Finance Act 1972

PART IValue added tax

Imposition and extent of tax

1Value added tax

(1)A tax, to be known as value added tax, shall be charged in accordance with the provisions of this Part of this Act on the supply of goods and services in the United Kingdom (including anything treated as such a supply) and on the importation of goods into the United Kingdom.

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

(3)All money and securities for money collected or received for or on account of the tax shall—

(a)if collected or received in Great Britain, be placed to the general account of the Commissioners kept at the Bank of England under section 11 of the [1952 c. 44.] Customs and Excise Act 1952 ;

(b)if collected or received in Northern Ireland, be paid into the Consolidated Fund of the United Kingdom in such manner as the Treasury may direct.

(4)The [1920 c. 67.] Government of Ireland Act 1920 shall have effect as if the tax were one of the taxes mentioned in section 22(1) of that Act (reserved taxes).

(5)The [1968 c. 2.] Provisional Collection of Taxes Act 1968 shall be amended by inserting in subsection (1) of section 1, after the words " income tax " , the words " value added tax "; and the Act as so amended shall apply in relation to a resolution of the House of Commons passed before 1st April 1974 and providing for any variation of that tax as it applies in relation to such a resolution as is mentioned in subsection (2)(a) of that section.

2Scope of tax

(1)Except as otherwise provided by this Part of this Act the tax shall be charged and payable as follows.

(2)Tax on the supply of goods or services shall be charged only where—

(a)the supply is a taxable supply; and

(b)the goods or services are supplied by a taxable person in the course of a business carried on by him;

and shall be payable by the person supplying the goods or services.

(3)Tax on the importation of goods shall be charged and payable as if it were a duty of customs.

(4)Any reference in the following provisions of this Part of this Act to the supply by any person of goods or services is a reference to such a supply in the United Kingdom in the course of a business carried on by him.

3Deduction of input tax

(1)The following tax (in this Part of this Act referred to as " input tax "), that is to say—

(a)tax on the supply to a taxable person of any goods or services for the purpose of a business carried on or to be carried on by him; and

(b)tax paid or payable by a taxable person on the importation of any goods used or to be used for the purpose of a business carried on or to be carried on by him;

may, at the end of any prescribed accounting period, be deducted by him, so far as not previously deducted and to the extent and subject to the exceptions provided for by or under this section, from the tax chargeable on supplies by him (in this section referred to as " output tax ").

(2)Where the amount of input tax that may be so deducted by any person exceeds the amount of the output tax due from him, the amount of the excess shall be paid to him by the Commissioners.

(3)Subject to subsection (6) of this section, the input tax that may be deducted by a taxable person shall be—

(a)the whole of that tax, if all his supplies of goods or services are taxable supplies ; and

(b)such part of that tax as, in accordance with regulations under this section, is attributable to taxable supplies, if some but not all of his supplies of goods or services are taxable supplies;

and any such regulations may provide for treating all supplies of goods or services by any person as taxable supplies where the tax attributable to exempt supplies would be less than such amount or less than such part of the whole of the tax as may be specified in the regulations or in such other circumstances as may be so specified.

(4)The Commissioners shall make regulations for securing a fair and reasonable attribution of input tax to taxable supplies, and any such regulations may provide for—

(a)determining a proportion of supplies in any prescribed accounting period which is to be taken as consisting of taxable supplies; and

(b)provisionally attributing input tax in accordance with the proportion so determined and adjusting the attribution for periods comprising two or more prescribed accounting periods or parts thereof ;

and may make different provision for different circumstances and, in particular (but without prejudice to the generality of this provision) for different descriptions of goods or services; and may contain such incidental and supplementary provisions as appear to the Commissioners necessary or expedient.

(5)Regulations under this section may include provision for enabling a taxable person to deduct as input tax, in such circumstances, to such extent and subject to such conditions as may be specified in the regulations, tax on the supply to him, or paid by him on the importation, of goods notwithstanding that he was not a taxable person at the time of the supply or payment.

(6)The Treasury may by order make provision for excepting from the preceding provisions of this section input tax chargeable on such supplies and importations as may be specified in the order, and any such provision may be framed by reference to the description of goods or services supplied or goods imported, the persons by whom they are supplied or imported or to whom they are supplied, the purposes for which they are supplied or imported, or any circumstances whatsoever; and any such order may contain provision for consequential relief from output tax.

4Taxable persons

(1)A person who makes or intends to make taxable supplies is a taxable person while he is or is required to be registered under this Part of this Act.

(2)Schedule 1 to this Act shall have effect with respect to the registration of persons under this Part of this Act.

Supply

5Supply of goods and services

(1)The following provisions apply for determining for the purposes of this Part of this Act what is a supply of goods or services.

(2)Supply of goods includes all forms of supply and, in particular, the letting of goods on hire and the making of a gift or loan of goods; but supply of services does not include anything done otherwise than for a consideration.

(3)Where a person produces goods by applying to another person's goods a treatment or process he is treated as supplying goods and not as supplying services.

(4)The supply of any form of power, heat, refrigeration or ventilation is a supply of goods and not of services.

(5)Schedule 2 to this Act shall have effect with respect to matters to be treated as a supply of goods.

(6)The granting, assignment or surrender of a major interest in land shall be treated as a supply of goods.

In this subsection " major interest" means the fee simple or a tenancy for a term certain exceeding twenty-one years, and, in relation to Scotland, means the estate or interest of the proprietor of the dominium utile, or in the case of land not held on feudal tenure, the estate or interest of the owner, or the lessee's interest under a lease for a period exceeding twenty-one years.

(7)Subject to the preceding provisions of this section, the Treasury may by order provide with respect to any description of transaction—

(a)that it is to be treated as a supply of goods and not as a supply of services ; or

(b)that it is to be treated as a supply of services and not as a supply of goods ; or

(c)that it is to be treated as neither a supply of goods nor a supply of services.

(8)Subject to the preceding provisions of this section, anything which is not a supply of goods but is done for a consideration (including, if so done, the granting, assignment or surrender of the whole or part of any right) is a supply of services.

6Self-supply

(1)The Treasury may by order make provision for securing, subject to any exceptions provided for by or under the order, that, where in such circumstances as may be specified in the order goods of a description so specified are acquired or produced by a person in the course of a business carried on by him and—

(a)are neither supplied to another person nor incorporated in other goods produced in the course of that business; but

(b)are used by him for the purpose of a business carried on by him;

the goods are treated for the purposes of this Part of this Act as both supplied to him for the purpose of that business and supplied by him in the course of that business.

(2)The Treasury may by order make provision for securing, with respect to services of any description specified in the order, that, where—

(a)a person, in the course of a business carried on by him, does anything for the purpose of that business which is not a supply of services but would, if done for a consideration, be a supply of services of a description specified in the order ; and

(b)such other conditions as may be specified in the order are satisfied;

such services are treated for the purposes of this Part of this Act as being both supplied to him for the purpose of that business and supplied by him in the course of that business.

(3)For the purposes of this section, where goods are manufactured or produced from any other goods those other goods shall be treated as incorporated in the first-mentioned goods.

7Time of supply

(1)The following provisions of this section shall apply for determining the time when a supply of goods or services is to be treated as taking place for the purposes of the charge to tax.

(2)Subject to the following provisions of this section, a supply of goods shall be treated as taking place—

(a)if the goods are to be removed, at the time of the removal;

(b)if the goods are not to be removed, at the time when they are made available to the person to whom they are supplied;

(c)if the goods (being sent or taken on approval or sale or return or similar terms) are removed before it is known whether a supply will take place, at the time when it becomes certain that the supply has taken place, but not later than twelve months after the removal.

(3)Subject to the following provisions of this section, a supply of services shall be treated as taking place at the time when the services are performed.

(4)If, before the time applicable under subsection (2) or subsection (3) of this section, the person making the supply issues a tax invoice in respect of it or if, before the time applicable under paragraph (a) or (b) of subsection (2) or subsection (3) of this section, he receives a payment in respect of it, the supply shall, to the extent covered by the invoice or payment, be treated as taking place at the time the invoice is issued or the payment is received.

(5)If, within fourteen days after the time applicable under subsection (2) or subsection (3) of this section, the person making the supply issues a tax invoice in respect of it, then, unless he has notified the Commissioners in writing that he elects not to avail himself of this subsection, the supply shall (notwithstanding the preceding provisions of this section) be treated as taking place at the time the invoice is issued.

(6)The Commissioners may, at the request of a taxable person, direct that subsection (5) of this section shall apply in relation to supplies made by him (or such supplies made by him as may be specified in the direction) as if for the period of fourteen days there were substituted such longer period as may be specified in the direction.

(7)Where goods are deemed to be supplied by virtue of paragraph 1 of Schedule 2 to this Act or section 6 of this Act, the supply shall be treated as taking place when they are applied or used as mentioned in that paragraph or section.

(8)The Commissioners may by regulation make provision with respect to the time at which, notwithstanding the preceding provisions of this section, a supply is to be treated as taking place in cases where goods or services are supplied for a consideration the whole or part of which is determined or payable periodically or at the end of any period or where goods are supplied for a consideration the whole or part of which is determined at the time when the goods are appropriated for any purpose ; and any such regulations may provide—

(a)for treating goods supplied on hire for any period as being successively supplied on hire for successive parts of that period ; and

(b)for treating services supplied for any period as being successively supplied for successive parts of that period.

(9)In this section " tax invoice " means such an invoice as is required under section 30(2) of this Act or would be so required if the person to whom the supply is made were a taxable person.

8Place of supply

(1)The following provisions of this section shall apply for determining, for the purposes of the charge to tax, whether goods or services are supplied in the United Kingdom.

(2)If the supply of any goods does not involve their removal from or to the United Kingdom they shall be treated as supplied in the United Kingdom if they are in the United Kingdom and otherwise shall be treated as supplied outside the United Kingdom.

(3)If the supply of any goods involves their removal from the United Kingdom they shall be treated as supplied in the United Kingdom and if it involves their removal to the United Kingdom they shall be treated as supplied outside the United Kingdom.

(4)Subject to subsection (5) of this section, if services might be considered as supplied either in or outside the United Kingdom or as supplied both in and outside the United Kingdom, they shall be treated as supplied in the United Kingdom if the person supplying them has his place of business or principal place of business in the United Kingdom and otherwise shall be treated as supplied outside the United Kingdom; but for the purposes of this subsection any person carrying on a business through a branch or agency in the United Kingdom shall be treated as having his principal place of business in the United Kingdom.

(5)Where services consist of transport between places of which one is and the other is not in the United Kingdom, so much of the services as consists of transport within the United Kingdom shall be treated as supplied in the United Kingdom and the remainder as supplied outside the United Kingdom.

(6)The Treasury may by order make provision, with respect to such services as may be specified in the order, for substituting for the provisions contained in subsection (4) or (5) of this section such other provisions as may be specified in the order, either generally or in such circumstances as may be so specified.

(7)Where a supply of goods is such that subsections (2) and (3) of this section cannot be applied to it, subsections (4) and (6) of this section shall apply to it as they apply to a supply of services.

(8)For the purposes of this section, where goods, in the course of their removal from a place in the United Kingdom to another place in the United Kingdom, leave and re-enter the United Kingdom the removal shall not be treated as a removal from or to the United Kingdom.

Rate of tax and determination of value

9Rate of tax

(1)Subject to the following provisions of this section, tax shall be charged at the rate of ten per cent., and shall be charged—

(a)on the supply of goods or services, by reference to the value of the supply as determined under this Part of this Act; and

(b)on the importation of goods, by reference to the value of the goods as determined under this Part of this Act.

(2)The Treasury may by order made before 1st April 1973 substitute for the rate of ten per cent. a rate not lower than seven and a half per cent. nor higher than twelve and a half per cent.

(3)The Treasury may by order increase or decrease the rate for the time being in force by such percentage thereof, not exceeding 20 percent., as may be specified in the order, but any such order shall cease to be in force at the expiration of a period of one year from the date on which it takes effect, unless continued in force by a further order under this subsection.

(4)In relation to an order made under subsection (3) of this section to continue, vary or replace a previous order, the reference in that subsection to the rate for the time being in force is a reference to the rate that would be in force if no order under that subsection had been made.

10Value of supply of goods or services

(1)For the purposes of this Part of this Act the value of any supply of goods or services shall be determined as follows.

(2)If the supply is for a consideration in money its value shall be taken to be such amount as, with the addition of the tax chargeable, is equal to the consideration.

(3)If the supply is not for a consideration or is for a consideration not consisting or not wholly consisting of money, the value of the supply shall be taken to be its open market value.

(4)Where a supply of any goods or services is not the only matter to which a consideration in money relates the supply shall be deemed to be for such part of the consideration as is properly attributable to it.

(5)For the purposes of this Part of this Act the open market value of a supply of goods or services shall be taken to be the amount that would fall to be taken as its value under subsection (2) of this section if the supply were for such consideration in money as would be payable by a person standing in no such relationship with any person as would affect that consideration.

(6)This section has effect subject to Schedule 3 to this Act

11Value of imported goods

For the purposes of this Part of this Act the value of any imported goods shall be taken to be the aggregate of the following, that is to say,—

(a)the amount that would fall to be taken as their value under section 258 of the [1952 c. 44.] Customs and Excise Act 1952 if value added tax were a duty of customs; and

(b)the amount of any customs duty payable on the goods or of any payment or repayment made in order to secure relief from such customs duty under section 35 or section 36 of the Customs and Excise Act 1952 (relief on re-importation); and

(c)any amount payable on the goods by way of surcharge under section 7 of the [1956 c. 48.] Sugar Act 1956 or a levy under section 1 of the [1964 c. 28.] Agriculture and Horticulture Act 1964 or payable on the goods under section 6(5) of the European Communities Act 1972 or that section as applied by section 7(1) of that Act.

Reliefs

12Zero-rating

(1)Where a taxable person supplies goods or services and the supply is zero-rated, then, whether or not tax would be chargeable on the supply apart from this section,—

(a)no tax shall be charged on the supply; but

(b)it shall in all other respects be treated as a taxable supply;

and accordingly the rate at which tax is treated as charged on the supply shall be nil.

(2)A supply of goods or services is zero-rated by virtue of this subsection if the goods or services are of a description for the time being specified in Schedule 4 to this Act or the supply is of a description for the time being so specified.

(3)Where goods of a description for the time being specified in Schedule 4 to this Act, or of a description forming part of a description of supply for the time being so specified, are imported into the United Kingdom no tax shall be chargeable on their importation, except as otherwise provided in that Schedule.

(4)The Treasury may by order vary Schedule 4 to this Act by adding to or deleting from it any description or by varying any description for the time being specified in it.

(5)Where a description included in Schedule 4 to this Act (whether by virtue of an order under the preceding subsection or otherwise) is of a supply of goods or services outside the United Kingdom or of a transaction which would not otherwise be a supply of goods or services the supply or transaction shall for the purposes of this Part of this Act be treated as a supply of goods or services in the United Kingdom.

(6)A supply of goods is zero-rated by virtue of this subsection if the Commissioners are satisfied that the person supplying the goods—

(a)has exported them; or

(b)has shipped them for use as stores on a voyage or flight to an eventual destination outside the United Kingdom, or as merchandise for sale by retail to persons carried on such a voyage or flight in a ship or aircraft.

(7)The Commissioners may by regulations make provision for the zero-rating of supplies of goods, or of such goods as may be specified in the regulations, in cases where the Commissioners are satisfied that the goods have been or are to be exported and such other conditions, if any, as may be specified in the regulations or the Commissioners may impose are fulfilled.

(8)Where the supply of any goods has been zero-rated in pursuance of regulations made under the preceding subsection and—

(a)the goods are found in the United Kingdom after the date on which they were alleged to have been or were to be exported ; or

(b)any condition specified in the regulations or imposed by the Commissioners is not complied with ;

and the presence of the goods in the United Kingdom after that date or the non-observance of the condition has not been authorised for the purposes of this subsection by the Commissioners, the goods shall be liable to forfeiture under the [1952 c. 44.] Customs and Excise Act 1952 and the tax that would have been chargeable on the supply but for the zero-rating shall become payable forthwith by the person to whom the goods were supplied or by any person in whose possession the goods are found in the United Kingdom; but the Commissioners may, if they think fit, waive payment of the whole or part of that tax.

13Exemptions

(1)A supply of goods or services is an exempt supply if it is of a description for the time being specified in Schedule 5 to this Act.

(2)The Treasury may by order vary that Schedule by adding to or deleting from it any description of supply or by varying any description of supply for the time being specified in it.

14Relief on supply of certain second-hand goods

(1)The Treasury may by order make provision for securing a reduction of the tax chargeable on the supply of goods of such descriptions as may be specified in the order in cases where no tax was chargeable on a previous supply of the goods and such other conditions are satisfied as may be specified in the order or as may be imposed by the Commissioners in pursuance of the order.

(2)The amount of the reduction that may be secured by an order under this section shall not exceed the amount of tax that would have been chargeable on the previous supply had tax been chargeable on it at the same rate as that at which the tax to be reduced would be chargeable but for the reduction.

(3)An order under this section making provision for reducing the tax chargeable on the supply of goods of any description may include provision—

(a)for giving relief from the tax chargeable on the importation of goods of that description ; and

(b)for securing the like reduction where no tax was chargeable on the importation of goods of that description as where no tax was chargeable on a previous supply of the goods.

(4)An order under this section may extend to cases where the previous supply or the importation took place before tax was chargeable on any supply or importation.

(5)The preceding provisions of this section shall, with the necessary modifications, apply in relation to cases where consequential relief from tax was given on a previous supply by an order under section 3(6) of this Act but the relief did not extend to the whole amount of the tax.

(6)An order under this section may make different provision for goods of different descriptions and for different circumstances.

15Refund of tax in certain cases

(1)Subject to the following provisions of this section, where tax is chargeable on the supply of goods or services to, or on the importation of goods by, a body to which this section applies and the supply or importation is not for the purpose of any business carried on by the body, the Commissioners shall, on a claim made by the body at such time and in such form and manner as the Commissioners may determine, refund to it the amount of the tax so chargeable.

(2)Where goods or services so supplied to or imported by the body cannot be conveniently distinguished from goods or services supplied to or imported by it for the purpose of a business carried on by it, the amount to be refunded under this section shall be such amount as remains after deducting from the whole of the tax chargeable on any supply to or importation by the body such proportion thereof as appears to the Commissioners to be attributable to the carrying on of the business; but where the tax so attributable is or includes tax attributable, in accordance with regulations under section 3 of this Act, to exempt supplies by the body and the tax attributable to the exempt supplies is in the opinion of the Commissioners an insignificant proportion of the tax so chargeable they may include it in the tax refunded under this section.

(3)The bodies to which this section applies are—

(a)a local authority;

(b)a river authority, a river purification board, the Conservators of the River Thames and the Lee Conservancy Catchment Board;

(c)a drainage board within the meaning of the [1930 c. 44.] Land Drainage Act 1930;

(d)any statutory water undertakers within the meaning of the [1945 c. 42.] Water Act 1945, and a regional water board and water development board within the meaning of the [1967 c. 28.] Water (Scotland) Act 1967 ;

(e)the London Transport Executive and a passenger transport authority or executive established under Part II of the [1968 c. 73.] Transport Act 1968 ;

(f)a port health authority constituted under Part I of the [1936 c. 49.] Public Health Act 1936, and a port local authority and joint port local authority constituted under Part X of the [1897 c. 38.] Public Health (Scotland) Act 1897;

(g)a police authority and the Receiver for the Metropolitan Police District;

(h)a development corporation within the meaning of the [1965 c. 59.] New Towns Act 1965 or the [1968 c. 16.] New Towns (Scotland) Act 1968, a new town commission within the meaning of the [1965 c. 13 (N.I.).] New Towns Act (Northern Ireland) 1965 and the Commission for the New Towns;

(i)a general lighthouse authority within the meaning of Part XI of the [1894 c. 60.] Merchant Shipping Act 1894;

(j)the British Broadcasting Corporation;

(k)Independent Television News Limited ; and

(l)any body specified for the purposes of this section by an order made by the Treasury.

(4)No tax shall be refunded under this section to a general lighthouse authority which in the opinion of the Commissioners is attributable to activities other than those concerned with the provision, maintenance or management of lights or other navigational aids.

(5)References in this section to any tax chargeable do not include any tax which, by virtue of an order under section 3(6) of this Act, could not be deducted as input tax.

(6)In this section " local authority " means the council of a county, borough, county district, district, parish or group of parishes, community or group of communities, the Greater London Council, the Common Council of the City of London, the Council of the Isles of Scilly, and any joint committee or joint board established by two or more of the foregoing and, in relation to Scotland, the council of a county, county of a city, large burgh, small burgh, district and any combination and any joint committee or joint board established by two or more of the foregoing.

16Relief from tax on importation of goods

(1)The Treasury may by order make provision for giving relief from the whole or part of the tax chargeable on the importation of goods, subject to such conditions (including conditions prohibiting or restricting the disposal of or dealing with the goods) as may be imposed by or under the order, if and so far as the relief appears to the Treasury to be necessary or expedient, having regard to any international agreement or arrangements.

(2)The Commissioners may by regulations make provision for remitting or repaying, if they think fit, the whole or part of the tax chargeable on the importation of any goods which are shown to their satisfaction to have been previously exported from the United Kingdom.

(3)The Commissioners may by regulations make provision for remitting or repaying the whole or part of the tax chargeable on the importation of any goods if they are satisfied that the goods have been or are to be re-exported and they think fit to do so in all the circumstances and having regard to the tax chargeable on the supply of like goods in the United Kingdom.

Further provisions as to importation of goods

17Application of customs enactments

(1)Subject to the provisions of this section, the [1952 c. 44.] Customs and Excise Act 1952 and, except where the contrary intention appears, any other enactments (including provisions of regulations or other instruments having statutory effect) relating to customs generally, whether passed or made before or after the passing of this Act, shall have effect, with such exceptions and adaptations as the Commissioners may by regulations prescribe, as if all goods imported into the United Kingdom were liable to duties of customs and as if those duties included value added tax chargeable on the importation of goods.

(2)The following provisions of the Customs and Excise Act 1952, that is to say—

(a)sections 34(4), 35 and 36 (reimportation);

(b)A charge taking effect by virtue of subsection (4) above shall, notwithstanding subsection (5) of section 59 of the Land Registration Act 1925, be a land charge for the purposes of that section, and subsection (2) of that section shall apply accordingly with respect to its protection and realisation.

(c)section 43(a) (relief from duty of antiques);

(d)section 221(2) (exemption of certain mechanical lighters);

(e)section 259 (charge of duty on manufactured or composite articles);

(f)section 260(1)(b) (declaration as to duty payable);

(g)section 272 (supply of goods without payment of duty to Her Majesty's ships); and

(h)sections 308 to 311 (Isle of Man);

shall be excepted from the enactments which are to have effect as mentioned in subsection (1) of this section.

(3)Section 258(1) of the Customs and Excise Act 1952 shall have effect, in its application by virtue of subsection (1) of this section, in a case where paragraph (b) or (c) of section 11 of this Act applies, as if the value to be taken as the value of imported goods were increased by the amount mentioned in that paragraph.

(4)Regulations under section 16 of the [1953 c. 36.] Post Office Act 1953 (which provides for the application of customs enactments to postal packets) may make special provision in relation to value added tax.

18Importation of goods by taxable persons

The Commissioners may by regulations make provision for enabling goods imported by a taxable person in the course of a business carried on by him to be delivered or removed, subject to such conditions or restrictions as the Commissioners may impose for the protection of the revenue, without payment of the tax chargeable on the importation, and for that tax to be accounted for together with the tax chargeable on the supply of goods or services by him.

Special cases

19Application to Crown

(1)This Part of this Act shall apply in relation to taxable supplies by the Crown as it applies in relation to taxable supplies by taxable persons.

(2)Where the supply by a Government department of any goods or services does not amount to the carrying on of a business but it appears to the Treasury that similar goods or services are or might be supplied by taxable persons in the course of a business, then, if and to the extent that the Treasury so directs, the supply of those goods or services by that department shall be treated for the purposes of this Part of this Act as a supply in the course of a business carried on by it.

(3)For the purposes of this section goods or services obtained by one Government department from another Government department shall be treated, if and to the extent that the Treasury so directs, as supplied by that other department and similarly as regards goods or services obtained by or from the Crown Estate Commissioners.

(4)In this section " Government department" includes a department of the Government of Northern Ireland, any body of persons exercising functions on behalf of a Minister of the Crown, and any part of a Government department (as defined in the foregoing) designated for the purposes of this subsection by a direction of the Treasury.

20Local authorities

(1)A local authority which makes taxable supplies is liable to be registered under this Part of this Act, whatever the value of the supplies; and accordingly Schedule 1 to this Act shall apply, in a case where the value of the taxable supplies made by a local authority in any period of one year is £5,000 or less, as if that value exceeded £5,000.

(2)In this section " local authority " has the same meaning as in section 15 of this Act.

21Groups of companies

(1)Where, under the following provisions of this section, any bodies corporate are treated as members of a group any business carried on by a member of the group shall be treated as carried on by the representative member, and—

(a)any supply of goods or services by a member of the group to another member of the group shall be disregarded ; and

(b)any other supply of goods or services by or to a member of the group shall be treated as a supply by or to the representative member; and

(c)any tax paid or payable by a member of the group on the importation of any goods shall be treated as paid or payable by the representative member and the goods shall be treated for the purposes of sections 18 and 31(3) of this Act as imported by the representative member;

and all members of the group shall be liable jointly and severally for any tax due from the representative member.

(2)An order under section 6 of this Act may make provision for securing that any goods or services which, if all the members of the group were one person, would fall to be treated under that section as supplied to and by that person, are treated as supplied to and by the representative member.

(3)Two or more bodies corporate resident in the United Kingdom are eligible to be treated as members of a group if—

(a)one of them controls each of the others; or

(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.

(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, from the beginning of a prescribed accounting period they shall be so treated, and one of them shall be the representative member, unless the Commissioners refuse the application; but they shall not refuse it 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 a prescribed accounting period—

(a)a further body eligible to be so treated shall be included among the bodies so treated ; or

(b)a body corporate shall be excluded from the bodies so treated; or

(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 paragraph (c) above and the Commissioners refuse the application ; but they shall not refuse it unless it appears to them necessary to do so for the protection of the revenue.

(6)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.

(7)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 ninety days before the date from which it is to take effect, or at such later time as the Commissioners may allow.

(8)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 the [1948 c. 38.] Companies Act 1948 ; 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 Act.

22Partnerships

(1)The registration under this Part of this Act of persons carrying on a business in partnership may be in the name of the firm; and no account shall be taken, in determining whether goods or services are supplied to or by such persons, of any change in the partnership or of a change from the business being carried on by a person on his own to its being carried on by him in partnership or from the business being carried on in partnership to its being carried on by one of the former partners on his own.

(2)Subsection (1) of this section shall not affect the extent to which, under section 9 of the [1890 c. 39.] Partnership Act 1890, a partner is liable for tax owed by the firm; but where a person is a partner in a firm during part only of a prescribed accounting period his liability for tax on the supply by the firm of goods or services during that accounting period shall be such proportion of the firm's liability as may be just.

23Business carried on in divisions or by unincorporated bodies, personal representatives, etc.

(1)The registration under this Part of this Act 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.

(2)The Commissioners may by regulations make provision for determining by what persons anything required by or under this Part of this Act to be done by a person carrying on a business is to be done where a business is carried on in partnership or by a club or association the affairs of which are managed by its members or a committee or committees of its members.

(3)The Commissioners may by regulations make provision for persons who carry on a business of a taxable person who has died or become bankrupt or incapacitated to be treated for a limited time as taxable persons, and for securing continuity in the application of this Part of this Act in cases where persons are so treated.

24Agents, etc.

(1)Where a person who is accountable for any tax, or on whom any duties are imposed by or under this Part of this Act, is not resident in the United Kingdom, the Commissioners may by notice in writing served on any agent, manager or factor who is resident in the United Kingdom and has acted on behalf of that person in matters by reference to which that person is accountable or the duties are imposed, direct that he shall be substituted for that person as the person accountable for the tax or that he shall be under an obligation to discharge those duties or any of them.

(2)For the purposes of this Part of this Act goods imported by a taxable person and supplied by him as agent for a person who is not a taxable person may be treated as imported and supplied by the taxable person as principal.

(3)Where goods or services are supplied through an agent who acts in his own name the Commissioners may, if they think fit, treat the supply both as a supply to the agent and as a supply by the agent.

25Transfers of going concerns

Where a business carried on by a taxable person is transferred to another person as a going concern, then—

(a)for the purpose of determining whether the transferee is liable to be registered under this Part of this Act he shall be treated as having carried on the business before as well as after the transfer; and supplies by the transferor shall be treated accordingly ; and

(b)any records relating to the business which, under section 34 of this Act, are required to be preserved for any period after the transfer shall be preserved by the transferee instead of by the transferor, unless the Commissioners, at the request of the tranferor, otherwise direct.

26Terminal markets

(1)The Treasury may by order make provision for modifying the provisions of this Part of this Act in their application to dealings on terminal markets and such persons ordinarily engaged in such dealings as may be specified in the order, subject to such conditions as may be so specified.

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

(a)for zero-rating the supply of any goods or services or for treating the supply of any goods or services as exempt;

(b)for the registration under this Part of this Act of any body of persons representing persons ordinarily engaged in dealing on a terminal market and for disregarding such dealings by persons so represented in determining liability to be registered under this Part of this Act, and for disregarding such dealings between persons so represented for all the purposes of this Part of this Act;

(c)for refunding, to such persons as may be specified by or under the order, input tax attributable to such dealings on a terminal market as may be so specified;

and may contain such incidental and supplementary provisions as appear to the Treasury to be necessary or expedient.

(3)An order under this section may make different provision with respect to different terminal markets and with respect to different commodities.

27Supplies of dutiable goods in warehouse

(1)Where goods subject to a duty of customs are supplied while warehoused and before payment of the duty the supply shall be disregarded for the purposes of this Part of this Act.

(2)Where goods subject to a duty of excise or such goods mixed with goods subject to a duty of customs are supplied while warehoused and before payment of the duty, then—

(a)if there is more than one such supply any but the last such supply shall be disregarded for the purposes of this Part of this Act; and

(b)the supply or, if more than one, the last such supply shall be treated for the purposes of this Part of this Act as taking place when the duty is paid and the value of the supply shall be treated as including the duty; and

(c)the tax on the supply shall be payable, together with the duty, by the person by whom the duty is paid, except as otherwise provided by regulations under this section;

except that, if the goods are permitted to be removed from warehouse without payment of the duty, the supply (or last supply) shall be treated as taking place when the goods are so removed, the value of the supply shall not be treated as including the duty and the tax on the supply shall be payable by the person by whom the goods are removed.

(3)The Commissioners may by regulations make provision for enabling goods which are supplied as mentioned in subsection (2) of this section, and are so supplied to a taxable person for the purpose of a business carried on by him, to be removed from warehouse without payment of the tax on the supply and for that tax to be accounted for together with the tax chargeable on the supply of goods or services by him.

(4)Subsection (1) of this section applies in relation to a surcharge under section 7 of the [1956 c. 48.] Sugar Act 1956 or any amount payable under section 6(5) of the European Communities Act 1972 or that section as applied by section 7(1) of that Act as it applies in relation to a duty of customs.

28Capital goods

(1)The Treasury may by order make provision for the giving of relief, in such cases, to such extent and subject to such exceptions as may be specified in the order, from tax paid on the supply or importation for the purpose of a business carried on by any person of machinery or plant or any specified description of machinery or plant in cases where that tax or part of that tax cannot be deducted under section 3 of this Act and such other conditions are satisfied as may be specified in the order.

(2)Without prejudice to the generality of subsection (1) of this section, an order under this section may provide for relief to be given by deduction or refunding of tax and for aggregating or excluding the aggregation of value where goods of the same description are supplied or imported together.

(3)An order under this section may substitute a period exceeding three years but not exceeding six years as the period for which records relating to goods in respect of which relief is given under the order may be required to be preserved under section 34(2) of this Act.

29Trading stamp schemes

The Commissioners may by regulations make provision for modifying section 10 of this Act and paragraph 5 of Schedule 3 to this Act in their application to the supply of goods under trading stamp schemes within the meaning of the [1964 c. 71.] Trading Stamps Act 1964 or the [1965 c. 6 (N.I.).] Trading Stamps Act (Northern Ireland) 1965.

Collection and enforcement

30Accounting for and payment of tax

(1)Tax on the supply of goods or services shall be accounted for and paid by reference to such periods (in this Part of this Act referred to as " prescribed accounting periods ") at such time and in such manner as may be determined by or under regulations made by the Commissioners; and claims for deduction of input tax or for payments under section 3(2) of this Act shall be made in such manner as may be so determined.

(2)Regulations under this section may require the keeping of accounts and the making of returns in such form and manner as may be specified in the regulations and may require taxable persons supplying goods or services to other taxable persons to provide them with invoices (to be known as " tax invoices ") containing statements of such particulars as may be so specified of the supply, the tax chargeable on it and the persons by and to whom the goods or services are supplied.

(3)Regulations under this section may make special provision for such taxable supplies by retailers of any goods or of any description of goods or of services or any description of services as may be determined by or under the regulations and, in particular,—

(a)for permitting the value which is to be taken as the value of the supplies in any prescribed accounting period or part thereof to be determined, subject to any limitations or restrictions, by such method or one of such methods as may have been described in any notice published by the Commissioners in pursuance of the regulations and not withdrawn by a further notice or as may be agreed with the Commissioners; and

(b)for determining the proportion of the value of the supplies which is to be attributed to any description of supplies; and

(c)for adjusting that value and proportion for periods comprising two or more prescribed accounting periods or parts thereof.

(4)Regulations under this section may make provision—

(a)for treating tax chargeable in one prescribed accounting period as chargeable in another such period; and

(b)for the adjustment of accounts in cases where tax has become chargeable by reference to a consideration and the amount of the consideration is reduced or no consideration becomes payable and in such other circumstances as may be specified in the regulations; and

(c)for the correction of errors.

(5)Regulations under this section may make different provision for different circumstances and may provide for different dates as the commencement of prescribed accounting periods applicable to different persons.

(6)The provisions made by regulations under this section for cases where goods are treated as supplied by a taxable person by virtue of paragraph 2 of Schedule 2 to this Act may require the tax chargeable on the supply to be accounted for and paid, and particulars thereof to be provided, by such other person and in such manner as may be specified by the regulations.

(7)Where, at the end of a prescribed accounting period, the amount of tax due from any person or the amount due to any person under section 3(2) of this Act would be less than £1 that amount shall be treated as nil.

31Power of Commissioners to assess tax due

(1)Where a taxable person has failed to make any returns required under this Part of this Act or to keep any documents and afford the facilities necessary to verify such returns or where it appears to the Commissioners that such returns are incomplete or incorrect they may assess the amount of tax due from him to the best of their judgment and notify it to him.

(2)An assessment under subsection (1) of this section of an amount of tax due for any prescribed accounting period shall not be made after the later of the following:—

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

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

but may, where further such evidence comes to their knowledge after the making of such an assessment, be made in addition to that assessment.

(3)Where a taxable person has acquired or imported any goods in the course of a business carried on by him the Commissioners may require him from time to time to account for the goods; and if he fails to prove that the goods have been or are available to be supplied by him or have been lost or destroyed they may assess to the best of their judgment and notify to him the amount of tax that would have been chargeable in respect of the supply of the goods if they had been supplied by him.

(4)An assessment under subsection (1) or subsection (3) of this section shall not be made more than six years after the end of the prescribed accounting period or importation concerned, nor, if the taxable person has died, more than three years after his death; except that if the Commissioners satisfy a value added tax tribunal that there are reasonable grounds for believing that tax has been or may have been lost through the fraud or wilful default or neglect of any person an assessment may, with the leave of the tribunal, be made at any time, or, if the taxable person has died, at any time not later than six years after the death.

(5)Members of a value added tax tribunal giving leave for an assessment shall not take part in the proceedings or be present when an appeal against the assessment or against the amount of the assessment is heard or determined.

(6)Where an amount has been assessed and notified to any person under subsection (1) or subsection (3) of this section it shall, subject to the provisions of this Part of this Act as to appeals, 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.

32Power to require security and production of evidence

(1)The Commissioners may, as a condition of allowing or repaying any input tax to any person, require the production of such documents relating to the tax as may have been supplied to him and may, if they think it necessary for the protection of the revenue, require as a condition of making any payment under section 3(2) of this Act the giving of such security for the amount of the payment as appears to them appropriate.

(2)Where it appears to the Commissioners requisite to do so for the protection of the revenue they may require a taxable person, as a condition of his supplying goods or services under a taxable supply, to give security, or further security, of such amount and in such manner as they may determine, for the payment of any tax which is or may become due from him.

33Recovery of tax, etc.

(1)Tax due from any person shall be recoverable as a debt due to the Crown.

(2)Any amount shown in an invoice as tax chargeable on a supply of goods or services shall be recoverable as tax due from the person issuing the invoice, whether or not—

(a)the invoice is a tax invoice issued in pursuance of section 30(2) of this Act; or

(b)that or any amount of tax is chargeable on the supply; or

(c)the person issuing the invoice is a taxable person.

(3)The Commissioners may by regulations make provision for authorising distress to be levied on the goods and chattels of any person refusing or neglecting to pay any tax due from him or any amount recoverable as if it were tax due from him, and for the disposal of any goods or chattels on which distress is levied in pursuance of the regulations.

(4)In the application of the preceding subsection to Scotland, for the reference to the levying of distress on goods and chattels there shall be substituted a reference to the doing of diligence, and for the expression " chattels " there shall be substituted a reference to corporeal movables.

34Duty to keep records

(1)Every taxable person shall keep such records as the Commissioners may require.

(2)The Commissioners may require any records kept in pursuance of this section to be preserved for such period not exceeding three years as they may require.

(3)The duty under this section to preserve records may be discharged by the preservation of the information contained therein by such means as the Commissioners may approve; and where that information is so preserved a copy of any document forming part of the records shall, subject to the following provisions of this section, be admissible in evidence in any proceedings, whether civil or criminal, to the same extent as the records themselves.

(4)The Commissioners may, as a condition of approving under subsection (3) of this section any means of preserving information contained in any records, impose such reasonable requirements as appear to them necessary for securing that the information will be as readily available to them as if the records themselves had been preserved.

(5)A statement contained in a document produced by a computer shall not be admissible in evidence by virtue of subsection (3) of this section unless the conditions mentioned in subsection (2) of section 5 of the [1968 c. 64.] Civil Evidence Act 1968 or in the corresponding Scottish enactment are satisfied in relation to the statement and the computer; and the other provisions of that section and subsections (1), (2), (3) and (5) of section 6 of that Act (supplementary provisions) and the like provisions of the corresponding Scottish enactment shall, with the necessary modifications, apply in relation to the giving of evidence in pursuance of this section.

(6)Notwithstanding the preceding provisions of this section, in criminal proceedings the court may, for special cause, require oral evidence to be given of any matter of which evidence could ordinarily be given by means of a certificate under section 5"(4) of the [1968 c. 64.] Civil Evidence Act 1968 or under the corresponding Scottish enactment as applied by the preceding subsection.

(7)In subsections (3) and (5) of this section " document", " copy " and " computer " have the same meanings as, by virtue of section 10 of the Civil Evidence Act 1968, they have in Part I of that Act or as they have in the corresponding Scottish enactment.

(8)For the purposes of this section—

(a)section 13 of the [1968 c. 70.] Law Reform (Miscellaneous Provisions) (Scotland) Act 1968 is the corresponding Scottish enactment to section 5 of the Civil Evidence Act 1968 and the provisions of the said section 13 (which are identical in number with the provisions of the said section 5) shall apply accordingly;

(b)section 14 of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1968 is the corresponding Scottish enactment to subsections (1), (2), (3) and (5) of section 6 of the Civil Evidence Act 1968 ; and

(c)section 17 and Part III of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1968 are the corresponding Scottish enactments to section 10 and Part I of the Civil Evidence Act 1968.

(9)In the application of this section to Northern Ireland, for references to any subsection of section 5 or 6 of the Civil Evidence Act 1968 or to section 10 of that Act there shall be substituted references to the same subsection of section 2 or 3 of the [1971 c. 36 (N.I.).] Civil Evidence Act (Northern Ireland) 1971 or section 6 of that Act.

35Furnishing of information and production of documents

(1)The Commissioners may by regulations make provision for requiring taxable persons to notify to the Commissioners such particulars of changes in circumstances relating to those persons or any business carried on by them as appear to the Commissioners required for, the purpose of keeping the register kept under this Part of this Act up to date.

(2)Every person who is concerned (in whatever capacity) in the supply of goods in the course of a business or to whom such a supply is made shall—

(a)furnish to the Commissioners, within such time and in such form as they may require, such information relating to the goods or to the supply as the Commissioners may specify; and

(b)upon demand made by an authorised person, produce or cause to be produced any documents relating to the goods or to the supply for inspection by the authorised person and permit him to take copies of or to make extracts from them or to remove them at a reasonable time and for a reasonable period.

(3)Every person who is concerned (in whatever capacity) in the taxable supply of any services or to whom such a supply is made shall—

(a)furnish to the Commissioners, within such time and in such form as they may require, such information relating to the consideration for the supply or to the name and address of the person to whom the supply is made as the Commissioners may specify; and

(b)upon demand made by an authorised person, produce or cause to be produced any documents relating to the consideration for inspection by the authorised person and permit him to take copies of or to make extracts from them or to remove them at a reasonable time and for a reasonable period.

(4)For the purposes of this section, the documents relating to the supply of goods, or to the consideration for the supply of services, in the course of a business shall be taken to include any profit and loss account and balance sheet relating to that business.

(5)Where any documents removed under the powers conferred by this section are lost or damaged the Commissioners shall be liable to compensate their owner for any expenses reasonably incurred by him in replacing or repairing the documents.

(6)In this section " document" and " copy " have the same meanings—

(a)in relation to England and Wales, as, by virtue of section 10 of the [1968 c. 64.] Civil Evidence Act 1968, they have in Part I of that Act;

(b)in relation to Scotland, as, by virtue of section 17 of the [1968 c. 70.] Law Reform (Miscellaneous Provisions) (Scotland) Act 1968, they have in Part III of that Act; and

(c)in relation to Northern Ireland, as, by virtue of section 6 of the [1971 c. 36 (N.I.).] Civil Evidence Act (Northern Ireland) 1971, they have in Part I of that Act.

36Power to take samples

(1)An authorised person, if it appears to him necessary for the protection of the revenue against mistake or fraud, may at any time take, from the goods in the possession of any person who supplies goods, such samples as the authorised person may require with a view to determining how the goods or the materials of which they are made ought to be or to have been treated for the purposes of tax.

(2)Any sample taken under this section shall be disposed of and accounted for in such manner as the Commissioners may direct.

(3)Where a sample is taken under this section from the goods in any person's possession and is not returned to him within a reasonable time and in good condition the Commissioners shall pay him by way of compensation a sum equal to the cost of the sample to him or such larger sum as they may determine.

37Entry and search of premises and persons

(1)For the purpose of exercising any powers under this Part of this Act an authorised person may at any reasonable time enter premises used in connection with the carrying on of a business.

(2)Where an authorised person has reasonable cause to believe that any premises are used in connection with the supply of goods under taxable supplies and that goods to be so supplied are on those premises, he may at any reasonable time enter and inspect those premises and inspect any goods found on them.

(3)If a justice of the peace is satisfied on information on oath that there is reasonable ground for suspecting that an offence in connection with the tax is being, has been or is about to be committed on any premises or that evidence of the commission of such an offence is to be found there, he may issue a warrant in writing authorising any authorised person to enter those premises, if necessary by force, at any time within fourteen days from the time of the issue of the warrant and search them ; and any person who enters the premises under the authority of the warrant may—

(a)take with him such other persons as appear to him to be necessary;

(b)seize and remove any documents or other things whatsoever found on the premises which he has reasonable cause to believe may be required as evidence for the purposes of proceedings in respect of such an offence; and

(c)search or cause to be searched any person found on the premises whom he has reasonable cause to believe to have committed or be about to commit such an offence or to be in possession of any such documents or other things;

but no woman or girl shall be searched except by a woman.

(4)In the application of this section to Scotland, the reference to a justice of the peace includes a reference to the sheriff and a magistrate.

38Offences and penalties

(1)If any person is knowingly concerned in, or in the taking of steps with a view to, the fraudulent evasion of tax by him or any other person, he shall be liable to a penalty of £1,000 or three times the amount of the tax, whichever is the greater, or to imprisonment for a term not exceeding two years, or to both.

(2)If any person—

(a)with intent to deceive produces, furnishes or sends for the purposes of this Part of this Act or otherwise makes use for those purposes of any document which is false in a material particular ; or

(b)in furnishing any information for the purposes of this Part of this Act makes any statement which he knows to be false in a material particular or recklessly makes a statement which is false in a material particular;

he shall be liable to a penalty of £1,000 or to imprisonment for a term not exceeding two years, or to both.

(3)Where a person's conduct during any specified period must have involved the commission by him of one or more offences under the preceding provisions of this section, then, whether or not the particulars of that offence or those offences are known, he shall, by virtue of this subsection, be guilty of an offence and liable to a penalty of £1,000 or, if greater, three times the amount of any tax that was or was intended to be evaded by his conduct, or to imprisonment for a term not exceeding two years, or to both.

(4)If any person acquires possession of or deals with any goods, or accepts the supply of any services, having reason to believe that tax on the supply of the goods or services or on the importation of the goods has been or will be evaded, he shall be liable to a penalty of £1,000 or three times the amount of the tax, whichever is the greater.

(5)If any person fails to comply with the requirements of Schedule 1 to this Act or supplies goods or services in contravention of section 32(2) of this Act he shall be liable to a penalty of £1,000 or, if greater, three times the amount of the tax evaded by the failure or contravention.

(6)If a person other than—

(a)a person registered under this Part of this Act; or

(b)a body corporate treated for the purposes of section 21 of this Act as a member of a group ; or

(c)a person treated as a taxable person under regulations made under section 23(3) of this Act; or

(d)a person authorised to do so under regulations made under section 30(6) of this Act; or

(e)a person acting on behalf of the Crown ;

issues an invoice showing an amount as being tax or as being attributable to tax he shall be liable to a penalty of £1,000 or three times the amount so shown, whichever is the greater.

(7)If any person fails to comply with any requirement imposed under section 34 or 35 of this Act or any regulations or rules made under this Part of this Act, he shall be liable to a penalty of £100, together with a penalty of £10 for each day on which the failure continues.

(8)Sections 281 to 291 of the [1952 c. 44.] Customs and Excise Act 1952 (proceedings for offences, mitigation of penalties and certain other matters) shall apply in relation to offences under this Part of this Act (which include any act or omission in respect of which a penalty is imposed) and penalties imposed under this Part of this Act as they apply in relation to offences and penalties under the customs and excise Acts as defined in that Act; and accordingly in section 290(2) as it applies by virtue of this subsection the reference to duty shall be construed as a reference to the tax.

39Evidence by certificate, etc.

(1)A certificate of the Commissioners—

(a)that a person was or was not, at any date, registered under this Part of this Act; or

(b)that any return required by or under this Part of this Act has not been made or had not been made at any date; or

(c)that any tax shown as due in any return or assessment made in pursuance of this Part of this Act has not been paid;

shall be sufficient evidence of that fact until the contrary is proved.

(2)A photograph of any document furnished to the Commissioners for the purposes of this Part of this Act and certified by them to be such a photograph shall be admissible in any proceedings, whether civil or criminal, to the same extent as the document itself.

(3)Any document purporting to be a certificate under subsection (1) or subsection (2) of this section shall be deemed to be such a certificate until the contrary is proved.

Appeals

40Appeals

(1)An appeal shall lie to a value added tax tribunal constituted in accordance with Schedule 6 to this Act against the decision of the Commissioners with respect to any of the following matters:—

(a)the registration or cancellation of registration of any person under this Part of this Act;

(b)an assessment under section 31 of this Act or the amount of such an assessment;

(c)the tax chargeable on the supply of any goods or services or, subject to subsection (5) of this section, on the importation of any goods;

(d)the amount of any input tax which may be deducted by a person;

(e)the proportion of any supplies that is to be taken as consisting of taxable supplies ;

(f)any refusal to permit the value of supplies to be determined by a method described in a notice published under section 30(3) of this Act;

(g)any refusal of an application under section 21 of this Act;

(h)any direction under paragraph 1 or paragraph 2 of Schedule 3 to this Act;

(i)the requirement of any security under section 32(2) of this Act.

(2)An appeal under this section shall not be entertained unless the appellant has made all the returns which he was required to make under section 30(2) of this Act and has paid the amounts shown in those returns as payable by him.

(3)Where the appeal is against a decision with respect to any of the matters mentioned in paragraph (b) or (c) of subsection (1) of this section it 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 value added tax tribunal decides that it should be entertained notwithstanding that that amount has not been so paid or deposited.

(4)Where on an appeal under this section it is found—

(a)that the whole or part of any amount paid or deposited in pursuance of subsection (3) of this section is not due; or

(b)that the whole or part of any amount due to the appellant under section 3(2) of this Act has not been paid;

so much of that amount as is found not to be due or not to have been paid shall be repaid (or, as the case may be, paid) with interest at such rate as the value added tax tribunal may determine; and where the appeal 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.

(5)No appeal shall lie under this section with respect to any matter that has been or could have been referred to arbitration under section 260 of the [1952 c. 44.] Customs and Excise Act 1952 as applied by section 17 of this Act.

Supplementary

41Priority of tax in bankruptcy, winding-up, etc.

(1)There shall be included among the debts which—

(a)under section 33 of the [1914 c. 59.] Bankruptcy Act 1914 are to be paid in priority to all other debts in the distribution of the property of a bankrupt or person dying insolvent; or

(b)under section 118 of the [1913 c. 20.] Bankruptcy (Scotland) Act 1913 are to be paid in priority to all other debts in the division of a bankrupt's estate; or

(c)under section 1 of the [1964 c. 32 (N.I.).] Preferential Payments (Bankruptcies and Arrangements) Act (Northern Ireland) 1964 are to be paid in priority to all other debts in the distribution of the property of a bankrupt, arranging debtor or person dying insolvent; or

(d)under section 319 of the [1948 c. 38.] Companies Act 1948 or section 287 of the [1960 c. 22 (N.I.).] Companies Act (Northern Ireland) 1960 are to be paid in priority to all other debts in the winding up of a company, or under section 94 of the Act of 1948 or section 92 of the Act of 1960 are on an appointment of a receiver on behalf of debenture holders or taking of possession by or on behalf of debenture holders to be paid in priority to any claim for principal or interest in respect of the debentures;

the amount of any tax due at the relevant date from the bankrupt, debtor, person dying or company and having become due within the twelve months next before that date.

(2)In this section " the relevant date "—

(a)in relation to section 33 of the Act of 1914, means the date of the receiving order or of the death, as the case may be;

(b)in relation to section 118 of the Act of 1913, means the date mentioned in subsection (4) of that section;

(c)in relation to section 1 of the Act of 1964, means the date of the order of adjudication, the date of the filing of a petition for arrangement or of the death, as the case may be;

(d)in relation to section 319 of the Act of 1948, or section 287 of the Act of 1960, has the meaning assigned to it by that section, and in relation to section 94 of the Act of 1948 or section 92 of the Act of 1960, means the date of the appointment of the receiver or taking of possession ;

and for the purposes of this section the tax having become due within the twelve months mentioned therein in respect of any prescribed accounting period falling partly within and partly outside those twelve months shall be taken to be such part of the tax due for the whole of that accounting period as is proportionate to the part of that period falling within those twelve months.

42Adjustment of contracts on changes in tax

(1)Where, after the making of a contract for the supply of goods or services and before the goods or services are supplied, there is a change in the tax charged on the supply, then, unless the contract otherwise provided, there shall be added to or deducted from the consideration for the supply an amount equal to the change.

(2)References in this section to a change in the tax charged on a supply include references to a change to or from no tax being charged on the supply.

43Orders, rules and regulations

(1)Any order under this Part of this Act may be varied or revoked by a subsequent order.

(2)Any order made by the Treasury and any regulations or rules under this Part of this Act shall be made by statutory instrument.

(3)Any statutory instrument made under this Part of this Act shall be subject to annulment in pursuance of a resolution of the Commons House of Parliament, except an Order in Council and an order making such provision as is mentioned in subsection (4) of this section.

(4)An order under this Part of this Act making provision—

(a)for increasing the rate of tax in force at the time of the making of the order; or

(b)for excepting any input tax from the provisions of subsections (1) to (5) of section 3 of this Act; or

(c)for varying Schedule 4 or Schedule 5 to this Act so as to abolish the zero-rating of a supply or to abolish the exemption of a supply without zero-rating it;

shall be laid before the Commons House of Parliament; and unless it is approved by that House before the expiration of a period of twenty-eight 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 thereunder or to the making of a new order. In reckoning any such period no account shall be taken of any time during which Parliament is dissolved or prorogued or during which the Commons House of Parliament is adjourned for more than four days.

44Service of notices

A notice to be served on any person for any of the purposes of this Part of this Act may be served by sending it by post in a letter addressed to that person at his last or usual residence or place of business.

45Meaning of " business ", etc.

(1)In this Part of this Act "business" includes any trade, profession or vocation ; and—

(a)the provision by the Independent Broadcasting Authority of broadcasting services ; and

(b)the provision by a club or by an association to which this paragraph applies of the facilities available to its members; and

(c)the provision by an organisation to which this paragraph applies of the advantages of membership; and

(d)the admission, for a consideration, of persons to any premises;

shall be deemed to be the carrying on of a business.

(2)Paragraph (b) of the preceding subsection applies to any association providing facilities for its members but shall not be taken to apply to an organisation of workers (within the meaning of section 61 of the [1971 c. 72.] Industrial Relations Act 1971 as extended by section 86 of that Act); and paragraph (c) of that subsection applies to any organisation of persons carrying on a trade, profession or vocation and to any association of such organisations, but only if the organisation or association so elects by notice in writing given to the Commissioners.

(3)Where a person, in the course of carrying on a trade, profession or vocation, accepts an office, other than a public office, any services supplied by him as holder of the office shall be treated for the purposes of this Part of this Act as supplied in the course of a business carried on by him.

46Interpretation

(1)In this Part of this Act—

• " assignment ", in relation to Scotland, means assignation;

• " authorised person " means any person acting under the authority of the Commissioners;

• " invoice " includes any document similar to an invoice;

• " input tax " has the meaning assigned to it by section 3 of this Act;

• " money " includes currencies other than sterling;

• " prescribed accounting period " has the meaning assigned to it by section 30(1) of this Act;

• " quarter " means a period of three months ending at the end of March, June, September or December;

• " ship " includes hovercraft;

• " tax " means value added tax ;

• " taxable person " has the meaning assigned to it by section 4 of this Act;

• " taxable supply " means any supply of goods or services in the United Kingdom other than an exempt supply;

• " the Commissioners" means the Commissioners of Customs and Excise.

(2)Schedules 4 and 5 to this Act shall be interpreted in accordance with the notes contained therein; and accordingly the powers conferred by this Act to vary those Schedules include a power to add to, delete or vary those notes.

(3)The descriptions of Groups in those Schedules are for ease of reference only and shall not affect the interpretation of the descriptions of items in those Groups.

(4)References in this Part of this Act to the United Kingdom include the territorial sea of the United Kingdom.

47Commencement

(1)Tax shall not be charged on any supply or importation taking place before 1st April 1973.

(2)Notwithstanding anything in section 7 of this Act or in section 79 of the [1952 c. 44.] Customs and Excise Act 1952 as applied by section 17 of this Act—

(a)a payment made before 1st April 1973 may be disregarded in determining for the purposes of this section whether a supply takes place before that date if, or to the extent that, it appears to the Commissioners that it would not have been so made but for the tax; and

(b)goods of which entry is made under section 28 of the Customs and Excise Act 1952 shall be treated for the purposes of this section as imported on the date on which entry is so made, except that if the entry is for warehousing the goods shall be treated for the purposes of this section as imported on the date on which they are removed from warehouse.

48Television sets supplied on hire at commencement of tax

The Treasury may by order make provision for securing that where a television set—

(a)is supplied on hire for a period beginning before 1st April 1973 ; and

(b)is treated by virtue of regulations made under section 7 of this Act as supplied for successive parts of that period;

and such other conditions are satisfied as may be specified in the order, the tax on the supply for such a part ending on or before 31st March 1975 shall be chargeable as if the consideration for the supply were reduced to such extent as may be specified in the order; and different provision may be so made for different parts so ending and for different circumstances.

49Vehicles brought back to U.K. after remission of purchase tax

Where a vehicle in respect of which purchase tax has been remitted under section 23 of the [1963 c. 9.] Purchase Tax Act 1963 (vehicles acquired for use outside United Kingdom) is brought back to the United Kingdom, the vehicle shall not, when brought back, be treated as imported for the purpose of value added tax chargeable on the importation of goods.

50Isle of Man

(1)If an Act of Tynwald makes provision similar to the provision made with respect to value added tax by this Act, Her Majesty may by Order in Council make provision for securing that—

(a)tax is charged under either Act as if references therein to the United Kingdom or the Isle of Man included both the United Kingdom and the Isle of Man, but is not charged under both Acts in respect of the same transaction; and

(b)persons who are taxable persons for the purposes of either Act are treated as taxable persons for the purposes also of the other; and

(c)a removal of goods from the United Kingdom into the Isle of Man or from the Isle of Man into the United Kingdom is not treated for the purposes of either Act as an importation or exportation of the goods;

and for making such modifications in those Acts and orders rules and regulations made thereunder as may be requisite for those purposes; and similarly with respect to any Act passed after this Act and relating to value added tax.

(2)An Order in Council under this section may include provision for section 2 of the [1958 c. 11.] Isle of Man Act 1958 (Isle of Man share of certain duties) to apply as if value added tax and the tax for which provision is made by Act of Tynwald were included among the duties mentioned in subsection (4) of that section and as if the reference in subsection (2)(a) of that section to goods consumed or used in the Isle of Man included a reference to services supplied in the Island.

51Refund of tax to Government of Northern Ireland

The Commissioners shall refund to the Government of Northern Ireland the amount of the tax charged on the supply of goods or services to, or on the importation of goods by, that Government, after deducting therefrom so much of that amount as may be agreed between them and the Ministry of Finance for Northern Ireland as attributable to supplies and importations for the purpose of a business carried on by the Government of Northern Ireland.

PART IICar Tax and Purchase Tax

52Car tax

(1)A tax, to be known as car tax, shall be charged after 31st March 1973 on all chargeable vehicles made or registered in the United Kingdom.

(2)Car tax on any vehicle shall be charged at the rate of 10 per cent. of the wholesale value of the vehicle.

(3)In this section " chargeable vehicle " means, subject to the following provisions of this section, any vehicle of a kind normally used on public roads which is propelled by an internal combustion engine, has three or more wheels and either—

(a)is constructed or adapted solely or mainly for the carriage of passengers; or

(b)has to the rear of the driver's seat roofed accommodation which is fitted with side windows or which is constructed or adapted for the fitting of side windows.

(4)The following are not chargeable vehicles—

(a)vehicles capable of accommodating only one person or suitable for carrying twelve or more persons;

(b)vehicles of not less than three tons unladen weight;

(c)caravans, ambulances and prison vans;

(d)vehicles of a type approved by the Assistant Commissioner of Police of the Metropolis as conforming to the conditions of fitness for the time being laid down by him for the purposes of the [1934 S.R. & O. No. 1346.] London Cab Order 1934;

(e)vehicles constructed for a special purpose other than the carriage of persons and having no other accommodation for carrying persons than such as is incidental to that purpose.

(5)The Treasury may by order made by statutory instrument delete or vary any description of vehicle for the time being specified in subsection (4) of this section or add a description of vehicle to those so specified; and any such order may contain such transitional provisions as appear to the Treasury to be necessary or expedient.

A statutory instrument made under this subsection shall be subject to annulment in pursuance of a resolution of the Commons House of Parliament except such an order as is mentioned in subsection (6) of this section.

(6)An order under subsection (5) of this section the effect of which is to include any description of vehicle among those which are chargeable vehicles shall be laid before the Commons House of Parliament; and unless it is approved by that House before the expiration of a period of twenty-eight 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 thereunder or to the making of a new order.

In reckoning any such period no account shall be taken of any time during which Parliament is dissolved or prorogued or during which the Commons House of Parliament is adjourned for more than four days.

(7)A vehicle is not a chargeable vehicle if it is more than twenty years old.

(8)A vehicle is not a chargeable vehicle if purchase tax has been paid in respect of it.

(9)References in this section to the making of a chargeable vehicle include references to the conversion into a chargeable vehicle of a vehicle of any other description.

(10)In this section " registered " means registered under the [1971 c. 10.] Vehicles (Excise) Act 1971 or any corresponding enactment of the Parliament of Northern Ireland for the time being in force.

(11)Schedule 7 to this Act shall have effect in relation to the car tax.

53Purchase tax: alteration of rates

Subject to any new order of the Treasury under section 2 of the [1963 c. 9.] Purchase Tax Act 1963, Part I of Schedule 1 to that Act (chargeable and exempt goods and rates of tax) as amended shall have effect as from 22nd March 1972 with the substitution for any reference to 45 per cent. or 30 per cent. of a reference to 25 per cent.

54Abolition of purchase tax

(1)Purchase tax shall not be charged in any case where, under the provisions of the Purchase Tax Act 1963, it would become due after 31st March 1973 or where, under the enactments applied by section 25 of that Act to tax chargeable under section 11 thereof, it would be payable after that date.

(2)Subsection (1) of this section shall not affect—

(a)the operation of section 13(4) of the Purchase Tax Act 1963 (tax on imported goods not accounted for to satisfaction of Commissioners) in relation to goods deemed to be imported as mentioned in subsection (3) of that section on a representation made before April 1973; or

(b)any liability to tax arising on the breach of a condition subject to which relief from purchase tax was given.

(3)Where a person carries on a business before 1st April 1973 in such circumstances that he is required under section 4(1) of the Purchase Tax Act 1963 to be registered but the relevant date mentioned in section 5(1) of that Act (applications for registration) falls not earlier than fourteen days before that day, that section shall have effect as if it required him to give to the Commissioners of Customs and Excise, before the expiration of fourteen days from the relevant date, notice in writing of his so carrying on the business.

(4)Notwithstanding anything in section 14 of the Purchase Tax Act 1963, no process completed after 31st March 1973 shall be a chargeable process within the meaning of that Act.

(5)Where a person is, on 31st March 1973, under a duty to preserve records and accounts kept under section 24 of the Purchase Tax Act 1963, that duty, and his obligation to produce them for inspection, shall continue after that date, notwithstanding that he is no longer registered or required to be registered under that Act.

(6)In relation to any time falling after 31st March 1973 references to registered persons in section 31 of the [1963 c. 9.] Purchase Tax Act 1963 and in any regulations made under that section before the passing of this Act shall have effect as references to persons who were registered persons before 1st April 1973 ; and the reference to a registered person in section 12(3) of that Act shall be construed accordingly.

(7)Regulations under section 31 of the Purchase Tax Act 1963 may make provision for requiring persons—

(a)to keep, on and after 1st October 1972, and preserve for such period as may be specified in the regulations, records in such form and containing such particulars as may be so specified of chargeable goods in their possession in circumstances where the delivery of the goods is liable, under section 40(4) of that Act, to be treated as a delivery under a chargeable purchase, and of such purchases made of such goods, and to produce the records for inspection by any officer or other person authorised in that behalf by the Commissioners of Customs and Excise at such time and at such place as that officer or person may require; and

(b)to furnish, at such times and places as may be specified in the regulations, to persons who have delivered such goods statements in such form and containing such particulars of goods remaining in the possession of the persons furnishing the statements and of purchases made of the goods as may be so specified, and to require such statements to contain a declaration, signed by the person to whom the goods were delivered, or on his behalf, by such persons as may be specified in the regulations, that the statement is to the best of his knowledge correct and complete.

(8)The enactments mentioned in Part I of Schedule 28 to this Act are hereby repealed, to the extent specified in the third column of that Part, as from the end of March 1973 ; and the enactments mentioned in Part II of that Schedule are hereby repealed, to the extent specified in the third column of that Part, as from such date as the Treasury may by order made by statutory instrument appoint, and different dates may be so appointed for different enactments.

55Amendments consequential on replacement of purchase tax

(1)In section 14(2) of the [1947 c. 44.] Crown Proceedings Act 1947 (summary applications to High Court for payment of purchase tax and furnishing of information relating thereto) and in section 14 of that Act as it applies in Northern Ireland for the words " purchase tax " in paragraphs (c) and (d) there shall be substituted the words " value added tax " ; but without prejudice to the operation of that section as originally enacted (or of the section substituted for Northern Ireland) with respect to purchase tax becoming due before the coming into force of this section or with respect to so much of the enactments relating to purchase tax as remains in force thereafter.

(2)In subsections (1) and (2) of section 7 of the [1968 c. 44.] Finance Act 1968 (relief from customs duty and purchase tax payable by persons entering the United Kingdom and simplified computation of duty and tax) for the words " purchase tax", wherever they occur, there shall be substituted the words " value added tax ".

(3)For subsection (6) of that section there shall be substituted the following subsection—

“(6)In this section " value added tax " means value added tax chargeable on the importation of goods and references to customs duty include any addition thereto by virtue of section 9 of the [1961 c. 36.] Finance Act 1961”.

(4)In section 6(1) of the Finance Act 1968 for the words following paragraph (a) there shall be substituted the following words—

“(b)being dutiable goods or chargeable goods, he has obtained in the United Kingdom without payment of duty or tax;

and in respect of which he is not entitled to exemption from duty and tax by virtue of any order under section 7 of this Act.

In this subsection 'chargeable goods' means goods on the importation of which value added tax is chargeable or goods obtained in the United Kingdom before 1st April 1973 which are chargeable goods within the meaning of the Purchase Tax Act 1963 ; and ' tax' means value added tax or purchase tax.”

(5)In section 9 of the [1968 c. 48.] International Organisations Act 1968 for the words " or of purchase tax " there shall be substituted the words " value added tax or car tax " and in paragraph 7 of Schedule 1 to that Act for the words " purchase tax paid on any goods " there shall be substituted the words " car tax paid on any vehicles and value added tax paid on the supply of any goods or services " ; but without prejudice to the operation of that section or paragraph as originally enacted with respect to purchase tax becoming due before the coming into force of this section.

(6)In section 6 of the [1971 c. 10.] Vehicles (Excise) Act 1971 (exemption from vehicles excise duty of vehicles acquired by overseas residents) the following shall be substituted for subsection (1), but without prejudice to the operation of that subsection as originally enacted in relation to purchase tax remitted under section 23 of the [1963 c. 9.] Purchase Tax Act 1963:—

“(1)A mechanically propelled vehicle shall not be chargeable with any duty under this Act if it has been supplied to the person keeping it by a taxable person within the meaning of section 4 of the Finance Act 1972 and the supply has been zero-rated in pursuance of subsection (7) of section 12 of that Act; but if, at any time, the value added tax that would have been chargeable on the supply but for the zero-rating becomes payable under subsection (8) of that section, or would have become so payable but for any authorisation or waiver under that subsection, then the provisions of subsection (3) below shall apply in relation to that vehicle”.

(7)This section shall come into force on 1st April 1973.

PART IIICustoms and Excise

56Spirits and mechanical lighters (Kennedy round reductions)

(1)The following provisions of this section (which, in pursuance of the international obligations of the United Kingdom, reduce certain rates of customs duties) shall have effect as from 8th August 1972.

(2)For Table 1 in Schedule 1 to the [1964 c. 49.] Finance Act 1964 (rates of customs and excise duties on spirits other than imported perfumed spirits) as substituted by section 1(2) of the [1969 c. 32.] Finance Act 1969 there shall be substituted the Table set out in Schedule 8 to this Act.

(3)The duty of customs charged on mechanical lighters by section 6 of the [1928 c. 17.] Finance Act 1928 shall be charged (except where, by virtue of section 3 of the [1963 c. 25.] Finance Act 1963 (E.F.T.A.) or section 3 of the [1968 c. 44.] Finance Act 1968 (Republic of Ireland) it is charged at the corresponding rates of excise duty) at the rate of 32½ p or, in the case of gas lighters within the meaning of section 8 of the [1949 c. 47.] Finance Act 1949, 22½ p, a lighter, instead of at the rates specified in subsection (1) of that section.

57Spirits-compounding and rectifying in warehouse and use for medical purposes

(1)The operations that may be permitted on warehoused goods under section 84 of the [1952 c. 44.] Customs and Excise Act 1952 shall include the rectifying and compounding of spirits; and accordingly—

(a)spirits used in warehouse in pursuance of a permission given by virtue of this section shall be treated for the purposes of section 102 of that Act (restrictions relating to rectifiers) as spirits on which duty has been duly paid and section 101 of that Act (penalty for excess or deficiency in stock) shall not apply to spirits so used; and

(b)no allowance shall be paid under section 104 of that Act in respect of spirits compounded in pursuance of such a permission and section 109(1) of that Act (restrictions on delivery of immature spirits) shall not apply to spirits so compounded.

(2)Where the Commissioners approve as a warehouse in which operations permitted by virtue of this section may be carried out the premises or part of the premises of a rectifier or compounder and at the time of the approval there are on the premises or part any spirits on which duty has been duly paid, then—

(a)if those spirits are British compounded spirits section 103 of the [1952 c. 44.] Customs and Excise Act 1952 (warehousing on drawback) shall apply as if the spirits had been warehoused at that time; and

(b)if those spirits are not British compounded spirits the Commissioners may repay the duty paid on them.

(3)Duty shall not be payable on any spirits contained in an article imported or delivered from warehouse which is recognised by the Commissioners as being used for medical purposes; and—

(a)in relation to spirits used after the coming into operation of this section, section 112(1) of the Customs and Excise Act 1952 (repayment of duty) shall have effect as if for the words following " repayment" there were substituted the words " of the duty paid thereon "; and

(b)in relation to spirits in respect of which a repayment has been made after the coming into operation of this section, paragraph (a) of the proviso to section 103(5) of that Act shall have effect as if for the words following " this Act" there were substituted the words " no drawback shall be payable "; and

(c)in section 113(1)(b) of that Act after the words "the last foregoing section" there shall be inserted the words " or which were exempted from duty under section 57 of the Finance Act 1972 ".

(4)This section shall have effect as from 8th August 1972.

58Reduction of general betting duty on on-course bets

(1)In section 1(2)(a) of the [1972 c. 25.] Betting and Gaming Duties Act 1972 (general betting duty on on-course bets) for the words " 5 per cent." there shall be substituted the words " 4 per cent. ".

(2)This section shall come into force on 31st July 1972.

59Gaming licence duty

In paragraph 18(1) of Schedule 2 to the Betting and Gaming Duties Act 1972 (provisions as to rateable values in Scotland) the words " but before 1st April 1973 " shall be omitted and after that paragraph there shall be inserted the following:—

“Provisions as to rateable values in England and Wales

19(1)For the purpose of determining the amount of the duty chargeable on a gaming licence in respect of premises in England and Wales for a period beginning after 31st March 1973 the rateable value of any hereditament shall be ascertained in accordance with the following provisions of this paragraph in any case where a rateable value is shown for it in the valuation list then in force and either a lower value or no value is shown for it in the valuation list in force on 31st March 1973.

(2)Where the rateable value of any hereditament falls to be ascertained in accordance with this paragraph, then—

(a)if a rateable value is shown for it in the valuation list in force on 31st March 1973, its rateable value shall be taken to be the value so shown, but subject to paragraph (b) below;

(b)if, since the time of valuation, there has been a change of use or a material change of circumstances affecting the value of the hereditament its rateable value shall be taken to be the value determined under this paragraph as the rateable value that would have been shown for it in that valuation list if the change had been given effect to in the preparation of that list;

(c)if no value is shown for the hereditament in the valuation list in force on 31st March 1973 its rateable value shall be taken to be the value determined under this paragraph as the value that would have been so shown if, at the time of the valuation for the purposes of that list, the premises in respect of which the licence is to be granted had been in existence and all relevant circumstances had been the same as at the time the value of the hereditament is determined under this paragraph.

(3)Any determination under this paragraph shall be made by the Commissioners after consultation with the valuation officer; but an appeal shall lie to the Lands Tribunal from their determination.

(4)If the amount of duty chargeable is reduced in consequence of such an appeal, any amount overpaid shall be repaid.

(5)In this paragraph 'valuation officer' has the same meaning as in the [1967 c. 9.] General Rate Act 1967 and 'material change of circumstances' and 'the time of valuation' have the meanings assigned to them by section 68(4) of that Act.”

60Continuation of powers under section 9 of Finance Act 1961

The period after which orders of the Treasury under section 9 of the [1961 c. 36.] Finance Act 1961 may not be made or continue in force (which, by section 12 of the [1971 c. 68.] Finance Act 1971, was extended until the end of August 1972) shall extend until the end of August 1973 or such later date as Parliament may hereafter determine.

61Temporary power to reduce certain revenue duties

(1)The Treasury may by order made before 1st April 1973 substitute for any of the rates at which any duty of customs or excise is chargeable on—

(a)spirits, other than power methylated spirits;

(b)beer;

(c)wine;

(d)British wine;

(e)tobacco;

(f)matches; or

(g)mechanical fighters;

such lower rate as may be specified in the order and may substitute a correspondingly lower rate for any rate of drawback payable.

(2)An order under subsection (1) of this section shall be made by statutory instrument and may be varied or revoked by a further order under that subsection.

(3)Any statutory instrument made by virtue of this section shall be subject to annulment in pursuance of a resolution of the Commons House of Parliament.

PART IVIncome Tax and Corporation Tax

62Charge of income tax for 1972-73

Income tax for the year 1972-73 shall be charged at the standard rate of 38.75 per cent. and, in the case of an individual whose total income exceeds £3,000, at such higher rates in respect of the excess over £2,000 as Parliament may hereafter determine.

63Surtax rates for 1971-72

(1)Subject to subsection (2) below, income tax for the year 1971-72 shall be charged, in the case of an individual whose total income exceeded £3,000, at rates in respect of the excess of that income over £2,000 which respectively exceed the standard rate by the amounts by which the higher rates for the year 1970-71 exceeded the standard rate for that year.

(2)An individual whose total income for the year 1971-72 did not exceed £3,500 shall be entitled to have the surtax chargeable by virtue of subsection (1) above reduced to an amount equal to 40 per cent. of the difference between his total income and £3,000.

64Charge of corporation tax for financial year 1971

Corporation tax shall be charged for the financial year 1971 at the rate of 40 per cent.

65Alterations of personal reliefs

(1)The deductions from tax to be made under section 8 of the Taxes Act (personal relief) shall be increased by the substitution—

(a)in subsection (1)(a) (married) of £600 for £465;

(b)in subsection (1)(b) (single) of £460 for £325 ; and

(c)in subsection (2) (wife's earned income relief) of £460 for £325;

and accordingly that section shall have effect for the year 1973-74 and subsequent years of assessment as if in the third column of the Table set out in section 33(2) of the [1971 c. 68.] Finance Act 1971 the amounts to be deducted from total income under section 8 were £775, £595 and £595 instead of £600, £420 and £420, and that Table shall have effect as if the amounts substituted by paragraphs (a) to (c) above were also substituted in the second column for the amounts shown as previous deductions under section 8; and paragraph 5 of Schedule 6 to the Finance Act 1971 shall have effect with corresponding substitutions.

(2)In section 7 of the Taxes Act (relief for persons over sixty-five with small incomes)—

(a)for the references to £530 and £825 (income limits for exemption) there shall be substituted references to £634 and £929 ; and

(b)for the reference to £345 (excess over those limits beyond which relief by reduction of tax is excluded) there shall be substituted a reference to £245.

(3)In section 6 of the Taxes Act (relief for small incomes)—

(a)for the references to £450 (income limit for full relief) there shall be substituted references to £550; and

(b)for the reference to £750 (income limit for marginal relief) there shall be substituted a reference to £805.

66Income tax rates for 1973-74

Income tax for the year 1973-74 shall, unless Parliament otherwise determines, be charged at the basic rate of 30 per cent.; and

(a)in respect of so much of an individual's total income as exceeds £5,000 at such higher rates as are specified in the Table below; and

(b)in respect of so much of the investment income included in an individual's total income as exceeds £2,000 at the additional rate of 15 per cent.

67Capital allowances

(1)In relation to expenditure incurred after 19th July 1971 and before 22nd March 1972 section 42 of the [1971 c. 68.] Finance Act 1971 (first-year allowances) shall have effect as if—

(a)in subsection (1) 80 per cent. were substituted for 60 per cent.;

(b)in subsection (2)(b) the words " for industrial purposes ", in subsection (4) paragraphs (ii) and (iii), and, in subsection (6), the definition of " industrial purposes " were omitted; and

(c)in the definition of " mobile equipment" for the words " in or about a building or structure used for industrial purposes " there were substituted the words " in or about premises used for the purposes of a trade, or on agricultural, forestry or amenity land or ".

(2)In relation to expenditure incurred after 21st March 1972—

(a)that section shall have effect as if in subsection (1) the words "the whole" were substituted for the words " 60 per cent. " and subsections (2) to (6) were omitted ;

(b)paragraph 8 of Schedule 8 to that Act shall have effect as if at the end there were added the following sub-paragraph—

“(5)Where a first-year allowance in respect of a person's expenditure on the provision of a ship falls to be withheld or withdrawn by virtue of section 41(2) of this Act, that person's ownership of the ship shall be disregarded in determining for the purposes of this paragraph whether the ship is new.”;

(c)section 177(3A) of the Taxes Act shall have effect as if the words " within section 42(2)(b) of that Act" were omitted and after the word " disclaimed "there were inserted the words " or postponed "; and

(d)section 1(2) of the [1968 c. 3.] Capital Allowances Act 1968 (initial allowances for industrial buildings and structures, etc.) shall have effect as if for the words " three-twentieths " there were substituted the words " two-fifths ";

and accordingly subsection (1)(b) of section 15 of the [1970 c. 24.] Finance Act 1970 shall not apply to expenditure so incurred.

(3)At the end of section 84(1) and of section 95(6) of the Capital Allowances Act 1968 there shall be added the words " unless it is so met by a grant made under Part I of the Industry Act 1972 or such grant made under an enactment of the Parliament of Northern Ireland as may be declared by the Treasury by order made by statutory instrument to correspond to a grant made under the said Part I.

A statutory instrument made under this section shall be subject to annulment in pursuance of a resolution of the Commons House of Parliament. "

(4)Expenditure shall not be treated for the purposes of this section as having been incurred after the date on which it was in fact incurred by reason only of section 1(6) of the Capital Allowances Act 1968 (expenditure incurred before trade began) or section 5(1) of that Act (purchase of unused buildings) or so much of section 50(4) of the [1971 c. 68.] Finance Act 1971 as relates to expenditure incurred before trade began.

68Restriction of capital allowances in respect of machinery and plant

(1)Chapter I of Part III of the Finance Act 1971 shall not apply to capital expenditure on the provision of second-hand machinery or plant incurred by any person on or after 14th June 1972 if—

(a)the machinery or plant belonged to him at any time before 27th October 1970 or fell to be treated as belonging to him at any such time for the purposes of any provision of Chapter II of Part I of the Capital Allowances Act 1968 ; or

(b)capital expenditure on providing the machinery or plant was incurred by another person before the said 27th October and the machinery or plant continues after the date of the transaction under which the first-mentioned expenditure is incurred to be used for the purposes of a trade carried on by that other person.

(2)Where on or after 14th June 1972 a person disposes of any machinery or plant to another person who is connected with him and the disposal value falls to be treated under subsection (6) of section 44 of the said Act of 1971 as equal to the open market value of the machinery or plant, the proviso to that subsection shall have effect as if the reference to the capital expenditure incurred by the person there mentioned were a reference to that capital expenditure or to the capital expenditure on the provision of the machinery or plant incurred by any other person who is connected with him, whichever is the greater.

(3)Paragraph 3 of Schedule 8 to the said Act of 1971 shall be amended as follows—

(a)in sub-paragraph (1) the words " which has been in use for the purposes of a trade carried on by the seller " shall be omitted ;

(b)in sub-paragraph (2) for the words " which has been in use for the purposes of a trade carried on by the person to whom the machinery or plant belongs " there shall be substituted the words " belonging to another person ";

(c)in sub-paragraph (3) the words " which has been in use for the purposes of his trade " shall be omitted;

and paragraph (b) of each of those sub-paragraphs shall have effect as if the reference to the machinery or plant continuing to be used for the purposes of a trade carried on by the person there mentioned included a reference to its being used after the date of the sale, the making of the contract or the assignment of the benefit of the contract (as the case may be) for the purposes of a trade carried on by that person or another person who is connected with him (other than the buyer, the person entering into the contract or the assignee) without having been used since that date for the purposes of any other trade except that of leasing machinery or plant.

(4)In a case in which no disposal value falls to be brought into account as mentioned in sub-paragraph (1) of the said paragraph 3, that sub-paragraph shall have effect as if for the reference to the disposal value to be so brought into account there were substituted a reference to an amount equal to whichever of the following is the smallest—

(a)the open market value of the machinery or plant;

(b)the capital expenditure incurred by the seller on the provision of the machinery or plant;

(c)the capital expenditure so incurred by any person who is connected with the seller.

(5)The said sub-paragraph (1) shall not by virtue of paragraph (a) or (b) thereof deny a first-year allowance if the machinery or plant has not before the sale been used for the purposes of a trade by the seller or any person connected with him but for the purposes of that allowance there shall be disregarded so much (if any) of the expenditure as exceeds whichever is the smallest of the amounts mentioned in subsection (4)(a), (b) and (c) above.

(6)Subsections (4) and (5) above shall apply in relation to sub-paragraphs (2) and (3) of the said paragraph 3 as they apply in relation to sub-paragraph (1) of that paragraph but taking references—

(a)to the sale as references to the making of the contract and to the assignment of the benefit of the contract respectively;

(b)to the seller as references to the person to whom the machinery or plant belongs and to the assignor respectively.

(7)Neither sub-paragraph (1) nor sub-paragraph (2) of the said paragraph 3 shall apply in relation to a sale or contract if the machinery or plant has never been used before the sale or the making of the contract and the business or part of the business of the seller or owner was the manufacture or supply of machinery or plant of that class and the sale was effected or the contract was made in the ordinary course of that business.

(8)In paragraph 4 of Schedule 8 to the said Act of 1971, sub-paragraph (1)(b) and sub-paragraph (2)(b), together with the word " and " preceding the latter, shall be omitted.

(9)Subsections (3) to (7) above apply in relation to cases where the incurring of the capital expenditure, the making of the contract or the assignment of the benefit of the contract mentioned in the said paragraph 3(1), (2) or (3) occurs on or after 14th June 1972, and subsection (8) above has effect from that date.

(10)This section shall be construed as if contained in Chapter I of Part III of the said Act of 1971 ; and in this section " open market value " in relation to any machinery or plant means an amount equal to the price which the machinery or plant would have fetched if sold in the open market and references to persons connected with each other shall be construed in accordance with section 533 of the Taxes Act.

69Restriction of balancing allowances on sale of industrial buildings and structures

(1)This section has effect where—

(a)the relevant interest in a building or structure is sold subject to a subordinate interest; and

(b)a balancing allowance would, apart from this section, fall to be made to the person who is entitled to the relevant interest immediately before the sale (" the relevant person") under section 3 of the [1968 c. 3.] Capital Allowances Act 1968 by virtue of the sale; and

(c)either—

(i)the relevant person, the person to whom the relevant interest is sold and the grantee of the subordinate interest, or any two of them, are connected with each other within the terms of section 533 of the Taxes Act, or

(ii)it appears with respect to the sale or to the grant of the subordinate interest, or with respect to transactions including the sale or grant, that the sole or main benefit which, but for this section, might have been expected to accrue to the parties or any of them was the obtaining of an allowance under Chapter I of Part I of the said Act of 1968.

(2)For the purposes of section 3 of the said Act of 1968 the net proceeds to the relevant person of the sale—

(a)shall be taken to be increased by an amount equal to any premium receivable by him for the grant of the subordinate interest; and

(b)where no rent, or no commercial rent, is payable in respect of the subordinate interest, shall be taken to be what those proceeds would have been if a commercial rent had been payable and the relevant interest had been sold in the open market (increased by any amount to be added under paragraph (a) of this subsection) ;

but the net proceeds of sale shall not by virtue of this subsection be taken to be greater than such amount as will secure that no balancing allowance falls to be made.

(3)Where subsection (2) above operates, in relation to a sale, to deny or reduce a balancing allowance in respect of any expenditure the residue of that expenditure immediately after the sale shall be calculated for the purposes of Chapter I of Part I of the said Act of 1968 as if that balancing allowance had been made or, as the case may be, had not been reduced.

(4)In this section—

• " subordinate interest " means any interest in or right over the building or structure in question (whether granted by the relevant person or by somebody else);

• " premium " includes any capital consideration except so much of any sum as corresponds to any amount of rent or profits falling to be computed by reference to that sum under section 80 of the Taxes Act (premium treated as rent or Schedule D profits);

• " capital consideration " means consideration which consists of a capital sum or would be a capital sum if it had taken the form of a money payment;

• " rent " includes any consideration which is not capital consideration;

• " commercial rent " means such rent as may reasonably be expected to have been required in respect of the subordinate interest in question (having regard to any premium payable for the grant of the interest) if the transaction had been at arm's length.

(5)Where the terms on which a subordinate interest is granted are varied before the sale of the relevant interest any capital consideration for the variation shall be treated for the purposes of this section as a premium for the grant of the interest, and the question whether any and, if so, what rent is payable in respect of the interest shall be determined by reference to the terms as in force immediately before the sale.

(6)This section shall be construed as if contained in Chapter I of Part I of the said Act of 1968 and applies where the relevant interest is sold on or after 14th June 1972.

70Disabled persons' vehicle maintenance grant

A grant made under section 33(3) of the [1968 c. 46.] Health Services and Public Health Act 1968 (cost of maintenance etc. of vehicles belonging to disabled persons) or under any corresponding enactment of the Parliament of Northern Ireland to any person owning a vehicle shall not be treated as income for any purpose of the Income Tax Acts.

71Temporary disregard of increase in certain pensions and allowances

So much of any pension or allowance—

(a)payable under the [1965 c. 51.] National Insurance Act 1965 or the [1965 c. 52.] National Insurance (Industrial Injuries) Act 1965 or any corresponding enactment of the Parliament of Northern Ireland; or

(b)payable under any Order in Council, Royal Warrant, order or scheme in respect of death due to service in the armed forces of the Crown or the merchant navy or to war injuries ;

as is attributable to any general increase taking effect in the year 1972-73 shall be left out of account for all the purposes of income tax charged for that year but not for the purpose of furnishing information relating to any person's income for that year.

72Terminal grants to Members of Parliament

A grant made in pursuance of a resolution of the House of Commons to a person ceasing to be a Member of that House on a dissolution of Parliament shall be exempt from income tax under Schedule E as an emolument, but without prejudice to its being taken into account, to the extent permitted by section 188(3) of the Taxes Act, under section 187 of that Act.

73Compensation for premature retirement, etc.

The exclusion, by virtue of section 188(1)(d) of the Taxes Act, of certain benefits from the charge to tax under section 187 of that Act (payments on retirement or removal from office or employment) shall not apply to any compensation paid for loss of office or employment or for loss or diminution of emoluments unless the loss or diminution is due to ill-health ; but this section shall not be taken to apply to any payment properly regarded as a benefit earned by past service.

74Occupational pension schemes

(1)The date on which—

(a)section 22 of the [1970 c. 24.] Finance Act 1970 (exemptions and reliefs for certain statutory schemes) comes into force ; and

(b)section 209 of the Taxes Act (the provision replaced by section 22) and section 211(5) of that Act cease to have effect;

shall, instead of being a date appointed under paragraph 3 of Schedule 3 to the [1971 c. 68.] Finance Act 1971, be 6th April 1973 ; and on that date section 210 of the Taxes Act (disallowance of certain contributions) shall cease to have effect.

(2)Accordingly, in paragraph 3(1) of Schedule 3 to the Finance Act 1971 for the words preceding the paragraphs there shall be substituted the words " On 6th April 1973 ".

(3)In section 22(2) of the Finance Act 1970 for the words " Any contribution " there shall be substituted the words " Any ordinary annual contribution " and for the words " for which the contribution is paid " the words " in which the contribution is paid ".

75Relief for payment of interest

(1)Where a person pays in any year of assessment—

(a)annual interest chargeable to tax under Case III of Schedule D; or

(b)interest payable in the United Kingdom on an advance from a bank carrying on a bona fide banking business in the United Kingdom or from a person bona fide carrying on a business as a member of a stock exchange in the United Kingdom or bona fide carrying on the business of a discount house in the United Kingdom;

and makes a claim to relief under this subsection, then, subject to the following provisions of this section, the amount of the interest shall be deducted from or set off against his income for that year of assessment, and income tax shall be discharged or repaid accordingly.

(2)Where interest is paid at a rate in excess of a reasonable commercial rate relief under this section shall not be given in respect of so much of the interest as represents the excess.

(3)Relief shall not be given under this section on the first £35 of the interest paid by an individual in any year of assessment except in so far as it is protected interest as defined in Schedule 9 to this Act, that is to say, interest which would have been eligible for relief under section 57, 60 or 190 of the Taxes Act, other than interest on overdrafts.

(4)Where the whole or part of any sum on which interest is paid by an individual in any year of assessment is outstanding in one or more other years of assessment and—

(a)the interest is not protected interest; and

(b)the amount (if any) of interest other than protected interest paid by that individual on that and any other sum in that other year or any of those other years is less than £35;

subsection (2) above shall be applied as if the question whether or to what extent interest paid in any year of assessment is in excess of a reasonable commercial rate had to be decided without regard to whether or at what rate interest is payable in any other year; but the amount on which relief is given under this section shall not be reduced, by virtue of that subsection as so applied, by more than, for each of those other years in which the amount so paid is less than £35, the amount of the difference.

(5)Where interest other than protected interest is paid after the end of the year of assessment in which it is due the amount on which relief is given under this section shall not be reduced under subsections (3) and (4) above to less than what it would have been had the interest been paid when due.

(6)For any year in which the agreements set out in Part I of Schedule 12 to the Taxes Act are in force this section shall have effect as if the references to the United Kingdom included references to the Republic of Ireland.

(7)This section has effect subject to Schedule 10 to this Act.

(8)The Taxes Act shall have effect subject to the amendments specified in Schedule 11 to this Act; and the enactments mentioned in Part V of Schedule 28 to this Act are hereby repealed to the extent specified in the third column of that Part.

76Securities bought with borrowed money

(1)The following provisions of this section shall apply where a person (in this section referred to as " the borrower ") acquires, whether before or after the passing of this Act, any securities, or an interest in any securities, which are redeemable at a specified date (in this section referred to as " the terminal date"); and—

(a)he pays interest on a debt or other liability which he has incurred in circumstances which cannot be shown to be unconnected with the acquisition; and

(b)the whole or part of the debt or other liability is outstanding in any part of the period of three years ending with the terminal date (in this section referred to as " the terminal period ").

(2)Subject to subsection (3) below, if—

(a)the borrower is for any year of assessment entitled to relief under section 75 of this Act in respect of interest paid on the debt or liability; and

(b)the total amount on which he is entitled to relief under that section in that year in respect of that and any other interest exceeds £2,000;

then, if the income arising to him from the securities in the terminal period is less than the interest payable by him in respect of so much of the debt or liability as is outstanding in any part of that period, the amount of the difference shall be chargeable to tax under Case VI of Schedule D as if it were income arising to him in the year of assessment in which the securities are redeemed or the securities are or the interest is disposed of by him.

(3)If the borrower is a close company which is not a trading company, subsection (2) above shall have effect as if—

(a)the references to a year of assessment were references to an accounting period;

(b)the reference to the borrower being entitled to relief under section 75 of this Act were a reference to the borrower being entitled to relief under the Corporation Tax Acts; and

(c)paragraph (b) were omitted;

but subject to subsection (4) below.

(4)Where a person to whom any part of the company's income is finally apportioned would not be chargeable to tax under subsection (2) above if he, instead of the company, had, to an extent proportionate to that part, acquired and retained the securities, incurred the debt or other liability, and paid the interest on it, and similarly with any other close company any of whose income is finally apportioned to him,—

(a)the amount finally apportioned to him shall not be increased by virtue of subsection (3) above; and

(b)a reduction proportionate to the increase avoided by paragraph (a) above shall be made in the amount on which the company is charged to tax under that subsection, but the reduction shall not diminish the amount finally apportioned to any other person.

(5)Where under arrangements made between connected persons (within the meaning of section 533 of the Taxes Act) or reciprocal arrangements made between any persons—

(a)one or more of them (in this subsection referred to as " the holders ") acquire such securities or an interest in such securities as are mentioned in subsection (1) above; and

(b)the other or another of them (in this subsection referred to as " the claimant ") pays interest on a debt or other liability which cannot be shown to be unconnected with the holders' acquisition;

then, if subsection (1)(b) above applies to the debt or liability, subsections (2) to (4) above shall apply as if the securities or interest had been acquired and retained by the claimant instead of by the holders.

(6)In its application to any transaction resulting in a debt or liability falling within subsection (1) of this section, section 496(2) of the Taxes Act (annuity or other annual payment treated as interest) shall have effect as if it required the annuity or payment to be treated as annual interest on that debt or liability.

(7)For the purposes of this section, where securities of any class are redeemable at different dates they shall be treated as redeemable at the latest of those dates.

(8)In this section " security " includes any loan stock or similar security whether of the Government of the United Kingdom or of any other government, or of any public or local authority in the United Kingdom or elsewhere, or of any company, and whether secured or unsecured, and also includes a certificate of deposit as defined in section 55(3) of the [1968 c. 44.] Finance Act 1968; and references to an interest in any securities include references to an interest in the proceeds of sale of any securities.

(9)A debt incurred for the purpose of extinguishing the whole or part of another debt or liability shall be treated for the purposes of this section as incurred for the same purpose as that other, and so on where more than two are successively incurred.

(10)This section does not apply in relation to any interest paid or income arising before the year 1972-73.

77Share options-modification of section 186(2) of Taxes Act

(1)Where, on or after 11th April 1972, such a right as is mentioned in subsection (1) of section 186 of the Taxes Act is obtained as mentioned therein and the right is capable of being exercised later than seven years after it is obtained, subsection (2) of that section shall not prevent the charging of tax under any other provisions of the Tax Acts in respect of the receipt of the right; but where tax is charged under any of those provisions, it shall be deducted from any tax which, under that section, is chargeable by reference to the gain realised by the exercise, assignment or release of the right.

(2)For the purpose of any charge to tax enabled to be made by virtue of this section, the value of a right shall be taken to be not less than the market value at the time the right is obtained of the shares which may be acquired by the exercise of the right or of shares for which shares so acquired may be exchanged, reduced by the amount or value (or, if variable, the least amount or value) of the consideration for which the shares may be so acquired.

(3)Paragraph 6 of Part VII of Schedule 12 to this Act shall apply for the interpretation of this section.

78Approved share option schemes

(1)Where a person, on or after 6th April 1972, exercises a right to acquire shares in a body corporate which he obtained as a director or employee of that or any other body corporate, then, if—

(a)the right was obtained by him in pursuance of a scheme approved under Schedule 12 to this Act (whether before or after the right was obtained or exercised); and

(b)he satisfies the conditions specified in Part V of that Schedule;

section 186 of the Taxes Act (charge to tax under Schedule E) shall not apply to any gain realised by him by the exercise and, subject to subsection (2) of this section, tax shall not be chargeable under any other provision of the Tax Acts in respect of the receipt of the right.

(2)Where such a right is on or after 6th April 1972 obtained by a person as a director or employee of a body corporate in pursuance of a scheme so approved and he satisfies those conditions, but the aggregate of—

(a)the amount or value of the consideration (if any) 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.

(3)Where a person who has obtained a right to acquire any shares—

(a)is chargeable to tax under this section on any amount; and

(b)acquires the shares by exercising the right,

then, on the first disposal of the shares, whether by him or another person, after his acquisition, paragraph 4(1)(a) of Schedule 6 to the [1965 c. 25.] Finance Act 1965 (expenditure allowable in computation of chargeable gains) shall apply as if a sum equal to the amount chargeable had formed part of the consideration given by the person making the disposal for his acquisition of the shares.

(4)Schedule 12 to this Act shall have effect for supplementing this section.

79Share incentive schemes

(1)Where a person, on or after 6th April 1972, acquires shares or an interest in shares in a body corporate in pursuance of a right conferred on him or opportunity offered to him as a director or employee of that or any other body corporate, and not in pursuance of an offer to the public, subsections (4) and (7) of this section shall apply unless their application is excluded by subsections (2) and (3) of this section respectively.

(2)Subsection (4) below does not apply if—

(a)the acquisition was made in pursuance of a scheme approved (whether before or after the acquisition) under Schedule 12 to this Act and the person making the acquisition satisfies the conditions specified in Part V of that Schedule; or

(b)the acquisition was made in pursuance of such arrangements as are mentioned in subsection (8) below; or

(c)the acquisition was of shares which were not subject to any restrictions other than restrictions attaching to all shares of the same class, and the majority of shares of that class were acquired otherwise than as mentioned in subsection (1) above.

(3)Subsection (7) below does not apply if—

(a)the acquisition was made and the benefit mentioned in that subsection was received in pursuance of a scheme approved (whether before or after the acquisition or receipt) under Schedule 12 to this Act; or

(b)the acquisition was made under such arrangements as are mentioned in subsection (8) of this section.

(4)Where this subsection applies and the market value of the shares at the end of the period mentioned in subsection (6) below exceeds their market value at the time of the acquisition the person making the acquisition shall be chargeable to tax under Schedule E for the year of assessment in which that period ends on an amount equal, except as provided by subsection (5) below, to the excess (or, if his interest is less than the full beneficial ownership, such part of that amount as corresponds to his interest); and the amount so chargeable shall be treated as earned income, whether or not it would otherwise fall to be so treated.

(5)The amount on which or on part of which the person making the acquisition is chargeable to tax under subsection (4) above shall, in the following cases, be reduced as follows, that is to say—

(a)where, in accordance with the terms on which the acquisition of the shares was made, the consideration for the acquisition is subsequently increased, the said amount shall be reduced by an amount equal to the increase; and

(b)where, in accordance with those terms, the shares are subsequently disposed of for a consideration which is less than their market value at the time of the disposal, the said amount shall be reduced so as to be equal to the excess of that consideration over the market value of the shares at the time of the acquisition ;

and similarly where the interest acquired is less than the full beneficial ownership; and such assessments, alterations of assessments or repayments of tax shall be made as may be necessary to give effect to the reduction.

(6)The period referred to in subsection (4) above is a period ending at the earliest of the following times:—

(a)the expiration of seven years from the acquisition of the shares or interest in the shares;

(b)the time when that person ceases to have any beneficial interest in the shares; and

(c)in relation only to a person who acquires shares, the time when the shares cease to be subject to any restrictions other than restrictions attaching to all shares of the same class;

and for the purposes of that subsection and of paragraph (b) above a person whose beneficial interest in shares is reduced shall be treated as ceasing to have an interest in such part of the shares as is proportionate to the reduction.

(7)Where this subsection applies and the person making the acquisition receives, by virtue of his ownership of or interest in the shares, any benefit not received by the majority of persons who—

(a)hold shares forming part of the ordinary share capital of the same body corporate; and

(b)have acquired the shares otherwise than as mentioned in subsection (1) above;

and the benefit is not otherwise chargeable to income tax, he shall be chargeable to tax under Schedule E for the year of assessment in which he receives the benefit on an amount equal to the value of the benefit; and the amount so chargeable shall be treated as earned income, whether or not it would otherwise fall to be so treated.

(8)The arrangements referred to in subsections (2)(b) and (3)(b) of this section are arrangements under which employees of a body corporate receive as part of their emoluments shares or interests in shares of that body or of a body controlling it to an extent determined in advance by reference to the profits of either body.

(9)Where an amount is chargeable to tax under this section on a person acquiring any shares or interest in shares, then on the first disposal of the shares (whether by him or another person) after his acquisition, paragraph 4(1)(a) of Schedule 6 to the [1965 c. 25.] Finance Act 1965 (expenditure allowable in computation of chargeable gains) shall apply as if a sum equal to the amount chargeable had formed part of the consideration given by the person making the disposal for his acquisition of the shares.

(10)For the purposes of this section, where a person acquires any shares or an interest in shares in a body corporate in pursuance of a right conferred on him or opportunity offered to him as a person connected with a director or employee of that or any other body corporate, the shares or interest shall be deemed to be acquired by the director or employee, and subsection (9) above shall apply with the necessary modifications; and where that person receives a benefit as mentioned in subsection (7) above, the benefit shall be deemed to be received by the director or employee.

(11)For the purposes of this section a person who disposes of shares or an interest in shares otherwise than by a bargain at arm's length with a person who is not connected with him shall be deemed not to cease to have a beneficial interest in the shares.

(12)Schedule 12 to this Act shall have effect for supplementing this section.

80Land sold and leased back: taxation of consideration received

(1)If, in any case where a person (in this section referred to as " the lessee ") who is a lessee of land under a lease having not more than 50 years to run (in this section referred to as " the original lease ") is entitled in respect of the rent under the lease to a deduction by way of tax relief of a kind to which section 491 of the Taxes Act applies (land sold and leased back: limitation on tax reliefs),—

(a)the lessee assigns the original lease to another person, or surrenders it to his landlord, for a consideration which apart from this section would not be taxable otherwise than as capital in the hands of the lessee, and

(b)there is granted or assigned to the lessee another lease (in this section referred to as " the new lease ") of or including the whole or any part of the land which was the subject of the original lease for a term not exceeding 15 years,

then, subject to the following provisions of this section, the provisions of the Taxes Act providing for deductions or allowances by way of tax relief in respect of payments of rent shall apply in relation to the rent under the new lease, and for the purposes of the Tax Acts a proportion of the consideration received by the lessee shall be treated not as a capital receipt but in accordance with subsection (3) below.

(2)For the purposes of this section—

(a)if the aggregate of the rent payable under the new lease in respect of any rental period ending on a date falling before the 15th anniversary of the date on which the term of the new lease begins is greater than the aggregate of the rent payable under the new lease in respect of the period of equal duration beginning on the day following that date, then, unless the term of the new lease would be treated as ending on an earlier date by virtue of paragraph (b) below, that term shall be treated as ending on that date ; and

(b)if under the terms of the new lease either the lessor or the lessee has power to determine the new lease at a time before the expiry of the term for which it was granted or the lessee has power to vary his obligations under the new lease so as to reduce the rent which he would otherwise have to pay or in any other manner beneficial to him, then, unless the term of the new lease would be treated as ending on an earlier date by virtue of paragraph (a) above, that term shall be treated as ending on the earliest date with effect from which, in exercise of that power, the lessor or the lessee could determine the new lease or, as the case may be, the lessee could so vary his obligations;

and in any case where a rentcharge payable by the lessee is secured on the whole or any part of the property which is the subject of the new lease, the rent payable under the new lease shall be treated for the purposes of paragraphs (a) and (b) above as equal to the aggregate of the rentcharge and the rent payable under the terms of that lease.

(3)Subject to the following provisions of this section, the proportion of the consideration received by the lessee as mentioned in subsection (1) above, or of any instalment thereof, which for the purposes of the Tax Acts is to be treated not as a capital receipt but in accordance with this subsection shall be determined by the formula—

(4)In any case where the property which is the subject of the new lease does not include the whole of the property which was the subject of the original lease, the consideration received by the lessee shall be treated for the purposes of subsection (3) above as reduced to that portion thereof which is reasonably attributable to such part of the property which was the subject of the original lease as consists of, or is included in, the property which is the subject of the new lease.

(5)Schedule 3 to the Taxes Act (relief for individuals in respect of premiums taxable under Schedules D and A) shall have effect for the purpose of giving relief, on a claim being made in that behalf, from any increase in an individual's liability to income tax which is attributable to any amount being treated, by virtue of subsection (3) above, as an income receipt for a single year of assessment rather than as a series of such receipts during the term of the new lease; and in the application of that Schedule by virtue of this subsection, for the definitions of " chargeable sum " and " relevant period " there shall be substituted the following definitions:—

• " chargeable sum " means the amount in respect of which, by virtue of subsection (3) above, the claimant is chargeable for income tax for the year of assessment;

• " relevant period ", in relation to any chargeable sum, means the term of the new lease.

(6)Where, by agreement with his landlord, the lessee varies the terms of the original lease in such a manner that, in return for such a consideration as is specified in subsection (1)(a) above, the lessee undertakes to pay, during a period ending not later than 15 years after the date on which the consideration, or if the consideration is paid in instalments, the last instalment thereof, is paid to the lessee, a rent greater than that payable under the original lease, he shall be treated for the purposes of this section as having surrendered the original lease for that consideration and as having been granted a new lease for a term not exceeding 15 years but otherwise on the terms of the original lease as so varied.

(7)References in this section to the lessee (other than in subsection (1)(a) above) include references to a person who is a partner or associate of the lessee or an associate of a partner of the lessee; and for the purposes of this section the expression " associate " shall be construed in accordance with section 494(10) of the Taxes Act.

(8)Subject to subsection (7) above, expressions used in this section have the meanings assigned to them by section 90 of the Taxes Act (interpretation of Part III), and in subsection (2)(a) above " rental period " means a period in respect of which a payment of rent falls to be made, and for the purposes of that subsection, in a case where the rental period is a quarter or a month, each such period shall be treated as of equal duration.

(9)The preceding provisions of this section shall not apply if the lessee had, before 22nd June 1971, a right enforceable at law or in equity to the grant of the new lease, but in any case where, apart from this subsection, those provisions would apply, no part of the rent paid under the new lease shall be treated as a payment of capital, and the provisions of the Taxes Act providing for deductions or allowances by way of tax relief in respect of payments of rent shall apply accordingly.

81Premiums for and duration of leases

(1)In subsection (6) of section 80 of the Taxes Act (amount payable by instalments) for the words from " shall, if he makes a claim " to the end there shall be substituted the words " may, if he satisfies the Board that he would otherwise suffer undue hardship, be paid at his option by such instalments as the Board may allow over a period not exceeding eight years and ending not later than the time at which the last of the first-mentioned instalments is payable ".

(2)Section 84 of the Taxes Act (rules for ascertaining duration of leases) shall be amended as follows—

(a)in subsection (1), paragraph (a) shall be omitted and in paragraph (b) after the words " a date falling before the expiry of the term of the lease " there shall be inserted the words " and the premium was not substantially greater than it would have been (on the assumptions required by subsection (2) below) had the term been one expiring on that date ";

(b)at the end of subsection (1) there shall be added: “and

(d)where the tenant, or a person connected with him (within the meaning of section 533 of this Act) is or may become entitled to a further lease or the grant of a further lease (whenever commencing) of the same premises or of premises including the whole or part of the same premises, the term of the lease may be treated as not expiring before the term of the further lease.”;

(c)in subsection (2) for the words " subsection (1)(b) " (in both places) there shall be substituted the words " subsection (1) " and at the end of the subsection there shall be added the words " and where, by the lease or in connection with the granting of it, benefits were conferred other than vacant possession and beneficial occupation of the premises or the right to receive rent at a reasonable commercial rate in respect of them, or payments were made which would not be expected to be made by parties so acting if no other benefits had been so conferred, it shall be further assumed, unless it is shown that the benefits were not conferred or the payments made for the purpose of securing a tax advantage in the application of this Part of this Act, that the benefits would not have been conferred nor the payments made had the lease been for a term ending on the date mentioned in subsection (1)(b) above. ";

(d)in subsection (3) for the words " subsection (1)" there shall be substituted the words " subsections (1) and (2) ".

(3)In section 90(1) of the Taxes Act, in the definition of " premium " after the words " superior landlord " there shall be added the words " or to a person connected, within the meaning of section 533 of this Act, with the immediate or a superior landlord ".

(4)After section 90(2) of the Taxes Act there shall be inserted the following subsections—

“(2A)Where paragraph (d) of section 84(1) above applies, the premium, or an appropriate part of the premium, payable for or in connection with either lease mentioned in that paragraph may be treated as having been required under the other.

(2B)References in this section to a sum shall be construed as including the value of any consideration, and references to a sum paid or payable or to the payment of a sum shall be construed accordingly.”

(5)After section 84(3) of the Taxes Act there shall be inserted the following subsection—

“(3A)Where an inspector has reason to believe that a person has information relevant to the ascertainment of the duration of a lease in accordance with the preceding provisions of this section, the inspector may by notice in writing require him to give, within a time specified in the notice, such information on the matters specified in the notice as is in his possession ; but a solicitor shall not be so required to do more, in relation to anything done by him on behalf of a client, than state that he is or was acting on behalf of a client and give the name and address of his client. and the subsection so inserted shall be added to the provisions of the Taxes Act specified in the second column of the Table set out in section 98 of the [1970 c. 9.] Taxes Management Act 1970 (penalty for failure to furnish information).”;

(6)Subject to the transitional provisions contained in Schedule 13 to this Act, subsection (1) of this section shall be deemed to have come into force on 11th April 1972 and subsections (2) to (4) on 25th August 1971.

82Appeals against determinations under sections 80 to 82 of Taxes Act

(1)Where it appears to the inspector that the determination of any amount on which a person may be chargeable to tax by virtue of section 80, 81 or 82 of the Taxes Act may affect the liability to tax of other persons he may give notice in writing to those persons as well as to the first-mentioned person of the determination he proposes to make and of the rights conferred on them by this section.

(2)Any person to whom such a notice is given may, within thirty days after the date on which it is given, object to the proposed determination by notice in writing given to the inspector.

(3)Where notices have been given under subsection (1) above and no notice of objection is duly given under subsection (2) above the inspector shall make the determination as proposed in his notices and the determination shall not be called in question in any proceedings.

(4)Where a notice of objection is duly given the amount mentioned in subsection (1) above shall be determined in like manner as an appeal and shall be so determined by the Special Commissioners or such body of General Commissioners as may be agreed on by the person to be charged and all persons who have given notice of objection.

(5)All persons to whom notices have been given under subsection (1) above may take part in any proceedings under subsection (4) above and in any appeal arising out of those proceedings and shall be bound by the determination made in the proceedings or on appeal, whether or not they have taken part in the proceedings; and their successors in tide shall also be so bound.

(6)A notice under subsection (1) above may, notwithstanding any obligation as to secrecy or other restriction on the disclosure of information, include a statement of the grounds on which the inspector proposes to make the determination.

(7)An inspector may by notice in writing require any person to give, within the time specified in the notice, such information as appears to the inspector required for deciding whether to give a notice under subsection (1) above to any person.

(8)In section 98 of the [1970 c. 9.] Taxes Management Act 1970 (penalty for failure to furnish information etc.) the following shall be added in the second column of the Table: " Section 82 of the Finance Act 1972 ".

(9)In this section " tax " means income tax, corporation tax or capital gains tax.

83Double taxation relief for underlying tax

(1)Subsection (4) of section 498 of the Taxes Act (relief for underlying tax where dividend is paid by overseas company to company resident in the United Kingdom if not less than 10 per cent. of voting power in the company paying the dividend is directly or indirectly controlled by the company receiving it or by that company's parent) shall apply also where the voting power controlled as mentioned in that subsection is less than 10 per cent. if—

(a)it has been reduced below that percentage on or after 1st April 1972; or

(b)it has been acquired on or after that date in exchange for voting power in another company in respect of which relief under the said subsection (4) was due prior to the exchange,

and the company receiving the dividend shows that the conditions specified in subsection (2) below are satisfied.

(2)The said conditions are—

(a)that the reduction below the said percentage (and any further reduction) or, as the case may be, the exchange (and any reduction thereafter) could not have been prevented by any reasonable endeavours on the part of the company receiving the dividend and was due to a cause or causes not reasonably foreseeable by it when control of the relevant voting power was acquired; and

(b)no reasonable endeavours on the part of that company could have restored or, as the case may be, increased the voting power to not less than 10 per cent.

(3)In subsection (2) above references to the company receiving the dividend include references—

(a)to any company of which it is a subsidiary within the meaning of section 500(2) of the Taxes Act; and

(b)where prior to the reduction or exchange the voting power in question was controlled otherwise than directly by the company receiving the dividend, to each other company relevant for determining whether that voting power was controlled as required by the said subsection (4).

(4)In subsection (2)(a) above " the relevant voting power " means the voting power by virtue of which relief was due under the said subsection (4) prior to the reduction or exchange or, where control of the whole of that voting power was not acquired at the same time, that part thereof of which control was last acquired.

(5)In any case in which relief in respect of a dividend is due by virtue of the foregoing provisions of this section there shall be taken into account, as if it were tax payable under the law of the territory in which the company paying the dividend is resident, any tax that would be so taken into account under section 508 of the Taxes Act (extension of relief to U.K. and third country taxes) if the company paying the dividend and the company receiving it were related to each other within the meaning of subsection (5) of that section.

(6)This section has effect with respect to dividends paid (within the meaning of section 527(3) of the Taxes Act) on or after 1st April 1972.

PART VTaxation of Companies and Company Distributions

Advance corporation tax and tax credit

84Liability for advance corporation tax where company makes qualifying distribution

(1)Where a company resident in the United Kingdom makes a qualifying distribution after 5th April 1973 it shall be liable to pay an amount of corporation tax (to be known as " advance corporation tax ") in accordance with this section.

(2)Subject to section 89 below, advance corporation tax shall be payable on an amount equal to the amount or value of the distribution, and shall be so payable at a rate (to be known as " the rate of advance corporation tax ") which for the period beginning with 6th April 1973 and ending with 31st March 1974 shall be three-sevenths and thereafter such fraction as Parliament may from time to time determine.

(3)The sum of the amount or value of a qualifying distribution and such proportion thereof as corresponds to the rate of advance corporation tax in force for the financial year in which the distribution is made is in this Part of this Act referred to as " a franked payment ", and references to any accounting or other period in which a franked payment is made are references to the period in which the distribution in question is made.

(4)In this Part of this Act " qualifying distribution " means any distribution other than—

(a)a distribution which, in relation to the company making it, is a distribution by virtue only of paragraph (c) of section 233(2) of the Taxes Act (bonus redeemable share capital and bonus securities); or

(b)a distribution consisting of any share capital or security which the company making the distribution has directly or indirectly received from the company by which the share capital or security was issued and which, in relation to the latter company, is a distribution by virtue only of that paragraph.

(5)Schedule 14 to this Act shall have effect for the purpose of regulating the time and manner in which advance corporation tax is to be accounted for and paid.

85Payments of advance corporation tax to be set against company's liability to corporation tax on its income

(1)Subject to subsection (2) below, advance corporation tax paid by a company (and not repaid) in respect of any distribution made by it in an accounting period shall be set against its liability to corporation tax on any income charged to corporation tax for that accounting period and shall accordingly discharge a corresponding amount of that liability.

(2)The amount of advance corporation tax to be set against a company's liability for any accounting period under subsection (1) above shall not exceed the amount of advance corporation tax that would have been payable (apart from section 89 below) in respect of a distribution made at the end of that period of an amount which, together with the advance corporation tax so payable in respect of it, is equal to the company's income charged to corporation tax for that period.

(3)Where in the case of any accounting period of a company there is an amount of surplus advance corporation tax (that is to say, advance corporation tax which cannot be set against the company's liability to corporation tax for that period because the company has no income charged to corporation tax for that period or because of subsection (2) above) the company may, within two years after the end of that period, claim to have the whole or any part of that amount treated for the purposes of this section (but not of any further application of this subsection) as if it were advance corporation tax paid in respect of distributions made by the company in any of its accounting periods beginning in the two years preceding that period (but so that the amount which is the subject of the claim is set, so far as possible, against the company's liability for a more recent accounting period before a more remote one) and corporation tax shall, so far as may be required, be repaid accordingly.

(4)Where in the case of any accounting period of a company there is an amount of surplus advance corporation tax which has not been dealt with under subsection (3) above, that amount shall be treated for the purposes of this section (including any further application of this subsection) as if it were advance corporation tax paid in respect of distributions made by the company in the next accounting period.

(5)Effect shall be given to subsections (1) and (4) above as if on a claim in that behalf by the company and, for that purpose, a return made by the company under section 11 of the Management Act containing particulars of advance corporation tax or surplus advance corporation tax which falls to be dealt with under those subsections shall be treated as a claim.

(6)For the purposes of this section the income of a company charged to corporation tax for any period shall be taken to be the amount of its profits for that period on which corporation tax falls finally to be borne exclusive of the part of the profits attributable to chargeable gains; and that part shall be taken to be the amount brought into the company's profits for that period for the purposes of corporation tax in respect of chargeable gains before any deduction for charges on income, expenses of management or other amounts which can be deducted from or set against or treated as reducing profits of more than one description.

(7)No advance corporation tax shall by virtue of this section be set against a company's liability to corporation tax charged for any time before 1st April 1973, and this section has effect subject to the subsequent provisions of this Act.

86Tax credit for certain recipients of qualifying distributions

(1)Where a company resident in the United Kingdom makes a qualifying distribution after 5th April 1973 and the person receiving the distribution is another such company or a person resident in the United Kingdom, not being a company, the recipient of the distribution shall be entitled to a tax credit under this section (in this Part of this Act referred to as a " tax credit").

(2)The tax credit in respect of a distribution shall be available for the purposes specified in this section and the subsequent provisions of this Act, and shall be equal to such proportion of the amount or value of the distribution as corresponds to the rate of advance corporation tax in force for the financial year in which the distribution is made.

(3)Subject to section 89(5) below, a company resident in the United Kingdom which is entitled to a tax credit in respect of a distribution may claim to have the amount of the credit paid to it if—

(a)the company is wholly exempt from corporation tax or is only not exempt in respect of trading income; or

(b)the distribution is one in relation to which express exemption (otherwise than by section 239 of the Taxes Act) is given, whether specifically or by virtue of a more general exemption from tax, under any provision of the Tax Acts.

(4)A person, not being a company resident in the United Kingdom, who is entitled to a tax credit in respect of a distribution may claim to have the credit set against the income tax chargeable on his income under section 3 of the Taxes Act or on his total income for the year of assessment in which the distribution is made and, where the credit exceeds that income tax, to have the excess paid to him.

(5)Where a distribution mentioned in subsection (1) above is, or falls to be treated as, or under any provision of the Tax Acts is deemed to be, income of a person other than the recipient, that person shall be treated for the purposes of this section as receiving the distribution (and accordingly the question whether he is entitled to a tax credit in respect of it shall be determined by reference to where he, and not the actual recipient, is resident); and where any such distribution is income of a United Kingdom trust the trustees shall be entitled to a tax credit in respect of it if no other person falls to be treated for the purposes of this section as receiving the distribution.

87Income tax on distributions

(1)This section shall have effect for the year 1973-74 and subsequent years of assessment.

(2)For the Schedule F set out in subsection (1) of section 232 of the Taxes Act there shall be substituted—

“SCHEDULE F

1Income tax under this Schedule shall be chargeable for any year of assessment in respect of all dividends and other distributions in that year of a company resident in the United Kingdom which are not specially excluded from income tax, and for the purposes of income tax all such distributions shall be regarded as income however they fall to be dealt with in the hands of the recipient.

2For the purposes of this Schedule and all other purposes of the Tax Acts and such distribution as aforesaid in respect of which a person is entitled to a tax credit shall be treated as representing income equal to the aggregate of the amount or value of that distribution and the amount of that credit, and income tax under this Schedule shall accordingly be charged on that aggregate.”

(3)No distribution which is chargeable under the said Schedule F shall be chargeable under any other provision of the Income Tax Acts.

(4)Subsections (2) and (3) of the said section 232 (which require a company resident in the United Kingdom to deduct and account for income tax in respect of distributions made by it) shall cease to have effect.

(5)Where in any year of assessment the income of a person, not being a company resident in the United Kingdom, includes a distribution in respect of which that person is not entitled to a tax credit—

(a)no assessment shall be made on that person in respect of income tax at the basic rate on the amount or value of the distribution;

(b)that person's liability under any assessment made in respect of income tax at any such higher rate as is mentioned in section 32(1)(b) of the [1971 c. 68.] Finance Act 1971 on the amount or value of the distribution or on any part thereof shall be reduced by a sum equal to income tax at the basic rate on so much thereof as is assessed at any such higher rate; and

(c)the amount or value of the distribution shall be treated for the purposes of sections 52 and 53 of the Taxes Act as not brought into charge to income tax.

(6)Where a person has paid tax in respect of excess liability on, or on any part of, a distribution which is not a qualifying distribution (" the non-qualifying distribution "), then, if, apart from this subsection, he would be liable to pay an amount of tax in respect of excess liability on, or on any part of, a repayment of the share capital or of the principal of the security which constituted the non-qualifying distribution, he shall be so liable only to the extent (if any) to which that amount exceeds the tax which he has already paid as aforesaid.

In this subsection " excess liability" means the excess of liability to income tax over what it would be if all income tax were charged at the basic rate to the exclusion of any other rate.

Franked investment income

88" Franked investment income "

(1)Income of a company resident in the United Kingdom which consists of a distribution in respect of which the company is entitled to a tax credit (and which accordingly represents income equal to the aggregate of the amount or value of the distribution and the amount of that credit) is in this Part of this Act referred to as " franked investment income " of the company.

(2)Subject to the transitional provisions hereinafter contained, the foregoing subsection shall apply also for the construction of references to franked investment income in other provisions of the Tax Acts in their application to any time after 5th April 1973 and shall so apply to the exclusion of the definition in section 240 of the Taxes Act.

89Calculation of advance corporation tax where company receives franked investment income

(1)Where in any accounting period a company receives franked investment income the company shall not be liable to pay advance corporation tax in respect of qualifying distributions made by it in that period unless the amount of the franked payments made by it in that period exceeds the amount of that income.

(2)If in an accounting period there is such an excess, advance corporation tax shall be payable on an amount which, when the advance corporation tax payable thereon is added to it, is equal to the excess.

(3)If the amount of franked investment income received by a company in an accounting period exceeds the amount of the franked payments made by it in that period the excess shall be carried forward to the next accounting period and treated for the purposes of this section (including any further application of this subsection) as franked investment income received by the company in that period.

(4)Schedule 14 to this Act shall apply for the purpose of regulating the manner in which effect is to be given to the foregoing provisions of this section.

(5)No franked investment income shall be used to frank distributions of a company (that is to say, used in accordance with this section and the said Schedule so as to relieve the company from, or obtain repayment of, advance corporation tax for which the company would otherwise be liable) if the amount of the tax credit comprised in it has been paid under subsection (3) of section 86 above; and no payment shall be made under that subsection in respect of the tax credit comprised in franked investment income which has been used as aforesaid.

(6)In this Part of this Act any such excess as is mentioned in subsection (3) above (calculated without regard to franked investment income which by virtue of subsection (5) above cannot be used to frank distributions) is referred to as a " surplus of franked investment income " ; and, subject to the transitional provisions hereinafter contained, references to a surplus of franked investment income in other provisions of the Tax Acts in their application to any time after 5th April 1973 shall be construed as references to any such excess instead of as references to any such surplus as is mentioned in section 240(1) of the Taxes Act.

90Set-off of losses etc. against surplus of franked investment income

(1)For sections 254 and 255 of the Taxes Act (under which a company may recover income tax on any such surplus of franked investment income as is mentioned in section 240(1) of that Act by claiming a set-off for trading losses and certain other matters) there shall, as respects any time after 5th April 1973, be substituted the sections set out in Part I of Schedule 15 to this Act (under which a company may in corresponding circumstances receive payment of the amount of the tax credit comprised in a surplus of franked investment income as defined in section 89(6) above).

(2)Without prejudice to subsection (8) of the said section 254 or subsection (7) of the said section 255 as set out in the said Schedule, the surplus of franked investment income for an accounting period for which a claim is made under either of those sections shall be calculated without regard to any part of that surplus which, when the claim is made, has been used to frank distributions made by the company in a later accounting period.

(3)Where in consequence of a claim under either of the said sections 254 and 255 for any accounting period a company is entitled to payment of a sum in respect of tax credit, an amount equal to that sum shall be deducted from any advance corporation tax which apart from this subsection would fall, under section 85 above, to be set against the company's liability to corporation tax for the next accounting period and, if that amount exceeds that advance corporation tax or there is no such advance corporation tax, that excess or that amount (as the case may be) shall be carried forward and similarly deducted in relation to the following accounting period and so on.

Groups of companies

91Group income

(1)For subsection (1) of section 256 of the Taxes Act (under which two related companies may elect to pay dividends to each other without deducting and accounting for income tax) there shall, as respects any time after 5th April 1973, be substituted the subsection (1) set out in Part II of Schedule 15 to this Act (under which companies may in corresponding circumstances elect to pay dividends to each other without incurring a liability to advance corporation tax and without the recipient being entitled to a tax credit).

(2)For subsection (4) of the said section 256 (recovery of tax where companies wrongly omit to pay it) there shall, as respects any time after 5th April 1973, be substituted the subsections (4) and (4A) set out in Part II of the said Schedule.

(3)The Board may make regulations with respect to the procedure to be adopted for giving effect to the said section 256 and as to the information and evidence to be furnished by a company in connection with that section.

Regulations under this subsection shall be made by statutory instrument, and the Board shall not make any such regulations unless a draft of them has been laid before, and approved by a resolution of, the Commons House of Parliament.

(4)Any election which has been made for the purpose of subsection (1) of the said section 256 as originally enacted and has not ceased to have effect by virtue of section 257(3) or (4) of the Taxes Act before 6th April 1973 shall be treated as having been made also for the purposes of subsection (1) of the said section 256 as substituted by this section.

92Setting of company's surplus advance corporation tax against subsidiary's liability

(1)Where in the case of any accounting period of a company—

(a)there is an amount of surplus advance corporation tax (calculated without regard to any surplus carried back or forward to that period under section 85(3) or (4) above); and

(b)advance corporation tax has been paid in respect of a dividend or dividends paid by the company in that period,

the company (in this section referred to as " the surrendering company ") may, on making a claim, surrender the benefit of the whole or any part of the amount mentioned in paragraph (a) above, up to a sum not exceeding the advance corporation tax mentioned in paragraph (b) above, to any company which was a subsidiary of the surrendering company throughout that accounting period, or (in such proportions as the surrendering company may determine) to any two or more companies which were subsidiaries of the surrendering company throughout that period.

(2)Subject to subsection (4) below, where the benefit of any amount of surplus advance corporation tax (" the surrendered amount") is surrendered under this section to a subsidiary, then—

(a)if the advance corporation tax mentioned in subsection (1)(b) above was paid in respect of one dividend only or of dividends all of which were paid on the same date, the subsidiary shall be treated for the purposes of section 85 above as having paid an amount of advance corporation tax equal to the surrendered amount in respect of a distribution made by it on the date on which the dividend or dividends were paid;

(b)if the advance corporation tax mentioned in subsection (1)(b) above was paid in respect of dividends paid on different dates, the subsidiary shall be treated for the purposes of that section as having paid an amount of advance corporation tax equal to the appropriate part of the surrendered amount in respect of a distribution made by it on each of those dates.

(3)For the purposes of paragraph (b) of subsection (2) above " the appropriate part of the surrendered amount", in relation to any distribution treated as made on the same date as that on which a dividend was paid, means such part of that amount as bears to the whole of it the same proportion as the amount of that dividend bears to the total amount of the dividends mentioned in that paragraph.

(4)No advance corporation tax which a subsidiary is treated as having paid by virtue of subsection (2) above shall be set against the subsidiary's liability to corporation tax for any accounting period in which, or in any part of which, it was not a subsidiary of the surrendering company.

(5)Any claim under this section shall be made within two years after the end of the accounting period to which it relates and shall require the consent, notified to the inspector in such form as the Board may require, of the subsidiary or subsidiaries concerned.

(6)No amount of surplus advance corporation tax which has been dealt with under subsection (3) of section 85 above shall be available for the purposes of a claim under this section; and no amount of surplus advance corporation tax the benefit of which has been surrendered under this section shall be treated for the purposes of that section as advance corporation tax paid by the surrendering company.

(7)A payment made by a subsidiary to a surrendering company in pursuance of an agreement between them as respects the surrender of the benefit of an amount of surplus advance corporation tax, being a payment not exceeding that amount,—

(a)shall not be taken into account in computing profits or losses of either company for corporation tax purposes; and

(b)shall not for any of the purposes of the Corporation Tax Acts be regarded as a distribution or a charge on income.

(8)References in this section to a company apply only to bodies corporate resident in the United Kingdom; and for the purposes of this section the question whether one body corporate is the subsidiary of another shall be determined as a question whether it is a 51 per cent. subsidiary of that other, except that that other shall be treated as not being the owner—

(a)of any share capital which it owns directly in a body corporate if a profit on the sale of the shares would be treated as a trading receipt of its trade; or

(b)of any share capital which it owns indirectly, and which is owned directly by a body corporate for which a profit on the sale of the shares would be a trading receipt; or

(c)of any share capital which it owns directly or indirectly in a body corporate not resident in the United Kingdom.

Companies' capital gains

93Reduction of corporation tax liability in respect of chargeable gains

(1)This section shall have effect—

(a)in relation to companies other than authorised unit trusts or investment trusts, from 1st April 1973 ;

(b)in relation to authorised unit trusts and investment trusts from 1st April 1972.

(2)The amount which in accordance with section 265 of the Taxes Act is to be included in respect of chargeable gains in a company's total profits for any accounting period shall, subject to subsections (3) and (4) below, be reduced—

(a)in the case of a company other than an authorised unit trust or investment trust, by such fraction as Parliament may from time to time determine for the purposes of this paragraph;

(b)in the case of an authorised unit trust or investment trust, by five-eighths or such other fraction as Parliament may from time to time determine for the purposes of this paragraph.

(3)Where under either paragraph of subsection (2) above different fractions are in force in different parts of an accounting period—

(a)the amount mentioned in that subsection shall be apportioned between those parts; and

(b)the portion for each part shall be reduced under that subsection by the fraction in force in that part.

(4)If in an accounting period of a company there is a part falling before and a part falling after the time when this section comes into force in relation to the company, the amount mentioned in subsection (2) above shall be apportioned between those parts and no reduction shall be made under that subsection in respect of the portion for the part falling before that time.

(5)In this section " authorised unit trust" has the meaning given in section 358 of the Taxes Act and, subject to subsection (6) below, " investment trust" has the meaning given in section 359 of that Act.

(6)The said section 359 shall be amended as follows—

(a)before paragraph (a) of subsection (1) there shall be inserted " (aa) that the company is resident in the United Kingdom, and ";

(b)for the purposes of paragraph (b) of that subsection and the other provisions having effect in relation thereto—

(i)holdings in companies which are members of a group (whether or not including the investing company) and are not excluded from that paragraph shall be treated as holdings in a single company;

(ii)where the investing company is a member of a group, money owed to it by another member of the group shall be treated as a security of the latter held by the investing company and accordingly as, or as part of, the holding of the investing company in the company owing the money,

and for the purposes of this paragraph " group " means a company and all companies which are its 51 per cent. subsidiaries;

(c)for paragraph (c) of that subsection there shall be substituted " (c) that the shares making up the company's ordinary share capital (or, if there are such shares of more than one class, those of each class) are quoted on a recognised stock exchange in the United Kingdom, and ",

but the amendments in paragraphs (b) and (c) above shall not affect the meaning of " investment trust" for any time before 11th April 1972 and, in relation to a company which immediately before that date was an investment trust within the meaning of the said section 359 without those amendments, that section shall continue to have effect without those amendments until the end of the company's accounting period containing or ending with 11th April 1975.

(7)The following provisions, that is to say—

(a)section 311 of the Taxes Act (under which the effective rate of corporation tax is reduced for insurance companies in respect of chargeable gains reserved for holders of life assurance policies);

(b)section 356 of that Act (which limits the rate of corporation tax payable on chargeable gains by authorised unit trusts and investment trusts to the rate payable by an individual),

shall cease to have effect, but this subsection shall not affect the operation of those provisions in relation to any accounting period ending before the time when this section comes into force in relation to the company concerned or, in the case of any such accounting period as is mentioned in subsection (4) above, as respects any portion of gains which, in accordance with that subsection, is not reduced under this section.

(8)The proviso to subsection (3) of section 322 of the Taxes Act (rate of corporation tax relevant for determining the amounts that may be retained under subsection (2) of that section by an insurance company when paying benefit in certain circumstances) shall not apply where the disposal mentioned in subsection (2)(b) of that section is on or after 1st April 1974; and where the disposal is on or after that date the rate of corporation tax mentioned in the said subsection (3) shall be reduced by the fraction for the time being fixed for the purposes of subsection (2)(a) of this section.

Close companies

94Close companies

(1)Schedule 16 to this Act shall have effect instead of sections 289 to 301 of the Taxes Act (charge to income tax in respect of shortfall in distributions of close companies and apportionment of income of close companies among participators).

(2)The remaining provisions of Chapter III of Part XI of the Taxes Act shall be amended in accordance with Schedule 17 to this Act.

(3)The said Schedule 16 shall be construed as if it were included in the said Chapter III.

(4)Subsection (1) above shall have effect in relation to accounting periods ending after 5th April 1973.

Special classes of companies

95Mitigation of corporation tax liability of small companies

(1)Where in any accounting period the profits of a company resident in the United Kingdom do not exceed the lower relevant maximum amount, the corporation tax charged on its income for that period shall be calculated as if the rate of corporation tax (instead of being the rate fixed for companies generally) were such lower rate (to be known as the "small companies rate ") as Parliament may from time to time determine.

(2)Where in any accounting period the profits of any such company exceed the lower relevant maximum amount but do not exceed the upper relevant maximum amount, the corporation tax charged on its income for that period shall be reduced by a sum equal to such fraction as Parliament may from time to time determine of the following amount—

(3)The lower and upper relevant maximum amounts mentioned above shall be determined as follows—

(a)where the company has no associated company in the accounting period, those amounts are £15,000 and £25,000 respectively;

(b)where the company has one or more associated companies in the accounting period, the lower relevant maximum amount is £15,000 divided by one plus the number of those associated companies and the upper relevant maximum amount is £25,000 divided by one plus the number of those associated companies.

(4)In applying subsection (3) above to any accounting period of a company, an associated company which has not carried on any trade or business at any time in that accounting period (or, if an associated company during part only of that accounting period, at any time in that part of that accounting period) shall be disregarded and for the purposes of this section a company is to be treated as an " associated company " of another at a given time if at that time one of the two has control of the other or both are under the control of the same person or persons.

In this subsection " control" shall be construed in accordance with section 302 of the Taxes Act.

(5)In determining how many associated companies a company has got in an accounting period or whether a company has an associated company in an accounting period, an associated company shall be counted even if it was an associated company for part only of the accounting period, and two or more associated companies shall be counted even if they were associated companies for different parts of the accounting period.

(6)For an accounting period of less than twelve months the relevant maximum amounts determined in accordance with subsection (3) above shall be proportionately reduced.

(7)For the purposes of this section the profits of a company for an accounting period shall be taken to be the amount of its profits for that period on which corporation tax falls finally to be borne, with the addition of franked investment income other than franked investment income which the company (if a member of a group) receives from companies within the group ; and for this purpose distributions received by the company from another are to be treated as coming from within the company's group if, but only if, dividends so received are group income or would be group income if the companies so elected.

(8)For the purposes of this section the income of a company for an accounting period is its income charged to corporation tax for that period as defined in section 85(6) above.

96Mitigation of corporation tax liability of industrial and provident societies, housing associations and building societies

(1)Where in any accounting period of a body to which this section applies the rate of corporation tax exceeds such special rate as Parliament may fix for the purposes of this section, the corporation tax charged on the income of that body for that period shall be calculated as if the rate of corporation tax were equal to that special rate.

(2)The bodies to which this section applies are—

(a)any registered industrial and provident society as defined in section 340 of the Taxes Act and any such cooperative association as is mentioned in subsection (8) of that section;

(b)any housing association for the time being approved for the purposes of section 341 of that Act;

(c)any building society as defined in section 343 of that Act and any company to which that section applies by virtue of subsection (9) of that section,

not being a society, association or company under the control (within the meaning of section 302 of that Act) of one or more companies which are not themselves bodies to which this section applies.

(3)For the purposes of this section the income of a company for an accounting period is its income charged to corporation tax for that period as defined in section 85(6) above.

97Insurance companies

The enactments relating to the taxation of insurance companies shall, as from 6th April 1973, have effect subject to the provisions of Schedule 18 to this Act, being provisions for adapting and supplementing those enactments in consequence of the foregoing provisions of this Part of this Act.

Overseas residents and income

98Persons resident abroad: tax credit

(1)An individual who, having made a claim in that behalf, is entitled to relief under Chapter II of Part I of the Taxes Act by virtue of section 27(2) of that Act (personal reliefs for certain non-residents) in respect of any year of assessment shall be entitled to a tax credit in respect of any qualifying distribution received by him in that year to the same extent as if he were resident in the United Kingdom.

(2)In subsection (1) of section 497 of the Taxes Act (which gives effect to double taxation agreements so far as they provide for the matters specified in paragraphs (a) to (c) of that subsection) after paragraph (c) there shall be inserted “or

(d)for conferring on persons not resident in the United Kingdom the right to a tax credit under section 86 of the Finance Act 1972 in respect of qualifying distributions made to them by companies which are so resident.”

(3)Where a qualifying distribution is income of a fund to which section 214(1)(b) or (c) of the Taxes Act applies (colonial pension funds) the persons entitled to receive the income shall be entitled to a tax credit in respect of the distribution to the same extent as a recipient mentioned in section 86(1) above.

(4)Where a qualifying distribution is income of, or of the government of, any sovereign power or of any international organisation, that power, government or organisation shall be entitled to a tax credit in respect of the distribution to the same extent as a recipient mentioned in section 86(1) above.

In this subsection " international organisation" means an organisation of which two or more sovereign powers, or the governments of two or more such powers, are members; and if in any proceedings a question arises whether a person is within this subsection 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.

99Companies with overseas trading income: extension and modification of transitional relief

(1)The relief afforded by section 84 of the [1965 c. 25.] Finance Act 1965 (transitional relief for companies with overseas trading income) shall be available for an additional four years and accordingly in subsection (1) of that section for the words " the seven years of assessment" and " those seven years " there shall be substituted respectively the words " the eleven years of assessment " and " those eleven years ".

(2)The proportion by which relief under that section is to be reduced in accordance with the proviso to the said subsection (1) shall be three-fifths in the five years following the year 1971-72, and accordingly in that proviso for the words " by three-fifths in the year 1971-72 " to the end there shall be substituted the words " and by three-fifths in the year 1971-72 and each of the five following years of assessment ".

(3)Subsection (4) of the said section 84 (restriction of relief where a company increases its net dividends) shall not apply to any year of assessment after the year 1971-72.

(4)In relation to any year of assessment beginning with the year 1973-74 the said section 84 and Schedule 20 to the said Act of 1965 shall have effect subject to Schedule 19 to this Act.

100Double taxation relief

(1)The provisions of Chapters I and II of Part XVIII of the Taxes Act (double taxation relief) applicable to corporation tax in respect of income shall apply also to corporation tax in respect of chargeable gains, and for that purpose—

(a)references in those Chapters to income shall be construed as references to chargeable gains; and

(b)in sections 497(1) and 498(6) references to taxes of a similar character, or corresponding, to corporation tax shall be construed as references to taxes on chargeable gains;

and sections 517 and 518 of that Act (regulations and information) shall have effect accordingly.

(2)Section 499 of the Taxes Act (which has the effect that the provisions of those Chapters applicable to income tax apply to corporation tax in respect of chargeable gains) shall cease to have effect.

(3)For the purposes of section 505 of the Taxes Act (which limits the credit for foreign tax allowable against corporation tax in respect of any income to the corporation tax attributable to that income and, by virtue of subsection (1) above, applies similarly in relation to chargeable gains) the corporation tax attributable to any income or gain (" the relevant income or gain ") shall be determined in accordance with subsections (4) to (6) below.

(4)Subject to subsections (5) and (6) below, the amount of corporation tax attributable to the relevant income or gain shall be treated as equal to such proportion of the amount of that income or gain as corresponds to the rate of corporation tax payable by the company (before any credit under the said Part XVIII) on its income or chargeable gains for the accounting period in which the income arises or the gain accrues (" the relevant accounting period ").

(5)Where in the relevant accounting period there is any deduction to be made for charges on income, expenses of management or other amounts which can be deducted from or set against or treated as reducing profits of more than one description—

(a)the company may for the purposes of this section allocate the deduction in such amounts and to such of its profits for that period as it thinks fit; and

(b)the amount of the relevant income or gain shall be treated for the purposes of subsection (4) above as reduced or, as the case may be, extinguished by so much (if any) of the deduction as is allocated to it.

(6)Where in accordance with section 85 above any advance corporation tax falls to be set against the company's liability to corporation tax on its income for the relevant accounting period—

(a)the company may for the purposes of this section allocate that advance corporation tax in such amounts and to the corporation tax attributable to such of its income for that period as it thinks fit; and

(b)the amount of corporation tax attributable to the relevant income as determined in accordance with subsections (4) and (5) above shall be reduced by so much (if any) of that advance corporation tax as is allocated to the corporation tax attributable to that income;

but the amount of advance corporation tax allocated under this subsection to the corporation tax attributable to any income shall not exceed the advance corporation tax that would have been payable (apart from section 89 above) in respect of a distribution made at the end of the relevant accounting period of an amount which, together with the advance corporation tax so payable in respect of it, is equal to that income.

(7)The foregoing provisions of this section shall have effect from 1st April 1973.

(8)No order shall be made under section 31 or 32 of the [1966 c. 18.] Finance Act 1966 (transitory provisions for dividends, interest and royalties paid to non-residents) extending the period mentioned in either of those sections beyond 5th April 1973.

Miscellaneous provisions

101Change in ownership of company: calculation and treatment of advance corporation tax

(1)This section applies if—

(a)within any period of three years there is both a change in the ownership of a company and (either earlier or later in that period, or at the same time) a major change in the nature or conduct of a trade or business carried on by the company; or

(b)at any time after the scale of the activities in a trade or business carried on by a company has become small or negligible, and before any considerable revival of the trade or business, there is a change in the ownership of the company.

(2)Sections 85 and 89 above and Schedule 14 below shall apply to an accounting period in which the change of ownership occurs as if the part ending with the change of ownership, and the part after, were two separate accounting periods; and for that purpose the income of the company charged to corporation tax for the accounting period (as defined in subsection (6) of the said section 85) shall be apportioned between those parts.

(3)No advance corporation tax paid by the company in respect of distributions made in an accounting period beginning before the change of ownership shall be treated under subsection (4) of the said section 85 as paid by it in respect of distributions made in an accounting period ending after the change of ownership; and this subsection shall apply to an accounting period in which the change of ownership occurs as if the part ending with the change of ownership, and the part after, were two separate accounting periods.

(4)In subsection (1) above "major change in the nature or conduct of a trade or business " includes—

(a)a major change in the type of property dealt in, or services or facilities provided, in the trade or business; or

(b)a major change in customers, outlets or markets of the trade or business; or

(c)a change whereby the company ceases to be a trading company and becomes an investment company or vice versa;

(d)where the company is an investment company, a major change in the nature of the investments held by the company;

and this section applies even if the change is the result of a gradual process which began outside the period of three years mentioned in subsection (1)(a) above.

(5)In this section—

• " trading company " means a company whose business consists wholly or mainly of the carrying on of a trade or trades;

• " investment company " means a company (other than a holding company) whose business consists wholly or mainly in the making of investments and the principal part of whose income is derived therefrom ;

• " holding company " means a company whose business consists wholly or mainly in the holding of shares or securities of companies which are its 90 per cent. subsidiaries and which are trading companies.

(6)Subsection (3) above applies to advance corporation tax which a company is treated as having paid by virtue of section 92 above as it applies to advance corporation tax which it has actually paid.

(7)Subsections (6) and (7) of section 483 of the Taxes Act (which contain supplementary provisions relating to the restriction of the carry-forward of losses under that section in circumstances corresponding to those dealt with in this section) and section 484 of that Act (which contains rules for ascertaining changes of ownership for the purposes of that section) shall apply also for the purposes of this section and as if in subsection (3) of section 484 the reference to the benefit of the losses were a reference to the benefit of the advance corporation tax.

102Rectification of excessive set-off etc. of advance corporation tax or tax credit

(1)If an inspector discovers that—

(a)any set-off of advance corporation tax under section 85 above; or

(b)any set-off or payment of tax credit,

ought not to have been made, or is or has become excessive, the inspector may make any such assessments as may in his judgment be required for recovering any tax that ought to have been paid or any payment of tax credit that ought not to have been made and generally for securing that the resulting liabilities to tax (including interest on unpaid tax) of the persons concerned are what they would have been if only such set-offs or payments had been made as ought to have been made.

(2)The Management Act shall apply to any assessment under this section for recovering a payment of tax credit as if it were an assessment to income tax for the year of assessment, or, in the case of a company, corporation tax for the accounting period, in respect of which the payment was claimed, and as if that payment represented a loss of tax to the Crown; and any sum charged by any such assessment shall, subject to any appeal against the assessment, be due within fourteen days after the issue of the notice of assessment.

103Charge of advance corporation tax at previous rate until new rate is fixed and changes of rate

(1)Notwithstanding that a rate of advance corporation tax has not been fixed for any financial year, advance corporation tax in respect of distributions made in that year shall be payable under Schedule 14 to this Act and may be assessed under that Schedule according to the rate last fixed but, if a rate of advance corporation tax for that year is not fixed by an Act passed on or before 5th August next after the end of the year, or advance corporation tax is charged for that year otherwise than as it has been paid or assessed, the necessary adjustment shall be made by discharge or repayment of tax or by a further assessment.

(2)Where the House of Commons passes a Resolution for fixing the rate of advance corporation tax for any financial year or for altering the charge to advance corporation tax for any financial year, then any payment or assessment afterwards made by virtue of subsection (1) above may be made in accordance with the Resolution; but that subsection shall not require any payment to be made or authorise the making of any assessment later than 5th May next after the end of any financial year unless a Resolution for fixing a rate of advance corporation tax for that year has been so passed, nor shall any such payment be required or assessment made by virtue of any such Resolution later than the prescribed period from the date on which the Resolution is passed.

(3)In subsection (2) above " the prescribed period " has the meaning given in section 243(7) of the Taxes Act.

(4)Where different rates of advance corporation tax are in force in different parts of an accounting period, the maximum set-off permitted for that accounting period under subsection (2) of section 85 above shall be determined by apportioning the income of the company charged to corporation tax for that period (as defined in subsection (6) of that section) between the different parts of the period, calculating the maximum for each part as if it were a separate accounting period and aggregating the result.

(5)Where a company makes a distribution before 6th April in any financial year and the rate of advance corporation tax for that year differs from the rate last fixed—

(a)any advance corporation tax payable in respect of the distribution shall be calculated according to the rate last fixed and sections 84(3) and 86(2) above and Schedule 14 below shall have effect in relation to the distribution as if the rate for that year were the same as the rate last fixed ;

(b)if the distribution is made in an accounting period which extends beyond 5th April in that year and another distribution is made, or franked investment income is received, in that period after that date, the company's liability for advance corporation tax, the amount of any such tax and the amount of any surplus of franked investment income for that accounting period shall be determined under section 89 above and Schedule 14 below as if the part of the accounting period ending with, and the part of it beginning after, that date were separate accounting periods.

104Payments in respect of which company is liable to account for income tax

Schedule 20 to this Act shall have effect for the purpose of regulating the time and manner in which companies resident in the United Kingdom—

(a)are to account for and pay income tax in respect of payments made after 5th April 1973 from which tax is deductible under section 53 or 54 of the Taxes Act;

(b)are to be repaid income tax in respect of payments received by them after that date.

105Returns of distributions which are not qualifying distributions

Schedule 21 to this Act shall have effect for the purpose of requiring companies resident in the United Kingdom to make returns and give information to the inspector in respect of distributions made by them after 5th April 1973 which are not qualifying distributions.

106Amendments as to meaning of " distribution "

Sections 233 to 237 of the Taxes Act (meaning of " distribution ") shall have effect subject to the provisions of Schedule 22 to this Act.

107Amendments as to accounting periods

(1)For paragraph (c) of section 247(3) of the Taxes Act (under which a company's accounting period ends on its beginning or ceasing to carry on any trade or to be, in respect of a trade, within the charge to corporation tax) there shall be substituted—

“(c)the company beginning or ceasing to trade or to be, in respect of the trade or (if more than one) of all the trades carried on by it, within the charge to corporation tax”.

(2)For subsection (2) of section 155 of the said Act (corporation tax in respect of company's share in partnership profits etc.) there shall be substituted—

“(2)A company's share in the profits or loss of any accounting period of the partnership, or in any matter excluded from the computation by proviso (b) to subsection (1) above, shall be determined according to the interests of the partners during that period, and corporation tax shall be chargeable as if that share derived from a trade carried on by the company alone in its corresponding accounting period or periods; and the company shall be assessed and charged to tax for its corresponding accounting period or periods accordingly.

In this subsection "corresponding accounting period or periods " means the accounting period or periods of the company comprising or together comprising the accounting period of the partnership, and any necessary apportionment shall be made between corresponding accounting periods if more than one.”

(3)In section 252(8) of the said Act (company reconstructions without change of ownership) for the words from " the accounting periods" onwards there shall be substituted the words " any necessary apportionment shall be made of receipts or expenses ".

(4)This section has effect in relation to accounting periods ending after 5th April 1972.

Supplementary

108Power to make regulations modifying or replacing Schedules 14, 20 and 21

(1)The Board may, by regulations made for any of the purposes mentioned in sections 84(5), 89(4), 104 or 105 above, modify, supplement or replace any of the provisions of Schedules 14, 20 or 21 to this Act; and references in this Act and in any other enactment to any of those Schedules shall be construed as including references to any such regulations.

(2)Without prejudice to the generality of the preceding subsection, regulations under that subsection may, in relation to advance corporation tax or income tax for which a company is liable to account, modify any provision of Parts II to VI of the Management Act or apply any such provision with or without modifications.

(3)Regulations under this section may—

(a)make different provision for different descriptions of companies and for different circumstances and may authorise the Board, where in their opinion there are special circumstances justifying it, to make special arrangements as respects advance corporation tax or income tax for which a company is liable to account or the repayment of income tax borne by a company or the payment to a company of amounts in respect of any tax credit to which it is entitled ;

(b)include such transitional and other supplemental provisions as appear to the Board to be expedient or necessary.

(4)Regulations under this section shall be made by statutory instrument, and the Board shall not make any such regulations unless a draft of them has been laid before, and approved by a resolution of, the Commons House of Parliament.

109Transitional provisions

Schedule 23 to this Act shall have effect with respect to the matters there dealt with, being transitional provisions relating to this Part of this Act.

110Interpretation of Part V

(1)In this Part of this Act—

• " franked investment income " shall be construed in accordance with section 88 above but subject to section 256(1) of the Taxes Act;

• " franked payment " shall be construed in accordance with section 84(3) above but subject to section 256(1) of the Taxes Act;

• " the Management Act " means the [1970 c. 9.] Taxes Management Act 1970;

• " qualifying distribution " has the meaning given in section 84(4) above;

• " surplus of franked investment income " has the meaning given in section 89(6) above ;

• " surplus advance corporation tax " has the meaning given in section 85(3) above ;

• " tax credit " means a tax credit under section 86 above ;

• " United Kingdom trust " means a trust administered under the law of any part of the United Kingdom, not being a trust the general administration of which is ordinarily carried on outside the United Kingdom and the trustees, or a majority of the trustees, of which are resident or ordinarily resident outside the United Kingdom.

(2)References in this Part of this Act to distributions or payments received by a company apply to any received by another person on behalf of or in trust for the company but not to any received by the company on behalf of or in trust for another person.

(3)References in this Part of this Act to using franked investment income to frank distributions of a company shall be construed in accordance with section 89(5) above.

(4)References in this Part of this Act to an amount of profits on which corporation tax falls finally to be borne are references to the amount of those profits after making all deductions and giving all reliefs that for the purposes of corporation tax are made or given from or against those profits, including deductions and reliefs which under any provision are treated as reducing them for those purposes.

(5)For the purposes of any reference in this Part of this Act, or in any provision amended thereby, to the rate of advance corporation tax in force for a financial year, the period beginning with 6th April 1973 and ending with 31st March 1974 shall be treated as if it were a financial year.

111Consequential amendments

(1)The enactments specified in Schedule 24 to this Act shall have effect with the amendments there specified, being amendments adapting and supplementing those enactments in consequence of the provisions of this Part of this Act.

(2)The provisions of the Taxes Act as to the charge, calculation and payment of corporation tax (including provisions conferring any exemption) shall not be construed as affecting the charge, calculation or payment of advance corporation tax, and the Corporation Tax Acts shall apply for the purposes of this Part of this Act whether or not they are for the time being applicable for the purposes of corporation tax other than advance corporation tax.

(3)This section has effect from 6th April 1973 and does not affect the operation of any enactment in relation to any previous time; and no amendment in the said Schedule 24 adapting an enactment so as to make it apply or refer to a provision of this Act instead of a provision repealed thereby shall be construed as affecting the operation of that enactment in relation to the repealed provision so far as concerns matters occurring before the repeal or otherwise unaffected by it.

PART VITax on Capital Gains and Estate Duty

112Reduction of tax liability on disposals of shares in unit trusts, investment trusts and funds in court

(1)Subject to subsections (2) and (6) below, this section applies to disposals after 5th April 1972 of—

(a)shares in authorised unit trusts, in unit trusts to which section 38(2) of the [1965 c. 25.] Finance Act 1965 applies, or in investment trusts; and

(b)shares in any common investment fund established under section 1 of the [1965 c. 2.] Administration of Justice Act 1965.

(2)Paragraph (a) of subsection (1) above does not apply to any share of a class to which there would not be attributable in a liquidation of the trust the whole or a substantial part—

(a)of the assets of the trust representing gains on capital; or

(b)if those assets would be so attributable to two or more classes of shares, of a proportion of those assets corresponding to the proportion of all the issued shares of those classes represented by the issued shares of the class in question.

Where there are shares on which different amounts have been paid up the proportion mentioned in paragraph (b) above shall be calculated by reference to the amount paid up on the issued share capital of each class of shares.

(3)Where gains accrue to a person in any year of assessment on any disposals to which this section applies, the capital gains tax to which he is chargeable for that year shall be reduced by a credit equal to whichever of the following amounts is the smallest—

(a)the amount of that tax ;

(b)an amount equal to 15 per cent. of the total chargeable gains accruing to him in that year on disposals to which this section applies ;

(c)an amount equal to 15 per cent. of the total amount of chargeable gains accruing to him in that year on which capital gains tax is chargeable (or would have been chargeable apart from section 21 of the [1965 c. 25.] Finance Act 1965).

(4)Subsection (3) above shall have effect in relation to the corporation tax chargeable on a company for an accounting period in which gains accrue to it on any disposals to which this section applies as it has effect in relation to the capital gains tax chargeable on a person other than a company, and shall so have effect as if—

(a)references to a year of assessment were references to an accounting period ; and

(b)for the total amount of chargeable gains mentioned in paragraph (c) of that subsection there were substituted the amount of gains charged to corporation tax for the accounting period in question increased, where subsection (5) below applies, in accordance with that subsection.

In this subsection " gains charged to corporation tax " means the profits on which corporation tax falls finally to be borne after deducting the income charged to corporation tax as defined in section 85(6) (read with section 110(4)) above except that, in relation to an accounting period for which the company claims a credit for foreign tax, those gains shall be determined in accordance with section 100(5) above.

(5)In relation to an accounting period for which any reduction falls to be made under section 93 above in the amount to be included in respect of chargeable gains in the company's total profits, the gains mentioned in subsection (4)(b) above shall be increased by multiplying by the inverse of the fraction of that amount remaining after the reduction; and if under subsection (3) or (4) of that section the reduction falls to be made by reference to different portions of that amount, the increase under this subsection shall be made similarly, using the inverse of the fractions of those portions remaining after any reduction.

(6)Where a person disposes after 5th April 1972 of a share—

(a)which at the time of disposal is a qualifying share (that is to say, a share falling within subsection (1)(a) above) but has not at all times while in the ownership of that person been a qualifying share ; or

(b)which at the time of disposal is not a qualifying share but has previously while in his ownership been such a share,

this section shall apply to the disposal but for the purposes of subsection (3)(b) above the gain accruing on the disposal shall be treated as reduced in proportion to the time for which the share was in the ownership of that person without being a qualifying share.

(7)Where under paragraphs 4 to 7 of Schedule 7 to the [1965 c. 25.] Finance Act 1965 (exchanges, etc. of shares) the share of which a person disposes falls to be identified with another asset or other assets previously held by him, subsection (6) above shall have effect as if—

(a)his period of ownership of the share disposed of included his period of ownership of the other asset or assets; and

(b)the share disposed of had or had not been a qualifying share at any time during that additional period according to whether or not the other asset or any of those other assets was a qualifying share at that time.

(8)Where a person disposes after 5th April 1972 of a share which at the time of disposal is a qualifying share and which he has received on a conversion of—

(a)a share other than a qualifying share ; or

(b)loan stock,

previously held by him, being a conversion pursuant to rights in that behalf attached to the share or stock previously held, subsections (6) and (7) above shall have effect as if that share or stock had been a qualifying share throughout any time for which the company by which it was issued was a body of the kind mentioned in subsection (1)(a) above.

(9)Where the gain accruing on a disposal to which this section applies falls to be computed in accordance with paragraph 27(2)(b) of Schedule 6 to the [1965 c. 25.] Finance Act 1965 (unquoted securities held before 6th April 1965 which are subsequently converted or exchanged)—

(a)the period of ownership of the share disposed of shall not be treated under subsection (7)(a) above as having begun before the time mentioned in the said paragraph 27(2)(b); and

(b)for the purposes of subsection (3)(b) above the gain shall be taken to be that mentioned in sub-paragraph (ii) of the said paragraph 27(2)(b) reduced, where applicable, in accordance with subsections (6) and (7) above.

(10)For the purposes of subsections (6) to (8) above no account shall be taken of any period of ownership before 6th April 1965; and nothing in paragraphs 4 to 7 of the said Schedule 7 shall be construed as enabling any asset to be treated as having been a qualifying share at any time when it was not such in fact.

(11)The following provisions, that is to say—

(a)section 37(1) of the Finance Act 1965 and that section as applied by section 38(2) of that Act (under which the amount apportioned to a share out of the net gains of a unit trust or investment trust is deductible in computing a gain on a disposal) and section 357 of the Taxes Act (which provides for making the apportionment) ; and

(b)section 94(2) of the said Act of 1965 (which makes corresponding provision for common investment funds),

together with any apportionment already made under those provisions, shall not apply as respects any disposal after 5th April 1972 whether or not a disposal to which this section applies.

(12)For the purposes of this section loan stock issued by an investment trust before 11th April 1972, being loan stock to which there would be attributable in a liquidation of the trust the whole of the assets of the trust representing gains on capital, shall be treated as shares in the trust falling within subsection (1)(a) above.

(13)In this section " authorised unit trust" has the meaning given in section 358 of the Taxes Act and, subject to section 93(6) above, "investment trust" has the meaning given in section 359 of that Act.

113Reduced rate of capital gains tax for unit trusts with exempt unit holders and for funds in court

For the year 1972-73 and subsequent years of assessment the rate of capital gains tax payable on chargeable gains accruing—

(a)to a unit trust to which section 38(2) of the [1965 c. 25.] Finance Act 1965 applies (unit trusts for exempt unit holders);

(b)to a common investment fund established under section 1 of the [1965 c. 2.] Administration of Justice Act 1965,

shall be 15 per cent.

114Valuation of assets of and rights in unit trusts

(1)Nothing in any trust deed executed before 1st September 1972 and regulating any such unit trust as is mentioned in section 112(1)(a) above shall preclude the managers of the trust or the trustee, in valuing the assets of the trust at any time during an accounting period, from making a deduction for any tax for which the trust may become liable in respect of its net gains in that period up to that time.

In this subsection " net gains " means the excess, if any, of chargeable gains over the allowable losses deductible from those gains as those gains and losses are computed for the charge to tax on the trust.

(2)In section 44(4) of, and paragraph 22(1)(b) of Schedule 6 to, the Finance Act 1965 (valuation of rights of unit holders in unit trust scheme the prices of which are published daily by the managers of the scheme) for the words " are published daily " there shall be substituted the words " are published regularly ".

This subsection has effect in relation to disposals after 5th April 1972.

115Share option schemes (capital gains tax)

Section 22(4) of the Finance Act 1965 (assets deemed acquired and disposed of at market value) shall not apply in calculating, for the purposes of any disposal made after 5th April 1972, the consideration given for the acquisition of shares in pursuance of a share option scheme as defined in Schedule 12 to this Act.

116Consideration payable by instalments

(1)In sub-paragraph (1) of paragraph 14 of Schedule 6 to the Finance Act 1965 (consideration payable by instalments) for the words from " the chargeable gain " to the end there shall be substituted the words " then, if the person making the disposal satisfies the Board that he would otherwise suffer undue hardship, the tax on a chargeable gain accruing on the disposal may, at his option, be paid by such instalments as the Board may allow over a period not exceeding eight years and ending not later than the time at which the last of the first-mentioned instalments is payable " ; and sub-paragraphs (2) to (4) of that paragraph and paragraph 5 of Schedule 11 to the [1971 c. 68.] Finance Act 1971 (which, in relation to relief under section 57 of that Act, makes provision corresponding to that made by paragraph 14) shall be omitted.

(2)Subject to subsections (3) and (4) below, this section shall be deemed to have come into force on 11th April 1972.

(3)Where, under paragraph 14 of Schedule 6 to the Finance Act 1965 as originally enacted, part of a chargeable gain would fall to be regarded as accruing before and part as accruing on or after 11th April 1972, subsection (1) above shall not apply but so much of the gain as would fall to be regarded as accruing after that date shall instead be regarded as accruing on that date; but if the person liable to pay the tax on the gain regarded as so accruing satisfies the Board that he would otherwise suffer undue hardship, the tax may, at his option, be paid by such instalments as the Board may allow.

(4)Where, under paragraph 5 of Schedule 11 to the Finance Act 1971, part of any consideration for a disposal made before 11th April 1972 would have been deemed, for the purposes of section 57 of that Act, to be a consideration for a disposal made in a year of assessment later than 1971-72 it shall be deemed for those purposes to be a consideration for a disposal made in the year 1972-73.

117Postponement of payment of tax

In relation to a disposal made or deemed to be made on or after 11th April 1972 the following shall be substituted for paragraph 4 of Schedule 10 to the Finance Act 1965:—

“4(1)Where the whole or part of any assets falling within sub-paragraph (2) below is disposed of by way of gift or is under subsection (3) or subsection (4) of section 25 of this Act deemed to be disposed of, the capital gains tax chargeable on a gain accruing on the disposal may, at the option of the person liable to pay it, be paid by eight equal yearly instalments or sixteen half-yearly instalments, but subject to the payment of interest under Part IX (except sections 87 and 88) of the [1970 c. 91.] Taxes Management Act 1970.

(2)The assets referred to in sub-paragraph (1) above are:—

(a)land or an estate or interest in land;

(b)any shares or securities of a company not quoted on a recognised stock exchange in the United Kingdom or elsewhere ; and

(c)any assets used exclusively for the purposes of a trade, profession or vocation which, immediately before the disposal, was carried on (whether alone or in partnership) by the person by whom the disposal was made or deemed to be made.

(3)Where tax is payable by instalments by virtue of this paragraph, the first instalment shall be due at the expiration of twelve months from the time of the disposal and the interest on the unpaid portion of the tax shall be added to each instalment and paid accordingly; but the tax for the time being unpaid, with interest to the date of payment, may be paid at any time, and shall become due and payable forthwith if—

(a)the disposal was by way of gift to a person connected with the donor or was deemed to be made under subsection (3) or subsection (4) of section 25 of this Act; and

(b)the assets are disposed of for valuable consideration under a subsequent disposal (whether or not the subsequent disposal is made by the person who acquired them under the first disposal).”

118Replacement of business assets

Section 33 of the [1965 c. 25.] Finance Act 1965 (replacement of business assets) shall be amended by adding after paragraph (c) of subsection (10) the words “and

(d)in relation to such of the activities of a body of persons whose activities are carried on otherwise than for profit and are wholly or mainly directed to the protection or promotion of the interests of its members in the carrying on of their trade or profession as are so directed ;”

and the section as so amended shall apply in any case where the acquisition of the new assets, or of the interest in the new assets, referred to therein takes place on or after 11th April 1972.

119Gifts to charities

(1)Subsection (2) of this section shall apply where a disposal of an asset is made, after 21st March 1972, otherwise than under a bargain at arm's length—

(a)to a charity ; or

(b)to any of the bodies falling within Schedule 25 to this Act.

(2)Section 22(4) of the [1965 c. 25.] Finance Act 1965 (consideration deemed to be equal to market value) and section 31(3) of that Act (concession for gifts of national and other interest) shall not apply; but if the disposal is by way of gift (including a gift in settlement) or for a consideration not exceeding the sums allowable as a deduction under paragraph 4 of Schedule 6 to that Act, then—

(a)the disposal and acquisition shall be treated for the purposes of Part III of that Act, but not for the purposes of section 57 of the [1971 c. 68.] Finance Act 1971 (exemption or relief for small disposals) as being made for such consideration as to secure that neither a gain nor a loss accrues on the disposal; and

(b)where, after the disposal, the asset is disposed of by the person who acquired it under the disposal, its acquisition by the person making the earlier disposal shall be treated for the purposes of Part III of the [1965 c. 25.] Finance Act 1965 as the acquisition of the person making the later disposal.

(3)Where, otherwise than on the termination of a life interest (within the meaning of section 25 of the Finance Act 1965) by the death of the person entitled thereto, any assets or parts of any assets forming part of settled property are, under subsection (3) or subsection (4) of that section, deemed to be disposed of and re-acquired by the trustee, and—

(a)the person becoming entitled as mentioned in subsection (3) of that section is a charity or a body falling within Schedule 25 to this Act; or

(b)any of the assets which, or parts of which, are deemed to be disposed of and re-acquired under subsection (4) of that section are held for the purposes of a charity or a body falling within Schedule 25 to this Act;

then, if no consideration is received by any person for or in connection with any transaction by virtue of which the charity or other body becomes so entitled or the assets are so held, the disposal and re-acquisition of the assets to which the charity or other body becomes so entitled or of the assets or parts of the assets which are held as mentioned in paragraph (b) above shall, notwithstanding those subsections, be treated for the purposes of Part III of that Act as made for such consideration as to secure that neither a gain nor a loss accrues on the disposal.

120Alteration of amount of estate duty

(1)In relation to deaths occurring after 21st March 1972 Part I of Schedule 17 to the [1969 c. 32.] Finance Act 1969 (amount of duty) and section 16(3) of the [1894 c. 30.] Finance Act 1894 (small estates) shall be further amended as follows.

(2)In Part I of that Schedule the following shall be substituted for the words following " The amount of the estate duty on an estate " —

“(a)if the aggregate principal value of all property comprised in the estate does not exceed £15,000, shall be nil;

(b)in any other case shall be an amount equal to the aggregate of—

(i)25 per cent. of any amount by which that aggregate principal value exceeds £15,000 but does not exceed £20,000 ; and

(ii)30 per cent. of any amount by which that aggregate principal value exceeds £20,000 but does not exceed £30,000 ; and

(iii)35 per cent. of any amount by which that aggregate principal value exceeds £30,000 but does not exceed £40,000 ; and

(iv)40 per cent. of any amount by which that aggregate principal value exceeds £40.000 but does not exceed £50,000 ; and

(v)45 per cent. of any amount by which that aggregate principal value exceeds £50,000 but does not exceed £60,000 ; and

(vi)50 per cent. of any amount by which that aggregate principal value exceeds £60,000 but does not exceed £80,000 ; and

(vii)55 per cent. of any amount by which that aggregate principal value exceeds £80,000 but does not exceed £100,000 ; and

(viii)60 per cent. of any amount by which that aggregate principal value exceeds £100,000 but does not exceed £150,000 ; and

(ix)65 per cent. of any amount by which that aggregate principal value exceeds £150,000 but does not exceed £200,000 ; and

(x)70 per cent. of any amount by which that aggregate principal value exceeds £200,000 but does not exceed £500,000 ; and

(xi)75 per cent. of any amount by which that aggregate principal value exceeds £500,000.”

(3)In paragraphs (a) and (b) of section 16(3) of the [1894 c. 30.] Finance Act 1894 " £15,000 " shall be substituted for " £12,500 ".

121Estate duty: relief for surviving spouse, charities and certain institutions

(1)In determining for the purposes of estate duty chargeable on any death occurring after 21st March 1972 the principal value of an estate there shall be disregarded so much thereof as is attributable to property falling within the following paragraphs, but subject to the limits specified therein—

(a)property given to any of the bodies falling within Schedule 25 to this Act; and

(b)property given to charities, up to a limit of £50,000; and

(c)property given to or devolving on the deceased's widow or widower, up to a limit of £15,000 ;

but it shall not be so disregarded if the property passes under a gift excepted under Part I of Schedule 26 to this Act.

(2)Schedule 26 to this Act shall have effect for supplementing this section.

PART VIIMiscellaneous

122Abolition of selective employment tax

(1)Selective employment tax shall not be payable in respect of any contribution week beginning after 1st April 1973, and, subject to the following provisions of this section—

(a)no payment shall be made under the [1966 c. 32.] Selective Employment Payments Acts 1966 in respect of persons in any employment in or carried out from an establishment registered under subsection (1) of section 7 of that Act unless the application for registration was made before 1st July 1973 ; and

(b)no payment under the Act of 1966, section 25 of the [1967 c. 54.] Finance Act 1967 or section 52(3) of the [1968 c. 44.] Finance Act 1968 shall be made unless the claim for it was made before 1st October 1973 ; and

(c)no question arising in connection with a payment mentioned in paragraph (b) above shall after 1st April 1973 be referred to an industrial tribunal under paragraph (a), (b) or (c) of section 7(5) of the Act of 1966 or under paragraph 6 of Schedule 12 to the Finance Act 1967 unless the reference is required within six weeks of the time the question arises.

(2)Where—

(a)an employer has required the reference of a question to an industrial tribunal under paragraph (a) or (b) of section 7(5) of the Act of 1966 ; or

(b)an employer has duly applied for the registration of an establishment under section 7(1) of that Act but the decision on the application has been notified to him after 30th June 1973 ; or

(c)a charity, within the meaning of section 5 of that Act, has, before 1st July 1973, applied for a certificate under subsection (3) or (4) of that section or for registration under section 4 of the [1960 c. 58.] Charities Act 1960 ;

subsection (1)(b) of this section shall not prevent the making of a payment to the employer or charity on a claim made within three months of the final determination of the question or, as the case may be, of the notification, the granting of the certificate or the registration under the Act of 1960.

(3)Subsection (1) of this section shall not affect the payment of regional employment premiums, that is to say, of so much of any amount payable under section 1 of the Act of 1966 as exceeds the amount of tax paid, in respect of any contribution week beginning before such date as the Treasury may by order made by statutory instrument appoint; and accordingly—

(a)payments under that section equal to the amounts of the increases specified in subsection (1) of section 26 of the [1967 c. 54.] Finance Act 1967 (or, where subsection (2) of that section applies, equal to one-half of the amounts so specified) shall be made in respect of any such week in the cases mentioned in the said section 26; and

(b)in relation to any contribution week beginning after 1st April 1973 and before the date so appointed the enactments mentioned in Schedule 27 to this Act shall have effect subject to the amendments specified in that Schedule.

(4)An order under subsection (3) of this section may include provisions corresponding to paragraphs (a) to (c) of subsection (1) and subsection (2) of this section.

(5)The enactments mentioned in Part VIII of Schedule 28 to this Act are hereby repealed as from 2nd April 1973 to the extent specified in the third column of that Part; and the enactments mentioned in Part IX of that Schedule are hereby repealed, to the extent specified in the third column of that Part, as from such day as the Treasury may by order made by statutory instrument appoint.

(6)This section and Parts VIII and IX of Schedule 28 to this Act extend to Northern Ireland (except in so far as they relate to enactments which do not so extend).

123Registered trade unions

(1)Notwithstanding section 80 of the [1971 c. 72.] Industrial Relations Act 1971 and the repeals made by that Act—

(a)no organisation which, immediately before 1st October 1971, was a registered trade union shall be treated for the purposes of section 338 of the Taxes Act (exemption of income and gains applied for the purpose of provident benefits) as having ceased to be such a trade union before the end of 5th April 1972; and

(b)any organisation which is for the time being entered in the provisional register maintained under the Act of 1971 shall for the purposes of section 338 of the Taxes Act and subsection (2) of this section be treated as a registered trade union.

(2)The exemption from tax conferred by section 338 of the Taxes Act shall not extend to so much of the income or gains of a trade union registered either in Great Britain or Northern Ireland as is after 5th April 1972 applied for the purpose of provident benefits paid to persons residing in the other of those countries, unless the majority of its members reside in the country in which it is registered.

124Payments to or by Export Credits Guarantee Department under investment insurance scheme

(1)Any sums paid by a person to the Export Credits Guarantee Department under an agreement entered into under arrangements made by the Secretary of State in pursuance of section 1 of the [1972 c. 40.] Overseas Investment and Export Guarantees Act 1972 or with a view to entering into such an agreement shall be included—

(a)in the sums to be deducted in computing for the purposes of Case I or Case II of Schedule D the profits or gains of any trade, profession or vocation carried on by that person; or

(b)if that person is an investment company within the meaning of section 304 of the Taxes Act or a company in the case of which that section applies by virtue of section 305 of that Act, in the sums to be deducted as expenses of management in computing the company's profits for the purposes of corporation tax;

whether or not they would fall to be so included apart from this section.

(2)Where, under such an agreement, any payment is made by the Exports Credits Guarantee Department in respect of any income or gains which cannot be transferred to the United Kingdom, then, to the extent of the payment,—

(a)the income or gains shall be treated as income or gains with respect to which the conditions mentioned in section 418(2) of the Taxes Act or section 40(1) of the [1965 c. 25.] Finance Act 1965 (relief in respect of unremittable overseas income or gains) are not satisfied (and accordingly cannot cease to be satisfied); and

(b)if the payment is made in respect of income arising from investments of the foreign life assurance fund, within the meaning of section 315 of the Taxes Act, of an insurance company that section shall apply in relation to the income as if it had been received in the United Kingdom (and accordingly cannot be received again in the United Kingdom).

125Reduction of stamp duty on conveyances and leases

(1)In subsection (1) of section 55 of, and in Part I of Schedule 11 to, the [1963 c. 25.] Finance Act 1963 (under which, as amended by section 27(1) of the [1967 c. 54.] Finance Act 1967 and paragraph 10 of Schedule 7 to the [1970 c. 24.] Finance Act 1970, duty is not chargeable on conveyances or transfers certified at £5,500 and is chargeable at a reduced rate on those certified at £7,000), for " £5,500 " and " £7,000 ", wherever occurring, there shall be substituted respectively " £10,000 " and " £15,000 ".

(2)In subsection (2) of the said section 55 (under which the relief afforded by subsection (1) of that section is not available as respects the duty chargeable in respect of a premium for a lease if the consideration includes rent exceeding £50 a year) for " £50 " there shall be substituted " £150 ".

(3)No duty shall be chargeable under paragraph (3) of the heading " Lease or Tack " in Schedule 1 to the [1891 c. 39.] Stamp Act 1891 in respect of consideration consisting of rent if the term does not exceed seven years or is indefinite and the rent is at a rate or average rate not exceeding £250 per annum; and accordingly—

(a)the rate of duty specified in the second column of the Table in that paragraph as applicable where the rent is at a rate or average rate exceeding £100 shall apply only when the rent is at a rate or average rate exceeding £250; and

(b)in paragraph (2)(a) of that heading for " £100 " there shall be substituted " £250 ".

(4)This section has effect in relation to instruments executed on or after 1st August 1972.

126Abolition of stamp duty on bank notes and of bankers' licences

(1)The following are hereby abolished—

(a)the stamp duty chargeable by virtue of the heading "BANK NOTE" in Schedule 1 to the Stamp Act 1891;

(b)the licences required to be taken out under section 24 of the [1815 c. 184.] Stamp Act 1815 (licences for bankers etc. issuing certain promissory notes).

(2)This section takes effect on 25th June 1972; and if on or after that date and before the passing of this Act a person pays any duty in respect of a licence of the kind mentioned in subsection (1)(b) above which would not have been payable if this Act had then been in force the Commissioners of Inland Revenue shall, on application made to them within two years after the date of payment, repay the duty.

127Disclosure of information between revenue departments

(1)No obligation as to secrecy or other restriction upon the disclosure of information imposed by statute or otherwise shall prevent either—

(a)the Commissioners of Inland Revenue or an authorised officer of those Commissioners; or

(b)the Commissioners of Customs and Excise or an authorised officer of those Commissioners;

from disclosing information to the other Commissioners or an authorised officer of the other Commissioners for the purpose of assisting them in the performance of their duties.

(2)Information obtained in pursuance of this section shall not be disclosed except—

(a)to the Commissioners or an authorised officer of the Commissioners on whose behalf it was obtained; or

(b)for the purpose of any proceedings connected with a matter in relation to which those Commissioners perform duties.

128Vehicle excise duty-disabled persons

(1)For subsection (2) of section 7 of the [1971 c. 10.] Vehicles (Excise) Act 1971 (exemption from duty of certain vehicles registered in name of disabled persons) there shall be substituted the following subsection—

“(2)A mechanically propelled vehicle shall not be chargeable with any duty under this Act by reason of its use by or for the purposes of a person suffering from a physical defect or disability or by reason of its being kept for such use if—

(a)it is registered under this Act in the name of that person; and

(b)he has obtained, or is eligible for, a grant under section 33(3) of the [1968 c. 46.] Health Services and Public Health Act 1968 in relation to that vehicle; and

(c)no other vehicle registered in his name under this Act is exempted from duty under this subsection.”

(2)In section 7 of the [1971 c. 68.] Finance Act 1971 the words from " fitted with controls " to " or a vehicle " and paragraphs (a) and (b) shall be omitted.

(3)In section 4(1)(g) of the Vehicles (Excise) Act 1971 (vehicles not exceeding eight hundredweight for invalids) for the word " eight" there shall be substituted the word " ten ".

129Summary award of penalties

(1)In section 53(1) of the [1970 c. 9.] Taxes Management Act 1970 (summary award of penalties) there shall be substituted, for the words from " section 98(3) " to " awarded " the words" section 98 of this Act shall have effect, in relation to a penalty so awarded, as if subsection (3) were omitted and the reference in subsection (1)(ii) to the Commissioners before whom proceedings for the penalty have been commenced were a reference to the Commissioners by whom the penalty has been awarded ".

(2)This section does not apply in relation to a penalty awarded before the commencement of this Act.

130Compensation for loss of office etc. by clerks to General Commissioners

(1)The Commissioners of Inland Revenue may, with the concurrence of the Minister for the Civil Service, by regulations provide for the payment out of money provided by Parliament of compensation to or in respect of any clerk to the General Commissioners for any division who suffers or has suffered loss of office or loss or diminution of emoluments which is attributable to any order affecting that division made (whether before or after the passing of this Act) under section 2(6) of the Taxes Management Act 1970 (alteration and abolition of divisions).

(2)Regulations under this section may—

(a)include provision as to the manner in which and the person to whom any claim for compensation under the regulations is to be made, and for the determination of all questions arising under the regulations;

(b)make different provision for different classes of persons and for different circumstances, and make, or authorise the Commissioners of Inland Revenue to make, exceptions and conditions;

(c)be framed so as to have effect from a date earlier than the making of the regulations,

but so that regulations having effect from a date earlier than their making shall not place any individual in a worse position than he would have been in if the regulations had been so framed as to have effect only from the date of their making.

(3)Regulations under this section shall be made by statutory instrument subject to annulment in pursuance of a resolution of either House of Parliament.

131Post-war credits

(1)On the repayment of any post-war credit, or payment to a building society of any amount outstanding under section 3 of the [1959 c. 28.] Income Tax (Repayment of Post-War Credits) Act 1959, the sum payable, inclusive of the interest, may be taken by the Commissioners of Inland Revenue as amounting to 138 per cent. of the credit as notified under section 7 of the [1941 c. 30.] Finance Act 1941 or of the amount so outstanding, as the case may be.

(2)An application for such a repayment made before the applicant is qualified may, if he later becomes qualified, be treated as made on the date when he does so.

(3)No such repayment shall be made unless application therefor is made before such time (not earlier than the beginning of the year 1974) as the Treasury may by order direct.

Any order under this subsection shall be made by statutory instrument, which shall be laid before Parliament after being made, and may be varied by a subsequent order so as to extend the time for applications for repayment.

(4)In this section " post-war credit" has the same meaning as in the [1959 c. 28.] Income Tax (Repayment of Post-War Credits) Act 1959.

(5)This section shall be deemed to have had effect from the beginning of April 1972.

132Local loans

(1)Loans in pursuance of section 3 of the [1968 c. 13.] National Loans Act 1968 may be made by the Public Works Loan Commissioners, in addition to any loans made by them under section 4 of that Act, but the aggregate of—

(a)the commitments of the Commissioners outstanding at any time in respect of undertakings entered into by them to grant such loans ; and

(b)the advances in respect of such loans made by them under this section up to that time ;

shall not exceed £1,000 million or such greater amount as may be specified in an order under subsection (2) of this section.

(2)The Treasury may, on not more than three occasions, by order made by statutory instrument increase or further increase the limit imposed by subsection (1) of this section by such sum not exceeding £1,000 million as may be specified in the order.

(3)No order shall be made under this section unless a draft of it has been laid before and approved by a resolution of the Commons House of Parliament.

133Advances to trustee savings banks

In section 53(2) of the [1969 c. 50.] Trustee Savings Banks Act 1969 (limit on advances to trustee savings banks out of the Fund for the Banks for Savings) for the words " but the total of the advances so made shall not exceed £10 million " there shall be substituted the words " but the amount outstanding at any time in respect of such advances shall not exceed £15 million ".

134Citation, interpretation, construction, extent and repeals

(1)This Act may be cited as the Finance Act 1972.

(2)In this Act " the Taxes Act" means the [1970 c. 10.] Income and Corporation Taxes Act 1970.

(3)In this Act—

(a)Part III shall be construed as one with the [1952 c. 44.] Customs and Excise Act 1952;

(b)Parts IV and V, so far as they relate to income tax, shall be construed as one with the Income Tax Acts and, so far as they relate to corporation tax, shall be construed as one with the Corporation Tax Acts;

(c)sections 112 to 119 shall be construed as one with Part III of the [1965 c. 25.] Finance Act 1965 ;

(d)sections 120 and 121 shall be construed as one with the [1894 c. 30.] Finance Act 1894.

(4)Except so far as the context otherwise requires, any reference in this Act to any enactment shall be construed as a reference to that enactment as amended, and as including a reference to that enactment as applied, by or under any other enactment, including this Act.

(5)Except as otherwise expressly provided, such of the provisions of this Act as relate to matters in respect of which the Parliament of Northern Ireland has power to make laws do not extend to Northern Ireland.

(6)If the Parliament of Northern Ireland passes provisions amending or replacing any enactment of that Parliament referred to in this Act the reference shall be construed as a reference to the enactment as so amended or, as the case may be, as a reference to those provisions.

(7)The enactments mentioned in Schedule 28 to this Act are hereby repealed to the extent mentioned in the third column of that Schedule, but subject to any provision at the end of any Part of that Schedule.