

they may assess the amount of duty due from him to the best of their judgement and notify that amount to him or his representative.

(5)An assessment under subsection (4) above shall be treated as if it were an assessment under section 12(1) of the M8Finance Act 1994.

(6)The Commissioners may give a direction that a person who is, or expects to be, liable to pay duty charged under section 20AAA above—

(a)shall account for duty charged under that section by reference to such periods (“accounting periods”) as may be determined by or under the direction;

(b)shall make, in relation to accounting periods, returns in such form and at such times and containing such particulars as may be so determined;

(c)shall pay duty charged under that section at such times and in such manner as may be so determined.

(7)The power to make an assessment under subsection (4) above does not apply in relation to a person who is for the time being subject to a direction under subsection (6) above.

(8)Where any person—

(a)fails to give a notification which he is required to give under subsection (1) above, or

(b)fails to comply with a direction under subsection (6) above,

his failure shall attract a penalty under section 9 of the M9Finance Act 1994 (civil penalties).

(4)After Schedule 2 there shall be inserted the Schedule set out in Schedule 1 to this Act.

(5)This section and Schedule 1 to this Act shall have effect in relation to—

(a)the production on or after the appointed day of a mixture which is leaded or unleaded petrol; and

(b)the supply on or after the appointed day of a mixture of heavy oils;

and “the appointed day” here means such day as the Commissioners of Customs and Excise may by order made by statutory instrument appoint.

Annotations:

Subordinate Legislation Made

P1S. 6(5) power exercised (28.10.1996) by S.I. 1996/2751, art. 2

Marginal Citations

7 Marked oil used as fuel for road vehicles.E+W+S+N.I.

(1)After section 24 of the M10Hydrocarbon Oil Duties Act 1979 (control of use of duty free and rebated oil) there shall be inserted the following section—

24A Penalties for misuse of marked oil.

(1)Marked oil shall not be used as fuel for a road vehicle.

(2)For the purposes of this section marked oil is any hydrocarbon oil in which a marker is present which is for the time being designated by regulations made by the Commissioners under subsection (3) below.

(3)The Commissioners may for the purposes of this section designate any marker which appears to them to be used for the purposes of the law of any place (whether within or outside the United Kingdom) for identifying hydrocarbon oil that is not to be used as fuel for road vehicles, or for road vehicles of a particular description.

(4)For the purposes of this section marked oil shall be taken to be used as fuel for a road vehicle if, but only if, it is used as fuel for the engine provided for propelling the vehicle or for an engine which draws its fuel from the same supply as that engine.

(5)Where a person uses any hydrocarbon oil in contravention of subsection (1) above, his use of the oil shall attract a penalty under section 9 of the Finance Act 1994 (civil penalties).

(6)If a person who uses any marked oil in contravention of subsection (1) above does so in the knowledge that the oil he is using is marked oil, he shall be guilty of an offence and liable—

(a)on summary conviction, to a penalty of the statutory maximum, or to imprisonment for a term not exceeding 6 months, or to both;

(b)on conviction on indictment, to a penalty of any amount, or to a term of imprisonment not exceeding 7 years, or to both.

(7)Any marked oil which is in a road vehicle as part of the fuel supply for the engine which propels the vehicle shall be liable to forfeiture.

(8)Where in any proceedings relating to this section a question arises as to the nature of any substance present at any time in any hydrocarbon oil—

(a)a certificate of the Commissioners to the effect that that substance is or was a marker designated for the purposes of this section shall be sufficient, unless the contrary is shown, for establishing that fact; and

(b)any document purporting to be such a certificate shall be taken to be one unless it is shown not to be.

(2)In section 24(1) of that Act (purposes for which regulations may be made), for “or section 19A above” there shall be inserted “ , section 19A or section 24A of this Act ”.

Annotations:

Marginal Citations

8 Relief for marine voyages.E+W+S+N.I.

(1)The following provisions of the M11Hydrocarbon Oil Duties Act 1979 are hereby repealed—

(a)section 18 (fuel for ships in home waters), and

(b)in subsection (1) of section 19 (fuel used in fishing boats, etc.), paragraph(a) and the words from “by the owner” to “be”.

(2)This section shall come into force on such day as the Commissioners of Customs and Excise may by order made by statutory instrument appoint.

Annotations:

Subordinate Legislation Made

P2S. 8(2) power fully exercised (4.10.1996): 1.11.1996 appointed by S.I. 1996/2536, art. 2

Marginal Citations

Tobacco products dutyE+W+S+N.I.

9 Rates of duty.E+W+S+N.I.

(1)For the Table of rates of duty in Schedule 1 to the M12Tobacco Products Duty Act 1979 there shall be substituted—

1. CigarettesAn amount equal to 20 per cent. of the retail price plus £62.52 per thousand cigarettes.
2. Cigars£91.52 per kilogram.
3. Hand-rolling tobacco£85.94 per kilogram.
4. Other smoking tobacco and chewing tobacco£40.24 per kilogram.

(2)This section shall be deemed to have come into force at 6 o’clock in the evening of 28th November 1995.

Annotations:

Marginal Citations

Betting duties: ratesE+W+S+N.I.

10 General betting duty.E+W+S+N.I.

(1)In section 1(2) of the M13Betting and Gaming Duties Act 1981 (rate of general betting duty), for “7.75 per cent.” there shall be substituted “ 6.75 per cent. ”

(2)This section shall apply in relation to bets made on or after 1st March 1996.

Annotations:

Marginal Citations

11 Pool betting duty.E+W+S+N.I.

In section 7(1) of the M14Betting and Gaming Duties Act 1981 (rate of pool betting duty), for “32.50 per cent” there shall be substituted—

(a)in relation to bets the stake money on which has been or is paid on or after 3rd December 1995 and before the first Sunday to follow the day on which this Act is passed, “ 27.50 per cent. ”; and

(b)in relation to bets the stake money on which is paid on or after that first Sunday, “ 26.50 per cent. ”

Annotations:

Marginal Citations

Amusement machine licence dutyE+W+S+N.I.

12 Licences for machines as well as premises.E+W+S+N.I.

(1)In subsection (1) of section 21 of the M15Betting and Gaming Duties Act 1981 (requirement for amusement machine licence with respect to premises), at the end there shall be inserted “ or the machine ”.

(2)In subsection (2) of that section (licences to be known as amusement machine licences), at the end there shall be inserted “ and, if it is granted with respect to a machine, rather than with respect to premises, as a special amusement machine licence. ”

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

(3AA)A special amusement machine licence shall not be granted except where—

(a)the machine with respect to which it is granted is of a description of machine for which special amusement machine licences are available;

(b)such conditions as may be prescribed by regulations made by the Commissioners are satisfied in relation to the application for the licence, the machine and the person by whom the application is made; and

(c)the licence is for twelve months.

(3AB)Special amusement machine licences shall be available for amusement machines of each of the following descriptions—

(a)machines that are not gaming machines; and

(b)small prize machines.

(4)In section 24(4) of that Act (provision of unlicensed machines), at the end there shall be inserted “ or the machines ”.

(5)In paragraph 4 of Schedule 4 to that Act (seasonal licences), after sub-paragraph (7) there shall be inserted the following sub-paragraph—

(7AA)Sub-paragraphs (4) and (5) above shall have effect where—

(a)an amusement machine is provided on any premises at any time in a winter period, and

(b)the provision of that machine on those premises at that time is authorised by a special amusement machine licence,

as if an amusement machine licence had been granted in respect of those premises for that winter period.

(6)Paragraph 5 of that Schedule shall become sub-paragraph (1) of that paragraph, and after that sub-paragraph there shall be inserted the following sub-paragraphs—

(2)Regulations may provide for this Schedule to have effect in relation to special amusement machine licences with such exceptions, adaptations and modifications as may be prescribed.

(3)Without prejudice to the generality of sub-paragraphs (1) and (2) above, regulations may include provision requiring—

(a)a special amusement machine licence to be displayed on such premises and in such manner, and

(b)the machine to which such a licence relates to bear such labels and marks,

as may be determined by directions given, in accordance with the regulations, by the Commissioners.

Annotations:

Marginal Citations

Air passenger dutyE+W+S+N.I.

13 Pleasure flights.E+W+S+N.I.

(1)In section 31 of the M16Finance Act 1994 (air passenger duty: exceptions for certain passengers) after subsection (4) there shall be inserted—

(4A)A passenger is not a chargeable passenger in relation to a flight if under his agreement for carriage (whether or not it is evidenced by a ticket)—

(a)the flight is to depart from and return to the same airport, and

(b)the duration of the flight (excluding any period during which the aircraft’s doors are open for boarding or disembarkation) is not to exceed 60 minutes.

(2)In section 32 of that Act (change of circumstances after ticket issued etc.)—

(a)in subsection (1) (which provides that that section applies where a person’s agreement for carriage is evidenced by a ticket) for the words “This section applies” there shall be substituted the words “ Subsections (2) and (3) below apply ”;

(b)after subsection (3) there shall be added—

(4)Where—

(a)at the time a passenger’s flight begins, by virtue of section 31(4A) above he would not (assuming there is no change of circumstances) be a chargeable passenger in relation to the flight, and

(b)by reason only of a change of circumstances not attributable to any act or default of his, the flight does not return to the airport from which it departed or exceeds 60 minutes in duration (excluding any period during which the aircraft’s doors are open for boarding or disembarkation),

he shall not by reason of the change of circumstances be treated as a chargeable passenger in relation to that flight.

Annotations:

Marginal Citations

Vehicle excise dutyE+W+S+N.I.

14 Increase in general rate.E+W+S+N.I.

(1)In Schedule 1 to the M17Vehicle Excise and Registration Act 1994 (annual rates of duty), in paragraph 1(2) (the general rate), for “£135” there shall be substituted “ £140 ”.

(2)Subsection (1) above applies in relation to licences taken out after 28th November 1995.

Annotations:

Marginal Citations

15 Electrically propelled vehicles.E+W+S+N.I.

F2(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F2(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3)In section 62 of that Act (definitions), after subsection (1) there shall be inserted the following subsection—

(1A)For the purposes of this Act, a vehicle is not an electrically propelled vehicle 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.

(4)Subsections (1) to (3) above apply in relation to licences taken out after 28th November 1995.

(5)In Schedule 2 to that Act (exemptions), after paragraph 2 there shall be inserted the following paragraph—

Electrically assisted pedal cycles

2A(1)An electrically assisted pedal cycle is an exempt vehicle.

(2)For the purposes of sub-paragraph (1) an electrically assisted pedal cycle is a vehicle of a class complying with such requirements as may be prescribed by regulations made by the Secretary of State for the purposes of this paragraph.

Annotations:

Amendments (Textual)

F2S. 15(1)(2) repealed (1.4.2001) by 2001 c. 9, s. 110, Sch. 33 Pt. 1(3), Note 2

16 Steam powered vehicles etc.E+W+S+N.I.

(1)In Schedule 1 to the Vehicle Excise and Registration Act 1994 (annual rates of duty), after paragraph 4E there shall be inserted the following paragraph—

4EEA steam powered vehicle is a special concessionary vehicle.

(2)In paragraph 3 of that Schedule (buses), in sub-paragraph (2)(b) (vehicles which are not buses), after “excepted vehicle” there shall be inserted “ or a special concessionary vehicle ”.

(3)In paragraph 4(2) of that Schedule (meaning of “special vehicle”), for “and is” there shall be substituted “ which is not a special concessionary vehicle and which is ”.

(4)In paragraph 5 of that Schedule (recovery vehicles), after sub-paragraph (5) there shall be inserted the following sub-paragraph—

(5A)A vehicle is not a recovery vehicle if it is a special concessionary vehicle.

(5)In paragraph 6(1) of that Schedule (vehicles used for exceptional loads), after paragraph (b) there shall be inserted—

and which is not a special concessionary vehicle.

F3(6). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F3(7). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(8)This section applies in relation to licences taken out after 28th November 1995.

Annotations:

Amendments (Textual)

F3S. 16(6)(7) repealed (1.4.2001) by 2001 c. 9, s. 110, Sch. 33 Pt. 1(3), Note 2

17 Vehicles capable of conveying loads.E+W+S+N.I.

(1)Schedule 1 to the M18Vehicle Excise and Registration Act 1994 (annual rates of duty) shall be amended in accordance with subsections (2) to (8) below.

(2)In paragraph 4(2) (meaning of “special vehicle”), immediately before paragraph (c) there shall be inserted the following paragraph—

(bb)a vehicle falling within sub-paragraph (2A) or (2B),.

(3)After sub-paragraph (2) of paragraph 4 there shall be inserted the following sub-paragraphs—

(2A)A vehicle falls within this sub-paragraph if—

(a)it is designed or adapted for use for the conveyance of goods or burden of any description; but

(b)it is not so used or is not so used for hire or reward or for or in connection with a trade or business.

(2B)A vehicle falls within this sub-paragraph if—

(a)it is designed or adapted for use with a semi-trailer attached; but

(b)it is not so used or, if it is so used, the semi-trailer is not used for the conveyance of goods or burden of any description.

(4)In paragraph 9(2) (rigid goods vehicles which are subject to basic goods vehicle rate), after paragraph (b) there shall be inserted and

(c)to any rigid goods vehicle which is used loaded only in connection with a person learning to drive the vehicle or taking a driving test,.

(5)In paragraph 10(1) (trailer supplement), after “exceeding 12,000 kilograms” there shall be inserted “ , which does not fall within paragraph 9(2)(b) or (c) ”.

(6)In paragraph 11(2) (tractive units which are subject to basic goods vehicle rate), after paragraph (b) there shall be inserted and

(c)to any tractive unit to which a semi-trailer is attached which is used loaded only in connection with a person learning to drive the tractive unit or taking a driving test,.

(7)In paragraph 16(1) (cases where Part VIII of Schedule 1 does not apply), paragraph (b), and the word “or” immediately preceding it, shall be omitted.

(8)After paragraph 18 there shall be inserted the following paragraph—

19 Other expressions

(1)In this Part “driving test” means any test of competence to drive mentioned in section 89(1) of the M19Road Traffic Act 1988.

(2)For the purposes of this Part a vehicle or a semi-trailer is used loaded if the vehicle or, as the case may be, the semi-trailer is used for the conveyance of goods or burden of any description.

(9)In section 7 of the M20Vehicle Excise and Registration Act 1994 (issue of licences), in subsection (2) (declarations and particulars in relation to goods vehicles)—

(a)after “goods vehicle” there shall be inserted “ or a special vehicle ”; and

(b)after “goods vehicles” there shall be inserted “ or, as the case may be, special vehicles ”.

(10)After subsection (7) of that section there shall be inserted the following subsection—

(8)In this section “special vehicle” has the same meaning as in paragraph 4 of Schedule 1.

(11)Subject to subsection (13) below, subsections (1) to (8) above apply in relation to licences taken out after 28th November 1995.

(12)Subsection (13) below applies where a vehicle licence is taken out—

(a)on or before 28th November 1995, and

(b)at the rate applicable (at the time it is taken out) under Schedule 1 to the Vehicle Excise and Registration Act 1994.

(13)While the licence is in force duty shall not, by virtue of this section, become chargeable under section 15 of that Act (vehicle used in manner attracting higher rate).

(14)Subsections (9) and (10) above apply in relation to applications made after 28th November 1995.

(15)Paragraph 15 of Schedule 1 to that Act (which is unnecessary) shall be omitted.

Annotations:

Marginal Citations

18 Old vehicles.E+W+S+N.I.

(1)In Schedule 2 to the M21Vehicle Excise and Registration Act 1994 (exempt vehicles), immediately before paragraph 2 there shall be inserted the following paragraph—

Old vehicles

1A(1)A vehicle of a description mentioned in sub-paragraph (2) is an exempt vehicle at any time if it was constructed more than 25 years before the beginning of the year in which that time falls.

(2)The descriptions of vehicles are—

(a)a vehicle in respect of which no annual rate is specified by any provision of Parts II to VIII of Schedule 1;

(b)a motorcycle which does not exceed 450 kilograms in weight unladen.

(3)In sub-paragraph (2)(b) “motorcycle” has the same meaning as in Part II of Schedule 1.

(2)In Schedule 1 to that Act (annual rates of duty), in paragraph 1 (rate for vehicle for which no other rate is specified)—

(a)for paragraphs (a) and (b) of sub-paragraph (1) there shall be substituted “ the general rate ”; and

(b)sub-paragraphs (3) to (5) shall be omitted;

and, in paragraph 2 (motorcycles), sub-paragraph (2) shall be omitted.

(3)In section 2(4) of that Act (rate of duty for vehicle not currently in use and for which no previous licence issued), for the words from “whichever” to the end there shall be substituted “ the general rate currently specified in paragraph 1(2) of Schedule 1 ”.

(4)In that Act—

(a)in section 13 (trade licences), in subsection (3)(b),

(b)in section 13 as substituted under paragraph 8 of Schedule 4, in subsection (4)(b), and

(c)in section 36(3)(b) (additional liability where cheque dishonoured),

for “1(1)(a)” there shall be substituted “ 1 ”.

(5)This section has effect in relation to times after 28th November 1995.

Annotations:

Marginal Citations

19 Old vehicles: further provisions.E+W+S+N.I.

(1)In Schedule 2 to the M22Vehicle Excise and Registration Act 1994 (exempt vehicles), for paragraph 1A (inserted by section 18 above) there shall be substituted the following paragraph—

Old vehicles

1A(1)Subject to sub-paragraph (2), a vehicle is an exempt vehicle at any time if it was constructed more than 25 years before the beginning of the year in which that time falls.

(2)A vehicle is not an exempt vehicle by virtue of sub-paragraph (1) if—

(a)an annual rate is specified in respect of it by any provision of Part III, V, VI, VII or VIII of Schedule 1; or

(b)it is a special vehicle, within the meaning of Part IV of Schedule 1, which—

(i)falls within sub-paragraph (3) or (4); and

(ii)is not a digging machine, mobile crane, works truck or road roller.

(3)A vehicle falls within this sub-paragraph if—

(a)it is designed or adapted for use for the conveyance of goods or burden of any description;

(b)it is put to a commercial use on a public road; and

(c)that use is not a use for the conveyance of goods or burden of any description.

(4)A vehicle falls within this sub-paragraph if—

(a)it is designed or adapted for use with a semi-trailer attached;

(b)it is put to a commercial use on a public road; and

(c)in a case where that use is a use with a semi-trailer attached, the semi-trailer is not used for the conveyance of goods or burden of any description.

(5)In sub-paragraph (2) “digging machine”, “mobile crane” and “works truck” have the same meanings as in paragraph 4 of Schedule 1.

(6)In sub-paragraphs (3) and (4) “commercial use” means use for hire or reward or for or in connection with a trade or business.

(2)This section has effect in relation to times on or after 1st June 1996.

Annotations:

Marginal Citations

20 Exemptions for vehicle testing: general.E+W+S+N.I.

(1)Paragraph 22 of Schedule 2 to the M23Vehicle Excise and Registration Act 1994 (exemption for vehicle testing) shall be amended as follows.

(2)In sub-paragraph (1) (use for the purposes of submitting a vehicle to, or bringing it away from, a compulsory test), after the words “compulsory test”, in each place where they occur, there shall be inserted “ or a vehicle weight test ”.

(3)After sub-paragraph (1) there shall be inserted the following sub-paragraph—

(1A)A vehicle is an exempt vehicle when it is being used solely for the purpose of—

(a)taking it (by previous arrangement for a specified time on a specified date) for a relevant re-examination, or

(b)bringing it away from such a re-examination.

(4)In sub-paragraph (2) (use by an authorised person in the course of compulsory test)—

(a)after “compulsory test” there shall be inserted “ , a vehicle weight test or a relevant re-examination and is being so used ”; and

(b)in paragraphs (a) and (b), after the words “the test”, in each place where they occur, there shall be inserted “ or re-examination ”.

(5)After sub-paragraph (2) there shall be inserted the following sub-paragraph—

(2A)A vehicle is an exempt vehicle when it is being used by an authorised person solely for the purpose of warming up its engine in preparation for the carrying out of—

(a)a compulsory test, or

(b)a relevant re-examination that is to be carried out for the purposes of an appeal relating to a determination made on a compulsory test.

(6)In sub-paragraph (3) (exemption applying where the relevant certificate is refused), after “a vehicle” there shall be inserted “ or as a result of a relevant re-examination, ”.

(7)In sub-paragraph (5) (relevant examinations)—

(a)for paragraph (a), there shall be substituted the following paragraph—

(a)an examination under regulations under section 49(1)(b) or (c) of the M24Road Traffic Act 1988 (examination as to compliance with construction and use or safety requirements);

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

(c)paragraph (c) (examinations for the purpose of an appeal under section 60 of the Road Traffic Act 1988) shall be omitted.

(8)After sub-paragraph (6) there shall be inserted the following sub-paragraphs—

(6A)In this paragraph “a vehicle weight test” means any examination of a vehicle for which provision is made by regulations under—

(a)section 61A of this Act,

(b)section 49(1)(a) of the Road Traffic Act 1988 (tests for selecting plated weights and other plated particulars), or

(c)Article 65(1)(a) of the M25Road Traffic (Northern Ireland) Order 1995.

(6B)In this paragraph “a relevant re-examination” means any examination or re-examination which is carried out in accordance with any provision or requirement made or imposed for the purposes of an appeal relating to a determination made on a compulsory test or vehicle weight test.

(9)Subject to section 21(3) below, in sub-paragraph (7) (meaning of “authorised person”)—

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

(b)at the end of paragraph (c) there shall be inserted the word “ and ”; and

(c)after that paragraph there shall be inserted the following paragraph—

(d)in the case of a relevant re-examination—

(i)the person to whom the appeal in question is made, or

(ii)any person who, by virtue of an appointment made by that person, is authorised by or under any enactment to carry out that re-examination.

(10)This section shall be deemed to have come into force on 28th November 1995.

Annotations:

Marginal Citations

Prospective

21 Exemptions for vehicle testing in Northern Ireland.E+W+S+N.I.

(1)Paragraph 22 of Schedule 2 to the M26Vehicle Excise and Registration Act 1994 (exemption for vehicle testing) shall be further amended as follows.

(2)For sub-paragraph (6) (meaning of “compulsory test” in Northern Ireland) there shall be substituted the following sub-paragraph—

(6)In this paragraph “compulsory test” means, as respects Northern Ireland—

(a)an examination to obtain a test certificate under Article 61 of the M27Road Traffic (Northern Ireland) Order 1995 without which a vehicle licence cannot be obtained for the vehicle,

(b)an examination to obtain a goods vehicle test certificate under Article 65 of that Order, or

(c)an examination to obtain a public service vehicle licence under Article 60(1) of the M28Road Traffic (Northern Ireland) Order 1981.

(3)For paragraph (c) of sub-paragraph (7) (as amended by section 20(9) above) there shall be substituted the following paragraph—

(c)in the case of an examination within sub-paragraph (6), an authorised examiner within the meaning of Article 61(3)(a) of the Road Traffic (Northern Ireland) Order 1995 or a vehicle examiner within the meaning of Part III of that Order; and.

(4)In sub-paragraph (9) (meaning of “relevant certificate” in Northern Ireland), for paragraphs (a) and (b) there shall be substituted the following paragraphs—

(a)a test certificate (within the meaning of Article 61(2) of the Road Traffic (Northern Ireland) Order 1995),

(b)a goods vehicle test certificate (within the meaning of Article 65(2) of that Order), or.

(5)In sub-paragraph (10)(a) (meaning of “relevant work”), the words “(or, in Northern Ireland, a vehicle test certificate)” shall be omitted.

(6)This section shall be deemed to have come into force on the date of the coming into operation of Articles 61 and 65 of the Road Traffic (Northern Ireland) Order 1995 (“the operational date”).

(7)Subsections (2), (4) and (5) above do not have effect in relation to a compulsory test carried out in Northern Ireland before the operational date except for the purpose of construing, in relation to such a test, the reference to a further compulsory test in paragraph 22(10)(a) of Schedule 2 to the Vehicle Excise and Registration Act 1994.

Annotations:

Commencement Information

I3S. 21 comes into force in accordance with s. 21(6).

Marginal Citations

22 Other provisions relating to Northern Ireland.E+W+S+N.I.

(1)In section 42 of the Vehicle Excise and Registration Act 1994 (not fixing registration mark), in subsection (5)(b), for “Article 34 of the Road Traffic (Northern Ireland) Order 1981” there shall be substituted “ Article 63 of the Road Traffic (Northern Ireland) Order 1995 ”.

(2)In subsection (6) of that section, for paragraph (b) there shall be substituted—

(b)it is being driven for the purposes of, or in connection with, its examination under Article 61 of the M29Road Traffic (Northern Ireland) Order 1995 in circumstances in which its use is exempted from paragraph (1) of Article 63 of that Order by regulations under paragraph (6) of that Article.

(3)In section 60A(11) of that Act (special maximum weight in Northern Ireland), for “Article 29(3) of the M30Road Traffic (Northern Ireland) Order 1981” there shall be substituted “ Article 60(1) of the Road Traffic (Northern Ireland) Order 1995 ”.

(4)In section 61(6) of that Act (meaning of “weight unladen”), for paragraph (b) there shall be substituted—

(b)in Northern Ireland, has the same meaning as it has for the purposes of the Road Traffic (Northern Ireland) Order 1995 by virtue of Article 7 of that Order.

(5)In paragraph 6 of Schedule 1 to that Act (vehicles used for exceptional loads), in sub-paragraph (2) for paragraph (b) there shall be substituted—

(b)Article 60 of the Road Traffic (Northern Ireland) Order 1995,.

(6)In that paragraph—

(a)in sub-paragraph (3)(a), for “Article 28 of the Road Traffic (Northern Ireland) Order 1981” there shall be substituted “ Article 55 of the Road Traffic (Northern Ireland) Order 1995 ”; and

(b)in sub-paragraph (4), for “the Road Traffic (Northern Ireland) Order 1981” there shall be substituted “ the Road Traffic (Northern Ireland) Order 1995 ”.

(7)In paragraph 17 of Schedule 3 to that Act (amendments of the Road Traffic (Northern Ireland) Order 1981)—

(a)in sub-paragraph (1), “29(2),” and “34(6),” shall be omitted, and

(b)sub-paragraph (2) shall be omitted.

23 Licensing and registration.E+W+S+N.I.

Schedule 2 to this Act (which makes provision in connection with powers conferred on the Secretary of State by the M31Vehicle Excise and Registration Act 1994) shall have effect.

Annotations:

Marginal Citations

Repeal of certain drawbacks and allowancesE+W+S+N.I.

24 Repeal of certain drawbacks and allowances.E+W+S+N.I.

The following provisions (which provide for repayments, drawbacks or allowances in the case of certain excise duties) shall cease to have effect, that is to say—

(a)section 3 of the M32Finance Act 1977 (repayment in respect of tobacco used in the manufacture of a tobacco product after having borne duty under section 4 of the M33Finance Act 1964);

(b)section 22(6) of the M34Alcoholic Liquor Duties Act 1979 (additions in respect of waste which are deemed to be made to tinctures exported or shipped as stores);

(c)section 23 of that Act of 1979 (allowances in respect of British compounded spirits);

(d)section 92(6) of that Act of 1979 (transitional right to drawback); and

(e)section 9(2) and (3) of the M35Isle of Man Act 1979 (removal to the Isle of Man treated as export for the purposes of drawback).

Annotations:

Marginal Citations

Part IIE+W+S+N.I. Value Added Tax

EC Second VAT Simplification DirectiveE+W+S+N.I.

25 EC Second VAT Simplification Directive.E+W+S+N.I.

Sections 26 to 29 of and Schedule 3 to this Act are for the purpose of giving effect to requirements of the directive of the Council of the European Communities dated 17th May 1977 No.77/388/EEC and the amendments of that directive by the directive of that Council dated 10th April 1995 No.95/7/EC (amendments with a view to introducing new simplification measures with regard to value added tax).

26 Fiscal and other warehousing.E+W+S+N.I.

(1)The provisions of Schedule 3 to this Act shall have effect.

(2)Subject to subsection (3) below, this section and Schedule 3 to this Act shall come into force on such day as the Commissioners of Customs and Excise may by order made by statutory instrument appoint, and shall apply to any acquisition of goods from another member State and any supply taking place on or after that day.

(3)In so far as the provisions inserted by Schedule 3 to this Act confer power to make regulations they shall come into force on the day this Act is passed.

Annotations:

Subordinate Legislation Made

P3S. 26(2) power fully exercised (9.5.1996): 1.6.1996 appointed by S.I. 1996/1249, art. 2

Commencement Information

I4S. 26 wholly in force at 1.6.1996; s. 26 partly in force at Royal Assent see s. 26(3); s. 26 in force at 1.6.1996 in so far as not already in force by S.I 1996/1249, art. 2

27 Value of imported goods.E+W+S+N.I.

(1)Section 21 of the M36 Value Added Tax Act 1994 (value of imported goods) shall be amended as follows.

(2)In subsection (2) of that section at the end of paragraph (a) the word “and” shall be omitted.

(3)For paragraph (b) of that subsection there shall be substituted—

(b)all incidental expenses, such as commission, packing, transport and insurance costs, up to the goods’ first destination in the United Kingdom; and

(c)if at the time of the importation of the goods from a place outside the member States a further destination for the goods is known, and that destination is within the United Kingdom or another member State, all such incidental expenses in so far as they result from the transport of the goods to that other destination;

and in this subsection “the goods’ first destination” means the place mentioned on the consignment note or any other document by means of which the goods are imported into the United Kingdom, or in the absence of such documentation it means the place of the first transfer of cargo in the United Kingdom.

(4)This section shall have effect in relation to goods imported on or after 1st January 1996.

Annotations:

Marginal Citations

28 Adaptation of aircraft and hovercraft.E+W+S+N.I.

(1)Section 22 of the M37Value Added Tax Act 1994 shall be omitted.

(2)This section shall apply to supplies made on or after 1st January 1996.

Annotations:

Marginal Citations

29 Work on materials.E+W+S+N.I.

(1)The Value Added Tax Act 1994 shall be amended as follows.

(2)After subsection (2) of section 30 there shall be inserted the following subsection—

(2A)A supply by a person of services which consist of applying a treatment or process to another person’s goods is zero-rated by virtue of this subsection if by doing so he produces goods, and either—

(a)those goods are of a description for the time being specified in Schedule 8; or

(b)a supply by him of those goods to the person to whom he supplies the services would be of a description so specified.

(3)In subsection (5) of section 55 (supplies of gold), after paragraph (b) there shall be inserted the following— ; or

(c)any supply of services consisting in the application to another person’s goods of a treatment or process which produces goods a supply of which would fall within paragraph (a) above.;

and the word “or” at the end of paragraph (a) shall be omitted.

(4)Paragraph 2 of Schedule 4 (which provides that the treatment or processing of another person’s goods shall in certain circumstances be a supply of goods) shall be omitted.

(5)This section shall apply to supplies made on or after 1st January 1996.

Other provisions relating to charges to VATE+W+S+N.I.

30 Refunds in connection with construction and conversion.E+W+S+N.I.

(1)For subsection (1) of section 35 of the Value Added Tax Act 1994 (refund of VAT to persons constructing certain buildings) there shall be substituted the following subsections—

(1)Where—

(a)a person carries out works to which this section applies,

(b)his carrying out of the works is lawful and otherwise than in the course or furtherance of any business, and

(c)VAT is chargeable on the supply, acquisition or importation of any goods used by him for the purposes of the works,

the Commissioners shall, on a claim made in that behalf, refund to that person the amount of VAT so chargeable.

(1A)The works to which this section applies are—

(a)the construction of a building designed as a dwelling or number of dwellings;

(b)the construction of a building for use solely for a relevant residential purpose or relevant charitable purpose; and

(c)a residential conversion.

(1B)For the purposes of this section goods shall be treated as used for the purposes of works to which this section applies by the person carrying out the works in so far only as they are building materials which, in the course of the works, are incorporated in the building in question or its site.

(1C)Where—

(a)a person (“the relevant person”) carries out a residential conversion by arranging for any of the work of the conversion to be done by another (“a contractor”),

(b)the relevant person’s carrying out of the conversion is lawful and otherwise than in the course or furtherance of any business,

(c)the contractor is not acting as an architect, surveyor or consultant or in a supervisory capacity, and

(d)VAT is chargeable on services consisting in the work done by the contractor,

the Commissioners shall, on a claim made in that behalf, refund to the relevant person the amount of VAT so chargeable.

(1D)For the purposes of this section works constitute a residential conversion to the extent that they consist in the conversion of a non-residential building, or a non-residential part of a building, into—

(a)a building designed as a dwelling or a number of dwellings;

(b)a building intended for use solely for a relevant residential purpose; or

(c)anything which would fall within paragraph (a) or (b) above if different parts of a building were treated as separate buildings.

(2)In subsection (2) of that section (method of making claim), after “may by regulations prescribe” there shall be inserted “ or, in the case of documents, as the Commissioners may determine in accordance with the regulations ”.

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

(4)The notes to Group 5 of Schedule 8 shall apply for construing this section as they apply for construing that Group.

(5)The power of the Treasury by order under section 30 to vary Schedule 8 shall include—

(a)power to apply any variation made by the order for the purposes of this section; and

(b)power to make such consequential modifications of this section as they may think fit.

(4)This section applies in relation to any case in which a claim for repayment under section 35 of the M38Value Added Tax Act 1994 is made at any time on or after the day on which this Act is passed.

Annotations:

Marginal Citations

31 Groups: anti-avoidance.E+W+S+N.I.

(1)In section 43 of the M39Value Added Tax Act 1994 (groups of companies), after subsection (8) there shall be inserted the following subsection—

(9)Schedule 9A (which makes provision for ensuring that this section is not used for tax avoidance) shall have effect.

(2)After Schedule 9 to that Act there shall be inserted the Schedule set out in Schedule 4 to this Act.

(3)In section 83 of that Act (appeals), after paragraph (w) there shall be inserted the following paragraph—

(wa)any direction or assessment under Schedule 9A;.

(4)In section 84 of that Act (further provisions relating to appeals), after subsection (7) there shall be inserted the following subsection—

(7A)Where there is an appeal against a decision to make such a direction as is mentioned in section 83(wa), the cases in which the tribunal shall allow the appeal shall include (in addition to the case where the conditions for the making of the direction were not fulfilled) the case where the tribunal are satisfied, in relation to the relevant event by reference to which the direction was given, that—

(a)the change in the treatment of the body corporate, or

(b)the transaction in question,

had as its main purpose or, as the case may be, as each of its main purposes a genuine commercial purpose unconnected with the fulfilment of the condition specified in paragraph 1(3) of Schedule 9A.

(5)Subsection (1A) of section 43 of that Act shall not have effect in relation to supplies on or after the day on which this Act is passed.

Annotations:

Marginal Citations

32 Supplies of gold etc.E+W+S+N.I.

(1)In section 55 of the Value Added Tax Act 1994 (supplies of gold), for paragraph (a) of subsection (5) there shall be substituted the following paragraph—

(a)any supply of goods consisting in fine gold, in gold grain of any purity or in gold coins of any purity; or.

(2)This section applies in relation to any supply after 28th November 1995.

33 Small gifts.E+W+S+N.I.

(1)In Schedule 4 to the M40Value Added Tax Act 1994 (matters to be treated as supply of goods or services), in paragraph 5(2)(a) (gift of goods in the course or furtherance of a business not a supply if cost to donor is not more than £10), for “£10” there shall be substituted “ £15 ”.

(2)At the end of paragraph 5 of Schedule 4 to that Act there shall be inserted the following sub-paragraph—

(7)The Treasury may by order substitute for the sum for the time being specified in sub-paragraph (2)(a) above such sum, not being less than £10, as they think fit.

(3)In section 97(4) of that Act (orders which are subject to affirmative procedure), after paragraph (a) there shall be inserted the following paragraph—

(ab)an order under paragraph 5(7) of Schedule 4 substituting a lesser sum for the sum for the time being specified in paragraph 5(2)(a) of that Schedule;.

(4)Subsection (1) above shall apply where a gift is made after 28th November 1995.

Annotations:

Marginal Citations

Payment and enforcementE+W+S+N.I.

34 Method of making payments on account.E+W+S+N.I.

In section 28 of the M41Value Added Tax Act 1994 (payments on account of VAT), after subsection (2) there shall be inserted the following subsection—

(2A)The Commissioners may give directions, to persons who are or may become liable by virtue of any order under this section to make payments on account of VAT, about the manner in which they are to make such payments; and where such a direction has been given to any person and has not subsequently been withdrawn, any duty of that person by virtue of such an order to make such a payment shall have effect as if it included a requirement for the payment to be made in the manner directed.

Annotations:

Marginal Citations

35 Default surcharges.E+W+S+N.I.

(1)The Value Added Tax Act 1994 shall be amended as follows.

(2)After section 59 (default surcharge) there shall be inserted the following section—

59A Default surcharge: payments on account.

(1)For the purposes of this section a taxable person shall be regarded as in default in respect of any prescribed accounting period if the period is one in respect of which he is required, by virtue of an order under section 28, to make any payment on account of VAT and either—

(a)a payment which he is so required to make in respect of that period has not been received in full by the Commissioners by the day on which it became due; or

(b)he would, but for section 59(1A), be in default in respect of that period for the purposes of section 59.

(2)Subject to subsections (10) and (11) below, subsection (4) below applies in any case where—

(a)a taxable person is in default in respect of a prescribed accounting period; and

(b)the Commissioners serve notice on the taxable person (a “surcharge liability notice”) specifying as a surcharge period for the purposes of this section a period which—

(i)begins, subject to subsection (3) below, on the date of the notice; and

(ii)ends on the first anniversary of the last day of the period referred to in paragraph (a) above.

(3)If—

(a)a surcharge liability notice is served by reason of a default in respect of a prescribed accounting period, and

(b)that period ends at or before the expiry of an existing surcharge period already notified to the taxable person concerned,

the surcharge period specified in that notice shall be expressed as a continuation of the existing surcharge period; and, accordingly, the existing period and its extension shall be regarded as a single surcharge period.

(4)Subject to subsections (7) to (11) below, if—

(a)a taxable person on whom a surcharge liability notice has been served is in default in respect of a prescribed accounting period,

(b)that prescribed accounting period is one ending within the surcharge period specified in (or extended by) that notice, and

(c)the aggregate value of his defaults in respect of that prescribed accounting period is more than nil,

that person shall be liable to a surcharge equal to whichever is the greater of £30 and the specified percentage of the aggregate value of his defaults in respect of that prescribed accounting period.

(5)Subject to subsections (7) to (11) below, the specified percentage referred to in subsection (4) above shall be determined in relation to a prescribed accounting period by reference to the number of such periods during the surcharge period which are periods in respect of which the taxable person is in default and in respect of which the value of his defaults is more than nil, so that—

(a)in relation to the first such prescribed accounting period, the specified percentage is 2 per cent.;

(b)in relation to the second such period, the specified percentage is 5 per cent.;

(c)in relation to the third such period, the specified percentage is 10 per cent.; and

(d)in relation to each such period after the third, the specified percentage is 15 per cent.

(6)For the purposes of this section the aggregate value of a person’s defaults in respect of a prescribed accounting period shall be calculated as follows—

(a)where the whole or any part of a payment in respect of that period on account of VAT was not received by the Commissioners by the day on which it became due, an amount equal to that payment or, as the case may be, to that part of it shall be taken to be the value of the default relating to that payment;

(b)if there is more than one default with a value given by paragraph (a) above, those values shall be aggregated;

(c)the total given by paragraph (b) above, or (where there is only one default) the value of the default under paragraph (a) above, shall be taken to be the value for that period of that person’s defaults on payments on account;

(d)the value of any default by that person which is a default falling within subsection (1)(b) above shall be taken to be equal to the amount of any outstanding VAT less the amount of unpaid payments on account; and

(e)the aggregate value of a person’s defaults in respect of that period shall be taken to be the aggregate of—

(i)the value for that period of that person’s defaults (if any) on payments on account; and

(ii)the value of any default of his in respect of that period that falls within subsection (1)(b) above.

(7)In the application of subsection (6) above for the calculation of the aggregate value of a person’s defaults in respect of a prescribed accounting period—

(a)the amount of outstanding VAT referred to in paragraph (d) of that subsection is the amount (if any) which would be the amount of that person’s outstanding VAT for that period for the purposes of section 59(4); and

(b)the amount of unpaid payments on account referred to in that paragraph is the amount (if any) equal to so much of any payments on account of VAT (being payments in respect of that period) as has not been received by the Commissioners by the last day on which that person is required (as mentioned in section 59(1)) to make a return for that period.

(8)If a person who, apart from this subsection, would be liable to a surcharge under subsection (4) above satisfies the Commissioners or, on appeal, a tribunal—

(a)in the case of a default that is material for the purposes of the surcharge and falls within subsection (1)(a) above—

(i)that the payment on account of VAT was despatched at such a time and in such a manner that it was reasonable to expect that it would be received by the Commissioners by the day on which it became due, or

(ii)that there is a reasonable excuse for the payment not having been so despatched,

or

(b)in the case of a default that is material for the purposes of the surcharge and falls within subsection (1)(b) above, that the condition specified in section 59(7)(a) or (b) is satisfied as respects the default,

he shall not be liable to the surcharge and for the purposes of the preceding provisions of this section he shall be treated as not having been in default in respect of the prescribed accounting period in question (and, accordingly, any surcharge liability notice the service of which depended upon that default shall be deemed not to have been served).

(9)For the purposes of subsection (8) above, a default is material to a surcharge if—

(a)it is the default which, by virtue of subsection (4) above, gives rise to the surcharge; or

(b)it is a default which was taken into account in the service of the surcharge liability notice upon which the surcharge depends and the person concerned has not previously been liable to a surcharge in respect of a prescribed accounting period ending within the surcharge period specified in or extended by that notice.

(10)In any case where—

(a)the conduct by virtue of which a person is in default in respect of a prescribed accounting period is also conduct falling within section 69(1), and

(b)by reason of that conduct, the person concerned is assessed to a penalty under section 69,

the default shall be left out of account for the purposes of subsections (2) to (5) above.

(11)If the Commissioners, after consultation with the Treasury, so direct, a default in respect of a prescribed accounting period specified in the direction shall be left out of account for the purposes of subsections (2) to (5) above.

(12)For the purposes of this section the Commissioners shall be taken not to receive a payment by the day on which it becomes due unless it is made in such a manner as secures (in a case where the payment is made otherwise than in cash) that, by the last day for the payment of that amount, all the transactions can be completed that need to be completed before the whole amount of the payment becomes available to the Commissioners.

(13)In determining for the purposes of this section whether any person would, but for section 59(1A), be in default in respect of any period for the purposes of section 59, subsection (12) above shall be deemed to apply for the purposes of section 59 as it applies for the purposes of this section.

(14)For the purposes of this section references to a thing’s being done by any day include references to its being done on that day.

(3)In section 59, at the beginning of subsection (1) (circumstances amounting to a default in respect of any prescribed accounting period), there shall be inserted “Subject to subsection (1A) below”; and after that subsection there shall be inserted the following subsection—

(1A)A person shall not be regarded for the purposes of this section as being in default in respect of any prescribed accounting period if that period is one in respect of which he is required by virtue of any order under section 28 to make any payment on account of VAT.

(4)After subsection (10) of that section there shall be inserted the following subsection—

(11)For the purposes of this section references to a thing’s being done by any day include references to its being done on that day.

(5)After the section 59A inserted by subsection (2) above there shall be inserted the following section—

59B Relationship between sections 59 and 59A.

(1)This section applies in each of the following cases, namely—

(a)where a section 28 accounting period ends within a surcharge period begun or extended by the service on a taxable person (whether before or after the coming into force of section 59A) of a surcharge liability notice under section 59; and

(b)where a prescribed accounting period which is not a section 28 accounting period ends within a surcharge period begun or extended by the service on a taxable person of a surcharge liability notice under section 59A.

(2)In a case falling within subsection (1)(a) above section 59A shall have effect as if—

(a)subject to paragraph (b) below, the section 28 accounting period were deemed to be a period ending within a surcharge period begun or, as the case may be, extended by a notice served under section 59A; but

(b)any question—

(i)whether a surcharge period was begun or extended by the notice, or

(ii)whether the taxable person was in default in respect of any prescribed accounting period which was not a section 28 accounting period but ended within the surcharge period begun or extended by that notice,

were to be determined as it would be determined for the purposes of section 59.

(3)In a case falling within subsection (1)(b) above section 59 shall have effect as if—

(a)subject to paragraph (b) below, the prescribed accounting period that is not a section 28 accounting period were deemed to be a period ending within a surcharge period begun or, as the case may be, extended by a notice served under section 59;

(b)any question—

(i)whether a surcharge period was begun or extended by the notice, or

(ii)whether the taxable person was in default in respect of any prescribed accounting period which was a section 28 accounting period but ended within the surcharge period begun or extended by that notice,

were to be determined as it would be determined for the purposes of section 59A; and

(c)that person were to be treated as having had outstanding VAT for a section 28 accounting period in any case where the aggregate value of his defaults in respect of that period was, for the purposes of section 59A, more than nil.

(4)In this section “a section 28 accounting period”, in relation to a taxable person, means any prescribed accounting period ending on or after the day on which the Finance Act 1996 was passed in respect of which that person is liable by virtue of an order under section 28 to make any payment on account of VAT.

(6)In section 69(4)(a) and (9)(b) (disregard in connection with penalties for breach of regulations of conduct giving rise to a surcharge), after the words “section 59”, in each case, there shall be inserted “ or 59A ”.

(7)In section 76(1) and (3)(a) (assessments for surcharges), after the words “section 59”, in each case, there shall be inserted “ or 59A ”.

(8)This section applies in relation to any prescribed accounting period ending on or after 1st June 1996, but a liability to make a payment on account of VAT shall be disregarded for the purposes of the amendments made by this section if the payment is one becoming due before that date.

36 Repeated misdeclaration penalty.E+W+S+N.I.

(1)In section 64 of the M42Value Added Tax Act 1994 (repeated misdeclaration penalty), the following subsections shall be substituted for subsections (6) and (7) (inaccuracies treated as not material)—

(6)Subject to subsection (6A) below, where by reason of conduct falling within subsection (1) above—

(a)a person is convicted of an offence (whether under this Act or otherwise), or

(b)a person is assessed to a penalty under section 60 or 63,

the inaccuracy concerned shall not be regarded as material for the purposes of this section.

(6A)Subsection (6) above shall not prevent an inaccuracy by reason of which a person has been assessed to a penalty under section 63—

(a)from being regarded as a material inaccuracy in respect of which the Commissioners may serve a penalty liability notice under subsection (2) above; or

(b)from being regarded for the purposes of subsection (3) above as a material inaccuracy by reference to which any prescribed accounting period falling within the penalty period is to be treated as the first prescribed accounting period so falling in respect of which there is a material inaccuracy.

(7)Where subsection (5) or (6) above requires any inaccuracy to be regarded as not material for the purposes of the serving of a penalty liability notice, any such notice served in respect of that inaccuracy shall be deemed not to have been served.

(2)This section has effect in relation to inaccuracies contained in returns made on or after the day on which this Act is passed.

Annotations:

Marginal Citations

37 Penalties for failure to notify.E+W+S+N.I.

(1)In section 67 of the M43Value Added Tax Act 1994 (penalty for failure to notify liability to be registered under Schedule 1, etc.)—

(a)in subsection (1)(a), after “6” there shall be inserted “ , 7 ”; and

(b)in subsection (3)(a), for “or 6” there shall be substituted “ , 6 or 7 ”.

(2)Subject to subsection (3) below, subsection (1) above shall apply in relation to—

(a)any person becoming liable to be registered by virtue of sub-paragraph (2) of paragraph 1 of Schedule 1 to the M44Value Added Tax Act 1994 on or after 1st January 1996; and

(b)any person who became liable to be registered by virtue of that sub-paragraph before that date but who had not notified the Commissioners of the liability before that date.

(3)In relation to a person falling within subsection (2)(b) above, section 67 of the Value Added Tax Act 1994 shall have effect as if in subsection (3)(a) for the words “the date with effect from which he is, in accordance with that paragraph, required to be registered” there were substituted “ 1st January 1996 ”.

Annotations:

Marginal Citations

38 VAT invoices and accounting.E+W+S+N.I.

(1)Paragraph 2 of Schedule 11 to the M45Value Added Tax Act 1994 (regulations about accounting for VAT, VAT invoices etc.) shall be amended as follows.

(2)F4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3)In sub-paragraph (10) (adjustments of VAT accounts), at the end of paragraph (c) there shall be inserted and

(d)for a person, for purposes connected with the making of any such entry or financial adjustment, to be required to provide to any prescribed person, or to retain, a document in the prescribed form containing prescribed particulars of the matters to which the entry or adjustment relates; and

(e)for enabling the Commissioners, in such cases as they may think fit, to dispense with or relax a requirement imposed by regulations made by virtue of paragraph (d) above.

Annotations:

Amendments (Textual)

F4S. 38(2) repealed (24.7.2002 with effect in accordance with s. 24(5)(6) of the repealing Act) by Finance Act 2002 (c. 23), s. 141, Sch. 40 Pt. 2(2)

Marginal Citations

Part IIIE+W+S+N.I. Landfill Tax

Annotations:

Modifications etc. (not altering text)

C1Pt. III (ss. 39-71 applied (29.4.1996) by 1986 c. 45, Sch. 6 paras. 3B, 8B (as inserted (29.4.1996) by 1996 c. 8, s. 60, Sch. 5 Pt. III para. 12)

Pt. III (ss. 39-71) applied (31.7.1998) by 1998 c. 36, s. 148(4)

The basic provisionsE+W+S+N.I.

39 Landfill tax.E+W+S+N.I.

(1)A tax, to be known as landfill tax, shall be charged in accordance with this Part.

(2)The tax shall be under the care and management of the Commissioners of Customs and Excise.

40 Charge to tax.E+W+S+N.I.

(1)Tax shall be charged on a taxable disposal.

(2)A disposal is a taxable disposal if—

(a)it is a disposal of material as waste,

(b)it is made by way of landfill,

(c)it is made at a landfill site, and

(d)it is made on or after 1st October 1996.

(3)For this purpose a disposal is made at a landfill site if the land on or under which it is made constitutes or falls within land which is a landfill site at the time of the disposal.

41 Liability to pay tax.E+W+S+N.I.

(1)The person liable to pay tax charged on a taxable disposal is the landfill site operator.

(2)The reference here to the landfill site operator is to the person who is at the time of the disposal the operator of the landfill site which constitutes or contains the land on or under which the disposal is made.

42 Amount of tax.E+W+S+N.I.

(1)The amount of tax charged on a taxable disposal shall be found by taking—

(a)[F5£13] for each whole tonne disposed of and a proportionately reduced sum for any additional part of a tonne, or

(b)a proportionately reduced sum if less than a tonne is disposed of.

(2)Where the material disposed of consists entirely of qualifying material this section applies as if the reference to [F5£13] were to £2.

(3)Qualifying material is material for the time being listed for the purposes of this section in an order.

(4)The Treasury must have regard to the object of securing that material is listed if it is of a kind commonly described as inactive or inert.

Annotations:

Amendments (Textual)

F5Sums in s. 42(1)(a)(2) substituted (24.7.2002 with effect in relation to taxable disposals made, or treated as made, on or after 1.4.2002) by Finance Act 2002 (c. 23), s. 122

ExemptionsE+W+S+N.I.

43 Material removed from water.E+W+S+N.I.

(1)A disposal is not a taxable disposal for the purposes of this Part if it is shown to the satisfaction of the Commissioners that the disposal is of material all of which—

(a)has been removed (by dredging or otherwise) from water falling within subsection (2) below, and

(b)formed part of or projected from the bed of the water concerned before its removal.

(2)Water falls within this subsection if it is—

(a)a river, canal or watercourse (whether natural or artificial), or

(b)a dock or harbour (whether natural or artificial).

(3)A disposal is not a taxable disposal for the purposes of this Part if it is shown to the satisfaction of the Commissioners that the disposal is of material all of which—

(a)has been removed (by dredging or otherwise) from water falling within the approaches to a harbour (whether natural or artificial),

(b)has been removed in the interests of navigation, and

(c)formed part of or projected from the bed of the water concerned before its removal.

(4)A disposal is not a taxable disposal for the purposes of this Part if it is shown to the satisfaction of the Commissioners that the disposal is of material all of which—

(a)consists of naturally occurring mineral material, and

(b)has been removed (by dredging or otherwise) from the sea in the course of commercial operations carried out to obtain substances such as sand or gravel from the seabed.

[F643A Contaminated land.E+W

(1)A disposal is not a taxable disposal for the purposes of this Part if it is a disposal within subsection (2) below.

(2)A disposal is within this subsection if —

(a)it is of material all of which has been removed from land in relation to which a certificate issued under section 43B below was in force at the time of the removal;

(b)none of that material has been removed from a part of the land in relation to which, as at the time of the removal, the qualifying period has expired;

(c)it is a disposal in relation to which any conditions to which the certificate was made subject are satisfied; and

(d)it is not a disposal within subsection (4) below.

(3)For the purpose of subsection (2)(b) above the qualifying period expires, in relation to the part of the land in question —

(a)in the case of a reclamation which qualified under section 43B(7)(a) below, where the object involves the construction of —

(i)a building; or

(ii)a civil engineering work,

when the construction commences;

(b)in any other case of a reclamation which qualified under section 43B(7)(a) below, when pollutants have been cleared to the extent that they no longer prevent the object from being fulfilled; or

(c)in the case of a reclamation which qualified under section 43B(7)(b) below, when pollutants have been cleared to the extent that the potential for harm has been removed.

(4)Subject to subsection (5) below, a disposal is within this subsection if it is of material the removal of any of which is required in order to comply with —

(a)a works notice served under section 46A of the Control of Pollution Act 1974; F7;

(b)an enforcement notice served under section 13 of the Environmental Protection Act 1990; F8

(c)a prohibition notice served under section 14 of the Environmental Protection Act 1990;

(d)an order under section 26 of the Environmental Protection Act 1990;

(e)a remediation notice served under section 78E of the Environmental Protection Act 1990 F9,

(f)an enforcement notice served under section 90B of the Water Resources Act 1991; F10. . .

(g)a works notice served under section 161A of the Water Resources Act 1991. F11

[F12(h)an enforcement notice served under regulation 24 of the Pollution Prevention and Control (England and Wales) Regulations 2000;

(j)a suspension notice served under regulation 25 of those Regulations; or

(k)an order under regulation 35 of those Regulations.]]

(5)A disposal shall not be regarded as falling within subsection (4) above where the removal of the material has been carried out by or on behalf of any of the following bodies:

(a)a local authority;

(b)a development corporation;

(c)the Environment Agency;

(d)the Scottish Environment Protection Agency;

(e)English Partnerships;

(f)Scottish Enterprise;

(g)Highlands and Islands Enterprise;

(h)the Welsh Development Agency.

(6)In this section —

  • “development corporation” means —

    (a)

    in England and Wales, a corporation established under section 135 of the Local Government, Planning and Land Act 1980; F13

    (b)

    in Scotland, a corporation established under section 2 of the New Towns (Scotland) Act 1968; F14

  • “English Partnerships” means the Urban Regeneration Agency established by section 158 of the Leasehold Reform, Housing and Urban Development Act 1993; F15

  • “Highlands and Islands Enterprise” means the body established by section 1(b) of the Enterprise and New Towns (Scotland) Act 1990; F16

  • “land” includes land covered by water;

  • “Scottish Enterprise” means the corporation established by section 1(a) of the Enterprise and New Towns (Scotland) Act 1990; F17

  • “the Welsh Development Agency” means the body established by section 1 of the Welsh Development Agency Act 1975. F18

(7)For the purposes of this section —

(a)the removal of material includes its removal from one part of the land for disposal on another part of the same land;

(b)the clearing of pollutants includes their being cleared from one part of the land for disposal on another part of the same land.

Annotations:

Extent Information

E1This version of this provision extends to England and Wales only; a separate version has been created for Scotland and Northern Ireland only

Amendments (Textual)

F6Ss. 43A, 43B inserted (1.10.1996 with effect as mentioned in 1996 c. 8, s. 57) by S.I. 1996/1529, art. 3

F71974 c.40; section 46A was inserted by section 120 of, and Schedule 22 to, the Environment Act 1995 (c.25).

F91990 c.43; section 78E was inserted by section 57 of the Environment Act 1995.

F10Word in s. 43A(4)(f) omitted (1.8.2000) by virtue of S.I. 2000/1973, reg. 39, Sch. 10 para. 21(a)

F111991 c.57; section 161A was inserted by section 120 of, and Schedule 22 to, the Environment Act 1995.

[F47643A Contaminated land.S+N.I.

(1)A disposal is not a taxable disposal for the purposes of this Part if it is a disposal within subsection (2) below.

(2)A disposal is within this subsection if —

(a)it is of material all of which has been removed from land in relation to which a certificate issued under section 43B below was in force at the time of the removal;

(b)none of that material has been removed from a part of the land in relation to which, as at the time of the removal, the qualifying period has expired;

(c)it is a disposal in relation to which any conditions to which the certificate was made subject are satisfied; and

(d)it is not a disposal within subsection (4) below.

(3)For the purpose of subsection (2)(b) above the qualifying period expires, in relation to the part of the land in question —

(a)in the case of a reclamation which qualified under section 43B(7)(a) below, where the object involves the construction of —

(i)a building; or

(ii)a civil engineering work,

when the construction commences;

(b)in any other case of a reclamation which qualified under section 43B(7)(a) below, when pollutants have been cleared to the extent that they no longer prevent the object from being fulfilled; or

(c)in the case of a reclamation which qualified under section 43B(7)(b) below, when pollutants have been cleared to the extent that the potential for harm has been removed.

(4)Subject to subsection (5) below, a disposal is within this subsection if it is of material the removal of any of which is required in order to comply with —

(a)a works notice served under section 46A of the Control of Pollution Act 1974; F477;

(b)an enforcement notice served under section 13 of the Environmental Protection Act 1990; F478

(c)a prohibition notice served under section 14 of the Environmental Protection Act 1990;

(d)an order under section 26 of the Environmental Protection Act 1990;

(e)a remediation notice served under section 78E of the Environmental Protection Act 1990 F479,

(f)an enforcement notice served under section 90B of the Water Resources Act 1991; F480. . .

(g)a works notice served under section 161A of the Water Resources Act 1991. F481

[F482(h)an enforcement notice served under regulation 19 of the Pollution Prevention and Control (Scotland) Regulations 2000;

(j)a suspension notice served under regulation 20 of those Regulations; or

(k)an order under regulation 33 of those Regulations.]]

(5)A disposal shall not be regarded as falling within subsection (4) above where the removal of the material has been carried out by or on behalf of any of the following bodies:

(a)a local authority;

(b)a development corporation;

(c)the Environment Agency;

(d)the Scottish Environment Protection Agency;

(e)English Partnerships;

(f)Scottish Enterprise;

(g)Highlands and Islands Enterprise;

(h)the Welsh Development Agency.

(6)In this section —

  • “development corporation” means —

    (a)

    in England and Wales, a corporation established under section 135 of the Local Government, Planning and Land Act 1980; F483

    (b)

    in Scotland, a corporation established under section 2 of the New Towns (Scotland) Act 1968; F484

  • “English Partnerships” means the Urban Regeneration Agency established by section 158 of the Leasehold Reform, Housing and Urban Development Act 1993; F485

  • “Highlands and Islands Enterprise” means the body established by section 1(b) of the Enterprise and New Towns (Scotland) Act 1990; F486

  • “land” includes land covered by water;

  • “Scottish Enterprise” means the corporation established by section 1(a) of the Enterprise and New Towns (Scotland) Act 1990; F487

  • “the Welsh Development Agency” means the body established by section 1 of the Welsh Development Agency Act 1975. F488

(7)For the purposes of this section —

(a)the removal of material includes its removal from one part of the land for disposal on another part of the same land;

(b)the clearing of pollutants includes their being cleared from one part of the land for disposal on another part of the same land.

Annotations:

Extent Information

E2This version of this provision extends to Scotland and Northern Ireland only; a separate version has been created for England and Wales only

Amendments (Textual)

F476Ss. 43A, 43B inserted (1.8.1996) by S.I. 1996/1529, art. 3

F4771974 c.40; section 46A was inserted by section 120 of, and Schedule 22 to, the Environment Act 1995 (c.25).

F4791990 c.43; section 78E was inserted by section 57 of the Environment Act 1995.

F480Word in s. 43A(4)(f) omitted (S.) (28.9.2000) by virtue of S.S.I. 2000/323, regs. 1(1), 36, Sch. 10 para. 6(2)(a)

F4811991 c.57; section 161A was inserted by section 120 of, and Schedule 22 to, the Environment Act 1995.

43BF19 Contaminated land: certificates.E+W+S+N.I.

(1)Subject to subsection (2) below, the Commissioners shall issue a certificate in relation to any land where —

(a)an application in writing is made by a person carrying out, or intending to carry out, a reclamation of that land (the applicant);

(b)the applicant provides to them such information as they may direct, whether generally or as regards that particular case;

(c)the application is made not less than 30 days before the date from which the certificate is to take effect; and

(d)the reclamation qualifies under subsection (7) below.

(2)The Commissioners shall not refuse an application for a certificate in a case where the conditions specified in subsection (1)(a) to (d) above are satisfied unless it appears to them —

(a)necessary to do so for the protection of the revenue; or

(b)except where the applicant is one of the bodies mentioned in subsection (5) of section 43A above, that all or part of the reclamation of land to which the application relates is required in order to comply with a notice or order mentioned in subsection (4) of that section.

(3)The Commissioners may make a certificate subject to such conditions set out in the certificate as they think fit, including (but not restricted to) conditions —

(a)that the certificate is to be in force only in relation to a particular quantity of material;

(b)that the certificate is to be in force only in relation to disposals made at a particular landfill site or sites;

(c)that the certificate is to be in force in relation to part only of the land to which the application relates.

(4)A certificate issued under this section —

(a)shall have effect from the date it is issued to the applicant or such later date as the Commissioners may specify in the certificate; and

(b)shall cease to have effect on such date as the Commissioners may set out in the certificate, but in any event no later than the day on which the person to whom the certificate was issued ceases to have the intention to carry out any activity involving reclamation of the land in relation to which the certificate was issued.

(5)Where a certificate has been issued to a person, the Commissioners —

(a)may vary it by issuing a further certificate to that person; or

(b)may withdraw it by giving notice in writing to that person; but this is subject to subsection (6) below.

(6)The Commissioners shall not withdraw a certificate unless it appears to them —

(a)necessary to do so for the protection of the revenue;

(b)that the reclamation did not in fact qualify under subsection (7) below or no longer so qualifies;

(c)that there will not be any or any more disposals within section 43A(2) above of material from the land to which the certificate relates; or

(d)except where the person to whom the certificate was issued is one of the bodies mentioned in subsection (5) of section 43A above, that the removal of material from the land to which the certificate relates is required in order to comply with a notice or order mentioned in subsection (4) of that section.

(7)A reclamation qualifies under this subsection if —

(a)it is, or is to be, carried out with the object of facilitating development, conservation, the provision of a public park or other amenity, or the use of the land for agriculture or forestry; or

(b)in a case other than one within paragraph (a) above, it is, or is to be, carried out with the object of reducing or removing the potential of pollutants to cause harm,

and, in either case, the conditions specified in subsection (8) below are satisfied.

(8)The conditions mentioned in subsection (7) above are —

(a)that the reclamation constitutes or includes clearing the land of pollutants which are causing harm or have the potential for causing harm;

(b)that, in a case within subsection (7)(a) above, those pollutants would (unless cleared) prevent the object concerned being fulfilled; and

(c)that all relevant activities have ceased or have ceased to give rise to any pollutants in relation to that land.

(9)For the purposes of subsection (8) above the clearing of pollutants —

(a)need not be such that all pollutants are removed;

(b)need not be such that pollutants are removed from every part of the land in which they are present;

(c)may involve their being cleared from one part of the land and disposed of on another part of the same land.

(10)For the purposes of subsection (8)(c) above an activity is relevant if —

(a)it has at any time resulted in the presence of pollutants in, on or under the land in question otherwise than —

(i)without the consent of the person who was the occupier of the land at the time, or

(ii)by allowing pollutants to be carried onto the land by air or water, and

(b)at that time it was carried out —

(i)by the applicant or a person connected with him, or

(ii)by any person on the land in question.

(11)For the purposes of subsection (10) above —

(a)any question whether a person is connected with another shall be determined in accordance with section 839 of the Taxes Act 1988; F20

(b)the occupier of land that is not in fact occupied is the person entitled to occupy it.

(12)In this section “land” has the meaning given by section 43A(6) above.

Annotations:

Amendments (Textual)

F19Ss. 43A, 43B, inserted (1.8.1996) by S.I. 1996/1529, art. 3

F20Section 204 of the Finance Act 1996 (c.8) defines "the Taxes Act 1988" as meaning the Income and Corporation Taxes Act 1988 (c.1); section 839 was amended by paragraph 20 of Schedule 17 to the Finance Act 1995 (c.4).

[F2143C Site restoration.E+W+S+N.I.

(1)A disposal is not a taxable disposal for the purposes of this Part if—

(a)the disposal is of material all of which is treated for the purposes of section 42 above as qualifying material,

(b)before the disposal the operator of the landfill site notifies the Commissioners in writing that he is commencing the restoration of all or a part of the site and provides such other written information as the Commissioners may require generally or in the particular case, and

(c)the material is deposited on and used in the restoration of the site or part specified in the notification under paragraph (b) above.

(2)In this section “restoration” means work, other than capping waste, which is required by a relevant instrument to be carried out to restore a landfill site to use on completion of waste disposal operations.

(3)The following are relevant instruments—

(a)a planning consent;

(b)a waste management licence;

(c)resolution authorising the disposal of waste on or in land.]

Annotations:

Amendments (Textual)

F21S. 43C inserted (1.10.1999) by S.I. 1999/2075, art. 2(a)

44 Mining and quarrying.E+W+S+N.I.

(1)A disposal is not a taxable disposal for the purposes of this Part if it is shown to the satisfaction of the Commissioners that the disposal is of material all of which fulfils each of the conditions set out in subsections (2) to (4) below.

(2)The material must result from commercial mining operations (whether the mining is deep or open-cast) or from commercial quarrying operations.

(3)The material must be naturally occurring material extracted from the earth in the course of the operations.

(4)The material must not have been subjected to, or result from, a non-qualifying process carried out at any stage between the extraction and the disposal.

(5)A non-qualifying process is—

(a)a process separate from the mining or quarrying operations, or

(b)a process forming part of those operations and permanently altering the material’s chemical composition.

[F2244A Quarries.E+W+S+N.I.

(1)A disposal is not a taxable disposal for the purposes of this Part if it is—

(a)of material all of which is treated for the purposes of section 42 above as qualifying material,

(b)made at a qualifying landfill site, and

(c)made, or treated as made, on or after 1st October 1999.

(2)A landfill site is a qualifying landfill site for the purposes of this section if at the time of the disposal—

(a)the landfill site is or was a quarry,

(b)subject to subsection (3) below, it is a requirement of planning consent in respect of the land in which the quarry or former quarry is situated that it be wholly or partially refilled, and

(c)subject to subsection (4) below, the licence or, as the case may require, resolution authorising disposals on or in the land comprising the site permits only the disposal of material which comprises qualifying material.

(3)Where a quarry—

(a)was in existence before 1st October 1999, and

(b)quarrying operations ceased before that date,

the requirement referred to in subsection (2)(b) must have been imposed on or before that date.

(4)Where a licence authorising disposals on or in the land does not (apart from the application of this subsection) meet the requirements of subsection (2)(c) above and an application has been made to vary the licence in order to meet them, it shall be deemed to meet them for the period before—

(a)the application is disposed of, or

(b)the second anniversary of the making of the application if it occurs before the application is disposed of.

(5)For the purposes of subsection (4) an application is disposed of if—

(a)it is granted,

(b)it is withdrawn,

(c)it is refused and there is no right of appeal against the refusal,

(d)a time limit for appeal against refusal expires without an appeal having been commenced, or

(e)an appeal against refusal is dismissed or withdrawn and there is no further right of appeal.]

Annotations:

Amendments (Textual)

F22S. 44A inserted (1.10.1999) by S.I. 1999/2075, art. 2(b)

45 Pet cemeteries.E+W+S+N.I.

(1)A disposal is not a taxable disposal for the purposes of this Part if—

(a)the disposal is of material consisting entirely of the remains of dead domestic pets, and

(b)the landfill site at which the disposal is made fulfils the test set out in subsection (2) below.

(2)The test is that during the relevant period—

(a)no landfill disposal was made at the site, or

(b)the only landfill disposals made at the site were of material consisting entirely of the remains of dead domestic pets.

(3)For the purposes of subsection (2) above the relevant period—

(a)begins with 1st October 1996 or (if later) with the coming into force in relation to the site of the licence or resolution mentioned in section 66 below, and

(b)ends immediately before the disposal mentioned in subsection (1) above.

46 Power to vary.E+W+S+N.I.

(1)Provision may be made by order to produce the result that—

(a)a disposal which would otherwise be a taxable disposal (by virtue of this Part as it applies for the time being) is not a taxable disposal;

(b)a disposal which would otherwise not be a taxable disposal (by virtue of this Part as it applies for the time being) is a taxable disposal.

(2)Without prejudice to the generality of subsection (1) above, an order under this section may—

(a)confer exemption by reference to certificates issued by the Commissioners and to conditions set out in certificates;

(b)allow the Commissioners to direct requirements to be met before certificates can be issued;

(c)provide for the review of decisions about certificates and for appeals relating to decisions on review.

(3)Provision may be made under this section in such way as the Treasury think fit (whether by amending this Part or otherwise).

AdministrationE+W+S+N.I.

47 Registration.E+W+S+N.I.

(1)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.

(2)A person who—

(a)carries out taxable activities, and

(b)is not registered,

is liable to be registered.

(3)Where—

(a)a person at any time forms the intention of carrying out taxable activities, and

(b)he is not registered,

he shall notify the Commissioners of his intention.

(4)A person who at any time ceases to have the intention of carrying out taxable activities shall notify the Commissioners of that fact.

(5)Where a person is liable to be registered by virtue of subsection (2) above the Commissioners shall register him with effect from the time when he begins to carry out taxable activities; and this subsection applies whether or not he notifies the Commissioners under subsection (3) above.

(6)Where the Commissioners are satisfied that a person has ceased to carry out taxable activities they may cancel his registration with effect from the earliest practicable time after he so ceased; and this subsection applies whether or not he notifies the Commissioners under subsection (4) above.

(7)Where—

(a)a person notifies the Commissioners under subsection (4) above,

(b)they are satisfied that he will not carry out taxable activities,

(c)they are satisfied that no tax which he is liable to pay is unpaid,

(d)they are satisfied that no credit to which he is entitled under regulations made under section 51 below is outstanding, and

(e)subsection (8) below does not apply,

the Commissioners shall cancel his registration with effect from the earliest practicable time after he ceases to carry out taxable activities.

(8)Where—

(a)a person notifies the Commissioners under subsection (4) above, and

(b)they are satisfied that he has not carried out, and will not carry out, taxable activities,

the Commissioners shall cancel his registration with effect from the time when he ceased to have the intention to carry out taxable activities.

(9)For the purposes of this section 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 any notification is to be made and as to the information to be contained in or provided with it;

(c)requiring a person who has made a notification to notify the Commissioners if any information contained in or provided in connection with it is or becomes inaccurate;

(d)as to the correction of entries in the register.

(10)References in this Part to a registrable person are to a person who—

(a)is registered under this section, or

(b)is liable to be registered under this section.

48 Information required to keep register up to date.E+W+S+N.I.

(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 47 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.

49 Accounting for tax and time for payment.E+W+S+N.I.

Regulations may provide that a registrable person shall—

(a)account for tax by reference to such periods (accounting periods) as may be determined by or under the regulations;

(b)make, in relation to accounting periods, returns in such form as may be prescribed and at such times as may be so determined;

(c)pay tax at such times and in such manner as may be so determined.

50 Power to assess.E+W+S+N.I.

(1)Where—

(a)a person has failed to make any returns required to be made under this Part,

(b)a person has failed to keep any documents necessary to verify returns required to be made under this Part,

(c)a person has failed to afford the facilities necessary to verify returns required to be made under this Part, or

(d)it appears to the Commissioners that returns required to be made by a person under this Part are incomplete or incorrect,

the Commissioners may assess the amount of tax due from the person concerned to the best of their judgment and notify it to him.

(2)Where a person has for an accounting period been paid an amount to which he purports to be entitled under regulations made under section 51 below, then, to the extent that the amount ought not to have been paid or would not have been paid had the facts been known or been as they later turn out to be, the Commissioners may assess the amount as being tax due from him for that period and notify it to him accordingly.

(3)Where a person is assessed under subsections (1) and (2) above in respect of the same accounting period the assessments may be combined and notified to him as one assessment.

(4)Where the person failing to make a return, or making a return which appears to the Commissioners to be incomplete or incorrect, was required to make the return as a personal representative, trustee in bankruptcy, receiver, liquidator or person otherwise acting in a representative capacity in relation to another person, subsection (1) above shall apply as if the reference to tax due from him included a reference to tax due from that other person.

(5)An assessment under subsection (1) or (2) above of an amount of tax due for an accounting period shall not be made after the later of the following—

(a)two years after the end of the accounting period;

(b)one year after evidence of facts, sufficient in the Commissioners’ opinion to justify the making of the assessment, comes to their knowledge;

but where further such evidence comes to their knowledge after the making of an assessment under subsection (1) or (2) above another assessment may be made under the subsection concerned in addition to any earlier assessment.

(6)Where—

(a)as a result of a person’s failure to make a return in relation to an accounting period the Commissioners have made an assessment under subsection (1) above for that period,

(b)the tax assessed has been paid but no proper return has been made in relation to the period to which the assessment related, and

(c)as a result of a failure to make a return in relation to a later accounting period, being a failure by the person referred to in paragraph (a) above or a person acting in a representative capacity in relation to him, as mentioned in subsection (4) above, the Commissioners find it necessary to make another assessment under subsection (1) above,

then, if the Commissioners think fit, having regard to the failure referred to in paragraph (a) above, they may specify in the assessment referred to in paragraph (c) above an amount of tax greater than that which they would otherwise have considered to be appropriate.

(7)Where an amount has been assessed and notified to any person under subsection (1) or (2) above it shall be deemed to be an amount of tax due from him and may be recovered accordingly unless, or except to the extent that, the assessment has subsequently been withdrawn or reduced.

(8)For the purposes of this section notification to—

(a)a personal representative, trustee in bankruptcy, receiver or liquidator, or

(b)a person otherwise acting in a representative capacity in relation to another person,

shall be treated as notification to the person in relation to whom the person mentioned in paragraph (a) above, or the first person mentioned in paragraph (b) above, acts.

(9)Subsection (5) above has effect subject to paragraph 33 of Schedule 5 to this Act.

(10)In this section “trustee in bankruptcy” means, as respects Scotland, an interim or permanent trustee (within the meaning of the M46Bankruptcy (Scotland) Act 1985) or a trustee acting under a trust deed (within the meaning of that Act).

Annotations:

Marginal Citations

CreditE+W+S+N.I.

51 Credit: general.E+W+S+N.I.

(1)Regulations may provide that where—

(a)a person has paid or is liable to pay tax, and

(b)prescribed conditions are fulfilled,

the person shall be entitled to credit of such an amount as is found in accordance with prescribed rules.

(2)Regulations may make provision as to the manner in which a person is to benefit from credit, and in particular may make provision—

(a)that a person shall be entitled to credit by reference to accounting periods;

(b)that a person shall be entitled to deduct an amount equal to his total credit for an accounting period from the total amount of tax due from him for the period;

(c)that if no tax is due from a person for an accounting period but he is entitled to credit for the period, the amount of the credit shall be paid to him by the Commissioners;

(d)that if the amount of credit to which a person is entitled for an accounting period exceeds the amount of tax due from him for the period, an amount equal to the excess shall be paid to him by the Commissioners;

(e)for the whole or part of any credit to be held over to be credited for a subsequent accounting period;

(f)as to the manner in which a person who has ceased to be registrable is to benefit from credit.

(3)Regulations under subsection (2)(c) or (d) above may provide that where at the end of an accounting period an amount is due to a person who has failed to submit returns for an earlier period as required by this Part, the Commissioners may withhold payment of the amount until he has complied with that requirement.

(4)Regulations under subsection (2)(e) above may provide for credit to be held over either on the person’s application or in accordance with directions given by the Commissioners from time to time; and the regulations may allow directions to be given generally or with regard to particular cases.

(5)Regulations may provide that—

(a)no benefit shall be conferred in respect of credit except on a claim made in such manner and at such time as may be determined by or under regulations;

(b)payment in respect of credit shall be made subject to such conditions (if any) as the Commissioners think fit to impose, including conditions as to repayment in specified circumstances;

(c)deduction in respect of credit shall be made subject to such conditions (if any) as the Commissioners think fit to impose, including conditions as to the payment to the Commissioners, in specified circumstances, of an amount representing the whole or part of the amount deducted.

(6)Regulations may require a claim by a person to be made in a return required by provision made under section 49 above.

(7)Nothing in section 52 or 53 below shall be taken to derogate from the power to make regulations under this section (whether with regard to bad debts, the environment or any other matter).

52 Bad debts.E+W+S+N.I.

(1)Regulations may be made under section 51 above with a view to securing that a person is entitled to credit if—

(a)he carries out a taxable activity as a result of which he becomes entitled to a debt which turns out to be bad (in whole or in part), and

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

(2)The regulations may include provision under section 51(5)(b) or (c) above requiring repayment or payment if it turns out that it was not justified to regard a debt as bad (or to regard it as bad to the extent that it was so regarded).

(3)The regulations may include provision for determining whether, and to what extent, a debt is to be taken to be bad.

53 Bodies concerned with the environment.E+W+S+N.I.

(1)Regulations may be made under section 51 above with a view to securing that a person is entitled to credit if—

(a)he pays a sum to a body whose objects are or include the protection of the environment, and

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

(2)The regulations may in particular prescribe conditions—

(a)requiring bodies to which sums are paid (environmental bodies) to be approved by another body (the regulatory body);

(b)requiring the regulatory body to be approved by the Commissioners;

(c)requiring sums to be paid with the intention that they be expended on such matters connected with the protection of the environment as may be prescribed.

(3)The regulations may include provision under section 51(5)(b) or (c) above requiring repayment or payment if—

(a)a sum is not in fact expended on matters prescribed under subsection (2)(c) above, or

(b)a prescribed condition turns out not to have been fulfilled.

(4)The regulations may include—

(a)provision for determining the amount of credit (including provision for limiting it);

(b)provision that matters connected with the protection of the environment include such matters as overheads (including administration) of environmental bodies and the regulatory body;

(c)provision as to the matters by reference to which an environmental body or the regulatory body can be, and remain, approved (including matters relating to the functions and activities of any such body);

(d)provision allowing approval of an environmental body or the regulatory body to be withdrawn (whether prospectively or retrospectively);

(e)provision that, if approval of the regulatory body is withdrawn, another body may be approved in its place or its functions may be performed by the Commissioners;

(f)provision allowing the Commissioners to disclose to the regulatory body information which relates to the tax affairs of persons carrying out taxable activities and which is relevant to the credit scheme established by the regulations.

Review and appealE+W+S+N.I.

54 Review of Commissioners’ decisions.E+W+S+N.I.

(1)This section applies to the following decisions of the Commissioners—

(a)a decision as to the registration or cancellation of registration of any person under this Part;

(b)a decision as to whether tax is chargeable in respect of a disposal or as to how much tax is chargeable;

[F23(ba)a decision to refuse an application for a certificate under section 43B above, or to withdraw such a certificate;

F23(bb)a decision to make a certificate issued under section 43B above subject to a condition that it is to be in force in relation to part only of the land to which the application for the certificate related;]

(c)a decision as to whether a person is entitled to credit by virtue of regulations under section 51 above or as to how much credit a person is entitled to or as to the manner in which he is to benefit from credit;

(d)a decision as to an assessment falling within subsection (2) below or as to the amount of such an assessment;

(e)a decision to refuse a request under section 58(3) below;

(f)a decision to refuse an application under section 59 below;

(g)a decision as to whether conditions set out in a specification under the authority of provision made under section 68(4)(b) below are met in relation to a disposal;

(h)a decision to give a direction under any provision contained in regulations by virtue of section 68(5) below;

(i)a decision as to a claim for the repayment of an amount under paragraph 14 of Schedule 5 to this Act;

(j)a decision as to liability to a penalty under Part V of that Schedule or as to the amount of such a penalty;

(k)a decision under paragraph 19 of that Schedule (as mentioned in paragraph 19(5));

(l)a decision as to any liability to pay interest under paragraph 26 or 27 of that Schedule or as to the amount of the interest payable;

(m)a decision as to any liability to pay interest under paragraph 29 of that Schedule or as to the amount of the interest payable;

(n)a decision to require any security under paragraph 31 of that Schedule or as to its amount;

(o)a decision as to the amount of any penalty or interest specified in an assessment under paragraph 32 of that Schedule.

(2)An assessment falls within this subsection if it is an assessment under section 50 above in respect of an accounting period in relation to which a return required to be made by virtue of regulations under section 49 above has been made.

(3)Any person who is or will be affected by any decision to which this section applies may by notice in writing to the Commissioners require them to review the decision.

(4)The Commissioners shall not be required under this section to review any decision unless the notice requiring the review is given before the end of the period of 45 days beginning with the day on which written notification of the decision, or of the assessment containing the decision, was first given to the person requiring the review.

(5)For the purposes of subsection (4) above it shall be the duty of the Commissioners to give written notification of any decision to which this section applies to any person who—

(a)requests such a notification,

(b)has not previously been given written notification of that decision, and

(c)if given such a notification, will be entitled to require a review of the decision under this section.

(6)A person shall be entitled to give a notice under this section requiring a decision to be reviewed for a second or subsequent time only if—

(a)the grounds on which he requires the further review are that the Commissioners did not, on any previous review, have the opportunity to consider certain facts or other matters, and

(b)he does not, on the further review, require the Commissioners to consider any facts or matters which were considered on a previous review except in so far as they are relevant to any issue not previously considered.

(7)Where the Commissioners are required in accordance with this section to review any decision it shall be their duty to do so; and on the review they may withdraw, vary or confirm the decision.

(8)Where—

(a)it is the duty under this section of the Commissioners to review any decision, and

(b)they do not, within the period of 45 days beginning with the day on which the review was required, give notice to the person requiring it of their determination on the review,

they shall be deemed for the purposes of this Part to have confirmed the decision.

Annotations:

Amendments (Textual)

F23S. 54(1)(ba)(bb) inserted (1.10.1996 with effect as mentioned in s. 57 of this Act) by S.I. 1996/1529, arts. 1, 4

Modifications etc. (not altering text)

Commencement Information

I5S. 54 in force by 1.10.1996 at the latest see s. 57

54 Review of Commissioners’ decisions.E+W+S+N.I.

(1)This section applies to the following decisions of the Commissioners—

(a)a decision as to the registration or cancellation of registration of any person under this Part;

(b)a decision as to whether tax is chargeable in respect of a disposal or as to how much tax is chargeable;

(c)a decision as to whether a person is entitled to credit by virtue of regulations under section 51 above or as to how much credit a person is entitled to or as to the manner in which he is to benefit from credit;

(d)a decision as to an assessment falling within subsection (2) below or as to the amount of such an assessment;

(e)a decision to refuse a request under section 58(3) below;

(f)a decision to refuse an application under section 59 below;

(g)a decision as to whether conditions set out in a specification under the authority of provision made under section 68(4)(b) below are met in relation to a disposal;

(h)a decision to give a direction under any provision contained in regulations by virtue of section 68(5) below;

(i)a decision as to a claim for the repayment of an amount under paragraph 14 of Schedule 5 to this Act;

(j)a decision as to liability to a penalty under Part V of that Schedule or as to the amount of such a penalty;

(k)a decision under paragraph 19 of that Schedule (as mentioned in paragraph 19(5));

(l)a decision as to any liability to pay interest under paragraph 26 or 27 of that Schedule or as to the amount of the interest payable;

(m)a decision as to any liability to pay interest under paragraph 29 of that Schedule or as to the amount of the interest payable;

(n)a decision to require any security under paragraph 31 of that Schedule or as to its amount;

(o)a decision as to the amount of any penalty or interest specified in an assessment under paragraph 32 of that Schedule.

(2)An assessment falls within this subsection if it is an assessment under section 50 above in respect of an accounting period in relation to which a return required to be made by virtue of regulations under section 49 above has been made.

(3)Any person who is or will be affected by any decision to which this section applies may by notice in writing to the Commissioners require them to review the decision.

(4)The Commissioners shall not be required under this section to review any decision unless the notice requiring the review is given before the end of the period of 45 days beginning with the day on which written notification of the decision, or of the assessment containing the decision, was first given to the person requiring the review.

(5)For the purposes of subsection (4) above it shall be the duty of the Commissioners to give written notification of any decision to which this section applies to any person who—

(a)requests such a notification,

(b)has not previously been given written notification of that decision, and

(c)if given such a notification, will be entitled to require a review of the decision under this section.

(6)A person shall be entitled to give a notice under this section requiring a decision to be reviewed for a second or subsequent time only if—

(a)the grounds on which he requires the further review are that the Commissioners did not, on any previous review, have the opportunity to consider certain facts or other matters, and

(b)he does not, on the further review, require the Commissioners to consider any facts or matters which were considered on a previous review except in so far as they are relevant to any issue not previously considered.

(7)Where the Commissioners are required in accordance with this section to review any decision it shall be their duty to do so; and on the review they may withdraw, vary or confirm the decision.

(8)Where—

(a)it is the duty under this section of the Commissioners to review any decision, and

(b)they do not, within the period of 45 days beginning with the day on which the review was required, give notice to the person requiring it of their determination on the review,

they shall be deemed for the purposes of this Part to have confirmed the decision.

Annotations:

Commencement Information

I27S. 54 in force by 1.10.1996 at the latest see s. 57

55 Appeals: general.E+W+S+N.I.

(1)Subject to the following provisions of this section, an appeal shall lie to an appeal tribunal with respect to any of the following decisions—

(a)any decision by the Commissioners on a review under section 54 above (including a deemed confirmation under subsection (8) of that section);

(b)any decision by the Commissioners on such review of a decision referred to in section 54(1) above as the Commissioners have agreed to undertake in consequence of a request made after the end of the period mentioned in section 54(4) above.

(2)Where an appeal is made under this section by a person who is required to make returns by virtue of regulations under section 49 above, the appeal shall not be entertained unless the appellant—

(a)has made all the returns which he is required to make by virtue of those regulations, and

(b)has paid the amounts shown in those returns as payable by him.

(3)Where an appeal is made under this section with respect to a decision falling within section 54(1)(b) or (d) above the appeal shall not be entertained unless—

(a)the amount which the Commissioners have determined to be payable as tax has been paid or deposited with them, or

(b)on being satisfied that the appellant would otherwise suffer hardship the Commissioners agree or the tribunal decides that it should be entertained notwithstanding that that amount has not been so paid or deposited.

(4)On an appeal under this section against an assessment to a penalty under paragraph 18 of Schedule 5 to this Act, the burden of proof as to the matters specified in paragraphs (a) and (b) of sub-paragraph (1) of paragraph 18 shall lie upon the Commissioners.

Annotations:

Modifications etc. (not altering text)

Commencement Information

I6S. 55 in force by 1.10.1993 at the latest see s. 57.

56 Appeals: other provisions.E+W+S+N.I.

(1)Subsection (2) below applies where the Commissioners make a decision falling within section 54(1)(d) above and on a review of it there is a further decision with respect to which an appeal is made under section 55 above; and the reference here to a further decision includes a reference to a deemed confirmation under section 54(8) above.

(2)Where on the appeal—

(a)it is found that the amount specified in the assessment is less than it ought to have been, and

(b)the tribunal gives a direction specifying the correct amount,

the assessment shall have effect as an assessment of the amount specified in the direction and that amount shall be deemed to have been notified to the appellant.

(3)Where on an appeal under section 55 above it is found that the whole or part of any amount paid or deposited in pursuance of section 55(3) above is not due, so much of that amount as is found not to be due shall be repaid with interest at such rate as the tribunal may determine.

(4)Where on an appeal under section 55 above it is found that the whole or part of any amount due to the appellant by virtue of regulations under section 51(2)(c) or (d) or (f) above has not been paid, so much of that amount as is found not to have been paid shall be paid with interest at such rate as the tribunal may determine.

(5)Where an appeal under section 55 above has been entertained notwithstanding that an amount determined by the Commissioners to be payable as tax has not been paid or deposited and it is found on the appeal that that amount is due the tribunal may, if it thinks fit, direct that that amount shall be paid with interest at such rate as may be specified in the direction.

(6)Without prejudice to paragraph 25 of Schedule 5 to this Act, nothing in section 55 above shall be taken to confer on a tribunal any power to vary an amount assessed by way of penalty except in so far as it is necessary to reduce it to the amount which is appropriate under paragraphs 18 to 24 of that Schedule.

(7)Without prejudice to paragraph 28 of Schedule 5 to this Act, nothing in section 55 above shall be taken to confer on a tribunal any power to vary an amount assessed by way of interest except in so far as it is necessary to reduce it to the amount which is appropriate under paragraph 26 or 27 of that Schedule.

(8)Sections 85 and 87 of the M47Value Added Tax Act 1994 (settling of appeals by agreement and enforcement of certain decisions of tribunal) shall have effect as if—

(a)the references to section 83 of that Act included references to section 55 above, and

(b)the references to value added tax included references to landfill tax.

Annotations:

Modifications etc. (not altering text)

Commencement Information

I7S. 56 in force by 1.10.1996 at the latest see s. 57.

Marginal Citations

57 Review and appeal: commencement.E+W+S+N.I.

Sections 54 to 56 above shall come into force on—

(a)1st October 1996, or

(b)such earlier day as may be appointed by order.

MiscellaneousE+W+S+N.I.

58 Partnership, bankruptcy, transfer of business, etc.E+W+S+N.I.

(1)As regards any case where a business is carried on in partnership or by another unincorporated body, regulations may make provision for determining by what persons anything required by this Part to be done by a person is to be done.

(2)The registration under this Part of an unincorporated body other than a partnership may be in the name of the body concerned; and in determining whether taxable activities are carried out by such a body no account shall be taken of any change in its members.

(3)The registration under this Part of a body corporate carrying on a business in several divisions may, if the body corporate so requests and the Commissioners see fit, be in the names of those divisions.

(4)As regards any case where a person carries on a business of a person who has died or become bankrupt or incapacitated or whose estate has been sequestrated, or of a person which is in liquidation or receivership or in relation to which an administration order is in force, regulations may—

(a)require the first-mentioned person to inform the Commissioners of the fact that he is carrying on the business and of the event that has led to his carrying it on;

(b)make provision allowing the person to be treated for a limited time as if he were the other person;

(c)make provision for securing continuity in the application of this Part where a person is so treated.

(5)Regulations may make provision for securing continuity in the application of this Part in cases where a business carried on by a person is transferred to another person as a going concern.

(6)Regulations under subsection (5) above may in particular—

(a)require the transferor to inform the Commissioners of the transfer;

(b)provide for liabilities and duties under this Part of the transferor to become, to such extent as may be provided by the regulations, liabilities and duties of the transferee;

(c)provide for any right of either of them to repayment or credit in respect of tax to be satisfied by making a repayment or allowing a credit to the other;

but the regulations may provide that no such provision as is mentioned in paragraph (b) or (c) of this subsection shall have effect in relation to any transferor and transferee unless an application in that behalf has been made by them under the regulations.

59 Groups of companies.E+W+S+N.I.

(1)Where under the following provisions of this section any bodies corporate are treated as members of a group, for the purposes of this Part—

(a)any liability of a member of the group to pay tax shall be taken to be a liability of the representative member;

(b)the representative member shall be taken to carry out any taxable activities which a member of the group would carry out (apart from this section) by virtue of section 69 below;

(c)all members of the group shall be jointly and severally liable for any tax due from the representative member.

(2)Two or more bodies corporate are eligible to be treated as members of a group if the condition mentioned in subsection (3) below is fulfilled and—

(a)one of them controls each of the others,

(b)one person (whether a body corporate or an individual) controls all of them, or

(c)two or more individuals carrying on a business in partnership control all of them.

(3)The condition is that the prospective representative member has an established place of business in the United Kingdom.

(4)Where an application to that effect is made to the Commissioners with respect to two or more bodies corporate eligible to be treated as members of a group, then—

(a)from the beginning of an accounting period they shall be so treated, and

(b)one of them shall be the representative member,

unless the Commissioners refuse the application; and the Commissioners shall not refuse the application unless it appears to them necessary to do so for the protection of the revenue.

(5)Where any bodies corporate are treated as members of a group and an application to that effect is made to the Commissioners, then, from the beginning of an accounting period—

(a)a further body eligible to be so treated shall be included among the bodies so treated,

(b)a body corporate shall be excluded from the bodies so treated,

(c)another member of the group shall be substituted as the representative member, or

(d)the bodies corporate shall no longer be treated as members of a group,

unless the application is to the effect mentioned in paragraph (a) or (c) above and the Commissioners refuse the application.

(6)The Commissioners may refuse an application under subsection (5)(a) or (c) above only if it appears to them necessary to do so for the protection of the revenue.

(7)Where a body corporate is treated as a member of a group as being controlled by any person and it appears to the Commissioners that it has ceased to be so controlled, they shall, by notice given to that person, terminate that treatment from such date as may be specified in the notice.

(8)An application under this section with respect to any bodies corporate must be made by one of those bodies or by the person controlling them and must be made not less than 90 days before the date from which it is to take effect, or at such later time as the Commissioners may allow.

(9)For the purposes of this section a body corporate shall be taken to control another body corporate if it is empowered by statute to control that body’s activities or if it is that body’s holding company within the meaning of section 736 of the M48Companies Act 1985; and an individual or individuals shall be taken to control a body corporate if he or they, were he or they a company, would be that body’s holding company within the meaning of that section.

Annotations:

Marginal Citations

60[F24Information, powers, penalties, secondary liability, etc.]E+W+S+N.I.

Schedule 5 to this Act (which contains provisions relating to information, powers, penalties [F25, secondary liability] and other matters) shall have effect.

Annotations:

Amendments (Textual)

F24Sidenote to s. 60 substituted (28.7.2000) by virtue of 2000 c. 17, s. 142(2)

F25Words in s. 60 inserted (28.7.2000) by 2000 c. 17, s. 142(1)

61 Taxable disposals: special provisions.E+W+S+N.I.

(1)Where—

(a)a taxable disposal is in fact made on a particular day,

(b)within the period of 14 days beginning with that day the person liable to pay tax in respect of the disposal issues a landfill invoice in respect of the disposal, and

(c)he has not notified the Commissioners in writing that he elects not to avail himself of this subsection,

for the purposes of this Part the disposal shall be treated as made at the time the invoice is issued.

(2)The reference in subsection (1) above to a landfill invoice is to a document containing such particulars as regulations may prescribe for the purposes of that subsection.

(3)The Commissioners may at the request of a person direct that subsection (1) above shall apply—

(a)in relation to disposals in respect of which he is liable to pay tax, or

(b)in relation to such of them as may be specified in the direction,

as if for the period of 14 days there were substituted such longer period as may be specified in the direction.

62 Taxable disposals: regulations.E+W+S+N.I.

(1)For the purposes of this Part, regulations may make provision under this section in relation to a disposal which is a taxable disposal (or would be apart from the regulations).

(2)The regulations may provide that if particular conditions are fulfilled—

(a)the disposal shall be treated as not being a taxable disposal, or

(b)the disposal shall, to the extent found in accordance with prescribed rules, be treated as not being a taxable disposal.

(3)The regulations may provide that if particular conditions are fulfilled—

(a)the disposal shall be treated as made at a time which is found in accordance with prescribed rules and which falls after the time when it would be regarded as made apart from the regulations, or

(b)the disposal shall, to the extent found in accordance with prescribed rules, be treated as made at a time which is found in accordance with prescribed rules and which falls after the time when it would be regarded as made apart from the regulations.

(4)In finding the time when the disposal would be regarded as made apart from the regulations, section 61(1) above and any direction under section 61(3) above shall be taken into account.

(5)The regulations may be framed by reference to—

(a)conditions specified in the regulations or by the Commissioners or by an authorised person, or

(b)any combination of such conditions;

and the regulations may specify conditions, or allow conditions to be specified, generally or with regard to particular cases.

(6)The regulations may make provision under subsections (2)(b) and (3)(b) above in relation to the same disposal.

(7)The regulations may only provide that a disposal is to be treated as not being a taxable disposal if or to the extent that—

[F26(a)the material comprised in the disposal is held temporarily pending one or more of the following—

(i)the incineration or recycling of the material, or

(ii)the removal of the material for use elsewhere, or

(iii)the use of the material, if it is qualifying material within the meaning of section 42(3) above, for the restoration to use of the site at which the disposal takes place, or any part of that site, upon completion of waste disposal operations at the site, or as the case may be, that part of the site, or

(iv)the sorting of the material with a view to its removal elsewhere or its eventual disposal, and]

(b)[F27the material in question is held temporarily] in an area designated for the purpose by an authorised person.

Annotations:

Amendments (Textual)

F26S. 62(7)(a) substituted (28.7.2000) by 2000 c. 17, s. 141(2)

F27Words in s. 62(7)(b) substituted (28.7.2000) by 2000 c. 17, s. 141(3)

63 Qualifying material: special provisions.E+W+S+N.I.

(1)This section applies for the purposes of section 42 above.

(2)The Commissioners may direct that where material is disposed of it must be treated as qualifying material if it would in fact be such material but for a small quantity of non-qualifying material; and whether a quantity of non-qualifying material is small must be determined in accordance with the terms of the direction.

(3)The Commissioners may at the request of a person direct that where there is a disposal in respect of which he is liable to pay tax the material disposed of must be treated as qualifying material if it would in fact be such material but for a small quantity of non-qualifying material, and—

(a)a direction may apply to all disposals in respect of which a person is liable to pay tax or to such of them as are identified in the direction;

(b)whether a quantity of non-qualifying material is small must be determined in accordance with the terms of the direction.

(4)If a direction under subsection (3) above applies to a disposal any direction under subsection (2) above shall not apply to it.

(5)An order may provide that material must not be treated as qualifying material unless prescribed conditions are met.

(6)A condition may relate to any matter the Treasury think fit (such as the production of a document which includes a statement of the nature of the material).

InterpretationE+W+S+N.I.

64 Disposal of material as waste.E+W+S+N.I.

(1)A disposal of material is a disposal of it as waste if the person making the disposal does so with the intention of discarding the material.

(2)The fact that the person making the disposal or any other person could benefit from or make use of the material is irrelevant.

(3)Where a person makes a disposal on behalf of another person, for the purposes of subsections (1) and (2) above the person on whose behalf the disposal is made shall be treated as making the disposal.

(4)The reference in subsection (3) above to a disposal on behalf of another person includes references to a disposal—

(a)at the request of another person;

(b)in pursuance of a contract with another person.

65 Disposal by way of landfill.E+W+S+N.I.

(1)There is a disposal of material by way of landfill if—

(a)it is deposited on the surface of land or on a structure set into the surface, or

(b)it is deposited under the surface of land.

(2)Subsection (1) above applies whether or not the material is placed in a container before it is deposited.

(3)Subsection (1)(b) above applies whether the material—

(a)is covered with earth after it is deposited, or

(b)is deposited in a cavity (such as a cavern or mine).

(4)If material is deposited on the surface of land (or on a structure set into the surface) with a view to it being covered with earth the disposal must be treated as made when the material is deposited and not when it is covered.

(5)An order may provide that the meaning of the disposal of material by way of landfill (as it applies for the time being) shall be varied.

(6)An order under subsection (5) above may make provision in such way as the Treasury think fit, whether by amending any of subsections (1) to (4) above or otherwise.

(7)In this section “land” includes land covered by water where the land is above the low water mark of ordinary spring tides.

(8)In this section “earth” includes similar matter (such as sand or rocks).

66 Landfill sites.E+W+S+N.I.

Land is a landfill site at a given time if at that time—

(a)a licence which is a site licence for the purposes of Part II of the M49Environmental Protection Act 1990 (waste on land) is in force in relation to the land and authorises disposals in or on the land,

(b)a resolution under section 54 of that Act (land occupied by waste disposal authorities in Scotland) is in force in relation to the land and authorises deposits or disposals in or on the land,

[F28(ba)a permit under regulations under section 2 of the Pollution Prevention and Control Act 1999 [F29or under regulations under Article 4 of the Environment (Northern Ireland) Order 2002] is in force in relation to the land and authorises deposits or disposals in or on the land,]

(c)a disposal licence issued under Part II of the M50Pollution Control and Local Government (Northern Ireland) Order 1978 (waste on land) is in force in relation to the land and authorises deposits on the land,

(d)a resolution passed under Article 13 of that Order (land occupied by district councils in Northern Ireland) is in force in relation to the land and relates to deposits on the land, or

(e)a licence under any provision for the time being having effect in Northern Ireland and corresponding to section 35 of the Environmental Protection Act 1990 (waste management licences) is in force in relation to the land and authorises disposals in or on the land.

Annotations:

Amendments (Textual)

F28S. 66(ba) inserted (21.3.2000 for E.W., otherwise prosp.) by 1999 c. 24, ss. 6, 7(3), Sch. 2 para. 19; S.I. 2000/800, art. 2

Marginal Citations

67 Operators of landfill sites.E+W+S+N.I.

The operator of a landfill site at a given time is—

(a)the person who is at the time concerned the holder of the licence, where section 66(a) above applies;

(b)the waste disposal authority which at the time concerned occupies the landfill site, where section 66(b) above applies;

[F30(ba)the person who is at the time concerned the holder of the permit, where section 66(ba) above applies;]

(c)the person who is at the time concerned the holder of the licence, where section 66(c) above applies;

(d)the district council which passed the resolution, where section 66(d) above applies;

(e)the person who is at the time concerned the holder of the licence, where section 66(e) above applies.

Annotations:

Amendments (Textual)

F30S. 67(ba) inserted (E.W.) (1.8.2000) by S.I. 2000/2973, reg. 39, Sch. 10 para. 22 and (S.) (28.9.2000) by S.S.I. 2000/323, reg. 36, Sch. 10 para. 6(3)

68 Weight of material disposed of.E+W+S+N.I.

(1)The weight of the material disposed of on a taxable disposal shall be determined in accordance with regulations.

(2)The regulations may—

(a)prescribe rules for determining the weight;

(b)authorise rules for determining the weight to be specified by the Commissioners in a prescribed manner;

(c)authorise rules for determining the weight to be agreed by the person liable to pay the tax and an authorised person.

(3)The regulations may in particular prescribe, or authorise the specification or agreement of, rules about—

(a)the method by which the weight is to be determined;

(b)the time by reference to which the weight is to be determined;

(c)the discounting of constituents (such as water).

(4)The regulations may include provision that a specification authorised under subsection (2)(b) above may provide—

(a)that it is to have effect only in relation to disposals of such descriptions as may be set out in the specification;

(b)that it is not to have effect in relation to particular disposals unless the Commissioners are satisfied that such conditions as may be set out in the specification are met in relation to the disposals;

and the conditions may be framed by reference to such factors as the Commissioners think fit (such as the consent of an authorised person to the specification having effect in relation to disposals).

(5)The regulations may include provision that—

(a)where rules are agreed as mentioned in subsection (2)(c) above, and

(b)the Commissioners believe that they should no longer be applied because they do not give an accurate indication of the weight or they are not being fully observed or for some other reason,

the Commissioners may direct that the agreed rules shall no longer have effect.

(6)The regulations shall be so framed that where in relation to a given disposal—

(a)no specification of the Commissioners has effect, and

(b)no agreed rules have effect,

the weight shall be determined in accordance with rules prescribed in the regulations.

69 Taxable activities.E+W+S+N.I.

(1)A person carries out a taxable activity if—

(a)he makes a taxable disposal in respect of which he is liable to pay tax, or

(b)he permits another person to make a taxable disposal in respect of which he (the first-mentioned person) is liable to pay tax.

(2)Where—

(a)a taxable disposal is made, and

(b)it is made without the knowledge of the person who is liable to pay tax in respect of it,

that person shall for the purposes of this section be taken to permit the disposal.

70 Interpretation: other provisions.E+W+S+N.I.

(1)Unless the context otherwise requires—

  • “accounting period” shall be construed in accordance with section 49 above;

  • appeal tribunal” means a VAT and duties tribunal;

  • authorised person” means any person acting under the authority of the Commissioners;

  • the Commissioners” means the Commissioners of Customs and Excise;

  • conduct” includes any act, omission or statement;

  • [F31“the Environment Agency” means the body established by section 1 of the Environment Act 1995; F32]

  • material” means material of all kinds, including objects, substances and products of all kinds;

  • prescribed” means prescribed by an order or regulations under this Part;

  • registrable person” has the meaning given by section 47(10) above;

  • [F31“the Scottish Environment Protection Agency” means the body established by section 20 of the Environment Act l995; F33]

  • tax” means landfill tax;

  • taxable disposal” has the meaning given by section 40 above.

(2)A landfill disposal is a disposal—

(a)of material as waste, and

(b)made by way of landfill.

[F34(2A)A local authority is —

(a)the council of a county, county borough, district, London borough, parish or group of parishes (or, in Wales, community or group of communities);

(b)the Common Council of the City of London;

(c)as respects the Temples, the Sub-Treasurer of the Inner Temple and the Under-Treasurer of the Middle Temple respectively;

(d)the council of the Isles of Scilly;

(e)any joint committee or joint board established by two or more of the foregoing;

(f)in relation to Scotland, a council constituted under section 2 of the Local Government etc. (Scotland) Act 1994 F35, any two or more such councils and any joint committee or joint board within the meaning of section 235(1) of the Local Government (Scotland) Act 1973. F36]

(3)A reference to this Part includes a reference to any order or regulations made under it and a reference to a provision of this Part includes a reference to any order or regulations made under the provision, unless otherwise required by the context or any order or regulations.

(4)This section and sections 64 to 69 above apply for the purposes of this Part.

Annotations:

Amendments (Textual)

F31S. 70(1): definitions of

the Environment Agency

and

the Scottish Environment Protection Agency

inserted (1.8.1996) by S.I. 1996/1529, art. 5(a)(b)

F34S. 70(2A) inserted (1.8.1996) by S.I. 1996/1529, art. 6

SupplementaryE+W+S+N.I.

71 Orders and regulations.E+W+S+N.I.

(1)The power to make an order under section 57 above shall be exercisable by the Commissioners, and the power to make an order under any other provision of this Part shall be exercisable by the Treasury.

(2)Any power to make regulations under this Part shall be exercisable by the Commissioners.

(3)Any power to make an order or regulations under this Part shall be exercisable by statutory instrument.

(4)An order to which this subsection applies shall be laid before the House of Commons; and unless it is approved by that House before the expiration of a period of 28 days beginning with the date on which it was made it shall cease to have effect on the expiration of that period, but without prejudice to anything previously done under the order or to the making of a new order.

(5)In reckoning any such period as is mentioned in subsection (4) above no account shall be taken of any time during which Parliament is dissolved or prorogued or during which the House of Commons is adjourned for more than four days.

(6)A statutory instrument containing an order or regulations under this Part (other than an order under section 57 above or an order to which subsection (4) above applies) shall be subject to annulment in pursuance of a resolution of the House of Commons.

(7)Subsection (4) above applies to—

(a)an order under section 42(3) above providing for material which would otherwise be qualifying material not to be qualifying material;

(b)an order under section 46 above which produces the result that a disposal which would otherwise not be a taxable disposal is a taxable disposal;

(c)an order under section 63(5) above other than one which provides only that an earlier order under section 63(5) is not to apply to material;

(d)an order under section 65(5) above providing for anything which would otherwise not be a disposal of material by way of landfill to be such a disposal.

(8)Any power to make an order or regulations under this Part—

(a)may be exercised as regards prescribed cases or descriptions of case;

(b)may be exercised differently in relation to different cases or descriptions of case.

(9)An order or regulations under this Part may include such supplementary, incidental, consequential or transitional provisions as appear to the Treasury or the Commissioners (as the case may be) to be necessary or expedient.

(10)No specific provision of this Part about an order or regulations shall prejudice the generality of subsections (8) and (9) above.

Part IVE+W+S+N.I. Income Tax, Corporation Tax and Capital Gains Tax

Chapter IE+W+S+N.I. Principal provisions

Income tax charge, rates and reliefsE+W+S+N.I.

72 Charge and rates of income tax for 1996-97.E+W+S+N.I.

(1)Income tax shall be charged for the year 1996-97, and for that year—

(a)the lower rate shall be 20 per cent.;

(b)the basic rate shall be 24 per cent.; and

(c)the higher rate shall be 40 per cent.

(2)For the year 1996-97 section 1(2) of the Taxes Act 1988 shall apply—

(a)as if the amount specified in paragraph (aa) (the lower rate limit) were £3,900; and

(b)as if the amount specified in paragraph (b) (the basic rate limit) were £25,500;

and, accordingly, section 1(4) of that Act (indexation) shall not apply for the year 1996-97.

(3)Section 559(4) of the Taxes Act 1988 (deductions from payments to sub-contractors in the construction industry) shall have effect—

(a)in relation to payments made on or after 1st July 1996 and before the appointed day (within the meaning of section 139 of the M51Finance Act 1995), with “24 per cent.” substituted for “ 25 per cent. ”; and

(b)in relation to payments made on or after that appointed day, as if the substitution for which section 139(1) of the M52Finance Act 1995 provided were a substitution of “ the relevant percentage ” for “ 24 per cent. ”

Annotations:

Marginal Citations

73 Application of lower rate to income from savings.E+W+S+N.I.

(1)After section 1 of the Taxes Act 1988 there shall be inserted the following section—

1A Application of lower rate to income from savings and distributions.

(1)Subject to sections 469(2) and 686, so much of any person’s total income for any year of assessment as—

(a)comprises income to which this section applies, and

(b)in the case of an individual, is not income falling within section 1(2)(b),

shall, by virtue of this section, be charged for that year at the lower rate, instead of at the rate otherwise applicable to it in accordance with section 1(2)(aa) and (a).

(2)Subject to subsection (4) below, this section applies to the following income—

(a)any income chargeable under Case III of Schedule D other than—

(i)relevant annuities and other annual payments that are not interest; and

(ii)amounts so chargeable by virtue of section 119 or 120;

(b)any income chargeable under Schedule F; and

(c)subject to subsection (4) below, any equivalent foreign income.

(3)The income which is equivalent foreign income for the purposes of this section is any income chargeable under Case IV or V of Schedule D which—

(a)is equivalent to a description of income falling within subsection (2)(a) above but arises from securities or other possessions out of the United Kingdom; or

(b)consists in any such dividend or other distribution of a company not resident in the United Kingdom as would be chargeable under Schedule F if the company were resident in the United Kingdom.

(4)This section does not apply to—

(a)any income chargeable to tax under Case IV or V of Schedule D which is such that section 65(5)(a) or (b) provides for the tax to be computed on the full amount of sums received in the United Kingdom; or

(b)any amounts deemed by virtue of section 695(4)(b) or 696(6) to be income chargeable under Case IV of Schedule D.

(5)So much of any person’s income as comprises income to which this section applies shall be treated for the purposes of subsection (1)(b) above and any other provisions of the Income Tax Acts as the highest part of his income.

(6)Subsection (5) above shall have effect subject to section 833(3) but shall otherwise have effect notwithstanding any provision requiring income of any description to be treated for the purposes of the Income Tax Acts (other than section 550) as the highest part of a person’s income.

(7)In this section “relevant annuity” means any annuity other than a purchased life annuity to which section 656 applies or to which that section would apply but for section 657(2)(a).

(2)In section 4 of that Act (construction of references to deduction of tax), after subsection (1) there shall be inserted the following subsection—

(1A)As respects deductions from, and tax treated as paid on, any such amounts as constitute or (but for the person whose income they are) would constitute income to which section 1A applies, subsection (1) above shall have effect with a reference to the lower rate in force for the relevant year of assessment substituted for the reference to the basic rate in force for that year.

(3)Subsection (1) above has effect in relation to the year 1996-97 and subsequent years of assessment and subsection (2) above has effect in relation to payments on or after 6th April 1996.

(4)Schedule 6 to this Act (which makes further amendments in connection with the charge at the lower rate on income from savings etc.) shall have effect.

(5)Where any subordinate legislation (within the meaning of the M53Interpretation Act 1978) falls to be construed in accordance with section 4 of the Taxes Act 1988, that legislation (whenever it was made) shall be construed, in relation to payments on or after 6th April 1996, subject to subsection (1A) of that section.

Annotations:

Marginal Citations

74 Personal allowances for 1996-97.E+W+S+N.I.

(1)For the year 1996-97 the amounts specified in the provisions mentioned in subsection (2) below shall be taken to be as set out in that subsection; and, accordingly, section 257C(1) of the Taxes Act 1988 (indexation), so far as it relates to the amounts so specified, shall not apply for the year 1996-97.

(2)In section 257 of that Act (personal allowance)—

(a)the amount in subsection (1) (basic allowance) shall be £3,765;

(b)the amount in subsection (2) (allowance for persons aged 65 or more but not aged 75 or more) shall be £4,910; and

(c)the amount in subsection (3) (allowance for persons aged 75 or more) shall be £5,090.

75 Blind person’s allowance.E+W+S+N.I.

(1)In section 265(1) of the Taxes Act 1988 (blind person’s allowance), for “£1,200” there shall be substituted “ £1,250 ”.

(2)This section shall apply for the year 1996-97 and subsequent years of assessment.

76 Limit on relief for interest.E+W+S+N.I.

For the year 1996-97 the qualifying maximum defined in section 367(5) of the Taxes Act 1988 (limit on relief for interest on certain loans) shall be £30,000.

Corporation tax charge and rateE+W+S+N.I.

77 Charge and rate of corporation tax for 1996.E+W+S+N.I.

Corporation tax shall be charged for the financial year 1996 at the rate of 33 per cent.

78 Small companies.E+W+S+N.I.

For the financial year 1996—

(a)the small companies’ rate shall be 24 per cent.; and

(b)the fraction mentioned in section 13(2) of the Taxes Act 1988 (marginal relief for small companies) shall be nine four-hundredths.

Abolition of Schedule C charge etc.E+W+S+N.I.

79 Abolition of Schedule C charge etc.E+W+S+N.I.

(1)The charge to tax under Schedule C is abolished—

(a)for the purposes of income tax, for the year 1996-97 and subsequent years of assessment;

(b)for the purposes of corporation tax, for accounting periods ending after 31st March 1996.

(2)Schedule 7 to this Act (which, together with Chapter II of this Part of this Act, makes provision for imposing a charge under Schedule D on descriptions of income previously charged under Schedule C, and makes connected amendments) shall have effect.

Chapter IIE+W+S+N.I. Loan relationships

Annotations:

Modifications etc. (not altering text)

C5Pt. IV Ch. II modified (29.4.1996) by 1986 c. 44, s. 60(3) (as substituted (29.4.1996) by 1996 c. 8, s. 104, Sch. 14 para. 4 (with savings in Pt. IV Ch. II))

Pt. IV Ch. II modified (29.4.1996) by 1988 c. 1, s. 730A(6) (as substituted (29.4.1996) by 1996 c. 8, s. 104, Sch. 14 para. 37 (with savings in Pt. IV Ch. II) and as further substituted (24.7.2002 with effect as mentioned in s. 82(2) of the amending Act) by 2002 c. 23, s. 82(1), Sch. 25 Pt. 2 para. 52(3))

Pt. IV Ch. II modified (29.4.1996) by 1988 c. 1, s. 768B(10) (as substituted (29.4.1996) by 1996 c. 8, s. 104, Sch. 14 para. 39(1) (with savings in Pt. IV Ch. II))

Pt. IV Ch. II modified (29.4.1996) by 1988 c. 1, s. 786C(9) (as substituted (29.4.1996) by 1996 c. 8, s. 104, Sch. 14 para. 40 (with savings in Pt. IV Ch. II))

Pt. IV Ch. II modified (29.4.1996) by 1988 c. 35, s. 11(7) (as substituted (29.4.1996) by 1996 c. 8, s. 104, Sch. 14 para. 55 (with savings in Pt. IV Ch. II))

Pt. IV Ch. II modified (29.4.1996) by 1988 c. 1, s. 477A(3)(a) (as substituted (29.4.1996) by 1996 c. 8, s. 104, Sch. 14 para. 28(1) (with savings in Pt. IV Ch. II))

Pt. IV Ch. II modified (29.4.1996) by 1986 c. 31, s. 77(3) (as substituted (29.4.1996) by 1996 c. 8, s. 104, Sch. 14 para. 3 (with savings in Pt. IV Ch. II))

Pt. IV Ch. II modified (24.7.1996) by 1996 c. 55, s. 135, Sch. 7 para. 11(2)

Pt. IV Ch. II modified (27.7.1999 with effect as mentioned in s. 100(2)(3) of 1999 c. 16) by 1988 c. 1, s. 494AA(5) (as inserted (27.7.1999 with effect as mentioned in s. 100(2)(3) of the amending Act) by 1999 c. 16, s. 100(1))

Pt. IV Ch. II modified (15.1.2001) by 2000 c. 38, s. 250, Sch. 26 paras. 7(2); S.I. 2000/3376, art. 2

Pt. IV Ch. II modified (15.1.2001) by 2000 c. 38, s. 250, Sch. 26 paras. 17(2); S.I. 2000/3376, art. 2

Pt. IV Ch. II modified (15.1.2001) by 2000 c. 38, s. 250, Sch. 26 paras. 29(2); S.I. 2000/3376, art. 2

Pt. IV Ch. II modified (24.7.2002 with effect as mentioned in s. 71(2)(4) of the amending Act) by Finance Act 2002 (c. 23), s. 71(3)

Pt. IV Ch. II modified (24.7.2002 with effect as mentioned in s. 79(3) of Finance Act 2002) by Income and Corporation Taxes Act 1988 (c.1), s. 494(2ZA) (as inserted (24.7.2002 with effect as mentioned in s. 79(3) of the amending Act) by Finance Act 2002 (c. 23), s. 79(2), Sch. 23 Pt. 2 para. 17(7) (with Sch. 23 para. 25))

Pt. IV Ch. II modified (24.7.2002 with effect as mentioned in s. 82(2) of Finance Act 2002) by Income and Corporation Taxes Act 1988 (c.1), s. 730A(6B) (as inserted (24.7.2002 with effect as mentioned in s. 82(2) of the amending Act) by Finance Act 2002 (c. 23), s. 82(1), Sch. 25 Pt. 2 para. 52(4))

Pt. IV Ch. II modified (24.7.2002 with effect as mentioned in s. 82(2) of Finance Act 2002) by Income and Corporation Taxes Act 1988 (c.1), s. 842(1AB) (as inserted (24.7.2002 with effect as mentioned in s. 82(2) of the amending Act) by Finance Act 2002 (c. 23), s. 82(1), Sch. 25 Pt. 2 para. 56(4))

Pt. IV Ch. II modified (24.7.2002) by Finance Act 2002 (c. 23), s. 82(1), Sch. 25 Pt. 3 para. 64

Pt. IV Ch. II modified (24.7.2002 with effect as mentioned in s. 83(3)(4) of the amending Act) by Finance Act 2002 (c. 23), s. 83(1), Sch. 26 Pt. 4 para. 19(4)

Pt. IV Ch. II modified (1.10.2002 with effect in relation to accounting periods beginning on or after that date) by The Exchange Gains and Losses (Bringing into Account Gains or Losses) Regulations 2002 (S.I. 2002/1970), regs. 1(2), 6, 7, 13

C6Pt. IV Ch. II applied (29.4.1996) by 1988 c. 1, s. 434A(2A) (as inserted (29.4.1996) by 1996 c. 8, s. 104, Sch. 14 para. 23(2) (with savings in Pt. IV Ch. II))

Pt. IV Ch. II applied (29.4.1996) by 1993 c. 34, s. 130(1) (as substituted (29.4.1996) by 1996 c. 8, s. 104, Sch. 14 para. 69 (with savings in Pt. IV Ch. II))

Pt. IV Ch. II applied (29.4.1996) by 1994 c. 9, s. 160(2) (as substituted (29.4.1996) by 1996 c. 8, s. 104, Sch. 14 para. 75 (with savings in Pt. IV Ch. II)

Pt. IV Ch. II applied (24.7.2002 with effect as mentioned in s. 82(2) of Finance Act 2002) by Income and Corporation Taxes Act 1988 (c.1), s. 510A(6A) (as inserted (24.7.2002 with effect as mentioned in s. 82(2) of the amending Act) by Finance Act 2002 (c. 23), s. 82(1), Sch. 25 Pt. 2 para. 49(4))

C7Pt. IV Ch. II restricted (29.4.1996) by 1988 c. 1, s. 475(2)(b) (as substituted (29.4.1996) by 1996 c. 8, s. 104, Sch. 14 para. 27(1) (with savings in Pt. IV Ch. II))

Pt. IV Ch. II restricted (29.4.1996) by 1988 c. 1, s. 487(1)(b) (as substituted (29.4.1996) by 1996 c. 8, s. 104, Sch. 14 para. 31(1) (with savings in Pt. IV Ch. II))

Pt. IV Ch. II restricted (29.4.1996) by 1988 c. 1, s. 487(3A) (as inserted (29.4.1996) by 1996 c. 8, s. 104, Sch. 14 para. 31(3) (with savings in Pt. IV Ch. II)

Pt. IV Ch. II restricted (29.4.1996) by 1988 c. 1, s. 494(2) (as substituted (29.4.1996) by 1996 c. 8, s. 104, Sch. 14 para. 32(2) (with savings in Pt. IV Ch. II))

Pt. IV Ch. II restricted (24.7.2002 with effect as mentioned in s. 82(2) of Finance Act 2002) by Income and Corporation Taxes Act 1988 (c.1), s. 582(3A) (as inserted (24.7.2002 with effect as mentioned in s. 82(2) of the amending Act) by Finance Act 2002 (c. 23), s. 82(1), Sch. 25 Pt. 2 para. 50)

Pt. IV Ch. II restricted (24.7.2002 with effect as mentioned in s. 82(2) of Finance Act 2002) by Income and Corporation Taxes Act 1988 (c.1), s. 787(1A) (as inserted (24.7.2002 with effect as mentioned in s. 82(2) of the amending Act) by Finance Act 2002 (c. 23), s. 82(1), Sch. 25 Pt. 2 para. 53(2))

Pt. IV Ch. II restricted (24.7.2002 with effect as mentioned in s. 83(3)(4) of the amending Act) by Finance Act 2002 (c. 23), s. 83(1), Sch. 26 Pt. 9 para. 48(4)

C8Pt. IV Ch. II excluded (29.4.1996) by 1988 c. 1, s. 56(4B) (as inserted (29.4.1996) by 1996 c. 8, s. 104, Sch. 14 para. 6 (with savings in Pt. IV Ch. II))

Pt. IV Ch. II excluded (29.4.1996) by 1988 c. 1, s. 468L(5) (as substituted (29.4.1996) by 1996 c. 8, s. 104, Sch. 14 para. 26 (with savings in Pt. IV Ch. II))

Introductory provisionsE+W+S+N.I.

80 Taxation of loan relationships.E+W+S+N.I.

(1)For the purposes of corporation tax all profits and gains arising to a company from its loan relationships shall be chargeable to tax as income in accordance with this Chapter.

(2)To the extent that a company is a party to a loan relationship for the purposes of a trade carried on by the company, profits and gains arising from the relationship shall be brought into account in computing the [F37profits] of the trade.

(3)Profits and gains arising from a loan relationship of a company that are not brought into account under subsection (2) above shall be brought into account as profits and gains chargeable to tax under Case III of Schedule D.

(4)This Chapter shall also have effect for the purposes of corporation tax for determining how any deficit on a company’s loan relationships is to be brought into account in any case, including a case where none of the company’s loan relationships falls by virtue of this Chapter to be regarded as a source of income.

(5)Subject to any express provision to the contrary, the amounts which in the case of any company are brought into account in accordance with this Chapter as respects any matter shall be the only amounts brought into account for the purposes of corporation tax as respects that matter.

Annotations:

Amendments (Textual)

F37Words in s. 80(2) substituted (31.7.1998) by 1998 c. 36, s. 46(3)(a), Sch. 7 para. 11

Modifications etc. (not altering text)

C9S. 80(5) excluded (29.4.1996) by 1988 c. 1, s. 400(9A) (as inserted 29.4.1996) by 1996 c. 8, s. 104, Sch. 14 para. 19 (with savings in Pt. IV Ch. II)

S. 80(5) excluded (29.4.1996) by 1988 c. 1, s. 795(4) (as inserted (29.4.1996) by 1996 c. 8, s. 104, Sch. 14 para. 41 (with savings in Pt. IV Ch. II))

S. 80(5) excluded (29.4.1996) by 1998 c. 1, s. 811(3) (as inserted (29.4.1996) by 1996 c. 8, s. 104, Sch. 14 para. 47 (with savings in Pt. IV Ch. II))

S. 80(5) excluded (29.4.1996) by 1988 c. 1, s. 116(16) (as inserted (29.4.1996) by 1996 c. 8, s. 104, Sch. 14 para. 60(4) (with savings in Pt. IV Ch. II))

S. 80(5) excluded (29.4.1996) by 1988 c. 1, s. 798(3A) (as inserted (29.4.1996) by 1996 c. 8, s. 104, Sch. 14 para. 44(2) (with savings in Pt. IV Ch. II))

S. 80(5) excluded (31.7.1998 with effect as mentioned in s. 103(2)(3) of 1998 c. 36) by 1988 c. 1, s. 798A(4) (as inserted (31.7.1998 with effect as mentioned in s. 103(2)(3) of the amending Act) by 1998 c. 36, s. 104)

S. 80(5) excluded (24.7.2002 with effect as mentioned in s. 82(2) of Finance Act 2002) by Income and Corporation Taxes Act 1988 (c. 1), s. 582(3A) (as inserted (24.7.2002 with effect as mentioned in s. 82(2) of the amending Act) by Finance Act 2002 (c. 23), s. 82(1), Sch. 25 Pt. 2 para. 50)

81 Meaning of “loan relationship” etc.E+W+S+N.I.

(1)Subject to the following provisions of this section, a company has a loan relationship for the purposes of the Corporation Tax Acts wherever—

(a)the company stands (whether by reference to a security or otherwise) in the position of a creditor or debtor as respects any money debt; and

(b)that debt is one arising from a transaction for the lending of money;

and references to a loan relationship and to a company’s being a party to a loan relationship shall be construed accordingly.

(2)For the purposes of this Chapter a money debt is a debt [F38which is, or has at any time been, one that falls, or that may at the option of the debtor or of the creditor fall,] to be settled—

(a)by the payment of money; or

(b)by the transfer of a right to settlement under a debt which is itself a money debt

[F39disregarding any other option exercisable by either party.]

(3)Subject to subsection (4) below, where an instrument is issued by any person for the purpose of representing security for, or the rights of a creditor in respect of, any money debt, then (whatever the circumstances of the issue of the instrument) that debt shall be taken for the purposes of this Chapter to be a debt arising from a transaction for the lending of money.

(4)For the purposes of this Chapter a debt shall not be taken to arise from a transaction for the lending of money to the extent that it is a debt arising from rights conferred by shares in a company.

(5)For the purposes of this Chapter—

(a)references to payments or interest under a loan relationship are references to payments or interest made or payable in pursuance of any of the rights or liabilities under that relationship; and

(b)references to rights or liabilities under a loan relationship are references to any of the rights or liabilities under the agreement or arrangements by virtue of which that relationship subsists;

and those rights or liabilities shall be taken to include the rights or liabilities attached to any security which, being a security issued in relation to the money debt in question, is a security representing that relationship.

(6)In this Chapter “money” includes money expressed in a currency other than sterling.

Annotations:

Amendments (Textual)

F38Words in s. 81(2) substituted (24.7.2002 with effect as mentioned in s. 82(2) of the amending Act) by Finance Act 2002 (c. 23), s. 82(1), Sch. 25 Pt. 1 para. 2(2)(a)

F39Words in s. 81(2) inserted (24.7.2002 with effect as mentioned in s. 82(2) of the amending Act) by Finance Act 2002 (c. 23), s. 82(1), Sch. 25 Pt. 1 para. 2(2)(b)

Taxation of profits and gains and relief for deficitsE+W+S+N.I.

82 Method of bringing amounts into account.E+W+S+N.I.

(1)For the purposes of corporation tax—

(a)the profits and gains arising from the loan relationships of a company, and

(b)any deficit on a company’s loan relationships,

shall be computed in accordance with this section using the credits and debits given for the accounting period in question by the following provisions of this Chapter.

(2)To the extent that, in any accounting period, a loan relationship of a company is one to which it is a party for the purposes of a trade carried on by it, the credits and debits given in respect of that relationship for that period shall be treated (according to whether they are credits or debits) either—

(a)as receipts of that trade falling to be brought into account in computing the [F40profits] of that trade for that period; or

(b)as expenses of that trade which are deductible in computing those profits and gains.

(3)Where for any accounting period there are, in respect of the loan relationships of a company, both—

(a)credits that are not brought into account under subsection (2) above (“non-trading credits”), and

(b)debits that are not so brought into account (“non-trading debits”),

the aggregate of the non-trading debits shall be subtracted from the aggregate of the non-trading credits to give the amount to be brought into account under subsection (4) below.

(4)That amount is the amount which for any accounting period is to be taken (according to whether the aggregate of the non-trading credits or the aggregate of the non-trading debits is the greater) to be either—

(a)the amount of the company’s profits and gains for that period that are chargeable under Case III of Schedule D as profits and gains arising from the company’s loan relationships; or

(b)the amount of the company’s non-trading deficit for that period on its loan relationships.

(5)Where for any accounting period a company has non-trading credits but no non-trading debits in respect of its loan relationships, the aggregate amount of the credits shall be the amount of the company’s profits and gains for that period that are chargeable under Case III of Schedule D as profits and gains arising from those relationships.

(6)Where for any accounting period a company has non-trading debits but no non-trading credits in respect of its loan relationships, that company shall have a non-trading deficit on its loan relationships for that period equal to the aggregate of the debits.

(7)Subsection (2) above, so far as it provides for any amount to be deductible as mentioned in paragraph (b) of that subsection, shall have effect notwithstanding anything in section 74 of the Taxes Act 1988 (allowable deductions).

Annotations:

Amendments (Textual)

F40Words in s. 82(2)(a) substituted (31.7.1998) by 1998 c. 36, s. 46(3)(a), Sch. 7 para. 11

83 Non-trading deficit on loan relationships.E+W+S+N.I.

(1)This section applies for the purposes of corporation tax where for any accounting period (“the deficit period”) there is a non-trading deficit on a company’s loan relationships.

(2)The company may make a claim for the whole or any part of the deficit [F41(to the extent that it is not surrendered as group relief by virtue of section 403 of the Taxes Act 1988)] to be treated in any of the following ways, that is to say—

(a)to be set off against any profits of the company (of whatever description) for the deficit period; [F42or]

(b)F43. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(c)to be carried back to be set off against profits for earlier accounting periods; F44. . .

(d)F45. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F46(3A)So much of the deficit for the deficit period as is not—

(a)surrendered as group relief by virtue of section 403 of the Taxes Act 1988, or

(b)treated in any of the ways specified in subsection (2) above,

shall be carried forward and set against non-trading profits of the company for succeeding accounting periods.]

(4)F47. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5)No part of any non-trading deficit of a company established for charitable purposes only shall be set off against the profits of that or any other company in pursuance of a claim under subsection (2) above.

(6)A claim under subsection (2) above must be made within the period of two years immediately following the end of the relevant period, or within such further period as the Board may allow.

(7)In subsection (6) above “the relevant period”—

(a)in relation to a claim under subsection (2)(a), F48. . . or (c) above, means the deficit period; F49. . .

(b)F49. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(8)Different claims may be made under subsection (2) above as respects different parts of a non-trading deficit for any period, but no claim may be made as respects any part of a deficit to which another claim made under that subsection relates.

(9)Schedule 8 to this Act (which makes provision about what happens where a claim is made under [F50subsection (2)(a) or (c) above or where subsection (3A) above has effect)] shall have effect.

Annotations:

Amendments (Textual)

F41Words in s. 83(2) inserted (24.7.2002 with effect as mentioned in s. 82(2) of the amending Act) by Finance Act 2002 (c. 23), s. 82(1), Sch. 25 Pt. 1 para. 3(2)

F42Word in s. 83(2)(a) inserted (24.7.2002 with effect as mentioned in s. 82(2) of the amending Act) by Finance Act 2002 (c. 23), s. 82(1), Sch. 25 Pt. 1 para. 3(3)

F43S. 83(2)(b) repealed (24.7.2002 with effect as mentioned in s. 82(2) of the repealing Act) by Finance Act 2002 (c. 23), ss. 82(1), 141, Sch. 25 Pt. 1 para. 3(4), Sch. 40 Pt. 3(12)

F44Word in s. 83(2)(c) repealed (24.7.2002 with effect in accordance with s. 82(2) of the repealing Act) by Finance Act 2002 (c. 23), s. 141, Sch. 40 Pt. 3(12)

F45S. 83(2)(d) repealed (24.7.2002 with effect as mentioned in s. 82(2) of the repealing Act) by Finance Act 2002 (c. 23), ss. 82(1), 141, Sch. 25 Pt. 1 para. 3(5), Sch. 40 Pt. 3(12)

F46S. 83(3A) substituted for s. 83(3) (24.7.2002 with effect as mentioned in s. 82(2) of the amending Act) by Finance Act 2002 (c. 23), s. 82(1), Sch. 25 Pt. 1 para. 3(6)

F47S. 83(4) repealed (24.7.2002 with effect as mentioned in s. 82(2) of the repealing Act) by Finance Act 2002 (c. 23), ss. 82(1), 141, Sch. 25 Pt. 1 para. 3(7), Sch. 40 Pt. 3(12)

F48Word in s. 83(7)(a) repealed (24.7.2002 with effect in accordance with s. 82(2) of the repealing Act) by Finance Act 2002 (c. 23), s. 141, Sch. 40 Pt. 3(12)

F49S. 83(7)(b) and preceding word repealed (24.7.2002 with effect in accordance with s. 82(2) of the repealing Act) by Finance Act 2002 (c. 23), s. 141, Sch. 40 Pt. 3(12)

F50Words in s. 83(9) substituted (24.7.2002 with effect as mentioned in s. 82(2) of the amending Act) by Finance Act 2002 (c. 23), s. 82(1), Sch. 25 Pt. 1 para. 3(8)

Computational provisions etc.E+W+S+N.I.

84 Debits and credits brought into account.E+W+S+N.I.

(1)The credits and debits to be brought into account in the case of any company in respect of its loan relationships shall be the sums which, in accordance with an authorised accounting method and when taken together, fairly represent, for the accounting period in question—

(a)all profits, gains and losses of the company, including those of a capital nature, which (disregarding interest and any charges or expenses) arise to the company from its loan relationships and related transactions; and

(b)all interest under the company’s loan relationship and all charges and expenses incurred by the company under or for the purposes of its loan relationships and related transactions.

(2)The reference in subsection (1) above to the profits, gains and losses arising to a company—

(a)does not include a reference to any amounts required to be transferred to the company’s share premium account; but

(b)does include a reference to any profits, gains or losses which, in accordance with [F51generally accepted accounting practice], are carried to or sustained by any other reserve maintained by the company.

(3)The reference in subsection (1)(b) above to charges and expenses incurred for the purposes of a company’s loan relationships and related transactions does not include a reference to any charges or expenses other than those incurred directly—

(a)in bringing any of those relationships into existence;

(b)in entering into or giving effect to any of those transactions;

(c)in making payments under any of those relationships or in pursuance of any of those transactions; or

(d)in taking steps for ensuring the receipt of payments under any of those relationships or in accordance with any of those transactions.

(4)Where—

(a)any charges or expenses are incurred by a company for purposes connected—

(i)with entering into a loan relationship or related transaction, or

(ii)with giving effect to any obligation that might arise under a loan relationship or related transaction,

(b)at the time when the charges or expenses are incurred, the relationship or transaction is one into which the company may enter but has not entered, and

(c)if that relationship or transaction had been entered into by that company, the charges or expenses would be charges or expenses incurred as mentioned in subsection (3) above,

those charges or expenses shall be treated for the purposes of this Chapter as charges or expenses in relation to which debits may be brought into account in accordance with subsection (1)(b) above to the same extent as if the relationship or transaction had been entered into.

[F52(4A)Where—

(a)different authorised accounting methods are used for the purposes of this Chapter as respects the same loan relationship for different parts of the same accounting period or for successive accounting periods, and

(b)no debit or credit falls to be brought into account under subsection (2)(c) or (3)(b) of section 90 below in consequence of the change of method, but

(c)an amount is brought into account for the purposes of the company’s statutory accounts in respect of the change of method,

that amount shall be taken for the purposes of this Chapter to be included among the sums in respect of which debits and credits fall to be brought into account for the purposes of this Chapter in accordance with subsection (1)(a) above.]

(5)[F53In this Chapter]related transaction”, in relation to a loan relationship, means any disposal or acquisition (in whole or in part) of rights or liabilities under that relationship.

(6)The cases where there shall be taken [F54for the purposes of subsection (5) above] to be a disposal and acquisition of rights or liabilities under a loan relationship shall include those where such rights or liabilities are transferred or extinguished by any sale, gift, exchange, surrender, redemption or release.

(7)This section has effect subject to Schedule 9 to this Act (which contains provision disallowing certain debits and credits for the purposes of this Chapter and making assumptions about how an authorised accounting method is to be applied in certain cases).

Annotations:

Amendments (Textual)

F51Words in s. 84(2)(b) substituted (24.7.2002 with effect as mentioned in s. 82(2) of the amending Act) by Finance Act 2002 (c. 23), ss. 82(1), 103(4)(d)), {Sch. 25 Pt. 1 para. 4(2)}

F52S. 84(4A) inserted (24.7.2002 with effect as mentioned in s. 82(2) of the amending Act) by Finance Act 2002 (c. 23), s. 82(1), Sch. 25 Pt. 1 para. 4(3)

F53Words in s. 84(5) substituted (24.7.2002 with effect as mentioned in s. 79(3) of the amending Act) by Finance Act 2002 (c. 23), s. 79(2), Sch. 23 Pt. 1 para. 2(2) (with Sch. 23 Pt. 3 para. 25)

F54Words in s. 84(6) substituted (24.7.2002 with effect as mentioned in s. 79(3) of the amending Act) by Finance Act 2002 (c. 23), s. 79(2), Sch. 23 Pt. 1 para. 2(3) (with Sch. 23 Pt. 3 para. 25)

[F5584A Exchange gains and losses from loan relationshipsE+W+S+N.I.

(1)The reference in section 84(1)(a) above to the profits, gains and losses arising to a company from its loan relationships and related transactions includes a reference to exchange gains and losses arising to the company from its loan relationships.

(2)Subsection (1) above is subject to the following provisions of this section.

(3)Subsection (1) above does not have effect in relation to—

(a)so much of an exchange gain or loss arising to a company in relation to an asset representing a loan relationship of the company as falls within subsection (4) below; or

(b)so much of an exchange gain or loss arising to a company in relation to a liability representing a loan relationship of the company as falls within subsection (5) below; or

(c)so much of any exchange gain or loss arising to a company as results from any translation from one currency to another pursuant to section 93A(4) of the Finance Act 1993 of the profit or loss of part of the company’s business and falls within subsection (4) below; or

(d)so much of an exchange gain or loss arising to a company in relation to an asset or liability representing a loan relationship of the company as falls within a description prescribed for the purpose in regulations made by the Treasury.

(4)For the purposes of subsection (3)(a) or (c) above, an exchange gain or loss falls within this subsection to the extent that, in accordance with generally accepted accounting practice, an amount representing the whole or part of it is carried to or sustained by a reserve maintained by the company.

(5)For the purposes of subsection (3)(b) above, an exchange gain or loss falls within this subsection to the extent that, in accordance with generally accepted accounting practice, an amount representing the whole or part of it—

(a)is carried to or sustained by a reserve maintained by the company; and

(b)is set off by or against an amount falling within subsection (6) below.

(6)An amount falls within this subsection if—

(a)it represents the whole or part of an exchange gain or loss arising to the company in relation to any asset of the company; and

(b)in accordance with generally accepted accounting practice it is carried to or sustained by the reserve mentioned in subsection (5)(a) above.

(7)Where by virtue of subsection (3) above subsection (1) above does not have effect in relation to an amount representing the whole or part of an exchange gain or loss, section 84(2)(b) above shall not have effect in relation to that amount (but this subsection is subject to regulations under subsection (8) below).

(8)The Treasury may by regulations make provision for or in connection with bringing into account in prescribed circumstances amounts in relation to which subsection (3) above does not, by virtue of subsection (3) above, have effect.

(9)The reference in subsection (8) above to bringing amounts into account is a reference to bringing amounts into account—

(a)for the purposes of this Chapter, as credits or debits in respect of the loan relationships of the company concerned; or

(b)for the purposes of the Taxation of Chargeable Gains Act 1992.

(10)Any power to make regulations under this section includes power to make different provision for different cases.]]

Annotations:

Amendments (Textual)

F55S. 84A inserted (24.7.2002 with effect as mentioned in s. 79(3) of the amending Act) by Finance Act 2002 (c. 23), s. 79(2), Sch. 23 paras. 3, 26(5) (with Sch. 23 para. 25)

85 Authorised accounting methods.E+W+S+N.I.

(1)Subject to the following provisions of this Chapter, the alternative accounting methods that are authorised for the purposes of this Chapter are—

(a)an accruals basis of accounting; and

(b)a mark to market basis of accounting under which any loan relationship to which that basis is applied is brought into account in each accounting period at a fair value.

(2)An accounting method applied in any case shall be treated as authorised for the purposes of this Chapter only if—

[F56(a)subject to paragraphs (b) to (c) below, it is in conformity with generally accepted accounting practice to use that method in that case;]

(b)it contains proper provision for allocating payments under a loan relationship [F57, or arising as a result of a related transaction,] to accounting periods; F58. . .

[F59(bb)it contains proper provision for determining exchange gains and losses from loan relationships for accounting periods; and]

(c)where it is an accruals basis of accounting, it does not contain any provision (other than [F60provision in respect of exchange losses or] provision comprised in authorised arrangements for bad debt) that gives debits by reference to the valuation at different times of any asset representing a loan relationship.

(3)In the case of an accruals basis of accounting, proper provision for allocating payments under a loan relationship to accounting periods is provision which—

(a)allocates payments to the period to which they relate, without regard to the periods in which they are made or received or in which they become due and payable;

(b)includes provision which, where payments relate to two or more periods, apportions them on a just and reasonable basis between the different periods;

(c)assumes, subject to authorised arrangements for bad debt, that, so far as any company in the position of a creditor is concerned, every amount payable under the relationship will be paid in full as it becomes due;

(d)secures the making of the adjustments required in the case of the relationship by authorised arrangements for bad debt; and

(e)provides, subject to authorised arrangements for bad debt and for writing off government investments, that, where there is a release of any liability under the relationship, the appropriate amount in respect of the release is credited to the debtor in the accounting period in which the release takes place.

(4)In the case of a mark to market basis of accounting, proper provision for allocating payments under a loan relationship to accounting periods is provision which allocates payments to the accounting period in which they become due and payable.

(5)In this section—

(a)the references to authorised arrangements for bad debt are references to accounting arrangements under which debits and credits are brought into account in conformity with the provisions of paragraph 5 of Schedule 9 to this Act; and

(b)the reference to authorised arrangements for writing off government investments is a reference to accounting arrangements that give effect to paragraph 7 of that Schedule.

(6)In this section “fair value”, in relation to any loan relationship of a company, means the amount which, at the time as at which the value falls to be determined, is the amount that the company would obtain from or, as the case may be, would have to pay to an independent person for—

(a)the transfer of all the company’s rights under the relationship in respect of amounts which at that time are not yet due and payable; and

(b)the release of all the company’s liabilities under the relationship in respect of amounts which at that time are not yet due and payable.

Annotations:

Amendments (Textual)

F56S. 85(2)(a) substituted (24.7.2002 with effect as mentioned in s. 82(2) of the amending Act) by Finance Act 2002 (c. 23), s. 82(1), Sch. 25 Pt. 1 para. 5(2); and before the substitution of this paragraph the words "generally accepted accounting practice" were substituted (24.7.2002) for the words "normal accountancy practice" by Finance Act 2002 (c. 23), s. 103(4)(d)

F57Words in s. 85(2)(b) inserted (24.7.2002 with effect as mentioned in s. 82(2) of the amending Act) by Finance Act 2002 (c. 23), s. 82(1), Sch. 25 Pt. 1 para. 5(3)

F58Word in s. 85(2)(b) repealed (24.7.2002 with effect in accordance with s. 79(3) of and Sch. 23 to the repealing Act) by Finance Act 2002 (c. 23), s. 141, Sch. 40 Pt. 3(10)

F59S. 85(2)(bb) inserted (24.7.2002 with effect as mentioned in s. 79(3) of the amending Act) by Finance Act 2002 (c. 23), s. 79(2), Sch. 23 Pt. 1 para. 4(2) (with Sch. 23 Pt. 3 para. 25)

F60Words in s. 85(2)(c) inserted (24.7.2002 with effect as mentioned in s. 79(3) of the amending Act) by Finance Act 2002 (c. 23), s. 79(2), Sch. 23 Pt. 1 para. 4(3) (with Sch. 23 Pt. 3 para. 25)

86 Application of accounting methods.E+W+S+N.I.

(1)This section has effect, subject to the following provisions of this Chapter, for the determination of which of the alternative authorised accounting methods that are available by virtue of section 85 above is to be used as respects the loan relationships of a company.

(2)Different methods may be used as respects different relationships or, as respects the same relationship, for different accounting periods or for different parts of the same accounting period.

(3)If a basis of accounting which is or equates with an authorised accounting method is used as respects any loan relationship of a company in a company’s statutory accounts, then the method which is to be used for the purposes of this Chapter as respects that relationship for the accounting period, or part of a period, for which that basis is used in those accounts shall be—

(a)where the basis used in those accounts is an authorised accounting method, that method; and

(b)where it is not, the authorised accounting method with which it equates.

[F61but this subsection is subject to subsections (3A) and (3D) below.]

[F62(3A)If, in the case of a company falling within subsection (8)(c) or (d) below, an authorised mark to market basis of accounting—

(a)would be used as respects some or all of the company’s loan relationships, were the company a UK company following generally accepted accounting practice, but

(b)is not the basis of accounting used as respects those loan relationships in the company’s statutory accounts,

the company may elect to use an authorised mark to market basis of accounting as its authorised accounting method for the purposes of this Chapter in relation to every loan relationship as respects which that basis would be used if the company were a UK company following generally accepted accounting practice.

(3B)Any election under subsection (3A) above—

(a)must be made before the expiration of the period of two years following the end of the company’s first accounting period beginning on or after 1st October 2002 in which it is party to a loan relationship in relation to which such an election may be made;

(b)has effect for that accounting period and all subsequent accounting periods of the company; and

(c)is irrevocable.

(3C)A company which makes an election under sub-paragraph (3A) above as respects its loan relationships shall be taken for the purposes of Schedule 26 to the Finance Act 2002 (derivative contracts) to have at the same time made an election under sub-paragraph (2) of paragraph 19 of that Schedule having effect—

(a)for the accounting periods mentioned in subsection (3B)(b) above, and

(b)as respects any derivative contracts to which the company is or may become party in any of those accounting periods,

and that election shall so have effect notwithstanding anything in paragraph (a) or (b) of sub-paragraph (3) of that paragraph.

(3D)If, in the case of a company falling within subsection (8)(c) or (d) below which has not made an election under subsection (3A) above,—

(a)an authorised mark to market basis of accounting would be used for an accounting period—

(i)as respects some or all of the company’s loan relationships, and

(ii)as respects some or all of the company’s derivative contracts,

were the company a UK company following generally accepted accounting practice, and

(b)that basis of accounting—

(i)is used in the company’s statutory accounts as respects those derivative contracts for that accounting period, but

(ii)is not the basis of accounting used in those accounts as respects those loan relationships for that accounting period,

the company must for that accounting period use an authorised mark to market basis of accounting as its authorised accounting method for the purposes of this Chapter in relation to every loan relationship as respects which that basis would be used if the company were a UK company following generally accepted accounting practice.]

(4)For any period or part of a period for which the authorised accounting method to be used as respects a loan relationship of a company is not

[F63(a)a method determined under subsection (3) above,

(b)an authorised mark to market method in accordance with an election under subsection (3A) above, or

(c)an authorised mark to market method in accordance with subsection (3D) above,]

an authorised accruals basis of accounting shall be used for the purposes of this Chapter as respects that loan relationship.

(5)For the purposes of this section (but subject to subsection (6) below)—

(a)a basis of accounting equates with an authorised accruals basis of accounting if it purports to allocate payments under a loan relationship to accounting periods according to when they are taken to accrue; and

(b)a basis of accounting equates with an authorised mark to market basis of accounting if (without equating with an authorised accruals basis of accounting) it purports in respect of a loan relationship—

(i)to produce credits or debits computed by reference to the determination, as at different times in an accounting period, of a fair value; and

(ii)to produce credits or debits relating to payments under that relationship according to when they become due and payable.

(6)An accounting method which purports to make any such allocation of payments under a loan relationship as is mentioned in subsection (5)(a) above shall be taken for the purposes of this section to equate with an authorised mark to market basis of accounting (rather than with an authorised accruals basis of accounting) if—

(a)it purports to bring that relationship into account in each accounting period at a value which would be a fair value if the valuation were made on the basis that interest under the relationship were to be disregarded to the extent that it has already accrued; and

(b)the credits and debits produced in the case of that relationship by that method (when it is properly applied) correspond, for all practical purposes, to the credits and debits produced in the case of that relationship, and for the same accounting period, by an authorised mark to market basis of accounting.

(7)In this section

  • F64fair value” has the same meaning as in section 85 above.

  • [F65UK company” means a company incorporated or formed under the law of a part of the United Kingdom.]

(8)[F66In this Chapter]statutory accounts”, in relation to a company, means—

(a)any accounts relating to that company that are drawn up in accordance with any requirements of the M54Companies Act 1985 or the M55Companies (Northern Ireland) Order 1986 that apply in relation to that company;

(b)any accounts relating to that company that are drawn up in accordance with any requirements of regulations under section 70 of the M56Friendly Societies Act 1992 that apply in relation to that company;

(c)any accounts relating to that company which are accounts to which Part I of Schedule 21C to the M57Companies Act 1985 or Part I of Schedule 21D to that Act (companies with UK branches) applies;

(d)in the case of a company which—

(i)is not subject to any such requirements as are mentioned in paragraphs (a) or (b) above, and

(ii)is a company in whose case there are no accounts for the period in question that fall within paragraph (c) above,

any accounts relating to the company drawn up in accordance with requirements imposed in relation to that company under the law of its home State; and

(e)in the case of a company which—

(i)is not subject to any such requirements as are mentioned in paragraphs (a), (b) or (d) above, and

(ii)is a company in whose case there are no accounts for the period in question that fall within paragraph (c) above,

the accounts relating to the company that most closely correspond to the accounts which, in the case of a company formed and registered under the Companies Act 1985, are required under that Act.

(9)For the purposes of subsection (8) above the home State of a company is the country or territory under whose law the company is incorporated.

Annotations:

Amendments (Textual)

F61Words in s. 86(3) inserted (24.7.2002 with effect as mentioned in s. 82(2) of the amending Act) by Finance Act 2002 (c. 23), s. 82(1), Sch. 25 Pt. 1 para. 6(2)

F62S. 86(3A)-(3D) inserted (24.7.2002 with effect as mentioned in s. 82(2) of the amending Act) by Finance Act 2002 (c. 23), s. 82(1), Sch. 25 Pt. 1 para. 6(3)

F63S. 86(4)(a)-(c) substituted (24.7.2002 with effect as mentioned in s. 82(2) of the amending Act) for words by Finance Act 2002 (c. 23), s. 82(1), Sch. 25 Pt. 1 para. 6(4)

F64In s. 86(7) the words from ""fair value"" onwards become a separate definition (24.7.2002 with effect as mentioned in s. 82(2) of the amending Act) by virtue of Finance Act 2002 (c. 23), s. 82(1), Sch. 25 Pt. 1 para. 6(5)

F65In s. 86(7) definition of "UK company" inserted (24.7.2002 with effect as mentioned in s. 82(2) of the amending Act) by Finance Act 2002 (c. 23), s. 82(1), Sch. 25 Pt. 1 para. 6(5)

F66Words in s. 86(8) substituted (24.7.2002 with effect as mentioned in s. 82(2) of the amending Act) by Finance Act 2002 (c. 23), s. 82(1), Sch. 25 Pt. 1 para. 6(6)

Marginal Citations

87 Accounting method where parties have a connection.E+W+S+N.I.

(1)This section applies in the case of a loan relationship of a company where for any accounting period there is a connection between the company and—

(a)in the case of a debtor relationship of the company, a person standing in the position of a creditor as respects the debt in question; or

(b)in the case of a creditor relationship of the company, a person standing in the position of a debtor as respects that debt.

(2)The only accounting method authorised for the purposes of this Chapter for use by the company as respects the loan relationship shall be an authorised accruals basis of accounting.

(3)For the purposes of this section there is a connection between a company and another person for an accounting period if (subject to subsection (4) and section 88 below)—

(a)the other person is a company and there is a time in that period F67. . . when one of the companies has had control of the other; [F68or]

(b)the other person is a company and there is a time in that period F69. . . when both the companies have been under the control of the same person; or

(c)F70. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4)Two companies which have at any time been under the control of the same person shall not, by virtue of that fact, be taken for the purposes of this section to be companies between whom there is a connection if the person was the Crown, a Minister of the Crown, a government department, a Northern Ireland department, a foreign sovereign power or an international organisation.

(5)The references in subsection (1) above to a person who stands in the position of a creditor or debtor as respects a loan relationship include references to a person who indirectly stands in that position by reference to a series of loan relationships [F71or money debts which would be loan relationships if a company directly stood in the position of creditor or debtor] .

[F72(5A)Where a trade, profession or business is carried on by two or more persons in partnership (“the firm”) and the firm stands in the position of a creditor or debtor as respects a money debt, any question—

(a)whether there is for the purposes of this Chapter a connection, within the meaning of this section, between any two companies for an accounting period in the case of a loan relationship, or

(b)to what extent any amount is to be treated under this Chapter in any particular way as a result of there being, or not being, such a connection,

shall be determined as if to the extent of his appropriate share each of the partners separately, instead of the firm, stood in the position of a creditor or, as the case may be, debtor as respects the money debt.

The reference in the words following paragraph (b) above to partners does not include a reference to the general partner of a limited partnership which is a collective investment scheme within the meaning of section 235 of the Financial Services and Markets Act 2000.

(5B)For the purposes of subsection (5A) above, a partner’s “appropriate share” is the share that would be apportioned to him if an apportionment were made in the shares in which any profit or loss computed in accordance with subsection (1) of section 114 of the Taxes Act 1988 for the accounting period in question would be apportioned between the partners under subsection (2) of that section.]

(6)F73. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7)F73. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(8)F73. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Annotations:

Amendments (Textual)

F67Words in s. 87(3)(a) repealed (24.7.2002 with effect as mentioned in s. 82(2) of the repealing Act) by Finance Act 2002 (c. 23), ss. 82(1), 141, Sch. 25 Pt. 1 para. 7(2)(a), Sch. 40 Pt. 3(12)

F68Word in s. 87(3)(a) inserted (24.7.2002 with effect as mentioned in s. 82(2) of the amending Act) by Finance Act 2002 (c. 23), s. 82(1), Sch. 25 Pt. 1 para. 7(2)(b)

F69Words in s. 87(3)(b) repealed (24.7.2002 with effect as mentioned in s. 82(2) of the repealing Act) by Finance Act 2002 (c. 23), ss. 82(1), 141, Sch. 25 Pt. 1 para. 7(3), Sch. 40 Pt. 3(12)

F70S. 87(3)(c) repealed (24.7.2002 with effect as mentioned in s. 82(2) of the repealing Act) by Finance Act 2002 (c. 23), ss. 82(1), 141, Sch. 25 Pt. 1 para. 7(4), Sch. 40 Pt. 3(12)

F71Words in s. 87(5) inserted (24.7.2002 with effect as mentioned in s. 82(2) of the amending Act) by Finance Act 2002 (c. 23), s. 82(1), Sch. 25 Pt. 1 para. 7(5)

F72S. 87(5A)(5B) inserted (24.7.2002 with effect as mentioned in s. 82(2) of the amending Act) by Finance Act 2002 (c. 23), s. 82(1), Sch. 25 Pt. 1 para. 7(6)

F73S. 87(6)-(8) repealed (24.7.2002 with effect as mentioned in s. 82(2) of the repealing Act) by Finance Act 2002 (c. 23), ss. 82(1), 141, Sch. 25 Pt. 1 para. 7(7), Sch. 40 Pt. 3(12)

Modifications etc. (not altering text)

C10S. 87(3) applied (24.7.2002) by Finance Act 2002 (c. 23), s. 73(8)

C11S. 87(3)(4) applied (with modifications) (24.7.2002 with effect as mentioned in s. 83(3)(4) of the amending Act) by Finance Act 2002 (c. 23), s. 83(1), Sch. 26 Pt. 2 paras. 6(9), 7(8) (with Sch. 26 Pt. 2 para. 10(2))

S. 87(3)(4) applied (with modifications) (24.7.2002 with effect as mentioned in s. 83(3)(4) of the amending Act) by Finance Act 2002 (c. 23), s. 83(1), Sch. 26 Pt. 6 para. 26(6)

[F7487A Meaning of “control” in section 87E+W+S+N.I.

(1)For the purposes of section 87 above, “control”, in relation to a company, means the power of a person to secure—

(a)by means of the holding of shares or the possession of voting power in or in relation to the company or any other company, or

(b)by virtue of any powers conferred by the articles of association or other document regulating the company or any other company,

that the affairs of the company are conducted in accordance with his wishes.

(2)There shall be left out of account for the purposes of this section—

(a)any shares held by a company, and

(b)any voting power or other powers arising from shares held by a company,

if a profit on a sale of the shares would be treated as a trading receipt of a trade carried on by the company and the shares are not, within the meaning of Chapter 1 of Part 12 of the Taxes Act 1988, assets of an insurance company’s long-term insurance fund (see section 431(2) of that Act).

(3)Where section 114 of the Taxes Act 1988 (partnerships involving companies: special rules for computing profits and losses) applies in relation to a partnership, any property, rights or powers held or exercisable for the purposes of the partnership shall be treated for the purposes of this section, as respects any time in an accounting period of the partnership, as if—

(a)the property, rights or powers had been apportioned between, and were held or exercisable by, the partners severally, and

(b)the apportionment had been in the shares in which the profit or loss of the accounting period of the partnership would be apportioned between the partners under subsection (2) of that section,

but taking the references in paragraphs (a) and (b) above to partners as not including a reference to the general partner of a limited partnership which is a collective investment scheme within the meaning of section 235 of the Financial Services and Markets Act 2000.]]

Annotations:

Amendments (Textual)

F74S. 87A inserted (24.7.2002 with effect as mentioned in s. 82(2) of the amending Act) by Finance Act 2002 (c. 23), s. 82(1), Sch. 25 Pt. 1 para. 8

Modifications etc. (not altering text)

C12S. 87A applied (with modifications) (24.7.2002 with effect as mentioned in s. 83(3)(4) of the amending Act) by Finance Act 2002 (c. 23), s. 83(1), Sch. 26 Pt. 2 paras. 6(9), 7(8) (with Sch. 26 Pt. 2 para. 10(2))

S. 87A applied (with modifications) (24.7.2002 with effect as mentioned in s. 83(3)(4) of the amending Act) by Finance Act 2002 (c. 23), s. 83(1), Sch. 26 Pt. 6 para. 26(6)

88 Exemption from section 87 in certain cases.E+W+S+N.I.

(1)Subject to subsection (5) below, where a creditor relationship of a company is one to which that company is a party in any accounting period in exempt circumstances, any connection for that accounting period between the company and a person who stands in the position of a debtor as respects the debt shall be disregarded for the purposes of section 87 above.

(2)A company having a creditor relationship in any accounting period shall, for that period, be taken for the purposes of this section to be a party to that relationship in exempt circumstances if—

(a)the company, in the course of carrying on any activities forming an integral part of a trade carried on by that company in that period, disposes of or acquires assets representing creditor relationships;

(b)that period is one for which the company uses an authorised mark to market basis of accounting as respects all the creditor relationships represented by assets acquired in the course of those activities;

(c)the asset representing the creditor relationship in question was acquired in the course of those activities;

(d)that asset is either—

(i)listed on a recognised stock exchange at the end of that period; or

(ii)a security the redemption of which must occur within twelve months of its issue;

(e)there is a time in that period when assets of the same kind as the asset representing the loan relationship in question are in the beneficial ownership of persons other than the company; and

(f)there is not more than three months, in aggregate, in that accounting period during which the equivalent of 30 per cent. or more of the assets of that kind is in the beneficial ownership of connected persons.

(3)An insurance company carrying on basic life assurance and general annuity business and having a creditor relationship in any accounting period shall, for that period, be taken for the purposes of this section to be a party to that relationship in exempt circumstances if—

(a)assets of the company representing any of its creditor relationships are linked for that period to its basic life assurance and general annuity business;

(b)that period is one for which the company uses an authorised mark to market basis of accounting as respects all the creditor relationships of the company represented by assets that are so linked;

(c)the asset representing the creditor relationship in question is so linked;

(d)that asset is either—

(i)listed on a recognised stock exchange at the end of that period; or

(ii)a security the redemption of which must occur within twelve months of its issue;

(e)there is a time in that period when assets of the same kind as the asset representing the creditor relationship in question are in the beneficial ownership of persons other than the company; and

(f)there is not more than three months, in aggregate, in that accounting period during which the equivalent of 30 per cent. or more of the assets of that kind is in the beneficial ownership of connected persons.

(4)For the purposes of subsections (2) and (3) above—

(a)assets shall be taken to be of the same kind where they are treated as being of the same kind by the practice of any recognised stock exchange, or would be so treated if dealt with on such a stock exchange; and

(b)a connected person has the beneficial ownership of an asset wherever there is, or (apart from this section) would be, a connection (within the meaning of section 87 above) between—

(i)the person who has the beneficial ownership of the asset, and

(ii)a person who stands in the position of a debtor as respects the money debt by reference to which any loan relationship represented by that asset subsists.

(5)Where for any accounting period—

(a)subsection (1) above has effect in the case of a creditor relationship of a company, and

(b)the person who stands in the position of a debtor as respects the debt in question is also a company,

that subsection shall not apply for determining, for the purposes of so much of section 87 above as relates to the corresponding debtor relationship, whether there is a connection between the two companies.

(6)Subsection (5) of section 87 above shall apply for the purposes of this section as it applies for the purposes of that section.

(7)In this section “basic life assurance and general annuity business” and “insurance company” have the same meanings as in Chapter I of Part XII of the Taxes Act 1988, and section 432ZA of that Act (linked assets) shall apply for the purposes of this section as it applies for the purposes of that Chapter.

[F7588A Accounting method where rate of interest is resetE+W+S+N.I.

(1)This section applies where—

(a)the conditions in subsections (2) and (3) below are satisfied in relation to an asset representing a creditor relationship of a company; and

(b)the object, or one of the main objects, of the company entering into or becoming a party to the creditor relationship was the securing, whether for itself or any other person, of a tax advantage (within the meaning of Chapter 1 of Part 17 of the Taxes Act 1988).

(2)The first condition is that there is or has at any time been a change in—

(a)the rate of interest payable in the case of the asset;

(b)the amount payable to discharge the debt; or

(c)the time at which any payments under the asset (whether of interest or otherwise) fall due.

(3)The second condition is that the difference between—

(a)the fair value of the asset immediately after the change, and

(b)the issue price of the asset,

is equal to at least 5 per cent of the issue price of the asset.

(4)On and after the day on which the conditions in subsections (2) and (3) above become satisfied in the case of an asset, the only accounting method authorised for the purposes of this Chapter for use by any company as respects a creditor relationship represented by the asset shall be an authorised mark to market basis of accounting.

(5)Where section 90 below applies in consequence of subsection (4) above, no debit shall be brought into account under subsection (2)(c) or (3)(b) of that section.

(6)In determining the fair value of an asset for any purpose of this section it shall be assumed that all amounts payable by the debtor will be paid in full as they fall due.]]

Annotations:

Amendments (Textual)

F75S. 88A inserted (24.7.2002 with effect as mentioned in s. 71(2)(4) of the amending Act) by Finance Act 2002 (c. 23), s. 71(1)

89 Inconsistent application of accounting methods.E+W+S+N.I.

F76. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Annotations:

Amendments (Textual)

F76S. 89 repealed (24.7.2002 with effect as mentioned in s. 82(2) of the repealing Act) by Finance Act 2002 (c. 23), ss. 82(1), 141, Sch. 25 Pt. 1 para. 9, Sch. 40 Pt. 3(12)

90 Changes of accounting method.E+W+S+N.I.

(1)This section applies where

[F77(a)]different authorised accounting methods are used for the purposes of this Chapter as respects the same loan relationship for different parts of the same accounting period or for successive accounting periods.

[F78(b)the change of method is in pursuance of a requirement of this Chapter as to the basis of accounting to be used for the purposes of this Chapter in the case of the loan relationship; and

(c)the case does not fall within subsection (1A) below]

[F79(1A)The case falls within this subsection if, for the purposes of the company’s statutory accounts, the different authorised accounting methods mentioned in subsection (1) above are also used as respects the loan relationship for the same parts of the same accounting period or, as the case may be, for the same successive accounting periods as are mentioned in subsection (1) above.]

(2)Where, in the case of any loan relationship, the use of any authorised accounting method is superseded in the course of any accounting period by the use of another—

(a)the assumptions specified in subsection (4) below shall be made;

(b)each method shall be applied on those assumptions as respects the part of the period for which it is used; and

(c)the credits and debits given by the application of those methods on those assumptions shall be brought into account in the accounting period in which the change of method takes effect.

(3)Where, in the case of any loan relationship, the use of any authorised accounting method is superseded as from the beginning of an accounting period by the use of another—

(a)a net credit or debit shall be computed (treating any debit used in the computation as a negative amount) by—

(i)aggregating the credits and debits which, on the assumptions specified in subsection (4) below, would have been given in respect of that relationship for the successive accounting periods by the use for each period of the accounting method actually used for that period;

(ii)aggregating the credits and debits so given without the making of those assumptions; and

(iii)subtracting the second aggregate from the first;

and

(b)the net credit or debit shall be brought into account for the purposes of this Chapter in the accounting period as from the beginning of which the change of method takes effect.

(4)The assumptions mentioned in subsections (2) and (3) above are—

(a)that the company ceased to be a party to the relationship immediately before the end of the period, or part of a period, for which the superseded method is used;

(b)that the company again became a party to that relationship as from the beginning of the period or, as the case may be, part of a period for which the other authorised accounting method is used;

(c)that the relationship to which the company is deemed to have become a party is separate and distinct from the one to which it is deemed to have ceased to be a party;

(d)that the amount payable under the transaction comprised in each of the assumptions specified in paragraphs (a) and (b) above was equal to the fair value of the relationship; and

(e)so far as relevant, that that amount became due at the time when the company is deemed to have ceased to be a party to the relationship or, as the case may be, to have again become a party to it.

(5)Where—

(a)a mark to market basis of accounting is superseded by an accruals basis of accounting in the case of any loan relationship,

[F80(aa)the relationship is one to which the company in question is still a party at the end of the period or part of a period for which the accruals basis of accounting is used, and

(b)the amount which would have accrued in respect of that relationship in the period or part of a period for which the accruals basis of accounting is used falls to be determined for the purposes of this section in accordance with the assumptions mentioned in subsection (4) above,]

[F81that amount shall be computed using for the closing value as at the end of that period or part of a period the amount specified in subsection (6) below.]

[F82(6)That amount is—

(a)in a case to which subsection (3) above applies, the amount taken for the purposes of subsection (3)(a)(ii) above to be the closing value as at the end of the period for which the accruals basis of accounting is used; and

(b)in a case to which subsection (2) above applies, the amount which, without the making of the assumptions mentioned in subsection (4) above, would be taken to be the closing value as at the end of the part of the period for which that basis is used.]

(7)In this section “fair value” has the same meaning as in section 85 above.

Annotations:

Amendments (Textual)

F77Words in s. 90(1) renumbered (24.7.2002 with effect as mentioned in s. 82(2) of the amending Act) as s. 90(1)(a) by virtue of Finance Act 2002 (c. 23), s. 82(1), Sch. 25 Pt. 1 para. 10(2)

F78S. 90(1)(b)(c) added (24.7.2002 with effect as mentioned in s. 82(2) of the amending Act) by Finance Act 2002 (c. 23), s. 82(1), Sch. 25 Pt. 1 para. 10(2)

F79S. 90(1A) inserted (24.7.2002 with effect as mentioned in s. 82(2) of the amending Act) by Finance Act 2002 (c. 23), s. 82(1), Sch. 25 Pt. 1 para. 10(3)

F80S. 90(5)(aa) inserted (19.3.1997 with effect as mentioned in s. 83(5) of the amending Act) by 1997 c. 16, s. 83(2)

F81Words in s. 90 substituted (19.3.1997 with effect as mentioned in s. 83(5) of the amending Act) by 1997 c. 16, s. 83(3)

F82S. 90(6) substituted (19.3.1997 with effect as mentioned in s. 83(5) of the amending Act) by 1997 c. 16, s. 83(4)

91 Payments subject to deduction of tax.E+W+S+N.I.

F83. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Annotations:

Amendments (Textual)

F83S. 91 repealed (24.7.2002 with effect as mentioned in s. 82(2) of the repealing Act) by Finance Act 2002 (c. 23), ss. 82(1), 141, Sch. 25 Pt. 1 para. 11, Sch. 40 Pt. 3(12)

Special casesE+W+S+N.I.

92[F84Convertible securities etc: creditor relationships]E+W+S+N.I.

(1)This section applies to an asset if—

(a)the asset represents a creditor relationship of a company;

(b)the rights attached to the asset include provision by virtue of which the company is or may become entitled to acquire (whether by conversion or exchange or otherwise) [F85shares in a company];

[F86(bb)the only shares that may be so acquired under any such provision are shares which, at the time when the asset comes or came into existence are or were, and at all times since have been,—

(i)qualifying ordinary shares in one or more companies, or

(ii)mandatorily convertible preference shares in one or more companies;]

(c)the extent to which shares may be acquired under [F87any such provision] is not determined using a cash value which is specified in that provision or which is or will be ascertainable by reference to the terms of that provision;

(d)the asset is not a relevant discounted security within the meaning of Schedule 13 to this Act [F88or an excluded indexed security within the meaning of that Schedule];

[F89(dd)the rights attached to the asset do not include provision by virtue of which the company may require a person other than the issuing company to acquire the asset for an amount which would, if payable on redemption, be an amount involving a deep gain for the purposes of paragraph 3 of that Schedule;]

(e)at the time when the asset came into existence there was a more than negligible likelihood that [F90the rights] to acquire shares in a company would in due course be exercised to a significant extent; F91. . .

[F92(ee)the rights to acquire shares in a company (whether by conversion or exchange or otherwise) are such that exercising them to their full extent would result in the replacement of the asset—

(i)wholly by shares, or

(ii)in a case where exercising the rights to acquire shares to their full extent would not confer an entitlement to a whole number of shares, wholly by shares and a cash adjustment in respect of the fraction of a share so arising,

and the ending of the creditor relationship; and]

(f)the asset is not one the disposal of which by the company would fall to be treated as a disposal in the course of activities forming an integral part of a trade carried on by the company.

[F93(1A)In subsection (1) above—

  • the issuing company” means the company that brought into existence the asset mentioned in subsection (1) above;

  • mandatorily convertible preference shares” means shares (other than qualifying ordinary shares) which are issued upon terms that stipulate that, by a time no more than 24 hours after their acquisition by a person who immediately before that acquisition had the creditor relationship represented by those shares, they must be converted into or exchanged for qualifying ordinary shares;

  • qualifying ordinary shares” means shares in a company which satisfy the conditions in subsections (1B) and (1C) below.

(1B)The first condition is that the shares are shares representing some or all of the issued share capital (by whatever name called) of the company, other than—

(a)capital the holders of which have a right to a dividend at a fixed rate but have no other right to share in the profits of the company, or

(b)capital the holders of which have no right to a dividend of any description nor any other right to share in the profits of the company.

(1C)The second condition is that the shares are—

(a)shares which are listed on a recognised stock exchange, or

(b)shares in a company which is a trading company or a holding company;

and for this purpose “trading company” and “holding company” have the meaning given by paragraph 22(1) of Schedule A1 to the Taxation of Chargeable Gains Act 1992.]

[F94(1D)For the purposes of subsection (1)(ee)(ii) above, the amount which may be paid by way of a cash adjustment may not exceed five per cent of the value of the relevant shares at the relevant time; and for these purposes—

(a)the relevant shares” means the shares which would be acquired by exercising the rights attached to the asset to their full extent, and

(b)the relevant time” means the time at which the rights to acquire those shares are exercised.]

[F95(1E)This section does not apply to an asset representing a creditor relationship of a company if, for the accounting period in which the asset comes into existence, there is a connection between the company and the company which is the issuing company in relation to that asset.

(1F)If, in the case of an asset representing a creditor relationship of a company, the company and the company which is the issuing company in relation to that asset become companies between which, for any accounting period, there is a connection—

(a)the asset shall cease to be an asset to which this section applies, and

(b)it shall be treated, for the purposes of subsection (7)(a) below, as having ceased to be such an asset at the time when the circumstances giving rise to that connection arose.

(1G)Section 87(3) above (connection between a company and another person for an accounting period) applies for the purposes of subsections (1E) and (1F) above.]

(2)The amounts falling for any accounting period to be brought into account for the purposes of this Chapter in respect of a creditor relationship represented by an asset to which this section applies shall be confined to

[F96(a)]amounts relating to interest[F97; and

(b)amounts relating to exchange gains or losses]

(3)Only an authorised accruals basis of accounting shall be used for ascertaining those amounts.

(4)Amounts shall be brought into account in computing the profits of the company for the purposes of corporation tax as if the M58Taxation of Chargeable Gains Act 1992 had effect in relation to any asset to which this section applies as it has effect in relation to an asset that does not represent a loan relationship.

(5)For the purposes of that Act the amount or value of the consideration for any disposal or acquisition of the asset shall be treated as adjusted so as to exclude so much of it as, on a just and reasonable apportionment, relates to any interest which—

(a)falls to be brought into account under subsections (2) and (3) above as accruing to any company at any time; and

(b)in consequence of, or of the terms of, the disposal or acquisition, is not paid or payable to the company to which it is treated for the purposes of this Chapter as accruing.

[F98(5A)For the purposes of that Act the amount or value of the consideration for any disposal of the asset—

(a)shall be increased by the addition of any relevant exchange losses, determined in accordance with subsection (5C) below; and

(b)shall (after giving effect to any such increase) be reduced (but not below nil) by the deduction of any relevant exchange gains, determined in accordance with that subsection.

(5B)In subsection (5C) below—

  • relevant accounting period” means any accounting period beginning on or after 1st October 2002; and

  • the relevant condition” is that the asset in question is an asset to which this section applies and is held by the company making the disposal.

(5C)For the purposes of subsection (5A) above, relevant exchange gains or, as the case may be, losses in the case of any asset are—

(a)the amount of any exchange gains or, as the case may be, losses brought into account under subsections (2) and (3) above in respect of the asset, by the company making the disposal, for a relevant accounting period throughout which the relevant condition is satisfied; and

(b)for any relevant accounting period not falling within paragraph (a) above in which the relevant condition is at some time satisfied, an amount which, on a just and reasonable apportionment, represents so much of the amount of any exchange gains or, as the case may be, losses brought into account under subsections (2) and (3) above in respect of the asset, by the company making the disposal, for that period as is referable to the part of the period for which the relevant condition is satisfied.

(5D)Where—

(a)the amount of the relevant exchange gains falling to be deducted under subsection (5A)(b) above, exceeds

(b)the amount required to reduce the amount or value of the consideration to nil,

the excess shall be treated for the purposes of section 38(1)(c) of the Taxation of Chargeable Gains Act 1992 as incidental costs of making the disposal of the asset.]

(6)In [F99subsections (5) and (5A)] above the references to a disposal, in relation to an asset, are references to anything which—

(a)is a disposal of that asset (within the meaning of the Taxation of Chargeable Gains Act 1992); or

(b)would be such a disposal but for section F100. . . 116(10) of that Act (reorganisations etc.);

and the references to the acquisition of an asset shall be construed accordingly.

[F101(7)Where an asset representing a creditor relationship of a company—

(a)ceases at any time to be an asset to which this section applies, but

(b)does not cease at that time to represent a creditor relationship of that company,

the company shall be deemed for the purposes of the M59Taxation of Chargeable Gains Act 1992 and this Chapter to have disposed of the asset immediately before that time for the relevant consideration, and to have re-acquired it immediately after that time for the relevant consideration.

(8)Any deemed disposal and re-acquisition under subsection (7) above shall be treated for the purposes of that Act of 1992 as a transaction in the case of which—

(a)sections 127 to 130 of that Act would apply, apart from the provisions of section 116 of that Act, by virtue of any provision of Chapter II of Part IV of that Act;

(b)the asset in question represents both the original shares and the new holding for the purposes of those sections;

(c)the market value of the asset at the time of the transaction is an amount equal to the relevant consideration.

(9)Subject to [F102subsections (10) and (10A)] below, in subsections (7) and (8) above “the relevant consideration”, in relation to an asset, means the amount that would have been taken, in accordance with the relevant accounting method, to be the value of the asset at the time of its deemed disposal if that method had been applied to the asset for tax purposes at all times until then.

(10)Subsection (5) above shall not apply in the case of a deemed disposal and re-acquisition under subsection (7) above; but the amount of the relevant consideration in such a case shall be treated for the purposes of the Taxation of Chargeable Gains Act 1992 as reduced by so much (if any) of the amount mentioned in subsection (9) above as is referable to interest which—

(a)is not paid or payable to the company before the time of the deemed disposal; but

(b)is interest falling to be brought into account under subsections (2) and (3) above as having accrued before that time.

[F103(10A)Subsection (5A) above shall not apply in the case of a deemed disposal and re-acquisition under subsection (7) above; but in any such case the amount of the relevant consideration, after any reduction under subsection (10) above, shall be treated for the purposes of the Taxation of Chargeable Gains Act 1992 as further adjusted by making the same additions and deductions (and for the purposes of both the disposal and the re-acquisition) as would fall to be made under subsection (5A) above if it were the consideration for an actual disposal and that subsection also applied in relation to the corresponding acquisition.]

(11)In subsection (9) above “the relevant accounting method”, in relation to an asset representing a creditor relationship of a company, means the accounting method which, for the accounting period of that company in which the deemed re-acquisition takes place, is used as respects that asset and the part of that accounting period beginning with the deemed re-acquisition.]

Annotations:

Amendments (Textual)

F84S. 92 sidenote substituted (24.7.2002 with effect as mentioned in s. 72(13)-(16) of the amending Act) by virtue of Finance Act 2002 (c. 23), s. 72(12)

F85Words in s. 92(1)(b) substituted (24.7.2002 with effect as mentioned in s. 72(13)-(16) of the amending Act) by Finance Act 2002 (c. 23), s. 72(3)

F86S. 92(1)(bb) inserted (24.7.2002 with effect as mentioned in s. 72(13)-(16) of the amending Act) by Finance Act 2002 (c. 23), s. 72(4)

F87Words in s. 92(1)(c) substituted (24.7.2002 with effect as mentioned in s. 72(13)-(16) of the amending Act) by Finance Act 2002 (c. 23), s. 72(5)

F88Words in s. 92(1)(d) inserted (24.7.2002 with effect as mentioned in s. 72(13)-(16) of the amending Act) by Finance Act 2002 (c. 23), s. 72(6)

F89S. 92(1)(dd) inserted (24.7.2002 with effect as mentioned in s. 72(13)-(16) of the amending Act) by Finance Act 2002 (c. 23), s. 72(7)

F90Words in s. 92(1)(e) substituted (24.7.2002 with effect as mentioned in s. 72(13)-(16) of the amending Act) by Finance Act 2002 (c. 23), s. 72(8)(a)

F91Word in s. 92(1)(e) repealed (24.7.2002 with effect as mentioned in s. 72(13)-(16) of the repealing Act) by Finance Act 2002 (c. 23), ss. {72(8)(b)}, 141, {Sch. 40 Pt. 3(9)}

F92S. 92(1)(ee) inserted (24.7.2002 with effect as mentioned in s. 72(13)-(16) of the amending Act) by Finance Act 2002 (c. 23), s. 72(9)

F93S. 92(1A)-(1C) inserted (24.7.2002 with effect as mentioned in s. 72(13)-(16) of the amending Act) by Finance Act 2002 (c. 23), s. 72(10)

F94S. 92(1D) inserted (24.7.2002 with effect as mentioned in s. 72(13)-(16) of the amending Act) by Finance Act 2002 (c. 23), s. 72(11)

F95S. 92(1E)-(1G) inserted (24.7.2002 with effect as mentioned in s. 73(2)-(9) of the amending Act) by Finance Act 2002 (c. 23), s. 73(1)

F96Words in s. 92(2) renumbered (24.7.2002 with effect as mentioned in s. 79(3) of the amending Act) as s. 92(2)(a) by virtue of Finance Act 2002 (c. 23), s. 79(2), Sch. 23 Pt. 1 para. 5(2) (with Sch. 23 Pt. 3 para. 25)

F97S. 92(2)(b) and preceding word inserted (24.7.2002 with effect as mentioned in s. 79(3) of the amending Act) by Finance Act 2002 (c. 23), s. 79(2), Sch. 23 Pt. 1 para. 5(2) (with Sch. 23 Pt. 3 para. 25)

F98S. 92(5A)-(5D) inserted (24.7.2002 with effect as mentioned in s. 79(3) of the amending Act) by Finance Act 2002 (c. 23), s. 79(2), Sch. 23 Pt. 1 para. 5(3) (with Sch. 23 Pt. 3 para. 25)

F99Words in s. 92(6) substituted (24.7.2002 with effect as mentioned in s. 79(3) of the amending Act) by Finance Act 2002 (c. 23), s. 79(2), Sch. 23 Pt. 1 para. 5(4)(a) (with Sch. 23 Pt. 3 para. 25)

F100Words in s. 92(6)(b) repealed (24.7.2002 with effect as mentioned in s. 79(3) of and Sch. 23 to the repealing Act) by Finance Act 2002 (c. 23), ss. 79(2), 141, Sch. 23 Pt. 1 para. 5(4)(b), Sch. 40 Pt. 3(10) (with Sch. 23 Pt. 3 para. 25)

F101S. 92(7)-(11) inserted (27.7.1999 with effect as mentioned in s. 65(8) of the amending Act) by 1999 c. 16, s. 65(7)

F102Words in s. 92(9) substituted (24.7.2002 with effect as mentioned in s. 79(3) of the amending Act) by Finance Act 2002 (c. 23), s. 79(2), Sch. 23 Pt. 1 para. 5(5) (with Sch. 23 Pt. 3 para. 25)

F103S. 92(10A) inserted (24.7.2002 with effect as mentioned in s. 79(3) of the amending Act) by Finance Act 2002 (c. 23), s. 79(2), Sch. 23 Pt. 1 para. 5(6) (with Sch. 23 Pt. 3 para. 25)

Modifications etc. (not altering text)

C13S. 92 modified (27.7.1999) by 1999 c. 16, s. 65(9)

C14S. 92(7) modified (24.7.2002 with effect as mentioned in s. 73(2)-(9) of the amending Act) by Finance Act 2002 (c. 23), s. 73(4)

Marginal Citations

[F10492A Convertible securities etc: debtor relationshipsE+W+S+N.I.

(1)This section applies to a liability if—

(a)the liability represents a debtor relationship of a company (“the debtor company”); and

(b)the rights attached to the asset that represents the corresponding creditor relationship include provision by virtue of which a person is or may become entitled to acquire (whether by conversion or exchange or otherwise)—

(i)any shares in the debtor company, or

(ii)any shares in another company.

(2)The debits falling for any accounting period to be brought into account for the purposes of this Chapter in respect of a debtor relationship represented by a liability to which this section applies shall not include debits in relation to any of the amounts falling within subsection (3) below.

(3)The amounts are—

(a)any amounts payable by the debtor company in respect of, or in connection with, any such acquisition of shares as is described in subsection (1)(b)(ii) above, but not any amounts to which subsection (4) below applies; and

(b)any charges or expenses incurred by the debtor company as described in paragraph (b), (c) or (d) of section 84(3) above, where the related transaction in question relates to, or is connected with, the acquisition of shares by another person (whether by conversion or exchange or otherwise) as described in subsection (1)(b) above.

(4)This subsection applies to amounts payable by the debtor company, as described in subsection (3)(a) above, in respect of the debtor relationship in a case where—

(a)the debtor company is carrying on a banking business or a business consisting wholly or partly in dealing in securities, and

(b)it entered into the debtor relationship in the ordinary course of that business.

(5)For the purposes of subsection (4) above “securities” has the same meaning as in section 473 of the Taxes Act.

(6)Subject to subsection (7) below, only an authorised accruals basis of accounting shall be used for ascertaining the amounts which fall to be taken into account as described in subsection (2) above.

(7)The requirement in subsection (6) above to use an authorised accruals basis of accounting does not apply in the case of a debtor relationship where—

(a)the debtor company is carrying on a banking business or a business consisting wholly or partly in dealing in securities, and

(b)it entered into the debtor relationship in the ordinary course of that business.]]

Annotations:

Amendments (Textual)

F104S. 92A inserted (24.7.2002 with effect as mentioned in s. 74(2) of the amending Act) by Finance Act 2002 (c. 23), s. 74(1)

93 Relationships linked to the value of chargeable assets.E+W+S+N.I.

(1)This section applies in the case of any loan relationship of a company that is linked to the value of chargeable assets [F105 unless—

(a)in a case where the loan relationship is a creditor relationship, the asset representing the loan relationship is one] the disposal of which by the company would fall to be treated as a disposal in the course of activities forming an integral part of a trade carried on by the company.

[F106(b)in a case where the loan relationship is a debtor relationship, the liability representing the loan relationship is a liability entered into by the company in the course of activities forming an integral part of a trade carried on by the company; or

(c)the loan relationship is one to which section 93A below applies.]

(2)The amounts falling for any accounting period to be brought into account for the purposes of this Chapter in respect of the relationship shall be confined to amounts relating to interest.

(3)Only an authorised accruals basis of accounting shall be used for ascertaining those amounts.

(4)Amounts shall be brought into account in computing the profits of the company for the purposes of corporation tax as if the M60Taxation of Chargeable Gains Act 1992 had effect in relation to the asset representing the relationship as it has effect in relation to an asset that does not represent a loan relationship.

(5)For the purposes of that Act the amount or value of the consideration for any disposal or acquisition of the asset shall be treated as adjusted so as to exclude so much of it as, on a just and reasonable apportionment, relates to any interest which—

(a)falls to be brought into account under subsections (2) and (3) above as accruing to any company at any time; and

(b)in consequence of, or of the terms of, the disposal or acquisition, is not paid or payable to the company to which it is treated for the purposes of this Chapter as accruing.

(6)For the purposes of this section a loan relationship is linked to the value of chargeable assets if, in pursuance of any provision having effect for the purposes of that relationship, the amount that must be paid to discharge the money debt (whether on redemption of a security issued in relation to that debt or otherwise) is equal to the amount determined by applying a relevant percentage change in the value of chargeable assets to the amount falling for the purposes of this Chapter to be regarded as the amount of the original loan from which the money debt arises.

(7)In subsection (6) above the reference to a relevant percentage change in the value of chargeable assets is a reference to the amount of the percentage change (if any) over the relevant period in the value of chargeable assets of any particular description or in any index of the value of any such assets.

(8)In subsection (7) above “the relevant period” means—

(a)the period between the time of the original loan and the discharge of the money debt; or

(b)any other period in which almost all of that period is comprised and which differs from that period exclusively for purposes connected with giving effect to a valuation in relation to rights or liabilities under the loan relationship.

(9)If—

(a)there is a provision which, in the case of any loan relationship, falls within subsection (6) above,

(b)that provision is made subject to any other provision applying to the determination of the amount payable to discharge the money debt,

(c)that other provision is to the effect only that the amount so payable must not be less than a specified percentage of the amount falling for the purposes of this Chapter to be regarded as the amount of the original loan, and

(d)the specified percentage is not more than 10 per cent.,

that other provision shall be disregarded in determining for the purposes of this section whether the relationship is linked to the value of chargeable assets.

(10)For the purposes of this section an asset is a chargeable asset, in relation to a loan relationship of a company, if [F107the asset is—

(a)an estate or interest in land (wherever situated), or

(b)qualifying ordinary shares which are listed on a recognised stock exchange.]

(11)F108. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(12)In subsection (5) above references to a disposal, in relation to an asset, are references to anything which—

(a)is a disposal of that asset (within the meaning of the Taxation of Chargeable Gains Act 1992); or

(b)would be such a disposal but for section 127 or 116(10) of that Act (reorganisations etc.);

and the references to the acquisition of an asset shall be construed accordingly.

[F109(12A)In subsection (10)(b) above “qualifying ordinary shares”, in relation to a company, means shares representing some or all of the issued share capital (by whatever name called) of the company, other than—

(a)capital the holders of which have a right to a dividend at a fixed rate but have no other right to share in the profits of the company, or

(b)capital the holders of which have no right to a dividend of any description nor any other right to share in the profits of the company.]

(13)F110. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F111(14)This section is supplemented by section 93B below.]

Annotations:

Amendments (Textual)

F105Words in s. 93(1) substituted (24.7.2002 with effect as mentioned in s. 75(8)(9) of the amending Act) by Finance Act 2002 (c. 23), s. 75(2)(a)

F106S. 93(1)(b)(c) inserted (24.7.2002 with effect as mentioned in s. 75(8)(9) of the amending Act) by Finance Act 2002 (c. 23), s. 75(2)(b)

F107S. 93(10): words substituted (24.7.2002 with effect as mentioned in s. 75(8)(9) of the amending Act) for the words from "if" to the end of the subsection by Finance Act 2002 (c. 23), s. 75(3)

F108S. 93(11) repealed (24.7.2002 with effect as mentioned in s. 75(8)(9) of the repealing Act) by Finance Act 2002 (c. 23), ss. 75(4), 141, Sch. 40 Pt. 3(9)

F109S. 93(12A) inserted (24.7.2002 with effect as mentioned in s. 75(8)(9) of the amending Act) by Finance Act 2002 (c. 23), s. 75(5)

F110S. 93(13) repealed (24.7.2002 with effect as mentioned in s. 75(8)(9) of the repealing Act) by Finance Act 2002 (c. 23), ss. 75(6), 141, Sch. 40 Pt. 3(9)

F111S. 93(14) added (24.7.2002 with effect as mentioned in s. 75(8)(9) of the amending Act) by Finance Act 2002 (c. 23), s. 75(7)

Marginal Citations

[F11293A Relationships linked to the value of chargeable assets: guaranteed returnsE+W+S+N.I.

(1)This section applies to a loan relationship which is a creditor relationship of a company if—

(a)that loan relationship and one or more other transactions are associated transactions designed to produce a guaranteed return;

(b)any such other transaction is [F113 a derivative contract falling within paragraph 6 of Schedule 26 to the Finance Act 2002 (“an associated derivative contract”)]; and

(c)the guaranteed return comprises the return consisting of the amount that must be paid to discharge the money debt arising in connection with that loan relationship taken together with the return from any one or more of [F114the associated derivative contracts].

(2)For the purposes of this section a loan relationship of a company and one or more [F115associated derivative contracts] are transactions designed to produce a guaranteed return if, taking the transactions together, it would be reasonable to assume, from considering—

(a)the likely effect of the transactions,

(b)the circumstances in which the transactions are entered into, or in which any of them is entered into, or

(c)the matters in both of paragraphs (a) and (b),

that the main purpose of the transactions, or one of their main purposes, is or was the production of a guaranteed return from the loan relationship and [F116any one or more of the associated derivative contracts].

(3)For the purposes of this section a guaranteed return is produced from the loan relationship and [F117any one or more of the associated derivative contracts] wherever (taking all the transactions together) risks from fluctuations in the underlying subject matter are so eliminated or reduced as to produce a return from the transactions—

(a)F118. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b)which equates, in substance, to the return on an investment of money at interest.

(4)For the purposes of subsection (3) above the cases where risks from fluctuations in the underlying subject matter are eliminated or reduced shall be deemed to include any case where the main reason, or one of the main reasons, for the choice of that subject matter is—

(a)that there appears to be no risk that that subject matter will fluctuate; or

(b)that the risk that it will fluctuate appears to be insignificant.

(5)In this section—

(a)the references, in relation to a loan relationship, to the underlying subject matter are references to the value of chargeable assets of a particular description to which that relationship is linked;

[F119(b)the references, in relation to an associated derivative contract, to the underlying subject matter are to be construed in accordance with paragraphs 6(2)(a) and 11 of Schedule 26 to the Finance Act 2002.]

(6)Subsection (5)(a) above is to be construed in accordance with section 93 above.

(7)F120. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]]

Annotations:

Amendments (Textual)

F112S. 93A inserted (24.7.2002 with effect as mentioned in s. 76(2) of the amending Act) by Finance Act 2002 (c. 23), s. 76(1)

F113Words in s. 93A(1)(b) substituted (with effect in relation to accounting periods beginning on or after 1.10.2002 subject to Sch. 28 of the amending Act) by Finance Act 2002 (c. 23), s. 83, Sch. 27 para. 18(2)(a)

F114Words in s. 93A(1)(c) substituted (with effect in relation to accounting periods beginning on or after 1.10.2002 subject to Sch. 28 of the amending Act) by Finance Act 2002 (c. 23), s. 83, Sch. 27 para. 18(2)(b)

F115Words in s. 93A(2) substituted (with effect in relation to accounting periods beginning on or after 1.10.2002 subject to Sch. 28 of the amending Act) by Finance Act 2002 (c. 23), s. 83, Sch. 27 para. 18(3)(a)

F116Words in s. 93A(2) substituted (with effect in relation to accounting periods beginning on or after 1.10.2002 subject to Sch. 28 of the amending Act) by Finance Act 2002 (c. 23), s. 83, Sch. 27 para. 18(3)(b)

F117Words in s. 93A(3) substituted (with effect in relation to accounting periods beginning on or after 1.10.2002 subject to Sch. 28 of the amending Act) by Finance Act 2002 (c. 23), s. 83, Sch. 27 para. 18(4)(a)

F118S. 93A(3)(a) repealed (with effect in relation to accounting periods beginning on or after 1.10.2002 subject to Sch. 28 of the repealing Act) by Finance Act 2002 (c. 23), ss. 83, 141, Sch. 27 para. 18(4)(b), Sch. 40 Pt. 3(13)

F119S. 93A(5)(b) substituted (with effect in relation to accounting periods beginning on or after 1.10.2002 subject to Sch. 28 of the amending Act) by Finance Act 2002 (c. 23), s. 83, Sch. 27 para. 18(5)

F120S. 93A(7) repealed (with effect in relation to accounting periods beginning on or after 1.10.2002 subject to Sch. 28 of the repealing Act) by Finance Act 2002 (c. 23), ss. 83, 141, Sch. 27 para. 18(6), Sch. 40 Pt. 3(13)

[F12193B Loan relationships ceasing to be within section 93E+W+S+N.I.

(1)Where a loan relationship of a company—

(a)ceases at any time to be a loan relationship to which section 93 above applies, but

(b)does not cease at that time to be a loan relationship of that company,

subsection (2) below shall have effect in relation to the asset representing that relationship.

(2)Where this subsection has effect in relation to an asset representing a loan relationship of a company, the company shall be deemed for the purposes of the Taxation of Chargeable Gains Act 1992 and this Chapter—

(a)to have disposed of the asset for the relevant consideration immediately before the time when the loan relationship ceases to be one to which section 93 above applies, and

(b)to have re-acquired it for the relevant consideration immediately after that time.

(3)Any deemed disposal and re-acquisition of an asset under subsection (2) above shall be treated for the purposes of the Taxation of Chargeable Gains Act 1992 as a transaction in the case of which—

(a)sections 127 to 130 of that Act would apply, apart from the provisions of section 116 of that Act, by virtue of any provision of Chapter 2 of Part 4 of that Act;

(b)the asset in question represents both the original shares and the new holding for the purposes of those sections;

(c)the market value of the asset at the time of the transaction is an amount equal to the relevant consideration.

(4)Subject to subsection (5) below, in subsections (2) and (3) above “the relevant consideration”, in relation to an asset, means the amount that would have been taken, in accordance with the relevant accounting method, to be the value of the asset at the time of its deemed disposal if that method had been applied to the asset for tax purposes at all times until then.

(5)Section 93(5) above shall not apply in the case of a deemed disposal and re-acquisition under subsection (2) above; but the amount of the relevant consideration in such a case shall be treated for the purposes of the Taxation of Chargeable Gains Act 1992 as reduced by so much (if any) of the amount mentioned in subsection (4) above as is referable to interest which—

(a)is not paid or payable to the company before the time of the deemed disposal; but

(b)is interest falling to be brought into account under section 93(2) and (3) above as having accrued before that time.

(6)In subsection (4) above “the relevant accounting method”, in relation to an asset representing a loan relationship of a company, means the accounting method which, for the accounting period of that company in which the deemed re-acquisition takes place, is used as respects that asset and the part of that accounting period beginning with the deemed re-acquisition.

(7)This section shall be construed as one with section 93 above.]]

Annotations:

Amendments (Textual)

F121S. 93B inserted (24.7.2002 with effect as mentioned in s. 77(2)(3) of the amending Act) by Finance Act 2002 (c. 23), s. 77(1)

94 Indexed gilt-edged securities.E+W+S+N.I.

(1)In the case of any loan relationship represented by an index-linked gilt-edged security, the adjustment for which this section provides shall be made in computing the credits and debits which fall, for any accounting period, to be brought into account for the purposes of this Chapter in respect of that relationship as non-trading credits or non-trading debits.

(2)The adjustment shall be made wherever—

(a)the authorised accounting method applied as respects the index-linked gilt-edged security gives credits or debits by reference to the value of the security at two different times, and

(b)there is any change in the retail prices index between those times.

(3)Subject to subsection (4) below, the adjustment is such an adjustment of the amount which would otherwise be taken for the purposes of that accounting method to be the value of the security at the earlier time (“the opening value”) as results in the amount in fact so taken being equal to the opening value increased or, as the case may be, reduced by the same percentage as the percentage increase or reduction in the retail prices index between the earlier and the later time.

[F122(3A)Where the authorised accounting method applied is an accruals basis of accounting, the amount which is the opening value shall be taken to be the amount of the value which (disregarding interest) accrued to the company under the loan relationship before the earlier time.]

(4)The Treasury may, in relation to any description of index-linked gilt-edged securities, by order provide that—

(a)there are to be no adjustments under this section; or

(b)that an adjustment specified in the order (instead of the adjustment specified in subsection (3) above) is to be the adjustment for which this section provides.

(5)An order under subsection (4) above—

(a)shall not have effect in relation to any gilt-edged security issued before the making of the order; but

(b)may make different provision for different descriptions of securities.

(6)For the purposes of this section the percentage increase or reduction in the retail prices index between any two times shall be determined by reference to the difference between—

(a)that index for the month in which the earlier time falls; and

(b)that index for the month in which the later time falls

[F123except that where the earlier time falls at the beginning of an accounting period which begins with the first day of a month, the index for the previous month shall be used for the purposes of paragraph (a) above.]

(7)In this section “index-linked gilt-edged securities” means any gilt-edged securities the amounts of the payments under which are determined wholly or partly by reference to the retail prices index.

Annotations:

Amendments (Textual)

F122S. 94(3A) inserted (24.7.2002 with effect as mentioned in s. 82(2) of the amending Act) by Finance Act 2002 (c. 23), s. 82(1), Sch. 25 Pt. 1 para. 12(2)

F123Words in s. 94(6) inserted (24.7.2002 with effect as mentioned in s. 82(2) of the amending Act) by Finance Act 2002 (c. 23), s. 82(1), Sch. 25 Pt. 1 para. 12(3)

95 Gilt strips.E+W+S+N.I.

(1)This section has effect for the purposes of the application of an authorised accruals basis of accounting as respects a loan relationship represented by a gilt-edged security or a strip of a gilt-edged security.

(2)Where a gilt-edged security is exchanged by any person for strips of that security—

(a)the security shall be deemed to have been redeemed at the time of the exchange by the payment to that person of its market value; and

(b)that person shall be deemed to have acquired each strip for the amount which bears the same proportion to that market value as is borne by the market value of the strip to the aggregate of the market values of all the strips received in exchange for the security.

(3)Where strips of a gilt-edged security are consolidated into a single gilt-edged security by being exchanged by any person for that security—

(a)each of the strips shall be deemed to have been redeemed at the time of the exchange by the payment to that person of the amount equal to its market value; and

(b)that person shall be deemed to have acquired the security received in the exchange for the amount equal to the aggregate of the market values of the strips given in exchange for the security.

(4)References in this section to the market value of a security given or received in exchange for another are references to its market value at the time of the exchange.

(5)Without prejudice to the generality of any power conferred by section 202 below, the Treasury may by regulations make provision for the purposes of this section as to the manner of determining the market value at any time of any gilt-edged security (including any strip).

(6)Regulations under subsection (5) above may—

(a)make different provision for different cases; and

(b)contain such incidental, supplemental, consequential and transitional provision as the Treasury may think fit.

(7)In this section “strip” means anything which, within the meaning of section 47 of the M61Finance Act 1942, is a strip of a gilt-edged security.

Annotations:

Marginal Citations

96 Special rules for certain other gilts.E+W+S+N.I.

(1)This section applies as respects any loan relationship of a company if—

(a)it is represented by a security of any of the following descriptions—

(i)3½% Funding Stock 1999-2004; or

(ii)5½% Treasury Stock 2008-2012;

and

(b)it is one to which the company is a party otherwise than in the course of activities that form an integral part of a trade carried on by the company.

(2)The amounts falling for any accounting period to be brought into account for the purposes of this Chapter in respect of a loan relationship to which this section applies shall be confined to amounts relating to interest.

(3)Only an authorised accruals basis of accounting shall be used for ascertaining those amounts.

97 Manufactured interest.E+W+S+N.I.

(1)[F124For the purposes of the Corporation Tax Acts, a company has a relationship to which this section applies in any case where—]

(a)any amount (“manufactured interest”) is payable by or on behalf of, or to, [F125the company] under any contract or arrangements relating to the transfer of an asset representing a loan relationship; and

(b)that amount is, or (when paid) will fall to be treated as, representative of interest under [F126that loan relationship](“the real interest”).

[F127and references to a relationship to which this section applies, and to a company’s being party to such a relationship, shall be construed accordingly]

[F128(2)Where a company has a relationship to which this section applies—

(a)this Chapter shall have effect in relation to the company and the manufactured interest under the relationship—

(i)as it would have effect if the manufactured interest were interest payable on a loan by, or (as the case may be) to, the company and were accordingly interest under a loan relationship to which the company is a party, and

(ii)where that company is the company to which the manufactured interest is payable, as if that relationship were the one under which the real interest is payable, but

(b)the only credits or (subject to subsection (4A) below) debits to be brought into account for the purposes of this Chapter by virtue of this section in respect of a relationship are those relating to that interest,

and, subject to paragraphs (a)(ii) and (b) above, references in the Corporation Tax Acts to a loan relationship accordingly include a reference to a relationship to which this section applies.]

(3)Any question whether debits or credits falling to be brought into account in the case of any company by virtue of this section—

(a)are to be brought into account under section 82(2) above, or

(b)are to be treated as non-trading debits or non-trading credits,

shall be determined according to the extent (if any) to which the manufactured interest is paid for the purposes of a trade carried on by the company or is received in the course of activities forming an integral part of such a trade.

[F129(3A)To the extent that debits or credits fall to be brought into account by a company under section 82(2) above in the case of a relationship to which this section applies, the company shall be regarded for the purposes of this Chapter as being party to the relationship for the purposes of a trade carried on by the company.]

(4)Where section [F130736B(2) or] 737A(5) of the Taxes Act 1988 (deemed manufactured payments) has effect in relation to a transaction relating to an asset representing a loan relationship so as, for the purposes of [F131section 737 of, or] Schedule 23A to, that Act, to deem there to have been a payment representative of interest under that relationship, this section shall apply as it would have applied if such a representative payment had in fact been made.

[F132(4A)Where, for the purposes of section 736B of the Taxes Act 1988, a company is the borrower under a stock lending arrangement, then (pursuant to subsection (2A) of that section (which precludes deductions or group relief for the borrower)) no debits are to be brought into account for the purposes of this Chapter by that company in respect of the deemed representative payment under that section which is treated under subsection (4) above as if it had in fact been made.]

[F133(5)This section does not apply where the manufactured interest is treated by virtue of paragraph 5(2)(c) or (4)(c) of Schedule 23A to the Taxes Act 1988 (manufactured interest passing through the market) as not being income of the person who receives it.]

Annotations:

Amendments (Textual)

F124Words in s. 97(1) substituted (24.7.2002 with effect as mentioned in s. 82(2) of the amending Act) by Finance Act 2002 (c. 23), s. 82(1), Sch. 25 Pt. 1 para. 13(2)(a)

F125Words in s. 97(1)(a) substituted (24.7.2002 with effect as mentioned in s. 82(2) of the amending Act) by Finance Act 2002 (c. 23), s. 82(1), Sch. 25 Pt. 1 para. 13(2)(b)

F126Words in s. 97(1)(b) substituted (24.7.2002 with effect as mentioned in s. 82(2) of the amending Act) by Finance Act 2002 (c. 23), s. 82(1), Sch. 25 Pt. 1 para. 13(2)(c)

F127Words in s. 97(1) added (24.7.2002 with effect as mentioned in s. 82(2) of the amending Act) by Finance Act 2002 (c. 23), s. 82(1), Sch. 25 Pt. 1 para. 13(2)(d)

F128S. 97(2) substituted (24.7.2002 with effect as mentioned in s. 82(2) of the amending Act) by Finance Act 2002 (c. 23), s. 82(1), Sch. 25 Pt. 1 para. 13(3)

F129S. 97(3A) inserted (24.7.2002 with effect as mentioned in s. 82(2) of the amending Act) by Finance Act 2002 (c. 23), s. 82(1), Sch. 25 Pt. 1 para. 13(4)

F130Words in s. 97(4) inserted (24.7.2002 with effect as mentioned in s. 82(2) of the amending Act) by Finance Act 2002 (c. 23), s. 82(1), Sch. 25 Pt. 1 para. 13(5)

F131Words in s. 97(4) repealed (19.3.1997 with effect as mentioned in Sch. 18 Pt. VI(10), Notes 4, 6 of the amending Act) by 1997 c. 16, s. 113, Sch. 18 Pt. VI(10)

F132S. 97(4A) inserted (24.7.2002 with effect as mentioned in s. 82(2) of the amending Act) by Finance Act 2002 (c. 23), s. 82(1), Sch. 25 Pt. 1 para. 13(6)

F133S. 97(5) repealed (19.3.1997 with effect as mentioned in Sch. 18 Pt. VI(10), Notes 3, 4, 6 of the amending Act) by 1997 c. 16, s. 113, Sch. 18 Pt. VI(10)

98 Collective investment schemes.E+W+S+N.I.

The provisions of this Chapter have effect subject to the provisions of Schedule 10 to this Act (which makes special provision in relation to certain collective investment schemes).

99 Insurance companies.E+W+S+N.I.

The preceding provisions of this Chapter have effect subject to Schedule 11 to this Act (which makes special provision in relation to certain insurance companies and in relation to corporate members of Lloyd’s).

Miscellaneous other provisionsE+W+S+N.I.

[F134100 Interest, and exchange gains and losses, on debts etc not arising from the lending of moneyE+W+S+N.I.

(1)For the purposes of the Corporation Tax Acts, a company has a relationship to which this section applies in any case where—

(a)the company stands, or has stood, in the position of a creditor or debtor as respects a money debt;

(b)the money debt is not one which arose from a transaction for the lending of money (so that, in consequence of section 81(1)(b) above, there is no loan relationship); and

(c)the money debt is one—

(i)on which interest is payable to or by the company; or

(ii)in relation to which exchange gains or losses arise to the company;

and references to a relationship to which this section applies, and to a company’s being party to such a relationship, shall be construed accordingly.

(2)Where a company has a relationship to which this section applies—

(a)this Chapter shall have effect in relation to the interest payable under, or the exchange gains or losses arising to the company from, the relationship as it has effect in relation to interest payable under, or (as the case may be) exchange gains or losses arising to the company from, a loan relationship to which the company is a party; but

(b)the only credits or debits to be brought into account for the purposes of this Chapter in respect of the relationship are those relating to the interest or (as the case may be) to the exchange gains or losses;

and, subject to paragraph above, references in the Corporation Tax Acts to a loan relationship accordingly include a reference to a relationship to which this section applies.

(3)References in this section to interest payable on a money debt include a reference to any amount which, in pursuance of Schedule 28AA to the Taxes Act 1988 (provision not at arm’s length), falls to be treated as—

(a)interest on a money debt; or

(b)interest on an amount which is treated as a money debt;

and references in the other provisions of this section to a money debt accordingly include a reference to the amount on which that amount so falls to be treated as interest.

(4)Except as provided by subsection (7) below, any question whether debits or credits falling to be brought into account by virtue of this section in relation to a company—

(a)are to be brought into account under section 82(2) above, or

(b)are to be treated as non-trading debits or non-trading credits,

shall be determined in accordance with subsection (5) below (in the case of interest) or subsection (6) below (in the case of an exchange gain or loss).

(5)In the case of interest, any such question shall be determined according to the extent (if any) to which the interest—

(a)is paid for the purposes of a trade carried on by the company;

(b)is received in the course of activities forming an integral part of such a trade; or

(c)in the case of deemed interest, would be deemed to be so paid or received.

(6)In the case of an exchange gain or loss, any such question shall be determined according to the extent (if any) to which the money debt—

(a)is owed by the company for the purposes of a trade carried on by the company; or

(b)is held in the course of activities forming an integral part of such a trade.

(7)Any debits or credits which—

(a)relate to interest payable under the Tax Acts, and

(b)fall to be brought into account by virtue of this section in relation to any company,

are to be treated as non-trading debits or credits.

(8)To the extent that debits or credits fall to be brought into account by a company under section 82(2) above in the case of a relationship to which this section applies, the company shall be regarded for the purposes of the Corporation Tax Acts as being party to the relationship for the purposes of a trade carried on by the company.

(9)No exchange gains or losses shall be taken to arise for the purposes of this section if the money debt in question—

(a)is an amount of tax,

(b)is an amount of tax payable under the law of a territory outside the United Kingdom, or

(c)is an amount which would, but for any statutory provision or rule of law to the contrary other than section 74(1)(f) or (g) of the Taxes Act 1988, be deductible as an expense in computing profits in accordance with Case I of Schedule D or as an expense of management within section 75 of the Taxes Act 1988,

except to the extent that, in the case of a money debt falling within paragraph (b) above, a reduction in respect of the tax there mentioned falls to be made under section 811 of the Taxes Act 1988 (double taxation relief: deduction for foreign tax where no credit allowable).

(10)For the purposes of this section so far as relating to exchange gains and losses, each of the following shall be treated as a money debt owed to a company—

(a)any currency held by the company;

(b)in the case of a company carrying on insurance business, any deferred acquisition costs, within the meaning of Assets item G.II in the Balance Sheet Format set out after paragraph 9 of Schedule 9A to the Companies Act 1985 (form and content of accounts of insurance companies and groups) as read with note (17) of the Notes on the Balance Sheet Format (which follow immediately after that format).

(11)For the purposes of this section so far as relating to exchange gains and losses, each of the following shall be treated as a money debt owed by a company—

(a)any provision made by the company for the purposes of its statutory accounts in respect of a liability to which the company may become subject;

(b)in the case of a company carrying on insurance business—

(i)any provision made by the company for unearned premiums, within the meaning of Liabilities item C.1 in the Balance Sheet Format set out after paragraph 9 of Schedule 9A to the Companies Act 1985, as read with note (20) of the Notes on the Balance Sheet Format (which follow immediately after that format);

(ii)any provision for unexpired risks, as defined in paragraph 81(1) of that Schedule.

(12)A provision does not fall within paragraph (a) of subsection (11) above unless—

(a)the duty to settle the liability in question would (if the company were to become subject to it) be owed for the purposes of a trade, a Schedule A business or an overseas property business (within the meaning of section 70A of the Taxes Act 1988); and

(b)the provision falls to be taken into account (apart from this Chapter) in computing the profits or losses of the trade, Schedule A business or overseas property business for corporation tax purposes.

(13)This section has effect subject to the provisions of Schedules 9 and 11 to this Act.]

Annotations:

Amendments (Textual)

F134S. 100 substituted (24.7.2002 with effect as mentioned in s. 79(3) of the amending Act) by Finance Act 2002 (c. 23), s. 79(2), Sch. 23 Pt. 1 para. 6 (with Sch. 23 Pt. 3 para. 25)

101 Financial instruments.E+W+S+N.I.

(1)[F135Schedule 26 to the Finance Act 2002 (provisions relating to derivative contracts)] shall not apply to any profit or loss which, [F136in accordance with that Schedule], accrues to a company for any accounting period on [F137a derivative contract] by virtue of which the company is a party to any loan relationship if—

(a)an amount representing that profit or loss, or

(b)an amount representing the profit or loss accruing to that company on that contract,

is brought into account for that period for the purposes of this Chapter.

(2)F138. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3)F138. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4)F138. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5)F138. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6)F138. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Annotations:

Amendments (Textual)

F135Words in s. 101(1) substituted (24.7.2002 with effect as mentioned in s. 83(3)(4) of the amending Act) by Finance Act 2002 (c. 23), s. 83(1), Sch. 27 para. 19(2)(a)

F136Words in s. 101(1) substituted (24.7.2002 with effect as mentioned in s. 83(3)(4) of the amending Act) by Finance Act 2002 (c. 23), s. 83(1), Sch. 27 para. 19(2)(b)

F137Words in s. 101(1) substituted (24.7.2002 with effect as mentioned in s. 83(3)(4) of the amending Act) by Finance Act 2002 (c. 23), s. 83(1), Sch. 27 para. 19(2)(c)

F138S. 101(2)-(6) repealed (24.7.2002 with effect as mentioned in s. 83(3)(4) of the repealing Act) by Finance Act 2002 (c. 23), ss. 83(1), 141, Sch. 27 para. 19(3), Sch. 40 Pt. 3(13)

102 Discounted securities: income tax provisions.E+W+S+N.I.

Schedule 13 to this Act (which, in connection with the provisions of this Chapter relating to corporation tax, makes provision for income tax purposes about discounted securities) shall have effect.

SupplementalE+W+S+N.I.

103 Interpretation of Chapter.E+W+S+N.I.

(1)In this Chapter—

  • authorised accounting method”, “authorised accruals basis of accounting” and “authorised mark to market basis of accounting” shall be construed in accordance with section 85 above;

  • creditor relationship”, in relation to a company, means any loan relationship of that company in the case of which it stands in the position of a creditor as respects the debt in question;

  • debt” includes a debt the amount of which falls to be ascertained by reference to matters which vary from time to time;

  • debtor relationship”, in relation to a company, means any loan relationship of that company in the case of which it stands in the position of a debtor as respects the debt in question;

  • [F139derivative contract” has the same meaning as in Schedule 26 to the Finance Act 2002;]

  • [F140exchange gain” and “exchange loss” shall be construed in accordance with subsections (1A) and (1B) below;]

  • gilt-edged securities” means any securities which—

    (a)

    are gilt-edged securities for the purposes of the M62Taxation of Chargeable Gains Act 1992; or

    (b)

    will be such securities on the making of any order under paragraph 1 of Schedule 9 to that Act the making of which is anticipated in the prospectus under which they are issued;

  • an independent person” means a knowledgeable and willing party dealing at arm’s length;

  • international organisation” means an organisation of which two or more sovereign powers, or the governments of two or more sovereign powers, are members;

  • loan” includes any advance of money, and cognate expressions shall be construed accordingly;

  • money” shall be construed in accordance with section 81(6) above and subsection (5) below;

  • money debt” shall be construed in accordance with section 81(2) above;

  • non-trading credit” and “non-trading debit” shall be construed in accordance with section 82(3) above;

  • [F141related transaction” shall be construed in accordance with section 84 above (see subsections (5) and (6) of that section);]

  • retail prices index” has the same meaning as it has, by virtue of section 833(2) of the Taxes Act 1988, in the Income Tax Acts;

  • share”, in relation to a company, means any share in the company under which an entitlement to receive distributions may arise [F142but does not include a share in a building society].

  • [F143statutory accounts” has the meaning given by section 86(8) above]

[F144(1A)References in this Chapter to exchange gains or exchange losses, in the case of any company, are references respectively to—

(a)profits or gains, or

(b)losses,

which arise as a result of comparing at different times the expression in one currency of the whole or some part of the valuation put by the company in another currency on an asset or liability of the company.

If the result of such a comparison is that neither an exchange gain nor an exchange loss arises, then for the purposes of this Chapter an exchange gain of nil shall be taken to arise in the case of that comparison.

(1B)Any reference in this Chapter to an exchange gain or loss from a loan relationship of a company is a reference to an exchange gain or loss arising to a company in relation to an asset or liability representing a loan relationship of the company.]

(2)For the purposes of this Chapter a company shall be taken to be a party to a creditor relationship for the purposes of a trade carried on by that company only if it is a party to that relationship in the course of activities forming an integral part of that trade.

(3)For the purposes of this Chapter, and of so much of any other enactment as contains provision by reference to which amounts fall to be brought into account for the purposes of this Chapter, activities carried on by a company in the course of—

(a)any mutual trading, or

(b)any mutual insurance or other mutual business which is not life assurance business (within the meaning of Chapter I of Part XII of the Taxes Act 1988),

shall be deemed not to constitute the whole or any part of a trade.

(4)If, in any proceedings, any question arises whether a person is an international organisation for the purposes of any provision of this Chapter, a certificate issued by or under the authority of the Secretary of State stating any fact relevant to that question shall be conclusive evidence of that fact.

(5)For the purposes of this Chapter the European currency unit (as for the time being defined in Council Regulation No. 3180/78/EEC or in any Community instrument replacing it) shall be taken to be a currency other than sterling.

[F145(6)Where—

(a)a company ceases to be a party to a loan relationship in an accounting period (the “cessation period”),

(b)profits, gains or losses arise to the company from the loan relationship or a related transaction in that accounting period, and

(c)the credits or debits brought into account for the purposes of this Chapter for that accounting period do not include credits or debits which represent the whole of those profits, gains or losses,

credits or debits in respect of so much of those profits, gains or losses as are not represented by credits or debits brought into account for the cessation period shall continue to be brought into account under this Chapter over one or more subsequent accounting periods (“post-cessation periods”) as in the case of a loan relationship to which the company is a party in those periods, and subsections (7) and (8) below shall apply.

(7)In any case falling within subsection (6) above, any question—

(a)whether, in a post-cessation period, the company is to any extent a party to the loan relationship—

(i)for the purposes of a trade carried on by it, or

(ii)for any other particular purpose or purposes, or

(b)whether, in a post-cessation period, the loan relationship is to any extent referable to a particular business, or a particular class, category or description of business, carried on by the company,

shall be determined by reference to the circumstances immediately before the company ceased to be a party to the loan relationship instead of the circumstances in the post-cessation period.

(8)In any case falling within subsection (6) above, any question—

(a)whether the loan relationship has to any extent a particular purpose in a post-cessation period, or

(b)whether there is a connection between the company and any other person for a post-cessation period,

shall be determined by reference to the circumstances in the cessation period instead of the circumstances in the post-cessation period.]

Annotations:

Amendments (Textual)

F139In s. 103(1) definition of "derivative contract" inserted (24.7.2002 with effect as mentioned in s. 82(2) of the amending Act) by Finance Act 2002 (c. 23), s. 82(1), Sch. 25 Pt. 1 para. 15

F140In s. 103(1) definitions of "exchange gain" and "exchange loss" inserted (24.7.2002 with effect as mentioned in s. 79(3) of the amending Act) by Finance Act 2002 (c. 23), s. 79(2), Sch. 23 Pt. 1 para. 7(2) (with Sch. 23 Pt. 3 para. 25)

F141In s. 103(1) definition of "related transaction" inserted (24.7.2002 with effect as mentioned in s. 79(3) of the amending Act) by Finance Act 2002 (c. 23), s. 79(2), Sch. 23 Pt. 1 para. 7(2) (with Sch. 23 Pt. 3 para. 25)

F142In s. 103(1) words in definition of "share" inserted (24.7.2002 with effect as mentioned in s. 82(2) of the amending Act) by Finance Act 2002 (c. 23), s. 82(1), Sch. 25 Pt. 1 para. 14

F143In s. 103(1) definition of "statutory accounts" inserted (24.7.2002 with effect as mentioned in s. 82(2) of the amending Act) by Finance Act 2002 (c. 23), s. 82(1), Sch. 25 Pt. 1 para. 15

F144S. 103(1A)(1B) inserted (24.7.2002 with effect as mentioned in s. 79(3) of the amending Act) by Finance Act 2002 (c. 23), s. 79(2), Sch. 23 Pt. 1 para. 7(3) (with Sch. 23 Pt. 3 para. 25)

F145S. 103(6)-(8) inserted (24.7.2002 with effect as mentioned in s. 82(2) of the amending Act) by Finance Act 2002 (c. 23), s. 82(1), Sch. 25 Pt. 1 para. 16

Marginal Citations

104 Minor and consequential amendments.E+W+S+N.I.

Schedule 14 to this Act (which, for the purposes of both corporation tax and income tax, makes certain minor and consequential amendments in connection with the provisions of this Chapter) shall have effect.

105 Commencement and transitional provisions.E+W+S+N.I.

(1)Subject to Schedule 15 to this Act, this Chapter has effect—

(a)for the purposes of corporation tax, in relation to accounting periods ending after 31st March 1996; and

(b)so far as it makes provision for the purposes of income tax, in relation to the year 1996-97 and subsequent years of assessment.

(2)Schedule 15 to this Act (which contains transitional provisions and savings in connection with the coming into force of this Chapter) shall have effect.

Chapter IIIE+W+S+N.I. Provisions relating to the Schedule E charge

106 Living accommodation provided for employees.E+W+S+N.I.

(1)In subsection (1) of section 145 of the Taxes Act 1988 (living accommodation provided for employees), the words “and is not otherwise made the subject of any charge to him by way of income tax” shall be omitted.

(2)After section 146 of that Act there shall be inserted the following section—

146A Priority of rules applying to living accommodation.

(1)This section applies where, within the meaning of section 145, living accommodation is provided in any period for any person by reason of his employment.

(2)The question whether the employee is to be treated under section 145 or 146 as in receipt of emoluments in respect of the provision of the accommodation shall be determined before any other question whether there is an amount falling to be treated in respect of the provision of that accommodation as emoluments.

(3)Tax under Schedule E in respect of the provision of the accommodation shall be chargeable on the employee otherwise than in pursuance of sections 145 and 146 to the extent only that the amount on which it is chargeable by virtue of those sections is exceeded by the amount on which it would be chargeable apart from those sections.

(3)This section applies for the year 1996-97 and subsequent years of assessment.

107 Beneficial loans.E+W+S+N.I.

(1)For section 160(1B) of the Taxes Act 1988 (aggregation of loans) there shall be substituted the following subsections—

(1B)Where, in relation to any year—

(a)there are loans between the same lender and borrower which are aggregable with each other,

(b)the lender elects, by notice given to the inspector, for aggregation to apply in the case of that borrower, and

(c)that notice is given before the end of the period of 92 days after the end of that year,

all the loans between that lender and that borrower which are aggregable with each other shall be treated for the purposes of subsections (1) and (1A) above and Part II of Schedule 7 as a single loan.

(1BA)For the purposes of subsection (1B) above loans are aggregable with each other for any year where—

(a)in the case of each of the loans, there is a time in that year, while the loan is outstanding as to any amount, when the lender is a close company and the borrower a director of that company;

(b)the benefit of each of the loans is obtained by reason of the borrower’s employment;

(c)in the case of each of the loans, there is no time in that year when a rate of interest is applied to the loan which is equal to or more than whatever is the official rate at that time;

(d)the loans are loans made in the same currency; and

(e)none of the loans is a qualifying loan.

(2)In paragraph 5 of Schedule 7 to that Act (alternative method of calculation)—

(a)in sub-paragraph (1)(a), for the words from “for the purpose” to “appeal)” there shall be substituted “ at a time allowed by sub-paragraph (2) below ”; and

(b)in sub-paragraph (1)(b), for “within the time allowed by sub-paragraph (2) below” there shall be substituted “ at such a time ”.

(3)For sub-paragraph (2) of that paragraph there shall be substituted the following sub-paragraph—

(2)A notice containing a requirement or election for the purposes of sub-paragraph (1) above is allowed to be given at any time before the end of the period of 12 months beginning with the 31st January next following the relevant year.

(4)This section has effect for the year 1996-97 and subsequent years of assessment and applies to loans whenever made.

108 Incidental benefits for holders of certain offices etc.E+W+S+N.I.

(1)After section 200 of the Taxes Act 1988 (expenses of Members of Parliament) there shall be inserted the following section—

200AA Incidental benefits for holders of certain offices etc.

(1)A person holding any of the offices mentioned in subsection (2) below shall not be charged to tax under Schedule E in respect of—

(a)any transport or subsistence provided or made available by or on behalf of the Crown to the office-holder or any member of his family or household; or

(b)the payment or reimbursement by or on behalf of the Crown of any expenses incurred in connection with the provision of transport or subsistence to the office-holder or any member of his family or household.

(2)Those offices are—

(a)any office in Her Majesty’s Government in the United Kingdom, and

(b)any other office which is one of the offices and positions in respect of which salaries are payable under section 1 of the M63Ministerial and other Salaries Act 1975 (whether or not the person holding it is a person to whom a salary is paid or payable under the Act).

(3)Nothing in this section shall prevent a person from being chargeable to tax under Schedule E in respect of the benefit of a mobile telephone (within the meaning of section 159A).

(4)References in this section to a member of the family or household of an office-holder shall be construed in accordance with section 168(4).

(5)References in this section to the provision of transport to any person include references to the following—

(a)the provision or making available to that person of any car (whether with or without a driver);

(b)the provision of any fuel for a car provided or made available to that person;

(c)the provision of any other benefit in connection with a car provided or made available to that person.

(6)In this section—

  • car” means any mechanically propelled road vehicle; and

  • subsistence” includes food and drink and temporary living accommodation.

(2)This section has effect for the year 1996–97 and subsequent years of assessment.

Annotations:

Marginal Citations

109 Charitable donations: payroll deduction schemes.E+W+S+N.I.

(1)In section 202(7) of the Taxes Act 1988 (which limits to £900 the deductions attracting relief), for “£900” there shall be substituted “ £1,200 ”.

(2)This section has effect for the year 1996-97 and subsequent years of assessment.

110 PAYE settlement agreements.E+W+S+N.I.

After section 206 of the Taxes Act 1988 there shall be inserted the following section—

206A PAYE settlement agreements.

(1)PAYE regulations may make provision falling within subsection (2) below about the sums which, as sums in respect of income tax under Schedule E on emoluments of a person’s employees, are to be the sums for which the employer is to be accountable to the Board from time to time.

(2)That provision is provision under which the accountability of the employer, and the sums for which he is to be accountable, are to be determined, to such extent as may be prescribed, in accordance with an agreement between the Board and the employer (“a PAYE settlement agreement”), instead of under PAYE regulations made otherwise than by virtue of this section.

(3)PAYE regulations may provide for a PAYE settlement agreement to allow sums for which an employer is to be accountable to the Board in accordance with the agreement—

(a)to be computed, in cases where there are two or more persons holding employments to which the agreement relates, by reference to a number of those persons all taken together;

(b)to include sums representing income tax on an estimated amount taken, in accordance with the agreement, to be the aggregate of the cash equivalents and other amounts chargeable to tax in respect of—

(i)taxable benefits provided or made available by reason of the employments to which the agreement relates; and

(ii)expenses paid to the persons holding those employments;

and

(c)to be computed in a manner under which the sums for which the employer is accountable do not necessarily represent an amount of income tax payable in respect of income which (apart from the regulations) is assessable under Schedule E on persons holding employments to which the agreement relates.

(4)PAYE regulations may provide—

(a)for an employer who is accountable to the Board under a PAYE settlement agreement for any sum to be so accountable without that sum, or any other sum, being treated for any prescribed purpose as tax deducted from emoluments;

(b)for an employee to have no right to be treated as having paid tax in respect of sums for which his employer is accountable under such an agreement;

(c)for an employee to be treated, except—

(i)for the purposes of the obligations imposed on his employer by such an agreement, and

(ii)to such further extent as may be prescribed,

as relieved from any prescribed obligations of his under the Income Tax Acts in respect of emoluments from an employment to which the agreement relates; and

(d)for such emoluments to be treated as excluded from the employee’s income for such further purposes of the Income Tax Acts, and to such extent, as may be prescribed.

(5)For the purposes of any PAYE regulations made by virtue of this section it shall be immaterial that any agreement to which they relate was entered into before the coming into force of the regulations.

(6)PAYE regulations made by virtue of this section may—

(a)make different provision for different cases; and

(b)contain such incidental, supplemental, consequential and transitional provision as the Board may think fit.

(7)Without prejudice to the generality of subsection (6) above, the transitional provision that may be made by virtue of that subsection includes transitional provision for any year of assessment which—

(a)for the purposes of the regulations, treats sums accounted for in that year before the coming into force of the regulations as accounted for in accordance with an agreement as respects which the regulations have effect after they come into force; and

(b)provides, by reference to any provision made by virtue of paragraph (a) above, for income arising in that year before the coming into force of the regulations to be treated as income in relation to which modifications of the Income Tax Acts contained in the regulations apply.

(8)Without prejudice to the generality of subsection (6) above, any power of the Board to make PAYE regulations with respect to sums falling to be accounted for under such regulations shall include power to make the corresponding provision with respect to sums falling, by virtue of this section, to be accounted for in accordance with a PAYE settlement agreement.

(9)In this section—

  • employment” means any office or employment the emoluments from which are (or, apart from any regulations made by virtue of this section, would be) assessable to tax under Schedule E, and cognate expressions shall be construed accordingly;

  • PAYE regulations” means regulations under section 203;

  • prescribed” means prescribed by PAYE regulations;

  • taxable benefit”, in relation to an employee, means any benefit provided or made available, otherwise than in the form of a payment of money, to the employee or to a person who is, for the purposes of Chapter II of this Part, a member of his family or household;

and references in this section to a time before the coming into force of any regulations include references to a time before the commencement of section 110 of the Finance Act 1996 (by virtue of which this section was inserted in this Act).

Chapter IVE+W+S+N.I. Share Options, Profit Sharing and Employee Share Ownership

Share optionsE+W+S+N.I.

111 Amount or value of consideration for option.E+W+S+N.I.

(1)Section 149A of the M64Taxation of Chargeable Gains Act 1992 (consideration for grant of option under approved share option schemes not to be deemed to be equal to market value of option) shall be amended as follows.

(2)In subsection (1)(b) (restriction to approved share option schemes) for “as mentioned in section 185(1) of the Taxes Act (approved share option schemes)” there shall be substituted “ by an individual by reason of his office or employment as a director or employee of that or any other body corporate ”.

(3)In subsection (2) (grantor to be treated as if the amount or value of the consideration was its actual amount or value) for “The grantor of the option” there shall be substituted “ Both the grantor of the option and the person to whom the option is granted ”.

(4)Subsection (4) (section not to affect treatment under that Act of person to whom option granted) shall cease to have effect.

(5)For the side-note to that section there shall be substituted “ Share option schemes. ”

(6)This section has effect in relation to any right to acquire shares in a body corporate obtained on or after 28th November 1995 by an individual by reason of his office or employment as a director or employee of a body corporate.

Annotations:

Marginal Citations

112 Release and replacement.E+W+S+N.I.

(1)After section 237 of the M65Taxation of Chargeable Gains Act 1992 there shall be inserted—

237A Share option schemes: release and replacement of options.

(1)This section applies in any case where a right to acquire shares in a body corporate (“the old right”) which was obtained by an individual by reason of his office or employment as a director or employee of that or any other body corporate is released in whole or in part for a consideration which consists of or includes the grant to that individual of another right (“the new right”) to acquire shares in that or any other body corporate.

(2)As respects the person to whom the new right is granted—

(a)without prejudice to subsection (1) above, the new right shall not be regarded for the purposes of capital gains tax as consideration for the release of the old right;

(b)the amount or value of the consideration given by him or on his behalf for the acquisition of the new right shall be taken for the purposes of section 38(1) to be the amount or value of the consideration given by him or on his behalf for the old right; and

(c)any consideration paid for the acquisition of the new right shall be taken to be expenditure falling within section 38(1)(b).

(3)As respects the grantor of the new right, in determining for the purposes of this Act the amount or value of the consideration received for the new right, the release of the old right shall be disregarded.

(2)Section 238(4) of that Act (which provides that the release of an option under an approved share option scheme in exchange for another option, in connection with a company take-over, is not to involve a disposal, and which is superseded by subsection (1) above) shall cease to have effect.

(3)This section has effect in relation to transactions effected on or after 28th November 1995.

Annotations:

Marginal Citations

Savings-related share option schemesE+W+S+N.I.

113 Exercise of rights by employees of non-participating companies.E+W+S+N.I.

(1)In paragraph 21 of Schedule 9 to the Taxes Act 1988 (provisions which an approved savings-related share option scheme may make with respect to the exercise of rights under the scheme) in sub-paragraph (1), the word “and” immediately preceding paragraph (e) shall be omitted and after that paragraph there shall be inserted and

(f)if, at the bonus date, a person who has obtained rights under the scheme holds an office or employment in a company which is not a participating company but which is—

(i)an associated company of the grantor, or

(ii)a company of which the grantor has control,

those rights may be exercised within six months of that date.

(2)After sub-paragraph (3) of that paragraph there shall be inserted—

(4)Where a scheme approved before the date of the passing of the Finance Act 1996 is altered before 5th May 1998 so as to include such a provision as is specified in sub-paragraph (1)(f) above, the scheme may apply the provision to rights obtained under the scheme before the alteration takes effect, whether the bonus date in relation to the rights occurred before or after the passing of that Act; and where the provision is applied to such rights by virtue of this sub-paragraph, its application to such rights shall not itself be regarded as the acquisition of a right for the purposes of this Schedule.

This sub-paragraph has effect subject to paragraph 4 above.

(3)In paragraph 26(3) of that Schedule (only directors or employees of grantor or participating company to be eligible to participate, except as provided by paragraph 19 or pursuant to such a provision as is referred to in paragraph 21(1)(e)) after “21(1)(e)” there shall be inserted “ or (f) ”.

Other share option schemesE+W+S+N.I.

114 Requirements to be satisfied by approved schemes.E+W+S+N.I.

(1)Part IV of Schedule 9 to the Taxes Act 1988 (requirements applicable to approved share option schemes which are not savings-related) shall be amended in accordance with subsections (2) and (3) below.

(2)In paragraph 28 (scheme must impose limit on aggregate market value of shares which may be acquired in pursuance of rights obtained under the scheme or certain related schemes)—

(a)in sub-paragraph (1) (aggregate market value of shares not to exceed the appropriate limit) for “the appropriate limit” there shall be substituted “ £30,000 ”; and

(b)sub-paragraphs (2) and (4) (meaning of the appropriate limit and, for the purposes of that definition, the relevant emoluments) shall cease to have effect.

(3)In paragraph 29 (price at which shares may be acquired to be stated and to be not manifestly less than the market value, or, in certain circumstances, 85 per cent. of the market value, of shares of the same class) for sub-paragraphs (1) to (6) there shall be substituted—

(1)The price at which scheme shares may be acquired by the exercise of a right obtained under the scheme—

(a)must be stated at the time the right is obtained, and

(b)must not be manifestly less than the market value of shares of the same class at that time or, if the Board and the grantor agree in writing, at such earlier time or times as may be provided in the agreement.

(4)Section 185 of the Taxes Act 1988 (approved share option schemes) shall be amended in accordance with subsections (5) to (7) below.

(5)In subsection (2), for “Subject to subsections (6) to (6B) below” there shall be substituted “ Subject to subsection (6) below ”.

(6)For subsections (6) to (6B) there shall be substituted—

(6)Where, in the case of a right obtained by a person under a scheme which is not a savings-related share option scheme, the aggregate of—

(a)the amount or value of any consideration given by him for obtaining the right, and

(b)the price at which he may acquire the shares by exercising the right,

is less than the market value, at the time he obtains the right, of the same quantity of issued shares of the same class, he shall be chargeable to tax under Schedule E for the year of assessment in which he obtains the right on the amount of the difference; and the amount so chargeable shall be treated as earned income, whether or not it would otherwise fall to be so treated.

(7)In subsections (7) and (8) for “(6A)” there shall be substituted “ (6) ”.

(8)In section 120 of the M66Taxation of Chargeable Gains Act 1992 (increase in expenditure by reference to tax charged in relation to shares etc) in subsection (6) (which defines the applicable provision) for paragraph (b) (which refers to subsection (6A) of section 185 of the Taxes Act 1988) there shall be substituted—

(b)subsection (6A) of that section (as that subsection has effect in relation to rights obtained before the day on which the Finance Act 1996 was passed), or

(c)subsection (6) of that section (as that subsection has effect in relation to rights obtained on or after that day).

(9)Schedule 16 to this Act, which makes provision with respect to share option schemes approved before the day on which this Act is passed, shall have effect.

(10)Subsections (3) to (7) above have effect in relation to rights obtained on or after the day on which this Act is passed.

Annotations:

Marginal Citations

115 Transitional provisions.E+W+S+N.I.

(1)If, during the period—

(a)beginning with 17th July 1995, and

(b)ending with the day preceding the passing of this Act,

any rights have been obtained by a person under an approved share option scheme in circumstances falling within subsection (2) below, the rights shall be treated for the purposes of sections 185 to 187of, and Schedule 9 to, the Taxes Act 1988 as being rights obtained otherwise than in accordance with the provisions of an approved share option scheme.

(2)The circumstances mentioned in subsection (1) above are circumstances such that, on the assumptions in subsection (3) below, there would, by virtue of paragraph 28 or 29 of Schedule 9 to the Taxes Act 1988 (limit on what may be obtained and requirements with respect to price), have been, with respect to the operation of the scheme, a contravention of any of the relevant requirements or of the scheme itself.

(3)The assumptions mentioned in subsection (2) above are—

(a)that the amendments made by subsection (2) of section 114 above had effect at all times on and after 17th July 1995;

(b)that the amendments made by subsections (3) to (7) of that section had effect in relation to rights obtained at any time on or after that date; and

(c)that the provisions of paragraphs 1(1) and 2 to 5 of Schedule 16 to this Act had effect at all times on and after 17th July 1995, but with the substitution for references to the day on which this Act is passed of references to that date.

(4)For the purposes of this section, rights obtained by a person on or after 17th July 1995 shall be treated as having been obtained by him before that date if—

(a)the scheme in question is one approved before that date;

(b)an offer of the rights or an invitation to apply for them was made in writing to that person before that date; and

(c)he obtained the rights within the period of thirty days beginning with the day on which the offer or invitation was made.

(5)In this section—

  • approved share option scheme” means an approved share option scheme, within the meaning of section 185 of the Taxes Act 1988, other than a savings-related share option scheme;

  • relevant requirements” has the meaning given in paragraph 1(1) of Schedule 9 to the Taxes Act 1988;

  • savings-related share option scheme” has the meaning given by Schedule 9 to the Taxes Act 1988.

Profit sharing schemesE+W+S+N.I.

116 The release date.E+W+S+N.I.

(1)In section 187(2) of the Taxes Act 1988 (interpretation of sections 185 and 186 of, and Schedules 9 and 10 to, that Act) in the definition of “release date” (the fifth anniversary of the date on which shares were appropriated to a participant in a profit sharing scheme) for “fifth” there shall be substituted “ third ”.

(2)The amendment made by subsection (1) above shall have effect in relation to shares of a participant in a profit sharing scheme if the third anniversary of the appropriation of the shares to the participant occurs on or after the day on which this Act is passed.

(3)If the third anniversary of the appropriation of any shares to a participant in a profit sharing scheme has occurred, but the fifth anniversary of their appropriation to him has not occurred, before the passing of this Act, then, in the application of sections 186 and 187 of, and Schedules 9 and 10 to, the Taxes Act 1988 in relation to those shares, the release date shall be the day on which this Act is passed.

117 The appropriate percentage.E+W+S+N.I.

(1)In Schedule 10 to the Taxes Act 1988 (further provisions relating to profit sharing schemes) for paragraph 3 (the appropriate percentage) there shall be substituted—

3(1)For the purposes of any of the relevant provisions charging an individual to income tax under Schedule E by reason of the occurrence of an event relating to any of his shares, the “appropriate percentage” in relation to those shares is 100 per cent., unless sub-paragraph (2) below applies.

(2)Where the individual—

(a)ceases to be a director or employee of the grantor or, in the case of a group scheme, a participating company as mentioned in paragraph 2(a) above, or

(b)reaches the relevant age,

before the event occurs, the “appropriate percentage” is 50 per cent., unless paragraph 6(4) below applies.

(2)