SCHEDULES

Section 6.

SCHEDULE 1U.K. Vehicles Excise Duty: Rates

F1Part IU.K.

Part II F2U.K.

Section 8.

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

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3F5U.K.

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F7SCHEDULE 3U.K.

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F8SCHEDULE 4U.K.

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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.

[F9(5)This paragraph applies in relation to trusts established on or before the day on which the Finance Act 1994 was passed.]

[F103AU.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.]

F113B(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.

F123C(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.U.K.

(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)[F13in the case of a director, at that given time he worked as a] director of the companyconcerned at the rate of at least 20 hours a week (ignoring such matters asholidays and sickness).

[F14(2A)The trust deed may provide that a person is a beneficiary at a given time if at that time he is eligible to participate in a savings-related share option scheme within the meaning of Schedule 9 to the Taxes Act 1988—

(a)which was established by a company within the founding company’s group, and

(b)which is approved under that Schedule.

F14(2B)Where a trust deed contains a rule conforming with sub-paragraph (2A) above it must provide that the only powers and duties which the trustees may exercise in relation to persons who are beneficiaries by virtue only of that rule are those which may be exercised in accordance with the provisions of a scheme such as is mentioned in that sub-paragraph.]

(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) [F15, (2A)] 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 F16. . . 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) [F17, (2A)], (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) [F18by virtue of a rule which conforms with sub-paragraph (2), (3) or (4) above] 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.U.K.

(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;

[F19(cc)to grant rights to acquire shares to persons who are beneficiaries under 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 [F20135(1) of the M9Taxation 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 [F20126] of that Act).

9(1)The trust deed must provide that—U.K.

(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 [F21qualifying 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 [F22other than those transferred on a transfer such as is mentioned in sub-paragraph (2ZA) below] are transferred on similarterms,

(b)securities have been offered to all the persons who are beneficiariesunder the terms of the trust deed [F23by virtue of a rule which conforms with paragraph 4(2), (3) or (4) above] when the transfer is made, and

(c)securities are transferred to all such [F24persons] who have accepted.

[F25(2ZA)For the purposes of sub-paragraph (1) above a transfer of securities is also made on qualifying terms if—

(a)it is made to a person exercising a right to acquire shares, and

(b)that right was obtained in accordance with the provisions of a savings-related share option scheme within the meaning of Schedule 9 to the Taxes Act 1988—

(i)which was established by, or by a company controlled by, the founding company, and

(ii)which is approved under that Schedule, and

(c)that right is being exercised in accordance with the provisions of that scheme, and

(d)the consideration for the transfer is payable to the trustees.]

[F26(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.

10U.K.The trust deed must not contain features which are not essential orreasonably incidental to the purpose of acquiring sums and securities, [F27granting rights to acquire shares to persons who are eligible to participate in savings-related share option schemes approved under Schedule 9 to the Taxes Act 1988, transferring shares to such persons,] transferring sums and securities to employees and directors, and transferringsecurities to the trustees of profit sharing schemes approved under [F28that Schedule].

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 [F29135(1) of the M10Taxation 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 [F29126] 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. [F30This paragraph applies in relation to trusts established on or before the day on which the Finance Act 1994 was passed.]

[F3112A(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.

[F3217U.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.

F332U.K.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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 [F34Pension Schemes Act 1993] or the [F35Pension 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.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F36

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)

F37(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”.

F384U.K.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F39

Section 89A.

[F40SCHEDULE 8AU.K. Modification of sections 83 [F41to 83A] and 89 in relation to overseas life insurance companies

[F421(1)In their application to an overseas life insurance company [F43sections 83 to 83A] of this Act shall have effect with the modifications specified in paragraphs 1A to 1C below.U.K.

(2)In those paragraphs—

(a)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; and

(b)any expression to which a meaning is given by section 11A of that Act has that meaning.]

F441A(1)The reference in section 83(2)(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.

(2)The reference to assets in section 83(2)(b) (as it applies apart from subsection (3) of that section) 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.

(3)In determining for the purposes of section 83(2) (as it applies apart from subsection (3) of that section) 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 (2) 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.

(4)For the reference in section 83(3) to any amount [F45being added to the company’s long term business fund], there shall be substituted a reference to assets becoming assets of the long term business fund used or held for the purposes of the company’s United Kingdom branch or agency, having immediately previously been held by the company otherwise than as assets of that fund or used or held otherwise than for those purposes.

[F47(5)Any reference in section 83AA(2), (3) or (4) or 83AB(1) or (3) to an amount being added to the relevant company’s long term business fund shall be construed in accordance with sub-paragraph (4) above.]

F481BThe references in section 83A to the company’s long term business shall be construed as references to the whole of that business or to the whole of that business other than business in respect of which preparation of a revenue account for the purposes of the Insurance Companies Act 1982 is not required.

F491C(1)Where for a period of account any investment income referred to in section 83(2)(a) is not otherwise brought into account within the meaning of that section, it shall be treated as brought into account for the period if it arises in the period.U.K.

(2)Where for a period of account any increase in value referred to in section 83(2)(b) (as it applies apart from subsection (3) of that section) is not otherwise brought into account within the meaning of that section, 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.

(3)Where for a period of account any reduction in value referred to in section 83(2) (as it applies apart from subsection (3) of that section) is not otherwise brought into account within the meaning of that section, 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.

(4)Where in any period of account any such [F50addition] is made as is mentioned in section 83(3) which is not otherwise brought into account within the meaning of that section, it shall be treated as brought into account for the period in which it is made.

F512(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.U.K.

(2)Any reference to franked investment income shall be treated as a reference to UK distribution income (as defined by [F52paragraph 5B(4) of that Schedule]).

(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;

[F53and in paragraph (b) above the “specified portion” has the same meaning as in paragraph 1A(3)(b) above.]

[F54(7A)For the purposes of this paragraph any expression to which a meaning is given by section 11A of the Taxes Act 1988 has that meaning.]

(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.

F55(11). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

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.

F56SCHEDULE 10U.K.

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Section 107.

SCHEDULE 12U.K. Close Companies

Part IU.K. Administrative Provisions

InterpretationU.K.

1In this Part of this Schedule “the relevant provisions”means—

(a)sections 13A, 231 and 419 to 422 of the Taxes Act 1988, and

(b)Chapter III of Part XI of that Act (as it has effect in relation toaccounting periods beginning before 1st April 1989).

Provision of information by companyU.K.

2U.K.The inspector may, by notice, require any company which is, or appears tohim to be, a close company to furnish him within such time (not being lessthan 30 days) as may be specified in the notice with such particulars as hethinks necessary for the purposes of the relevant provisions.

Provision of information by shareholdersU.K.

3(1)If for the purposes of the relevant provisions any person in whose nameany shares are registered is so required by notice by the inspector, he shallstate whether or not he is the beneficial owner of the shares and, if not thebeneficial owner of the shares, shall furnish the name and address of theperson or persons on whose behalf the shares are registered in his name.U.K.

(2)This paragraph shall apply in relation to loan capital as it applies inrelation to shares.

Information about bearer securitiesU.K.

4(1)The inspector may, for the purposes of the relevant provisions, by noticerequire—U.K.

(a)any company which appears to him to be a close company to furnish him withparticulars of any bearer securities issued by the company, and the names andaddresses of the persons to whom the securities were issued and the respectiveamounts issued to each person, and

(b)any person to whom bearer securities were issued by the company, or to orthrough whom such securities were subsequently sold or transferred, to furnishhim with such further information as he may require with a view to enablinghim to ascertain the names and addresses of the persons beneficiallyinterested in the securities.

(2)In this paragraph—

• “loan creditor” has the same meaning as in Part XI of theTaxes Act 1988, and

• “securities” includes shares, stock, bonds, debentures anddebenture stock and also any promissory note or other instrument evidencingindebtedness to a loan creditor of the company.

Part IIU.K. Amendments Connected with Repeal of Chapter III of Part XI of Taxes Act1988

The Taxes Management Act 1970 (c.9)U.K.

5U.K.In the first column of the Table in section 98 of the Taxes Management Act1970 (penalty for failure to give particulars etc.) there shall be added atthe end— “ Paragraphs 2 to 4 of Schedule 12 to the Finance Act 1989. ”

The Capital Gains Tax Act 1979 (c.14)U.K.

F796U.K.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The Income and Corporation Taxes Act 1988 (c.1)U.K.

7U.K.In section 13 of the Taxes Act 1988 (small companies’ rate) in subsection(9) for the words “paragraph 17 of Schedule 19” there shall besubstituted the words “paragraphs 2 to 4 of Schedule 12 to the Finance Act1989”.

8(1)In section 168(11) of the Taxes Act 1988 (cases in which a person has amaterial interest in a company for the purposes of Chapter II of Part V ofthat Act) for the words from “in a company” to the end of paragraph (b)there shall be substituted— “in a company if he, either on his own or with one or more associates,or if any associate of his with or without such other associates,— 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)in the case of a close company, possesses, or is entitled to acquire, suchrights as would, in the event of the winding-up of the company or in any othercircumstances, give an entitlement to receive more than 5 per cent. of theassets which would then be available for distribution among the participators.”and at the end there shall be added the words “ , and “participator” has the meaning given by section 417(1) ”.

(2)This paragraph shall have effect in relation to accounting periodsbeginning after 31st March 1989.

9(1)In section 187(3) of the Taxes Act 1988 (cases in which a person has amaterial interest in a company for the purposes of sections 185 to 187 of, andSchedules 9 and 10 to, that Act) for the words from “in a company” to theend of paragraph (b) there shall be substituted— “in a company if he, either on his own or with one or more associates,or if any associate of his with or without such other associates,— 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 25 percent., or in the case of a share option scheme which is not a savings-relatedshare option scheme more than 10 per cent., of the ordinary share capital ofthe company, or

(b)where the company is a close company, possesses, or is entitled toacquire, such rights as would, in the event of the winding-up of the companyor in any other circumstances, give an entitlement to receive more than 25 percent., or in the case of a share option scheme which is not a savings-relatedshare option scheme more than 10 per cent., of the assets which would then beavailable for distribution among the participators.”and at the end there shall be added the words “ and “participator” has the meaning given by section 417(1) ”.

(2)This paragraph shall have effect in relation to accounting periodsbeginning after 31st March 1989.

10(1)In section 214 of the Taxes Act 1988 (chargeable payments connected withexempt distributions) in subsection (1)(c) for the words from “338(2)(a)”to “Schedule 19” there shall be substituted the words “and338(2)(a)”.U.K.

(2)This paragraph shall have effect in relation to accounting periodsbeginning after 31st March 1989, except in any case where section 427(4) ofthe Taxes Act 1988 has effect by virtue of section 103(2) of this Act.

11U.K.In section 234 of the Taxes Act 1988 (information relating todistributions) in subsection (9) for the words from “paragraph 17” to “that Schedule” there shall be substituted the words “paragraphs 2 to4 of Schedule 12 to the Finance Act 1989 for the purposes of the relevantprovisions (as defined in paragraph 1 of that Schedule)”.

12(1)Section 360 of the Taxes Act 1988 (loan to buy interest in a closecompany) shall be amended in accordance with this paragraph.U.K.

(2)In subsection (1)(a) for the words from “satisfying” to “424(4)”there shall be substituted the words “complying with section 13A(2)”.

(3)In subsections (2)(a) and (3)(a) for the words “satisfy any of theconditions of section 424(4)” there shall be substituted the words “comply with section 13A(2)”.

(4)This paragraph shall have effect in relation to interest paid on or afterthe day on which this Act is passed (and, accordingly, the conditions ofsection 424(4) of the Taxes Act 1988 shall continue to have effect for thepurposes of section 360 of that Act in relation to interest paid before thatday).

13(1)Section 360A of the Taxes Act 1988 (cases in which a person has a materialinterest in a company for the purposes of section 360(2)(a)) shall be amendedin accordance with this paragraph.U.K.

(2)In subsection (1) for the words from “in a company” onwards thereshall be substituted— “in a company if he, either on his own or with one or more associates,or if any associate of his with or without such other associates,—

(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.”

(3)In subsection (10) after the word “section” there shall be insertedthe words “ “participator” has the meaning given by section 417(1)and”.

(4)This paragraph shall have effect in relation to accounting periodsbeginning after 31st March 1989.

14(1)In section 576 of the Taxes Act 1988 (which relates to relief for losseson certain unquoted shares) in subsection (5), for paragraph (a) of thedefinition of “trading company” there shall be substituted—U.K.

“(a)a company whose business consists wholly or mainly of the carrying on ofa trade or trades”.

(2)This paragraph shall have effect in relation to disposals made after 31stMarch 1989.

15(1)In section 623 of the Taxes Act 1988 (meaning of “relevant earnings” for the purposes of Chapter III of PartXIV of that Act) in subsection (2) for the words “(construed in accordancewith paragraph 7 of Schedule 19)” there shall be substituted the words “(that is to say, income which, if the company were an individual, would notbe earned income)”.U.K.

(2)This paragraph shall have effect in relation to accounting periodsbeginning after 31st March 1989.

16(1)In section 644 of the Taxes Act 1988 (meaning of “relevant earnings” for the purposes of Chapter IV of PartXIV of that Act) in subsection (6) for the definition of “investmentincome” there shall be substituted—U.K.

““investment income” means income which, if the company werean individual, would not be earned income.”

(2)This paragraph shall have effect in relation to accounting periodsbeginning after 31st March 1989.

17U.K.In section 745 of the Taxes Act 1988 (power to obtain information for thepurposes of Chapter III of Part XVII of that Act) in subsection (4) for thewords from “trading” onwards there shall be substituted the words “companies whose business consists wholly or mainly of the carrying on ofa trade or trades.”

18(1)Paragraph 7 of Schedule 8 to the Taxes Act 1988 (cases in which a personhas a material interest in a company for the purposes of a profit-related payscheme) shall be amended in accordance with this paragraph.U.K.

(2)In sub-paragraph (2) for the words from “in a company” onwards thereshall be substituted— “in a company if he, either on his own or with one or more associates,or if any associate of his with or without such other associates,—

(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 25 percent. of the ordinary share capital of the company, or

(b)in the case of a close company, possesses, or is entitled to acquire, suchrights as would, in the event of the winding-up of the company or in any othercircumstances, give an entitlement to receive more than 25 per cent. of theassets which would then be available for distribution among the participators”.

(3)In sub-paragraph (3) the second “and” shall be omitted and after thedefinition of “control” there shall be inserted “and

“participator” has the meaning given by section 417(1)”.

(4)This paragraph shall have effect in relation to accounting periodsbeginning after 31st March 1989.

Section 121.

SCHEDULE 13U.K. Capital Allowances: Miscellaneous Amendments

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Patent rightsU.K.

27(1)Section 521 of the Taxes Act 1988 shall be amended as follows.

(2)In subsection (5) (which limits allowable expenditure in the case ofcertain sales entered into between connected persons or for the purpose ofobtaining an allowance)—

(a)the words “within the terms of section 839” shall be omitted, and

(b)for the words “the disposal value” onwards there shall be substitutedthe words “the relevant amount determined in accordance with subsection (6)below”.

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

“(6)The relevant amount referred to in subsection (5) above is—

(a)in a case in which, by virtue of subsections (2) to (4) above, a disposalvalue falls to be brought into account by reason of the sale, an amount equalto that disposal value,

(b)in a case in which no disposal value falls to be brought into account asmentioned in paragraph (a) above, but the seller receives on the sale acapital sum in respect of which he is chargeable to tax in accordance withsection 524, an amount equal to that sum,

(c)in any other case, an amount equal to whichever of the following is thesmallest—

(i)the price which the rights would have fetched if sold in the open market,

(ii)where capital expenditure was incurred by the seller on acquiring therights, the amount of that expenditure,

(iii)where capital expenditure was incurred by any person connected with theseller on acquiring the rights, the amount of the expenditure incurred by thatperson.

(7)Section 839 (connected persons) shall apply for the purposes of thissection.”

(4)This paragraph shall have effect in relation to expenditure incurred onor after the day on which this Act is passed.

28–30U.K.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F81

F82SCHEDULE 14U.K.

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Section 181.

[F95SCHEDULE 16U.K. Broadcasting: Additional Payments by Programme Contractors

Part IU.K. Amendments of the Principal Sections

1(1)Section 32 of the M13Broadcasting Act 1981 (rentalpayments by programme contractors) shall be amended as follows.U.K.

(2)In subsection (1)(b), after the word “amounts” there shall beinserted the words “in respect of profits and in respect of advertisingrevenue”.

(3)In subsection (2)(b), after the word “amounts” there shall beinserted the words “in respect of profits”.

(4)In subsection (4), for the word “Table”, where it first occurs, thereshall be substituted the word “Tables” and the following Tables shall besubstituted for the Table in that subsection—

For the purposes of this Table—

(a)a nil rate, instead of the relevant revenue rate, is applicable in thecase of persons who are DBS programme contractors or DBS teletext contractors;

(b)the relevant revenue rate is 10 per cent; and

(c)the free slice for advertising revenue is £15 million or, in thecase of a TV programme contractor, that amount with the addition of thepayments payable by him in pursuance of section 13(2).

For the purposes of this Table—

(a)a nil rate, instead of the relevant profits rate, is applicable in thecase of—

(i)programme contractors who provide local sound broadcasts, and

(ii)DBS programme contractors or DBS teletext contractors;

(b)the relevant profits rate is 25 per cent; and

(c)the free slice for profits is £2 million.”

(5)Subsection (4A) shall be omitted.

(6)In subsection (5), for the words “relevant sum mentioned in subsection(4A)” there shall be substituted the words “relevant sum mentioned in theTables above”.

(7)In subsection (7), after the words “additional payments” there shallbe inserted the words “in respect of profits”.

(8)In subsection (8), for the words “any of the provisions of subsections(4), (4A)” there shall be substituted the words “any of the provisionsof subsections (4)”.

(9)For subsection (9) there shall be substituted the followingsubsections—

“(9)The power of the Secretary of State under subsection (8) shall includepower to amend the provisions in question as there mentioned—

(a)only in their application in relation to the additional payments mentionedin subsection (1)(b); or

(b)only in their application in relation to the additional payments mentionedin subsection (2)(b); or

(c)differently in their application as mentioned in paragraphs (a) and (b)respectively; or

(d)only in their application in relation to additional payments in respectof advertising revenue; or

(e)only in their application in relation to additional payments in respectof profits; or

(f)differently in their application as mentioned in paragraphs (d) and (e)respectively.

(9A)In the application of the provisions mentioned in subsection (8) inrelation to the additional payments mentioned in subsection (1)(b), the powerof the Secretary of State under subsection (8) shall also include power toamend those provisions as mentioned in subsection (8)—

(a)only in relation to persons who are TV programme contractors (includingpersons who are both TV programme contractors and teletext contractors); or

(b)only in relation to persons who are DBS programme contractors (includingpersons who are both DBS programme contractors and teletext contractors); or

(c)only in relation to persons who are teletext contractors (other than DBSteletext contractors) but are not TV or DBS programme contractors; or

(d)only in relation to persons who are DBS teletext contractors but are notTV or DBS programme contractors; or

(e)differently in relation to persons within paragraphs (a), (b), (c) and (d)respectively.”

2(1)Section 33 of the M14Broadcasting Act 1981 (supplementalprovisions) shall be amended as follows.U.K.

(2)In subsection (1), for the words “advertising receipts” there shallbe substituted the words “advertising revenue”.

(3)In subsection (2), for the words “advertising receipts” there shallbe substituted the words “advertising revenue” and for the words “thosereceipts derive” there shall be substituted the words “the revenuederives”.

(4)In subsection (3)(c), for the words “advertising receipts” thereshall be substituted the words “advertising revenue” and for the word “derive” there shall be substituted the word “derives”.

3(1)Section 34 of the Broadcasting Act 1981 (instalments payable on accountby programme contractors for their accounting periods) shall be amended asfollows.U.K.

(2)In subsection (3)(c), for the words “receipts are” there shall besubstituted the words “revenue is”.

4(1)Section 35 of the M15Broadcasting Act 1981 (provision forsupplementing additional payments) shall be amended as follows.U.K.

(2)In subsection (1)—

(a)in paragraph (a), after the words “additional payments” there shallbe inserted the words “in respect of profits”;

(b)in paragraph (b)(ii), the words “in the case of second categoryprofits,” shall be omitted; and

(c)at the end, there shall be added the words “in respect of profits of hisfor that period”.

Part IIU.K. Provisions Inserted as Schedule 4 to the Broadcasting Act 1981

“Schedule 4U.K. Rental Payments

Advertising revenueU.K.

1(1)The advertising revenue of a programme contractor for an accounting periodshall be computed in accordance with this paragraph.

(2)Advertising revenue shall consist of the payments received or to bereceived by the programme contractor in consideration of the insertion ofadvertisements in programmes provided by the programme contractor andbroadcast in the United Kingdom by the Authority.

(3)In the application of this Schedule in relation to the additional paymentsmentioned in section 32(1)(b), the advertising revenue of a programmecontractor other than a teletext contractor who is not a TV programmecontractor includes payments received or to be received by him inconsideration of the insertion of programmes consisting of advertisementsprovided by him for broadcasting on the Fourth Channel and so broadcast.

(4)If, in connection with the insertion of advertisements which are paid forby payments constituting advertising revenue, any payments are made to theprogramme contractor to meet any additional payments, those payments shall beregarded as made in consideration of the insertion of the advertisements inquestion.

(5)In the case of an advertisement inserted in a programme under arrangementsmade between a programme contractor and a person acting as advertising agent,the amount of any receipt by the programme contractor which represents apayment by the advertiser from which the advertising agent has deducted anyamount by way of commission shall, except in a case falling withinsub-paragraph (6), be the amount of the payment by the advertiser after thededuction of the commission.

(6)If the amount deducted by way of commission as mentioned in sub-paragraph(5) exceeds 15 per cent. of the payment by the advertiser, the amount of thereceipt shall be the amount of that payment less 15 per cent.

(7)Any contract shall provide that where for any insertion of anadvertisement a programme contractor receives or is entitled to an entireconsideration not solely referable to that insertion, the advertising revenueshall be calculated by reference to so much only of the consideration as isreferable to that insertion according to an apportionment made in such manneras the contract may provide.

ProfitsU.K.

2(1)The profits of a programme contractor for an accounting period shall becomputed in accordance with this paragraph.

(2)The profits shall consist of the excess of relevant income over relevantexpenditure.

(3)“Relevant income” means—

(a)in relation to a programme contractor other than a DBS programmecontractor or a DBS teletext contractor, income which accrues to thecontractor in connection (directly or indirectly) with—

(i)the provision by the contractor of programmes for broadcasting on ITV, theFourth Channel or a local sound broadcasting service, or

(ii)the provision by the contractor, for broadcasting, distribution or showingin the United Kingdom, of programmes provided by him for broadcasting on ITV,the Fourth Channel or a local sound broadcasting service;

(b)in relation to a DBS programme contractor or DBS teletext contractor,income which accrues to the contractor in connection (directly or indirectly)with—

(i)the provision by the contractor to the Authority, in accordance with theterms of his contract as a DBS programme contractor or (as the case may be)DBS teletext contractor, of programmes for broadcasting in the Authority’s DBSservice to which his contract with the Authority relates, or

(ii)the provision by the contractor, for broadcasting, distribution or showingin the United Kingdom, of programmes broadcast in the Authority’s DBS service.

(4)Without prejudice to the generality of sub-paragraph (3), “relevant income” includes—

(a)all revenue which is advertising revenue for the purposes of thisparagraph; and

(b)such part of any income which—

(i)accrues to any subsidiary of or company related to the programmecontractor or to the contractor’s holding company, and

(ii)would be relevant income of that contractor if he and the subsidiary orrelated company or his holding company were a single programme contractor,

as, in the opinion of the Authority, should be attributed to thecontractor as reflecting his financial interest in the subsidiary or therespective financial interests of the holding company in the contractor andthe company related to the contractor or the financial interest of the holdingcompany in the contractor, as the case may be.

(5)For the purposes of this paragraph advertising revenue includes—

(a)in relation to a DBS programme contractor, payments received or to bereceived by him in respect of charges made for the reception of programmesprovided by him and broadcast in a DBS service;

(b)in relation to a teletext contractor, payments received or to be receivedby him in respect of charges made for the reception of programmes provided byhim and broadcast in a DBS or additional teletext service.

(6)“Relevant expenditure” means any expenditure of the programmecontractor which is properly chargeable to revenue account and which isincurred in connection with the provision by him of programmes of a kindmentioned in sub-paragraph (3).

(7)Without prejudice to the generality of sub-paragraph (6), “relevant expenditure” includes—

(a)expenditure in connection with the sale of rights to insert advertisementsin programmes; and

(b)such part of any expenditure which—

(i)is incurred by any subsidiary of or company related to the programmecontractor or by the contractor’s holding company, and

(ii)would be relevant expenditure of that contractor if he and the subsidiaryor related company or his holding company were a single programme contractor,

as, in the opinion of the Authority, should be attributed to thecontractor as reflecting his financial interest in the subsidiary or therespective financial interests of the holding company in the contractor andthe company related to the contractor or the financial interest of the holdingcompany in the contractor, as the case may be;

(c)in the case of a DBS programme contractor or a teletext contractor, anyexpenditure incurred in connection with the collection of charges for thereception of programmes provided by him and broadcast in a DBS service or ina DBS or additional teletext service, as the case may be; and

(d)in the case of a DBS programme or DBS teletext contractor, any expenditureincurred in connection with the provision of the satellite transponder.

(8)In ascertaining relevant income or relevant expenditure no account shallbe taken of interest on any loan.

(9)Items of relevant income and items of relevant expenditure shall beattributed to accounting periods in accordance with the foregoing provisionsof this Schedule.

(10)In this paragraph “programme” means—

(a)in the application of this Schedule in relation to the additional paymentsmentioned in section 32(1)(b), a television programme; and

(b)in the application of this Schedule in relation to the additional paymentsmentioned in section 32(2)(b), a local sound broadcast.

Carry forward of lossesU.K.

3(1)Where, in any accounting period, the relevant expenditure of a programmecontractor exceeds his relevant income, the excess shall be carried forwardto the following accounting period and treated as relevant expenditure forthat period for the purpose of computing his profits for that period.

(2)When a programme contractor’s contract with the Authority comes to an end,no losses incurred at any time during the currency of that contract may becarried forward under this paragraph and set against income attributable toany subsequent contract between him and the Authority.

Computation of profits of programme contractorsU.K.

4(1)It shall be the duty of the Authority—

(a)to draw up, and from time to time review, a statement setting out theprinciples to be followed in ascertaining, for any accounting period, aprogramme contractor’s—

(i)advertising revenue, and

(ii)relevant income and relevant expenditure for the purpose of computing hisprofits;

(b)in computing the advertising revenue and the profits of a programmecontractor for any accounting period, to take account of that statement(including any revision thereof which has taken effect before the end of thatperiod).

(2)A statement under this paragraph may set out different principles for TVprogramme contractors, DBS programme contractors, programme contractors forthe provision of local sound broadcasting and teletext contractors.

(3)Before drawing up or revising a statement under this paragraph theAuthority shall consult the Secretary of State and the Treasury.

(4)The Authority shall—

(a)publish the statement drawn up under this paragraph and every revision ofthat statement; and

(b)transmit a copy of the statement, and of every revision of it, to theSecretary of State;

and the Secretary of State shall lay copies of the statement and of everysuch revision before each House of Parliament.

(5)The principles relating to advertising revenue and to profits may be setout in separate statements under this paragraph; and where this is done itsprovisions apply to each statement.

DisputesU.K.

5(1)For the purposes of the principal sections and this Schedule—

(a)the amount of any advertising revenue, or

(b)the amount of any profits, or

(c)the amount of any additional payments, or of an instalment of additionalpayments,

shall, in the event of a disagreement between the Authority and theprogramme contractor, be the amount determined by the Authority.

(2)No determination of the Authority under this paragraph shall be called inquestion in any court of law, or be the subject of any arbitration; butnothing in this sub-paragraph shall prevent the bringing of proceedings forjudicial review.

Accounting periodsU.K.

6(1)Subject to the provisions of this Schedule, each period for which a bodycorporate which is a programme contractor makes up a profit and loss accountwhich is laid before the body corporate in general meeting shall be anaccounting period, whether that period is a year or not.

(2)If part of the said period for which a profit and loss account is made upfalls before, and part after—

(a)the commencement of a relevant order under section 32, or

(b)the time when the programme contractor begins or ceases to provideprogrammes for broadcasting by the Authority,

the two parts shall be treated as separate accounting periods.

In paragraph (a) “relevant order” means, in theapplication of this Schedule in relation to the additional payments mentionedin subsection (1)(b) or (as the case may be) subsection (2)(b) of section 32,an order having effect in relation to those payments.

(3)Where two parts of such a period as is mentioned in sub-paragraph (1) fallto be divided from each other under sub-paragraph (2)(a), section 32(4) shallhave effect as if the profits and advertising revenue for each part were theprofits and advertising revenue for the whole multiplied by—

(4)If sub-paragraph (2)(b) would produce an accounting period of three monthsor less, that period shall be added on to the accounting period (if any) whichprecedes or succeeds it (and which does not fall to be divided from it undersub-paragraph (2)(b)).

(5)A contract which varies another contract may modify the precedingprovisions of this paragraph.

(6)Nothing in this paragraph shall create an accounting period during whichthe programme contractor is not providing programmes for broadcasting by theAuthority.

7If a programme contractor is not a body corporate the contractor’saccounting periods shall be such as the Authority may direct, or as may beprovided in the contract.

InformationU.K.

8(1)Every contract shall impose on the contractor such requirements withrespect to the furnishing of information to the Authority as appear to theAuthority, after consultation with the Secretary of State, to berequisite—

(a)for enabling the Authority to perform their functions under the provisionsof the principal sections and this Schedule, and

(b)for enabling the Authority to furnish to the Secretary of State suchinformation as he may require for the purpose of determining whether, and inwhat manner, to exercise his powers of making orders under the saidprovisions.

(2)Without prejudice to the generality of sub-paragraph (1), the duty imposedon the Authority by that sub-paragraph includes the duty to impose, so far asis reasonably practicable, such requirements as will enable the Authority todetermine the amounts (if any) which, in relation to any programme contractor,are to be treated as advertising revenue and relevant income and relevantexpenditure for the computation of profits by virtue, respectively, ofparagraphs 1 and 2.

(3)It shall be the duty of the Authority to furnish to the Secretary of Statesuch information (whether obtained from contractors or otherwise) as is intheir possession and is required by the Secretary of State for the purpose ofdetermining whether, and in what manner, to exercise his powers of makingorders under the said provisions.

9It shall be the duty of the Authority in framing any contract to includeterms ensuring that the Authority will have the right to inspect accounts andrecords—

(a)of the programme contractor, and

(b)of any subsidiary of the programme contractor,

for the purpose of discharging their functions under the principalsections and this Schedule.

InterpretationU.K.

10(1)In this Schedule, and in the principal sections, except where the contextotherwise requires—

• “accounting period” shall be construed in accordance withparagraph 6;

• “additional payments” and “contract”—

(a)in the application of this Schedule and the principal sections in relationto the additional payments mentioned in section 32(1)(b), mean respectivelyadditional payments payable by virtue of that paragraph and a contract betweenthe Authority and a programme contractor under which television programmes areto be provided by the programme contractor, and

(b)in their application in relation to the additional payments mentioned insection 32(2)(b), mean respectively additional payments payable by virtue ofthat paragraph and a contract between the Authority and a programme contractorunder which local sound broadcasts are to be provided by the programmecontractor;

• “related”, in relation to a company and a programmecontractor, means that another person (whether alone or jointly with one ormore persons and whether directly or indirectly) holds, or is beneficiallyentitled to, 50 per cent or more of the equity share capital, or possesses 50per cent or more of the voting power, in the company and in the programmecontractor and “holding company” means that other person; and

• “subsidiary”, in relation to any person, means a company inwhich that person (whether alone or jointly with one or more persons andwhether directly or indirectly) holds, or is beneficially entitled to, 10 percent or more of the equity share capital, or possesses 10 per cent or more ofthe voting power.

(2)In this Schedule “payment” includes any valuableconsideration, and references to revenue and receipts and expenditure shallbe construed accordingly.”

Part IIIU.K. Transitional Provisions

1(1)In this paragraph—U.K.

• “new statutory provisions” means the provisions of the M16Broadcasting Act 1981 as amended by this Act; and

• “existing statutory provisions” means the provisions of thatAct as they had effect immediately before the coming into force of section181.

(2)Any contract between the Authority and a programme contractor which is inforce immediately before the day on which section 181 of this Act comes intoforce shall, until it is varied or superseded by a further contract betweenthem or expires or is otherwise terminated (whichever first occurs), be deemedto be modified by virtue of this Schedule so as—

(a)to substitute provisions in conformity with the new statutory provisionsfor so much of the contract as is in accordance with the existing statutoryprovisions and is not in conformity with the new statutory provisions, and

(b)to incorporate in the contract such additional provisions as a contractbetween the Authority and a programme contractor is required to include inaccordance with the new statutory provisions;

and (subject to paragraph 5 of Schedule 4 to the 1981 Act) any provisionsof the contract which provide for arbitration as to any matters contained inthe contract in accordance with the existing statutory provisions shall beconstrued as making the like provision for arbitration in relation to mattersdeemed to be included in the contract by virtue of this sub-paragraph.

(3)Where it appears to the Authority that the new statutory provisions callfor the inclusion of additional terms in any such contract, but do not affordsufficient particulars of what those terms should be, the Authority may, afterconsulting the programme contractor, decide what those terms are to be.

(4)This paragraph shall not be taken to have effect in relation to anycontract entered into by a programme contractor and any person other than theAuthority before the day on which section 181 of this Act comes into force.

2U.K.Where any accounting period of a programme contractor begins before 1stJanuary 1990 and ends after 31st December 1989, the additional paymentspayable by the programme contractor in relation to that accounting periodunder section 32 of the M17Broadcasting Act 1981 shall be theaggregate of—

(a)the amounts payable by him on the assumption that section 181 of this Actwas not in force at any time during the accounting period, multipliedby—

and

(b)the amounts payable by him on the assumption that that section was inforce throughout the accounting period, multiplied by—

3U.K.Where, under the existing statutory provisions, any excess of firstcategory expenditure over first category income of a programme contractorwould have been carried forward and treated as relevant first categoryexpenditure of his for an accounting period ending after 31st December 1989if those provisions had applied in relation to that period then the excessshall be carried forward and treated, under the new statutory provisions, asrelevant expenditure of the contractor for any accounting period which endsafter that date.

4U.K.In this Part of this Schedule, references to programme contractors shallbe read as including references to teletext contractors.]

Section 187.

SCHEDULE 17U.K. Repeals

Part IU.K. Customs and Excise

The repeals of section 147(1) of the Customs and Excise Management Act1979 and section 11(2) of the Finance Act 1988 have effect in relation tooffences committed on or after the day on which this Act is passed.

F96Part IIU.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Part IIIU.K. Value Added Tax

1U.K.The repeal of Group 6 of Schedule 5 to the Value Added Tax Act 1983 haseffect in relation to supplies made on or after 1st April 1989.

2U.K.The remaining repeals have effect in accordance with Schedule 3 to thisAct.

Part IVU.K. Income and Corporation Tax: General

1U.K.The repeals in sections 131 and 149 and of section 170 of the Income andCorporation Taxes Act 1988 have effect in accordance with section 42 of thisAct.

2U.K.The repeals in sections 231 and 824 of the Income and Corporation TaxesAct 1988 have effect in accordance with sections 110 and 111 of this Act.

3U.K.The repeals in sections 433 to 435 of the Income and Corporation Taxes Act1988 have effect in accordance with section 84(5) of this Act and the repealof section 436(3)(b) of that Act has effect in accordance with section 87(5)of this Act.

4U.K.The repeals in sections 590, 595, 596 and 600 of, and in Schedule 23 to,the Income and Corporation Taxes Act 1988 have effect in accordance withSchedule 6 to this Act.

5U.K.The repeals in sections 635, 645 and 655 of the Income and CorporationTaxes Act 1988 have effect in accordance with Schedule 7 to this Act.

6U.K.The repeal of section 769(7)(b) and (c) of the Income and CorporationTaxes Act 1988 has effect in accordance with section 100 of this Act.

7U.K.The repeal in the Finance Act 1988 has effect in relation to offers madeon or after 11th October 1988.

Part VU.K. Close Companies

1U.K.The repeal in section 98 of the Taxes Management Act 1970 and the repealof paragraph 17 of Schedule 19 to the Income and Corporation Taxes Act 1988have effect on and after the day on which this Act is passed.

2U.K.The repeal in section 89 of the Capital Gains Tax Act 1979 (and thecorresponding repeal in Schedule 29 to the Income and Corporation Taxes Act1988) have effect where the due date of issue of the share capital issued toa close company falls in an accounting period of the company beginning after31st March 1989.

3U.K.The repeal of section 414(3) of the Income and Corporation Taxes Act 1988has effect from 1st April 1989.

4U.K.The repeal of sections 423 to 430 of, and Schedule 19 to, the Income andCorporation Taxes Act 1988 has effect in accordance with section 103 of thisAct.

5U.K.The repeals in section 681 of the Income and Corporation Taxes Act 1988have effect in relation to the income of bodies corporate for accountingperiods beginning after 31st March 1989.

6U.K.The remaining repeals have effect in relation to accounting periodsbeginning after 31st March 1989.

Part VIU.K. Capital Allowances

1U.K.The repeal in paragraph 7(1)(b) of Schedule 8 to the Finance Act 1971 haseffect in cases where machinery or plant is brought into use on or after theday on which this Act is passed.

2U.K.The repeals in sections 68 and 87(4) of the Capital Allowances Act 1968and in paragraphs 1 to 3 and 11 of Schedule 15 to the Finance Act 1986 haveeffect in relation to chargeable periods beginning on or after 6th April 1993.

3U.K.The repeal in section 521(5) of the Income and Corporation Taxes Act 1988has effect in accordance with paragraph 27 of Schedule 13 to this Act.

4U.K.The repeals of the provisions listed in sub-paragraph (5) of paragraph 28of Schedule 13 to this Act have effect in accordance with that paragraph.

Part VIIU.K. Capital Gains

1U.K.The repeal in the Finance Act 1973 has effect in accordance with section130 of this Act.

2U.K.The repeal in section 142A of the Capital Gains Tax Act 1979 has effectin accordance with section 92 of this Act.

3U.K.The repeal of section 81 of the Finance Act 1982 has effect in relationto disposals on or after 6th April 1989 or, in the case of section 81(1)(b),assets acquired on or after that date.

4U.K.The repeal of section 64(2)(a) of the Finance Act 1984 has effect inaccordance with section 139(1) of this Act.

5U.K.The repeal in section 97(2) of the Inheritance Tax Act 1984 has effect inaccordance with section 138(7) of this Act.

6U.K.The repeal in the Finance (No.2) Act 1987 has effect in accordance withsection 140 of this Act.

7U.K.The remaining repeals have effect in relation to disposals on or after14th March 1989 (except that they shall not have effect in relation to sucha disposal in a case where the enactment in question operates in consequenceof relief having been given under section 79 of the Finance Act 1980 inrespect of a disposal made before that date).

Part VIIIU.K. Management

1U.K.The repeals in sections 16, 53 and 98 of the Taxes Management Act 1970have effect in accordance with section 164 of this Act.

2U.K.The repeals in sections 20 and 20B of the Taxes Management Act 1970 andsection 126 of the Finance Act 1988 have effect with respect to notices given,or warrants issued, on or after the day on which this Act is passed.

3U.K.The repeals of sections 37 to 39, in section 40, of section 41 and insection 118 of the Taxes Management Act 1970 and in Schedule 3 to the FinanceAct 1988 have effect in accordance with section 149 of this Act.

4U.K.The repeals in section 61 of the Taxes Management Act 1970 come into forceon the day appointed under section 152(7) of this Act.

5U.K.The repeals in sections 86 and 87 of the Taxes Management Act 1970, theFinance (No.2) Act 1975, the Finance Act 1980 and sections 824 and 825 of theIncome and Corporation Taxes Act 1988 have effect in accordance with section158 of this Act.

6U.K.The repeal in the Finance Act 1982 has effect in accordance with section156(4) of this Act.

7U.K.The repeal of subsection (2) of section 165 of this Act has effect inrelation to failures beginning on or after the day appointed under thatsubsection.

Part IXU.K. Stamp Duty: Insurance

These repeals have effect in accordance with section 173 of this Act.

Part XU.K. Rates of Interest

These repeals have effect in accordance with section 178(7) of this Act.

Part XIU.K. Broadcasting

These repeals have effect on 1st January 1990.

Part XIIU.K. Government Stock: Redemption

So far as relating to stock registered in the National Savings StockRegister these repeals have effect on the coming into force of the firstregulations made by virtue of section 3(1)(bb) of the National Debt Act 1972and so far as relating to other stock and bonds they have effect on the cominginto force of the first regulations made by virtue of section 47(1)(bb) of theFinance Act 1942.

Part XIIIU.K. National Savings

These repeals, apart from the repeal of section 5(2), (5) and (6) of theNational Savings Bank Act 1971, come into force on 1st October 1989.

Part XIVU.K. Tithe Redemption

These repeals have effect from the day appointed under section 187(2)of this Act.