SCHEDULES:

Section 1.

SCHEDULE 1Alcoholic Liquor Duties

Part ITable of Rates of Duty on Wine and Made-Wine

Part IIBeverages of an Alcoholic Strength not Exceeding 5.5 per cent.

1(1)In subsection (2) of section 1 of the [1979 c. 4.] Alcoholic Liquor Duties Act 1979 (definition of “spirits”), for the words “subsections (7) and (8)” there shall be substituted the words “subsections (7) to (9)”.

(2)In subsection (3) of that section (definition of “beer”)—

(a)the words “thereof at any time” shall cease to have effect; and

(b)in paragraph (b), for the words from “at any time” to “and to be” there shall be substituted the words “is found to be”.

(3)In subsection (5) of that section (definition of “made-wine”), after the word “means” there shall be inserted the words “subject to subsection (10) below”.

(4)After subsection (8) of that section there shall be inserted—

“(9)Any beverage of an alcoholic strength exceeding 1.2 per cent. but not exceeding 5.5 per cent. which is made with spirits and is not of a description specified in an order made by the Treasury by statutory instrument shall be deemed not to be spirits.

(10)The Treasury may by order made by statutory instrument provide that any beverage of an alcoholic strength exceeding 1.2 per cent. but not exceeding 5.5 per cent. which is made with beer or cider and is of a description specified in the order shall be deemed to be beer or, as the case may be, cider, and not to be made-wine.”

2(1)In section 45 of that Act (repayment of duty on beer used in the production of other beverages etc.), for the words from “in the production” to the end of paragraph (b) there shall be substituted—

“(a)in the production of any beverage of an alcoholic strength not exceeding 1.2 per cent.;

(b)in the production in an excise warehouse of any beverage of an alcoholic strength exceeding 1.2 per cent. but not exceeding 5.5 per cent.; or

(c)in the manufacture of any such article (other than a beverage) as the Commissioners may determine having regard to its alcoholic content,”.

(2)That section shall be renumbered as subsection (1) of that section and after that provision as so renumbered there shall be inserted—

“(2)Any duty chargeable on imported beer of a strength not exceeding 1.2 per cent. may be remitted subject to such conditions as the Commissioners may impose.”

3After subsection (3) of section 52 of that Act (offences by brewers for sale) there shall be inserted—

“(3A)Nothing in this section shall be taken to preclude the use of beer as an ingredient in the production—

(a)of made-wine to which section 55A below applies; or

(b)of any beverage of an alcoholic strength exceeding 1.2 per cent. but not exceeding 5.5 per cent. which is of a description specified in an order made under section 1(10) above.”

4After subsection (4) of section 54 of that Act (wine: charge of excise duty) there shall be inserted—

“(4A)A person who, on any premises, produces wine to which section 55A below applies by rendering it sparkling, need not on that account hold an excise licence under subsection (2) above in respect of those premises.”

5(1)After subsection (4) of section 55 of that Act (made-wine: charge of excise duty), there shall be inserted—

“(4A)A person who, on any premises, produces made-wine to which section 55A below applies by rendering it sparkling, need not on that account hold an excise licence under subsection (2) above in respect of those premises.”

(2)In subsection (5) of that section, for the words “render any made-wine sparkling” there shall be substituted the words “render sparkling any made-wine other than made-wine to which section 55A below applies”.

6After section 55 of that Act there shall be inserted—

“55AWine and made-wine of a strength not exceeding 5.5 per cent

(1)This section applies to wine and made-wine of a strength exceeding 1.2 per cent. but not exceeding 5.5 per cent.

(2)The Commissioners may by regulations provide that, except in such cases and subject to such conditions as may be specified by or under the regulations, no wine or made-wine to which this section applies may be fortified at any time—

(a)after it leaves the entered or approved premises on which it was produced, or

(b)in the case of wine or made-wine produced outside the United Kingdom, after it is imported into the United Kingdom,

and before it is sold by retail or otherwise supplied for consumption.

(3)Any person who contravenes or fails to comply with any regulation under this section (including any conditions imposed by or under any such regulation) shall be liable on summary conviction to a penalty of level 3 on the standard scale, and the wine or made-wine and all vessels, utensils and materials for fortifying wine or made-wine found in his possession shall be liable to forfeiture.”

7In section 59 of that Act (rendering imported wine or made-wine sparkling in warehouse), for subsection (1) there shall be substituted—

“(1)Wine or made-wine which—

(a)is imported or is removed to the United Kingdom from the Isle of Man; and

(b)is not wine or made-wine of a strength exceeding 1.2 per cent. but not exceeding 5.5 per cent.,

shall not be rendered sparkling, whether by aeration, fermentation or any other process, except in warehouse in accordance with warehousing regulations.”

8After subsection (1) of section 60 of that Act (repayment of duty on imported wine or made-wine used in the production of other beverages etc.) there shall be inserted—

“(1A)Any duty chargeable on imported wine or made-wine of a strength not exceeding 1.2 per cent. may be remitted subject to such conditions as the Commissioners may impose.”

9Section 63 of that Act (repayment of duty on imported cider used in the production of other beverages etc.) shall be renumbered as subsection (1) of that section and after that provision as so renumbered there shall be inserted—

“(2)Any duty chargeable on imported cider of a strength not exceeding 1.2 per cent. may be remitted subject to such conditions as the Commissioners may impose.”

10At the end of subsection (1) of section 71 of that Act (penalty for misdescribing liquor as spirits), there shall be added the words “or that the liquor is made with spirits and is a made-wine to which section 55A above applies”.

11In section 72 of that Act (offences by wholesaler or retailer of beer), in subsection (3), after the words “for domestic use” there shall be inserted the words “or for use as mentioned in subsection (3A) below” and after that subsection there shall be inserted—

“(3A)The use referred to in subsection (3) above is use as an ingredient in the production—

(a)of made-wine to which section 55A above applies; or

(b)of any beverage of an alcoholic strength exceeding 1.2 per cent. but not exceeding 5.5 per cent. which is of a description specified in an order made under section 1(10) above.”

12At the end of subsection (1) of section 73 of that Act (penalty for misdescribing substances as beer), there shall be added the words “or that the substance is made with beer and is a made-wine to which section 55A above applies”.

13In Schedule 1 to that Act, for the Table of rates of duty there shall be substituted—

Section 4.

SCHEDULE 2Vehicles Excise Duty

Part ITables Substituted in Part II of Schedule 4 to the 1971 and 1972 Acts

Part IIVehicles Carrying or Drawing Exceptional Loads

1The [1971 c. 10.] Vehicles (Excise) Act 1971 (“the 1971 Act”) and the [1972 c. 10 (N.I.).] Vehicles (Excise) Act (Northern Ireland) 1972 (“the 1972 Act”) shall be amended as follows.

2In section 1(2) of each Act (charge of duty), for the words “the first five Schedules” there shall be substituted the words “Schedules 1 to 5”.

3In Part I of Schedule 3 to each Act (annual rates of duty on tractors etc.), in paragraph 6 (definition of “haulage vehicle”), after the words “other than one” there shall be inserted the words “to which Schedule 4A to this Act applies or which is”.

4In Part I of Schedule 4 to each Act (annual rates of duty on goods vehicles), in paragraph 15—

(a)in sub-paragraph (1), in the definition of “goods vehicle”, after the word “means” there shall be inserted the words “subject to sub-paragraph (1A) below”; and

(b)after that sub-paragraph there shall be inserted—

“(1A)In this Schedule “goods vehicle” does not include a vehicle to which Schedule 4A to this Act applies.”

5After Schedule 4 to the 1971 Act there shall be inserted—

“Schedule 4AAnnual Rates of Duty on Vehicles Used for Carrying or Drawing Exceptional Loads

1This Schedule applies to a vehicle—

(a)which is a heavy motor car used for the carriage of exceptional loads; or

(b)which is a heavy locomotive, light locomotive or motor tractor used to draw trailers carrying such loads,

and which, when so used, is authorised for use on roads by virtue of an order under section 42 of the [1972 c. 20.] Road Traffic Act 1972.

2The annual rate of duty applicable to a vehicle to which this Schedule applies shall be £1,600.

3Where a vehicle—

(a)to which this Schedule applies; and

(b)which would, but for paragraphs 5 and 15(1A) of Schedule 4 to this Act, be a goods vehicle of a description to which a higher rate of duty is applicable under this Act,

is at any time used on roads otherwise than as mentioned in paragraph 1 above, section 18 of this Act shall apply as if that vehicle were then being used in a manner or for a purpose which brings it within that description of vehicle.

4In this Schedule—

• “exceptional load” means a load which—

  (a)

  by reason of its dimensions, cannot be carried by a heavy motor car or trailer, or a combination of a heavy motor car and trailer, which (in either case) complies in all respects with requirements of regulations under section 40 of the Road Traffic Act 1972; or

  (b)

  by reason of its weight, cannot be carried by a heavy motor car or trailer, or a combination of a heavy motor car and trailer, which (in either case) has a total laden weight of not more than the specified amount and complies in all respects with such requirements;

• “specified amount” means—

  (a)

  in relation to any time before 1st October 1989, 32,520 kilograms;

  (b)

  in relation to any time on or after that date, 38,000 kilograms;

  and other expressions which are also used in the [1972 c. 20.] Road Traffic Act 1972 have the same meanings as in that Act.”

6The provisions set out in paragraph 5 above shall also be inserted after Schedule 4 to the 1972 Act, but modified for that purpose by the substitution for any reference to the Road Traffic Act 1972, or to section 40 or 42 of that Act, of a reference to the [S.I. 1981/154 (N.I. 1).] Road Traffic (Northern Ireland) Order 1981, or to Article 28 or 29(3) of that Order.

Section 35.

SCHEDULE 3Married Couples: Minor and Consequential Provisions

Part IAmendments of the Taxes Act 1988

Introductory

1The Taxes Act 1988 shall have effect subject to the following amendments.

Commencement of trade etc.

2In section 62 (special basis for early years following commencement of trade etc.) the following subsection shall be inserted after subsection (2)—

“(2A)Where—

(a)the second year of assessment is the year 1989-90,

(b)the person charged, or liable to be charged, for that year is a married man, and

(c)the person charged, or liable to be charged, for the year 1990-91 is his wife,

subsection (2) above shall have effect as if it conferred the right to give notice on her and not on him.”

Discontinuance of trade etc.

3In section 63 (special basis on discontinuance of trade etc.)—

(a)in subsection (1)(b), for the words “that person” and the word “he”, in both places where it occurs, there shall be substituted the words “income tax”, and

(b)in subsection (2), for the words “a person has been charged with income tax” there shall be substituted the words “income tax has been charged”.

Underpayments

4In section 203 (PAYE) the following subsection shall be inserted after subsection (3)—

“(3A)Regulations under this section may include provision for income tax in respect of any of a person’s income for the year 1989-90 or any earlier year of assessment to be collected and recovered (whether by deduction from income assessable under Schedule E or otherwise) from the person’s spouse if—

(a)the income was income to which section 279 applied, and

(b)the tax has not been deducted or otherwise recovered before 6th April 1990.”

Additional relief in respect of children

5(1)For the year 1990-91 and subsequent years of assessment section 259 (additional relief in respect of children) shall have effect with the following amendments.

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

“(1)This section applies to—

(a)any woman who is not throughout the year of assessment married and living with her husband;

(b)any man who is neither married and living with his wife for the whole or any part of the year, nor entitled to a deduction from his total income by virtue of section 257F; and

(c)any man who for the whole or any part of the year is married to and living with a wife who is totally incapacitated by physical or mental infirmity throughout the year.”

(3)In subsection (2), for the words “the difference between” onwards there shall be substituted the words “that specified in section 257A(1) for the year”.

(4)For subsection (4) there shall be substituted—

“(4)A woman shall not be entitled to relief under this section for a year of assessment during any part of which she is married and living with her husband unless the child in respect of whom the relief is claimed is resident with her during a part of the year when she is not married and living with her husband.”

6For the year 1990-91 and subsequent years of assessment the following section shall be substituted for section 261 (year of marriage)—

“261Claims under section 259 for year of marriage

A man (but not a woman) who becomes married during a year of assessment may by notice to the inspector elect that his marriage shall be disregarded for the purposes of any claim that he makes for that year under section 259, and, in that case, the marriage shall also be disregarded for the purposes of any claim that he makes for that year under section 257A.”

Widow’s bereavement allowance

7(1)The section set out in sub-paragraph (2) below shall have effect in substitution for section 262 (widow’s bereavement allowance) in relation to deaths occurring during the year 1989-90, and the section set out in sub-paragraph (3) below shall have effect in substitution for that section in relation to deaths occurring during the year 1990-91 or any subsequent year of assessment.

(2)The section first referred to in sub-paragraph (1) above is—

“262Widow’s bereavement allowance

Where a man dies in the year 1989-90 and for that year he is entitled to the higher (married person's) relief under section 257(1), or would be so entitled but for an election under section 261 or 287, his widow shall be entitled—

(a)for that year of assessment, to a deduction from her total income of an amount equal to the amount referred to in section 259(2), and

(b)(unless she marries again before the beginning of it) for the year 1990-91, to a deduction from her total income of an amount equal to the amount specified in section 257A(1) for that year.”

(3)The section second referred to in sub-paragraph (1) above is—

“262Widow’s bereavement allowance

Where a married man whose wife is living with him dies, his widow shall be entitled—

(a)for the year of assessment in which the death occurs, to a deduction from her total income of an amount equal to the amount specified in section 257A(1) for that year, and

(b)(unless she marries again before the beginning of it) for the next following year of assessment, to a deduction of an amount equal to the amount specified in section 257A(1) for that year.”

Blind person’s allowance

8For the year 1990-91 and subsequent years of assessment the following section shall be substituted for section 265—

“265Blind person’s allowance

(1)If the claimant proves that he is a registered blind person for the whole or any part of the year of assessment, he shall be entitled to a deduction of £540 from his total income.

(2)Where—

(a)a person entitled to relief under subsection (1) above is a married man whose wife is living with him for the whole or any part of the year of assessment, but

(b)the amount which he is entitled to deduct from his total income by virtue of that subsection exceeds what is left of his total income after all other deductions have been made from it,

his wife shall be entitled to a deduction from her total income of an amount equal to the excess.

(3)In determining for the purposes of subsection (2)(b) above the amount that is left of a person’s total income for a year of assessment after other deductions have been made from it, there shall be disregarded any deduction made—

(a)on account of any payments of relevant loan interest which become due in that year and to which section 369 applies, or

(b)under section 257A or section 289.

(4)Subsections (2) and (3) above shall have effect where a wife is entitled to relief under subsection (1) above as they have effect where the husband is entitled to that relief, but with the appropriate modifications (and in particular the omission from subsection (3) of the reference to section 257A).

(5)Subsections (2) to (4) above shall not apply for a year of assessment unless the person entitled to relief under subsection (1) has given to the inspector written notice that they are to apply; and any such notice—

(a)shall be given not later than six years after the end of the year of assessment to which it relates,

(b)shall be in such form as the Board may determine, and

(c)shall be irrevocable.

(6)A notice given under subsection (5) above in relation to a year of assesment by a husband shall have effect also as a notice under section 257B(3).

(7)In this section “registered blind person” means a person registered as a blind person in a register compiled under section 29 of the [1948 c. 29.] National Assistance Act 1948 or, in the case of a person ordinarily resident in Scotland or Northern Ireland, a person who is a blind person within the meaning of section 64(1) of that Act.”

Life assurance premiums

9For the year 1990-91 and subsequent years of assessment section 266 (life assurance premiums) shall have effect with the substitution—

(a)in subsection (9), of the word “spouse” for the words “wife (but not the husband)”, and

(b)in subsection (11)(a), of the words “spouse, widow, widower or children or other dependants of any such employee or person,” for the word “wife” onwards.

Payments securing annuities

10For the year 1990-91 and subsequent years of assessment the following section shall be substituted for section 273 (payments securing annuities)—

“273Payments securing annuities

Subject to sections 274, 617(3) and 619(6), if the claimant is, under any Act of Parliament or under any terms and conditions of employment, liable to the payment of any sum, or to the deduction from any salary or stipend of any sum, for the purpose of securing a deferred annuity to a widow or widower of the claimant or provision for the claimant’s children after the claimant dies, the claimant shall be entitled to a deduction from the amount of income tax on which he or she is chargeable equal to income tax at the basic rate on the amount of the sum which he or she has paid or which has been deducted from his or her salary or stipend.”

Married couples living together

11For the year 1990-91 and subsequent years of assessment the following section shall be substituted for section 282 (construction of references to married women living with their husbands)—

“282Construction of references to husband and wife living together

A husband and wife shall be treated for income tax purposes as living together unless—

(a)they are separated under an order of a court of competent jurisdiction, or by deed of separation, or

(b)they are in fact separated in such circumstances that the separation is likely to be permanent.”

Business expansion scheme

12(1)For the year 1990-91 and subsequent years of assessment section 304 (business expansion scheme: husband and wife) shall have effect—

(a)with the omission of subsections (1) to (4), and

(b)with the substitution of the following subsections for subsections (5) and (6)—

“(5)Subsection (1) of section 299 shall not apply to a disposal made by a married man to his wife or a married woman to her husband at a time when they are living together; but where shares issued to one of them have been transferred to the other by a transaction inter vivos that subsection shall apply on the disposal of the shares by the transferee to a third person and any assessment for withdrawing relief in respect of the shares shall be made on the transferee.

(6)If any relief given for the year 1989-90 or any earlier year of assessment in respect of shares for which a married man or married woman has subscribed and which were issued while they were living together falls to be withdrawn in the year 1990-91 or any subsequent year of assessment by virtue of a disposal of those shares by the person who subscribed for them, any assessment for withdrawing that relief shall be made on the person making the disposal and shall be made by reference to the reduction of tax flowing from the amount of the relief regardless of any allocation of that relief under section 280 or of any allocation of the reduction under section 284 for the year of assessment for which the relief was given.”

(2)Sub-paragraph (3) below applies where—

(a)an amount is subscribed for shares in the year 1990-91 by one of a married couple who are living together,

(b)the couple were married and living together throughout the year 1989-90, and

(c)the subscriber claims that relief in respect of the amount be given partly by way of deduction from total income for the year 1989-90 in accordance with section 289(6).

(3)Where this sub-paragraph applies—

(a)the deduction shall be made from the husband’s total income (references in Chapter II of Part VII to the relief to which an individual is entitled in respect of any shares being construed accordingly), and

(b)the limits in sections 289(7) and 290 shall apply jointly to the husband and wife for the year 1989-90 as respects the amount subscribed.

Qualifying maintenance payments

13For the year 1990-91 and subsequent years of assessment section 347B(3) (qualifying maintenance payments) shall have effect with the substitution of the words “specified in section 257A(1) for the year” for the words “of the difference between” onwards.

Home loans

14For the year 1990-91 and subsequent years of assessment the following section shall be substituted for section 356B—

“356BResidence basis: married couples

(1)A husband and wife who are not separated may jointly elect—

(a)that qualifying interest payable or paid by one of them for a year of assessment (or a period within a year), or such part of that interest as may be specified in the election, shall be treated for the purposes of sections 353 to 356A and 369 to 379 as payable or paid by the other, and

(b)that the sharer’s limit under section 356A for the year (or period) in the case of one of them shall be reduced by such amount as may be specified in the election and the sharer’s limit under that section for the year (or period) in the case of the other shall be correspondingly increased.

(2)An election under subsection (1) above—

(a)shall be made before the end of the period of twelve months beginning with the end of the first year of assessment for which it is made or such longer period as the Board may in any particular case allow,

(b)shall, subject to subsection (4) below, have effect not only for the year of assessment for which it is made but also for subsequent years of assessment, and

(c)shall be in such form, and be made in such manner, as the Board may prescribe.

(3)Where a husband and wife have made an election under subsection (1) above for any year of assessment either of them may give, for any subsequent year, a notice to withdraw that election; and, if he or she does so, the election shall not have effect (in relation to either of them) for the year for which the notice is given or any subsequent year.

(4)A notice of withdrawal under subsection (3) above—

(a)shall be in such form, and be given in such manner, as the Board may prescribe,

(b)shall not be given after the end of the period of twelve months beginning with the end of the year of assessment for which it is given or such longer period as the Board may in any particular case allow, and

(c)shall not prejudice the making of a fresh election for any subsequent year.

(5)Where—

(a)a husband and wife are not separated,

(b)the husband pays interest in relation to a residence used or to be used as his only or main residence, and

(c)the wife pays interest in relation to some other residence used or to be used as her only or main residence,

the residence which was purchased first shall be treated for the purposes of sections 355(1)(a) and 356 as used or to be used as the only or main residence of both of them and the other residence shall be treated as used or to be used as the only or main residence of neither.”

Loans for shares in employee-controlled company

15(1)In section 361 (relief for interest on loans to acquire shares in employee-controlled company)—

(a)the words “or his spouse” in subsection (4)(d) and “, or whose spouses,” in subsection (5) shall cease to have effect, and

(b)the following subsection shall be substituted for subsections (6) and (7)—

“(6)Where an individual owns beneficially more than 10 per cent. of the issued ordinary share capital of, or voting power in, a company, the excess shall be treated for the purposes of subsection (5) above as being owned by an individual who is not a full-time employee of the company.”

(2)Sub-paragraph (1) above shall have effect in relation to payments of interest made on or after 6th April 1990 unless the proceeds of the loan were used before that date to defray money applied as mentioned in section 361(3).

(3)Interest paid on a loan made on or after 6th April 1990 to defray money applied in paying off another loan shall not be eligible for relief by virtue of paragraph (b) of subsection (3) of section 361 unless—

(a)the proceeds of the loan paid off were used on or after 6th April 1990 to defray money applied as mentioned in that subsection, or

(b)those proceeds were so used before that date but interest on the loan paid off would have been eligible for relief had they been so used on or after that date.

Close company loans

16(1)In section 420(2)(a)(i) (exception from charge in case where close company loans to borrower and spouse do not exceed £15,000) the words “or the wife or husband of the borrower” shall cease to have effect.

(2)This paragraph shall apply where the loan first mentioned in section 420(2) is made on or after 6th April 1990.

Trade unions and employers' associations

17(1)In section 467(2) (tax exemption in respect of income of trade unions and employers' associations applied for provident benefits) for the word “wife” there shall be substituted the word “spouse”.

(2)This paragraph shall apply for any chargeable period beginning on or after 6th April 1990.

Retirement benefit schemes

18(1)In section 590 (conditions for approval of retirement benefit schemes)—

(a)after the word “widow,” in subsection (2)(a) there shall be inserted the word “widower,” and

(b)after the word “widow” in both places where it occurs in subsection (3)(b) there shall be inserted the words “or widower”.

(2)This paragraph shall have effect on and after 6th April 1990.

Partnership retirement annuities

19For the year 1990-91 and subsequent years of assessment section 628(1) (partnership retirement annuities) shall have effect with the substitution of the words “a widow, widower or dependant of the former partner” for the words “his widow or a dependant of his”.

20(1)For the year 1990-91 and subsequent years of assessment section 683 (settlements) shall have effect with the following amendments.

(2)In subsection (1)(a), after the word “widow” there shall be inserted the word “, widower”.

(3)In subsection (6)(a), for the words “he is dead, to or for the benefit of his widow” there shall be substituted the words “that individual is dead, to or for the benefit of that individual’s widow, widower”.

(4)In subsection (6)(b), after the word “widow”, in the first place where it occurs, there shall be inserted the word “, widower” and for the words “he is dead” onwards there shall be substituted the words “such an individual is dead, to or for the benefit of that individual’s widow, widower or dependants.”

(5)In subsection (9), after the word “widow” there shall be inserted the word “, widower”.

Earned income

21For the year 1990-91 and subsequent years of assessment section 833(4)(a) (meaning of “earned income”) shall have effect with the substitution of the word “spouse” for the word “husband”, in both places where it occurs.

Total income

22For the year 1990-91 and subsequent years of assessment section 835(5) (meaning of “total income”) shall have effect with the insertion of “, 257A(5)” after “257(5)”.

Part IIOther Provisions

Capital allowances

23Where—

(a)before 6th April 1990, a woman was entitled to the relevant interest, within the meaning of section 11 of the [1968 c. 3.] Capital Allowances Act 1968, in relation to expenditure incurred on the construction of a building or structure (whether she was entitled to it when the expenditure was incurred or acquired it afterwards);

(b)for a chargeable period ending before that date, an allowance such as is mentioned in section 3(6) of that Act (allowances relating to capital expenditure on industrial buildings etc.) was made to the woman’s husband in respect of her relevant interest; and

(c)on or after that date, there occurs an event such as is mentioned in section 3(1) of that Act (events giving rise to a balancing allowance or a balancing charge) in respect of which the woman is entitled to all or part of any sale, insurance, salvage or compensation moneys,

the allowance shall be treated, for the purposes of section 3(6) of that Act (amount of balancing charge not to exceed amount of allowances given), as having been made to the woman.

24Where—

(a)before 6th April 1990, a woman was entitled to the relevant interest, within the meaning of paragraph 3 of Schedule 15 to the [1986 c. 41.] Finance Act 1986, in relation to expenditure falling within paragraph 1(1) of that Schedule (expenditure on the construction of agricultural buildings, etc.), whether she was entitled to it when the expenditure was incurred or acquired it afterwards;

(b)for a chargeable period ending before that date, an allowance under paragraph 1(1) of that Schedule (writing-down allowances) was made to the woman’s husband in respect of her relevant interest; and

(c)on or after that date, there occurs an event which is a balancing event for the purposes of that Schedule and in respect of which the woman is entitled to all or part of any sale, insurance, salvage or compensation moneys,

the allowance shall be treated, for the purposes of paragraph 6(6) of that Schedule (amount of balancing charge not to exceed amount of allowances given), as having been made to the woman.

The transition

25The operation of section 279(1) of the Taxes Act 1988 for a year of assessment earlier than the year 1990-91 in the case of a married woman shall not affect the question whether there is any income of hers chargeable to income tax for the year 1990-91 or any subsequent year of assessment or, if there is, what is to be taken to be its amount for income tax purposes.

Returns

26Where a man is required under section 8 of the [1970 c. 9.] Taxes Management Act 1970 to deliver a return which is—

(a)so far as relates to certain sources of income, a return of income chargeable to income tax for the year 1990-91, and

(b)so far as relates to the remaining sources of income, a return of income chargeable to income tax for the year 1989-90,

the same particulars shall be included in the return as would have been required had section 279 of the Taxes Act 1988 not been repealed by this Act.

27Where a man delivers a return such as is mentioned in paragraph 26 above, the reference in sections 93(2) and 95(2) of the Taxes Management Act 1970 (penalties) to tax charged on or payable by him shall include a reference to tax charged on or payable by his wife in respect of any income of hers.

28Where a woman is liable to a penalty under section 93(1) or 95(1) of the Taxes Management Act 1970, section 93(2) or 95(2) shall apply as if the reference to tax charged on or payable by her included a reference to any tax which is charged on or payable by her husband by virtue of section 279 of the Taxes Act 1988.

Time limits for assessments

29Where—

(a)for the purpose of making good to the Crown a loss of tax wholly or partly attributable to fraud, wilful default or neglect, an assessment to income tax has been made on a woman for the year 1990-91 or any subsequent year of assessment, and

(b)the woman’s income for an earlier year was treated as that of her husband by virtue of section 279 of the Taxes Act 1988,

assessments to income tax for the earlier year may be made on him if they could have been made in accordance with section 37 of the Taxes Management Act 1970 had the assessment mentioned in sub-paragraph (a) above been made on him.

Transfers of allowances

30For the year 1990-91 and subsequent years of assessment the Taxes Management Act 1970 shall have effect with the insertion of the following section after section 37—

“37AEffect of assessment where allowances transferred

Where an assessment is made on any person for the purpose of making good a loss of tax wholly or partly attributable to fraud, wilful default or neglect, the fact that the person’s total income for any year of assessment is assessed as greater than it was previously taken to be shall not affect the validity of any deduction made from the total income of the person’s spouse by virtue of section 257B, 257D or 265 of the principal Act; and where any such deduction has been made in such a case, the total amount which the first-mentioned person is entitled to deduct from total income for the year in question shall be correspondingly reduced.”

Class 4 social security contributions

31For the year 1990-91 and subsequent years of assessment Schedule 2 to the [1975 c. 14.] Social Security Act 1975 and the [1975 c. 15.] Social Security (Northern Ireland) Act 1975 (Class 4 contributions) shall have effect with the substitution of the following for paragraph 3(3)—

“(3)Where in a year for which a person claims and is allowed relief by virtue of sub-paragraph (1) above there falls to be made in computing his total income for income tax purposes a deduction in respect of any loss in any relevant trade, profession or vocation—

(a)the amount of the deduction shall, as far as may be, be treated for the purpose of the charge to Class 4 contributions as reducing the person’s profits or gains for that year of any relevant trade, profession or vocation, and

(b)any excess shall be treated for that purpose as reducing such profits or gains for subsequent years (being deducted as far as may be from those of the immediately following year, whether or not the person claims or is entitled to claim relief under this paragraph for that year, and, so far as it cannot be so deducted, then from those of the next year, and so on).”

Annual payments

32Section 36 of this Act shall have effect in relation to a payment which is due from a husband to his wife or from a wife to her husband at a time after 5th April 1990 when they are living together, notwithstanding that the payment is made in pursuance of an obligation which is an existing obligation for the purposes of subsection (3) of that section.

Maintenance payments

33For the year 1990-91 and subsequent years of assessment section 38(5) of this Act shall have effect with the substitution of the words “specified in section 257A(1) of the Taxes Act 1988 for the year” for the words “of the difference between” onwards.

Section 50.

SCHEDULE 4Business Expansion Scheme: Private Rented Housing

Part IModifications Made by Section 50

Preliminary

1The modifications of Chapter III of Part VII of the Taxes Act 1988 (relief for investment in new corporate trades: the business expansion scheme) made by section 50 of this Act are as follows.

The relief

2(1)In subsection (1) of section 289 (relief under the business expansion scheme), for paragraph (a) there shall be substituted—

“(a)those shares are issued to him after the passing of the Finance Act 1988 and before the end of 1993 for the purpose of raising money for qualifying activities which are being carried on by the company or which it intends to carry on;”.

(2)In subsection (8) of that section, for paragraph (a) there shall be substituted—

“(a)in a case falling within subsection (1)(a) unless and until the company has carried on the activities for four months;”.

(3)For subsection (9) of that section there shall be substituted—

“(9)A claim for relief may be allowed under subsection (1)(a) at any time after the activities have been carried on by the company for four months, if the conditions for the relief are then satisfied.”

(4)In subsection (12)(b) of that section, for the words from “either” onwards there shall be substituted the words “four years after that date”.

(5)Subsection (13) of that section shall be omitted.

Restriction of relief where amounts raised exceed permitted maximum

3(1)In subsection (1) of section 290A (restriction of relief where amounts raised exceed permitted maximum), for “£500,000” there shall be substituted “£5 million”.

(2)In subsection (4) of that section, for the words “any trade or part of a trade” there shall be substituted the words “any qualifying activities” and for “£500,000”, in both places, there shall be substituted “£5 million”.

(3)Subsections (6) to (8), (10) and (11) of that section shall be omitted.

Individuals qualifying for relief

4In section 291 (individuals qualifying for relief), after subsection (1) there shall be inserted—

“(1A)An individual is connected with the company if—

(a)he, or an associate of his, occupies or is a tenant of a dwelling-house in which the company holds an interest; and

(b)the interest held by the company is superior to any interest in the dwelling-house held by the individual.”

Parallel trades

5Section 292 (parallel trades) shall be omitted.

Qualifying companies

6(1)For subsection (2) of section 293 (qualifying companies) there shall be substituted—

“(2)The company must, throughout the relevant period, be an unquoted company which is resident in the United Kingdom and not resident elsewhere, and be—

(a)a company which exists wholly, or substantially wholly, for the purpose of carrying on activities which do not include, to any substantial extent, activities which are not qualifying activities; or

(b)a company whose activities consist wholly of—

(i)the holding of shares or securities of, or the making of loans to, one or more qualifying subsidiaries of the company; or

(ii)both the holding of such shares or securities, or the making of such loans, and the carrying on of activities which do not include, to any substantial extent, activities which are not qualifying activities.”

(2)Subsections (4) and (9) to (11) of that section shall be omitted.

Companies with interests in land etc.

7The following shall be omitted, namely—

(a)section 294 (companies with interests in land);

(b)section 295 (valuation of interests in land for purposes of section 294(1)(b)); and

(c)section 296 (section 294 disapplied where amounts raised total £50,000 or more).

Qualifying trades etc.

8The following shall also be omitted, namely—

(a)section 297 (qualifying trades); and

(b)section 298 (provisions supplementary to sections 293 and 297).

Replacement capital

9(1)In subsection (1) of section 302 (replacement capital), for the words “carry on as its trade or as part of its trade a trade which was” there shall be substituted the words “carry on, as its activities or as part of its activities, activities which were” and for the words “of a trade” there shall be substituted the words “of activities”.

(2)In subsection (2) of that section, for the words “the trade”, in each place where they occur, there shall be substituted the words “the activities”.

(3)In subsection (4) of that section, for paragraph (a) there shall be substituted—

“(a)the persons to whom activities belong and, where activities belong to two or more persons, their respective shares in those activities shall be determined in accordance with section 344(1)(a) and (b), (2) and (3) (those provisions having effect for this purpose with any necessary modifications);”.

(4)In subsection (5) of that section, the definition of “trade” shall be omitted.

Claims

10In subsections (2) and (3) of section 306 (claims), for the words “the trade” there shall be substituted the words “the activities”.

Subsidiaries

11In subsection (1) of section 308 (application to subsidiaries), for paragraph (b) there shall be substituted—

“(b)the subsidiary or, as the case may be, each subsidiary is a dormant subsidiary or exists wholly, or substantially wholly, for the purpose of carrying on activities which do not include, to any substantial extent, activities which are not qualifying activities;”.

12In subsection (2) of section 309 (further provisions as to subsidiaries), for the words “a qualifying trade which is” there shall be substituted the words “qualifying activities which are” and for the words “subsections (8), (9), (12)(b)(ii) and (13)” there shall be substituted the words “subsections (8) and (9)”.

Part IIDwelling-Houses to Which Section 50 Does Not Apply

Expensive dwelling-houses

13(1)Section 50 of this Act does not apply to a dwelling-house the market value of which exceeds—

(a)in the case of a dwelling-house in Greater London, £125,000;

(b)in any other case, £85,000.

(2)The market value of a dwelling-house at any date (“the valuation date”) shall be taken to be the price which, at the relevant date, it might reasonably have been expected to fetch on a sale in the open market—

(a)on the assumptions as to state mentioned in sub-paragraph (3) below; and

(b)on the assumptions as to title mentioned in sub-paragraph (4) below;

and in this paragraph “the relevant date” means the date of the issue of the shares or, if later, the date when the company or any of its subsidiaries first acquired an interest in the dwelling-house (or the land which comprises the dwelling-house).

(3)The assumptions as to state are that, at the relevant date—

(a)the dwelling-house was in the same state as at the valuation date; and

(b)that the locality in which the dwelling-house is situated was in the same state, so far as concerns the other premises situated in that locality and the occupation and use of those premises, the transport services and other facilities available in the locality, and other matters affecting the amenities of the locality, as at that date.

(4)The assumptions as to title are—

(a)where the dwelling-house is in England and Wales or Northern Ireland and is a house, that the vendor was selling for an estate in fee simple with vacant possession and that the dwelling-house was to be conveyed with the same rights and subject to the same burdens as it would be if conveyed in pursuance of the right to buy legislation;

(b)where the dwelling-house is in England and Wales or Northern Ireland and is a flat, that the vendor was granting a lease with vacant possession for a term of 125 years at a rent of £10 per annum and that the grant was to be made with the same rights and subject to the same burdens as it would be if made in pursuance of that legislation; and

(c)where the dwelling-house is in Scotland, that it was available with vacant possession and with no heritable security constituted over any interest in it.

(5)In sub-paragraph (4) above “the right to buy legislation” means—

(a)in relation to a dwelling-house in England and Wales, Part V of the [1985 c. 68.] Housing Act 1985;

(b)in relation to a dwelling-house in Northern Ireland, Chapter I of Part II of the [S.I. 1983/1118 (N.I. 15).] Housing (Northern Ireland) Order 1983;

and “flat” and “house” have the same meanings as in that legislation.

(6)The Treasury may by order amend sub-paragraph (1) above by substituting a different amount for any amount for the time being specified there.

Unfit and sub-standard dwelling-houses

14Section 50 of this Act does not apply to—

(a)a dwelling-house in England and Wales which is unfit for human habitation within the meaning of section 604 of the [1985 c. 68.] Housing Act 1985 or does not have all the standard amenities within the meaning of section 508 of that Act;

(b)a dwelling-house in Scotland which does not meet the tolerable standard described, for the purposes of the [1987 c. 26.] Housing (Scotland) Act 1987, by section 86 of that Act or does not have all the standard amenities described in the first column of Part I of Schedule 18 to that Act; or

(c)a dwelling-house in Northern Ireland which is unfit for human habitation within the meaning of Article 46 of the [S.I. 1981/156 (N.I. 3).] Housing (Northern Ireland) Order 1981 or does not have all the standard amenities within the meaning of Article 59 of the [S.I. 1983/1118 (N.I. 15).] Housing (Northern Ireland) Order 1983.

Dwelling-houses already let etc.

15(1)Section 50 of this Act does not apply to a dwelling-house if—

(a)before the relevant date, the company or any of its subsidiaries had entered into arrangements for letting the whole or any part of the dwelling-house;

(b)at that date, the whole or any part of the dwelling-house was let; or

(c)after that date, the whole or any part of the dwelling-house has been let otherwise than on a qualifying tenancy.

(2)In this paragraph—

• “let” includes let under a licence and “letting” shall be construed accordingly;

• “the relevant date” means the date when the company or any of its subsidiaries first acquired an interest in the dwelling-house (or the land which comprises the dwelling-house).

Dwelling-houses already qualifying for relief

16(1)Section 50 of this Act does not apply to a dwelling-house if—

(a)a certificate has been issued under section 306(2) of the Taxes Act 1988 (as modified by paragraph 10 above) by some other company (“the other company”); and

(b)at any time after the issue of the shares to which that certificate related, the conditions mentioned in sub-paragraph (2) below were satisfied in relation to the dwelling-house (or a dwelling-house the whole or any part of which has been converted into or consists of the whole or any part of the dwelling-house).

(2)The conditions referred to in sub-paragraph (1) above are satisfied in relation to a dwelling-house at any time if, at that time—

(a)the dwelling-house is a dwelling-house to which section 50 of this Act applies in relation to the other company or any of its subsidiaries; and

(b)an interest in the dwelling-house is owned by that company or any such subsidiary.

Dwelling-houses qualifying for capital allowances

17Section 50 of this Act does not apply to a dwelling-house in respect of which the company is entitled to capital allowances under paragraph 2 of Schedule 12 to the [1982 c. 39.] Finance Act 1982.

Interpretation of certain expressions: Scotland

18In the application of the above provisions of this Part to Scotland, references to acquiring an interest shall be construed, if there is a contract to acquire the interest, as references to entering into that contract and for the purposes of paragraph 16(2)(b) above, a company or subsidiary shall be regarded as owning an interest during the period between its entering into such a contract as regards that interest and its acquiring the interest.

Section 58.

SCHEDULE 5Underwriters: Assessment and Collection of Tax

Preliminary

1(1)In this Schedule—

• “agent”, in relation to a syndicate and a year of assessment, means—

  (a)

  the person who was acting as underwriting agent for that syndicate at the end of the corresponding underwriting year; or

  (b)

  such other person as may be determined in accordance with regulations made by the Board by statutory instrument;

• “closing year”, in relation to a year of assessment, means the year of assessment next but one following that year;

• “inspector” includes any officer of the Board;

• “profits” includes gains;

• “syndicate” means a syndicate of underwriting members of Lloyd’s formed for an underwriting year;

• “syndicate profit or loss”, in relation to a syndicate, means the aggregate amount of the profits or losses arising to all the members of the syndicate (taken together), and “syndicate profits” and “syndicate losses” shall be construed accordingly.

(2)References in this Schedule to profits or losses arising to a member of a syndicate are references to profits or losses which—

(a)arise to him in his capacity as such a member, whether from his underwriting business or from assets forming part of a premiums trust fund; and

(b)are chargeable or, as the case may be, allowable under Case I of Schedule D.

(3)Regulations under this paragraph may make provision with respect to the year of assessment next but one preceding the year of assessment in which they are made.

Returns by agent

2(1)An inspector may, at any time after the end of the closing year for a year of assessment, by notice in writing to the agent require him to deliver to the inspector, on or before the final day determined under sub-paragraph (2) below, a return of the syndicate profit or loss for the year of assessment—

(a)containing such information as may be required in pursuance of the notice; and

(b)accompanied by such accounts, statements and reports as may be so required; and

(c)in the case of a syndicate profit, containing a statement of the amount of tax which would be payable on that profit if the whole of it were charged to tax at the basic rate of income tax for that year.

(2)The final day for the delivery of any return required by a notice under sub-paragraph (1) above is whichever is the later of—

(a)the 1st September next following the end of the closing year for the year of assessment; and

(b)the end of the period of three months beginning on the day following that on which the notice was served.

(3)If the agent, having been required by a notice under sub-paragraph (1) above to deliver a return, fails to deliver the return on or before the final day for its delivery, he shall be liable to a penalty equal to the prescribed amount multiplied by the number of days on which the failure continues; and in this sub-paragraph “the prescribed amount” means £10 for each fifty members of the syndicate (counting any number of members left over as fifty).

(4)If the agent fraudulently or negligently delivers an incorrect return under sub-paragraph (1) above, he shall be liable to a penalty not exceeding the prescribed amount multiplied by the number of members of the syndicate; and in this sub-paragraph “the prescribed amount” means £500 in the case of fraud and £250 in the case of negligence.

(5)In relation to a return required by a notice under sub-paragraph (1) above—

(a)any reference in sub-paragraph (2) or (3) above to the delivery of the return is a reference to its delivery together with the accompanying documents referred to in sub-paragraph (1) above; and

(b)the reference in sub-paragraph (4) above to the return being incorrect includes a reference to any of those documents being incorrect.

Payments on account of tax

3(1)In the case of a syndicate profit for a year of assessment, the agent shall, on or before the 1st January next following the end of the closing year for that year—

(a)pay to the collector, on account of the liabilities to tax of the members of the syndicate, the amount stated in his return for that year under paragraph 2(1)(c) above; and

(b)deliver to the inspector a return apportioning, between those members, the amount so paid.

(2)Where an amount is paid to the collector under sub-paragraph (1)(a) above for a year of assessment, the following provisions shall apply as between each member of the syndicate and the agent—

(a)where the member’s proportion of the amount so paid exceeds the amount deducted by the agent in accounting to the member for his share of the syndicate profit for that year, the amount of the excess shall be paid by the member to the agent; and

(b)where the amount so deducted exceeds that proportion, the amount of the excess shall be paid by the agent to the member.

(3)Where an amount is paid to the collector under sub-paragraph (1)(a) above for a year of assessment, the following provisions shall apply as respects the liability to tax for that year of each member of the syndicate—

(a)where the amount in which the member is charged to tax exceeds his proportion of the amount so paid, the amount of the excess shall be the amount of tax due and payable; and

(b)where that proportion exceeds the amount in which the member is so charged, the amount of the excess shall be treated as tax overpaid.

(4)Any amount which is payable under sub-paragraph (1)(a) above shall carry interest at the prescribed rate from the date when it becomes payable until payment, whether or not that date is a non-business day within the meaning of the [1882 c. 61.] Bills of Exchange Act 1882; and—

(a)section 89 of the [1970 c. 9.] Taxes Management Act 1970 (the prescribed rate of interest); and

(b)section 90 of that Act (disallowance of relief for interest on tax),

shall apply for the purposes of this sub-paragraph as they apply for the purposes of any provision of Part IX of that Act.

Determinations by inspector

4(1)If the inspector is satisfied that a return under paragraph 2(1) above affords correct and complete information concerning the syndicate profit or loss for a year of assessment, he shall determine that profit or loss accordingly.

(2)If for a year of assessment the inspector is dissatisfied with a return under paragraph 2(1) above, or there is no such return, the inspector shall determine the syndicate profit or loss for that year to the best of his judgment.

(3)If the inspector discovers that a determination under sub-paragraph (1) or (2) above—

(a)understates the syndicate profits for the year of assessment; or

(b)overstates the syndicate losses for that year,

he may, by a determination under this sub-paragraph, vary the first-mentioned determination accordingly.

(4)Notice of a determination under this paragraph shall be served on the agent and shall state the time within which any appeal against the determination may be made under paragraph 5 below.

(5)After notice of a determination under this paragraph has been served on the agent, the determination shall not be altered except in accordance with the express provisions of the Taxes Acts.

Appeals

5(1)The agent may appeal against a determination under paragraph 4 above by a notice of appeal in writing given to the inspector within thirty days after the date of the notice of determination.

(2)An appeal under this paragraph shall be to the General Commissioners, except that the agent may elect (in accordance with section 46(1) of the Taxes Management Act 1970) to bring the appeal before the Special Commissioners instead of the General Commissioners; and subsections (5) to (5E) of section 31 of that Act shall apply for the purposes of an election under this sub-paragraph as they apply for the purposes of an election under subsection (4) of that section.

Modification of determinations pending appeal

6(1)Where the agent appeals against a determination under paragraph 4 above, then, for the purpose of establishing, in the event of a member of the syndicate appealing against an assessment made on him, the amount of tax the payment of which should, pending the determination of that appeal, be postponed under section 55 of the Taxes Management Act 1970, that section shall apply to the first-mentioned appeal with the modifications specified in sub-paragraph (2) below.

(2)The modifications are as follows—

(a)any reference to the notice of assessment shall be construed as a reference to the notice of determination;

(b)any reference to the appellant believing that he is overcharged to tax by the assessment shall be construed as a reference to him believing that the determination overstates the syndicate profits, or understates the syndicate losses, for the year of assessment, and any reference to the appellant having grounds for so believing, or there being reasonable grounds for so believing, shall be construed accordingly;

(c)any reference to a determination of the amount of tax the payment of which should be postponed pending the determination of the appeal shall be construed as a reference to a direction that the determination shall, pending the determination of the appeal, have effect for the purpose stated in sub-paragraph (1) above as if the syndicate profits there stated were reduced, or the syndicate losses there stated were increased, by such amount as may be specified in the direction, and any reference to an amount of tax so determined, or to the amount of tax which should be so postponed, shall be construed accordingly; and

(d)subsections (2) and (9) and, in subsection (6), paragraphs (a) and (b) and the word “and” immediately preceding paragraph (a) shall be omitted.

Apportionments of syndicate profit or loss

7(1)Where a determination of a syndicate profit or loss for a year of assessment is made, varied or modified (whether under the foregoing provisions of this Schedule or on appeal), the inspector may, by notice in writing to the agent, require him to make to the inspector, within the specified period, a return apportioning, between the members of the syndicate, the syndicate profit or loss as stated in the determination as so made, varied or modified.

(2)If the agent, having been required by a notice under sub-paragraph (1) above to deliver a return within the specified period, fails to deliver the return within that period, he shall be liable to a penalty equal to the prescribed amount multiplied by the number of days on which the failure continues; and in this sub-paragraph “the prescribed amount” means £5 for each fifty members of the syndicate (counting any number of members left over as fifty).

(3)In this paragraph “the specified period” means such period, not being less than thirty days and beginning with the day following the date of the notice under sub-paragraph (1) above, as may be specified in that notice.

Individual members: effect of determinations

8(1)A determination of a syndicate profit or loss for a year of assessment (whether as originally made or as varied or modified) shall, for the purpose of determining the liability to tax of each member of the syndicate, be conclusive against that member that the syndicate profit or loss for that year is as there stated.

(2)Where a determination of a syndicate profit or loss for a year of assessment is varied or modified at any time after the issue of a notice of assessment assessing any member of the syndicate to tax—

(a)section 31 of the [1970 c. 9.] Taxes Management Act 1970 (right of appeal) and section 55 of that Act (postponement of tax) shall have effect, in relation to that member, as if any reference to the date of the notice of assessment, or the date of the issue of the notice of assessment, were a reference to the date of the variation or modification; and

(b)in the case of a variation, an assessment which gives effect to the determination as varied shall not be out of time if it is made within one year of the date of the variation.

(3)Sub-paragraph (2)(b) above shall not apply in the case of a variation under paragraph 4(3) above which is made later than six years after the end of the closing year.

Assessment of individual members: time limits

9For the purposes of sections 36, 37, 40 and 41 of the [1970 c. 9.] Taxes Management Act 1970 (extension of time in cases of fraud, wilful default or neglect), anything done or omitted to be done by the agent shall be deemed to have been done or omitted to be done by each member of the syndicate.

Supplemental: penalties

10(1)If it appears to an inspector or the Board that the agent is liable to a penalty under paragraph 2(3) or 7(2) above, the amount appearing to be due may be assessed by the inspector or the Board as if it were tax for the year of assessment in which the failure to make the return occurred; and, subject to the provisions of this paragraph, the provisions of the Taxes Management Act 1970 relating to the assessment and collection of tax shall apply accordingly.

(2)An amount assessed by way of penalty under paragraph 2(3) or 7(2) above shall be due at the end of the period of thirty days beginning with the date of the issue of the notice of assessment.

(3)On an appeal against an assessment of an amount by way of penalty under sub-paragraph (3) of paragraph 2 or sub-paragraph (2) of paragraph 7 above, subsections (6) to (8) of section 50 of that Act shall not apply but the Commissioners—

(a)may confirm the amount of the assessment or, if it appears to them that the amount assessed is greater or smaller than the penalty provided for under that sub-paragraph, may reduce it or increase it to such an amount as is appropriate having regard to the provisions of that sub-paragraph; and

(b)if it appears to them that no penalty has been incurred, may set the assessment aside.

(4)Where an amount has been assessed by way of penalty under sub-paragraph (3) of paragraph 2 or sub-paragraph (2) of paragraph 7 above and either no appeal has been brought against that assessment or the amount assessed has been confirmed or varied on appeal—

(a)a certificate of an inspector or other officer of the Board that an amount is due by way of penalty under that sub-paragraph; and

(b)a certificate of a collector that payment of that amount has not been made to him or, to the best of his knowledge and belief, to any other collector, or to a person acting on his behalf or on behalf of another collector,

shall be sufficient evidence that the amount mentioned in the certificates is unpaid and is due to the Crown; and any document purporting to be such a certificate as is mentioned in this sub-paragraph shall be deemed to be such a certificate unless the contrary is proved.

(5)Section 100 of the Taxes Management Act 1970 (procedure for recovery of penalties) shall not apply to a penalty under paragraph 2(3) or 7(2) above.

Supplemental: interest

11(1)Interest charged under paragraph 3(4) above shall be treated for the purposes of the enactments mentioned in section 69 of the Taxes Management Act 1970 (interest on tax) as if it were tax charged and due and payable under an assessment.

(2)References to section 86 of that Act in sections 70(2) and 92 of that Act (evidence, and remission of interest in certain cases) shall include a reference to paragraph 3(4) above.

Section 65.

SCHEDULE 6Commercial Woodlands

Preliminary

1In this Schedule “commercial woodlands” means woodlands in the United Kingdom which are managed on a commercial basis and with a view to the realisation of profits.

Abolition of charge under Schedule B

2(1)The charge to tax under Schedule B in respect of the occupation of commercial woodlands is hereby abolished.

(2)In any case where, as respects an accounting period of a company which begins before and ends on or after 6th April 1988, the charge to tax under Schedule B has effect in relation to one part of that period but does not have effect in relation to the other part—

(a)the income deemed to arise to the company for that period from the occupation of the woodlands concerned shall be apportioned between those parts; and

(b)so much of that income as is apportioned to the part beginning on 6th April 1988 shall not be regarded as income arising to the company for that period.

(3)This paragraph shall be deemed to have come into force on 6th April 1988.

Abolition of Schedule D election etc.

3(1)Section 54 of the Taxes Act 1988 and section 111 of the Taxes Act 1970 (which confer on a person occupying commercial woodlands the right to elect to be assessed and charged to tax in respect of them under Schedule D instead of under Schedule B) shall cease to have effect.

(2)Subject to paragraph 5(1) below, profits or gains or losses which arise to a person from the occupation of commercial woodlands on or after 15th March 1988 shall not be regarded for any purposes as profits or gains or losses chargeable under Schedule D.

(3)Subject to paragraph 5(1) below—

(a)interest which is paid by a company on or after 15th March 1988 shall not be treated as a charge on income for the purposes of corporation tax; and

(b)interest which is paid by any person on or after that date and—

(i)is stated in section 360(1), 361(3) or 362 of the Taxes Act 1988 (loans to buy interest in close company, interest in employee-controlled company or into partnership) to be eligible for relief under section 353 of that Act; or

(ii)is stated in any of the corresponding enactments repealed by that Act to be eligible for relief under section 75 of the [1972 c. 41.] Finance Act 1972,

shall not be so eligible,

if the relevant business consists of the occupation of commercial woodlands.

(4)Where part only of the relevant business consists of the occupation of commercial woodlands—

(a)interest falling within paragraph (a) of sub-paragraph (3) above shall not be treated as a charge on income for the purposes of corporation tax; and

(b)interest falling within paragraph (b) of that sub-paragraph shall not be eligible for relief under section 353 of the Taxes Act 1988 or section 75 of the [1972 c. 41.] Finance Act 1972,

to such extent as may be just and reasonable having regard to all the circumstances of the case and, in particular, to the proportion which that part of that business bears to the whole.

(5)In this paragraph “the relevant business” means—

(a)in relation to interest paid on or after 15th March 1988 by a company which is not a member of a group, the business carried on by the company;

(b)in relation to interest paid on or after that date by a company which is a member of a group, the business carried on by the group; and

(c)in relation to interest falling within paragraph (b) of sub-paragraph (3) above, the business carried on by the close company, employee-controlled company or partnership concerned;

and for the purposes of this paragraph two or more businesses carried on by a company, group or partnership shall be regarded as a single business.

(6)For the purposes of this paragraph a company shall be deemed to be a member of a group with one or more other companies if the relationship between that company and the other company or, as the case may be, each of the other companies is as mentioned in section 341(2) of the Taxes Act 1988 or section 60(2) of the [1987 c. 51.] Finance (No. 2) Act 1987 (payments of interest between related companies).

(7)This paragraph shall be deemed to have come into force on 15th March 1988.

Transitional provisions

4(1)Where this paragraph applies in relation to a person’s occupation of any commercial woodlands—

(a)that person; or

(b)in the event of his death, any other person who occupies them by virtue of any disposition (whether effected by will, under the law relating to intestacy or otherwise) of property comprised in his estate immediately before his death,

may elect to be assessed and charged to tax in respect of them under Schedule D; and the reference in this sub-paragraph to a disposition includes a reference to a disposition as varied under section 142 of the [1984 c. 51.] Inheritance Tax Act 1984.

(2)This paragraph applies in relation to a person’s occupation of any commercial woodlands if—

(a)he had entered into a contract or made arrangements before 15th March 1988 for his occupation of them;

(b)he was occupying them on that date; or

(c)he is or was occupying them after that date and the requirements of sub-paragraph (3) below are satisfied with respect to the land which comprises them;

and in this sub-paragraph and sub-paragraph (3) below “arrangements” does not include arrangements which are not evidenced by an instrument or other document made before that date.

(3)The requirements of this sub-paragraph are satisfied with respect to any land which comprises commercial woodlands if, before 15th March 1988, the person who is or was occupying them after that date—

(a)had entered into a contract or made arrangements for the afforestation (including the replanting) of the land; or

(b)had made an application for a grant under section 1 of the [1979 c. 21.] Forestry Act 1979 or section 2(1)(e) of the [1953 c. 2 (N.I.).] Forestry Act (Northern Ireland) 1953 with respect to the land;

and for the purposes of paragraph (b) above an application shall be treated as made when it was received by the Forestry Commissioners or, in Northern Ireland, by the Department of Agriculture.

(4)Subject to sub-paragraph (5) below, an election under sub-paragraph (1) above—

(a)shall be made by notice in writing given to the inspector not later than two years after the end of the chargeable period to which the election relates;

(b)shall have effect not only in relation to that period but also, so long as the person by whom it is made continues to occupy the woodlands, in relation to subsequent chargeable periods; and

(c)shall extend to all woodlands on the same estate.

(5)An election made under sub-paragraph (1) above in respect of any commercial woodlands shall not have effect in relation to any chargeable period if before the beginning of that period a relevant grant has been made with respect to any land which comprises woodlands on the same estate.

(6)For the purposes of sub-paragraphs (4) and (5) above, woodlands shall be treated as being on a separate estate if the person occupying them so elects by notice in writing given to the inspector not later than two years after the time when they are planted or replanted.

(7)An election under section 111 of the Taxes Act 1970 made before 15th March 1988 in respect of any commercial woodlands by a person who, on that date, was occupying those woodlands shall have effect as if made under sub-paragraph (1) above.

(8)In this paragraph and paragraph 5 below “relevant grant” means a grant under section 1 of the Forestry Act 1979 or section 2(1)(e) of the Forestry Act (Northern Ireland) 1953 which—

(a)is made on terms and conditions first published after 15th March 1988; and

(b)is not made by way of supplement to a grant made on terms and conditions first published before that date.

(9)This paragraph shall be deemed to have come into force on 15th March 1988 and shall cease to have effect on 6th April 1993.

5(1)For any chargeable period in relation to which an election made under paragraph 4(1) above by any person has effect in respect of any commercial woodlands—

(a)any profits or gains or losses which arise to him before 6th April 1993 from the occupation of those woodlands shall for all purposes be regarded as profits or gains or losses of a trade chargeable under Schedule D;

(b)in computing those profits or gains or losses, no account shall be taken of any relevant grant and no deduction shall be made for any expenditure in respect of which any such grant was made; and

(c)the occupation of those woodlands shall not be taken into account under paragraph 3(3) or (4) above as respects any interest paid before that date.

(2)In any case where, as respects an accounting period of a company which begins before and ends on or after 6th April 1993, sub-paragraph (1) above has effect in relation to one part of that period but does not have effect in relation to the other part—

(a)the profits or gains or losses arising to the company for that period from the occupation of the woodlands concerned shall be apportioned between those parts; and

(b)such of those profits or gains or losses as are apportioned to the part beginning on 6th April 1993 shall not be regarded as profits or gains or losses arising to the company for that period.

(3)In any case where—

(a)sub-paragraph (1) above, as it applies for income tax purposes, has effect for a year of assessment as respects a person’s occupation of any commercial woodlands;

(b)that year of assessment is the final year of assessment for which that sub-paragraph, as it so applies, has effect as respects that person’s occupation of those woodlands; and

(c)there is an interval between the end of the relevant basis period and the beginning of the next following year of assessment;

then, for the purpose of calculating any capital allowances which fall to be made in taxing his occupation of those woodlands, the interval shall be deemed to form part of that basis period.

(4)In sub-paragraph (3) above—

• “basis period” has the meaning given by section 72 of the [1968 c. 3.] Capital Allowances Act 1968;

• “the relevant basis period”, in relation to a year of assessment, means—

  (a)

  except where that year of assessment is in relation to the occupation by the person of the woodlands concerned a year of loss within the meaning of section 383 of the Taxes Act 1988, the basis period for that year of assessment;

  (b)

  in the excepted case, the basis period for the next following year of assessment.

(5)Sub-paragraph (1) above shall be deemed to have come into force on 15th March 1988 and shall cease to have effect on 6th April 1993.

Consequential amendments

6(1)In section 69 of the Capital Allowances Act 1968, in the definition of “forestry land”, and in section 85(4) of that Act, for any reference to section 111 of the Taxes Act 1970 or section 54 of the Taxes Act 1988 there shall be substituted a reference to paragraph 5 of this Schedule.

(2)In section 67(1) of the Taxes Act 1970 (Schedule A), in paragraph 3 of Schedule A (exceptions), after paragraph (a) there shall be inserted—

“(aa)to any profits or gains arising from a person’s occupation of any woodlands which are managed on a commercial basis and with a view to the realisation of profits, or”.

(3)In section 110 of the Taxes Act 1970 (farming and the commercial occupation of land), in subsection (3), for the proviso there shall be substituted—

“Provided that nothing in this subsection shall apply in relation to the occupation of land which comprises woodlands or is being prepared for use for forestry purposes.”;

but the amendment made by this sub-paragraph shall not apply in relation to land which is being prepared for use for forestry purposes if the requirements of paragraph 4(3) above are satisfied with respect to it.

(4)In sections 168(8), 169(10) and 171(5) of the Taxes Act 1970, for the words “section 111 of this Act” there shall be substituted the words “paragraph 4 of Schedule 6 to the Finance Act 1988”.

(5)In section 113(1) of the [1979 c. 14.] Capital Gains Tax Act 1979 (woodlands)—

(a)for the words “land assessed to income tax or corporation tax under Schedule B” there shall be substituted the words “woodlands managed by the occupier on a commercial basis and with a view to the realisation of profits”;

(b)for the words “such land” there shall be substituted the words “such woodlands”; and

(c)for the words “the person assessed to the tax under Schedule B” there shall be substituted the words “the occupier”.

(6)In section 15(1) of the Taxes Act 1988 (Schedule A), in paragraph 3 of Schedule A (exceptions), after paragraph (a) there shall be inserted—

“(aa)to any profits or gains arising from a person’s occupation of any woodlands which are managed on a commercial basis and with a view to the realisation of profits, or”.

(7)In section 53 of the Taxes Act 1988 (farming and the commercial occupation of land), for subsection (4) there shall be substituted—

“(4)Subsection (3) above shall not apply in relation to the occupation of land which comprises woodlands or is being prepared for use for forestry purposes.”;

but the amendment made by this sub-paragraph shall not apply in relation to land which is being prepared for use for forestry purposes if the requirements of paragraph 4(3) above are satisfied with respect to it.

(8)In sections 380(4), 383(12)(a) and 385(6) of the Taxes Act 1988, for the words “section 54” there shall be substituted the words “paragraph 4 of Schedule 6 to the Finance Act 1988”.

(9)Sub-paragraphs (1), (4) and (8) above shall be deemed to have come into force on 15th March 1988; and sub-paragraphs (2), (3) and (5) to (7) above shall be deemed to have come into force on 6th April 1988.

Section 66.

SCHEDULE 7Exceptions to Rule in Section 66(1)

Cases where rule does not apply

1(1)Subject to sub-paragraphs (2) and (3) below, section 66(1) of this Act shall not apply in relation to a company which, immediately before the commencement date—

(a)was carrying on business;

(b)was not resident in the United Kingdom, having ceased to be so resident in pursuance of a Treasury consent; and

(c)where that consent was a general consent, was taxable in a territory outside the United Kingdom.

(2)If at any time on or after the commencement date a company falling within sub-paragraph (1) above—

(a)ceases to carry on business; or

(b)where the Treasury consent there referred to was a general consent, ceases to be taxable in a territory outside the United Kingdom,

section 66(1) of this Act shall apply in relation to the company after that time or after the end of the transitional period, whichever is the later.

(3)If at any time on or after the commencement date a company falling within sub-paragraph (1) above becomes resident in the United Kingdom, section 66(1) of this Act shall apply in relation to the company after that time.

2(1)Subject to sub-paragraphs (2) and (3) below, section 66(1) of this Act shall not apply in relation to a company which—

(a)carried on business at any time before the commencement date;

(b)ceases to be resident in the United Kingdom at any time on or after that date in pursuance of a Treasury consent; and

(c)is carrying on business immediately after that time.

(2)If at any time after it ceases to be resident in the United Kingdom a company falling within sub-paragraph (1) above ceases to carry on business, section 66(1) of this Act shall apply in relation to the company after that time or after the end of the transitional period, whichever is the later.

(3)If at any time after it ceases to be resident in the United Kingdom a company falling within sub-paragraph (1) above becomes resident in the United Kingdom, section 66(1) of this Act shall apply in relation to the company after that time.

Cases where rule does not apply until end of transitional period

3(1)Subject to sub-paragraph (2) below, in relation to a company which—

(a)carried on business at any time before the commencement date;

(b)was not resident in the United Kingdom immediately before that date; and

(c)is not a company falling within paragraph 1(1) above,

section 66(1) of this Act shall not apply until after the end of the transitional period.

(2)If at any time on or after the commencement date a company falling within sub-paragraph (1) above becomes resident in the United Kingdom, section 66(1) of this Act shall apply in relation to the company after that time.

4(1)Subject to sub-paragraph (2) below, in relation to a company which—

(a)carried on business at any time before the commencement date;

(b)ceases to be resident in the United Kingdom at any time on or after that date in pursuance of a Treasury consent; and

(c)is not a company falling within paragraph 2(1) above,

section 66(1) of this Act shall not apply until after the end of the transitional period.

(2)If at any time after it ceases to be resident in the United Kingdom a company falling within sub-paragraph (1) above becomes resident in the United Kingdom, section 66(1) of this Act shall apply in relation to the company after that time.

Supplemental

5(1)In this Schedule—

• “the commencement date” means the date of the coming into force of this Schedule;

• “general consent” means a consent under any section to which sub-paragraph (2) below applies given generally within the meaning of subsection (4) of that section;

• “taxable” means liable to tax on income by reason of domicile, residence or place of management;

• “the transitional period” means the period of five years beginning with the commencement date;

• “Treasury consent” means a consent under any section to which sub-paragraph (2) below applies given for the purposes of subsection (1)(a) of that section.

(2)This sub-paragraph applies to the following sections (restrictions on the migration etc. of companies), namely—

• section 765 of the Taxes Act 1988;

• section 482 of the Taxes Act 1970;

• section 468 of the [1952 c. 10.] Income Tax Act 1952; and

• section 36 of the [1951 c. 43.] Finance Act 1951.

(3)Any question which arises under any of the provisions of this Schedule shall be determined without regard to the provision made by section 66(1) of this Act.

Section 96.

SCHEDULE 8Capital Gains: Assets Held on 31st March 1982

Previous no gain/no loss disposals

1(1)Where—

(a)a person makes a disposal, not being a no gain/no loss disposal, of an asset which he acquired after 31st March 1982, and

(b)the disposal by which he acquired the asset and any previous disposal of the asset after 31st March 1982 was a no gain/no loss disposal,

he shall be treated for the purposes of section 96 of this Act as having held the asset on 31st March 1982.

(2)For the purposes of this paragraph a no gain/no loss disposal is one on which by virtue of any of the enactments specified in sub-paragraph (3) below neither a gain nor a loss accrues to the person making the disposal.

(3)The enactments mentioned in sub-paragraph (2) above are—

(a)sections 44, 56, 123A, 146(3), 147(4), 148 and 149A of the [1979 c. 14.] Capital Gains Tax Act 1979;

(b)sections 267, 273, 340(7), 342, 342A, 342B, 343(5) and 352(7) of the Taxes Act 1970;

(c)section 148 of the [1982 c. 39.] Finance Act 1982;

(d)section 7 of the [1983 c. 49.] Finance (No.2) Act 1983;

(e)paragraph 2 of Schedule 2 to the [1985 c. 58.] Trustee Savings Banks Act 1985;

(f)section 486(8) of the Taxes Act 1988; and

(g)paragraph 4 of Schedule 12 to this Act.

2(1)Sub-paragraph (2) below applies where a person makes a disposal of an asset acquired by him on or after 6th April 1988 in circumstances in which either of the relevant enactments applied.

(2)Where this sub-paragraph applies—

(a)an election under subsection (5) of section 96 of this Act by the person making the disposal shall not cover the disposal, but

(b)the making of such an election by the person from whom the asset was acquired shall cause the disposal to fall outside subsection (3) of that section (so that subsection (2) of that section is not excluded by it) whether or not the person making the disposal makes such an election.

(3)Where the person from whom the asset was acquired by the person making the disposal himself acquired it on or after 6th April 1988 in circumstances in which either of the relevant enactments applied, an election made by him shall not have the effect described in sub-paragraph (2)(b) above but an election made by—

(a)the last person by whom the asset was acquired after 5th April 1988 otherwise than in such circumstances, or

(b)if there is no such person, the person who held the asset on 5th April 1988,

shall have that effect.

(4)In this paragraph “the relevant enactments” means—

(a)section 273 of the Taxes Act 1970, and

(b)section 44 of the [1979 c. 14.] Capital Gains Tax Act 1979.

Capital allowances

3If under section 96 of this Act it is to be assumed that any asset was on 31st March 1982 sold by the person making the disposal and immediately re-acquired by him, sections 34 and 39 of the Capital Gains Tax Act 1979 shall apply in relation to any capital allowance or renewals allowance made in respect of the expenditure actually incurred by him in providing the asset as if it were made in respect of expenditure which, on that assumption, was incurred by him in re-acquiring the asset on 31st March 1982.

Part disposals

4Where, in relation to a disposal to which section 96(2) of this Act applies, section 35 of the Capital Gains Tax Act 1979 has effect by reason of an earlier disposal made after 31st March 1982 and before 6th April 1988, the sums to be apportioned under section 35 shall for the purposes of the later disposal be ascertained on the assumption stated in section 96(2) of this Act.

Assets derived from other assets

5Section 96 of this Act shall have effect with the necessary modifications in relation to a disposal of an asset which on 31st March 1982 was not itself held by the person making the disposal, if its value is derived from another asset of which account is to be taken in relation to the disposal under section 36 of the Capital Gains Tax Act 1979.

Group transactions

6In relation to disposals to which section 96(2) of this Act applies, section 280 of the Taxes Act 1970 (depreciatory transactions effected on or after 6th April 1965) shall have effect with the substitution in subsections (1) and (5) of the words “31st March 1982” for the words “6th April 1965”.

Close companies

7In relation to disposals to which section 96(2) of this Act applies, section 75(1) of the Capital Gains Tax Act 1979 (close company transferring assets at an undervalue after 6th April 1965) shall have effect with the substitution of the words “31st March 1982” for the words “6th April 1965”.

Private residence relief

8In relation to disposals on or after 6th April 1988, section 102(4) of the [1979 c. 14.] Capital Gains Tax Act 1979 (reduced relief where house is not principal residence throughout ownership since 6th April 1965) shall have effect with the substitution of the words “31st March 1982” for the words “6th April 1965”.

Replacement of business assets

9In relation to disposals on or after 6th April 1988, section 115 of the Capital Gains Tax Act 1979 (under which relief is reduced where assets are used for differing purposes during the period of ownership) shall have effect with the insertion after subsection (7) of the following subsection—

“(7A)In this section “period of ownership” does not include any period before 31st March 1982.”

Apportionment of pre-1965 gains and losses

10In a case where because of paragraph 11 of Schedule 5 to the Capital Gains Tax Act 1979 (which apportions gains and losses partly attributable to ownership before 6th April 1965) only part of a gain or loss is a chargeable gain or allowable loss, subsection (3)(a) and (b) of section 96 of this Act shall have effect as if the amount of the gain or loss that would accrue if subsection (2) did not apply were equal to that part.

Indexation allowance

11In relation to disposals on or after 6th April 1988, section 68 of the [1985 c. 54.] Finance Act 1985 shall have effect with the substitution for subsection (5) of the following subsection—

“(5)Except where an election under section 96(5) of the Finance Act 1988 has effect, neither subsection (4) above nor section 96(2) of the Finance Act 1988 shall apply for the purpose of computing the indexation allowance in a case where that allowance would be greater if they did not apply.”

Elections under section 96(5): excluded disposals

12(1)An election under section 96(5) of this Act shall not cover disposals such as are specified in sub-paragraph (2) below.

(2)The disposals mentioned in sub-paragraph (1) above are disposals of, or of an interest in,—

(a)plant or machinery,

(b)an asset which the person making the disposal has at any time held for the purposes of or in connection with—

(i)a trade consisting of the working of a source of mineral deposits, or

(ii)where a trade involves (but does not consist of) such working, the part of the trade which involves such working, or

(c)a licence under the [1934 c. 36.] Petroleum (Production) Act 1934 or the [1964 c. 28 (N.I.).] Petroleum (Production) Act (Northern Ireland) 1964;

but a disposal does not fall within paragraph (a) or (b) above unless a capital allowance in respect of any expenditure attributable to the asset has been made to the person making the disposal or would have been made to him had he made a claim.

(3)Where the person making the disposal acquired the asset on a no gain/no loss disposal, the references in sub-paragraph (2) above to that person are references to the person making the disposal, the person who last acquired the asset otherwise than on a no gain/no loss disposal or any person who subsequently acquired the asset on such a disposal.

(4)In this paragraph—

(a)“source of mineral deposits” shall be construed in accordance with Schedule 13 to the [1986 c. 41.] Finance Act 1986, and

(b)references to a no gain/no loss disposal shall be construed in accordance with paragraph 1 above.

Elections under section 96(5): groups of companies

13(1)A company may not make an election under section 96(5) of this Act at a time when it is a member but not the principal company of a group unless the company did not become a member of the group until after the relevant time.

(2)Subject to sub-paragraph (3) below, an election under section 96(5) of this Act by a company which is the principal company of a group shall have effect also as an election by any other company which at the relevant time is a member of the group.

(3)Sub-paragraph (2) above shall not apply in relation to a company which, in some period after 5th April 1988 and before the relevant time, is not a member of the group if—

(a)during that period the company makes a disposal to which section 96 of this Act applies, and

(b)the period during which an election under subsection (5) of that section could be made expires without such an election having been made.

(4)Sub-paragraph (2) above shall apply in relation to a company notwithstanding that the company ceases to be a member of the group at any time after the relevant time except where—

(a)the company is an outgoing company in relation to the group, and

(b)the election relating to the group is made after the company ceases to be a member of the group.

(5)In relation to a company which is the principal company of a group the reference in subsection (5) of section 96 of this Act to the first relevant disposal is a reference to the first disposal to which that section applies by a company which is—

(a)a member of the group but not an outgoing company in relation to the group, or

(b)an incoming company in relation to the group.

14(1)In paragraph 13 above “the relevant time”, in relation to a group of companies, is—

(a)the first time when any company which is then a member of the group, and is not an outgoing company in relation to the group, makes a disposal to which section 96 of this Act applies,

(b)the time immediately following the first occasion when a company which is an incoming company in relation to the group becomes a member of the group,

(c)the time when an election is made by the principal company,

whichever is earliest.

(2)In paragraph 13 above and this paragraph—

• “incoming company”, in relation to a group of companies, means a company which—

  (a)

  makes its first disposal to which section 96 of this Act applies at a time when it is not a member of the group, and

  (b)

  becomes a member of the group before the end of the period during which an election under subsection (5) of that section could be made in relation to it and at a time when no such election has been made, and

• “outgoing company”, in relation to a group of companies, means a company which ceases to be a member of the group before the end of the period during which an election under section 96(5) of this Act could be made in relation to it and at a time when no such election has been made.

(3)Section 272 of the Taxes Act 1970 shall have effect for the purposes of paragraph 13 above and this paragraph as for those of sections 272 to 281 of that Act.

Section 97.

SCHEDULE 9Deferred Charges on Gains Before 31st March 1982

Reduction of deduction or gain

1Where this Schedule applies—

(a)in a case within paragraph 2 below, the amount of the deduction referred to in that paragraph, and

(b)in a case within paragraph 3 below, the amount of the gain referred to in that paragraph,

shall be one half of what it would be apart from this Schedule.

Charges rolled-over or held-over

2(1)Subject to sub-paragraph (2) below, this Schedule applies on a disposal, not being a no gain/no loss disposal, of an asset on or after 6th April 1988 if—

(a)the person making the disposal acquired the asset after 31st March 1982,

(b)a deduction falls to be made by virtue of any of the enactments specified in sub-paragraph (3) below from the expenditure which is allowable in computing the amount of any gain accruing on the disposal, and

(c)the deduction is attributable (whether directly or indirectly and whether in whole or in part) to a chargeable gain accruing on the disposal before 6th April 1988 of an asset acquired before 31st March 1982 by the person making that disposal.

(2)This Schedule does not apply where, by reason of the previous operation of this Schedule, the amount of the deduction is less than it otherwise would be.

(3)The enactments referred to in sub-paragraph (1) above are—

(a)section 21(4) and (5) of the [1979 c. 14.] Capital Gains Tax Act 1979 (roll-over where replacement asset acquired after receipt of compensation or insurance money);

(b)section 111A of that Act (roll-over where replacement land acquired on compulsory acquisition of other land);

(c)section 115 of that Act (roll-over where replacement asset acquired on disposal of business asset);

(d)section 123 of that Act (roll-over where shares acquired on disposal of business to company);

(e)section 126 of that Act (hold-over where business asset acquired by gift); and

(f)section 79 of the [1980 c. 48.] Finance Act 1980 (hold-over where asset acquired by gift).

Postponed charges

3(1)Subject to sub-paragraph (3) below, this Schedule applies where—

(a)by virtue of any of the enactments specified in sub-paragraph (2) below a gain is treated as accruing in consequence of an event occurring on or after 6th April 1988, and

(b)the gain is attributable (whether directly or indirectly and whether in whole or in part) to the disposal before 6th April 1988 of an asset acquired before 31st March 1982 by the person making that disposal.

(2)The enactments referred to in sub-paragraph (1) above are—

(a)section 268A of the Taxes Act 1970 (postponement of charge where securities acquired in exchange for business acquired by non-resident company);

(b)section 278(3) of that Act (charge on company leaving group in respect of asset acquired from another member of same group);

(c)section 84 of the [1979 c. 14.] Capital Gains Tax Act 1979 (postponement of charge where gilts acquired on compulsory acquisition of shares);

(d)section 111B(3) of that Act (postponement of charge where depreciating asset acquired on compulsory acquisition of land);

(e)section 117(2) of that Act (postponement of charge where depreciating asset acquired as replacement for business asset);

(f)section 79 of the [1981 c. 35.] Finance Act 1981 (activation of charge rolled-over under section 79 of the Finance Act 1980 on emigration of donee); and

(g)paragraph 10 of Schedule 13 to the [1984 c. 43.] Finance Act 1984 (postponement of charge on reorganisation etc. involving acquisition of qualifying corporate bonds).

(3)Where a gain is treated as accruing by virtue of section 278(3) of the Taxes Act 1970 this Schedule applies only if the asset was acquired by the chargeable company (within the meaning of section 278) before 6th April 1988.

Previous no gain/no loss disposals

4Where—

(a)a person makes a disposal of an asset which he acquired on or after 31st March 1982, and

(b)the disposal by which he acquired the asset and any previous disposal of the asset on or after 31st March 1982 was a no gain/no loss disposal,

he shall be treated for the purposes of paragraphs 2(1)(c) and 3(1)(b) above as having acquired the asset before 31st March 1982.

5(1)Sub-paragraph (2) below applies where—

(a)on or after 6th April 1988 a person makes a disposal of an asset which he acquired on or after 31st March 1982,

(b)the disposal by which he acquired the asset was a no gain/no loss disposal, and

(c)a deduction falling to be made as mentioned in paragraph (b) of sub-paragraph (1) of paragraph 2 above which was attributable as mentioned in paragraph (c) of that sub-paragraph was made—

(i)on that disposal, or

(ii)where one or more earlier no gain/no loss disposals of the asset have been made on or after 31st March 1982 and since the last disposal of the asset which was not a no gain/no loss disposal, on any such earlier disposal.

(2)Where this sub-paragraph applies the deduction shall be treated for the purposes of paragraph 2 above as falling to be made on the disposal mentioned in sub-paragraph (1)(a) above and not on the no gain/no loss disposal.

6For the purposes of this Schedule “no gain/no loss disposal” has the same meaning as in paragraph 1 of Schedule 8 to this Act.

Assets derived from other assets

7The references in paragraphs 2(1)(c) and 3(1)(b) above to the disposal of an asset acquired by a person before 31st March 1982 include references to the disposal of an asset which was not acquired by the person before that date if its value is derived from another asset which was so acquired and of which account is to be taken in relation to the disposal under section 36 of the [1979 c. 14.] Capital Gains Tax Act 1979.

Claims

8(1)No relief shall be given under this Schedule unless a claim is made—

(a)in the case of a gain treated as accruing by virtue of section 278(3) of the Taxes Act 1970 to a company which ceases to be a member of a group, within the period of two years beginning at the end of the accounting period which ends when the company ceases to be a member of the group,

(b)in any other case, within the period of two years beginning at the end of the year of assessment or accounting period in which the disposal in question is made, or the gain in question is treated as accruing,

or within such longer period as the Board may by notice in writing allow.

(2)A claim under sub-paragraph (1) above shall be supported by such particulars as the inspector may require for the purpose of establishing entitlement to relief under this Schedule and the amount of relief due.

Section 109.

SCHEDULE 10Gains Arising from Certain Settled Property

Charge on settlor with interest in settlement

1(1)Subject to paragraphs 3 and 4 below, this paragraph applies where—

(a)in a year of assessment chargeable gains accrue to the trustees of a settlement from the disposal of any or all of the settled property,

(b)after making any deductions provided for by section 4(1) of the Capital Gains Tax Act 1979 in respect of disposals of the settled property there remains an amount on which the trustees would, disregarding section 5 (annual exemption) of that Act (and apart from this Schedule), be chargeable to tax for the year in respect of those gains, and

(c)at any time during the year the settlor has an interest in the settlement.

(2)Where this paragraph applies, the trustees shall not be chargeable to tax in respect of the gains concerned but instead chargeable gains of an amount equal to that referred to in sub-paragraph (1)(b) above shall be treated as accruing to the settlor in the year.

2(1)Subject to sub-paragraphs (2) and (3) below, for the purposes of paragraph 1(1)(c) above a settlor has an interest in a settlement if—

(a)any property which may at any time be comprised in the settlement or any income which may arise under the settlement is, or will or may become, applicable for the benefit of or payable to the settlor or the spouse of the settlor in any circumstances whatsoever, or

(b)the settlor, or the spouse of the settlor, enjoys a benefit deriving directly or indirectly from any property which is comprised in the settlement or any income arising under the settlement.

(2)A settlor does not have an interest in a settlement by virtue of paragraph (a) of sub-paragraph (1) above if and so long as none of the property which may at any time be comprised in the settlement and none of the income which may arise under the settlement can become applicable or payable as mentioned in that paragraph except in the event of—

(a)the bankruptcy of some person who is or may become beneficially entitled to that property or income;

(b)any assignment of or charge on that property or income being made or given by some such person;

(c)in the case of a marriage settlement, the death of both the parties to the marriage and of all or any of the children of the marriage; or

(d)the death under the age of 25 or some lower age of some person who would be beneficially entitled to that property or income on attaining that age.

(3)A settlor does not have an interest in a settlement by virtue of paragraph (a) of sub-paragraph (1) above if and so long as some person is alive and under the age of 25 during whose life none of the property which may at any time be comprised in the settlement and none of the income which may arise under the settlement can become applicable or payable as mentioned in that paragraph except in the event of that person becoming bankrupt or assigning or charging his interest in that property or income.

3(1)Paragraph 1 above does not apply where the settlor dies during the year.

(2)In a case where the settlor has an interest in the settlement only for either or both of the following reasons, namely—

(a)that property or income is, or will or may become, applicable for the benefit of or payable to the settlor’s spouse, and

(b)that the settlor’s spouse enjoys a benefit from property or income,

paragraph 1 above does not apply where the spouse dies, or the settlor and the spouse cease to be married, during the year.

4Paragraph 1 above does not apply unless the settlor is, and the trustees are, either resident in the United Kingdom during any part of the year or ordinarily resident in the United Kingdom during the year.

Right of recovery

5(1)Where any tax becomes chargeable on and is paid by a person in respect of gains treated as accruing to him (or, if he is a married man, to his wife) under paragraph 1 above he shall be entitled—

(a)to recover the amount of the tax from any trustee of the settlement, and

(b)for that purpose to require an inspector to give him a certificate specifying—

(i)the amount of the gains accruing to the trustees in respect of which he has paid tax; and

(ii)the amount of tax paid;

and any such certificate shall be conclusive evidence of the facts stated in it.

(2)In order to ascertain for the purposes of sub-paragraph (1) above the amount of tax chargeable for any year by virtue of paragraph 1 above in respect of gains treated as accruing to any person, those gains shall be regarded as forming the highest part of the amount on which he is chargeable to capital gains tax for the year.

(3)Where for the year 1988-89 or 1989-90—

(a)section 99(1) of this Act applies in relation to a husband and wife, and

(b)gains are treated by virtue of paragraph 1 above as accruing to either of them, and

(c)tax at a rate equivalent to the higher rate of income tax is charged on the whole or part of the chargeable amount (within the meaning of section 99) of either of them,

sub-paragraphs (4) and (5) below shall have effect for ascertaining for the purposes of sub-paragraph (1) above the amount of tax chargeable for the year in respect of gains treated as accruing by virtue of paragraph 1 above.

(4)Those gains shall be regarded as having been taxed at a rate equivalent to the higher rate of income tax so far as their amount does not exceed the amount (or the aggregate of the amounts) on which tax was charged as mentioned in sub-paragraph (3)(c) above, and otherwise as having been taxed at a rate equivalent to the basic rate of income tax.

(5)In a case where—

(a)section 99(3) applies, and

(b)the chargeable amounts of both husband and wife include gains treated as accruing by virtue of paragraph 1 above,

the extent to which the gains treated as accruing to the husband and the gains treated as accruing to the wife are regarded as having been taxed at a rate equivalent to the higher rate of income tax shall be proportionate to the amounts of those gains.

Meaning of “settlor” etc.

6(1)For the purposes of this Schedule a person is a settlor in relation to a settlement if the settled property consists of or includes property originating from him.

(2)In this Schedule—

(a)references to settled property (and to property comprised in a settlement), in relation to any settlor, are references only to property originating from that settlor, and

(b)references to income arising under a settlement, in relation to any settlor, are references only to income originating from that settlor.

(3)References in this paragraph to property originating from a settlor are references to—

(a)property which that settlor has provided directly or indirectly for the purposes of the settlement,

(b)property representing that property, and

(c)so much of any property which represents both property so provided and other property as, on a just apportionment, represents the property so provided.

(4)References in this paragraph to income originating from a settlor are references to—

(a)income from property originating from that settlor, and

(b)income provided directly or indirectly by that settlor.

(5)In sub-paragraphs (3) and (4) above—

(a)references to property or income which a settlor has provided directly or indirectly include references to property or income which has been provided directly or indirectly by another person in pursuance of reciprocal arrangements with that settlor, but do not include references to property or income which that settlor has provided directly or indirectly in pursuance of reciprocal arrangements with another person, and

(b)references to property which represents other property include references to property which represents accumulated income from that other property.

Information

7(1)An inspector may by notice require any person who is or has been a trustee of, a beneficiary under, or a settlor in relation to, a settlement to give him within such time as he may direct, not being less than 28 days, such particulars as he thinks necessary for the purposes of this Schedule.

(2)In the first column in the Table in section 98 of the [1970 c. 9.] Taxes Management Act 1970 (penalty for failure to give particulars etc.) there shall be added at the end—

“Paragraph 7(1) of Schedule 10 to the Finance Act 1988.”

Shares in non-resident companies

8The reference in paragraph 1(1)(a) above to gains accruing to trustees from the disposal of settled property includes a reference to gains treated as accruing to them under section 15 of the [1979 c. 14.] Capital Gains Tax Act 1979 (non-resident companies) and the reference in paragraph 1(1)(b) above to deductions in respect of disposals of the settled property includes a reference to deductions on account of losses treated under that section as accruing to the trustees.

Maintenance funds for historic buildings

9Where the trustees of a settlement have elected that section 691(2) of the Taxes Act 1988 (certain income of maintenance funds for historic buildings not to be income of settlor etc.) shall have effect in the case of any settlement or part of a settlement in relation to a year of assessment, the preceding provisions of this Schedule shall not apply in relation to the settlement or part for the year.

Commencement

10This Schedule shall have effect for the year 1988-89 and subsequent years of assessment.

Section 114.

SCHEDULE 11Capital Gains Indexation: Groups and Associated Companies

Debts

1(1)Subject to sub-paragraph (3) below, where—

(a)there is a disposal by a company of a linked company debt on a security owed by another company, and

(b)the two companies are linked companies immediately before the disposal,

there shall be no indexation allowance on the disposal.

(2)Subject to sub-paragraph (3) below, where—

(a)there is a disposal by a company of a debt on a security owed by another company which is not a linked company debt on a security, and

(b)the two companies are linked companies immediately before the disposal,

then, in ascertaining any indexation allowance due on the disposal, RD as defined in section 87(2) of the [1982 c. 39.] Finance Act 1982 shall be taken as the retail prices index for the first month after the acquisition of the debt in which the two companies were linked companies (or, if later, March 1982).

(3)Where—

(a)there is a disposal by a company of a debt on a security owed by another company,

(b)the debt constituted or formed part of the new holding received by the company making the disposal on a reorganisation, and

(c)sub-paragraph (1) or (2) above would apply in relation to the disposal but for this sub-paragraph,

neither of those sub-paragraphs shall apply in relation to the disposal, but any indexation allowance which, apart from this sub-paragraph, would be due on the disposal shall be reduced by such amount as appears to the inspector, or on appeal the Commissioners concerned, to be just and reasonable.

(4)For the purposes of this paragraph a debt on a security owed by a company is a linked company debt on a security where immediately after its acquisition by the company making the disposal the two companies were linked companies.

2Where—

(a)there is a disposal by a company of a debt on a security owed by any person,

(b)the company and that person are not linked companies immediately before the disposal, and

(c)the debt was incurred by that person as part of arrangements involving another company being put in funds,

paragraph 1 above shall have effect if and to the extent that it would if the debt were owed by that other company.

Shares

3(1)This paragraph applies—

(a)where there is a disposal by a company of—

(i)a holding of redeemable preference shares of another company, or

(ii)a holding of shares, other than redeemable preference shares, of another company which has at all times consisted entirely of, or has at any time included, linked company shares, or

(b)where—

(i)there is a disposal by a company of a holding of shares of another company which is not a holding falling within paragraph (a) above,

(ii)the holding constituted or formed part of the new holding received by the company making the disposal on a reorganisation, and

(iii)but for section 78 of the [1979 c. 14.] Capital Gains Tax Act 1979 that reorganisation (or in a case where the holding disposed of derives, in whole or in part, from assets which were original shares in relation to an earlier reorganisation, that reorganisation or any such earlier reorganisation) would have involved a disposal in relation to which paragraph 1 above would have applied or this paragraph would have applied by virtue of paragraph (a) above,

if the two companies are linked companies immediately before the disposal.

(2)Where this paragraph applies, any indexation allowance which, apart from this paragraph, would be due on the disposal shall be reduced by such amount as appears to the inspector, or on appeal the Commissioners concerned, to be just and reasonable.

(3)For the purposes of this paragraph shares of a company are linked company shares where—

(a)immediately after their acquisition by the company making the disposal the two companies were linked companies,

(b)their acquisition by the company making the disposal was wholly or substantially financed by one or more linked company loans or linked company funded subscriptions (or by a combination of such loans and subscriptions), and

(c)the sole or main benefit which might have been expected to accrue from that acquisition was the obtaining of an indexation allowance on a disposal of the shares.

(4)In sub-paragraph (3) above—

• “linked company loan” means a loan made to the company making the disposal by another company where immediately after the acquisition of the shares by the company making the disposal the two companies were linked companies, and

• “linked company funded subscription” means a subscription for shares in the company making the disposal by another company where—

  (a)

  immediately after the acquisition of the shares by the company making the disposal those two companies were linked companies, and

  (b)

  the subscription was wholly or substantially financed, either directly or indirectly, by one or more linked company subscription-financing loans.

(5)In sub-paragraph (4) above “linked company subscription-financing loan” means a loan made by a company to the subscribing company or any other company where immediately after the acquisition of the shares by the company making the disposal—

(a)the company making the loan, and

(b)the subscribing company, and

(c)where the company to which the loan was made was not the subscribing company, that company,

were linked companies.

Linked companies

4For the purposes of this Schedule companies are linked companies if they are members of the same group or are associated with each other; and for the purposes of this paragraph—

(a)“group” means a company which has one or more 51 per cent. subsidiaries together with that subsidiary or those subsidiaries (section 838 (meaning of 51 per cent. subsidiary) of the Taxes Act 1988 having effect for the purposes of this paragraph as for those of the Tax Acts), and

(b)two companies are associated with each other if one controls the other or both are under the control of the same person or persons (section 416(2) to (6) (meaning of control) of the Taxes Act 1988 having effect for the purposes of this paragraph as for those of Part XI of that Act).

Supplementary

5Where a disposal of a holding of shares follows one or more disposals of the same holding to which section 273(1) of the Taxes Act 1970 (which treats certain intra-group transactions as producing neither a gain nor a loss) applied, paragraph 3(3) to (5) above shall have effect as if the references to the company making the disposal were references to the company which last acquired the asset otherwise than on a disposal to which section 273(1) applied.

6(1)In this Schedule “redeemable preference shares” means shares in a company which are described as such in the terms of their issue or which fulfil the condition in paragraph (a) below and either or both of the conditions in paragraphs (b) and (c) below—

(a)that, as against other shares in the company, they carry a preferential entitlement to a dividend or to any assets in a winding up or both;

(b)that, by virtue of the terms of their issue, the exercise of a right by any person or the existence of any arrangements, they are liable to be redeemed, cancelled or repaid, in whole or in part;

(c)that, by virtue of any arrangements—

(i)to which the company which issued the shares is a party, or

(ii)where that company and another company are linked companies at the time of the issue, to which that other company is a party,

the holder has a right to require another person to acquire the shares or is obliged in any circumstances to dispose of them or another person has a right or is in any circumstances obliged to acquire them;

and for the purposes of paragraph (a) above shares are to be treated as carrying a preferential entitlement to a dividend as against other shares if, by virtue of any arrangements, there are circumstances in which a minimum dividend will be payable on those shares but not on others.

(2)In this Schedule the expressions “reorganisation”, “original shares” and “new holding” have the meanings given by section 77 of the [1979 c. 14.] Capital Gains Tax Act 1979 except that, in a case where sections 78 and 79 of that Act apply in circumstances other than a reorganisation (within the meaning of section 77 of that Act) by virtue of any other provision of Chapter II of Part IV of that Act (conversion of securities, company reconstructions and amalgamations etc.), those expressions shall be construed as they fall to be construed in sections 78 and 79 as they so apply.

(3)In this Schedule—

• “holding”, in relation to shares, means a number of shares which are to be regarded for the purposes of the Capital Gains Tax Act 1979 as indistinguishable parts of a single asset,

• “indexation allowance” has the same meaning as in Chapter III of Part III of the [1982 c. 39.] Finance Act 1982, and

• “security” has the same meaning as in section 82 of the [1979 c. 14.] Capital Gains Tax Act 1979.

Commencement

7This Schedule shall apply to disposals on or after 15th March 1988.

Section 145.

SCHEDULE 12Building Societies: Change of Status

Introductory

1Paragraphs 2 to 7 below apply where there is a transfer of the whole of a building society’s business to a company (“the successor company”) in accordance with section 97 and the other applicable provisions of the [1986 c. 53.] Building Societies Act 1986.

Gilt-edged securities and other financial trading stock

2(1)For the purposes of section 100(1) of the Taxes Act 1988 (valuation of trading stock on discontinuance of trade) the society’s financial trading stock shall be valued at an amount equal to its cost to the society.

(2)In computing for any corporation tax purpose the profits or gains of a trade carried on by the successor company, such of the assets comprised in the transfer as constituted the society’s financial trading stock shall be regarded as acquired by the company at their cost to the society.

(3)In this paragraph “financial trading stock”, in relation to a building society, means such of the assets held by the society by virtue of regulations under section 21(7) of the Building Societies Act 1986 (liquid assets etc.) as constitute trading stock for the purposes of section 100 of the Taxes Act 1988.

Capital allowances

3(1)For the purposes of the allowances and charges provided for by the [1968 c. 3.] Capital Allowances Act 1968 and by Part III of the [1971 c. 68.] Finance Act 1971 (capital allowances) the trade of the society shall not be treated as permanently discontinued and the trade of the successor company shall not be treated as a new trade set up and commenced by the successor company.

(2)There shall be made to or on the successor company in accordance with those Acts all such allowances and charges as would, if the society had continued to carry on the trade, have fallen to be made to or on it, and the amount of any such allowance or charge shall be computed as if the successor company had been carrying on the trade since the society began to do so and as if everything done to or by the society had been done to or by the successor company.

(3)No transfer of assets from the society to the successor company effected by section 97 of the Building Societies Act 1986 shall be treated as giving rise to any such allowance or charge.

Capital gains: assets acquired from society, etc.

4(1)Where the society and the successor company are not members of the same group at the time of the transfer—

(a)they shall be treated for the purposes of corporation tax on capital gains as if any asset disposed of as part of the transfer were acquired by the successor company for a consideration of such amount as would secure that on the disposal neither a gain nor a loss would accrue to the society, and

(b)if because of the transfer any company ceases to be a member of the same group as the society, that event shall not cause section 278 of the Taxes Act 1970 (which treats a company ceasing to be a member of a group as having sold and reacquired at the time of acquisition assets acquired from another member of the group) to have effect as respects any asset acquired by the company from the society or any other member of the same group.

(2)Where the society and the successor company are members of the same group at the time of the transfer but later cease to be so, that later event shall not cause section 278 to have effect as respects—

(a)any asset acquired by the successor company on or before the transfer from the society or any other member of the same group, or

(b)any asset acquired from the society or any other member of the same group by any company other than the successor company which is a member of the same group at the time of the transfer.

(3)Subject to sub-paragraph (5) below, where a company which is a member of the same group as the society at the time of the transfer—

(a)ceases to be a member of that group and becomes a member of the same group as the successor company, and

(b)subsequently ceases to be a member of that group,

section 278 shall have effect on that later event as respects any relevant asset acquired by the company otherwise than from the successor company as if it had been acquired from the successor company.

(4)In sub-paragraph (3) above “relevant asset” means any asset acquired by the company—

(a)from the society, or

(b)from any other company which is a member of the same group at the time of the transfer,

when the company and the society, or the company, the society and the other company, were members of the same group.

(5)Sub-paragraph (3) above shall not apply if the company which acquired the asset and the company from which it was acquired (one being a 75 per cent. subsidiary of the other) cease simultaneously to be members of the same group as the successor company but continue to be members of the same group as one another.

(6)For the purposes of this paragraph “group” shall be construed in accordance with section 272 of the Taxes Act 1970.

Capital gains: shares, and rights to shares, in successor company

5(1)Where, in connection with the transfer, there are conferred on members of the society—

(a)any rights to acquire shares in the successor company in priority to other persons, or

(b)any rights to acquire shares in that company for consideration of an amount or value lower than the market value of the shares, or

(c)any rights to free shares in that company,

any such right so conferred on a member shall be regarded for the purposes of capital gains tax as an option (within the meaning of section 137 of the [1979 c. 14.] Capital Gains Tax Act 1979) granted to, and acquired by, him for no consideration and having no value at the time of that grant and acquisition.

(2)Where, in connection with the transfer, shares in the successor company are issued by that company, or disposed of by the society, to a member of the society, those shares shall be regarded for the purposes of capital gains tax—

(a)as acquired by the member for a consideration of an amount or value equal to the amount or value of any new consideration given by him for the shares (or, if no new consideration is given, as acquired for no consideration); and

(b)as having, at the time of their acquisition by the member, a value equal to the amount or value of the new consideration so given (or, if no new consideration is given, as having no value);

but this sub-paragraph is without prejudice to the operation of sub-paragraph (1) above, where applicable.

(3)Sub-paragraph (4) below applies in any case where—

(a)in connection with the transfer, shares in the successor company are issued by that company, or disposed of by the society, to trustees on terms which provide for the transfer of those shares to members of the society for no new consideration; and

(b)the circumstances are such that in the hands of the trustees the shares constitute settled property, within the meaning of the Capital Gains Tax Act 1979.

(4)Where this sub-paragraph applies, then, for the purposes of capital gains tax—

(a)the shares shall be regarded as acquired by the trustees for no consideration;

(b)the interest of any member in the settled property constituted by the shares shall be regarded as acquired by him for no consideration and as having no value at the time of its acquisition;

(c)where a member becomes absolutely entitled as against the trustees to any of the settled property, both the trustees and the member shall be treated as if, on his becoming so entitled, the shares in question had been disposed of and immediately reacquired by the trustees, in their capacity as trustees within section 46(1) of the Capital Gains Tax Act 1979, for a consideration of such an amount as would secure that on the disposal neither a gain nor a loss would accrue to the trustees (and accordingly section 54 of that Act shall not apply in relation to that occasion); and

(d)on the disposal by a member of an interest in the settled property, other than the disposal treated as occurring for the purposes of paragraph (c) above, any gain accruing shall be a chargeable gain (and accordingly section 58(1) of the Capital Gains Tax Act 1979 shall not apply in relation to the disposal).

(5)Where, in connection with the transfer, the society disposes of any shares in the successor company, then, for the purposes of the Capital Gains Tax Act 1979, any gains arising on the disposal shall not be chargeable gains.

(6)In this paragraph—

• “free shares”, in relation to a member of the society, means any shares issued by the successor company, or disposed of by the society, to that member in connection with the transfer but for no new consideration;

• “member”, in relation to the society, means a person who is or has been a member of it, in that capacity, and any reference to a member includes a reference to a member of any particular class or description;

• “new consideration” means consideration other than—

  (a)

  consideration provided directly or indirectly out of the assets of the society; or

  (b)

  consideration derived from a member’s shares or other rights in the society.

(7)References in this paragraph to the case where a member becomes absolutely entitled to settled property as against the trustees shall be taken to include references to the case where he would become so entitled but for being an infant or otherwise under disability.

Distributions

6(1)Where, in connection with the transfer, qualifying benefits are conferred by the society or the successor company on members of the society, the conferring of those benefits shall not be regarded as either—

(a)the making of a distribution, within the meaning of the Corporation Tax Acts; or

(b)the payment or crediting of a dividend for the purposes of section 476 of the Taxes Act 1988 or any regulations under that section (building society interest etc.).

(2)Sub-paragraph (1) above does not preclude any qualifying benefit (and, in particular, any qualifying benefit which in the hands of the recipient would, apart from that sub-paragraph, constitute income for the purposes of income tax) from being a capital distribution for the purposes of section 72 of the [1979 c. 14.] Capital Gains Tax Act 1979, and in that section “distribution” shall be construed accordingly.

(3)In this paragraph “qualifying benefits” means—

(a)any such rights as are mentioned in paragraph 5(1)(a), (b) or (c) above, and any property obtained by the exercise of those rights;

(b)any shares issued or disposed of as mentioned in paragraph 5(2) above;

(c)any shares issued or disposed of, or to which a member becomes entitled, as mentioned in paragraph 5(3) or (4) above, and any interest in the settled property constituted by those shares;

(d)any payment in lieu of a qualifying benefit falling within paragraphs (a) to (c) above;

(e)any distribution made in pursuance of section 100(2)(b) of the [1986 c. 53.] Building Societies Act 1986.

(4)“Member” has the same meaning in this paragraph as in paragraph 5 above.

Contractual savings schemes

7The following provisions, namely—

(a)section 326 of the Taxes Act 1988 (certain sums to be disregarded for income tax purposes), and

(b)section 149B(4) of the Capital Gains Tax Act 1979 (corresponding provision for capital gains tax purposes),

shall have effect in relation to any terminal bonus, or interest or other sum, payable after the transfer under a savings scheme which immediately before the transfer was a certified contractual savings scheme (within the meaning of section 326) in relation to the society notwithstanding that it ceased to be such a scheme by reason of the transfer.

Stamp duty

8Section 109 of the [1986 c. 53.] Building Societies Act 1986 (exemption from stamp duty) shall be renumbered as subsection (1) of that section and after that provision as so renumbered there shall be inserted—

“(2)No transfer effected by subsection (6) or (7) of section 97 shall give rise to any liability to stamp duty.”

Section 146.

SCHEDULE 13Post-Consolidation Amendments

Part IAmendments of the Taxes Act 1988

1The Taxes Act 1988 shall have effect, and shall be deemed always to have had effect, subject to the amendments specified in paragraphs 2 to 14 of this Schedule.

2In section 61(4) after the word “where” there shall be inserted the words “there is a change in the persons engaged in carrying on a trade, profession or vocation in partnership and”.

3In section 162(1) after the word “Where” there shall be inserted the words “after 6th April 1976”.

4In section 178(1)(a) after the word “with” there shall be inserted the words “its terms or in accordance with”.

5In section 533(4) after “1949” there shall be inserted the words “, sections 55 to 59 of the Patents Act 1977”.

6In section 591(5) and (6) after the word “made” there shall be inserted the words “by the Board”.

7In section 824—

(a)in subsection (1) the following paragraphs shall be substituted for paragraphs (a) and (b)—

“(a)in the case of income tax or surtax paid by or on behalf of an individual for a year of assessment for which he was resident in the United Kingdom, a repayment of the tax of not less than £25 is made by the Board or an inspector after the end of the 12 months following that year of assessment; or

(b)in the case of the special charge under Part IV of the [1968 c. 44.] Finance Act 1968, a repayment of the charge of not less than £25 is made by the Board or an inspector,”,

(b)the following subsection shall be inserted after that subsection—

“(1A)In relation to so much (if any) of the last-mentioned period as preceded 6th April 1974, subsection (1) above shall have effect as if the rate of interest specified in it were 6 per cent. per annum (instead of the rate so specified or any other rate in force by virtue of subsection (6) below or section 47(7) of the [1975 c. 45] Finance (No. 2) Act 1975).”,

(c)in subsection (2) for the words “Subsection (1)” there shall be substituted the words “Subsections (1) and (1A)” and for the words “it applies to a repayment falling within that subsection” there shall be substituted the words “they apply to a repayment falling within subsection (1)”,

(d)the following subsection shall be inserted after that subsection—

“(2A)Subsection (1) above shall apply to a repayment made in consequence of a claim under section 228 of the [1952 c. 10.] Income Tax Act 1952 (relief in respect of income accumulated under trusts) as if the repayment were of income tax paid by the claimant for the year of assessment in which the contingency mentioned in that section happened.”,

(e)in subsection (3) the following paragraph shall be inserted after paragraph (a)—

“(aa)if the repayment is of the special charge, the relevant time, as regards so much of the charge as was paid before the end of the year 1969-70, is the end of that year, and, as regards so much of the charge as was paid in any later year of assessment, is the end of the year of assessment in which it was paid;”, and

(f)in subsection (6) the words “Without prejudice to subsection (1A) above,” shall be inserted at the beginning.

8In section 825—

(a)the following subsection shall be inserted after subsection (2)—

“(2A)In relation to any complete tax month beginning before 6th April 1974 which is contained in the last-mentioned period, subsection (2) above shall have effect as if the rate of interest specified in it were 6 per cent. per annum (instead of the rate so specified or any other rate in force by virtue of subsection (5) below or section 48(6) of the [1975 c. 45.] Finance (No. 2) Act 1975).”, and

(b)in subsection (5) the words “Without prejudice to subsection (2A) above,” shall be inserted at the beginning.

9In paragraph 2 of Schedule 10 after sub-paragraph (c) there shall be inserted the word “or”.

10In paragraph 17(2)(a) of Schedule 15 after the words “but the old policy was” there shall be inserted the word “not”.

11In paragraph 18(2) of that Schedule for “1 to 9” there shall be substituted “1, 2, 3(5) to (11), 4 to 9”.

12In paragraph 4(3)(b) of Schedule 27 for “416” there shall be substituted “75”.

13In paragraph 8 of Schedule 29 for the words “added after paragraph (f)” there shall be substituted the words “substituted for paragraph (g)”.

14In the Table in paragraph 32 of that Schedule the amendments of —

(a)section 55(1)(g) of the [1970 c. 9.] Taxes Management Act 1970,

(b)section 108(9)(b) of the [1980 c. 48.] Finance Act 1980, and

(c)section 80(5)(b) of the [1985 c. 54.] Finance Act 1985,

shall be omitted.

15The repeals made in section 47 of the Finance (No. 2) Act 1975 shall be treated as never having had effect.

Part IIAmendments of Other Enactments

The Capital Gains Tax Act 1979 (c. 14)

16In section 34(4)(a) of the Capital Gains Tax Act 1979 for the words “section 79(1) of the Taxes Act” there shall be substituted the words “section 33(1) of the Taxes Act 1988”.

17In section 149B(1)(c) of that Act for “614(4)” there shall be substituted “614(2)”.

18In section 155(2) of that Act for “282(1) and (2)” there shall be substituted “282”.

The Finance Act 1980 (c. 48)

19In section 101 of the Finance Act 1980 for the words “60 above” there shall be substituted the words “468(5) of the Taxes Act 1988”.

20In section 109(8)(b) of that Act for the words “Part II of that Act” there shall be substituted the words “Chapter V of Part XII of the Taxes Act 1988”.

The Finance Act 1981 (c. 35)

21In section 110 of the Finance Act 1981 for the words “21(1) of the [1970 c. 24.] Finance Act 1970” there shall be substituted the words “592(1) of the Taxes Act”.

The Finance Act 1984 (c. 43)

22In section 80(5)(b) of the Finance Act 1984 for the words “13 of the [1975 c. 22] Oil Taxation Act 1975” there shall be substituted the words “492 of the Taxes Act 1988”.

The Finance Act 1986 (c. 41)

23In section 94(5) of the Finance Act 1986 for the words “535 of the Taxes Act” there shall be substituted the words “841 of the Taxes Act 1988”.

The Finance Act 1987 (c. 16)

24The repeals made by the Finance Act 1987 in section 47 of the [1975 c. 45] Finance (No. 2) Act 1975 shall be treated as never having had effect.

Commencement

25The amendments made by paragraphs 16 to 23 of this Schedule shall be treated for the purposes of their commencement as if they had been made by the Taxes Act 1988.

Section 148.

SCHEDULE 14Repeals

Part ICustoms and Excise

Part IIVehicles Excise Duty

Part IIIValue Added Tax

Part IVIncome and Corporation Tax: General

Part VCommercial Woodlands

Part VIUnapproved Employee Share Schemes

Part VIICapital Gains: General

Part VIIIMarried Couples

Part IXTax Appeals etc. in Northern Ireland

Part XInheritance Tax

Part XIStamp Duty