Finance Act 1984

Balance of capital payments U.K.

12 (1) If any capital payments received in any year of assessment as mentioned in paragraph 11(3) above fall to be brought into account for that year for the purposes of subsections (3) and (4) of section 80 of the Finance Act 1981, those capital payments shall be disregarded for the purposes of sub-paragraph (5) or, as the case may be, sub-paragraph (6) of paragraph 11 above except to the extent that the aggregate of those payments exceeds the chargeable gains and offshore income gains which in that year are treated under the said section 80 as accruing to the beneficiary or, as the case may be, the close relative; and any such excess is in the following provisions of this paragraph referred to as the balance of section 80 payments for that year.

(2) Subject to the following provisions of this paragraph, as respects any year of assessment subsequent to a material year of assessment for which there is a balance of section 80 payments there shall be left out of account for the purposes of subsections (3) and (4) of section 80 of the Finance Act 1981 so much of the capital payments as made up that balance.

(3) If paragraph 11(6) above did not apply for any material year of assessment for which there is a balance of section 80 payments then, as respects years of assessment subsequent to that year, sub-paragraph (2) above shall apply only to so much of the capital payments mentioned therein as is equal to 3⅓ times the amount of postponed tax released by that balance.

(4) For any material year of assessment, the amount of postponed tax released by a balance of section 80 payments for that year shall be determined by the formula:—

where

• “E" is the postponed tax, within the meaning of paragraph 11 above;

• “F" is an amount equal to 30 per cent. of any consideration for that year which falls within sub-paragraph (5)(a) of that paragraph;

• “G" is the balance of the section 80 payments for that year; and

• “H" is the aggregate of the capital payments (including that balance) taken into account under sub-paragraph (5)(b) of that paragraph for that year.

(5) If, in a case where sub-paragraph (2) above applies in accordance with sub-paragraph (3) above, there were, for the material year of assessment concerned,—

(a) a balance of section 80 payments derived from payments received by the beneficiary, and

(b) another such balance derived from payments by a close relative of his,

sub-paragraph (2) above shall apply (in accordance with sub-paragraph (3) above) to the capital payments which made up the balance derived from payments received by the beneficiary in priority to capital payments which made up the other balance.

(6) Subject to sub-paragraph (5) above, where there is more than one capital payment to which sub-paragraph (2) above applies, the proportion of each of them which is left out of account as mentioned in that sub-paragraph shall be the same.

(7) Where, by virtue of the preceding provisions of this paragraph, the whole or any part of a capital payment falls to be left out of account as mentioned in sub-paragraph (2) above, section [F1 740 of the Taxes Act 1988] shall have effect in relation to a benefit which is received by the beneficiary or, as the case may be, a close relative of his and which, in whole or in part, consists of that payment as if, in the material year of assessment concerned, chargeable gains equal to so much of that payment as falls to be so left out of account were, by reason of that payment, treated under section 80 of that Act as accruing to the beneficiary or, as the case may be, the close relative.

Textual Amendments

F1 Words substituted by Income and Corporation Taxes Act 1988 (c. 1), Sch. 29 para. 32

13 (1) Where, by virtue of sub-paragraph (2) of paragraph 12 above, the whole or any part of a capital payment falls to be left out of account as mentioned in that sub-paragraph, it shall to the same extent be left out of account for the purposes of the application on any other occasion of any provision of paragraphs 7 to 12 of this Schedule.

(2) Where sub-paragraph (6) of paragraph 11 above applies for any material year of assessment, any capital payments which—

(a) fall to be taken into account under sub-paragraph (5)(b) of that paragraph for that year, and

(b) are not such as to fall within paragraph 12(1) above,

shall be left out of account for the purposes referred to in sub-paragraph (1) above.

(3) Where sub-paragraph (6) of paragraph 11 above does not apply for any material year of assessment, so much of any capital payment falling within paragraphs (a) and (b) of sub-paragraph (2) above as is equal to 3;FO’ times the amount of postponed tax released by that payment shall be left out of account for the purposes referred to in sub-paragraph (1) above.

(4) The amount of postponed tax released by a capital payment shall be determined for the purposes of sub-paragraph (3) above by the formula in paragraph 12(4) above, except that, in applying that formula for those purposes, “G" shall be the amount of the capital payment in question.

(5) In this paragraph, “material year of assessment" shall be construed in accordance with paragraph 11(4) above.