SCHEDULES

Section 6.

SCHEDULE 1U.K. Vehicles Excise Duty: Rates

Part IU.K. Table substituted in Part II of Schedule 2 to the 1971 and 1972 Acts

Part II F1U.K.

Section 8.

SCHEDULE 2U.K. Vehicles Excise Duty: Special Machines

1The M1Vehicles (Excise) Act 1971 and the M2Vehicles (Excise) Act (Northern Ireland) 1972 shall be amended asfollows.

2In Part I of Schedule 3 to each Act (annual rates of duty on tractorsetc.)—

(a)after paragraph 1 there shall be inserted—

In this Schedule “special machine” means—

(a)a tractor;

(b)an agricultural engine;

(c)a digging machine;

(d)a mobile crane;

(e)a works truck; or

(f)a mowing machine.”;

(b)for paragraph 2 there shall be substituted—

In this Schedule “tractor” means a vehicle which iseither—

(a)an agricultural tractor, or

(b)a tractor (other than an agricultural tractor) that is—

(i)designed and constructed primarily for use otherwise than on roads, and

(ii)incapable by reason of its construction of exceeding a speed oftwenty-five miles per hour on the level under its own power.”;

(c)in paragraph 3(b), for the words “neither carries nor hauls any loadthan” there shall be substituted the words “does not carry any loadexcept”;

(d)in paragraph 4(b), for the words “neither carries nor hauls any loadthan” there shall be substituted the words “does not carry any loadexcept”;

(e)paragraph 5A shall be omitted; and

(f)in paragraph 6, for the words from “(other than” to “8 below)”there shall be substituted the words “(other than a special machine, arecovery vehicle or a vehicle to which Schedule 4A to this Act applies)”.

3F2U.K.

4In Part I of Schedule 4 to each Act (annual rates of duty on goodsvehicles)—

(a)in paragraph 11, for sub-paragraphs (b) and (c) there shall besubstituted—

“(b)a special machine within the meaning of Schedule 3 to this Act;

(c)a recovery vehicle within the meaning of that Schedule; or”;

(b)paragraphs 12 and 13 shall be omitted; and

(c)in paragraph 15(1), the definitions of “agricultural machine”, “fisherman’s tractor”, “mobile crane”, “recovery vehicle” and “works truck” shall be omitted.

Section 18.

SCHEDULE 3U.K. Value Added Tax: Buildings and Land

Zero-ratingU.K.

1For Group 8 (construction of buildings etc.) of Schedule 5 (zero-rating)to the M3Value Added Tax Act 1983 there shall besubstituted—

“Group 8—Construction of Dwellings, Etc.

Item No.

1The grant by a person constructing a building—

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

(b)intended for use solely for a relevant residential purpose or a relevantcharitable purpose,

of a major interest in, or in any part of, the building or its site.

2The supply in the course of the construction of—

(a)a building designed as a dwelling or number of dwellings or intended foruse solely for a relevant residential purpose or a relevant charitablepurpose; or

(b)any civil engineering work necessary for the development of a permanentpark for residential caravans,

of any services other than the services of an architect, surveyor or anyperson acting as consultant or in a supervisory capacity.

3The supply to a person of—

(a)materials; or

(b)builders’ hardware, sanitary ware or other articles of a kind ordinarilyinstalled by builders as fixtures,

by a supplier who also makes to the same person supplies within item 2 ofthis Group or Group 8A below of services which include the use of thematerials or the installation of the articles.

Notes:

(1)“Grant” includes assignment.

(2)“Dwelling” includes a garage constructed at the same time asa dwelling for occupation together with it.

(3)Use for a relevant residential purpose means use as—

(a)a home or other institution providing residential accommodation forchildren;

(b)a home or other institution providing residential accommodation withpersonal care for persons in need of personal care by reason of old age,disablement, past or present dependence on alcohol or drugs or past or presentmental disorder;

(c)a hospice;

(d)residential accommodation for students or school pupils;

(e)residential accommodation for members of any of the armed forces;

(f)a monastery, nunnery or similar establishment; or

(g)an institution which is the sole or main residence of at least 90 percent. of its residents,

except use as a hospital, a prison or similar institution or an hotel,inn or similar establishment.

(4)Use for a relevant charitable purpose means use by a charity in either orboth of the following ways, namely—

(a)otherwise than in the course or furtherance of a business;

(b)as a village hall or similarly in providing social or recreationalfacilities for a local community.

(5)Where part of a building is designed as a dwelling or number of dwellingsor intended for use solely for a relevant residential purpose or a relevantcharitable purpose (and part is not)—

(a)a grant or other supply relating only to the part so designed or intendedfor such use (or its site) shall be treated as relating to a building sodesigned or intended for such use;

(b)a grant or other supply relating only to the part neither so designed norintended for such use (or its site) shall not be so treated; and

(c)in the case of any other grant or other supply relating to, or to any partof, the building (or its site), an apportionment shall be made to determinethe extent to which it is to be so treated.

(6)Where all or part of a building is intended for use solely for a relevantresidential purpose or a relevant charitable purpose—

(a)a supply relating to the building (or any part of it) shall not be takenfor the purposes of item 2 or 3 as relating to a building intended for suchuse unless it is made to a person who intends to use the building (or part)for such a purpose; and

(b)a grant or other supply relating to the building (or any part of it) shallnot be taken as relating to a building intended for such use unless before itis made the person to whom it is made has given to the person making it acertificate in such form as may be specified in a notice published by theCommissioners stating that the grant or other supply (or a specified part ofit) so relates.

(7)The grant of an interest in, or in part of, a building designed as adwelling or number of dwellings is not within item 1 if—

(a)the interest granted is such that the grantee will not be entitled toreside in the building, or part, throughout the year; or

(b)residence there throughout the year will be prevented by the terms of acovenant, statutory planning consent or similar permission.

(8)Where the major interest referred to in item 1 is a tenancy orlease—

(a)if a premium is payable, the grant falls within that item only to theextent that it is made for consideration in the form of the premium; and

(b)if a premium is not payable, the grant falls within that item only to theextent that it is made for consideration in the form of the first payment ofrent due under the tenancy or lease.

(9)The reference in item 2 to the construction of a building or work does notinclude a reference to—

(a)the conversion, reconstruction, alteration or enlargement of an existingbuilding or work; or

(b)any extension or annexation to an existing building which provides forinternal access to the existing building or of which the separate use, lettingor disposal is prevented by the terms of any covenant, statutory planningconsent or similar permission;

and the reference in item 1 to a person constructing a building shall beconstrued accordingly.

(10)A caravan is not a residential caravan if residence in it throughout theyear is prevented by the terms of a covenant, statutory planning consent orsimilar permission.

(11)Item 2 does not include the supply of services described in paragraph 1(1)or 5(3) of Schedule 2 to this Act.

(12)The goods referred to in item 3 do not include—

(a)finished or prefabricated furniture, other than furniture designed to befitted in kitchens;

(b)materials for the construction of fitted furniture, other than kitchenfurniture;

(c)domestic electrical or gas appliances, other than those designed toprovide space heating or water heating or both; or

(d)carpets or carpeting material.

(13)Section 16(3) of this Act does not apply to goods forming part of adescription of supply in this Group.”

2(1)Group 8A (protected buildings) of that Schedule shall be amended asfollows.

(2)In item 1, for the word “granting” there shall be substituted theword “grant”.

(3)In Note (1), for the words “a building which” there shall besubstituted the words “a building which is designed to remain as or becomea dwelling or number of dwellings or is intended for use solely for a relevantresidential purpose or a relevant charitable purpose after the reconstructionor alteration and which, in either case,”.

(4)After that Note there shall be inserted—

“(1A)Notes (1) to (8) to Group 8 above apply in relation to this Group as theyapply in relation to that Group.”

(5)Note (5) shall be omitted.

(6)After Note (6) there shall be inserted—

“(6A)For the purposes of item 2 the construction of a building separate from,but in the curtilage of, a protected building does not constitute analteration of the protected building.”

(7)The following Note shall be substituted for Note (7)—

“(7)Item 2 does not include the supply of services described in paragraph 1(1)or 5(3) of Schedule 2 to this Act.”

3In Group 11 (caravans and houseboats) of that Schedule, for paragraph (b)of the Note there shall be substituted—

“(b)the supply of accommodation in a caravan or houseboat.”

ExemptionsU.K.

4(1)For Group 1 (land) of Schedule 6 (exemptions) to the M4Value Added Tax Act 1983 there shall be substituted—

“Group 1 – Land

Item No.

1The grant of any interest in or right over land or of any licence tooccupy land, other than—

(a)the grant of the fee simple in—

(i)a building which has not been completed and which is neither designed asa dwelling or number of dwellings nor intended for use solely for a relevantresidential purpose or a relevant charitable purpose;

(ii)a new building which is neither designed as a dwelling or number ofdwellings nor intended for use solely for a relevant residential purpose ora relevant charitable purpose after the grant;

(iii)a civil engineering work which has not been completed;

(iv)a new civil engineering work;

(b)the grant of any interest, right or licence consisting of a right to takegame or fish;

(c)the provision in an hotel, inn, boarding house or similar establishmentof sleeping accommodation or of accommodation in rooms which are provided inconjunction with sleeping accommodation or for the purpose of a supply ofcatering;

(d)the provision of holiday accommodation in a house, flat, caravan,houseboat or tent;

(e)the provision of seasonal pitches for caravans, and the grant offacilities at caravan parks to persons for whom such pitches are provided;

(f)the provision of pitches for tents or of camping facilities;

(g)the grant of facilities for parking a vehicle;

(h)the grant of any right to fell and remove standing timber;

(i)the grant of facilities for housing, or storage of, an aircraft or formooring, or storage of, a ship, boat or other vessel;

(j)the grant of any right to occupy a box, seat or other accommodation at asports ground, theatre, concert hall or other place of entertainment; and

(k)the grant of facilities for playing any sport or participating in anyphysical recreation.

Notes:

(1)“Grant” includes an assignment, other than an assignment ofan interest made to the person to whom a surrender of the interest could bemade.

(2)A building shall be taken to be completed when an architect issues acertificate of practical completion in relation to it or it is first fullyoccupied, whichever happens first; and a civil engineering work shall be takento be completed when an engineer issues a certificate of completion inrelation to it or it is first fully used, whichever happens first.

(3)Notes (2) to (6) to Group 8 of Schedule 5 to this Act apply in relationto this Group as they apply in relation to that Group.

(4)A building or civil engineering work is new if it was completed less thanthree years before the grant.

(5)Subject to Note (6), the grant of the fee simple in a building or workcompleted before 1st April 1989 is not excluded from this Group by paragraph(a)(ii) or (iv).

(6)Note (5) does not apply where the grant is the first grant of the feesimple made on or after 1st April 1989 and the building was not fullyoccupied, or the work not fully used, before that date.

(7)Where a grant of an interest in, right over or licence to occupy landincludes a valuable right to take game or fish, an apportionment shall be madeto determine the supply falling outside this Group by virtue of paragraph (b).

(8)“Similar establishment” includes premises in which there isprovided furnished sleeping accommodation, whether with or without theprovision of board or facilities for the preparation of food, which are usedby or held out as being suitable for use by visitors or travellers.

(9)“Houseboat” includes a houseboat within the meaning of Group11 of Schedule 5 to this Act.

(10)“Holiday accommodation” includes any accommodation advertisedor held out as such.

(11)A seasonal pitch is a pitch—

(a)which is provided for a period of less than a year; or

(b)which is provided for a year or a period longer than a year but which theperson to whom it is provided is prevented by the terms of any covenant,statutory planning consent or similar permission from occupying by living ina caravan at all times throughout the period for which the pitch is provided.

(12)“Mooring” includes anchoring or berthing.

(13)Paragraph (k) shall not apply where the grant of the facilities isfor—

(a)a continuous period of use exceeding twenty-four hours; or

(b)a series of ten or more periods, whether or not exceeding twenty-fourhours in total, where the following conditions are satisfied—

(i)each period is in respect of the same activity carried on at the sameplace;

(ii)the interval between each period is not less than one day and not morethan fourteen days;

(iii)consideration is payable by reference to the whole series and is evidencedby written agreement;

(iv)the grantee has exclusive use of the facilities; and

(v)the grantee is a school, a club, an association or an organisationrepresenting affiliated clubs or constituent associations.”

(2)In consequence of the amendment made by sub-paragraph (1) above, inparagraph 9(1) of Schedule 4 to the M5Value Added Tax Act1983 for “(a)” there shall be substituted “(c)”.

Other provisionsU.K.

5The following section shall be substituted for section 21 (refund of taxto person constructing dwelling) of the Value Added Tax Act 1983—

“21 Refund of tax to persons constructing certain buildings.

“21(1)Subject to subsection (2) below, where tax is chargeable on the supply ofgoods to, or the importation of goods by, a person constructing a buildinglawfully and otherwise than in the course or furtherance of any business,and—

(a)the goods are incorporated in the building or its site; and

(b)the supply of the goods would have been zero-rated by virtue of item 3 ofGroup 8 of Schedule 5 to this Act if they had been supplied by a suppliermaking to the same person supplies within item 2 of that Group of servicesincluding their use or installation, and any required certificate had beengiven,

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

(2)The Commissioners shall not be required to entertain a claim for a refundof tax under this section unless the claim—

(a)is made within such time and in such form and manner;

(b)contains such information; and

(c)is accompanied by such documents, whether by way of evidence or otherwise,

as the Commissioners may by regulations prescribe.”

6(1)The following section shall be inserted in the M6ValueAdded Tax Act 1983 after section 35—

“35A Buildings and land.

“35A(1)Schedule 6A to this Act shall have effect with respect to buildings andland.

(2)The Treasury may by order amend Schedule 6A to this Act.”

(2)The following Schedule shall be inserted in the Value Added Tax Act 1983after Schedule 6—

Section 35A.

“Schedule 6AU.K. Buildings and Land

Residential and charitable buildings: change of use etc.U.K.

1(1)In this paragraph “relevant zero-rated supply” means a grant or other supplytaking place on or after 1st April 1989 which—

(a)relates to a building intended for use solely for a relevant residentialpurpose or a relevant charitable purpose or part of such a building; and

(b)is zero-rated, in whole or in part, by virtue of Group 8 of Schedule 5 tothis Act.

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

(a)one or more relevant zero-rated supplies relating to a building (or partof a building) have been made to any person;

(b)within the period of ten years beginning with the day on which thebuilding is completed, the person grants an interest in, right over or licenceto occupy the building or any part of it (or the building or any part of itincluding, consisting of or forming part of the part to which the relevantzero-rated supply or supplies related); and

(c)after the grant the whole or any part of the building, or of the part towhich the grant relates, (or the whole of the building or of the part to whichthe grant relates, or any part of it including, consisting of or forming partof the part to which the relevant zero-rated supply or supplies related) isnot intended for use solely for a relevant residential purpose or a relevantcharitable purpose.

(3)Where this sub-paragraph applies, to the extent that the grant relates toso much of the building as—

(a)by reason of its intended use gave rise to the relevant zero-rated supplyor supplies; and

(b)is not intended for use solely for a relevant residential purpose or arelevant charitable purpose after the grant,

it shall be taken to be a taxable supply in the course or furtherance ofa business which is not zero-rated by virtue of Group 8 of Schedule 5 to thisAct (if it would not otherwise be such a supply).

(4)Sub-paragraph (5) below applies where—

(a)one or more relevant zero-rated supplies relating to a building (or partof a building) have been made to any person; and

(b)within the period of ten years beginning with the day on which thebuilding is completed, the person uses the building or any part of it (or thebuilding or any part of it including, consisting of or forming part of thepart to which the relevant zero-rated supply or supplies related) for apurpose which is neither a relevant residential purpose nor a relevantcharitable purpose.

(5)Where this sub-paragraph applies, his interest in, right over or licenceto occupy so much of the building as—

(a)by reason of its intended use gave rise to the relevant zero-rated supplyor supplies; and

(b)is used otherwise than for a relevant residential purpose or a relevantcharitable purpose,

shall be treated for the purposes of this Act as supplied to him for thepurpose of a business carried on by him and supplied by him in the course orfurtherance of the business when he first uses it for a purpose which isneither a relevant residential purpose nor a relevant charitable purpose.

(6)Where sub-paragraph (5) above applies—

(a)the supply shall be taken to be a taxable supply which is not zero-ratedby virtue of Group 8 of Schedule 5 to this Act (if it would not otherwise besuch a supply); and

(b)the value of the supply shall be such that the amount of tax chargeableon it is equal to the amount of the tax which would have been chargeable onthe relevant zero-rated supply (or, where there was more than one such supply,the aggregate amount which would have been chargeable on them) had so much ofthe building as is mentioned in sub-paragraph (5) above not been intended foruse solely for a relevant residential purpose or a relevant charitablepurpose.

Election to waive exemptionU.K.

2(1)Subject to sub-paragraphs (2) and (3) and paragraph 3 below, where anelection under this paragraph has effect in relation to any land, if and tothe extent that any grant made in relation to it at a time when the electionhas effect by the person who made the election, or where that person is a bodycorporate by that person or a relevant associate, would (apart from thissub-paragraph) fall within Group 1 of Schedule 6 to this Act, the grant shallnot fall within that Group.

(2)Sub-paragraph (1) above shall not apply in relation to a grant if thegrant is made in relation to—

(a)a building or part of a building intended for use as a dwelling or numberof dwellings or solely for a relevant residential purpose; or

(b)a building or part of a building intended for use solely for a relevantcharitable purpose, other than as an office.

(3)Sub-paragraph (1) above shall not apply in relation to a grant if—

(a)the grant is made to a registered housing association and the associationhas given to the grantor a certificate stating that the land is to be used(after any necessary demolition work) for the construction of a building orbuildings intended for use as a dwelling or number of dwellings or solely fora relevant residential purpose; or

(b)the grant is made to an individual and the land is to be used for theconstruction, otherwise than in the course or furtherance of a businesscarried on by him, of a building intended for use by him as a dwelling.

(4)Subject to the following provisions of this paragraph, no input tax on anysupply or importation which, apart from this sub-paragraph, would be allowableby virtue of the operation of this paragraph shall be allowed if the supplyor importation took place before the first day for which the election inquestion has effect.

(5)Subject to sub-paragraph (6) below, sub-paragraph (4) above shall notapply where the person by whom the election was made—

(a)has not, before the first day for which the election has effect, made inrelation to the land in relation to which the election has effect any grantfalling within Group 1 of Schedule 6 to this Act; or

(b)has before that day made in relation to that land a grant or grants sofalling but the grant, or all the grants,—

(i)were made in the period beginning with 1st April 1989 and ending with 31stJuly 1989; and

(ii)would have been taxable supplies but for the amendments made by Schedule3 to the Finance Act 1989.

(6)Sub-paragraph (5) above does not make allowable any input tax on suppliesor importations taking place before 1st August 1989 unless—

(a)it is attributable by or under regulations to grants made by the personon or after 1st April 1989 which would have been taxable supplies but for theamendments made by Schedule 3 to the Finance Act 1989; and

(b)the election has effect from 1st August 1989.

(7)Sub-paragraph (4) above shall not apply in relation to input tax on grantsor other supplies which are made in the period beginning with 1st April 1989and ending with 31st July 1989 if—

(a)they would have been zero-rated by virtue of item 1 or 2 of Group 8 ofSchedule 5 to this Act or exempt by virtue of item 1 of Group 1 of Schedule6 to this Act but for the amendments made by Schedule 3 to the Finance Act1989; and

(b)the election has effect from 1st August 1989.

3(1)An election under paragraph 2 above shall have effect—

(a)from the beginning of the day on which the election is made or of anylater day specified in the election; or

(b)where the election is made before 1st November 1989, from the beginningof 1st August 1989 or of any later day so specified.

(2)An election under paragraph 2 above shall have effect in relation to anyland specified, or of a description specified, in the election.

(3)Where such an election is made in relation to, or to part of, a building(or planned building), it shall have effect in relation to the whole of thebuilding and all the land within its curtilage; and for the purposes of thissub-paragraph buildings linked internally or by a covered walkway, andparades, precincts and complexes divided into separate units, shall be takento be a single building (if they otherwise would not be).

(4)Where such an election is made in relation to agricultural land (includinga building on agricultural land), it shall have effect in relation to anyother agricultural land if that other land is not separated from it by—

(a)land which is not agricultural land; or

(b)agricultural land in separate ownership.

(5)For the purposes of sub-paragraph (4) above—

(a)land shall be taken not to be separated from other land if it is separatedfrom it only by a road, railway, river or something similar; and

(b)land is in separate ownership from land in relation to which an electionis made if the person by whom the election is made has no interest in, rightover or licence to occupy it and, where that person is a body corporate, norelevant associate has any such interest, right or licence.

(6)An election under paragraph 2 above shall be irrevocable and, except whereit is an election of a description specified in a notice published by theCommissioners, shall not have effect unless written notification of it isgiven to the Commissioners together with such information as the Commissionersmay require.

(7)Except where the Commissioners otherwise allow, a notification requiredunder sub-paragraph (6) above shall be given not later than the end of theperiod of thirty days beginning with the day on which the election is made.

(8)In paragraph 2 above and this paragraph “relevantassociate”, in relation to a body corporate by which an electionunder paragraph 2 above has been made in relation to any building or land,means a body corporate which under section 29 of this Act—

(a)was treated as a member of the same group as the body corporate by whichthe election was made at the time when the election first had effect;

(b)has been so treated at any later time when the body corporate by which theelection was made had an interest in, right over or licence to occupy thebuilding or land (or any part of it); or

(c)has been treated as a member of the same group as a body corporate withinparagraph (a) or (b) above or this paragraph at a time when that bodycorporate had an interest in, right over or licence to occupy the building orland (or any part of it).

(9)In paragraph 2 above “registered housing association”means a registered housing association within the meaning of the Housing Associations Act 1985 or Part VII of the Housing (Northern Ireland) Order 1981.

4(1)This paragraph has effect where rent is payable in consideration of thegrant of an interest in, right over, or licence to occupy any building or landto which an election under paragraph 2 above relates (or any part of any suchbuilding or land).

(2)If—

(a)the rent relates to a period beginning before and ending on or after thefirst day for which the election has effect; and

(b)the grant for which the rent is consideration would, apart from thissub-paragraph, take place before that day,

the grant shall be treated as taking place on that day to the extent thatit is made for rent relating to the part of the period falling on or afterthat day.

(3)If—

(a)the rent relates to a period beginning on or after the first day for whichthe election has effect; and

(b)the grant for which the rent is consideration would, apart from thissub-paragraph, take place before that day,

the grant shall be treated as taking place on the first day of the periodto which the rent relates.

(4)If—

(a)the rent relates to a period beginning before the first day for which theelection has effect; and

(b)the grant for which the rent is consideration takes place on or after thatday,

tax shall not be chargeable on the grant by virtue of paragraph 2 aboveto the extent that it is made for rent relating to any time before that day.

(5)Where the rent is payable by a person in relation to a period when he isin occupation of a building completed before 1st August 1989 (or part of sucha building) or land of which he was in occupation immediately before thatdate, any tax which would be chargeable by virtue of paragraph 2 above on thegrant for which the rent is consideration—

(a)except in the case of a charity, shall be chargeable as if theconsideration were reduced by 50 per cent. if and to the extent that the rentrelates to or to any part of the year beginning on 1st August 1989 and endingon 31st July 1990; and

(b)in the case of a charity—

(i)shall be chargeable as if the consideration were reduced by 80 per cent.if and to the extent that the rent relates to or to any part of the yearbeginning on 1st August 1989 and ending on 31st July 1990;

(ii)shall be chargeable as if the consideration were reduced by 60 per cent.if and to the extent that the rent relates to or to any part of the yearbeginning on 1st August 1990 and ending on 31st July 1991;

(iii)shall be chargeable as if the consideration were reduced by 40 per cent.if and to the extent that the rent relates to or to any part of the yearbeginning on 1st August 1991 and ending on 31st July 1992; and

(iv)shall be chargeable as if the consideration were reduced by 20 per cent.if and to the extent that the rent relates to or to any part of the yearbeginning on 1st August 1992 and ending on 31st July 1993.

Developers of certain non-residential buildings etc.U.K.

5(1)Paragraph 6 below shall apply on the first occasion during the periodbeginning with the day when the construction of a building or work withinsub-paragraph (2) below is first planned and ending ten years after thecompletion of the building or work on which a person who is a developer inrelation to the building or work—

(a)grants an interest in, right over or licence to occupy the building orwork (or any part of it) which is an exempt supply; or

(b)is in occupation of the building, or uses the work, (or any part of it)when not a fully taxable person (or, if a person treated under section 29 ofthis Act as a member of a group, when the representative member is not a fullytaxable person).

(2)Subject to sub-paragraph (3) below, the buildings and works within thissub-paragraph are—

(a)any building neither designed as a dwelling or number of dwellings norintended for use solely for a relevant residential purpose or a relevantcharitable purpose; and

(b)any civil engineering work, other than a work necessary for thedevelopment of a permanent park for residential caravans.

(3)A building or work is not within sub-paragraph (2) above if—

(a)construction of it was commenced before 1st August 1989; or

(b)a grant of the fee simple in it which falls within paragraph (a) (ii) or(iv) of item 1 of Group 1 of Schedule 6 to this Act has been made before theoccasion concerned.

(4)For the purposes of this paragraph a taxable person is, in relation to anybuilding or work, a fully taxable person throughout a prescribed accountingperiod if—

(a)at the end of that period he is entitled to credit for input tax on allsupplies to, and importations by, him in the period (apart from any on whichinput tax is excluded from credit by virtue of section 14(10) of this Act);or

(b)the building or work is not used by him at any time during the period in,or in connection with, making any exempt supplies of goods or services.

(5)Subject to sub-paragraph (6) below, in this paragraph and paragraph 6below “developer”, in relation to a building or work, meansany person who—

(a)constructs it;

(b)orders it to be constructed; or

(c)finances its construction,

with a view to granting an interest in, right over or licence to occupyit (or any part of it) or to occupying or using it (or any part of it) for hisown purposes.

(6)Where—

(a)a body corporate treated under section 29 of this Act as a member of agroup is a developer in relation to a building or work; and

(b)it grants an interest in, right over or licence to occupy the building orwork (or any part of it) to another body corporate which is treated under thatsection as a member of the group,

then, for the purposes of this paragraph and paragraph 6 below, as fromthe time of the grant any body corporate such as is mentioned in sub-paragraph(7) below shall be treated as also being a developer in relation to thebuilding or work.

(7)The bodies corporate referred to in sub-paragraph (6) above are any whichunder section 29 of this Act—

(a)was treated as a member of the same group as the body corporate making thegrant at the time of the grant;

(b)has been so treated at any later time when the body corporate by which thegrant was made had an interest in, right over or licence to occupy thebuilding or work (or any part of it); or

(c)has been treated as a member of the same group as a body corporate withinparagraph (a) or (b) above or this paragraph at a time when that bodycorporate had an interest in, right over or licence to occupy the building orwork (or any part of it).

6(1)Where this paragraph applies the interest in, right over or licence tooccupy the building or work (or any part of it) held by the developer shallbe treated for the purposes of this Act as supplied to the developer for thepurpose of a business carried on by him and supplied by him in the course orfurtherance of the business on the last day of the prescribed accountingperiod during which it applies or, if later, of the prescribed accountingperiod during which the building or work becomes substantially ready foroccupation or use.

(2)The supply treated as made by sub-paragraph (1) above shall be taken tobe a taxable supply and the value of the supply shall be the aggregateof—

(a)the value of grants relating to the land on which the building or work isconstructed made or to be made to the developer, other than any grants to bemade for consideration in the form of rent the value of which cannot beascertained by the developer when the supply is treated as made; and

(b)the value of all the taxable supplies of goods and services, other thanany that are zero-rated, made or to be made for or in connection with theconstruction of the building or work.

(3)Where the value of a supply which, apart from this sub-paragraph, wouldbe treated as made by sub-paragraph (1) above would be less than£100,000, no supply shall be treated as made by that sub-paragraph.

GeneralU.K.

7Where the benefit of the consideration for the grant of an interest in,right over or licence to occupy land accrues to a person but that person isnot the person making the grant—

(a)the person to whom the benefit accrues shall for the purposes of this Actbe treated as the person making the grant; and

(b)to the extent that any input tax of the person actually making the grantis attributable to the grant it shall be treated as input tax of the personto whom the benefit accrues.

8The Notes to Group 8 of Schedule 5 to this Act and Group 1 of Schedule 6to this Act apply in relation to this Schedule as they apply in relation totheir respective Groups but subject to any appropriate modifications.”

7In section 42 (adjustment of consideration on changes in tax) of the M7Value Added Tax Act 1983—

(a)the following subsection shall be inserted after subsection (1)—

“(1A)Subsection (1) above shall apply in relation to a tenancy or lease as itapplies in relation to a contract except that a term of a tenancy or leaseshall not be taken to provide that the rule contained in that subsection isnot to apply in the case of the tenancy or lease if the term does not referspecifically to value added tax or this section.”, and

(b)in subsection (2), the words “(including a change attributable tothe making of an election under paragraph 2 of Schedule 6A to thisAct)” shall be added at the end.

8In section 45(4) (orders etc.) of the M8Value Added TaxAct 1983, there shall be added after paragraph (c)—

“(d)an order under section 35A above, except one making only such amendmentsas are necessary or expedient in consequence of provisions of an order underthis Act which—

(i)vary Schedule 5 or Schedule 6 to this Act; but

(ii)are not within paragraph (c) above.”

9In section 48 (interpretation) of the Value Added Tax Act 1983, after thedefinition of “Commissioners” there shall be inserted—

““fee simple”—

(a)in relation to Scotland, means the estate or interest of the proprietorof the dominium utile or, in the case of land not held on feudal tenure, theestate or interest of the owner;

(b)in relation to Northern Ireland, includes the estate of a person who holdsland under a fee farm grant;”.

10In Schedule 1 (registration) to the Value Added Tax Act 1983—

(a)in paragraph 1 there shall be added at the end—

“(6)Where, apart from this sub-paragraph, an interest in, right over orlicence to occupy any land would under sub-paragraph (5) above be disregardedfor the purposes of sub-paragraph (1) above, it shall not be if it is suppliedon a taxable supply which is not zero-rated.”, and

(b)in paragraph 2 there shall be added at the end—

“(4)Where, apart from this sub-paragraph, an interest in, right over orlicence to occupy any land would under sub-paragraph (3) above be disregardedfor the purposes of sub-paragraph (1) above, it shall not be if it is suppliedon a taxable supply which is not zero-rated.”

11In Schedule 2 (supplies of goods and services) to the Value Added Tax Act1983—

(a)in paragraph 4, for the word “granting” there shall be substitutedthe word “grant”,

(b)in paragraph 5(1), for the words “the goods” there shall besubstituted the word “goods”, and

(c)there shall be added at the end—

“8(1)Subject to sub-paragraphs (2) and (3) below, paragraphs 5 to 7 above haveeffect in relation to land forming part of the assets of, or held or used forthe purposes of, a business as if it were goods forming part of the assets of,or held or used for the purposes of, a business.

(2)In the application of those paragraphs by virtue of sub-paragraph (1)above, references to transfer, disposition or sale shall have effect asreferences to the grant or assignment of any interest in, right over orlicence to occupy the land concerned.

(3)Except in relation to—

(a)the grant or assignment of a major interest; or

(b)a grant or assignment otherwise than for a consideration,

in the application of paragraph 5(1) above by virtue of sub-paragraph (1)above the reference to a supply of goods shall have effect as a reference toa supply of services.”

CommencementU.K.

12(1)Subject to sub-paragraphs (2) and (3) and paragraph 13 below, theamendments made by paragraphs 1 to 4 of this Schedule shall have effect inrelation to grants, assignments and other supplies made on or after 1st April1989.

(2)Note 4(b) to Group 8 of Schedule 5 to the M9Value AddedTax Act 1983 shall have effect in relation to grants, assignments and othersupplies made on or after 1st August 1989.

(3)In relation to grants and assignments made on or after 1st April 1989 butbefore 1st August 1989—

(a)that Group shall have effect as if the Notes to it included a Note in thesame terms as Note (1) to that Group as it had effect before the substitutionmade by paragraph 1 above, and

(b)Group 8A of that Schedule shall have effect as if the Notes to it includeda Note in the same terms as Note (5) to that Group as it had effect before theamendments made by paragraph 2 above.

(4)Paragraphs 5, 7, 8, 11 and 13(6) and (7) of this Schedule and paragraph6, so far as relating to section 35A(2) of, and paragraphs 2 to 7 of Schedule6A to, the Value Added Tax Act 1983, shall come into force on 1st August 1989.

(5)Subject to the preceding provisions of this paragraph, this Schedule shallcome into force on 1st April 1989.

13(1)Subject to sub-paragraph (3) below, the amendments made by paragraphs 1and 2 of this Schedule shall not have effect in relation to a grant,assignment or other supply where—

(a)it is made in pursuance of a legally binding obligation to make it whichwas incurred before 21st June 1988, and

(b)if the Commissioners so require (whether before or after it is made), itis proved to their satisfaction by the production of documents made beforethat date that it is so made.

(2)Subject to sub-paragraph (3) below, the amendments made by paragraphs 1and 2 of this Schedule shall not have effect in relation to a grant orassignment of an interest in, or in any part of, a building or its sitewhere—

(a)the grant or assignment takes place before 21st June 1993,

(b)the person making the grant or assignment was under a legally bindingobligation incurred before 21st June 1988 to construct (or reconstruct) thebuilding or to construct any development of which it forms part (other thanan obligation to receive services or goods in the course of the constructionor reconstruction),

(c)if the Commissioners so require (whether before or after the grant orassignment is made), it is proved to their satisfaction by the production ofdocuments made before that date that he was under that obligation, and

(d)planning permission for the construction (or reconstruction) of thebuilding was granted before 21st June 1988.

(3)Where the grant or assignment is of a tenancy or lease—

(a)if a premium is payable, sub-paragraph (1) or (2) above shall apply onlyto the extent that it is made for consideration in the form of the premium;and

(b)if a premium is not payable, sub-paragraph (1) or (2) above shall applyonly to the extent that it is made for consideration in the form of the firstpayment of rent due under the tenancy or lease.

(4)The amendments made by paragraphs 1 and 2 of this Schedule shall not haveeffect in relation to a supply relating to a building or civil engineeringwork where—

(a)the supply takes place before 21st June 1993,

(b)the supply is made to the person constructing the building or work (orreconstructing the building),

(c)that person was under a legally binding obligation incurred before21st June 1988 to construct the building or work (or to reconstruct thebuilding) or to construct any development of which it forms part (other thanan obligation to receive services or goods in the course of the constructionor reconstruction),

(d)if the Commissioners so require (whether before or after the supply ismade), it is proved to their satisfaction by the production of documents madebefore that date that he was under that obligation,

(e)planning permission for the construction of the building or work (or thereconstruction of the building) was granted before 21st June 1988, and

(f)before the supply takes place the person constructing the building or work(or reconstructing the building) has given to the person making the supply acertificate in such form as may be specified in a notice published by theCommissioners stating that the supply is zero-rated (in whole or to the extentspecified in the certificate) by virtue of this sub-paragraph.

(5)Where a grant, assignment or other supply is zero-rated by virtue of thisparagraph, it is not a relevant zero-rated supply for the purposes ofparagraph 1 of Schedule 6A to the M10Value Added Tax Act1983.

(6)Nothing in paragraphs 5 and 6 of that Schedule shall apply—

(a)in relation to a person who has constructed a building if he incurredbefore 21st June 1988 a legally binding obligation to make a grant orassignment of a major interest in, or in any part of, the building or itssite;

(b)in relation to a building or work if there was incurred before that datea legally binding obligation to make in relation to the building or work asupply within item 2 of Group 8 of Schedule 5 to the Value Added Tax Act 1983;

(c)in relation to a person who has constructed a building if—

(i)he incurred before that date a legally binding obligation to construct thebuilding or any development of which it forms part, and

(ii)planning permission for the construction of the building was grantedbefore that date,

except where that person does not make a grant or assignment of a majorinterest in, or in any part of, the building or its site before 21st June1993.

(7)If the Commissioners so require, proof of any of the matters specified insub-paragraph (6)(a), (b) or (c)(i) above shall be given to their satisfactionby the production of documents made before 21st June 1988.

Section 61.

SCHEDULE 4U.K. Profit-Related Pay

1The Taxes Act 1988 shall be amended in accordance with the followingprovisions of this Schedule.

2(1)In section 171(4) (limit on pay of which half may be exempt from tax) for “£3,000” there shall be substituted “£4,000”.

(2)This paragraph shall have effect in relation to profit-related pay paidby reference to profit periods beginning on or after 1st April 1989.

3After section 177 there shall be inserted—

“177A Death of scheme employer.

“177A(1)Where a scheme employer has died, his personal representatives may makea written application to the Board under this section for the amendment of theregistration of the scheme.

(2)If on receiving an application under this section the Board are satisfiedthat, apart from the death of the scheme employer, there would be no groundsfor cancelling the registration of the scheme, the Board shall amend theregistration of the scheme by substituting the personal representatives forthe deceased scheme employer.

(3)An application under this section shall be made before the end of theperiod of one month beginning with the date of the grant of probate or lettersof administration or, in Scotland, confirmation of executors.

(4)Where the Board amend the registration of a scheme under this section,this Chapter shall (subject to any necessary modifications) have effect as ifthe personal representatives had been the scheme employer throughout.

(5)The Board shall give notice to the personal representatives if they refusean application under this section.

177B Alteration of scheme’s terms.

177B(1)The alteration of the terms of a registered scheme shall not of itselfinvalidate the registration of the scheme.

(2)Subsection (1) above is without prejudice to the power of cancellationconferred on the Board by section 178(3A); but the power conferred by section178(3A) shall not be exercisable by virtue of an alteration registered inaccordance with this section.

(3)Where the terms of a registered scheme have been altered, the schemeemployer may apply to the Board for the registration of the alteration.

(4)An application under subsection (3) above—

(a)shall be in such form as the Board may prescribe;

(b)shall be made within the period of one month beginning with the day onwhich the alteration is made;

(c)shall contain a declaration by the applicant that the alteration is withinsubsection (8) below and that the scheme as altered complies with therequirements of Schedule 8 (either as that Schedule had effect when the schemewas registered, or as it then had effect but subject to one or more subsequentamendments specified in the declaration);

(d)shall be accompanied by a report by an independent accountant, in a formprescribed by the Board, to the effect that in his opinion the alteration iswithin subsection (8) below and the scheme as altered complies with therequirements of Schedule 8 (either as that Schedule had effect when the schemewas registered, or as it then had effect but subject to one or more subsequentamendments specified in the report).

(5)The Board shall not more than three months after the day on which theyreceive an application under subsection (3) above either register thealteration or refuse the application; and in either case they shall givenotice of their decision to the applicant.

(6)Subject to subsection (7) below, the Board shall register an alterationon an application under subsection (3) above.

(7)The Board may refuse an application under subsection (3) above if they arenot satisfied—

(a)that the application complies with the requirements of subsection (4)above, or

(b)that the declaration referred to in subsection (4)(c) above is true.

(8)An alteration is within this subsection if—

(a)it relates to a term which is not relevant to the question whether thescheme complies with the requirements of Schedule 8; or

(b)it relates to a term identifying any person (other than the schemeemployer) who pays the emoluments of employees to whom the scheme relates; or

(c)it consists of the addition of a term making provision for an abbreviatedprofit period of the kind referred to in paragraph 10(3) of Schedule 8; or

(d)it amends the provisions by reference to which the employees to whom thescheme relates may be identified, and does so only for the purposes of profitperiods which begin after the date on which the alteration is made; or

(e)it relates to a provision of a kind referred to in paragraph 13(4) or (5)or 14(3), (4) or (5) of Schedule 8 (as those provisions have effect at thetime of the application for registration of the alteration), and has effectonly for the purposes of profit periods beginning after the date on which thealteration is made; or

(f)it amends the provisions as to when payments will be made to employees,and does so only for the purposes of profit periods beginning after the dateon which the alteration is made; or

(g)the scheme did not comply with the requirements of Schedule 8 when it wasregistered, and the alteration—

(i)is made in order to bring the scheme into compliance with the requirementsof that Schedule (either as it had effect when the scheme was registered oras it has effect at the time of the application for registration of thealteration), and

(ii)is made for the purposes of the first and any subsequent profit period towhich the scheme relates, and

(iii)is made within two years of the beginning of the first profit period, and

(iv)does not invalidate (in whole or in part) any payment of profit-relatedpay already made under the scheme.”

4(1)Section 178 (cancellation of registration) shall be amended as follows.

(2)In subsection (1) for the words “subsection (5)” there shall besubstituted the words “subsections (5) and (5A)”.

(3)After subsection (3) there shall be inserted—

“(3A)Where the terms of a registered scheme have been altered, then, subjectto section 177B(2), the Board may cancel the registration of the scheme witheffect from the beginning of the profit period during which the alterationtook effect or with effect from the beginning of any later profit period.

(3B)If after an alteration of the terms of a scheme has been registered undersection 177B it appears to the Board—

(a)that the application for registration of the alteration did not complywith the requirements of subsection (4) of that section, or

(b)that the declaration referred to in subsection (4)(c) of that section wasfalse,

the Board may cancel the registration of the scheme with effect from thebeginning of the profit period during which the alteration took effect or witheffect from the beginning of any later profit period.”

(4)After subsection (5) there shall be inserted—

“(5A)Where—

(a)the scheme employer has died, and

(b)his personal representatives by notice request the Board to cancel theregistration of the scheme with effect from the date of death,

then, if the notice is given before the end of the period of one monthbeginning with the date of the grant of probate or letters of administrationor, in Scotland, confirmation of executors, the Board shall comply with therequest.”

5At the end of section 179 (recovery of tax) there shall be added—

“(3)Where—

(a)the scheme employer has died, but

(b)his personal representatives have not been substituted for him as thescheme employer by virtue of section 177A,

the reference in subsection (2) above to the scheme employer shall beconstrued as a reference to the personal representatives.

(4)Where—

(a)a payment to which this section applies was made by a person other thanthe scheme employer, and

(b)the scheme employer is not resident in the United Kingdom,

then in relation to that payment the reference in subsection (2) aboveto the scheme employer shall include a reference to the person by whom thepayment was made.”

6At the end of section 180 (annual returns) there shall be added—

“(5)Where—

(a)the scheme employer has died, but

(b)his personal representatives have not been substituted for him as thescheme employer by virtue of section 177A,

the reference in subsection (1) above to the scheme employer shall beconstrued as a reference to the personal representatives.”

7At the end of section 181 (information) there shall be added—

“(4)Where the scheme employer has died, his personal representatives shallinform the Board of his death by notice given before the end of the period ofone month beginning with the date of the grant of probate or letters ofadministration or, in Scotland, confirmation of executors.”

8(1)Section 182 (appeals) shall be amended as follows.

(2)In subsection (1) after paragraph (b) there shall be inserted—

“(bb)against a refusal by the Board of an application under section 177B(3);”.

(3)After subsection (1) there shall be inserted—

“(1A)An appeal to the Special Commissioners may be made by the personalrepresentatives of a scheme employer against a refusal by the Board of anapplication under section 177A.”

(4)In subsection (2) for the words “scheme employer” there shall besubstituted the word “appellant”.

9(1)Paragraph 7 of Schedule 8 (no payments for employees with materialinterest in company) shall be amended as follows.

(2)In sub-paragraph (1), the words “, or is an associate of a person who has,” shall be omitted.

(3)In sub-paragraph (3), after the words “section 417(3) and (4)” thereshall be inserted the words “, but subject to sub-paragraph (4) below”.

(4)The following sub-paragraphs shall be added at the end—

“(4)For the purposes of this paragraph, where an employee of a company has aninterest in shares or obligations of the company as a beneficiary of anemployee benefit trust, the trustees shall not be regarded as associates ofhis by reason only of that interest unless sub-paragraph (8) below applies inrelation to him.

(5)A trust is an employee benefit trust for the purposes of this paragraphif—

(a)all or most of the employees of the company are eligible to benefit underit, and

(b)none of the property subject to it has been disposed of on or after 14thMarch 1989 (whether by sale, loan or otherwise) except in the ordinary courseof management of the trust or in accordance with sub-paragraph (6) below.

(6)Property is disposed of in accordance with this sub-paragraph if—

(a)it is applied for the benefit of—

(i)individual employees or former employees of the company,

(ii)spouses, former spouses, widows or widowers of employees or formeremployees of the company,

(iii)relatives, or spouses of relatives, of persons within sub-paragraph (i)or (ii) above, or

(iv)dependants of persons within sub-paragraph (i) above,

(b)it is applied for charitable purposes, or

(c)it is transferred to the trustees of an approved profit sharing scheme(within the meaning of section 187), of another employee benefit trust, or ofa qualifying employee share ownership trust (within the meaning of Schedule5 to the Finance Act 1989),

and the property applied or transferred consists of any of the ordinaryshare capital of the company or of money paid outright.

(7)In sub-paragraph (6)(a)(iii) above “relative” means parent or remoter forebear, child or remoterissue, brother, sister, uncle, aunt, nephew or niece.

(8)This sub-paragraph applies in relation to an employee if at any time onor after 14th March 1989—

(a)the employee, either on his own or with any one or more of his associates,or

(b)any associate of his, with or without other such associates,

has been the beneficial owner of, or able (directly or through the mediumof other companies or by any other indirect means) to control, more than 25per cent. of the ordinary share capital of the company.

(9)Where—

(a)on or after 14th March 1989 an employee of a company, or an associate ofhis, receives a payment (“the relevant payment”) from the trustees of anemployee benefit trust, and

(b)at any time during the period of three years ending with the day on whichthe relevant payment is received, the property subject to the trust consistsof or includes any part of the ordinary share capital of the company,

the employee or associate shall be treated for the purposes ofsub-paragraph (8) above as if he were the beneficial owner of the appropriatepercentage of the ordinary share capital of the company on the day on whichthe relevant payment is received (in addition to any percentage of that sharecapital of which he is actually the beneficial owner on that day).

(10)For the purposes of sub-paragraph (9) above, the appropriate percentageis—

• A is the smaller of—

  • (a) the aggregate of the relevant payment and any other paymentsreceived by the employee or associates of his from the trustees of the trustduring the period of 12 months ending with the day on which the relevant payment is received, and

  • (b) the aggregate of the distributions made to the trustees of the trustby the company in respect of its ordinary share capital during the period ofthree years ending with the day on which the relevant payment is received; and

• B is the aggregate of—

  • (a) any distributions made by the company in respect of its ordinaryshare capital during the period of 12 months ending with the day on which therelevant payment is received,

  • (b) any distributions so made during the period of 12 months immediatelypreceding that mentioned in paragraph (a) above, and

  • (c) any distributions so made during the period of 12 months immediately preceding that mentioned in paragraph (b) above,

divided by the number of the periods mentioned in paragraphs (a) to(c) above in which distributions were so made.

(11)Where—

(a)an employee or associate is treated by sub-paragraph (9) above as if hewere the beneficial owner of a percentage of the ordinary share capital of acompany by reason of receiving the relevant payment from the trustees of atrust, and

(b)that employee, or an associate of his, has, during the period of 12 monthsending with the day on which the relevant payment is received, received oneor more payments from trustees of another employee benefit trust or trustssatisfying the requirement in paragraph (b) of sub-paragraph (9) above,

that sub-paragraph shall have effect in relation to the employee orassociate mentioned in paragraph (a) above as if he had received the paymentfrom the trustees of the trust or of each of the trusts mentioned in paragraph(b) above (or where more than one payment has been received from the trusteesof a trust, the last of the payments) on the day on which the relevant paymentis received.

(12)In sub-paragraphs (8) to (11) above “associate”, in relation to an employee, does not include thetrustees of an employee benefit trust by reason only that the employee has aninterest in shares or obligations of the trust.”

10(1)Paragraphs 13(2) and 14(2) of Schedule 8 (which provide for a scheme’sdistributable pool to be at least 5 per cent. of the pay of all the employeesto whom the scheme relates if profits remain unchanged) shall be omitted.

(2)In consequence of sub-paragraph (1) above—

(a)the following provisions shall be omitted—

• section 175(3);

• in section 176(1), the words “(but not more than six months)”;

• section 178(2)(b);

• in paragraph 13(1) of Schedule 8, the word “fixed”;

• paragraph 13(3) of that Schedule;

• paragraph 14(7) of that Schedule.

(b)in paragraph 13 of Schedule 8—

(i)after sub-paragraph (1) there shall be inserted—

“(1A)That percentage must be a fixed percentage specified in the scheme and,if the scheme relates to more than one period, must be the same for eachperiod.”;

(ii)in sub-paragraph (4)(a), for the words “the base year referred to insub-paragraph (3) above” there shall be substituted the words “a baseyear specified in the scheme”;

(iii)in sub-paragraph (5), for the words “must be” onwards there shall besubstituted the words “must not exceed the profits for a base year specifiedin the scheme”;

(iv)for sub-paragraph (6), there shall be substituted—

“(6)The base year referred to in sub-paragraph (4)(a) and sub-paragraph (5)above must be a period of 12 months ending at a time within the period of twoyears immediately preceding the profit period, or the first of the profitperiods, to which the scheme relates”;

(c)in paragraph 14(5) of that Schedule, for the words “must be” onwardsthere shall be substituted the words “must not exceed the profits in theperiod of 12 months immediately preceding the first or only profit period towhich the scheme relates”.

11At the end of paragraph 13 of Schedule 8 (calculation of distributablepool by method A) there shall be added—

“(7)Any provision included in a scheme by virtue of sub-paragraph (4) or (5)above may take effect either from the scheme’s first profit period or from anylater profit period determined in accordance with the scheme.”

12In paragraph 14 of Schedule 8 (calculation of distributable pool by methodB), in sub-paragraph (5) the words “specified in, or” shall be omitted.

13At the end of paragraph 14 of Schedule 8 there shall be added—

“(8)Any provision included in a scheme by virtue of sub-paragraph (3)(b), (4)or (5) above may take effect either from the scheme’s first profit period orfrom any later profit period determined in accordance with the scheme.”

14(1)Paragraph 19 of Schedule 8 (profit and loss account for purposes ofprofit-related pay scheme) shall be amended as follows.

(2)After sub-paragraph (4) (account to make no allowance for remuneration ofpersons excluded from scheme) there shall be inserted—

“(4A)In sub-paragraph (4) above “remuneration”, in relation to a person, includes fees andpercentages, any sums paid by way of expenses allowance (insofar as those sumsare charged to income tax), any contributions paid in respect of him under anypension scheme and the estimated value of any other benefits received by himotherwise than in cash.”

(3)In sub-paragraph (6) (items which may be left out of account in arrivingat profits or losses) for paragraph (f) there shall be substituted—

“(f)profit-related pay payable under the scheme, and profit-related paypayable under any other registered scheme if it is one to which paragraph 21below applies;

(ff)secondary Class 1 contributions under Part I of the Social Security Act 1975 or Part I of the SocialSecurity (Northern Ireland) Act 1975 in respect of profit-related pay payableunder the scheme;”.

15After paragraph 20 of Schedule 8 there shall be inserted—

“ Parts of undertakings

21(1)This paragraph shall apply to a scheme if the employment unit is a partof an undertaking, and the scheme states that the profits or losses of theunit are for the purposes of the scheme to be taken to be equivalent to thoseof the whole undertaking (which must be identified by the scheme).

(2)Where this paragraph applies to a scheme, this Schedule shall have effectas if any reference to the profits or losses of the employment unit were areference to the profits or losses of the undertaking of which it forms part.

22(1)Where paragraph 21 above applies to a scheme, the scheme must containprovisions ensuring that no payments are made under it by reference to aprofit period unless, at the beginning of that profit period,—

(a)there is at least one other registered scheme which relates to employeesemployed in the same undertaking as that of which the employment unit formspart, and

(b)the number of the employees to whom the scheme relates does not exceed 33per cent. of the number of the employees to whom that other scheme relates (orif there is more than one other scheme, the aggregate number of the employeesto whom they relate).

(2)Another registered scheme shall be disregarded for the purposes ofsub-paragraph (1) above—

(a)if paragraph 21 above applies to it, or

(b)if, by virtue of provisions of the kind described in paragraph 6 above,no payments could be made under it by reference to the profit periodconcerned.

(3)Where paragraph 21 above applies to two or more schemes relating toemployment units which are parts of the same undertaking, an employee to whomanother scheme relates shall not be counted for the purposes of sub-paragraph(1)(b) above in connection with more than one of those schemes.”

Section 74.

SCHEDULE 5U.K. Employee Share Ownership Trusts

Qualifying trustsU.K.

1U.K.A trust is a qualifying employee share ownership trust at the time it isestablished if the conditions set out in paragraphs 2 to 11 below aresatisfied in relation to the trust at that time.

GeneralU.K.

2(1)The trust must be established under a deed (the trust deed).U.K.

(2)The trust must be established by a company (the founding company) which,at the time the trust is established, is resident in the United Kingdom andnot controlled by another company.

TrusteesU.K.

3(1)The trust deed must provide for the establishment of a body of trustees.U.K.

(2)The trust deed must—

(a)appoint the initial trustees;

(b)contain rules for the retirement and removal of trustees;

(c)contain rules for the appointment of replacement and additional trustees.

(3)The trust deed must provide that at any time while the trust subsists (therelevant time)—

(a)the number of trustees must not be less than three;

(b)all the trustees must be resident in the United Kingdom;

(c)the trustees must include one person who is a trust corporation, asolicitor, or a member of such other professional body as the Board may fromtime to time allow for the purposes of this paragraph;

(d)most of the trustees must be persons who are not and have never beendirectors of any company which falls within the founding company’s group atthe relevant time;

(e)most of the trustees must be persons who are employees of companies whichfall within the founding company’s group at the relevant time, and who do nothave and have never had a material interest in any such company;

(f)the trustees falling within paragraph (e) above must, before beingappointed as trustees, have been selected by a majority of the employees ofthe companies falling within the founding company’s group at the time of theselection or by persons elected to represent those employees.

(4)For the purposes of sub-paragraph (3) above a company falls within thefounding company’s group at a particular time if—

(a)it is the founding company, or

(b)it is at that time resident in the United Kingdom and controlled by thefounding company.

[F3(5)This paragraph applies in relation to trusts established on or before the day on which the Finance Act 1994 was passed.]

[F43AU.K.Where a trust is established after the day on which the Finance Act 1994 was passed, the trust deed must make provision as mentioned in one of paragraphs (a) to (c) below—

(a)provision for the establishment of a body of trustees and complying with paragraph 3(2) to (4) above;

(b)provision for the establishment of a body of trustees and complying with paragraph 3B(2) to (9) below;

(c)provision that at any time while the trust subsists there must be a single trustee.]

F53B(1)The following are the provisions that must be complied with under paragraph 3A(b) above.U.K.

(2)The trust deed must—

(a)appoint the initial trustees;

(b)contain rules for the retirement and removal of trustees;

(c)contain rules for the appointment of replacement and additional trustees.

(3)The trust deed must be so framed that at any time while the trust subsists the conditions set out in sub-paragraph (4) below are fulfilled as regards the persons who are then trustees; and in that sub-paragraph “the relevant time” means that time.

(4)The conditions are that—

(a)the number of trustees is not less than three;

(b)all the trustees are resident in the United Kingdom;

(c)the trustees include at least one person who is a professional trustee and at least two persons who are non-professional trustees;

(d)at least half of the non-professional trustees were, before being appointed as trustees, selected in accordance with sub-paragraph (7) or (8) below;

(e)all the trustees so selected are persons who are employees of companies which fall within the founding company’s group at the relevant time, and who do not have and have never had a material interest in any such company.

(5)For the purposes of this paragraph a trustee is a professional trustee at a particular time if—

(a)the trustee is then a trust corporation, a solicitor, or a member of such other professional body as the Board may at that time allow for the purposes of this sub-paragraph,

(b)the trustee is not then an employee or director of any company then falling within the founding company’s group, and

(c)the trustee meets the requirements of sub-paragraph (6) below;

and for the purposes of this paragraph a trustee is a non-professional trustee at a particular time if the trustee is not then a professional trustee for those purposes.

(6)A trustee meets the requirements of this sub-paragraph if—

(a)he was appointed as an initial trustee and, before being appointed as trustee, was selected by (and only by) the persons who later became the non-professional initial trustees, or

(b)he was appointed as a replacement or additional trustee and, before being appointed as trustee, was selected by (and only by) the persons who were the non-professional trustees at the time of the selection.

(7)Trustees are selected in accordance with this sub-paragraph if the process of selection is one under which—

(a)all the persons who are employees of the companies which fall within the founding company’s group at the time of the selection, and who do not have and have never had a material interest in any such company, are (so far as is reasonably practicable) given the opportunity to stand for selection,

(b)all the employees of the companies falling within the founding company’s group at the time of the selection are (so far as is reasonably practicable) given the opportunity to vote, and

(c)persons gaining more votes are preferred to those gaining less.

(8)Trustees are selected in accordance with this sub-paragraph if they are selected by persons elected to represent the employees of the companies falling within the founding company’s group at the time of the selection.

(9)For the purposes of this paragraph a company falls within the founding company’s group at a particular time if—

(a)it is at that time resident in the United Kingdom, and

(b)it is the founding company or it is at that time controlled by the founding company.

F63C(1)This paragraph applies where the trust deed provides that at any time while the trust subsists there must be a single trustee.U.K.

(2)The trust deed must—

(a)be so framed that at any time while the trust subsists the trustee is a company which at that time is resident in the United Kingdom and controlled by the founding company;

(b)appoint the initial trustee;

(c)contain rules for the removal of any trustee and for the appointment of a replacement trustee.

(3)The trust deed must be so framed that at any time while the trust subsists the company which is then the trustee is a company so constituted that the conditions set out in sub-paragraph (4) below are then fulfilled as regards the persons who are then directors of the company; and in that sub-paragraph “the relevant time” is that time and “the trust company” is that company.

(4)The conditions are that—

(a)the number of directors is not less than three;

(b)all the directors are resident in the United Kingdom;

(c)the directors include at least one person who is a professional director and at least two persons who are non-professional directors;

(d)at least half of the non-professional directors were, before being appointed as directors, selected in accordance with sub-paragraph (7) or (8) below;

(e)all the directors so selected are persons who are employees of companies which fall within the founding company’s group at the relevant time, and who do not have and have never had a material interest in any such company.

(5)For the purposes of this paragraph a director is a professional director at a particular time if—

(a)the director is then a solicitor or a member of such other professional body as the Board may at that time allow for the purposes of this sub-paragraph,

(b)the director is not then an employee of any company then falling within the founding company’s group,

(c)the director is not then a director of any such company (other than the trust company), and

(d)the director meets the requirements of sub-paragraph (6) below;

and for the purposes of this paragraph a director is a non-professional director at a particular time if the director is not then a professional director for those purposes.

(6)A director meets the requirements of this sub-paragraph if—

(a)he was appointed as an initial director and, before being appointed as director, was selected by (and only by) the persons who later became the non-professional initial directors, or

(b)he was appointed as a replacement or additional director and, before being appointed as director, was selected by (and only by) the persons who were the non-professional directors at the time of the selection.

(7)Directors are selected in accordance with this sub-paragraph if the process of selection is one under which—

(a)all the persons who are employees of the companies which fall within the founding company’s group at the time of the selection, and who do not have and have never had a material interest in any such company, are (so far as is reasonably practicable) given the opportunity to stand for selection,

(b)all the employees of the companies falling within the founding company’s group at the time of the selection are (so far as is reasonably practicable) given the opportunity to vote, and

(c)persons gaining more votes are preferred to those gaining less.

(8)Directors are selected in accordance with this sub-paragraph if they are selected by persons elected to represent the employees of the companies falling within the founding company’s group at the time of the selection.

(9)For the purposes of this paragraph a company falls within the founding company’s group at a particular time if—

(a)it is at that time resident in the United Kingdom, and

(b)it is the founding company or it is at that time controlled by the founding company.

BeneficiariesU.K.

4(1)The trust deed must contain provision as to the beneficiaries under thetrust, in accordance with the following rules.

(2)The trust deed must provide that a person is a beneficiary at a particulartime (the relevant time) if—

(a)he is at the relevant time an employee or director of a company which atthat time falls within the founding company’s group,

(b)at each given time in a qualifying period he was an employee or directorof a company falling within the founding company’s group at that given time,and

(c)at that given time he worked as an employee or director of the companyconcerned at the rate of at least 20 hours a week (ignoring such matters asholidays and sickness).

(3)The trust deed may provide that a person is a beneficiary at a particulartime (the relevant time) if—

(a)he has at each given time in a qualifying period been an employee ordirector of a company falling within the founding company’s group at thatgiven time,

(b)he has ceased to be an employee or director of the company or the companyhas ceased to fall within that group, and

(c)at the relevant time a period of not more than eighteen months has elapsedsince he so ceased or the company so ceased (as the case may be).

(4)The trust deed may provide for a person to be a beneficiary if the personis a charity and the circumstances are such that—

(a)there is no person who is a beneficiary within any rule which is includedin the deed and conforms with sub-paragraph (2) or (3) above, and

(b)the trust is in consequence being wound up.

(5)For the purposes of sub-paragraph (2) above a qualifying period is aperiod—

(a)whose length is not less than one year and not more than five years,

(b)whose length is specified in the trust deed, and

(c)which ends with the relevant time (within the meaning of thatsub-paragraph).

(6)For the purposes of sub-paragraph (3) above a qualifying period is aperiod—

(a)whose length is equal to that of the period specified in the trust deedfor the purposes of a rule which conforms with sub-paragraph (2) above, and

(b)which ends when the person or company (as the case may be) ceased asmentioned in sub-paragraph (3)(b) above.

(7)The trust deed must not provide for a person to be a beneficiary unlesshe falls within any rule which is included in the deed and conforms withsub-paragraph (2), (3) or (4) above.

(8)The trust deed must provide that, notwithstanding any other rule which isincluded in it, a person cannot be a beneficiary at a particular time (therelevant time) if—

(a)at that time he has a material interest in the founding company, or

(b)at any time in the period of one year preceding the relevant time he hashad a material interest in that company.

(9)For the purposes of this paragraph a company falls within the foundingcompany’s group at a particular time if—

(a)it is at that time resident in the United Kingdom, and

(b)it is the founding company or it is at that time controlled by thefounding company.

(10)For the purposes of this paragraph a charity is a body of personsestablished for charitable purposes only.

Trustees’ functionsU.K.

5(1)The trust deed must contain provision as to the functions of the trustees.

(2)The functions of the trustees must be so expressed that it is apparentthat their general functions are—

(a)to receive sums from the founding company and other sums (by way of loanor otherwise);

(b)to acquire securities;

(c)to transfer securities or sums (or both) to persons who are beneficiariesunder the terms of the trust deed;

(d)to transfer securities to the trustees of profit sharing schemes approvedunder Schedule 9 to the Taxes Act 1988, for a price not less than the pricethe securities might reasonably be expected to fetch on a sale in the openmarket;

(e)pending transfer, to retain the securities and to manage them (whether byexercising voting rights or otherwise).

SumsU.K.

6(1)The trust deed must require that any sum received by the trustees—U.K.

(a)must be expended within the relevant period,

(b)may be expended only for one or more of the qualifying purposes, and

(c)must, while it is retained by them, be kept as cash or be kept in anaccount with a bank or building society.

(2)For the purposes of sub-paragraph (1) above the relevant period is theperiod of nine months beginning with the day found as follows—

(a)in a case where the sum is received from the founding company, or acompany which is controlled by that company at the time the sum is received,the day following the end of the period of account in which the sum is chargedas an expense of the company from which it is received;

(b)in any other case, the day the sum is received.

(3)For the purposes of sub-paragraph (1) above each of the following is aqualifying purpose—

(a)the acquisition of shares in the founding company;

(b)the repayment of sums borrowed;

(c)the payment of interest on sums borrowed;

(d)the payment of any sum to a person who is a beneficiary under the termsof the trust deed;

(e)the meeting of expenses.

(4)The trust deed must provide that, in ascertaining for the purposes of arelevant rule whether a particular sum has been expended, sums receivedearlier by the trustees shall be treated as expended before sums received bythem later; and a relevant rule is one which is included in the trust deed andconforms with sub-paragraph (1) above.

(5)The trust deed must provide that, where the trustees pay sums to differentbeneficiaries at the same time, all the sums must be paid on similar terms.

(6)For the purposes of sub-paragraph (5) above, the fact that terms varyaccording to the levels of remuneration of beneficiaries, the length of theirservice, or similar factors, shall not be regarded as meaning that the termsare not similar.

SecuritiesU.K.

7(1)Subject to paragraph 8 below, the trust deed must provide that securitiesacquired by the trustees must be shares in the founding company which—U.K.

(a)form part of the ordinary share capital of the company,

(b)are fully paid up,

(c)are not redeemable, and

(d)are not subject to any restrictions other than restrictions which attachto all shares of the same class or a restriction authorised by sub-paragraph(2) below.

(2)Subject to sub-paragraph (3) below, a restriction is authorised by thissub-paragraph if—

(a)it is imposed by the founding company’s articles of association,

(b)it requires all shares held by directors or employees of the foundingcompany, or of any other company which it controls for the time being, to bedisposed of on ceasing to be so held, and

(c)it requires all shares acquired, in pursuance of rights or interestsobtained by such directors or employees, by persons who are not (or haveceased to be) such directors or employees to be disposed of when they areacquired.

(3)A restriction is not authorised by sub-paragraph (2) above unless—

(a)any disposal required by the restriction will be by way of sale for aconsideration in money on terms specified in the articles of association, and

(b)the articles also contain general provisions by virtue of which any persondisposing of shares of the same class (whether or not held or acquired asmentioned in sub-paragraph (2) above) may be required to sell them on termswhich are the same as those mentioned in paragraph (a) above.

(4)The trust deed must provide that shares in the founding company may notbe acquired by the trustees at a price exceeding the price they mightreasonably be expected to fetch on a sale in the open market.

(5)The trust deed must provide that shares in the founding company may notbe acquired by the trustees at a time when that company is controlled byanother company.

8U.K.The trust deed may provide that the trustees may acquire securities otherthan shares in the founding company—

(a)if they are securities issued to the trustees in exchange in circumstancesmentioned in section [F7135(1) of the M11Taxation of Chargeable Gains Act1992], or

(b)if they are securities acquired by the trustees as a result of areorganisation, and the original shares the securities represent are sharesin the founding company (construing “reorganisation” and “originalshares” in accordance with section [F7126] of that Act).

9(1)The trust deed must provide that—

(a)where the trustees transfer securities to a beneficiary, they must do soon qualifying terms;

(b)the trustees must transfer securities before the expiry of the [F8qualifying period] beginning with the date on which they acquired them.

(2)For the purposes of sub-paragraph (1) above a transfer of securities ismade on qualifying terms if—

(a)all the securities transferred at the same time are transferred on similarterms,

(b)securities have been offered to all the persons who are beneficiariesunder the terms of the trust deed when the transfer is made, and

(c)securities are transferred to all such beneficiaries who have accepted.

[F9(2A)For the purposes of sub-paragraph (1) above the qualifying period is—

(a)seven years, in the case of trusts established on or before the day on which the Finance Act 1994 was passed;

(b)twenty years, in the case of other trusts.]

(3)For the purposes of sub-paragraph (2) above, the fact that terms varyaccording to the levels of remuneration of beneficiaries, the length of theirservice, or similar factors, shall not be regarded as meaning that the termsare not similar.

(4)The trust deed must provide that, in ascertaining for the purposes of arelevant rule whether particular securities are transferred, securitiesacquired earlier by the trustees shall be treated as transferred by thembefore securities acquired by them later; and a relevant rule is one which isincluded in the trust deed and conforms with sub-paragraph (1) above.

Other featuresU.K.

10The trust deed must not contain features which are not essential orreasonably incidental to the purpose of acquiring sums and securities,transferring sums and securities to employees and directors, and transferringsecurities to the trustees of profit sharing schemes approved under Schedule9 to the Taxes Act 1988.

Rules about acquisition etc.U.K.

11(1)The trust deed must provide that, for the purposes of the deed, thetrustees—U.K.

(a)acquire securities when they become entitled to them;

(b)transfer securities to another person when that other becomes entitled tothem;

(c)retain securities if they remain entitled to them.

(2)But if the deed provides as mentioned in paragraph 8 above, it mustprovide for the following exceptions to any rule which is included in it andconforms with sub-paragraph (1)(a) above, namely, that—

(a)if securities are issued to the trustees in exchange in circumstancesmentioned in section [F10135(1) of the M12Taxation of Chargeable Gains Act 1992], they shall be treated as having acquired them when they became entitledto the securities for which they are exchanged;

(b)if the trustees become entitled to securities as a result of areorganisation, they shall be treated as having acquired them when they becameentitled to the original shares which those securities represent (construing “reorganisation” and “original shares” in accordance with section [F10126] of that Act).

(3)The trust deed must provide that—

(a)if the trustees agree to take a transfer of securities, for the purposesof the deed they become entitled to them when the agreement is made and noton a later transfer made pursuant to the agreement;

(b)if the trustees agree to transfer securities to another person, for thepurposes of the deed the other person becomes entitled to them when theagreement is made and not on a later transfer made pursuant to the agreement.

Position after trust’s establishmentU.K.

12U.K.A trust which was at the time it was established a qualifying employeeshare ownership trust shall continue to be one, except that it shall not besuch a trust at any time when the requirements mentioned in paragraph 3(3)(a)to (f) above are not satisfied. [F11This paragraph applies in relation to trusts established on or before the day on which the Finance Act 1994 was passed.]

[F1212A(1)Subject to sub-paragraphs (2) and (3) below, a trust which was at the time it was established a qualifying employee share ownership trust shall continue to be one.U.K.

(2)If the trust deed makes provision under paragraph 3A(a) above, the trust shall not be a qualifying employee share ownership trust at any time when the requirements mentioned in paragraph 3(3)(a) to (f) above are not satisfied.

(3)If the trust deed makes provision under paragraph 3A(b) above, the trust shall not be a qualifying employee share ownership trust at any time when the conditions mentioned in paragraph 3B(4)(a) to (e) above are not satisfied.

(4)If the trust deed makes provision under paragraph 3A(c) above, the trust shall not be a qualifying employee share ownership trust at any time when—

(a)there is not a single trustee,

(b)the trustee is not a company which is resident in the United Kingdom and controlled by the founding company, or

(c)the conditions mentioned in paragraph 3C(4)(a) to (e) above are not satisfied as regards the directors of the trustee.

(5)This paragraph applies in relation to trusts established after the day on which the Finance Act 1994 was passed.]

13U.K.A trust is an employee share ownership trust at a particular time (therelevant time) if it was a qualifying employee share ownership trust at thetime it was established; and it is immaterial whether or not it is aqualifying employee share ownership trust at the relevant time.

InterpretationU.K.

14U.K.For the purposes of this Schedule the following are securities—

(a)shares;

(b)debentures.

15U.K.For the purposes of this Schedule, the question whether one company iscontrolled by another shall be construed in accordance with section 840 of theTaxes Act 1988.

16(1)For the purposes of this Schedule a person shall be treated as having amaterial interest in a company if he, either on his own or with one or moreof his associates, or if any associate of his with or without other suchassociates,—U.K.

(a)is the beneficial owner of, or able (directly or through the medium ofother companies or by any other indirect means) to control, more than 5 percent. of the ordinary share capital of the company, or

(b)possesses, or is entitled to acquire, such rights as would, in the eventof the winding-up of the company or in any other circumstances, give anentitlement to receive more than 5 per cent. of the assets which would thenbe available for distribution among the participators.

(2)In this paragraph—

(a)“associate” has the same meaning as in section 417(3) and (4)of the Taxes Act 1988, but subject to sub-paragraph (3) below,

(b)“control” has the meaning given by section 840 of that Act,and

(c)“participator” has the same meaning as in Part XI of thatAct.

(3)Where a person has an interest in shares or obligations of the company asa beneficiary of an employee benefit trust, the trustees shall not be regardedas associates of his by reason only of that interest unless sub-paragraph (5)below applies in relation to him.

(4)In sub-paragraph (3) above “employee benefit trust” hasthe same meaning as in paragraph 7 of Schedule 8 to the Taxes Act 1988, exceptthat in its application for this purpose paragraph 7(5)(b) of that Scheduleshall have effect as if it referred to the day on which this Act was passedinstead of to 14th March 1989.

(5)This sub-paragraph applies in relation to a person if at any time on orafter the day on which this Act was passed—

(a)he, either on his own or with any one or more of his associates, or

(b)any associate of his, with or without other such associates,

has been the beneficial owner of, or able (directly or through the mediumof other companies or by any other indirect means) to control, more than 5 percent. of the ordinary share capital of the company.

(6)Sub-paragraphs (9) to (12) of paragraph 7 of Schedule 8 to the Taxes Act1988 shall apply for the purposes of sub-paragraph (5) above as they apply forthe purposes of that paragraph.

[F1317U.K.For the purposes of this Schedule a trust is established when the deed under which it is established is executed.]

Section 75.

SCHEDULE 6U.K. Retirement Benefits Schemes

Part IU.K. Amendments of Taxes Act

PreliminaryU.K.

1U.K.The Taxes Act 1988 shall be amended as mentioned in the followingprovisions of this Part of this Schedule.

AmendmentsU.K.

2In section 431(4) (pension business of insurance companies) for paragraph(d)(ii) there shall be substituted—

“(ii)a scheme which is a relevant statutory scheme for the purposes of ChapterI of Part XIV;”

3(1)Section 590 (conditions for approval of schemes) shall be amended asfollows.U.K.

(2)In subsection (3)(d) (condition to be satisfied as to lump sum) the words “(disregarding any excess of that remuneration over the permittedmaximum)” shall be omitted.

(3)In subsection (3) for the words from “In paragraph (d) above” to theend there shall be substituted—

“(e)that, in the case of any employee who is a member of the scheme by virtueof two or more relevant associated employments, the amount payable by way ofpension in respect of service in any one of them may not, when aggregated withany amount payable by way of pension in respect of service in the other orothers, exceed the relevant amount;

(f)that, in the case of any employee who is a member of the scheme by virtueof two or more relevant associated employments, the amount payable by way ofcommuted pension in respect of service in any one of them may not, whenaggregated with any amount payable by way of commuted pension in respect ofservice in the other or others, exceed the relevant amount;

(g)that, in the case of any employee in relation to whom the scheme isconnected with another scheme which is (or other schemes each of which is) anapproved scheme, the amount payable by way of pension under the scheme maynot, when aggregated with any amount payable by way of pension under the otherscheme or schemes, exceed the relevant amount;

(h)that, in the case of any employee in relation to whom the scheme isconnected with another scheme which is (or other schemes each of which is) anapproved scheme, the amount payable by way of commuted pension may not, whenaggregated with any amount payable by way of commuted pension under the otherscheme or schemes, exceed the relevant amount.”

(4)For subsection (7) there shall be substituted—

“(7)Subsections (8) to (10) below apply where the Board are consideringwhether a retirement benefits scheme satisfies or continues to satisfy theprescribed conditions.

(8)For the purpose of determining whether the scheme, so far as it relatesto a particular class or description of employees, satisfies or continues tosatisfy the prescribed conditions, that scheme shall be considered inconjunction with—

(a)any other retirement benefits scheme (or schemes) which relates (orrelate) to employees of that class or description and which is (or are)approved for the purposes of this Chapter,

(b)any other retirement benefits scheme (or schemes) which relates (orrelate) to employees of that class or description and which is (or are) at thesame time before the Board in order for them to decide whether to giveapproval for the purposes of this Chapter,

(c)any section 608 scheme or schemes relating to employees of that class ordescription, and

(d)any relevant statutory scheme or schemes relating to employees of thatclass or description.

(9)If those conditions are satisfied in the case of both or all of thoseschemes taken together, they shall be taken to be satisfied in the case of thescheme mentioned in subsection (7) above (as well as the other or others).

(10)If those conditions are not satisfied in the case of both or all of thoseschemes taken together, they shall not be taken to be satisfied in the caseof the scheme mentioned in subsection (7) above.

(11)The reference in subsection (8)(c) above to a section 608 scheme is areference to a fund to which section 608 applies.”

4U.K.The following sections shall be inserted after section 590—

“590A Section 590: supplementary provisions.

(1)For the purposes of section 590(3)(e) and (f) two or more employments arerelevant associated employments if they are employments in the case ofwhich—

(a)there is a period during which the employee has held both or all of them,

(b)the period counts under the scheme in the case of both or all of them asa period in respect of which benefits are payable, and

(c)the period is one during which both or all of the employers in questionare associated.

(2)For the purposes of section 590(3)(g) and (h) the scheme is connected withanother scheme in relation to an employee if—

(a)there is a period during which he has been the employee of two persons whoare associated employers,

(b)the period counts under both schemes as a period in respect of whichbenefits are payable, and

(c)the period counts under one scheme by virtue of service with one employerand under the other scheme by virtue of service with the other employer.

(3)For the purposes of subsections (1) and (2) above, employers areassociated if (directly or indirectly) one is controlled by the other or ifboth are controlled by a third person.

(4)In subsection (3) above the reference to control, in relation to a bodycorporate, shall be construed—

(a)where the body corporate is a close company, in accordance with section416, and

(b)where it is not, in accordance with section 840.

590B Section 590: further supplementary provisions.

(1)For the purposes of section 590(3)(e) the relevant amount, in relation toan employee, shall be found by applying the following formula—

(2)For the purposes of section 590(3)(f) the relevant amount, in relation toan employee, shall be found by applying the following formula—

(3)For the purposes of section 590(3)(g) the relevant amount, in relation toan employee, shall be found by applying the following formula—

(4)For the purposes of section 590(3)(h) the relevant amount, in relation toan employee, shall be found by applying the following formula—

(5)For the purposes of this section A is the aggregate number of yearsservice (expressing parts of a year as a fraction), subject to a maximum of40, which, in the case of the employee, count for the purposes of the schemeat the time the benefits in respect of service in the employment becomepayable.

(6)But where the same year (or part of a year) counts for the purposes of thescheme by virtue of more than one of the relevant associated employments itshall be counted only once in calculating the aggregate number of yearsservice for the purposes of subsection (5) above.

(7)For the purposes of this section B is the aggregate number of yearsservice (expressing parts of a year as a fraction), subject to a maximum of40, which, in the case of the employee, count for the purposes of any of thefollowing—

(a)the scheme, and

(b)the other scheme or schemes with which the scheme is connected in relationto him,

at the time the benefits become payable.

(8)But where the same year (or part of a year) counts for the purposes ofmore than one scheme it shall be counted only once in calculating theaggregate number of years service for the purpose of subsection (7) above.

(9)For the purposes of this section C is the permitted maximum in relationto the year of assessment in which the benefits in question become payable,that is, the figure found for that year by virtue of subsections (10) and (11)below.

(10)For the years 1988-89 and 1989-90 the figure is £60,000.

(11)For any subsequent year of assessment the figure is the figure found forthat year, for the purposes of section 590C, by virtue of section 590C(4) and(5).

590C Earnings cap.

(1)In arriving at an employee’s final remuneration for the purposes ofsection 590(3)(a) or (d), any excess of what would be his final remuneration(apart from this section) over the permitted maximum for the year ofassessment in which his participation in the scheme ceases shall bedisregarded.

(2)In subsection (1) above “the permitted maximum”, in relation to a year of assessment,means the figure found for that year by virtue of subsections (3) and (4)below.

(3)For the years 1988-89 and 1989-90 the figure is £60,000.

(4)For any subsequent year of assessment the figure is also £60,000,subject to subsection (5) below.

(5)If the retail prices index for the month of December preceding a year ofassessment falling within subsection (4) above is higher than it was for theprevious December, the figure for that year shall be an amount arrived atby—

(a)increasing the figure for the previous year of assessment by the samepercentage as the percentage increase in the retail prices index, and

(b)if the result is not a multiple of £600, rounding it up to thenearest amount which is such a multiple.

(6)The Treasury shall in the year of assessment 1989-90, and in eachsubsequent year of assessment, make an order specifying the figure which isby virtue of this section the figure for the following year of assessment.”

5(1)Section 592 (exempt approved schemes) shall be amended as follows.U.K.

(2)In subsection (8) there shall be inserted at the beginning the words “Subject to subsection (8A) below,”.

(3)After subsection (8) there shall be inserted—

“(8A)Where an employee’s remuneration for a year of assessment includesremuneration in respect of more than one employment, the amount allowed to bededucted by virtue of subsection (7) above in respect of contributions paidby the employee in that year by virtue of any employment (whether under asingle scheme or under two or more schemes) shall not exceed 15 per cent, orsuch higher percentage as the Board may in a particular case prescribe, of hisremuneration for the year in respect of that employment.”

(4)After subsection (8A) there shall be inserted—

“(8B)In arriving at an employee’s remuneration for a year of assessment for thepurposes of subsection (8) or (8A) above, any excess of what would be hisremuneration (apart from this subsection) over the permitted maximum for thatyear shall be disregarded.

(8C)In subsection (8B) above “permitted maximum”, in relation to a year of assessment,means the figure found for that year by virtue of subsections (8D) and (8E)below.

(8D)For the year 1989-90 the figure is £60,000.

(8E)For any subsequent year of assessment the figure is the figure found forthat year, for the purposes of section 590C, by virtue of section 590C(4) and(5).”

6(1)Section 594 (exempt statutory schemes) shall be amended as follows.U.K.

(2)In subsection (1) the word “relevant” shall be inserted before the words “statutoryscheme”.

(3)In subsection (2) there shall be inserted at the beginning the words “Subject to subsection (3) below,”.

(4)After subsection (2) there shall be inserted—

“(3)Where a person’s remuneration for a year of assessment includesremuneration in respect of more than one office or employment, the amountallowed to be deducted by virtue of subsection (1) above in respect ofcontributions paid by the person in that year by virtue of any office oremployment (whether under a single scheme or under two or more schemes) shallnot exceed 15 per cent, or such higher percentage as the Board may in aparticular case prescribe, of his remuneration for the year in respect of thatoffice or employment.”

(5)After subsection (3) there shall be inserted—

“(4)In arriving at a person’s remuneration for a year of assessment for thepurposes of subsection (2) or (3) above, any excess of what would be hisremuneration (apart from this subsection) over the permitted maximum for thatyear shall be disregarded.

(5)In subsection (4) above “permitted maximum”, in relation to a year of assessment,means the figure found for that year by virtue of subsections (6) and (7)below.

(6)For the year 1989-90 the figure is £60,000.

(7)For any subsequent year of assessment the figure is the figure found forthat year, for the purposes of section 590C, by virtue of section 590C(4) and(5).”

7U.K.Section 595(2) and (3) (charge to tax in certain cases) shall be omitted.

8(1)Section 596 (exceptions from section 595) shall be amended as follows.U.K.

(2)In subsection (1)—

(a)for the words “Neither subsection (1) nor subsection (2) of section 595shall” there shall be substituted the words “Section 595(1) shallnot”; and

(b)in paragraph (b) the word “relevant” shall be inserted before thewords “statutory scheme”.

(3)In subsection (2) for the words “Neither subsection (1) nor subsection(2) of section 595 shall” there shall be substituted the words “Section595(1) shall not”.

(4)In subsection (3)(a) the words “either” and “or subsection (2)” shall be omitted.

9U.K.The following section shall be inserted after section 596—

“596A Charge to tax: benefits under non-approved schemes.

(1)Where in any year of assessment a person receives a benefit provided undera retirement benefits scheme which is not of a description mentioned insection 596(1) (a), (b) or (c), tax shall be charged in accordance with theprovisions of this section.

(2)Where the benefit is received by an individual, he shall be charged to taxunder Schedule E for that year.

(3)Where the benefit is received by a person other than an individual, theadministrator of the scheme shall be charged to tax under Case VI of ScheduleD for that year.

(4)The amount to be charged to tax is—

(a)in the case of a cash benefit, the amount received, and

(b)in the case of a benefit in kind, an amount equal to whatever is the cashequivalent of the benefit.

(5)In the case of the charge under Case VI of Schedule D, the rate of tax is40 per cent. or such other rate (whether higher or lower) as may for the timebeing be specified by the Treasury by order.

(6)Tax shall not be charged under this section in the case of a benefit whichis chargeable to tax under Schedule E by virtue of section 19(1)1.

(7)But where the amount chargeable to tax by virtue of section 19(1)1 is lessthan the amount which would be chargeable to tax under this section—

(a)subsection (6) above shall not apply, and

(b)the amount chargeable to tax under this section shall be reduced by theamount chargeable to tax by virtue of section 19(1)1.

(8)Tax shall not be charged under this section to the extent that the benefitreceived is attributable to the payment of a sum—

(a)which is deemed to be the income of a person by virtue of section 595(1),and

(b)in respect of which that person has been assessed to tax.

(9)For the purpose of subsection (8) above the provision of a benefit shallbe presumed not to be attributable to the payment of such a sum as ismentioned in that subsection unless the contrary is shown.

596B Section 596A: supplementary provisions.

(1)For the purposes of section 596A the cash equivalent of a benefit in kindis—

(a)in the case of a benefit other than living accommodation, the amount whichwould be the cash equivalent of the benefit under Chapter II of Part V if itwere chargeable under the appropriate provision of that Chapter (treating anysum made good by the recipient as made good by the employee), and

(b)in the case of living accommodation, an amount equal to the value of theaccommodation to the recipient determined in accordance with the followingprovisions of this section less so much of any sum made good by him to thoseat whose cost the accommodation is provided as is properly attributable to theprovision of the accommodation.

(2)Where the cost of providing the accommodation does not exceed£75,000, the value of the accommodation to the recipient in any periodis the rent which would have been payable for the period if the premises hadbeen let to him at an annual rent equal to their annual value as ascertainedunder section 837.

(3)But for a period in which those at whose cost the accommodation isprovided pay rent at an annual rate greater than the annual value as soascertained, the value of the accommodation to the recipient is an amountequal to the rent payable by them for the period.

(4)Where the cost of providing the accommodation does exceed £75,000,the value of the accommodation to the recipient shall be taken to be theaggregate of the value of the accommodation to him determined in accordancewith subsections (2) and (3) above and the additional value of theaccommodation to him determined in accordance with subsections (5) and (6)below.

(5)The additional value of the accommodation to the recipient in any periodis the rent which would have been payable for that period if the premises hadbeen let to him at an annual rent equal to the appropriate percentage of theamount by which the cost of providing the accommodation exceeds £75,000.

(6)Where throughout the period of six years ending with the date when therecipient first occupied the property any estate or interest in the propertywas held by a relevant person (whether or not it was the same estate, interestor person throughout), the additional value shall be calculated as if insubsection (7) below—

(a)the amount referred to in paragraph (a) were the market value of thatproperty as at that date, and

(b)the amount referred to in paragraph (b) did not include expenditure onimprovements made before that date.

(7)For the purposes of this section, the cost of providing any livingaccommodation shall be taken to be the aggregate of—

(a)the amount of any expenditure incurred in acquiring the estate or interestin the property held by a relevant person, and

(b)the amount of any expenditure incurred by a relevant person before theyear of assessment in question on improvements to the property.

(8)The aggregate amount mentioned in subsection (7) above shall be reducedby the amount of any payment made by the recipient to a relevant person, sofar as that amount represents a reimbursement of any such expenditure as ismentioned in paragraph (a) or (b) of that subsection or representsconsideration for the grant to the recipient of a tenancy of the property.

(9)For the purposes of this section, any of the following persons is arelevant person—

(a)the person providing the accommodation;

(b)any person, other than the recipient, who is connected with a personfalling within paragraph (a) above.

(10)In this section—

• “the appropriate percentage” means the rate applicable forthe purposes of section 160 as at the beginning of the year of assessment inquestion;

• “market value”, in relation to any property, means the pricewhich that property might reasonably be expected to fetch on a sale in theopen market with vacant possession, no reduction being made, in estimating themarket value, on account of any option in respect of the property held by therecipient, or a person connected with him, or by any of the persons mentionedin subsection (9) above;

• “property”, in relation to any living accommodation, meansthe property consisting of that living accommodation;

• “tenancy” includes a sub-tenancy;

and section 839 shall apply for the purposes of this section.”

10U.K.In section 598(1)(b) (charge to tax: repayment of employee’scontributions) the word “relevant” shall be inserted before the words “statutoryscheme”.

11(1)Section 599 (charge to tax: commutation of entire pension in specialcircumstances) shall be amended as follows.U.K.

(2)In subsection (2)(b) the word “relevant” shall be inserted before thewords “statutory scheme”.

(3)After subsection (9) there shall be inserted—

“(10)In subsection (1)(a) above “the permitted maximum” means, as regards a charge to taxarising under this section in a particular year of assessment, the figurefound for that year by virtue of subsections (11) and (12) below.

(11)For the years 1988-89 and l989-90 the figure is £60,000.

(12)For any subsequent year of assessment the figure is the figure found forthat year, for the purposes of section 590C, by virtue of section 590C(4) and(5).”

12(1)The following section shall be inserted after section 599—U.K.

“599A Charge to tax: payments out of surplus funds.

(1)This subsection applies to any payment which is made to or for the benefitof an employee or to his personal representatives out of funds which are orhave been held for the purposes of—

(a)a scheme which is or has at any time been an exempt approved scheme, or

(b)a relevant statutory scheme established under a public general Act,

and which is made in pursuance of a duty to return surplus funds.

(2)On the making of a payment to which subsection (1) above applies, theadministrator of the scheme shall be charged to income tax under Case VI ofSchedule D at the relevant rate on such amount as, after deduction of tax atthat rate, would equal the amount of the payment.

(3)Subject to subsection (4) below, the relevant rate shall be 35 per cent.

(4)The Treasury may by order from time to time increase or decrease therelevant rate.

(5)Where a payment made to or for the benefit of an employee is one to whichsubsection (1) above applies, it shall be treated in computing the totalincome of the employee for the year in which it is made as income for thatyear which is—

(a)received by him after deduction of income tax at the basic rate from acorresponding gross amount, and

(b)chargeable to income tax under Case VI of Schedule D.

(6)But, subject to subsection (7) below, no assessment to income tax shallbe made on, and no repayment of income tax shall be made to, the employee.

(7)Subsection (6) above shall not prevent an assessment in respect of incometax at a rate other than the basic rate.

(8)Subsection (5) above applies whether or not the employee is the recipientof the payment.

(9)Any payment chargeable to tax under this section shall not be chargeableto tax under section 598, 599 or 600 or under the Regulations mentioned inparagraph 8 of Schedule 3 to the Finance Act 1971.

(10)In this section—

• “employee”, in relation to a relevant statutory scheme,includes any officer;

• references to any payment include references to any transfer of assets orother transfer of money’s worth.”

13(1)Section 600 (charge to tax: unauthorised payments to or for employees)shall be amended as follows.U.K.

(2)In subsection (1) the words “or have been” and “or has at any time been” shall be omitted.

(3)In subsection (2) for paragraphs (a) and (b) there shall be substitutedthe words “is not expressly authorised by the rules of the scheme or byvirtue of paragraph 33 of Schedule 6 to the Finance Act 1989.”

14U.K.In section 605 (information) the word “relevant” shall be inserted before the words “statutory scheme” in subsections (2), (3)(a) and (b)(i) and(4).

15U.K.The following section shall be inserted after section 611—

“611A Definition of relevant statutory scheme.

(1)In this Chapter any reference to a relevant statutory scheme is areference to a statutory scheme—

(a)established before 14th March 1989, or

(b)established on or after that date and entered in the register maintainedby the Board for the purposes of this section.

(2)The Board shall maintain a register for the purposes of this section andshall enter in it the relevant particulars of any statutory scheme establishedon or after 14th March 1989 which is reported to the Board by the authorityresponsible for establishing it as a scheme the provisions of which correspondwith those of an approved scheme.

(3)The reference in subsection (2) above to the relevant particulars, inrelation to a scheme, is a reference to—

(a)the identity of the scheme,

(b)the date on which it was established,

(c)the authority responsible for establishing it, and

(d)the date on which that authority reported the scheme to the Board.

(4)Where the Board enter the relevant particulars of a scheme in the registermaintained by them for the purposes of this section, they shall inform theauthority responsible for establishing the scheme of the date of the entry.”

16U.K.In section 828(4) (orders) after “377(8)” there shall be inserted “590C(6)”.

17U.K.Paragraph 8 of Schedule 23 (benefits under scheme for additional voluntarycontributions causing benefits under main scheme to abate if aggregatebenefits exceed limits) shall be omitted.

Effect of amendmentsU.K.

18(1)Paragraphs 2, 6(2), 8(2)(b), 10, 11(2), 14 and 15 above shall be deemedto have come into force on 14th March 1989.U.K.

(2)Paragraphs 3(2) and (3) and 4 above shall have effect in relation to ascheme not approved by the Board before the day on which this Act is passed;but if the scheme came into existence before 14th March 1989 those provisionsshall not have effect as regards an employee who became a member of the schemebefore 1st June 1989.

(3)Paragraph 3(4) above shall have effect where a determination is made onor after the day on which this Act is passed.

(4)Paragraphs 5 and 6(3), (4) and (5) above shall have effect for the year1989-90 and subsequent years of assessment, but paragraphs 5(4) and 6(5) aboveshall not have effect as regards a person’s remuneration in respect of anoffice or employment in such circumstances as the Board may by regulationsprescribe for the purposes of this sub-paragraph.

(5)Paragraphs 7 and 8(2)(a) and (3) above shall have effect for the year1988-89 and subsequent years of assessment.

(6)Paragraph 8(4) above shall not have effect where a sum has been deemed tobe income of a person by virtue of section 595(2) before 6th April 1988.

(7)Paragraph 9 above shall have effect in relation to payments made andbenefits provided on or after the day on which this Act is passed.

(8)Paragraph 11(3) above shall have effect where the charge to tax undersection 599 arises on or after 14th March 1989, but not where the scheme cameinto existence before that date and the employee became a member of it before1st June 1989.

(9)Paragraphs 12 and 13 above shall have effect in relation to payments madeon or after the day on which this Act is passed.

(10)Paragraph 17 above shall have effect in relation to benefits provided onor after the day on which this Act is passed.

Part IIU.K. Approved Schemes: General

PreliminaryU.K.

19(1)This Part of this Schedule shall be deemed to have come into force on 14thMarch 1989 and, subject to sub-paragraphs (2) to (4) below, applies inrelation to any retirement benefits scheme (within the meaning of Chapter Iof Part XIV of the Taxes Act 1988) approved by the Board before the day onwhich this Act is passed.U.K.

(2)The Board may by regulations provide that, in circumstances prescribed inthe regulations, this Part of this Schedule or any provision of it shall notapply or shall apply with such modifications as may be so prescribed.

(3)Regulations under sub-paragraph (2) above—

(a)may include provision authorising the Board to direct that this Part ofthis Schedule or any provision of it shall not apply in any particular casewhere in the opinion of the Board the facts are such that its applicationwould not be appropriate;

(b)may take effect (and may authorise any direction given under them to takeeffect) as from 14th March 1989 or any later date;

(c)may make such supplementary provision as appears to the Board to benecessary or expedient.

(4)This Part of this Schedule shall not apply to a scheme if, before the endof 1989, the administrator of the scheme gives written notice to the Boardthat it is not to apply.

(5)Where a notice is given to the Board under sub-paragraph (4) above, thescheme shall cease to be approved—

(a)if it came into existence before 14th March 1989, with effect from 1stJune 1989 or (if later) the date with effect from which it was approved;

(b)if it came into existence on or after 14th March 1989, with effect fromthe date with effect from which it was approved.

RemunerationU.K.

20(1)This paragraph applies—U.K.

(a)where the scheme came into existence before 14th March 1989, as regardsan employee who became a member of the scheme on or after 1st June 1989;

(b)where the scheme came into existence on or after 14th March 1989, asregards any employee who is a member of the scheme (whenever he became amember).

(2)The rules of the scheme shall have effect (notwithstanding anything inthem to the contrary and notwithstanding the effect of anything in Schedule23 to the Taxes Act 1988) as if, in arriving at the employee’s relevant annualremuneration for the purposes of calculating benefits, any excess of whatwould be his relevant annual remuneration (apart from this paragraph) over thepermitted maximum for the year of assessment in which his participation in thescheme ceases shall be disregarded.

(3)The rules of the scheme shall have effect (notwithstanding anything inthem to the contrary) as if, in arriving at the employee’s remuneration forthe year 1988-89 or any subsequent year of assessment for the purposes of anyrestriction on the aggregate amount of contributions payable under the schemeby the employee and the employer, there were disregarded any excess of whatwould be his remuneration for the year (apart from this paragraph) over thepermitted maximum for the year.

(4)In this paragraph “the permitted maximum”, in relation to a year of assessment,means the figure found for that year by virtue of sub-paragraphs (5) and (6)below.

(5)For the years 1988-89 and 1989-90 the figure is £60,000.

(6)For any subsequent year of assessment the figure is the figure found forthat year, for the purposes of section 590C of the Taxes Act 1988, by virtueof section 590C(4) and (5).

21(1)The rules of the scheme shall have effect (notwithstanding anything inthem to the contrary) as if the amount of contributions payable under thescheme by an employee in the year 1989-90 or any subsequent year of assessmentwere limited to 15 per cent. of his remuneration for the year in respect ofthe employment.U.K.

(2)Where in relation to any year of assessment a percentage higher than 15per cent. applies for the purposes of section 592(8) or (8A) of the Taxes Act1988 (relief in respect of contributions) as regards any employee,sub-paragraph (1) above, as regards him, shall have effect in relation to thatyear with the substitution for 15 per cent. of that higher percentage.

22(1)This paragraph applies—U.K.

(a)where the scheme came into existence before 14th March 1989, as regardsan employee who became a member of the scheme on or after 1st June 1989;

(b)where the scheme came into existence on or after 14th March 1989, asregards any employee who is a member of the scheme (whenever he became amember).

(2)For the purposes of paragraph 21(1) above, in arriving at the employee’sremuneration for the year any excess of what would be his remuneration for theyear (apart from this sub-paragraph) over the permitted maximum for the yearshall be disregarded.

(3)In sub-paragraph (2) above “the permitted maximum”, in relation to a year of assessment,means the figure found for that year by virtue of sub-paragraphs (4) and (5)below.

(4)For the year 1989-90 the figure is £60,000.

(5)For any subsequent year of assessment the figure is the figure found forthat year, for the purposes of section 590C of the Taxes Act 1988, by virtueof section 590C(4) and (5).

Accelerated accrualU.K.

23(1)This paragraph applies where the scheme allows a member to commute hispension or part of it for a lump sum or sums and—U.K.

(a)where the scheme came into existence before 14th March 1989, applies asregards an employee who became a member of the scheme on or after 1st June1989, and

(b)where the scheme came into existence on or after 14th March 1989, appliesas regards any employee who is a member of the scheme (whenever he became amember).

(2)The rules of the scheme shall have effect (notwithstanding anything inthem to the contrary and notwithstanding the effect of paragraph 3 of Schedule23 to the Taxes Act 1988) as if they did not allow the employee to obtain byway of commutation a lump sum or sums exceeding in all the greater of thefollowing sums—

(a)a sum of three-eightieths of his relevant annual remuneration for eachyear of service up to a maximum of 40;

(b)a sum of the pension payable under the scheme to the employee for thefirst year in which it is payable multiplied by 2.25.

(3)The following rules shall apply in calculating, for the purposes ofsub-paragraph (2) above, the pension payable under the scheme to the employeefor the first year in which it is payable—

(a)if the pension payable for the year changes, the initial pension payableshall be taken;

(b)it shall be assumed that the employee will survive for the year;

(c)the effect of commutation, and of any allocation of pension to providebenefits for survivors, shall be ignored.

24(1)This paragraph applies where the scheme provides a lump sum or sums fora member otherwise than by commutation of his pension or part of itand—U.K.

(a)where the scheme came into existence before 14th March 1989, applies asregards an employee who became a member of the scheme on or after 1st June1989, and

(b)where the scheme came into existence on or after 14th March 1989, appliesas regards any employee who is a member of the scheme (whenever he became amember).

(2)The rules of the scheme shall have effect (notwithstanding anything inthem to the contrary and notwithstanding the effect of paragraph 4 of Schedule23 to the Taxes Act 1988) as if they did not allow the payment to theemployee, otherwise than by way of commutation, of a lump sum or sumsexceeding in all the greater of the following sums—

(a)a sum of three-eightieths of his relevant annual remuneration for eachyear of service up to a maximum of 40;

(b)a sum of the relevant number of eightieths of his relevant annualremuneration.

(3)For the purposes of sub-paragraph (2) above the relevant number shall befound by taking the number of eightieths (of relevant annual remuneration) byreference to which the pension payable under the scheme to the employee iscalculated, multiplying that number by three, and treating the resultingnumber as 120 if it would otherwise exceed 120.

Associated employmentsU.K.

25(1)This paragraph applies—U.K.

(a)where the scheme came into existence before 14th March 1989, as regardsan employee who became a member of the scheme on or after 1st June 1989;

(b)where the scheme came into existence on or after 14th March 1989, asregards any employee who is a member of the scheme (whenever he became amember).

(2)Where the employee is a member of the scheme by virtue of two or morerelevant associated employments, the rules of the scheme shall have effect asmentioned in sub-paragraph (3) below.

(3)The rules of the scheme shall have effect (notwithstanding anything inthem to the contrary) as if they prohibited the amount payable by way ofpension in respect of service in any of the relevant associated employments,when aggregated with any amount payable by way of pension in respect ofservice in the other such employment or employments, from exceeding therelevant amount.

(4)For the purposes of sub-paragraph (3) above the relevant amount, inrelation to the employee, shall be found by applying the followingformula—

(5)For the purposes of this paragraph—

(a)section 590B(5) and (6) of the Taxes Act 1988 shall apply for the purposeof defining A, and

(b)section 590B(9) to (11) of that Act shall apply for the purpose ofdefining C,

as they apply for the purposes of section 590B of that Act, except thatfor the purposes of this paragraph A shall not exceed 20.

(6)The reference to two or more relevant associated employments shall beconstrued in accordance with section 590A of the Taxes Act 1988.

Connected schemesU.K.

26(1)This paragraph applies—U.K.

(a)where the scheme came into existence before 14th March 1989, as regardsan employee who became a member of the scheme on or after 1st June 1989;

(b)where the scheme came into existence on or after 14th March 1989, asregards any employee who is a member of the scheme (whenever he became amember).

(2)Where in relation to the employee the scheme is connected with anotherscheme which is (or other schemes each of which is) an approved scheme, therules of the scheme shall have effect as mentioned in sub-paragraph (3) below.

(3)The rules of the scheme shall have effect (notwithstanding anything inthem to the contrary) as if they prohibited the amount payable by way ofpension under the scheme, when aggregated with any amount payable by way ofpension under the other scheme or schemes, from exceeding the relevant amount.

(4)For the purposes of sub-paragraph (3) above the relevant amount, inrelation to the employee, shall be found by applying the followingformula—

(5)For the purposes of this paragraph—

(a)section 590B(7) and (8) of the Taxes Act 1988 shall apply for the purposeof defining B, and

(b)section 590B(9) to (11) of that Act shall apply for the purpose ofdefining C,

as they apply for the purposes of section 590B of that Act, except thatfor the purposes of this paragraph B shall not exceed 20.

(6)References in this paragraph to the scheme being connected with anotherscheme in relation to the employee shall be construed in accordance withsection 590A of the Taxes Act 1988.

AugmentationU.K.

27(1)This paragraph applies—U.K.

(a)where the scheme came into existence before 14th March 1989, as regardsan employee who became a member of the scheme on or after 1st June 1989;

(b)where the scheme came into existence on or after 14th March 1989, asregards any employee who is a member of the scheme (whenever he became amember).

(2)Where in addition to being a member of the scheme (the main scheme) theemployee is also a member of an approved scheme (the voluntary scheme) whichprovides additional benefits to supplement those provided by the main schemeand to which no contributions are made by any employer of his, sub-paragraph(3) below shall apply in relation to any augmentation of the benefits providedfor him by the main scheme after he has ceased to participate in it.

(3)Any rules of the main scheme imposing a limit on the amount of a benefitprovided for the employee shall have effect (notwithstanding anything in themto the contrary) as if they provided for the limit to be reduced by the amountof any like benefit provided for the employee by the voluntary scheme.

Centralised schemesU.K.

28(1)Where the scheme is a centralised scheme, sub-paragraph (1)(a) and (b) ofeach of paragraphs 20 and 22 to 27 above shall have effect with thesubstitution for the reference to the coming into existence of the scheme ofa reference to the commencement of the employer’s participation in the scheme.U.K.

(2)For the purposes of this paragraph a centralised scheme is a retirementbenefits scheme (within the meaning of Chapter I of Part XIV of the Taxes Act1988) established for the purpose of enabling any employer, other than anemployer associated with the person by whom the scheme is established, toparticipate in it as regards his employees.

(3)For the purposes of sub-paragraph (2) above one person is associated withanother if (directly or indirectly) one is controlled by the other or if bothare controlled by a third person.

(4)In sub-paragraph (3) above the reference to control, in relation to a bodycorporate, shall be construed—

(a)where the body corporate is a close company, in accordance with section416 of the Taxes Act 1988, and

(b)where it is not, in accordance with section 840 of that Act.

ElectionU.K.

29(1)In a case where—U.K.

(a)an employee became a member of the scheme on or after 17th March 1987 andbefore 1st June 1989, and

(b)he gives written notice to the administrator of the scheme that this Partof this Schedule is to apply in his case,

he shall be deemed for the purposes of this Part of this Schedule to havebecome a member of the scheme on 1st June 1989.

(2)A notice under this paragraph shall be given in such form as the Board mayprescribe.

SupplementaryU.K.

30U.K.In this Part of this Schedule “relevant annual remuneration” means final remuneration or,if the scheme provides for benefits to be calculated by reference to someother annual remuneration, that other annual remuneration.

Part IIIU.K. Approved Schemes: Additional Voluntary Contributions

PreliminaryU.K.

31(1)Subject to sub-paragraphs (2) to (4) below, this Part of this Scheduleapplies in relation to any retirement benefits scheme which was approved bythe Board before the day on which this Act is passed and which makes provisionfor the payment by an employee of voluntary contributions.U.K.

(2)Paragraph 32 below only applies where—

(a)the provision for the payment of voluntary contributions is freestanding,and

(b)the scheme is not one to which contributions are made by any employer ofthe employee.

(3)The Board may by regulations provide that, in circumstances prescribed inthe regulations, this Part of this Schedule or any provision of it shall notapply or shall apply with such modifications as may be so prescribed.

(4)Regulations under sub-paragraph (3) above—

(a)may include provision authorising the Board to direct that this Part ofthis Schedule or any provision of it shall not apply in any particular casewhere in the opinion of the Board the facts are such that its applicationwould not be appropriate;

(b)may make such supplementary provision as appears to the Board to benecessary or expedient.

Abatement of benefitsU.K.

32(1)The scheme shall have effect (notwithstanding anything in it to thecontrary) as if its rules included a rule imposing, in the case of eachbenefit provided for the employee, such a limit on the amount of the benefitas is mentioned in sub-paragraph (2) below.U.K.

(2)The limit referred to above is a limit of such an amount as is foundby—

(a)taking the amount of the limit imposed by the main scheme on the provisionof any like benefit for the employee by that scheme, and

(b)subtracting from that amount an amount equal to the relevant amount.

(3)For the purposes of sub-paragraph (2) above the relevant amount is—

(a)where the employee is not a member of any other relevant scheme, theamount of any like benefit provided for the employee by the main scheme, and

(b)where the employee is a member of another relevant scheme or schemes, anamount equal to the aggregate of the amount mentioned in paragraph (a) aboveand the amount of any like benefit provided for the employee by the otherrelevant scheme or schemes.

(4)In sub-paragraph (3) above, references to the employee being a member ofanother relevant scheme are references to his being a member of any approvedscheme, other than the scheme, which provides additional benefits for him tosupplement those provided by the main scheme.

(5)This paragraph shall have effect in relation to benefits provided on orafter the day on which this Act is passed.

Return of surplus fundsU.K.

33(1)The scheme shall have effect (notwithstanding anything in it to thecontrary) as if its rules included a rule requiring the administrator, in thecircumstances mentioned in sub-paragraph (2) or (3) below, as the case may be,to make to the employee or his personal representatives a payment of an amountequal to the prescribed amount out of funds which are or have been held forthe purposes of the scheme.U.K.

(2)Where the provision for the payment of voluntary contributions isfreestanding, the circumstances referred to above are that the amount of anybenefit provided for the employee by the scheme would have been greater hadthe amount of any like benefit provided for him by the main scheme, or anyother relevant scheme of which he is a member, been less.

(3)Where the provision for the payment of voluntary contributions is notfreestanding, the circumstances referred to above are that the amount of anybenefit provided for the employee by virtue of the voluntary contributionswould have been greater had the amount of any like benefit provided for himby the principal provisions of the scheme, or any other relevant scheme ofwhich he is a member, been less.

(4)In sub-paragraph (1) above, the reference to the prescribed amount is toan amount calculated in accordance with the method for the time beingspecified in regulations made for the purposes of section 591 of the Taxes Act1988 as the method to be used for calculating the amount of any surplus funds.

(5)In sub-paragraph (2) above, the reference to the employee being a memberof another relevant scheme is a reference to his being a member of anyapproved scheme, other than the scheme, which provides additional benefits forhim to supplement those provided by the main scheme.

(6)In sub-paragraph (3) above, the reference to the employee being a memberof another relevant scheme is a reference to his being a member of anyapproved scheme, other than the scheme, which provides additional benefits forhim to supplement those provided by the principal provisions of the scheme.

34U.K.The scheme shall have effect (notwithstanding anything in it to thecontrary) as if its rules included a rule enabling the administrator, beforemaking any payment by virtue of paragraph 33 above, to deduct the amount ofany tax to which he is charged by section 599A of the Taxes Act 1988 by virtueof making the payment.

SupplementaryU.K.

35U.K.In this Part of this Schedule—

(a)“administrator”, “approved scheme”, “employee” and “retirement benefits scheme”have the same meanings as in Chapter I of Part XIV of the Taxes Act 1988,

(b)“freestanding”, in relation to provision for the payment ofvoluntary contributions, means provision which is contained in a retirementbenefits scheme other than the one which provides the benefits which thevoluntary contributions are intended to supplement,

(c)“the main scheme”, in relation to provision for the paymentof voluntary contributions which is freestanding, means the retirementbenefits scheme which provides the benefits which the voluntary contributionsare intended to supplement,

(d)“principal provisions”, in relation to a retirement benefitsscheme which makes provision for the payment of voluntary contributions whichis not freestanding, means the provisions of the scheme concerning theprovision of the benefits which the voluntary contributions are intended tosupplement,

(e)references to the provision of a benefit for an employee shall, inrelation to a deceased employee, be construed as references to the provisionof a benefit in respect of him, and

(f)references to an employee being (or not being) a member of a scheme shall,in relation to a deceased employee, be construed as references to his havingbeen (or not having been) a member of a scheme immediately before the time ofhis death.

Section 77.

SCHEDULE 7U.K. Personal Pension Schemes

Part IU.K. Amendments of Taxes Act

1U.K.Chapter IV of Part XIV of the Taxes Act 1988 (personal pension schemes)shall be amended as mentioned in the following provisions of this Part of thisSchedule.

2(1)Section 635 (lump sum to member) shall be amended as follows.U.K.

(2)The following subsection shall be substituted for subsection (3) (lump sumnot to exceed one quarter of value of benefits for member)—

“(3)The lump sum must not exceed one quarter of the difference between—

(a)the total value, at the time when the lump sum is paid, of the benefitsprovided for by the arrangements made by the member in accordance with thescheme, and

(b)the value, at that time, of such of the member’s rights under the schemeas are protected rights for the purposes of the SocialSecurity Act 1986 or the Social Security(Northern Ireland) Order 1986.”

(3)Subsection (4) (lump sum not to exceed £150,000 or sum specified byTreasury by order) shall cease to have effect.

(4)This paragraph shall have effect in relation to the approval of a schemeon or after the day on which this Act is passed; but if the scheme came intoexistence before that day sub-paragraph (2) above shall not have effect asregards arrangements made by a member in accordance with the scheme beforethat day.

3(1)In section 640 (maximum amount of deductions) the following table shallbe substituted for the table in subsection (2) (maximum amount by referenceto age)—U.K.

(2)This paragraph shall have effect for the year 1989-90 and subsequent yearsof assessment.

4(1)The following section shall be inserted after section 640—U.K.

“640A Earnings cap.

(1)In arriving at an individual’s net relevant earnings for a year ofassessment for the purposes of section 640 above, any excess of what would behis net relevant earnings for the year (apart from this subsection) over theallowable maximum for the year shall be disregarded.

(2)In subsection (1) above “the allowable maximum” means, as regards a particular yearof assessment, the figure found for that year by virtue of subsections (3) and(4) below.

(3)For the year of assessment 1989-90 the figure is £60,000.

(4)For the year of assessment 1990-91 and any subsequent year of assessmentthe figure is the figure found for that year, for the purposes of section590C, by virtue of section 590C(4) and (5).”

(2)This paragraph shall have effect for the year 1989-90 and subsequent yearsof assessment.

5(1)Section 644 (meaning of relevant earnings) shall be amended as follows.U.K.

(2)In subsection (2) for “(5)” there shall be substituted “(6F)”.

(3)The following subsections shall be inserted after subsection (6)—

“(6A)Emoluments of an individual as an employee of a company are not incomewithin subsection (2) above if—

(a)he is a controlling director of the company at any time in the year ofassessment in question or has been a controlling director of the company atany time in the ten years immediately preceding that year of assessment, and

(b)any of subsections (6B) to (6E) below applies in his case.

(6B)This subsection applies in the case of the individual if—

(a)at any time in the year of assessment in question he is in receipt ofbenefits under a relevant superannuation scheme, and

(b)the benefits are payable in respect of past service with the company.

(6C)This subsection applies in the case of the individual if—

(a)at any time in the year of assessment in question he is in receipt ofbenefits under a personal pension scheme,

(b)the scheme has received a transfer payment relating to him from a relevantsuperannuation scheme, and

(c)the transfer payment is in respect of past service with the company.

(6D)This subsection applies in the case of the individual if—

(a)at any time in the year of assessment in question he is in receipt ofbenefits under a relevant superannuation scheme,

(b)the benefits are payable in respect of past service with another company,

(c)the emoluments are for a period during which the company mentioned insubsection (6A) above has carried on a trade or business previously carriedon by the other company, and

(d)the other company carried on the trade or business at any time during theperiod of service in respect of which the benefits are payable.

(6E)This subsection applies in the case of the individual if—

(a)at any time in the year of assessment in question he is in receipt ofbenefits under a personal pension scheme,

(b)the scheme has received a transfer payment relating to him from a relevantsuperannuation scheme,

(c)the transfer payment is in respect of past service with another company,

(d)the emoluments are for a period during which the company mentioned insubsection (6A) above has carried on a trade or business previously carriedon by the other company, and

(e)the other company carried on the trade or business at any time during theperiod of service in respect of which the transfer payment was made.

(6F)For the purposes of subsections (6A) to (6E) above—

(a)a person is a controlling director of a company if he is a director (asdefined by section 612(1)), and he is within paragraph (b) of section 417(5),in relation to the company;

(b)“relevant superannuation scheme” has the same meaning as insection 645(1);

(c)references to benefits payable in respect of past service with a companyinclude references to benefits payable partly in respect of past service withthe company; and

(d)references to a transfer payment in respect of past service with a companyinclude references to a transfer payment partly in respect of past servicewith the company.”

(4)This paragraph shall be deemed to have come into force on 6th April 1989.

6(1)Section 645 (earnings from pensionable employment) shall be amended asfollows.U.K.

(2)In subsection (1)(c) for the words “neither subsection (4) norsubsection (5) below applies” there shall be substituted the words “subsection (4) below does not apply”.

(3)In subsection (3) the word “and” following paragraph (a) shall beomitted and after paragraph (b) there shall be inserted “and

(c)which is of a description mentioned in section 596(1)(a), (b) or (c).”

(4)After subsection (4) there shall be inserted—

“(4A)Where the emoluments from an office or employment held by an individualare foreign emoluments within the meaning of section 192, this section shallhave effect with the substitution of the following for paragraph (c) ofsubsection (3) above—”

(c)which corresponds to a scheme of a description mentioned in section596(1)(a), (b) or (c).””

(5)Subsection (5) shall cease to have effect.

(6)This paragraph shall be deemed to have come into force on 6th April 1989.

7(1)In section 646 (“net relevant earnings”) in subsection (1) after thewords “(7) below” there shall be inserted the words “and section646A”.U.K.

(2)This paragraph shall have effect for the year 1989-90 and subsequent yearsof assessment.

8(1)The following section shall be inserted after section 646—U.K.

“646A Earnings from associated employments.

(1)This section applies where in the year of assessment in question—

(a)an individual holds two or more offices or employments which areassociated in that year,

(b)one or more of them is an office or employment to which section 645applies (“pensionable job”), and

(c)one or more of them is an office or employment to which that section doesnot apply (“non-pensionable job”).

(2)Where the emoluments for that year from the pensionable job (or jobs) areequal to or exceed the allowable maximum for that year, section 646(1) shallhave effect in the case of the individual as if the references to relevantearnings were references to relevant earnings not attributable to thenon-pensionable job (or jobs).

(3)Where the allowable maximum for that year exceeds the emoluments for thatyear from the pensionable job (or jobs), the individual’s net relevantearnings, so far as attributable to the non-pensionable job (or jobs), shallnot be greater than the amount of the excess.

(4)For the purposes of this section two or more offices or employments heldby an individual in a year of assessment are associated in that year if theemployers in question are associated at any time during it.

(5)For the purposes of subsection (4) above, employers are associated if(directly or indirectly) one is controlled by the other or if both arecontrolled by a third person.

(6)In subsection (5) above the reference to control, in relation to a bodycorporate, shall be construed—

(a)where the body corporate is a close company, in accordance with section416, and

(b)where it is not, in accordance with section 840.

(7)In this section “the allowable maximum” has the same meaning as in section640A(1).”

(2)This paragraph shall have effect for the year 1989-90 and subsequent yearsof assessment.

9U.K.In section 655(5) (provisional approval in the case of applications madebefore 1st February 1990) the words “in cases where the applications aremade before 1st February 1990” shall be omitted.

Part IIU.K. Schemes Approved Before Passing of This Act

InterpretationU.K.

10U.K.In this Part of this Schedule—

(a)“personal pension scheme” has the same meaning as in ChapterIV of Part XIV of the Taxes Act 1988, and

(b)references to approval of such a scheme do not include references toprovisional approval under regulations made under section 655(5) of that Act.

Lump sum to memberU.K.

11(1)This paragraph applies as regards arrangements made by a member of apersonal pension scheme approved by the Board before the day on which this Actis passed, if the arrangements are made by the member in accordance with thescheme on or after that day.U.K.

(2)The rules of the scheme shall have effect (notwithstanding anything inthem to the contrary) as if any limitation imposed on the maximum amountpayable to the member by way of lump sum, and imposed by reference to afraction of the total value of the benefits for him provided for by thearrangements, were imposed by reference to the same fraction of the differencebetween—

(a)the total value, at the time when the lump sum is paid, of the benefitsprovided for by the arrangements, and

(b)the value, at that time, of such of his rights under the scheme as areprotected rights for the purposes of the [F14Pension Schemes Act 1993] or the [F15Pension Schemes (Northern Ireland) Act 1993].

12(1)This paragraph applies where on or after the day on which this Act ispassed a lump sum becomes payable under a personal pension scheme approved bythe Board before that day.U.K.

(2)The rules of the scheme shall have effect (notwithstanding anything inthem to the contrary) as if any limitation imposed on the maximum amountpayable to a member by way of lump sum, and imposed by reference to a figure,did not apply.

(3)The reference in sub-paragraph (2) above to a limitation imposed on themaximum amount payable to a member by way of lump sum does not include areference to a limitation imposed on the maximum amount so payable out of atransfer payment.

Section 84.

SCHEDULE 8U.K. Amendments of Chapter I of Part XII of Taxes Act 1988 (InsuranceCompanies)

1U.K.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F16

2U.K.Section 433 (profits reserved for policy holders or annuitants) shallcease to have effect.

3(1)In section 434 (franked investment income etc.), for subsection (3) thereshall be substituted the following subsections—U.K.

“(3)Subject to sections 437 and 438, the policy holders’ fraction of thefranked investment income from investments held in connection with a company’slife assurance business shall not be used under Chapter V of Part VI to frankdistributions made by the company and, accordingly, for the purposes of thatChapter (other than the application of franked investment income under section241), in relation to any unrelieved income of a company falling withinsubsection (1) above, the surplus of franked investment income for anyaccounting period means the aggregate of—

(a)the policy holders’ fraction of that franked investment income; and

(b)the amount determined under section 241(3) on the basis that the referencetherein to franked investment income is a reference only to the shareholders’fraction of that income.

(3A)The policy holders’ fraction of the franked investment income frominvestments held in connection with a company’s life assurance business shallbe left out of account in determining, under subsection (7) of section 13, thefranked investment income forming part of the company’s profits for thepurposes of that section.”

(2)Subsections (4) and (5) of that section shall be omitted.

(3)

F17(4)In subsection (7) of that section for “(4)” there shall besubstituted “(3)” and after the words “against which” there shallbe inserted “disregarding relief under section 242”.

4After section 434 there shall be inserted the following section—

“434A Limitations on loss relief and group relief.

“434A(1)In the case of a company carrying on life assurance business, no reliefshall be allowable under Chapter II (loss relief) or Chapter IV (group relief)of Part X against the policy holders’ fraction of the relevant profits for anyaccounting period.

(2)For the purposes of subsection (1) above, the relevant profits of acompany for an accounting period are the total profits of its life assurancebusiness, less any deduction due under section 76, but before allowing anyrelief under Chapter II or Chapter IV of Part X.”

5U.K.Section 435 (taxation of gains reserved for policy holders and annuitants)shall cease to have effect.

6U.K.In section 436 (annuity and pension business: separate charge on profits)in subsection (3)(a) for the words “section 433” there shall besubstituted “sections 82 and 83 of the Finance Act 1989”.

7U.K.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F18

Section 89A.]

[F19SCHEDULE 8AU.K. Modification of sections 83 and 89 in relation to overseas life insurance companies

[F20F211(1)In its application to an overseas life insurance company (as defined in section 431(2) of the Taxes Act 1988) section 83 of this Act shall have effect with the following modifications; and in those modifications any reference to the Taxes Act 1988 is a reference to that Act as it has effect in relation to such a company by virtue of Schedule 19AC to that Act.

(2)The reference in subsection (1)(a) to investment income shall be construed as a reference to such of the income concerned as is attributable to the branch or agency in the United Kingdom through which the company carries on life assurance business.

(3)The reference in subsection (1)(b) to assets shall be construed as a reference to such of the assets concerned—

(a)as are—

(i)section 11(2)(b) assets;

(ii)section 11(2)(c) assets; or

(iii)assets which by virtue of section 11B of the Taxes Act 1988 are attributed to the branch or agency; or

(b)as are assets—

(i)(in a case where section 11C of that Act (other than subsection (9)) applies) of the relevant fund, or

(ii)(in a case where that section including that subsection applies) of the relevant funds,

other than assets which fall within paragraph (a) above.

(4)In determining for the purposes of subsection (1) whether there has been any increase or reduction in the value (whether realised or not) of assets—

(a)no regard shall be had to any period of time during which an asset held by the company does not fall within paragraph (a) or (b) of sub-paragraph (3) above; and

(b)in the case of an asset which falls within paragraph (b) of that sub-paragraph, only the specified portion of any increase or reduction in the value of the asset shall be taken into account.

(5)For the purposes of this paragraph—

(a)the specified portion of any increase or reduction in the value of an asset is found by applying to that increase or reduction the same fraction as would, by virtue of section 11C of the Taxes Act 1988, be applied to any relevant gain accruing to the company on the disposal of the asset; and

(b)any expression to which a meaning is given by section 11A of that Act has that meaning.

(6)Where for a period of account any investment income referred to in subsection (1) is not brought into account within the meaning given by subsection (2) it shall be treated as brought into account for the period if it arises in the period.

(7)Where for a period of account any increase in value referred to in subsection (1) is not brought into account within the meaning given by subsection (2) it shall be treated as brought into account for the period if it is shown in the company’s records as available to fund one or both of the following for the period, namely, bonuses to policy holders and dividends to shareholders.

(8)Where for a period of account any reduction in value referred to in subsection (1) is not brought into account within the meaning given by subsection (2) it shall be treated as brought into account for the period if it is shown in the company’s records as reducing sums available to fund one or both of the following for the period, namely, bonuses to policy holders and dividends to shareholders.

(9)This paragraph shall apply in relation to periods of account beginning after 31st December 1992.

F252(1)In its application to an overseas life insurance company section 89 of this Act shall have effect with the following modifications; and in those modifications any reference to the Taxes Act 1988 is a reference to that Act as it has effect in relation to such a company by virtue of Schedule 19AC to that Act.

(2)Any reference to franked investment income shall be treated as a reference to UK distribution income (as defined by section 444D(4) of the Taxes Act 1988).

(3)Any reference in subsection (5)(a) to income shall be construed as a reference to such of the income concerned as is attributable to the branch or agency in the United Kingdom through which the company carries on life assurance business.

(4)The reference in subsection (5)(b) to assets shall be construed as a reference to such of the assets concerned—

(a)as are—

(i)section 11(2)(b) assets;

(ii)section 11(2)(c) assets; or

(iii)assets which by virtue of section 11B of the Taxes Act 1988 are attributed to the branch or agency; or

(b)as are assets—

(i)(in a case where section 11C of that Act (other than subsection (9)) applies) of the relevant fund, or

(ii)(in a case where that section including that subsection applies) of the relevant funds,

other than assets which fall within paragraph (a) above.

(5)In subsection (5)(c) the reference to expenses shall be construed as a reference to such of the expenses concerned as are attributable to the branch or agency.

(6)In subsection (5)(d) the reference to interest shall be construed as a reference to such of the interest concerned as is so attributable.

(7)In determining for the purposes of subsection (5) whether there has been any increase or reduction in the value (whether realised or not) of assets—

(a)no regard shall be had to any period of time during which an asset does not fall within paragraph (a) or (b) of sub-paragraph (4) above; and

(b)in the case of an asset which falls within paragraph (b) of that sub-paragraph, only the specified portion of any increase or reduction in the value of the asset shall be taken into account;

and sub-paragraph (5) of paragraph 1 above shall apply for the purposes of this paragraph as it applies for the purposes of that paragraph.

(8)Where for a period of account any item consisting of income, expenses or interest referred to in subsection (5) is not brought into account within the meaning given by subsection (6) it shall be treated as brought into account for the period if it arises in the period.

(9)Where for a period of account any increase in value referred to in subsection (5) is not brought into account within the meaning given by subsection (6) it shall be treated as brought into account for the period if it is shown in the company’s records as available to fund one or both of the following for the period, namely, bonuses to policy holders and dividends to shareholders.

(10)Where for a period of account any reduction in value referred to in subsection (5) is not brought into account within the meaning given by subsection (6) it shall be treated as brought into account for the period if it is shown in the company’s records as reducing sums available to fund one or both of the following for the period, namely, bonuses to policy holders and dividends to shareholders.

(11)This paragraph shall apply in relation to accounting periods beginning after 31st December 1992.]

Section 90.

SCHEDULE 9U.K. Life Policies Etc. Held by Companies

1U.K.Chapter II of Part XIII of the Taxes Act 1988 shall be amended as follows.

2U.K.At the end of section 539 there shall be added—

“(9)A policy of life insurance issued in respect of an insurance made before14th March 1989 shall be treated for the purposes of sections 540(5A), 547(8)and 548(3A) as issued in respect of one made on or after that date if it isvaried on or after that date so as to increase the benefits secured or toextend the term of the insurance; and any exercise of rights conferred by thepolicy shall be regarded for this purpose as a variation.”

3(1)Section 540 shall be amended as follows.U.K.

(2)In subsection (4), for the words “this section” there shall besubstituted the words “subsections (1) and (3) above”.

(3)After subsection (5) there shall be inserted—

“(5A)Sub-paragraphs (i) and (ii) of subsection (1)(b) above shall not apply inrelation to a policy issued in respect of an insurance made on or after 14thMarch 1989 if, immediately before the happening of the event, the rightsconferred by the policy were in the beneficial ownership of a company, or wereheld on trusts created, or as security for a debt owed, by a company.”

4(1)Section 541 shall be amended as follows.U.K.

(2)After subsection (4) there shall be inserted—

“(4A)Where, immediately before the happening of the chargeable event, therights conferred by a qualifying endowment policy are held as security for adebt owed by a company, then, if—

(a)the conditions in subsection (4B) below are satisfied,

(b)the amount of the debt exceeds the total amount previously paid under thepolicy by way of premiums, and

(c)the company makes a claim for the purpose within two years after the endof the accounting period in which the chargeable event happens,

this section shall have effect as if the references in subsection (1)(a)and (b) to that total amount were references to the amount of the debt.

(4B)The conditions referred to in subsection (4A) above are—

(a)that, throughout the period beginning with the making of the insurance andending immediately before the happening of the chargeable event, the rightsconferred by the policy have been held as security for a debt owed by thecompany;

(b)that the capital sum payable under the policy in the event of death duringthe term of the policy is not less than the amount of the debt when theinsurance was made;

(c)that any sum payable under the policy by reason of the chargeable eventis applied in repayment of the debt (except to the extent that its amountexceeds the amount of the debt);

(d)that the debt was incurred to defray money applied—

(i)in purchasing an estate or interest in land to be occupied by the companyfor the purposes of a trade carried on by it, or

(ii)for the purpose of the construction, extension or improvement (but not therepair or maintenance) of buildings which are or are to be so occupied.

(4C)If the amount of the debt is higher immediately before the happening ofthe chargeable event than it was at some earlier time during the periodmentioned in subsection (4B)(a) above, the amount to be taken into account forthe purposes of subsection (1) above shall be the lowest amount at which itstood during that period.

(4D)If during the period mentioned in subsection (4B)(a) above the companyincurs a debt by borrowing in order to repay another debt, subsections (4B)and (4C) above shall have effect as if, where appropriate, references toeither debt included references to the other.”

(3)In subsection (5), after paragraph (b) there shall be inserted “and

(c)“qualifying endowment policy” means a policy which is aqualifying policy by virtue of paragraph 2 of Schedule 15;”.

5(1)Section 547 shall be amended as follows.U.K.

(2)In subsection (1), for paragraph (b) there shall be substituted—

“(b)if, immediately before the happening of that event, those rights were inthe beneficial ownership of a company, or were held on trusts created, or assecurity for a debt owed, by a company, the amount of the gain shall be deemedto form part of the company’s income (chargeable under Case VI of Schedule D)for the accounting period in which the event happened;”.

(3)After subsection (7) there shall be inserted—

“(8)Subsection (1)(b) above shall not have effect as respects—

(a)a policy of life insurance issued in respect of an insurance made before14th March 1989,

(b)a contract for a life annuity made before that date, or

(c)a capital redemption policy issued in respect of an insurance made beforethat date, or issued by a company resident in the United Kingdom in respectof an insurance made on or after that date.”

6(1)Section 548 shall be amended as follows.U.K.

(2)In subsection (1)—

(a)in paragraph (a), after the words “an individual’s total income”there shall be inserted the words “or the income of a company”;

(b)in paragraph (c), after the words “that individual” there shall beinserted the words “or company”;

(c)for the words “subsection (3)” there shall be substituted the words “subsections (3) and (3A)”.

(3)After subsection (3) there shall be inserted—

“(3A)Subsections (1) and (2) do not apply where the rights conferred by thepolicy or contract are in the beneficial ownership of a company, or are heldon trusts created, or as security for a debt owed, by a company, if the policywas issued in respect of an insurance made before 14th March 1989 or thecontract was made before that date.”

7U.K.In section 552, in subsection (2), after paragraph (b) there shall beinserted “or

(c)the event is a chargeable event only because of section 540(5A).”

8U.K.Paragraph 5 above shall have effect in relation to chargeable eventshappening in any accounting period of the company concerned which begins after31st March 1989; but subject to that this Schedule shall have effect as from14th March 1989.

Section 93.

SCHEDULE 10U.K. Deep Discount Securities: Amendments

1Schedule 4 to the Taxes Act 1988 (deep discount securities) shall beamended as mentioned in the following provisions of this Schedule.

2(1)Paragraph 1 shall be amended as follows.

(2)The following paragraph shall be inserted after sub-paragraph(1)(d)—

“(dd)“a deep discount security” also means any redeemable security whichhas been issued by a public body (at whatever time) at a deep discount, otherthan—

(i)a security such as is mentioned in paragraph (d)(ii) above;

(ii)a security falling within sub-paragraph (5), (6) or (7) below;”.

(3)In sub-paragraph (1)(g) after the words “the company” there shall beinserted the words “or the public body”.

(4)The following shall be inserted at the end of sub-paragraph (2)— “ This sub-paragraph applies only in the case of securities issued by acompany. ”

(5)The following sub-paragraphs shall be inserted after sub-paragraph(3)—

“(4)For the purposes of this Schedule a public body is any of the followingwhich is not a company—

(a)a government, whether of the United Kingdom or elsewhere;

(b)a public or local authority, whether in the United Kingdom or elsewhere.

(5)A security falls within this sub-paragraph if it is a gilt-edged securityand—

(a)it was issued before 14th March 1989, or

(b)it was issued on or after that date but was issued under the sameprospectus as any gilt-edged security issued before that date.

(6)A security falls within this sub-paragraph if it is a gilt-edged securityand—

(a)it was issued under a prospectus under which no securities were issuedbefore 14th March 1989,

(b)it was issued otherwise than on the occasion of the original issue underthe prospectus, and

(c)all the securities issued on the occasion of the original issue under theprospectus are gilt-edged securities which are not deep discount securities.

(7)A security falls within this sub-paragraph if it is not a gilt-edgedsecurity and was issued (at whatever time) under the same prospectus as anyother security which was issued before the security in question and which isnot a deep discount security.

(8)For the purposes of this Schedule “gilt-edged security”has the same meaning as it has for the purposes of the 1979 Act.”

3The following sub-paragraph shall be inserted after paragraph 4(7)—

“(8)In the case of a deep discount security issued by a public body, thisparagraph applies where a disposal is made on or after 14th March 1989(whatever the date of acquisition).”

4In paragraph 11(1) after the words “deep discount security” thereshall be inserted the words “issued by a company”.

5The following paragraph shall be inserted after paragraph 11—

Where any deep discount security issued by a public body is redeemedbefore the redemption date by the body which issued it, paragraph 4 aboveshall have effect subject to paragraph 11(2) above (ignoring the wordsfollowing paragraph (b)).”

6The following sub-paragraph shall be inserted after paragraph 13(2)—

“(3)Every public body which issues deep discount securities on or after 1stAugust 1989 shall cause to be shown on the certificate of each such securitythe income element for each income period between the date of issue of thesecurity and the redemption date.”

7The following shall be inserted after paragraph 14—

“15 Retirement benefit schemes

“15(1)In a case where—

(a)paragraph 4 above would apply (apart from this paragraph) to a disposalof a security, and

(b)immediately before the disposal was made the security was held for thepurposes of an exempt approved scheme (within the meaning of Chapter I of PartXIV),

that paragraph shall not apply to the disposal.

(2)Sub-paragraph (1) above shall not apply unless the disposal is made on orafter 14th March 1989.

16 Stock lending

16(1)In a case where—

(a)a security is the subject of a transfer which falls within section 129(3),and

(b)the transfer constitutes a disposal to which (apart from this paragraph)paragraph 4 above would apply,

that paragraph shall not apply to the disposal.

(2)Sub-paragraph (1) above shall not apply unless the disposal is made on orafter 14th March 1989.

17 Trustees

17(1)Where on the disposal by trustees of a deep discount security an amountis treated as income chargeable to tax by virtue of paragraph 4(1) above, therate at which it is chargeable shall be a rate equal to the sum of the basicrate and the additional rate for the year of assessment in which the disposalis made.

(2)Where the trustees are trustees of a scheme to which section 469 applies,sub-paragraph (1) above shall not apply if or to the extent that the amountis treated as income in the accounts of the scheme.

(3)Sub-paragraph (1) above shall not apply unless the disposal is made on orafter 14th March 1989.

18 Underwriters

18(1)An underwriting member of Lloyd’s shall be treated for the purposes ofthis Schedule as absolutely entitled as against the trustees to the securitiesforming part of his premiums trust fund, his special reserve fund (if any) andany other trust fund required or authorised by the rules of Lloyd’s, orrequired by the underwriting agent through whom his business or any part ofit is carried on, to be kept in connection with the business.

(2)Sub-paragraph (1) above applies where a disposal is made on or after 14thMarch 1989 (whatever the date of acquisition).

(3)Where a security forms part of a premiums trust fund at the end of 31stDecember of any relevant year, for the purposes of this Schedule the trusteesof the fund shall be deemed to dispose of the security at that time; and forthis purpose relevant years are 1989 and subsequent years.

(4)Where a security forms part of a premiums trust fund at the beginning of1st January of any relevant year, for the purposes of this Schedule thetrustees of the fund shall be deemed to acquire the security at that time; andfor this purpose relevant years are 1990 and subsequent years.

(5)Sub-paragraph (6) below applies where the following state of affairsexists at the beginning of 1st January of any year or the end of 31st Decemberof any year—

(a)securities have been transferred by the trustees of a premiums trust fundin pursuance of an arrangement mentioned in section 129(1) or (2),

(b)the transfer was made to enable another person to fulfil a contract or tomake a transfer,

(c)securities have not been transferred in return, and

(d)section 129(3) applies to the transfer made by the trustees.

(6)The securities transferred by the trustees shall be treated for thepurposes of sub-paragraphs (3) and (4) above as if they formed part of thepremiums trust fund at the beginning of 1st January concerned or the end of31st December concerned (as the case may be).

(7)Paragraph 7 above shall have effect subject to sub-paragraph (3) above.

(8)Paragraph 7(2) above shall not apply where—

(a)the deceased was an underwriting member of Lloyd’s who died on or after14th March 1989, and

(b)immediately before his death the security concerned formed part of apremiums trust fund, a special reserve fund or any other trust fund requiredor authorised by the rules of Lloyd’s, or required by the underwriting agentthrough whom the deceased’s business or any part of it was carried on, to bekept in connection with the business.

(9)In a case where an amount treated as income chargeable to tax by virtueof paragraph 4(1) above constitutes profits or gains mentioned in section450(1)—

(a)section 450(1)(b) shall apply; and

(b)paragraph 4(1)(b) above shall not apply.

(10)For the purpose of computing income tax for the year 1987–88sub-paragraph (9) above shall have effect as if—

(a)the reference to section 450(1) were to paragraph 2 of Schedule 16 to theFinance Act 1973, and

(b)the reference to section 450(1)(b) were to paragraph 2(b) of thatSchedule.

(11)In this paragraph “business” and “premiums trustfund” have the meanings given by section 457.

19 Gilts: special rules

19(1)In a case where—

(a)securities have been issued by a public body under a prospectus underwhich no securities were issued before 14th March 1989,

(b)some of the securities issued under the prospectus are gilt-edgedsecurities which are would-be deep discount securities,

(c)some of the securities issued under the prospectus are gilt-edgedsecurities which are not would-be deep discount securities, and

(d)there is a time when the aggregate nominal value of the securities fallingwithin paragraph (b) above (at that time) exceeds the aggregate nominal valueof the securities falling within paragraph (c) above (at that time),

sub-paragraph (2) below shall apply in relation to any gilt-edgedsecurity which has been or is issued under the prospectus at any time (whetherbefore, at or after the time mentioned in paragraph (d) above).

(2)As regards any event occurring in relation to the security after the timementioned in sub-paragraph (1)(d) above, paragraphs 4, 7, 8, 11A, 12 and 14to 18 above shall have effect as if—

(a)the security were a deep discount security,

(b)it had been issued as such (whatever the time it was issued), and

(c)it had been acquired as such (whatever the time it was acquired).

(3)For the purposes of sub-paragraph (1) above a would-be deep discountsecurity is a security which would be a deep discount security apart fromparagraph 1(6) above.

(4)For the purposes of sub-paragraph (2) above events, in relation to asecurity, include anything constituting a disposal for the purposes of the1979 Act, the death of a person competent to dispose of the security, adisposal mentioned in paragraph 18(3) above, and an acquisition mentioned inparagraph 18(4) above.

20 Non-gilts: special rules

20(1)In a case where—

(a)all the securities issued by a public body on the occasion of the originalissue under a particular prospectus (whatever the time of the issue) areneither gilt-edged securities nor deep discount securities,

(b)some of the securities issued under the prospectus are not gilt-edgedsecurities but are new would-be deep discount securities, and

(c)there is a time when the aggregate nominal value of the securities fallingwithin paragraph (b) above (at that time) exceeds the aggregate nominal valueof the securities which (looking at the state of affairs at that time) havebeen issued under the prospectus and are neither gilt-edged securities nor newwould-be deep discount securities,

sub-paragraph (2) below shall apply in relation to any security which isnot a gilt-edged security but which has been or is issued under the prospectusat any time (whether before, at or after the time mentioned in paragraph (c)above).

(2)As regards any event occurring in relation to the security after the timementioned in sub-paragraph (1)(c) above, paragraphs 4, 7, 8, 11A, 12 and 14to 18 above shall have effect as if—

(a)the security were a deep discount security,

(b)it had been issued as such (whatever the time it was issued), and

(c)it had been acquired as such (whatever the time it was acquired).

(3)For the purposes of sub-paragraph (1) above a new would-be deep discountsecurity is a security which—

(a)would be a deep discount security apart from paragraph 1(7) above, and

(b)was issued on or after 14th March 1989.

(4)For the purposes of sub-paragraph (2) above events, in relation to asecurity, include anything constituting a disposal for the purposes of the1979 Act, the death of a person competent to dispose of the security, adisposal mentioned in paragraph 18(3) above, and an acquisition mentioned inparagraph 18(4) above.”

Section 94.

SCHEDULE 11U.K. Deep Gain Securities

Deep gain securitiesU.K.

1(1)For the purposes of this Schedule a deep gain security is a redeemable security (whenever issued) which fulfils the first and second conditions.

(2)The first condition is that, taking the security at the time it is issuedand assuming redemption, the amount payable on redemption might constitute adeep gain; and if the security is capable of redemption on one of a number ofoccasions, this condition is fulfilled if it is fulfilled as regards any oneof them.

(3)For the purposes of sub-paragraph (2) above “redemption” does not include any redemption which may be made before maturity only at the option of the person who issued the security(and no other person).

[F26(3A)In the case of a security issued before 13th November 1991, for the purposes of sub-paragraph (2) above “redemption” does not include any redemption which may be made before maturity otherwise than in pursuance of the exercise by the person who holds the security for the time being of an option exercisable only on the effluxion of time or the happening of an event which (judged at the time of the security’s issue) is certain or likely to occur.

(3B)In the case of a security issued on or after 13th November 1991, for the purposes of sub-paragraph (2) above “redemption” does not include any redemption which may be made before maturity otherwise than at the option of the person who holds the security for the time being and as regards which the following conditions are fulfilled (judged at the time of the security’s issue)—

(a)the event occasioning redemption is such that, if it occurred and there was no provision for redemption, the interests of the person holding the security at the time of the occurrence might be adversely affected,

(b)the event occasioning redemption is neither certain nor likely to occur,

(c)the event occasioning redemption is not one of a number of events occasioning or allowing redemption before maturity at least one of which is certain or likely to occur, and

(d)the obtaining of a tax advantage by any person is not the main benefit, or one of the main benefits, that might be expected to accrue from the provision for redemption.

(3C)The condition set out in sub-paragraph (3B)(a) above is fulfilled if it is fulfilled by reference to any one potential holder, whether or not it is fulfilled by reference to other potential holders.

(3D) In a case where—

(a)the security is one which under the terms of issue can be converted into or exchanged for a security of a different kind, and

(b)it falls to be decided whether the condition set out in paragraph (b) or (c) of sub-paragraph (3B) above is fulfilled,

the condition concerned shall not be treated as fulfilled unless it is fulfilled having regard only to circumstances in which (judged at the time of the security’s issue) the right to convert or exchange cannot be or is unlikely to be exercised.

(3E)In the case of a security issued on or after 13th November 1991, for the purposes of sub-paragraph (2) above “redemption” does not include any redemption which may be made before maturity at the option of the person who holds the security for the time being and as regards which the following conditions are fulfilled (judged at the time of the security’s issue)—

(a)the event allowing the option to be exercised is such that, if it occurred and there was no provision for redemption, the interests of the person holding the security at the time of the occurrence might be adversely affected,

(b)the event allowing the option to be exercised is neither certain nor likely to occur,

(c)the event allowing the option to be exercised is not one of a number of events occasioning or allowing redemption before maturity at least one of which is certain or likely to occur, and

(d)the obtaining of a tax advantage by any person is not the main benefit, or one of the main benefits, that might be expected to accrue from the provision for redemption.

(3F)The condition set out in sub-paragraph (3E)(a) above is fulfilled if it is fulfilled by reference to any one potential holder, whether or not it is fulfilled by reference to other potential holders.

(3G) In a case where—

(a)the security is one which under the terms of issue can be converted into or exchanged for a security of a different kind, and

(b)it falls to be decided whether the condition set out in paragraph (b) or (c) of sub-paragraph (3E) above is fulfilled,

the condition concerned shall not be treated as fulfilled unless it is fulfilled having regard only to circumstances in which (judged at the time of the security’s issue) the right to convert or exchange cannot be or is unlikely to be exercised.]

(4)The second condition is that the security—

(a)is not a deep discount security (either because the amount payable onredemption is not known at issue or for some other reason),

(b)is not a share in a company,

(c)is not a qualifying indexed security,

(d)is not a convertible security, and

(e)does not fall within sub-paragraph (5), (6) or (7) below.

(5)A security falls within this sub-paragraph if it is a gilt-edged securityand—

(a)it was issued before 14th March 1989, or

(b)it was issued on or after that date but was issued under the sameprospectus as any gilt-edged security issued before that date.

(6)A security falls within this sub-paragraph if it is a gilt-edged securityand—

(a)it was issued under a prospectus under which no securities were issuedbefore 14th March 1989,

(b)it was issued otherwise than on the occasion of the original issue underthe prospectus, and

(c)all the securities issued on the occasion of the original issue under theprospectus are gilt-edged securities which are not deep gain securities.

(7)A security falls within this sub-paragraph if it is not a gilt-edgedsecurity and was issued (at whatever time) under the same prospectus as anyother security which was issued before the security in question and which isnot a deep gain security.

(8)For the purposes of this paragraph—

(a)a deep discount security is a security which is a deep discount securityfor the purposes of Schedule 4 to the Taxes Act 1988,

(b)“qualifying indexed security” has the meaning given byparagraph 2 below, and

(c)a gilt-edged security is a security which is a gilt-edged security for thepurposes of the M13[F27Taxation of Chargeable Gains Act 1992] .

(9)For the purposes of this paragraph the amount payable on redemption of asecurity constitutes a deep gain if the issue price is less than the amountso payable, and the amount by which it is less represents more than—

(a)15 per cent. of the amount so payable, or

(b)half Y per cent. of the amount so payable, where Y is the number ofcomplete years between the date of issue and the redemption date.

(10)For the purposes of this paragraph the amount payable on redemption doesnot include any amount payable by way of interest.

Qualifying indexed securitiesU.K.

2(1)For the purposes of paragraph 1 above a qualifying indexed security is asecurity which fulfils each of the conditions set out below.

(2)The first condition is that—

(a)the security is denominated in sterling and under the terms of issue theamount payable on redemption is determined by reference to the movement of theretail prices index,

(b)the security is denominated in a currency other than sterling and underthe terms of issue the amount payable on redemption is determined by referenceto any similar general index of prices which is published by the government,or by an agent of the government, of the territory in whose currency thesecurity is denominated, or