Finance Act 1977

PART ICustoms and Excise

1Spirits, beer, wine, made-wine, cider and tobacco

(1)In the Table in section 9 of the [1975 c. 45.] Finance (No. 2) Act 1975 (excise duty on spirits) for " 24.6300 " and " 24.7050 " there shall be substituted " 27.0900 " and "27.1650" respectively.

(2)In section 10(1) of that Act (excise duty on beer) for "£15.8400" and "£0.5280" there shall be substituted " £17.4240 " and " £0.5808 " respectively.

(3)For the provisions of Schedule 4 to that Act (rates of excise duty on wine) there shall be substituted the provisions of Schedule 1 to this Act.

(4)For the provisions of Schedule 5 to that Act (rates of excise duty on made-wine) there shall be substituted the provisions of Schedule 2 to this Act.

(5)In section 2(1) of the [1976 c. 40.] Finance Act 1976 (excise duty on cider) for " £0.22 " there shall be substituted " £0.242 ".

(6)The rates of the duties of customs and excise chargeable under the provisions of subsection (1) of section 8 of the said Act of 1976 and the provisions mentioned in subsection (2) of that section (customs and excise duties on tobacco) shall each be increased by £0.585 per pound; and as respects tobacco on which there have been paid duties of customs and excise at the said increased rates, the rates of drawback allowable under those provisions shall each be increased by the like amount per pound.

(7)In section 1(4) of the [1973 c. 51.] Finance Act 1973 (power to make orders before 1st July 1977 for giving effect to Community obligations in respect of tobacco duties) for the words " 1st July 1977 " there shall be substituted the words " 1st January 1978 " ; and subsection (6) above is without prejudice to the powers conferred by the said section 1(4).

(8)The [S.I. 1976/2133.] Surcharge on Revenue Duties Order 1976 (the effect of which is substantially reproduced by subsections (1) to (6) above) shall cease to have effect.

(9)This section shall be deemed to have come into force on 30th March 1977.

2Tobacco products

(1)For the Table in section 4(1) of the Finance Act 1976 there shall be substituted—

(2)For the purposes of paragraph 1 in the Table in the said section 4(1) any cigarette more than 9cm. long (excluding any filter or mouthpiece) shall be treated as if each 9cm. or part thereof were a separate cigarette ; and for the purposes of section 6 of the said Act of 1976 (power to alter rates of duty) the percentage and the amount per thousand cigarettes in that paragraph shall be treated as separate rates of duty.

(3)The [S.I. 1976/2134.] Tobacco Products Duty (Increase) Order 1976 shall cease to have effect,

(4)The Treasury may by order provide that in the enactments relating to the duty charged by section 4 of the said Act of 1976 references to cigarettes, cigars, hand-rolling tobacco, other smoking tobacco and chewing tobacco shall or shall not include references to any product of a description specified in the order, being a product manufactured wholly or partly from tobacco or any substance used as a substitute for tobacco but not including products commonly known as herbal cigarettes or herbal smoking mixtures; and any such order may amend or repeal subsection (5) of that section.

(5)The power to make orders under subsection (4) above includes power to vary or revoke a previous order and shall be exercisable by statutory instrument.

(6)Subject to subsection (7) below, any order under subsection (4) above shall be laid before the House of Commons after being made; and unless it is approved by that House before the expiration 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 House of Commons is adjourned for more than four days.

(7)Subsection (6) above shall not apply to any order containing a statement by the Treasury that the order does not extend the incidence of the duty or involve a greater charge to duty or a reduction of any relief; and any such order shall be subject to annulment in pursuance of a resolution of the House of Commons.

(8)Subsections (1) to (3) above shall be deemed to have come into force on 4th April 1977.

3Replacement by tobacco products duty of other tobacco duties

(1)As from 1st January 1978 no duties of customs or excise shall be charged under section 4 of the [1964 c. 49.] Finance Act 1964 and for the Table in section 4(1) of the [1976 c. 40.] Finance Act 1976 there shall be substituted—

(2)If it is shown to the satisfaction of the Commissioners that any tobacco which has borne duty under section 4 of the said Act of 1964 on or after 10th May 1976 has been or will be used in the manufacture of tobacco products chargeable with duty under section 4 of the said Act of 1976 on or after the said 1st January, they shall make a repayment at the appropriate rate specified in Schedule 3 to this Act in respect of the duty borne by that tobacco as aforesaid; and the rate per pound at which drawback is allowable on tobacco in respect of which a repayment has been made under this subsection shall be reduced by an amount equal to the rate per pound at which the repayment was made.

(3)Drawback in respect of any duty charged under section 4 of the said Act of 1964 shall not be allowed by virtue of any event occurring after 30th June 1978; but if it is shown to the satisfaction of the Commissioners after that date—

(a)that any tobacco which has borne duty under that section has been used in the manufacture of products which have become unmerchantable through natural causes; and

(b)that no drawback or repayment in respect of the duty has been allowed or made under any other provision,

the Commissioners shall repay the duty to the manufacturer, but any such repayment shall be conditional on the products being disposed of in such manner as the Commissioners may require.

(4)Part V of the [1952 c. 44.] Customs and Excise Act 1952 (which contains provisions for the collection and management of the duties charged by section 4 of the said Act of 1964 and for the protection of the revenue arising from them) shall cease to have effect on 1st January 1978 except as respects drawback by virtue of events occurring on or before the date mentioned in subsection (3) above.

(5)In section 4(3) of the said Act of 1976 (regulations for the purposes of tobacco products duty) after paragraph (b) there shall be inserted—

“(bb)for the registration of premises where—

(i)tobacco products are manufactured ;

(ii)materials for the manufacture of such products are grown, produced, stored or treated ; or

(iii)refuse from the manufacture of such products is stored or treated,

and for regulating the storage and treatment in, and removal from, premises so registered of such materials and refuse;”.

4Hydrocarbon oil etc.

(1)The rate of the duty of excise charged by section 11 of the [1975 c. 45.] Finance (No. 2) Act 1975 (hydrocarbon oil etc.) shall differ according to whether the oil is light oil or heavy oil; and accordingly—

(a)in that section after the words " £0.3000 a gallon " there shall be inserted the words " in the case of light oil and £0.3500 a gallon in the case of heavy oil ";

(b)in the following provisions (under which duty is charged by reference to the duty on hydrocarbon oil), that is to say—

(i)section 6 of the [1971 c. 12.] Hydrocarbon Oil (Customs & Excise) Act 1971 (petrol substitutes and power methylated spirits);

(ii)section 3(3) and (4)(c) of the [1971 c. 68.] Finance Act 1971 and Article 3 of the [S.I., 1972/567.] Excise Duties (Gas as Road Fuel) Order 1972,

for the words " hydrocarbon oil" there shall be substituted the words " light oil "; and

(c)in section 92(2) of the [1965 c. 25.] Finance Act 1965 and section 14(2) of the [1966 c. 21 (N.I.).] Finance Act (Northern Ireland) 1966 (grants towards duty on bus fuel) for the words " hydrocarbon oil " there shall be substituted the words " heavy oil ".

(2)In section 9 of the Hydrocarbon Oil (Customs & Excise) Act 1971 (rebate on heavy oil) for the words " at a rate of 1p a gallon less than the rate at which the duty is for the time being chargeable " there shall be substituted the words " at a rate—

(a)in the case of kerosene other than aviation turbine fuel, of 1p a gallon less than the rate at which the duty is for the time being chargeable ;

(b)in the case of aviation turbine fuel and heavy oil other than kerosene, of 2½ p a gallon less than the rate at which the duty is for the time being chargeable."

(3)The provisions of the said section 9 as amended by subsection (2) above shall become subsection (1) of that section and after those provisions there shall be added—

“(2)In this section—

• " aviation turbine fuel " means kerosene which is intended to be used as fuel for aircraft engines and is allowed to be delivered for that purpose without being marked in accordance with the regulations made for the purposes of this section;

• " kerosene " means heavy oil of which more than 50 per cent. by volume distils at a temperature not exceeding 240°C.”

(4)In section 12(1) of the said Act of 1971 (rebate on light oil for use as furnace fuel at a rate of 1p a gallon less than the rate at which the duty is charged) for " 1p " there shall be substituted " 2 ½ p ".

(5)This section shall be deemed to have come into force at 6 o'clock in the evening of 29th March 1977 ; but as respects the period beginning at that time and ending at 6 o'clock in the evening of 8th August 1977 the rate of the duty of excise charged by section 11 of the said Act of 1975 shall, notwithstanding subsection (1) above, be £0.3500 a gallon in the case of light oil as well as heavy oil and the provisions mentioned in paragraph (b) of that subsection shall have effect accordingly.

(6)The Commissioners may make repayments of duty at the rate of 5p a gallon under arrangements made by them for avoiding dislocation in the supply of petrol to retailers and distributors at the end of the period mentioned in subsection (5) above.

5Vehicles excise duty: Great Britain

(1)The [1971 c. 10.] Vehicles (Excise) Act 1971 shall be amended as follows.

(2)For the provisions of Part II of Schedules 1 to 5 (annual rates of duty) there shall be substituted the provisions set out in Schedule 4 to this Act.

(3)In subsection (5) of section 16 (rates of duty for trade licences), including that subsection as set out in paragraph 12 of Part I of Schedule 7, for " £20 " and " £3.35 " there shall be substituted respectively " £25 " and " £5 ".

(4)In section 2(1)(b) (four month licence for vehicles with annual rate exceeding £8) for " £8 " there shall be substituted " £18 ".

(5)This section has effect in relation to licences taken out after 29th March 1977.

6Vehicles excise duty: Northern Ireland

(1)The [1972 c. 10 (N.I.).] Vehicles (Excise) Act (Northern Ireland) 1972 shall be amended as follows.

(2)For the provisions of Part II of Schedules 1 to 5 (annual rates of duty) there shall be substituted the provisions set out in Schedule 5 to this Act.

(3)In subsection (6) of section 16 (rates of duty for trade licences), including that subsection as set out in paragraph 12 of Part I of Schedule 9, for " £20 " and " £3.35 " there shall be substituted respectively " £25 " and " £5 ".

(4)In section 2(1)(b) (four month licence for vehicles with annual rate exceeding £8) for " £8 " there shall be substituted " £18 ".

(5)This section has effect in relation to licences taken out after 29th March 1977.

7Units and methods of measurement in customs and excise Acts

(1)The Treasury may by order amend the customs and excise Acts for the purpose of—

(a)replacing any unit of measurement by a metric unit;

(b)replacing the proof system of ascertaining the alcoholic strength of spirits and other liquids by a system of measurement by reference to percentages of alcohol by volume;

(c)replacing any temperature expressed in degrees Fahrenheit by a temperature expressed in degrees Celsius;

(d)replacing any pressure expressed in atmospheres by a pressure expressed in millibars.

(2)Any amendment of an enactment under this section shall be such as to preserve the effect of the enactment except to such extent as the Treasury consider necessary to enable a substituted unit or method of measurement to be applied in a convenient and suitable manner.

(3)An order under this section may contain such transitional and other supplementary provisions as the Treasury think necessary.

(4)The power to make orders under this section includes power to vary or revoke a previous order and shall be exercisable by statutory instrument.

(5)Subject to subsection (6) below, any order under this section shall be laid before the House of Commons after being made ; and unless it is approved by that House before the expiration 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 House of Commons is adjourned for more than four days.

(6)Subsection (5) above shall not apply to any order containing a statement by the Treasury that the order does not involve a greater charge to duty or a reduction of any relief, drawback, rebate or allowance; and any such order shall be subject to annulment in pursuance of a resolution of the House of Commons.

8Regulations where duty depends on use

(1)The Commissioners may, in accordance with subsection (2) below, make regulations applying in cases where any question as to the duties of customs chargeable on any goods depends on the use to be made of them.

(2)In cases in which a Community instrument makes provision for the purpose of securing that the relevant use is made of the goods, regulations under this section may make provision for any matter which under the instrument is required or authorised to be dealt with by the authorities of member States or which otherwise arises out of the instrument; and in other cases regulations under this section may make such provision for that purpose as appears to the Commissioners to be necessary or expedient.

(3)Section 255A of the [1952 c. 44.] Customs and Excise Act 1952 (which makes provision for purposes including that mentioned in subsection (2) above) shall, with effect from such day as may be appointed by regulations under this section, be amended as follows—

(a)for the words " on the use to be made of any goods or on any other matter " there shall be substituted the words " on any matter (other than the use to be made of the goods) ";

(b)the words " for securing that the goods will be so used or otherwise " shall be omitted.

9Forfeiture of goods relieved from duty

(1)Section 257 of the Customs and Excise Act 1952 (forfeiture of goods relieved from duty) shall be amended in accordance with subsections (2) and (3) below.

(2)For subsection (1) there shall be substituted—

“(1)Where—

(a)any goods have been relieved from customs duty or have been charged with duty at a reduced rate; and

(b)any condition or other obligation required to be complied with in connection with the relief or with the charge of duty at that rate is not complied with,

the goods shall be liable to forfeiture.”

(3)In subsection (2) for the words "the observance of the condition " there shall be substituted the words " compliance with the condition or obligation ".

(4)Section 10(2) of the [1958 c. 6.] Import Duties Act 1958 and paragraph 1(3)(b) of the Schedule to the [1964 c. 28.] Agriculture and Horticulture Act 1964 (which become unnecessary in consequence of the above amendments) shall cease to have effect.

10Duties or levies on goods passing into free circulation etc.

(1)In any case where—

(a)goods which are not for the time being in free circulation in member States are imported into the United Kingdom from another member State, and

(b)in accordance with the Treaties the goods either are allowed to be put on the market in the United Kingdom or to be destroyed or otherwise cease to be subject to special arrangements involving the suspension of, or the giving of relief from, duties or levies in another member State,

then, in such circumstances as may be prescribed, duties of customs or levies shall be charged on or in respect of the goods by virtue of this section.

(2)Any question whether goods are at any time in free circulation in member States shall be determined in accordance with the Treaties.

(3)The amount of the duty of customs or levy which, in any particular prescribed circumstances, is charged on or in respect of any goods by virtue of this section shall be such as, in accordance with the Treaties, may either be prescribed or determined in a prescribed manner.

(4)Duties of customs charged by virtue of this section shall be treated as Community customs duties charged under subsection (1) of section 5 of the [1972 c. 68.] European Communities Act 1972 and levies charged by virtue of this section shall be treated as agricultural levies, as denned in subsection (8) of section 6 of that Act; and the provisions of, and of the enactments referred to in, those sections shall apply accordingly.

(5)In this section " prescribed " means prescribed by regulations made by the Commissioners.

(6)This section and, except in so far as any such regulations otherwise provide, any regulations made under it shall have effect in relation to goods imported into the United Kingdom on or after 1st July 1977.

11Recovery of duty etc. due in other member States

(1)This section applies where, in accordance with the [O.J. No. L73/18.] Directive of the Council of the European Communities dated 15th March 1976 No. 76/308/EEC, an authority in a member State makes a request for the recovery in the United Kingdom of any sum claimed by that authority in that State.

(2)Subject to the following provisions, where this section applies the Commissioners or the Intervention Board for Agricultural Produce may recover the sum specified in the request as if it were a debt due to the Crown.

(3)Proceedings for the recovery of any sum under this section shall be stayed if the defendant satisfies the court that proceedings relevant to his liability on the claim in relation to which the request has been made are pending, or are about to be instituted, before a court, tribunal or other competent body in the member State in question; but any such stay may be removed if the proceedings in the member State are not prosecuted or instituted with reasonable expedition.

(4)It shall be a defence to proceedings under this section for the defendant to show that a final decision on the claim has been given in his favour by a court, tribunal or other competent body in the member State in question; and if he shows that such a decision has been given in respect of part of the claim it shall be a defence to the proceedings in so far as they relate to that part.

(5)For the purposes of subsection (3) above proceedings shall be regarded as pending so long as an appeal may be brought against any decision in the proceedings; and for the purposes of subsection (4) above a final decision is one against which no appeal lies or against which an appeal lies within a period which has expired without an appeal having been brought.

(6)In proceedings under this section any averment in the pleadings that a request has been made as mentioned in subsection (1) above for the recovery of the sum which is the subject of the proceedings shall be conclusive evidence of that fact; and except as provided in subsection (4) above no question shall be raised in any such proceedings as to the defendant's liability on the claim in relation to which the request has been made.

(7)In relation to proceedings under this section in Scotland—

(a)the reference in subsection (3) above—

(i)to proceedings being stayed shall be construed as a reference to their being sisted ;

(ii)to a stay being removed shall be construed as a reference to a sist being recalled ; and

(b)the references in subsections (3), (4) and (6) above to a defendant shall be construed as references to a defender.

(8)This section shall not have effect in relation to a request for the recovery of any sum which became due before 15th March 1976.

12Conditional reliefs from import duty

(1)The following provisions of the [1958 c. 6.] Import Duties Act 1958 shall cease to have effect, that is to say—

(a)section 9 and Schedule 5 (drawback);

(b)paragraphs 1, 2, 3, 6, 7, 9, 10 and 11 of Schedule 3 (goods eligible for conditional relief).

(2)This section shall be deemed to have come into force on 1st July 1977.

13Continuation of powers under Finance Act 1961 s. 9

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 16 of the [1976 c. 40.] Finance Act 1976, was extended until the end of August 1977) shall extend until the end of August 1978 or such later date as Parliament may hereafter determine.

PART IIValue Added Tax

14Restatement of value added tax

(1)As from 1st January 1978, Part I of the [1972 c. 41.] Finance Act 1972 (which imposes the charge to value added tax) shall be amended as shown in Part I of Schedule 6 to this Act (these being amendments mainly to give effect to new Community provisions relating to the incidence and operation of the tax).

(2)As from that date, in consequence of subsection (1), that Part of the 1972 Act, and the other enactments and subordinate legislation mentioned in Part II of that Schedule, shall have effect subject to the amendments there specified; and Part III of the Schedule shall have effect for transitional purposes.

15Registration limits

(1)Paragraphs 1 and 2 of Schedule 1 to the Finance Act 1972 (liability to be registered) shall be amended as follows.

(2)In paragraph 1, in the provisions before the Table, for " £5,000 " (in both places) there shall be substituted " £7,500 " and in the second column of the Table for " 1,750 ", " 3,000 ", "4,250" and "5,000" there shall be substituted respectively " 2,625 ", " 4,500 ", " 6,375 " and " 7,500 ".

(3)In paragraph 2 for " £4,000 " (in both places) there shall be substituted " £6,000 ", and for "£1,250 " there shall be substituted " £1,875 ".

(4)In section 20(1) of that Act (registration of local authorities) for "£5,000" (in both places) there shall be substituted " £7,500 ".

(5)In Schedule 2 to that Act, at the end of paragraph 3 (deemed supply of business assets, where business proprietor de-registered, except in certain cases), there shall be added— “or

(c)the tax on the deemed supply would be not more than £50”.

(6)Subsection (5) above shall not come into force until 5th August 1977, and subsections (1) to (4) not until 1st October 1977.

16Goods imported for private purposes

(1)Where, on or after 1st August 1977, goods are imported by a taxable person and—

(a)at the time of importation they belong wholly or partly to another person ; and

(b)the purposes for which they are to be used include private purposes either of himself or of the other,

tax paid or payable by the taxable person on the importation of the goods shall not be regarded as input tax to be deducted or credited under section 3 of the [1972 c. 41.] Finance Act 1972 ; but he may make a separate claim to the Commissioners for it to be repaid.

(2)The Commissioners shall allow the claim if they are satisfied that to disallow it would result, in effect, in a double charge to tax; and where they allow it they shall do so only to the extent necessary to avoid the double charge.

(3)In considering a claim under this section, the Commissioners shall have regard to the circumstances of the importation and, so far as appearing to them to be relevant, things done with, or occurring in relation to, the goods at any subsequent time.

(4)Any amount allowed by the Commissioners on the claim shall be paid by them to the taxable person.

(5)In section 40(1) of the Finance Act 1972 (appeal to VAT Tribunal) after paragraph (j) there shall be inserted—

“(k)a claim by a taxable person under section 16 of the Finance Act 1977”.

(6)The reference above to a person's private purposes is to purposes which are not those of any business carried on by him.

PART IIIIncome Tax, Corporation Tax and Capital Gains Tax

17Charge of income tax for 1977-78

Income tax for the year 1977-78 shall be charged at the basic rate of 34 per cent.; and—

(a)in respect of so much of an individual's total income as exceeds £6,000 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 £1,500 at the additional rates of 10 per cent. for the first £500 of the excess and 15 per cent. for the remainder;

except that, in the case of an individual who shows that, at any time within that year, his age or that of his wife living with him was sixty-five years or more, paragraph (b) above shall have effect with the substitution for the reference to £1,500 of a reference to £2,000.

18Charge of corporation tax for financial year 1976

Corporation tax shall be charged for the financial year 1976 at the rate of 52 per cent.

19Rate of advance corporation tax for financial year 1977

The rate of advance corporation tax for the financial year 1977 shall be thirty-four sixty-sixths.

20Corporation tax: small companies

(1)The small companies rate for the financial year 1976 shall be 42 per cent., and for that year the fraction mentioned in subsection (2) of section 95 of the [1972 c. 41.] Finance Act 1972 (marginal relief for small companies) shall be four twenty-fifths.

(2)For the financial year 1976 and subsequent financial years subsection (3) of the said section 95 shall have effect with the substitution for any reference to £30,000 of a reference to £40,000 and with the substitution for any reference to £50,000 of a reference to £65,000.

(3)Where by virtue of subsection (2) above the said section 95 has effect with different relevant amounts in relation to different parts of the same accounting period, those parts shall be treated for the purposes of that section as if they were separate accounting periods, and the profits and income of the company for that period (as defined in that section) shall be apportioned between those parts.

21Relief for interest: limit for 1977-78

In paragraph 5(1) of Schedule 1 to the [1974 c. 30.] Finance Act 1974 (limit on relief for interest on certain loans for purchase or improvement of land used as an only or main residence) the references to £25,000 shall have effect for the year 1977-78 as well as for previous years of assessment.

22Alteration of personal reliefs

(1)In section 8 of the Taxes Act (personal reliefs)—

(a)in subsection (1)(a) (married) for " £1,085 " there shall be substituted " £1,295 ";

(b)in subsection (1)(b) (single) and (2) (wife's earned income relief) for " £735 " there shall be substituted " £845 ";

(c)in subsection (1A) (age allowance) for " £1,555 " and "£1,010" there shall be substituted " £1,765 " and " £1,120 " respectively, and after the paragraphs in that subsection there shall be inserted the words " and for the purposes of this subsection a person who would have been of the age of sixty-five or upwards within the year of assessment if he had not died in the course of it shall be treated as having been of that age within that year. ";

(d)in subsection (1B) for "£3,250" there shall be substituted " £3,500 ";

(e)in subsection (2)(b) (Category A retirement pension eligible for wife's earned income relief) after the word " pension" there shall be inserted the words " or mobility allowance ".

(2)In the year 1978-79 and subsequent years the personal reliefs allowed in this section shall be changed by not less than the same percentage as the increase in the retail price index for the previous calendar year :

Provided that the Treasury may by order, subject to approval before coming into effect by resolution of the House of Commons, prescribe a lesser relief in respect of any financial year, so long as those reliefs are not less than the levels provided for in subsection (1) above.

(3)In section 14(2) and (3) of that Act (additional relief for widows and others in respect of children) for " £350 " there shall be substituted " £450 " ; and in the year 1978-79 and subsequent years the additional relief allowed in this section shall be increased by not less than the same percentage as the increase in the retail price index for the previous calendar year :

Provided that the Treasury may by order, subject to approval before coming into effect by resolution of the House of Commons, prescribe a lesser relief in respect of any financial year, so long as that lesser relief is not less than £420.

23Child benefit and other benefits in respect of children

(1)In section 219(2) of the Taxes Act (social security benefits exempt from tax) the word " and " shall be omitted and after " 1971 " there shall be inserted the words " and payments of child benefit ".

(2)The amendments of the Income Tax Acts made by section 32(2), (3)(a) and (d), (4), (5) and (6) of the [1976 c. 40.] Finance Act 1976 shall not have effect.

(3)Where for the year 1977-78 an individual is (or apart from this subsection would be) assessable to income tax in respect of payments in respect of a child, being payments to which this subsection applies, his income shall for the purposes of the Income Tax Acts be deemed to include only so much, if any, of the payments in respect of that child as exceeds £52 or, if the payments in question are payments for a part only of the year, a proportionate part of that amount.

(4)Subsection (3) above applies to payments by way of—

(a)child's special allowance or guardian's allowance under the [1975 c. 14.] Social Security Act 1975 or the [1975 c. 15.] Social Security (Northern Ireland) Act 1975 ; or

(b)an allowance under section 70 of either of those Acts; or

(c)an increase under Chapter III of Part II of either of those Acts of a widow's allowance, widowed mother's allowance, child's special allowance, retirement pension or invalid care allowance.

(5)Subsections (1) and (2) above shall be deemed to have come into force on 4th April 1977.

24Child tax allowances for 1977-78

(1)Except in the case of a child to whom section 25 or 26 below applies, the appropriate amount to be deducted from the claimant's total income under subsection (1) of section 10 of the Taxes Act (children) for the year 1977-78 shall, instead of being determined in accordance with subsection (3) of that section, be determined in accordance with subsections (2) and (3) below; and in those subsections " first child " means a child shown by the claimant to be the only or eldest child in respect of whom he is entitled under that section to a deduction of an amount determined in accordance with those subsections.

(2)The appropriate amount for the child shall vary according to the age of the child at the commencement of the year of assessment and according to whether or not he is a first child and, subject to subsection (5) of the said section 10—

(a)for a child shown by the claimant to have been over the age of sixteen at the commencement of that year, shall be £261 in the case of a first child and £235 in the case of any other child:

(b)for a child not so shown but shown by the claimant to have been then over the age of eleven, shall be £231 in the case of a first child and £205 in the case of any other child ;

(c)for a child not falling within the foregoing paragraphs, shall be £196 in the case of a first child and £170 in the case of any other child.

(3)Where the appropriate amount for a child is required to be apportioned under section 11 of the Taxes Act between two or more individuals and the child is the first child in relation to any but not each of them, that amount shall be determined as if he were the first child in relation to each of them.

25Child tax allowances: children living abroad

(1)If in the case of a child in respect of whom a claim is made under section 10 of the Taxes Act (children) the claimant proves that the conditions in subsection (2) below are fulfilled, the appropriate amount to be deducted from the claimant's income under subsection (1) of that section for the year 1977-78 shall be determined in accordance with subsection (3) of that section as amended for the year 1976-77 by section 29(2) of the [1976 c. 40.] Finance Act 1976.

(2)The conditions referred to in subsection (1) above are—

(a)that the child is outside the United Kingdom throughout the year of assessment (apart from any visit which does not exceed, or visits which together do not exceed, 30 days) and does not in that year normally live in a country or territory specified in subsection (3) below; and

(b)that he is under the age of nineteen years at the end of that year ; and

(c)that no child benefit is paid in respect of the child for any week (as defined in the child benefit legislation) beginning in that year; and

(d)that no child benefit for any such week is (or if a claim were made would be) payable in respect of the child by virtue of Part II of the [S.I. 1976/963.] Child Benefit (Residence and Persons Abroad) Regulations 1976 or Part II of the [S.R. 1976/227.] Child Benefit (Residence and Persons Abroad) Regulations (Northern Ireland) 1976.

(3)The countries and territories referred to in subsection (2)(a) above are Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany (Federal Republic), Gibraltar, the Irish Republic, the Isle of Man, Israel, Italy, Jersey, Luxembourg, the Netherlands, New Zealand, Norway, Spain and Sweden.

26Child tax allowances: students

(1)If in the case of a child in respect of whom a claim is made under section 10 of the Taxes Act (children) the claimant proves that the conditions in subsection (2) below are fulfilled, the appropriate amount to be deducted from the claimant's income under subsection (1) of that section for the year 1977-78 and the three following years of assessment shall be determined in accordance with subsection (3) of that section as amended for the year 1976-77 by section 29(2) of the [1976 c. 40.] Finance Act 1976.

(2)The conditions referred to in subsection (1) above are—

(a)that on 31st December 1976 the child was following a full-time course at a university, college, school or other educational establishment; and

(b)that he was then over the age of nineteen years or that the course was an advanced course ; and

(c)that he is following such a course as is mentioned in paragraph (a) above in an academic year beginning in the year of assessment and either—

(i)is not in receipt of a grant from a government department or local authority or otherwise out of public funds in respect of that course for that academic year or any period determined by reference to it; or

(ii)is in receipt of such a grant as aforesaid, being a grant which is calculated in accordance with provisions for taking account of parental income but the amount of which does not fall to be reduced under those provisions.

(3)In subsection (2)(b) above " advanced course " means—

(a)a course in preparation for a degree, a diploma of higher education, a higher national diploma or a teaching qualification;

(b)a course of post-graduate or post-diploma instruction; or

(c)any other course, being a course of a standard above ordinary national diploma, general certificate of education (advanced level) or Scottish certificate of education (higher level);

and if any question arises whether a course falls within the above definition, the Board may consult the Secretary of State for Education and Science.

(4)In the application of subsection (3) above to Scotland and Northern Ireland the Secretary of State and the Department of Education for Northern Ireland shall respectively be substituted for the Secretary of State for Education and Science.

(5)In its application to the year 1977-78 subsection (1) above shall have effect as if in subsection (2) above there were inserted after paragraph (c)(ii) the words “or

(iii)is in receipt of such a grant as is mentioned in sub-paragraph (i) above, being a grant under section 2 of the [1962 c. 12.] Education Act 1962, section 49(1) or 51(1)(c) of the [1962 c. 47.] Education (Scotland) Act 1962 or regulation 7 of the [S.R. 1975/314.] Students Awards Regulations (Northern Ireland) 1975.”.

27Retirement annuities

(1)Sections 227 and 228 of the Taxes Act (which prescribe limits subject to which relief is available for premiums paid under approved retirement annuity contracts etc.) shall be amended as follows—

(a)in subsections (1A) and (1C) of section 227 and subsections (1) and (4) of section 228 for "£2,250", wherever it occurs, there shall be substituted " £3,000 ";

(b)in subsections (1B) and (1C) of section 227 for " £750 ", wherever it occurs, there shall be substituted " £1,000 "; and

(c)in the Table in subsection (4) of section 228 for the second and third columns there shall be substituted—

(2)This section does not affect relief for any year of assessment before the year 1977-78.

28Maintenance payments

In section 15(1) of the [1974 c. 30.] Finance Act 1974 (maintenance payments up to £1,000 not to be investment income) for " £1,000 " there shall be substituted " £1,500 ".

29Increase in relief for savings bank interest

Section 414(1) of the Taxes Act (relief from income tax on first £40 of certain savings bank interest) shall, for the year 1977-78 and subsequent years of assessment, have effect with the substitution of a reference to £70 for each reference to £40.

30Job release schemes

(1)A payment on account of any allowance to which this section applies shall not be treated as income for any purposes of the Income Tax Acts.

(2)This section applies to any allowance paid since the beginning of 1977 by the Secretary of State or the Department of Manpower Services for Northern Ireland under any scheme of the kind described in the [1977 c. 8.] Job Release Act 1977, being a scheme which provides for the payment of allowances for periods beginning not earlier than one year before the date on which the recipient attains pensionable age as defined in that Act.

31Earnings from work done abroad

(1)Schedule 7 to this Act shall have effect for affording relief from tax under Case I of Schedule E where the duties of an office or employment are performed wholly or partly outside the United Kingdom.

(2)A deduction shall not be allowed in respect of the same emoluments both under Schedule 7 to this Act and paragraph 3 of Schedule 2 to the [1974 c. 30.] Finance Act 1974 (foreign emoluments); and paragraph 4 of Schedule 7 to this Act shall, with the necessary modifications, have effect in relation to the amount of emoluments to be excepted under paragraph 4 of the said Schedule 2 as it has effect in relation to the amount of emoluments in respect of which a deduction is allowed under paragraph 1 of the said Schedule 7.

(3)In consequence of the foregoing provisions, the Income Tax Acts shall be amended as follows—

(a)in Case I in paragraph 1 of Schedule E as set out in section 181(1) of the Taxes Act for the words from " subject, however, to the deduction or exception" onwards there shall be substituted the words " subject, however, to the deduction or exception provided for in Schedule 2 to the Finance Act 1974 if the emoluments are foreign emoluments and to the deduction proveded for in Schedule 7 to the Finance Act 1977 if in the chargeable period he performs the duties of the office or employment wholly or partly outside the United Kingdom ";

(b)in section 184(3) of the Taxes Act after the words "For the purposes of Cases I and II of Schedule E " there shall be inserted the words " , but subject to paragraph 7 of Schedule 7 to the Finance Act 1977, ";

(c)in paragraph 16 of Schedule 8 to the Taxes Act after the words "the Finance Act 1974" there shall be inserted the words " or paragraph 1 of Schedule 7 to the Finance Act 1977 ";

(d)section 21(2) of the Finance Act 1974 and paragraphs 1 and 2 of Schedule 2 to that Act shall cease to have effect.

(4)This section has effect for the year 1977-78 and subsequent years of assessment but without prejudice to any deduction—

(a)under paragraph 1 of Schedule 7 to this Act for that or a subsequent year by virtue of a period falling partly in a year before the year 1977-78 ; or

(b)under paragraph 1 of Schedule 2 to the said Act of 1974 for a year before the year 1977-78 by virtue of a period falling partly in that or a subsequent year.

32Expenses in connection with work done abroad

(1)Subsections (2) and (3) below apply where a person (" the employee ") who is resident and ordinarily resident in the United Kingdom holds an office or employment (" the overseas employment") the duties of which are performed wholly outside the United Kingdom and the emoluments from which are not foreign emoluments within the meaning of paragraph 1 of Schedule E.

(2)For the purposes of section 189(1) of the Taxes Act (deduction for certain expenses) there shall be treated as having been necessarily incurred in the performance of the duties of the overseas employment expenses of the employee in travelling from the United Kingdom to take up the overseas employment and in returning to the United Kingdom on its termination; and if travel is partly for a purpose mentioned in this subsection and partly for another purpose this subsection applies only to such part of the expenses as is properly attributable to the former purpose.

(3)Where, for the purpose of enabling the employee to perform the duties of the overseas employment,—

(a)board and lodging outside the United Kingdom is provided for him and the cost of it is borne by or on behalf of his employer ; or

(b)he incurs expenses out of the emoluments of the employment on such board and lodging for himself and those expenses are reimbursed by or on behalf of his employer,

there shall be allowed, in charging tax under Case I of Schedule E on the emoluments from that employment, a deduction of an amount equal to so much of that cost or, as the case may be, those expenses as falls to be included in those emoluments.

Where board and lodging is partly for the purpose mentioned in this subsection and partly for another purpose, this subsection applies only to such part of the cost or expenses as is properly attributable to the former purpose.

(4)Subsection (5) below applies where a person resident and ordinarily resident in the United Kingdom—

(a)holds two or more offices or employments the duties of one or more of which are performed wholly or partly outside the United Kingdom ; and

(b)travels from one place having performed there duties of one office or employment to another place for the purpose of performing duties of another office or employment (the emoluments from which are not foreign emoluments within the meaning of paragraph 1 of Schedule E),

and either or both of those places is outside the United Kingdom.

(5)For the purposes of section 189(1) of the Taxes Act (deduction for certain expenses) expenses incurred by such a person on such travel shall be treated as having been necessarily incurred in the performance of the duties which he is to perform at his destination ; and if travel is partly for the purpose of performing those duties and partly for another purpose this subsection applies only to such part of the expenses as is properly attributable to the former purpose.

(6)Subsection (7) below applies where a person is absent from the United Kingdom for a continuous period of 60 days or more for the purpose of performing the duties of one or more offices or employments and applies to travel of the following descriptions between the United Kingdom and the place of performance of those duties, that is to say—

(a)any journey by his spouse or any child of his—

(i)accompanying him at the beginning of the period of absence ; or

(ii)to visit him during that period ;

(b)any journey by him at the end of that period to visit his spouse or any child of his ;

(c)any return journey following a journey of a kind described in paragraph (a) or (b) above ;

but that subsection does not extend to more than two journeys in each direction by the same person in any year of assessment.

For the purposes of this subsection " child " includes a stepchild, an adopted child and an illegitimate child but does not include a person who is aged 18 or over at the beginning of the outward journey.

(7)Where—

(a)travel facilities are provided for any such journey and the cost of them is borne by or on behalf of the employer; or

(b)expenses are incurred out of the emoluments of any such office or employment on any such journey and those expenses are reimbursed by or on behalf of the employer,

there shall be allowed, in charging tax under Case I of Schedule E on the emoluments from that office or employment, a deduction of an amount equal to so much of that cost or, as the case may be, those expenses as falls to be included in those emoluments.

(8)References in the Income Tax Acts to section 189 of the Taxes Act and to deductions allowable under Chapter I of Part VIII of that Act shall be construed as including a reference to subsections (3) and (7) above and to deductions allowable under those subsections.

(9)This section has effect for the year 1977-78 and subsequent years of assessment.

33Living accommodation provided for employee

(1)Subject to the provisions of this section, where living accommodation is provided for a person in any period by reason of his employment, and is not otherwise made the subject of any charge to him by way of income tax, he is to be treated for Schedule E purposes as being in receipt of emoluments of an amount equal to the value to him of the accommodation for the period, less so much as is properly attributable to that provision of any sum made good by him to those at whose cost the accommodation is provided.

(2)The value of the accommodation to the employee in any period is the rent which would have been payable for the period if the premises had been let to him at an annual rent equal to their annual value as ascertained under section 531 of the Taxes Act; but for a period in which those at whose cost the accommodation is provided pay rent at an annual rate greater than the annual value as so ascertained, the value of the accommodation to the employee is an amount equal to the rent payable by them for the period.

(3)From any amount to be treated as emoluments under subsection (1) above there are deductible under section 189 or 194(3) of the Taxes Act (necessary expenses etc.) such amounts (if any) as would have been so deductible if the accommodation had been paid for by the employee out of his emoluments.

(4)Subject to subsection (5), subsection (1) does not apply to accommodation provided for the employee in any of the following cases—

(a)where it is necessary for the proper performance of the employee's duties that he should reside in the accommodation;

(b)where the accommodation is provided for the better performance of the duties of his employment, and his is one of the kinds of employment in the case of which it is customary for employers to provide living accommodation for employees;

(c)where, there being a special threat to his security, special security arrangements are in force and he resides in the accommodation as part of those arrangements;

and in any such case there is no charge to tax under Schedule E (either by virtue of this section or under section 183 of the Taxes Act or otherwise) in respect of a liability for rates on the premises being discharged for or on behalf of the employee or the employee being reimbursed for the discharge of that liability.

(5)If the accommodation is provided by a company and the employee is a director of the company or of an associated company, then, except in a case where paragraph (c) of subsection (4) applies, no exemption is given by virtue of that subsection unless, for each employment of his which is employment as director of the company or an associated company, the following conditions are fulfilled, that is—

(a)he has no material interest in the company, and

(b)either his employment is as a full-time working director or the company is non-profit-making (meaning that neither does it carry on a trade, nor do its functions consist wholly or mainly in the holding of investments or other property) or is established for charitable purposes only.

(6)If by reason of a person's employment accommodation is provided for others being members of his family or household, he is to be treated under subsections (1) to (3) as if it were accommodation provided for him.

(7)For the purposes of this section, living accommodation provided for an employee, or for members of his family or household, by his employer is deemed to be provided by reason of his employment unless—

(a)the employer is an individual, and it can be shown that he makes the provision in the normal course of his domestic, family or personal relationships ; or

(b)the accommodation is provided by a local authority for an employee of theirs, and it can be shown that the terms on which it is provided are no more favourable than those on which similar accommodation is provided by the authority for persons who are not their employees but are otherwise similarly circumstanced.

(8)For the purposes of this section—

(a)a company is an associated company of another if one of them has control of the other or both are under the control of the same person ; and

(b)the following interpretative provisions of section 72 of the [1976 c. 40.] Finance Act 1976, that is to say, subsection (2) (" employment "), subsection (4) (" family or household "), subsections (8) to (10) (" director ", " full-time working director" and " material interest") and subsection (11) (" control ", in relation to body corporate) apply as if this section were included in sections 60 to 71 of that Act.

(9)This section has effect for the year 1977-78 and subsequent years of assessment.

34Expense connected with living accommodation

(1)After section 63 of the Finance Act 1976 (cash equivalent of benefits charged under section 61) there shall be inserted the following section:—

“63AExpense connected with living accommodation.

(1)This section applies where, in the case of a person employed in director's or higher-paid employment, living accommodation is provided by reason of the employment and, accordingly, a charge to tax would arise in his case under section 33 of the Finance Act 1977 (living accommodation for employees) but for the case being one of those specified in subsection (4) of that section (representative occupation).

(2)Where, by reason of expenditure incurred in one or more of the following, that is,—

(a)heating, lighting or cleaning the premises concerned;

(b)repairs to the premises, their maintenance or decoration;

(c)the provision in the premises of furniture, or other appurtenances or effects which are normal for domestic occupation,

or by reason of such expenditure being reimbursed to the employee, an amount falls to be included in the emoluments of his employment, that amount shall not exceed the limit specified in subsection (3).

(3)That limit is—

(a)10 per cent. of the net amount of the emoluments of the employment or, if the accommodation is provided for a period of less than a year, so much of that percentage of the net amount as is attributable to the period, less

(b)where the expenditure is incurred by a person other than the employee, so much as is properly attributable to the expenditure of any sum made good by the employee to that other.

(4)The net amount of the emoluments of a person's employment for the purposes of subsection (3) is the amount of those emoluments (leaving out of account the expenditure in question) after—

(a)any capital allowance, and

(b)any deductions allowable under Chapter I of Part VIII of the Taxes Act (Schedule E), section 208(1) of that Act (superannuation) or section 227(1) of that Act (retirement annuities) or section 21(4) or 22(2) of the [1970 c. 24.] Finance Act 1970 (approved pension schemes);

and, for the purposes of this subsection, in the case of employment by a company there shall be taken into account, as emoluments of the employment, the emoluments of any employment by an associated company.

(5)For the purposes of subsection (4), a company is an associated company of another if one of them has control of the other or both are under the control of the same person.”.

(2)This section has effect for the year 1977-78 and subsequent years of assessment.

35Other amendments relating to benefits of employment

(1)For section 69 of the [1976 c. 40.] Finance Act 1976 (employments to be treated as " director's or higher-paid ") the following section shall be substituted—

“69Employments subject to ss. 60 to 67.

(1)In this Chapter "director's or higher-paid employment" means—

(a)subject to subsection (5) below, employment as a director of a company ; or

(b)employment with emoluments at the rate of £5,000 a year or more.

(2)For this purpose emoluments are to be calculated—

(a)on the basis that they include all such amounts as come into charge under this Chapter or section 33 of the Finance Act 1977 in the case of those in director's or higher-paid employment or under section 68 of this Act or under section 36 or 37 of the Finance (No. 2) Act 1975 (cash or other vouchers); and

(b)without any deduction under section 189, 192 or 194(3) of the Taxes Act (necessary expenses of employment etc.).

(3)But where a person is employed in two or more employments by the same employer and either—

(a)the total of the emoluments of those employments (applying this section) is at the rate of £5,000 a year or more ; or

(b)one or more of those employments is (apart from this subsection) director's or higher-paid,

all the employments are to be treated as director's or higher-paid.

(4)All employees of a partnership or body over which an individual or another partnership or body has control are to be treated for the purposes of this section (but not for any other purpose) as if the employment were an employment by the individual or by that other partnership or body as the case may be.

(5)A person's employment is not director's or higher-paid by reason only of its being employment as a director of a company (without prejudice to its being so under subsection (1)(b) or (3)) if he has no material interest in the company and either—

(a)his employment is as a full-time working director; or

(b)the company is non-profit-making (meaning that neither does it carry on a trade, nor do its functions consist wholly or mainly in the holding of investments or other property) or is established for charitable purposes only.”.

(2)In consequence of sections 33 and 34 above and of this section, the Tax Acts shall be amended as shown in Part I of Schedule 8 to this Act.

(3)Subsections (1) and (2) above have effect for the year 1977-78 and subsequent years of assessment; and, for the year 1978-79 and subsequent years of assessment, " £7,500" shall be substituted for " £5,000 " in subsections (1)(b) and (3)(a) of section 69 of the [1976 c. 40.] Finance Act 1976.

(4)In Schedule 9 to the [1976 c. 40.] Finance Act 1976 (consequential amendments of enactments in connection with revised provisions relating to taxation of directors' benefits etc.), paragraph 15 (substitution of new proviso to section 284(2) of the Taxes Act, about close company distributions) shall be deemed to have been so enacted that in paragraph (b) of the substituted proviso, after the word " annuity " there were inserted the words " lump sum, gratuity or other like benefit to be given ".

36Interest relief for those in job-related living accommodation

(1)In Part II of Schedule 1 to the [1974 c. 30.] Finance Act 1974 (conditions of allowance of interest relief on loans for purchase or improvement of land), after paragraph 4 there shall be inserted—

“4A(1)Part I of Schedule 9 to the Finance Act 1972 shall nevertheless apply where the property concerned (that is, the land, caravan or house boat referred to in that Part)—

(a)is, at the time the interest is paid, used by the borrower as a residence or, if it is paid less than twelve months after the date on which the loan is made, is so used by him within twelve months after that date ; or

(b)is intended at that time to be used in due course as his only or main residence ;

and at that time he resides in living accommodation which is for him job-related.

(2)In the case of a borrower for whom there are two or more properties falling within sub-paragraph (1) above, he may not by virtue of this paragraph claim relief for any period under section 75 of the Finance Act 1972 in respect of more than one of them.

(3)Subject to sub-paragraph (4) below, living accommodation is job-related for a person if it is provided for him by reason of his employment, or for his spouse by reason of hers, in any of the following cases—

(a)where it is necessary for the proper performance of the duties of the employment that the employee should reside in that accommodation ;

(b)where the accommodation is provided for the better performance of the duties of the employment, and it is one of the kinds of employment in the case of which it is customary for employers to provide living accommodation for employees ;

(c)where, there being a special threat to the employee's security, special security arrangements are in force and the employee resides in the accommodation as part of those arrangements.

(4)The living accommodation is not job-related, except in a case where sub-paragraph (3)(c) above applies, if it is provided by a company and the employee is a director of the company or an associated company, unless the conditions of sub-paragraph (5) below are satisfied.

(5)Those conditions are that—

(a)the company of which the employee is a director is one in which he or she has no material interest; and

(b)either the employment is as a full-time working director or the company is non-profit-making (meaning that neither does it carry on a trade, nor do its functions consist wholly or mainly in the holding of investments or other property) or is established for charitable purposes only.

(6)For the purposes of this paragraph—

(a)a company is an associated company of another if one of them has control of the other or both are under the control of the same person; and

(b)the following interpretative provisions of section 72 of the Finance Act 1976, that is to say, subsection (2) ("employment"), subsections (8) to (10) " director ", " full-time working director" and "material interest") and subsection (11) ("control ", in relation to body corporate) apply as if this paragraph were included in sections 60 to 71 of that Act.

(7)Only interest paid on or after 6th April 1977 is eligible for relief by virtue of this paragraph.”.

(2)In consequence of subsection (1) above, other provisions of Part II of Schedule 1 to the [1974 c. 30.] Finance Act 1974 shall be amended as shown in Part II of Schedule 8 to this Act.

37Leave travel facilities for armed forces

(1)No charge to Schedule E tax shall arise in respect of travel facilities provided for members of the naval, military or air forces of the Crown going on, or returning from, leave.

(2)This applies whether the charge would otherwise have arisen under—

(a)section 36 of the [1975 c. 45.] Finance (No. 2) Act 1975 (certain vouchers treated as benefits in kind);

(b)section 61 of the [1976 c. 40.] Finance Act 1976 (benefits in kind for the higher-paid); or

(c)Chapter I of Part VIII of the Taxes Act (charge to Schedule E tax);

and applies not only to travel vouchers and warrants for particular journeys but also to allowances and other payments for and in respect of leave travel, whether or not a warrant was available.

(3)This section has effect for the year 1976-77 and subsequent years of assessment.

38Maintenance funds for historic buildings

(1)This section applies to any settlement in relation to which the Treasury have given a direction under section 84 of the [1976 c. 40.] Finance Act 1976 (maintenance funds for historic buildings).

(2)The trustees of the settlement may elect that this subsection shall have effect in relation to any year of assessment, and if they do so—

(a)any income arising in that year from the property comprised in the settlement which, apart from this subsection, would be treated by virtue of Part XVI of the Taxes Act (settlements) as income of the settlor shall not be so treated; and

(b)no sum applied in that year out of the property for the purposes mentioned in subsection (3)(a)(i) of the said section 84 (maintenance etc. of a building or land) shall be treated for any purposes of the Income Tax Acts as the income of any person—

(i)by virtue of any interest of that person in, or his occupation of, the building or land in question; or

(ii)by virtue of section 451 of the Taxes Act (sums paid to settlor otherwise than as income).

(3)Where income arising from the property comprised in the settlement in a year of assessment for which no election is made under subsection (2) above is treated by virtue of the said Part XVI as income of the settlor, paragraph (b) of that subsection shall have effect in relation to any sums in excess of that income which are applied in that year as mentioned in that paragraph.

(4)Any election under subsection (2) above shall be by notice in writing to the Board in such form as the Board may require and shall be made within two years of the end of the year of assessment to which it relates.

(5)Where—

(a)circumstances obtain for part of a year of assessment by virtue of which income arising from property comprised in the settlement is treated as income of a settlor under the said Part XVI; and

(b)no such circumstances obtain for the remainder of that year,

the foregoing provisions of this section shall apply as if each of those parts were a separate year of assessment and separate elections may be made accordingly.

39Deduction rate for sub-contractors in the construction industry

Subsection (4) of section 69 of the [1975 c. 45.] Finance (No. 2) Act 1975 (which requires deductions to be made from payments to certain sub-contractors in the construction industry) shall have effect in relation to payments made on or after 6th November 1977 with the substitution for " 35 per cent. " of " 34 per cent."

40Capital gains: company reconstructions and amalgamations involving exchange of shares etc.

(1)In sub-paragraph (2) of paragraph 6 of Schedule 7 to the [1965 c. 25.] Finance Act 1965 (roll-over relief on exchange of shares) for the words " where the company issuing the shares or debentures has or in consequence of the exchange will have control of the other company " there shall be substituted the words " where the company issuing the shares or debentures holds or in consequence of the exchange will hold more than one quarter of the ordinary share capital of the other company " ; and after that sub-paragraph there shall be inserted—

“(3)In this paragraph ' ordinary share capital' has the meaning given in section 526(5) of the Income and Corporation Taxes Act 1970.”

(2)Subject to subsection (3) below, neither the said paragraph 6 nor paragraph 7 of the said Schedule 7 (reconstructions and amalgamations) shall apply to any issue by a company of shares in or debentures of that company in exchange for or in respect of shares in or debentures of another company unless the exchange, reconstruction or amalgamation in question is effected for bona fide commercial reasons and does not form part of a scheme or arrangements of which the main purpose, or one of the main purposes, is avoidance of liability to capital gains tax or corporation tax.

(3)Subsection (2) above shall not affect the operation of paragraph 6 or 7—

(a)in any case where the person to whom the shares or debentures are issued does not hold more than 5 per cent. of, or of any class of, the shares in or debentures of the second company mentioned in that subsection; or

(b)in any case where, before the issue is made, the Board have, on the application of either company mentioned in that subsection, notified the company that the Board are satisfied that the exchange, reconstruction or amalgamation will be effected for bona fide commercial reasons and will not form part of any such scheme or arrangements as are there mentioned.

(4)Any application under subsection (3)(b) above shall be in writing and shall contain particulars of the operations that are to be effected and the Board may, within thirty days of the receipt of the application or of any further particulars previously required under this subsection, by notice require the applicant to furnish further particulars for the purpose of enabling the Board to make their decision; and if any such notice is not complied with within thirty days or such longer period as the Board may allow, the Board need not proceed further on the application.

(5)The Board shall notify their decision to the applicant within thirty days of receiving the application or, if they give a notice under subsection (4) above, within thirty days of the notice being complied with.

(6)If the Board notify the applicant that they are not satisfied as mentioned in subsection (3)(b) above or do not notify their decision to the applicant within the time required by subsection (5) above, the applicant may within thirty days of the notification or of that time require the Board to transmit the application, together with any notice given and further particulars furnished under subsection (4) above, to the Special Commissioners ; and in that event any notification by the Special Commissioners shall have effect for the purposes of subsection (3)(b) above as if it were a notification by the Board.

(7)If any particulars furnished under this section do not fully and accurately disclose all facts and considerations material for the decision of the Board or the Special Commissioners, any resulting notification that the Board or Commissioners are satisfied as mentioned in subsection (3)(b) above shall be void.

(8)If any tax assessed on a person (the chargeable person) by virtue of subsection (2) above is not paid within six months from the date when it is payable, any other person who—

(a)holds all or any part of the shares or debentures that were issued to the chargeable person; and

(b)has acquired them without there having been, since their acquisition by the chargeable person, any disposal of them not falling within paragraph 20 of Schedule 7 to the [1965 c. 23.] Finance Act 1965 or section 273 of the Taxes Act (disposals between spouses or members of a group of companies),

may, at any time within two years from the time when the tax became payable, be assessed and charged (in the name of the chargeable person) to all or, as the case may be, a corresponding part of the unpaid tax ; and a person paying any amount of tax under this subsection shall be entitled to recover a sum of that amount from the chargeable person.

(9)In this section references to shares or debentures include references to any interests or options to which the provisions mentioned in subsection (2) above apply by virtue of paragraph 15 of Schedule 12 to the [1968 c. 44.] Finance Act 1968 or section 58(4) of the [1971 c. 68.] Finance Act 1971; and for the purposes of subsection (3)(a) above shares or debentures held by persons connected with the person there mentioned shall be treated as held by him.

(10)This section applies where the shares or debentures are issued after 19th April 1977 and section 279 of the Taxes Act shall apply only if the earlier occasion mentioned in that section fell on or before that date.

41Capital gains: company reconstructions and amalgamations involving transfer of business assets

(1)In section 267 of the Taxes Act (relief where reconstruction or amalgamation involves transfer of business assets) after subsection (3) there shall be inserted—

“(3A)This section does not apply unless the reconstruction or amalgamation is effected for bona fide commercial reasons and does not form part of a scheme or arrangements of which the main purpose, or one of the main purposes, is avoidance of liability to corporation tax, capital gains tax or income tax; but the foregoing provisions of this subsection shall not affect the operation of this section in any case where, before the transfer, the Board have, on the application of the acquiring company, notified the company that the Board are satisfied that the reconstruction or amalgamation will be effected for bona fide commercial reasons and will not form part of any such scheme or arrangements as aforesaid.

Subsections (4) to (7) of section 40 of the Finance Act 1977 shall have effect in relation to this subsection as they have effect in relation to subsection (3)(b) of that section.

(3B)Where, if the company making the disposal had not been wound up, tax could have been assessed on it by virtue of subsection (3A) above, that tax may be assessed and charged (in the name of the company making the disposal) on the company to which the disposal is made.

(3C)If any tax assessed on a company (the chargeable company) by virtue of subsection (3A) or (3B) above is not paid within six months from the date when it is payable, any other person who—

(a)holds all or any part of the assets in respect of which the tax is charged; and

(b)either is the company to which the disposal was made or has acquired the assets without there having been any subsequent disposal not falling within this section or section 273 below,

may, within two years from the time when the tax became payable, be assessed and charged (in the name of the chargeable company) to all or, as the case may be, a corresponding part of the unpaid tax ; and a person paying any amount of tax under this section shall be entitled to recover a sum of that amount from the chargeable company.”.

(2)This section applies where the transfer takes effect after 19th April 1977.

42Capital gains: transfers of assets to non-resident companies

(1)For section 268 of the Taxes Act (postponement of charge on transfer of assets to non-resident company) there shall be substituted—

“268APostponement of charge on transfer of assets to non-resident company.

(1)This section applies where a company resident in the United Kingdom carries on a trade outside the United Kingdom through a branch or agency and—

(a)that trade, or part of it, together with the whole assets of the company used for the purposes of the trade or part (or together with the whole of those assets other than cash) is transferred to a company not resident in the United Kingdom;

(b)the trade or part is so transferred wholly or partly in exchange for securities consisting of snares, or of shares and loan stock, issued by the transferee company to the transferor company;

(c)the shares so issued, either alone or taken together with any other shares in the transferee company already held by the transferor company, amount in all to not less than one quarter of the ordinary share capital of the transferee company; and

(d)either no allowable losses accrue to the transferor company on the transfer or the aggregate of the chargeable gains so accruing exceeds the aggregate of the allowable losses so accruing.

(2)In any case to which this section applies the transferor company may claim that Part III of the [1965 c. 25.] Finance Act 1965 shall have effect in accordance with the following provisions.

(3)Any allowable losses accruing to the transferor company on the transfer shall be set off against the chargeable gains so accruing and the transfer shall be treated as giving rise to a single chargeable gain equal to the aggregate of those gains after deducting the aggregate of those losses and—

(a)if the securities are the whole consideration for the transfer, the whole of that gain shall be treated as not accruing to the transferor company on the transfer but an equivalent amount (" the deferred gain ") shall be brought into account in accordance with subsections (4) and (5) below ;

(b)if the securities are not the whole of that consideration—

(i)paragraph (a) above shall apply to the appropriate proportion of that gain; and

(ii)the remainder shall be treated as accruing to the transferor company on the transfer.

In paragraph (b)(i) above " the appropriate proportion " means the proportion that the market value of the securities at the time of the transfer bears to the market value of the whole of the consideration at that time.

(4)If at any time after the transfer the transferor company disposes of the whole or part of the securities held by it immediately before that time, the consideration received by it on the disposal shall be treated as increased by the whole or the appropriate proportion of the deferred gain so far as not already taken into account under this subsection or subsection (5) below.

In this subsection " the appropriate proportion " means the proportion that the market value of the part of the securities disposed of bears to the market value of the securities held immediately before the disposal.

(5)If at any time within six years after the transfer the transferee company disposes of the whole or part of the relevant assets held by it immediately before that time there shall be deemed to accrue to the transferor company as a chargeable gain on that occasion the whole or the appropriate proportion of the deferred gain so far as not already taken into account under this subsection or subsection (4) above.

In this subsection " relevant assets " means assets the chargeable gains on which were taken into account in arriving at the deferred gain and " the appropriate proportion " means the proportion which the chargeable gain so taken into account in respect of the part of the relevant assets disposed of bears to the aggregate of the chargeable gains so taken into account in respect of the relevant assets held immediately before the time of the disposal.

(6)There shall be disregarded—

(a)for the purposes of subsection (4) above any disposal to which section 273 of this Act applies; and

(b)for the purposes of subsection (5) above any disposal to which that section would apply apart from section 272(1)(a) or (2) of this Act;

and where a person acquires securities or an asset on a disposal disregarded for the purposes of subsection (4) or (5) above (and without there having been a previous disposal not so disregarded) a disposal of the securities or asset by that person shall be treated as a disposal by the transferor or, as the case may be, transferee company.

(7)This section applies where the transfer mentioned in subsection (1)(a) above is on or after 29th March 1977.

(8)If in the case of any such transfer as was mentioned in subsection (1) of section 268 of this Act there were on the said 29th March chargeable gains which by virtue of subsection (2) of that section were treated as not yet having accrued to the transferor company, subsections (4) and (5) above shall (without any claim in that behalf) apply to the aggregate of those gains as if references to the deferred gain were references to that aggregate and as if references to the transfer and the securities were references to the transfer and the shares, or shares and loan stock, mentioned in subsection (1) of that section.”

(2)This section shall be deemed to have come into force on 29th March 1977.

43Capital gains: value-shifting

(1)This section has effect as respects the disposal of an asset if a scheme has been effected or arrangements have been made (whether before or after the disposal) whereby—

(a)the value of the asset has been materially reduced ; and

(b)a tax-free benefit has been or will be conferred—

(i)on the person making the disposal or a person with whom he is connected; or

(ii)subject to subsection (3) below, on any other person.

(2)For the purposes of subsection (1)(b) above a benefit is conferred on a person if he becomes entitled to any money or money's worth or the value of any asset in which he has an interest is increased or he is wholly or partly relieved from any liability to which he is subject; and a benefit is tax-free unless it is required, on the occasion on which it is conferred on the person in question, to be brought into account in computing his income, profits or gains for the purposes of income tax, capital gains tax or corporation tax.

(3)This section shall not apply by virtue of subsection (1)(b)(ii) above if it is shown that avoidance of tax was not the main purpose or one of the main purposes of the scheme or arrangements in question.

(4)Where this section has effect in relation to any disposal, any allowable loss or chargeable gain accruing on the disposal shall be calculated as if the consideration for the disposal were increased by such amount as appears to the inspector, or on appeal the Commissioners concerned, to be just and reasonable having regard to the scheme or arrangements and the tax-free benefit in question.

(5)Where—

(a)by virtue of subsection (4) above the consideration for the disposal of an asset has been treated as increased ; and

(b)the benefit taken into account under subsection (1)(b) above was an increase in the value of another asset,

any allowable loss or chargeable gain accruing on the first disposal of the other asset after the increase in its value shall be calculated as if the consideration for that disposal were reduced by such amount as appears to the inspector, or on appeal the Commissioners concerned, to be just and reasonable having regard to the scheme or arrangements in question and the increase made in relation to the disposal mentioned in paragraph (a) above.

(6)References in this section to a disposal do not include references to any disposal falling within—

(a)section 24(7) of the [1965 c. 25.] Finance Act 1965 (disposals by personal representatives to legatees); or

(b)paragraph 20(1) of Schedule 7 to that Act (disposals between husband and wife); or

(c)section 273(1) of the Taxes Act (disposals within a group of companies).

(7)In relation to the disposal by a company of an asset consisting of shares in another company the reference in subsection (1)(a) above to a reduction in the value of the asset does not include a reference to any reduction attributable to—

(a)the payment of a dividend by the second company at a time when it and the first company are members of the same group of companies within the meaning of section 272 of the Taxes Act; or

(b)the disposal of any asset by the second company at such a time, being a disposal falling within section 273(1) of that Act.

(8)In relation to a case in which the disposal of an asset precedes its acquisition the reference in subsection (1)(a) above to a reduction shall be read as including a reference to an increase.

(9)This section applies where the disposal and reduction in value mentioned in subsection (1) above (or, in a case within subsection (8) above, the disposal and reduction or increase in value) are after 29th March 1977.

44Capital gains: unit trusts etc.

(1)In relation to gains accruing on disposals after 5th April 1977 section 112 of the [1972 c. 41.] Finance Act 1972 (reduction of tax liability on certain disposals of shares in unit trusts, investment trusts and funds in court) shall have effect as if for the references in paragraphs (b) and (c) of subsection (3) to 17 ½ per cent. there were substituted references to 17 per cent.

(2)Section 113 of that Act (reduced rate of capital gains tax for certain unit trusts and funds in court) shall have effect for the year 1977-78 and subsequent years of assessment as if the rate specified in it were 17 per cent. instead of 17 ½ per cent.

45Insurance companies: overseas business

(1)Subsections (2) and (3) below apply where a company resident in the United Kingdom carries on insurance business outside the United Kingdom through a branch or agency and—

(a)that business, or part of it, together with the whole assets of the company used for the purposes of that business or part (or together with the whole of those assets other than cash), is transferred to a company not resident in the United Kingdom ;

(b)the business or part is so transferred wholly or partly in exchange for shares, or for shares and loan stock, issued by the transferee company to the transferor company; and

(c)the shares so issued, either alone or taken together with any other shares in the transferee company already held by the transferor company, amount in all to not less than one quarter of the ordinary share capital of the transferee company.

(2)In making any computation in accordance with the provisions of the Taxes Act applicable to Case I of Schedule D of the profits or losses of the transferor company for the accounting period in which the transfer occurs there shall be disregarded any profit or loss in respect of any asset transferred which, apart from this subsection, would fall to be taken into account in making that computation.

(3)Where by virtue of subsection (2) above any profit or loss is disregarded in making any computation otherwise than for the purposes of section 305(2) of the Taxes Act (restriction on relief for expenses of management) the profit or loss shall be treated for the purposes of Part III of the [1965 c. 25.] Finance Act 1965 as a chargeable gain or allowable loss accruing to the transferor company on the transfer.

(4)Where at any time a company resident in the United Kingdom—

(a)which carries on insurance business wholly outside the United Kingdom; and

(b)the whole or part of whose ordinary share capital is beneficially owned by one or more companies resident in the United Kingdom,

ceases to be resident in the United Kingdom, the profits or losses of the company in respect of that business for the accounting period ending at that time shall be computed for tax purposes without regard to the whole or, as the case may be, a corresponding part of any profit or loss in respect of any asset which, apart from this subsection, would fall to be calculated in accordance with section 137(1)(b) of the Taxes Act (valuation of trading stock on discontinuance of trade) and taken into account in making that computation.

(5)Subsections (1) to (3) above apply where the transfer is on or after 29th March 1977 and subsection (4) above applies where the company ceases to be resident in the United Kingdom on or after that date.

46Conversion etc. of securities held as circulating capital

(1)Subsections (3) and (4) below shall have effect where a transaction to which this section applies occurs in relation to any securities (" the original holding ")—

(a)to which a person carrying on a banking business, an insurance business or a business consisting wholly or partly in dealing in securities is beneficially entitled; and

(b)which are such that a profit on their sale would form part of the trading profits of that business.

(2)This section applies to any transaction which, if the securities were not such as is mentioned in subsection (1)(b) above—

(a)would result in the original holding being equated with a new holding by virtue of paragraph 4, 5, 6 or 7 of Schedule 7 to the [1965 c. 25.] Finance Act 1965 (capital gains tax roll-over relief in cases of conversions etc.); or

(b)would be treated by virtue of section 53 of the [1976 c. 40.] Finance Act 1976 (compensation stock) as an exchange for a new holding which does not involve a disposal of the original holding,

but does not apply to any transaction in relation to which section 326 (exchange of securities in connection with conversion operations, nationalisation etc.) of the Taxes Act applies or would apply if the person concerned had not given a notice under that section.

(3)Subject to subsection (4) below, in making any computation in accordance with the provisions of the Taxes Act applicable to Case I of Schedule D of the profits or losses of the business—

(a)the transaction shall be treated as not involving any disposal of the original holding ; and

(b)the new holding shall be treated as the same asset as the original holding.

(4)Where under the transaction the person concerned receives or becomes entitled to receive any consideration in addition to the new holding, subsection (3) above shall have effect as if references to the original holding were references to the proportion of it which the market value of the new holding at the time of the transaction bears to the aggregate of that value and the market value at that time (or, if it is cash, the amount) of the consideration.

(5)Subsections (3) and (4) above shall have effect with the necessary modifications in relation to any computation made for the purposes of section 305(2) of the Taxes Act (restriction on relief for expenses of management) in a case where securities held by the company concerned are equated with a new holding by virtue of any of the provisions mentioned in paragraph (a) of subsection (2) above or are treated as not disposed of by virtue of the provision mentioned in paragraph (b) of that subsection.

(6)In this section " securities " includes shares, any security within the meaning of paragraph 5 of Schedule 7 to the said Act of 1965 and any rights, interests or options which by virtue of section 45(8) of that Act, paragraph 15 of Schedule 12 to the [1968 c. 44.] Finance Act 1968 or section 58(4) of the [1971 c. 68.] Finance Act 1971 are treated as shares for the purposes of the provisions mentioned in subsection (2) above.

(7)In determining for the purposes of subsection (2)(a) above whether a transaction would result in the original holding being equated with a new holding by virtue of paragraph 6 or 7 of Schedule 7 to the said Act of 1965 the reference in section 40(2) above to capital gains tax shall be construed as a reference to income tax.

(8)This section applies where the securities comprised in the new holding are issued after 19th April 1977.

47Police provident benefits

(1)In section 338 of the Taxes Act (exemption of income and gains of certain trade unions if applicable and applied for purpose of provident benefits) references to a registered trade union shall be construed as including references to the Police Federation for England and Wales, the Police Federation for Scotland, the Police Federation for Northern Ireland and any other organisation of persons in police service which has similar functions.

(2)This section shall have effect in relation to income or gains which are applicable and applied as mentioned in subsection (1) of the said section 338 after 30th September 1971.

48Annual payments for non-taxable consideration

(1)Any payment to which this subsection applies shall be made without deduction of income tax, shall not be allowed as a deduction in computing the income or total income of the person by whom it is made and shall not be a charge on income for the purposes of corporation tax.

(2)Subject to the following provisions of this section, subsection (1) above applies to any payment which—

(a)is an annuity or other annual payment charged with tax under Case III of Schedule D, not being interest; and

(b)is made under a liability incurred for consideration in money or money's worth all or any of which is not required to be brought into account in computing for the purposes of income tax or corporation tax the income of the person making the payment.

(3)Subsection (1) above does not apply to—

(a)any payment which in the hands of the recipient is income falling within section 457(1)(a) or (c) or (2) of the Taxes Act (partnership agreements, transfers of businesses and maintenance agreements);

(b)any payment made to an individual under a liability incurred in consideration of his surrendering, assigning or releasing an interest in settled property to or in favour of a person having a subsequent interest;

(c)any annuity granted in the ordinary course of a business of granting annuities ; or

(d)any annuity charged on an interest in settled property and granted at any time before 30th March 1977 by an individual to a company whose business at that time consisted wholly or mainly in the acquisition of interests in settled property or which was at that time carrying on life assurance business in the United Kingdom.

(4)In the application of this section to Scotland the references in subsection (3) above to settled property shall be construed as references to property held in trust.

(5)Subsection (1) above does not apply to any payment made on or before 29th March 1977 but applies to a payment made after that date irrespective of when the liability to make it was incurred.

PART IVCapital Transfer Tax

49Persons domiciled in Channel Islands or Isle of Man

(1)In section 45 of the [1975 c. 7.] Finance Act 1975 (which in subsection (1)(c) provides that certain persons domiciled in the Channel Islands or the Isle of Man are to be treated as domiciled in the United Kingdom) after subsection (2) there shall be inserted—

“(2A)Subsection (1)(c) above does not apply to—

(a)a person with a domicile of origin in the Islands ; or

(b)a person who, when he became domiciled in the Islands as there mentioned, was incapable of having an independent domicile.”.

(2)Subject to the following provisions of this section, property situated outside the United Kingdom is excluded property for the purposes of Part III of the said Act of 1975 if—

(a)the person beneficially entitled to it is domiciled in the United Kingdom by virtue only of subsection (1)(c) of the said section 45 ; and

(b)it is shown that the property directly or indirectly represents—

(i)emoluments resulting from the carrying on by him of an office or employment in the Islands at a time when (disregarding that section) he was domiciled there; or

(ii)profits resulting from the carrying on of a business there at such a time either by him or by a company of which he then had control.

(3)Paragraph (b)(i) of subsection (2) above does not apply to a person's emoluments from an office or employment in a business of the kind mentioned in subsection (4) below which is carried on by a person with whom he is connected; and paragraph (b)(ii) of subsection (2) above does not apply to profits from the carrying on of a business of the kind mentioned in subsection (4) below.

(4)The business referred to above is any business which consists wholly or mainly of one or more of the following, that is to say—

(a)dealing in securities, stocks or shares or in land or buildings situated outside the Islands ; or

(b)making or holding investments, being, in the case of investments consisting of land or buildings, land or buildings situated outside the Islands.

(5)Subsection (2) above does not apply in relation to settled property; but where at the time when a settlement was made the settlor was domiciled in the United Kingdom by virtue only of section 45(1)(c) of the said Act of 1975 any property comprised in the settlement is excluded property for the purposes of Part III of that Act if—

(a)it is situated outside the United Kingdom ; and

(b)it is, or directly or indirectly represents, property that was excluded property by virtue of that subsection at the time when it was settled.

(6)In this section—

• " business " includes a business carried on in the exercise of a profession or vocation;

• " the Islands " means the Channel Islands and the Isle of Man; and paragraph 13(7) of Schedule 4 to the said Act of 1975 (control of company) applies for the purposes of subsection (2) above.

50Interests in settled property

(1)After paragraph 11(10) of Schedule 5 to the [1975 c. 7.] Finance Act 1975 (under which an interest in possession acquired by a company is not treated as such an interest unless the company's business consists wholly or mainly in the acquisition of interests in settled property) there shall be inserted—

“(10A)Where the acquisition mentioned in paragraph (b) of sub-paragraph (10) above was before 14th March 1975—

(a)the condition mentioned in paragraph (a) of that sub-paragraph shall be treated as satisfied if the business of the company was at the time of the acquisition such as is described in that paragraph ; and

(b)that condition need not be satisfied if the company is authorised to carry on long term business under Part I of the Insurance Companies Act 1974 or Part II of the Insurance Companies (Northern Ireland) Order 1976.”.

(2)This section shall be deemed to have come into force on 29th March 1977.

51Trusts for persons in receipt of attendance allowance

(1)Paragraph 19 of Schedule 5 to the Finance Act 1975 (trusts for mentally disabled persons) shall be amended as follows.

(2)In sub-paragraph (1) after the words " a mentally disabled person " there shall be inserted the words " or of a person in receipt of an attendance allowance ".

(3)In sub-paragraphs (2)(a) and (3) for the words "the mentally disabled person " there shall be substituted the words " the person mentioned in sub-paragraph (1) above ".

(4)In sub-paragraph (2)(b) after the words "for the benefit of the mentally disabled person" there shall be inserted the words " or, as the case may be, for the care or maintenance of the person in receipt of the attendance allowance ".

(5)At the end of sub-paragraph (4) there shall be added the words " and ' attendance allowance ' means an allowance under section 35 of the Social Security Act 1975 or the Social Security (Northern Ireland) Act 1975 ".

52Relief for woodlands

Paragraph 5 of Schedule 9 to the [1975 c. 7.] Finance Act 1975 (relief for woodlands) shall have effect, and be deemed always to have had effect, with the omission of sub-paragraphs (1)(a) and (b) and sub-paragraph (2) (under which relief under that Schedule is conditional on the woodlands being managed in accordance with a plan approved by the Forestry Commissioners under a forestry dedication covenant or forestry dedication agreement or on equivalent conditions).

53Disposals of conditionally exempt property

(1)In sections 32(2) and 34(4) of the Finance Act 1975 and section 78(3) of the [1976 c. 40.] Finance Act 1976 (liability of person for whose benefit conditionally exempt property is disposed of) for the words "person for whose benefit" there shall be substituted the words " person by whom or for whose benefit ".

(2)This section applies where the event by reason of which tax is chargeable under the provisions mentioned in subsection (1) above occurs after 19th April 1977.

PART VMiscellaneous and Supplementary

54Petroleum revenue tax

(1)After paragraph 6 of Schedule 3 to the [1975 c. 22.] Oil Taxation Act 1975 there shall be inserted—

“Effect of certain transactions between participators

6AWhere the whole or part of the share of a participator (" the transferor ") of oil won from an oil field became the share, or part of the share, of another participator (" the transferee ") in pursuance of an agreement between them under which the transferor undertook to remain responsible for carrying out the transferee's obligations in connection with the field so far as they relate to the transferred share or part, then, for the purposes of this Part of this Act—

(a)the shares of the transferor and the transferee of oil won from the field shall be taken to be the same as they would have been if the transfer had not occurred, and

(b)any oil comprised in the transferred share or part and taken up by or on the authority of the transferee in pursuance of the agreement shall be regarded as being disposed of and delivered to him by the transferor at the time when it is taken up.”.

(2)In the said paragraph 6, in sub-paragraph (1), for the words "another person (in this paragraph referred to as " the owner")" there shall be substituted the words " a person (in this paragraph referred to as " the owner ") who is not a participator and ".

55Development land tax

Part III of Schedule 2 to the [1976 c. 24.] Development Land Tax Act 1976 (realised development value: provisions applicable to leases etc.) shall have effect, and be deemed always to have had effect, with the insertion, after paragraph 13, of the following paragraph:—

“13A(1)The provisions of this paragraph shall have effect where there is a part disposal consisting of the grant of a lease and the terms on which the lease is granted are such that—

(a)the landlord enters into an obligation to bear the whole or part of the cost of certain works to be carried out after the date of the part disposal; and

(b)the amount of the consideration for the lease is greater than it would have been if the landlord had not entered into that obligation.

(2)For the purpose only of determining the amount of the expenditure on improvements or, as the case may be, on relevant improvements to be taken into account in determining the relevant base value of the interest disposed of on the part disposal referred to in sub-paragraph (1) above,—

(a)the works referred to in paragraph (a) of that sub paragraph shall be deemed to have been carried out immediately before the disposal; and

(b)in the carrying out of those works the landlord shall be deemed to have incurred expenditure equal, subject to sub-paragraph (6) below, to the amount of expenditure for which he will become liable in complying with the obligation referred to in sub-paragraph (1)(a) above.

(3)If, in a case where this paragraph applies,—

(a)the realised development value accruing to the chargeable person on the part disposal exceeds

(b)the amount of realised development value which would have accrued to him if, instead of making the part disposal, he had disposed of his interest in the land in which the lease concerned subsists for a consideration equal to its market value on the date of the part disposal,

development land tax shall not be chargeable on the amount of the excess.

(4)Sub-paragraph (5) below shall apply if, in determining the relevant base value of the interest disposed of by the part disposal referred to in sub-paragraph (1) above,—

(a)expenditure on relevant improvements is included in the aggregate amount which constitutes base A of that interest, and

(b)the amount which, before the making of any reduction under paragraph 10 above, constitutes expenditure on relevant improvements consists of or includes an amount of expenditure which is deemed to have been incurred by virtue of subparagraph (2)(b) above, and

(c)section 6 of this Act applies.

(5)In a case falling within sub-paragraph (4) above, for the purpose only of determining the amount of the further addition (if any) which, by virtue of section 5(1)(a)(v) of this Act, falls to be included in the aggregate amount referred to in paragraph (a) of that sub-paragraph, the amount which, before the making of any reduction under paragraph 10 above, is the amount of expenditure on relevant improvements shall be reduced by deducting therefrom so much of that amount as consists of expenditure deemed to have been incurred by virtue of sub-paragraph (2)(b) above.

(6)If the terms of the obligation referred to in subparagraph (1)(a) above do not quantify the amount of expenditure for which the landlord will become liable in complying with the obligation,—

(a)the amount of expenditure which the landlord is deemed to have incurred by virtue of subparagraph (2)(b) above shall, in the first instance, be the amount for which the Board estimate that he might reasonably be expected to become liable in compliance with the obligation; and

(b)if it subsequently appears to the Board that the amount of expenditure actually incurred by the landlord in complying with the obligation differs from the amount estimated under paragraph (a) above, such adjustment, whether by way of an assessment or the discharge or repayment of tax or otherwise, shall be made as may be required in consequence.”

56Annuities under Tithe Acts 1936 and 1951

The amount payable on 1st October 1977 on account of any annuity under the Tithe Acts 1936 and 1951 shall be double what it would be apart from this section; and as from 2nd October 1977 all annuities then charged under those Acts shall be extinguished.

57National insurance surcharge

(1)No charity within the meaning of section 360 of the Taxes Act shall be liable to pay the surcharge imposed by the National Insurance Surcharge Act 1976.

(2)This section shall be deemed to have come into force on 6th April 1977.

58Exchange control

(1)In subsection (3) of section 30 of the Exchange Control Act 1947 (which restricts the making of loans of money or securities to bodies corporate which are resident in the scheduled territories but controlled by persons not so resident) for the words " any money, securities " there shall be substituted the words " any money or securities or any instrument to which subsection (3 A) of this section applies ".

(2)After subsection (3) of the said section 30 there shall be inserted—

“(3A)Except with the permission of the Treasury, no body corporate resident in the scheduled territories which is by any means controlled (whether directly or indirectly) by persons resident outside the scheduled territories shall in the United Kingdom, and no body corporate resident in the United Kingdom which is so controlled shall outside the United Kingdom, issue, negotiate, transfer, renew or otherwise deal with any instrument to which this subsection applies; but a contravention of this subsection shall not affect the validity of any instrument or the rights of the parties to any transaction.

(3B)Subsection (3A) of this section does not apply to a banknote but, with that exception, applies to—

(a)any bill of exchange (including a cheque), promissory note, certificate of deposit or similar instrument;

(b)any other instrument which confers or evidences a right (whether conditional or unconditional) to be paid or to obtain, or to draw on any person for, a sum of money with or without interest, being a right capable of being transferred by delivery of the instrument with or without endorsement; and

(c)any instrument (not being an instrument within paragraph (a) or (b) above) of a description which is for the time being prescribed for the purposes of this subsection,

including any such instrument as aforesaid which is governed by the law of a country outside the United Kingdom.”

(3)In section 42(1) of the said Act of 1947 (interpretation) for the definition of " securities " there shall be substituted the following definition (which incorporates the effect of section 55(1) of the [1968 c. 44.] Finance Act 1968)—

• “' securities ' means—

  (a)

  shares, stock, bonds, notes (other than promissory notes), debentures, debenture stock, units under a unit trust scheme and shares in an oil royalty;

  (b)

  certificates of deposit;

  (c)

  Government bills ; and

  (d)

  any description of promissory notes which is for the time being prescribed for the purposes of this definition;”

and there shall be inserted at the appropriate points in alphabetical order the definitions of " certificate of deposit " and " Government bill" set out in section 55(3) of the said Act of 1968.

(4)In sections 21(1)(c) and 22(1)(b) of the said Act of 1947 (which restrict the import and export of certain instruments) after the words " Treasury bills " there shall be inserted the words (which reproduce the effect of section 55(2) of the said Act of 1968) ", Government bills, certificates of deposit or any description of promissory notes which is for the time being prescribed under paragraph (d) of the definition of ' securities' in section 42(1) of this Act ".

(5)Any amendment by this section of a provision which extends to the Channel Islands by virtue of any Order in Council under section 43(3) of the said Act of 1947 extends similarly; and, without prejudice to any further provision made by any such Order, section 30(3A) shall so extend with the substitution for references to the United Kingdom of references to the Channel Islands as defined in any such Order.

(6)Subsections (1) and (2) above, and so much of subsection (5) above as relates to those subsections, shall not come into force until such day as the Treasury may appoint by order made by statutory instrument.

59Citation, interpretation, construction and repeals

(1)This Act may be cited as the Finance Act 1977.

(2)In this Act "the Taxes Act" means the [1970 c. 10.] Income and Corporation Taxes Act 1970.

(3)In this Act—

(a)Part I (except sections 5 and 6) shall be construed as one with the [1952 c. 44.] Customs and Excise Act 1952;

(b)Part II shall be construed as one with Part I of the [1972 c. 41.] Finance Act 1972;

(c)Part III, so far as it relates to income tax, shall be construed as one with the Income Tax Acts, so far as it relates to corporation tax shall be construed as one with the Corporation Tax Acts and, so far as it relates to capital gains tax, shall be construed as one with Part III of the [1965 c. 25.] Finance Act 1965 ;

(d)Part IV shall be construed as one with Part III of the [1975 c. 7.] Finance Act 1975.

(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)The enactments mentioned in Schedule 9 to this Act (which include spent enactments) are hereby repealed to the extent specified in the third column of that Schedule, but subject to any provision at the end of any Part of that Schedule.