Finance Act 1994

Part IVU.K. Income Tax, Corporation Tax and Capital Gains Tax

Chapter IU.K. General

Income tax: charge, rates and reliefsU.K.

F175 Charge and rates of income tax for 1994-95.U.K.

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F276 Personal allowance.U.K.

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77 Rate of relief to married couples etc.U.K.

(1)“ The provisions of section 256 of the Taxes Act 1988 (general provision as to personal reliefs) shall become subsection (1) of that section and after that subsection there shall be inserted the following subsections— ”

“(2)Where under any provision of this Chapter the relief to which a person is entitled for any year of assessment consists in an income tax reduction calculated by reference to a specified amount, the effect of that relief shall be that the amount of that person’s liability for that year to income tax on his total income shall be the amount to which he would have been liable apart from that provision less whichever is the smaller of—

(a)the amount equal to 20 per cent. of the specified amount; and

(b)the amount which reduces his liability to nil.

(3)In determining for the purposes of subsection (2) above the amount of income tax to which a person would be liable apart from any provision providing for an income tax reduction, no account shall be taken—

(a)where that provision is section 259 or 261A, of any income tax reduction under any of the other provisions of this Chapter;

(b)where that provision is section 262(1), of any income tax reduction under any of the other provisions of this Chapter except section 259 or 261A; or

(c)whatever that provision—

(i)of any relief by way of a reduction of liability to tax which is given in accordance with any arrangements having effect by virtue of section 788 or by way of a credit under section 790(1); or

(ii)of any tax at the basic rate on so much of that person’s income as is income the income tax on which he is entitled to charge against any other person or to deduct, retain or satisfy out of any payment;

but paragraph (a) above, so far as it relates to any income tax reduction under section 261A, is without prejudice to the provisions of subsection (2) of that section.”

(2)In section 257A of that Act (married couple’s allowance)—

F3(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b)in subsection (2), for the words from “to a deduction” to “the deduction” there shall be substituted “ for that year to an income tax reduction calculated by reference to £2,665 (instead of to the reduction ”; and

(c)in subsection (3), for the words from “to a deduction” to “the deduction” there shall be substituted “ for that year to an income tax reduction calculated by reference to £2,705 (instead of to the reduction ”.

F4(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F4(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F5(5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6)The Taxes Act 1988 and the M1Taxes Management Act 1970 shall have effect with the amendments specified in Schedule 8 to this Act (which supplements the provisions of this section).

(7)This section and Schedule 8 to this Act shall have effect for the year 1994-95 and, subject to the following provisions of this section, for subsequent years of assessment.

F6(8). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F6(9). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F6(10). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F778 Amount by reference to which MCA is reduced.U.K.

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79 Relief for maintenance payments.U.K.

(1)Sections 347A and 347B of the M2Taxes Act 1988 F8. . . (which contain provision with respect to the deductions from income allowed on account of maintenance payments) shall have effect in relation to payments becoming due on or after 6th April 1994 with the following modifications.

F9(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F10(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F10(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F10F9(5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F10(6). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F9(7). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F9(8). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

80 Limit on relief for interest.U.K.

For each of the years 1994-95 and 1995-96 the qualifying maximum defined in section 367(5) of the Taxes Act 1988 (limit on relief for interest on certain loans) shall be £30,000.

81 Mortgage interest relief etc.U.K.

(1)For subsection (1) of section 353 of the Taxes Act 1988 (general provision for relief for interest payments) there shall be substituted the following subsection—

“(1)Where a person pays interest in any year of assessment, that person, if he makes a claim to the relief, shall for that year of assessment be entitled (subject to sections 354 to 368) to relief in accordance with this section in respect of so much (if any) of the amount of that interest as is eligible for relief under this section by virtue of sections 354 to 365.”

(2)After that subsection there shall be inserted the following subsections—

“(1A)Where a person is entitled for any year of assessment to relief under this section in respect of any amount of interest which—

(a)is eligible for that relief by virtue of section 354 or 365, and

(b)so far as eligible by virtue of section 354, is so eligible in a case which falls, or is treated as falling, within section 355(1)(a), 356 or 358,

that relief shall consist in an income tax reduction for that year calculated by reference to that amount.

(1B)Where a person is entitled for any year of assessment to relief under this section in respect of any amount of interest which—

(a)is eligible for that relief otherwise than by virtue of section 354 or 365, or

(b)is eligible for that relief by virtue of section 354 in a case falling within section 355(1)(b),

that relief shall consist (subject to sections 237(5)(b) and 355(4)) in a deduction or set-off of that amount from or against that person’s income for that year.

(1C)Without prejudice to subsection (1E) below, where the whole or any part of an amount of interest is eligible for relief under this section by virtue of section 354 in a case which (apart from this subsection) would fall, or be treated as falling, within both section 355(1)(a) or 356 and section 355(1)(b), then that case shall be treated for the purposes of this section and the following provisions of this Act—

(a)except in relation to payments to which an election made for the purposes of this subsection by the person entitled to the relief applies, as falling within section 355(1)(b) and not within section 355(1)(a) or 356; and

(b)in relation to payments to which such an election does apply, as falling within section 355(1)(a) or, as the case may be, 356, and not within section 355(1)(b).

(1D)An election for the purposes of subsection (1C)—

(a)shall be made, and may be withdrawn, by the giving of written notice to an officer of the Board;

(b)shall apply to every payment of interest which—

(i)is made after the time specified in the notice of that election as the time as from which it takes effect; and

(ii)is not made after a time specified in a notice of the withdrawal of that election as the time as from which that election is withdrawn;

(c)shall not be made so as to take effect as from any time except the beginning of a year of assessment or a time as from which the conditions for the case to fall, or be treated as falling, within both section 355(1)(a) or 356 and section 355(1)(b) have begun to be satisfied in relation to payments of interest on the loan in question;

(d)shall not be withdrawn except as from the beginning of a year of assessment; and

(e)shall not be made so as to take effect, and shall not be withdrawn, as from any time before the beginning of the year of assessment immediately before that in which the notice of the election or, as the case may be, of the withdrawal is given to an officer of the Board.

(1E)Where any person is entitled for any year of assessment to relief under this section in respect of any amount of interest as is eligible for that relief partly as mentioned in subsection (1A) above and partly as mentioned in subsection (1B) above, that amount of interest shall be apportioned between the cases to which each of those subsections applies without regard to what parts of the total amount borrowed remain outstanding but according to the following factors, that is to say—

(a)the proportions of the total amount borrowed which were applied for different purposes; and

(b)in the case of so much of any amount of interest which is, or in pursuance of an apportionment under paragraph (a) above is treated as, eligible for relief by virtue of section 354, the different uses to which the land or other property in question is put from time to time;

and subsection (1A) or (1B) above shall apply accordingly in relation to the interest apportioned to the case to which that subsection applies.

(1F)Where any person is entitled under this section for any year of assessment to an income tax reduction calculated by reference to an amount of interest, the amount of that person’s liability for that year to income tax on his total income shall be the amount to which he would have been liable apart from this section less whichever is the smaller of—

(a)the amount equal to the applicable percentage of that amount of interest; and

(b)the amount which reduces his liability to nil.

(1G)In subsection (1F) above “the applicable percentage”—

(a)in relation to so much of any interest as is eligible for relief under this section by virtue of section 354, means 20 per cent.; and

(b)in relation to so much of any interest as is eligible for relief under this section by virtue of section 365, means the percentage which is the basic rate for the year of assessment in question;

but, in relation to any payment of interest which (whenever falling due) is made in the year 1995-96 or any subsequent year of assessment, paragraph (a) above shall have effect with the substitution of “15 per cent.” for “20 per cent.”

(1H)In determining for the purposes of subsection (1F) above the amount of income tax to which a person would be liable apart from any income tax reduction under this section, no account shall be taken of—

(a)any income tax reduction under Chapter I of Part VII or section 347B;

(b)any relief by way of a reduction of liability to tax which is given in accordance with any arrangements having effect by virtue of section 788 or by way of a credit under section 790(1); or

(c)any tax at the basic rate on so much of that person’s income as is income the income tax on which he is entitled to charge against any other person or to deduct, retain or satisfy out of any payment.”

F11(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4)For subsections (3) to (5B) of section 369 of that Act (provisions balancing deduction of relevant loan interest from income against charge to tax) there shall be substituted the following subsection—

“(3)The following payments, that is to say—

(a)payments of relevant loan interest to which this section applies, and

(b)payments which would be such payments but for section 373(5),

shall not be allowable as deductions for any purpose of the Income Tax Acts except in so far as they fall to be treated as such payments by virtue only of section 375(2) and would be allowable apart from this subsection.”

(5)Schedule 9 to this Act (which for the purposes of or in connection with the provisions of this section makes further modifications of certain enactments in relation to tax relief on interest payments) shall have effect.

(6)The preceding provisions of this section and that Schedule—

(a)shall have effect in relation to payments of interest made on or after 6th April 1994 (whenever falling due); and

(b)shall also have effect, so far as they relate to relevant loan interest, in relation to any payments of interest becoming due on or after 6th April 1994 which have been made at any time before that date but on or after 30th November 1993.

(7)Any provision made before the passing of this Act by reference to the basic rate of income tax and contained in any instrument or agreement under or in accordance with which payments of relevant loan interest have been or are to be made shall be taken, in relation to any such payment as is mentioned in subsection (6)(a) or (b) above, to have been made, instead, by reference to a rate which, in the case of that payment, is the applicable percentage for the purposes of subsection (1) of section 369 of the Taxes Act 1988.

F11(8). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(9)In this section “relevant loan interest” has the same meaning as in Part IX of the Taxes Act 1988.

82 Relief for blind persons.U.K.

(1)In section 265(1) of the Taxes Act 1988 (blind person’s allowance) for “£1,080” there shall be substituted “ £1,200 ”.

(2)This section shall apply for the year 1994-95 and subsequent years of assessment.

F1283. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .U.K.

F1384. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .U.K.

Corporation tax charge and rateU.K.

85 Charge and rate of corporation tax for 1994.U.K.

Corporation tax shall be charged for the financial year 1994 at the rate of 33 per cent.

86 Small companies.U.K.

(1)For the financial year 1994—

(a)the small companies’ rate shall be 25 per cent., and

(b)the fraction mentioned in section 13(2) of the Taxes Act 1988 (marginal relief for small companies) shall be one fiftieth.

(2)In section 13(3) of that Act (limits of marginal relief) in paragraphs (a) and (b)—

(a)for “£250,000” there shall be substituted “ £300,000 ”, and

(b)for “£1,250,000” there shall be substituted “ £1,500,000 ”.

(3)Subsection (2) above shall have effect for the financial year 1994 and subsequent financial years; and where by virtue of that subsection section 13 of the Taxes Act 1988 has effect with different relevant maximum amounts in relation to different parts of a company’s accounting period, then for the purposes of that section those parts shall be treated as if they were separate accounting periods and the profits and basic profits of the company for that period shall be apportioned between those parts.

Benefits in kindU.K.

87 Car fuel.U.K.

(1)In section 158 of the Taxes Act 1988 (car fuel) for the Tables in subsection (2) (tables of cash equivalents) there shall be substituted—

(2)This section shall have effect for the year 1994-95 and subsequent years of assessment.

F1488 Beneficial loan arrangements.U.K.

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F1489 Vouchers and credit-tokens.U.K.

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Chargeable gainsU.K.

90 Annual exempt amount for 1994-95.U.K.

For the year 1994-95 section 3 of the M3Taxation of Chargeable Gains Act 1992 (annual exempt amount) shall have effect as if the amount specified in subsection (2) were £5,800, and accordingly subsection (3) of that section (indexation) shall not apply for that year.

91 Relief on re-investment.U.K.

(1)Schedule 11 to this Act (which extends the relief on re-investment for individuals and trustees provided by Chapter IA of Part V of the Taxation of Chargeable Gains Act 1992) shall have effect.

(2)That Schedule shall have effect in relation to disposals made on or after 30th November 1993.

(3)In section 164H(1) of that Act—

(a)for “is greater than” there shall be substituted “ exceeds ”, and

(b)at the end there shall be added “ or half the value of the company’s assets as a whole (whichever is the greater); and section 294(3) and (4) of the Taxes Act (meaning of value of company’s assets as a whole) applies for the purposes of this subsection as it applies for the purposes of section 294 of that Act ”.

(4)Subsection (3) above shall apply to determine whether a company is a qualifying company on or after 30th November 1993.

F1592. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .U.K.

93 Indexation losses.U.K.

(1)In section 53 of the Taxation of Chargeable Gains Act 1992 (indexation allowance), in subsection (1), for the words following “contrary” to the end of paragraph (c) there shall be substituted “if on the disposal of an asset there is an unindexed gain, an allowance (“the indexation allowance”) shall be allowed against the unindexed gain—

(a)so as to give the gain for the purposes of this Act, or

(b)if the indexation allowance equals or exceeds the unindexed gain, so as to extinguish it (in which case the disposal shall be one on which, after taking account of the indexation allowance, neither a gain nor a loss accrues)”.

(2)In subsection (2) of that section—

(a)for “subsection (1) above” there shall be substituted “ this Chapter ”,

(b)for paragraph (a) there shall be substituted—

“(a)“unindexed gain” means the amount of the gain on the disposal computed in accordance with this Part”, and

(c)in paragraph (b), for “gain or loss” there shall be substituted “ gain ”.

(3)After that subsection there shall be inserted—

“(2A)Notwithstanding anything in section 16 of this Act, this section shall not apply to a disposal on which a loss accrues.”

(4)In section 55 of that Act (assets acquired on a no gain/no loss disposal), after subsection (6) there shall be inserted—

“(7)The rules in subsection (8) below apply (after the application of section 53 but before the application of section 35(3) or (4)) to give the gain or loss for the purposes of this Act where—

(a)subsection (6) above applies to the disposal (the “disposal in question”) of an asset by any person (the “transferor”), and

(b)but for paragraph (b) of that subsection, the consideration the transferor would be treated as having given for the asset would include an amount or amounts of indexation allowance brought into account by virtue of section 56(2) on any disposal made before 30th November 1993.

(8)The rules are as follows—

(a)where (apart from this subsection) there would be a loss, an amount equal to the rolled-up indexation shall be added to it so as to increase it,

(b)where (apart from this subsection) the unindexed gain or loss would be nil, there shall be a loss of an amount equal to the rolled-up indexation, and

(c)where (apart from this subsection)—

(i)there would be an unindexed gain, and

(ii)the gain or loss would be nil but the amount of the indexation allowance used to extinguish the gain would be less than the rolled-up indexation,

the difference shall constitute a loss.

(9)In this section the “rolled-up indexation” means, subject to subsections (10) and (11) below, the amount or, as the case may be, the aggregate of the amounts referred to in subsection (7)(b) above; and subsections (10) and (11) below shall, as well as applying on the disposal in question, be treated as having applied on any previous part disposal by the transferor.

(10)Where, for the purposes of any disposal of the asset by the transferor, any amount falling within any, or any combination of, paragraphs (a) to (c) of section 38(1) is required by any enactment to be excluded, reduced or written down, the amount or aggregate referred to in subsection (9) above (or so much of it as remains after the application of this subsection and subsection (11) below on a previous part disposal) shall be reduced in proportion to any reduction made in the amount falling within the paragraph, or the combination of paragraphs, in question.

(11)Where the transferor makes a part disposal of the asset at any time, then, for the purposes of that and any subsequent disposal, the amount or aggregate referred to in subsection (9) above (or so much of it as remains after the application of this subsection and subsection (10) above on a previous part disposal by him or after the application of subsection (10) above on the part disposal) shall be apportioned between the property disposed of and the property which remains in the same proportions as the sums falling within section 38(1)(a) and (b).”

(5)In section 56 of that Act (amount of consideration on no gain/no loss disposals)—

(a)in subsection (2) for the words preceding paragraph (a) there shall be substituted “ On a no gain/no loss disposal by any person (“the transferor”) ”, and

(b)after that subsection there shall be added—

“(3)Where apart from this subsection—

(a)a loss would accrue on the disposal of an asset, and

(b)the sums allowable as a deduction in computing that loss would include an amount attributable to the application of the assumption in subsection (2) above on any no gain/no loss disposal made on or after 30th November 1993,

those sums shall be determined as if that subsection had not applied on any such disposal made on or after that date and the loss shall be reduced accordingly or, if those sums are then equal to or less than the consideration for the disposal, the disposal shall be one on which neither a gain nor a loss accrues.

(4)For the purposes of this section a no gain/no loss disposal is one which, by virtue of any enactment other than section 35(4), 53(1) or this section, is treated as a disposal on which neither a gain nor a loss accrues to the person making the disposal.”

(6)In section 110 of that Act (indexation allowance for share pools), after subsection (6) there shall be inserted—

“(6A)Where a disposal to a person acquiring or adding to a new holding is treated by virtue of any enactment as one on which neither a gain nor a loss accrues to the person making the disposal—

(a)section 56(2) shall not apply to the disposal (and, accordingly, the amount of the consideration shall not be calculated on the assumption that a gain of an amount equal to the indexation allowance accrues to the person making the disposal), but

(b)an amount equal to the indexation allowance on the disposal shall be added to the indexed pool of expenditure for the holding acquired or, as the case may be, held by the person to whom the disposal is made (and, where it is added to the indexed pool of expenditure for a holding so held, it shall be added after any increase required by subsection (8)(a) below).”

(7)Sections 103 (collective investment schemes, etc.), 111 (building society etc. shares), 182 to 184 (groups and associated companies) and 200 (oil industry assets) of that Act (all of which relate to indexation allowance) shall cease to have effect.

(8)In Schedule 7A to that Act (restriction on set-off of pre-entry losses), in paragraph 2—

(a)in sub-paragraph (2), for the definitions of “B” and “C” there shall be substituted—

“B is the amount of the item of relevant allowable expenditure for which an amount falls to be determined under this paragraph;

C is the total amount of all the relevant allowable expenditure”,

(b)in sub-paragraph (4), “except in relation to the calculation of any indexed rise” shall cease to have effect,

(c)after sub-paragraph (8) there shall be inserted—

“(8A)Where by virtue of section 55(8) the allowable loss accruing on the disposal of a pre-entry asset, or any part of the loss, is attributable to an amount (“the rolled-up amount”) of rolled-up indexation (as defined in section 55(9) to (11)), then, for the purposes of this paragraph—

(a)the total amount of all the relevant allowable expenditure shall be treated as increased by the rolled-up amount, and

(b)the amount of each item of relevant allowable expenditure shall be treated as increased by so much (if any) of the rolled-up amount as is attributable to that item.

(8B)Where—

(a)section 56(3) applies on the disposal of a pre-entry asset on which an allowable loss accrues, and

(b)in accordance with that subsection, the total amount of all the relevant allowable expenditure is reduced by any amount (“the global reduction”),

the amount of each item of relevant allowable expenditure shall be treated for the purposes of this paragraph as reduced by so much (if any) of the global reduction as is attributable to that item”, and

(d)in sub-paragraph (9), the definition of “indexed rise” shall cease to have effect.

(9)In paragraph 4 of that Schedule—

(a)in sub-paragraph (12) the words from “together” to the end, and

(b)sub-paragraph (13),

shall cease to have effect.

(10)In paragraph 5 of that Schedule, after sub-paragraph (2) there shall be inserted—

“(2A)In determining for the purposes of sub-paragraph (2)(a) above the amount of any loss which would have accrued if the asset had been disposed of at the relevant time at its market value at that time—

(a)it shall be assumed that the amendments of this Act made by section 93(1) to (5) of the Finance Act 1994 (indexation losses) had effect in relation to that disposal and, accordingly,

(b)references in those amendments and in subsection (11) of that section to 30th November 1993 shall be read as references to the day on which the relevant time falls.”

(11)This section shall have effect in relation to disposals made on or after 30th November 1993 and Schedule 12 to this Act (which gives transitional relief) shall have effect for the years 1993–94 and 1994–95.

94 Set-off of pre-entry losses.U.K.

(1)Schedule 7A to the M4Taxation of Chargeable Gains Act 1992 (set off of pre-entry losses) shall be amended as follows.

(2)In sub-paragraph (3)(a) of paragraph 2 (calculation of pre-entry proportion of loss), for “assumption applying by virtue of sub-paragraphs (4) and (5)” there shall be substituted “ assumptions applying by virtue of sub-paragraphs (4) to (6B) ”, and for sub-paragraph (7) of that paragraph there shall be substituted the following sub-paragraphs—

“(6A)Notwithstanding anything in section 56(2), where in the case of the disposal of any pre-entry asset—

(a)any company has at any time between the relevant time and the time of the disposal acquired that asset or the equivalent asset, and

(b)the acquisition was either an acquisition in pursuance of a disposal on which there is treated by virtue of section 171 as having been neither a gain nor a loss accruing or an acquisition by virtue of which an asset is treated as the equivalent asset,

the items of relevant allowable expenditure and the times when those items shall be treated as having been incurred shall be determined for the purposes of this paragraph on the assumptions specified in sub-paragraph (6B) below.

(6B)Those assumptions are that—

(a)the company by reference to which the asset in question is a pre-entry asset, and

(b)the company mentioned in sub-paragraph (6A) above and every other company which has made an acquisition which, in relation to the disposal of that asset, falls within that sub-paragraph,

were the same person and, accordingly, that the pre-entry asset had been acquired by the company disposing of it at the time when it or the equivalent asset would have been treated for the purposes of this paragraph as acquired by the company mentioned in paragraph (a) above.

(7)In sub-paragraphs (5) to (6B) above the references to the equivalent asset, in relation to another asset acquired or disposed of by any company, are references to any asset which falls in relation to that company to be treated (whether by virtue of paragraph 1(8) above or otherwise) as the same as the other asset or which would fall to be so treated after applying, as respects other assets, the assumptions for which those sub-paragraphs provide.”

(3)In paragraph 9(2)(c) (cases where a group is relevant if a company was a member of it in the accounting period in which it joined another relevant group), after “paragraph (a)” there shall be inserted “ or (b) ”.

(4)This section shall apply in relation to the making in respect of any loss of any deduction from a chargeable gain where either the gain or the loss is one accruing on or after 11th March 1994.

95 Commodity and financial futures.U.K.

(1)In section 143 of the M5Taxation of Chargeable Gains Act 1992 (commodity and financial futures and qualifying options), subsection (4) shall cease to have effect and for subsection (6) there shall be substituted the following subsections—

“(6)In any case where, in the course of dealing in commodity or financial futures, a person has entered into a futures contract and—

(a)he has not closed out the contract (as mentioned in subsection (5) above), and

(b)he becomes entitled to receive or liable to make a payment, whether under the contract or otherwise, in full or partial settlement of any obligations under the contract,

then, for the purposes of this Act, he shall be treated as having disposed of an asset (namely, that entitlement or liability) and the payment received or made by him shall be treated as consideration for the disposal or, as the case may be, as incidental costs to him of making the disposal.

(7)Section 46 shall not apply to obligations under—

(a)a commodity or financial futures contract which is entered into by a person in the course of dealing in such futures on a recognised futures exchange; or

(b)a commodity or financial futures contract to which an authorised person or listed institution is a party.

(8)In this section—

• “authorised person” has the same meaning as in the Financial Services Act 1986, and

• “listed institution” has the same meaning as in section 43 of that Act.”

(2)This section shall apply in relation to contracts entered into on or after 30th November 1993.

96 Cash-settled options.U.K.

(1)After section 144 of the M6Taxation of Chargeable Gains Act 1992 (options and forfeited deposits) there shall be inserted the following section—

“144A Cash-settled options.

(1)In any case where—

(a)an option is exercised; and

(b)the nature of the option (or its exercise) is such that the grantor of the option is liable to make, and the person exercising it is entitled to receive, a payment in full settlement of all obligations under the option,

subsections (2) and (3) below shall apply in place of subsections (2) and (3) of section 144.

(2)As regards the grantor of the option—

(a)he shall be treated as having disposed of an asset (namely, his liability to make the payment) and the payment made by him shall be treated as incidental costs to him of making the disposal; and

(b)the grant of the option and the disposal shall be treated as a single transaction and the consideration for the option shall be treated as the consideration for the disposal.

(3)As regards the person exercising the option—

(a)he shall be treated as having disposed of an asset (namely, his entitlement to receive the payment) and the payment received by him shall be treated as the consideration for the disposal;

(b)the acquisition of the option (whether directly from the grantor or not) and the disposal shall be treated as a single transaction and the cost of acquiring the option shall be treated as expenditure allowable as a deduction under section 38(1)(a) from the consideration for the disposal; and

(c)for the purpose of computing the indexation allowance (if any) on the disposal, the cost of the option shall be treated (notwithstanding paragraph (b) above) as incurred when the option was acquired.

(4)In any case where subsections (2) and (3) above would apply as mentioned in subsection (1) above if the reference in that subsection to full settlement included a reference to partial settlement, those subsections and subsections (2) and (3) of section 144 shall both apply but with the following modifications—

(a)for any reference to the grant or acquisition of the option there shall be substituted a reference to the grant or acquisition of so much of the option as relates to the making and receipt of the payment or, as the case may be, the sale or purchase by the grantor; and

(b)for any reference to the consideration for, or the cost of or of acquiring, the option there shall be substituted a reference to the appropriate proportion of that consideration or cost.

(5)In this section “appropriate proportion” means such proportion as may be just and reasonable in all the circumstances.”

(2)This section shall apply in relation to options granted on or after 30th November 1993.

97 Settlements with foreign element: information.U.K.

(1)The M7Taxation of Chargeable Gains Act 1992 shall be amended as mentioned in subsections (2) to (4) below.

(2)In Chapter II of Part III (settlements) the following section shall be inserted after section 98—

“98A Settlements with foreign element: information.

Schedule 5A to this Act (which contains general provisions about information relating to settlements with a foreign element) shall have effect.”

(3)The following Schedule shall be inserted after Schedule 5—

Section 98A.

“SCHEDULE 5AU.K. Settlements with Foreign Element: Information

1In this Schedule “the commencement day” means the day on which the Finance Act 1994 was passed.

2(1)This paragraph applies if—

(a)a settlement was created before 19th March 1991,

(b)on or after the commencement day a person transfers property to the trustees otherwise than under a transaction entered into at arm’s length and otherwise than in pursuance of a liability incurred by any person before that day,

(c)the trustees are not resident or ordinarily resident in the United Kingdom at the time the property is transferred, and

(d)the transferor knows, or has reason to believe, that the trustees are not so resident or ordinarily resident.

(2)Before the expiry of the period of twelve months beginning with the relevant day, the transferor shall deliver to the Board a return which—

(a)identifies the settlement, and

(b)specifies the property transferred, the day on which the transfer was made, and the consideration (if any) for the transfer.

(3)For the purposes of sub-paragraph (2) above the relevant day is the day on which the transfer is made.

3(1)This paragraph applies if a settlement is created on or after the commencement day, and at the time it is created—

(a)the trustees are not resident or ordinarily resident in the United Kingdom, or

(b)the trustees are resident or ordinarily resident in the United Kingdom but fall to be regarded for the purposes of any double taxation relief arrangements as resident in a territory outside the United Kingdom.

(2)Any person who—

(a)is a settlor in relation to the settlement at the time it is created, and

(b)at that time fulfils the condition mentioned in sub-paragraph (3) below,

shall, before the expiry of the period of three months beginning with the relevant day, deliver to the Board a return specifying the particulars mentioned in sub-paragraph (4) below.

(3)The condition is that the person concerned is domiciled in the United Kingdom and is either resident or ordinarily resident in the United Kingdom.

(4)The particulars are—

(a)the day on which the settlement was created;

(b)the name and address of the person delivering the return;

(c)the names and addresses of the persons who are the trustees immediately before the delivery of the return.

(5)For the purposes of sub-paragraph (2) above the relevant day is the day on which the settlement is created.

4(1)This paragraph applies if a settlement is created on or after 19th March 1991, and at the time it is created—

(a)the trustees are not resident or ordinarily resident in the United Kingdom, or

(b)the trustees are resident or ordinarily resident in the United Kingdom but fall to be regarded for the purposes of any double taxation relief arrangements as resident in a territory outside the United Kingdom.

(2)Any person who—

(a)is a settlor in relation to the settlement at the time it is created,

(b)at that time does not fulfil the condition mentioned in sub-paragraph (3) below, and

(c)first fulfils that condition at a time falling on or after the commencement day,

shall, before the expiry of the period of twelve months beginning with the relevant day, deliver to the Board a return specifying the particulars mentioned in sub-paragraph (4) below.

(3)The condition is that the person concerned is domiciled in the United Kingdom and is either resident or ordinarily resident in the United Kingdom.

(4)The particulars are—

(a)the day on which the settlement was created;

(b)the name and address of the person delivering the return;

(c)the names and addresses of the persons who are the trustees immediately before the delivery of the return.

(5)For the purposes of sub-paragraph (2) above the relevant day is the day on which the person first fulfils the condition as mentioned in paragraph (c) of that sub-paragraph.

5(1)This paragraph applies if—

(a)the trustees of a settlement become at any time (the relevant time) on or after the commencement day neither resident nor ordinarily resident in the United Kingdom, or

(b)the trustees of a settlement, while continuing to be resident and ordinarily resident in the United Kingdom, become at any time (the relevant time) on or after the commencement day trustees who fall to be regarded for the purposes of any double taxation relief arrangements as resident in a territory outside the United Kingdom.

(2)Any person who was a trustee of the settlement immediately before the relevant time shall, before the expiry of the period of twelve months beginning with the relevant day, deliver to the Board a return specifying—

(a)the day on which the settlement was created,

(b)the name and address of each person who is a settlor in relation to the settlement immediately before the delivery of the return, and

(c)the names and addresses of the persons who are the trustees immediately before the delivery of the return.

(3)For the purposes of sub-paragraph (2) above the relevant day is the day when the relevant time falls.

6(1)Nothing in paragraph 2, 3, 4 or 5 above shall require information to be contained in the return concerned to the extent that—

(a)before the expiry of the period concerned the information has been provided to the Board by any person in pursuance of the paragraph concerned or of any other provision, or

(b)after the expiry of the period concerned the information falls to be provided to the Board by any person in pursuance of any provision other than the paragraph concerned.

(2)Nothing in paragraph 2, 3, 4 or 5 above shall require a return to be delivered if—

(a)before the expiry of the period concerned all the information concerned has been provided to the Board by any person in pursuance of the paragraph concerned or of any other provision, or

(b)after the expiry of the period concerned all the information concerned falls to be provided to the Board by any person in pursuance of any provision other than the paragraph concerned.”

(4)In Schedule 5, paragraphs 11 to 14 (information) shall be omitted.

(5)Subsection (4) above shall have effect where the relevant day falls on or after the day on which this Act is passed.

(6)In the Table in section 98 of the M8Taxes Management Act 1970 (penalties) at the end of the second column there shall be inserted—

Profit-related payU.K.

F1698. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .U.K.

F1799. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .U.K.

Profit sharing schemesU.K.

100 Relevant age for purpose of appropriate percentage.U.K.

(1)Schedule 10 to the Taxes Act 1988 (profit sharing schemes) shall be amended as follows.

(2)In paragraph 3 (the appropriate percentage for purposes of tax charge) the words from “In this paragraph” to the end of the paragraph shall be omitted.

(3)The following paragraph shall be inserted after paragraph 3—

“3A(1)In paragraph 3 above the reference to the relevant age shall be construed as follows.

(2)Where the scheme is approved before 25th July 1991 and the event occurs before 30th November 1993, the relevant age is pensionable age.

(3)Where—

(a)the scheme is approved before 25th July 1991,

(b)the event occurs on or after 30th November 1993,

(c)the scheme defines the period of retention by reference to the age of 60 for both men and women, and

(d)the reference to that age is incorporated in the definition by virtue of an alteration approved by the Board under paragraph 4 of Schedule 9 before the event occurs,

the relevant age is 60.

(4)Where—

(a)the scheme is approved before 25th July 1991,

(b)the event occurs on or after 30th November 1993, and

(c)sub-paragraph (3) above does not apply,

the relevant age is pensionable age.

(5)Where the scheme is approved on or after 25th July 1991, the relevant age is the specified age.”

101 Acceptance of qualifying corporate bonds for shares.U.K.

(1)Schedule 10 to the Taxes Act 1988 (profit sharing schemes) shall be amended as mentioned in subsections (2) to (4) below.

(2)In paragraph 1 (limitations on contractual obligations of participants) in sub-paragraph (1) the following paragraph shall be inserted after paragraph (c)—

“(cc)directing the trustees to accept an offer of a qualifying corporate bond, whether alone or with cash or other assets or both, for his shares if the offer forms part of a general offer which is made as mentioned in paragraph (c) above; or”.

(3)In paragraph 1 the following sub-paragraph shall be inserted after sub-paragraph (3)—

“(4)In sub-paragraph (1)(cc) above “qualifying corporate bond” shall be construed in accordance with section 117 of the 1992 Act.”

(4)The following paragraph shall be inserted after paragraph 5 (company reconstructions)—

“5A(1)Paragraph 5(2) to (6) above apply where there occurs in relation to any of a participant’s shares (“the original holding”) a relevant transaction which would result in a new holding being equated with the original holding for the purposes of capital gains tax, were it not for the fact that what would be the new holding consists of or includes a qualifying corporate bond; and “relevant transaction” here means a transaction mentioned in Chapter II of Part IV of the 1992 Act.

(2)In paragraph 5(2) to (6) above as applied by this paragraph—

(a)references to a company reconstruction are to the transaction referred to in sub-paragraph (1) above;

(b)references to the new holding are to what would be the new holding were it not for the fact mentioned in sub-paragraph (1) above;

(c)references to the original holding shall be construed in accordance with sub-paragraph (1) above (and not paragraph 5(1));

(d)references to shares, in the context of the new holding, include securities and rights of any description which form part of the new holding.

(3)In sub-paragraph (1) above “qualifying corporate bond” shall be construed in accordance with section 117 of the 1992 Act.”

(5)In paragraph 32(1) of Schedule 9 to the Taxes Act 1988 (requirements applicable to profit sharing schemes) for “or (c)” there shall be substituted “ , (c) or (cc) ”.

(6)In paragraph 33(a) of Schedule 9 to the Taxes Act 1988 (which provides that the trust instrument must contain certain provision by reference to new shares within the meaning of paragraph 5 of Schedule 10) the reference to paragraph 5 of Schedule 10 shall be construed as including a reference to that paragraph as applied by paragraph 5A.

(7)Subsections (2) and (3) above shall have effect where a direction is made on or after the day on which this Act is passed.

(8)Subsection (4) above shall have effect where what would be the new holding comes into being on or after the day on which this Act is passed; but this is subject to subsection (13) below.

(9)Subsection (5) above shall have effect in relation to any scheme not approved before the day on which this Act is passed.

(10)In a case where—

(a)a scheme is approved before the day on which this Act is passed, and

(b)on or after that day the trust instrument is altered in such a way that paragraph 32(1) of Schedule 9 to the Taxes Act 1988 would be fulfilled if subsection (5) above applied in relation to the scheme,

subsection (5) above shall apply in relation to the scheme with effect from the time the alteration is made.

(11)Subsection (6) above shall have effect in relation to any scheme not approved before the day on which this Act is passed.

(12)In a case where—

(a)a scheme is approved before the day on which this Act is passed, and

(b)on or after that day the trust instrument is altered in such a way that paragraph 33(a) of Schedule 9 to the Taxes Act 1988 would be fulfilled if subsection (6) above applied in relation to the scheme,

subsection (6) above shall apply in relation to the scheme with effect from the time the alteration is made.

(13)In a case where—

(a)a scheme is approved before the day on which this Act is passed,

(b)subsection (4) above would apply in relation to the scheme by virtue of subsection (8) above and apart from this subsection, and

(c)the trust instrument is not altered as mentioned in subsection (12)(b) above before what would be the new holding comes into being,

subsection (4) above shall not apply in relation to the scheme.

(14)Subsection (6) above shall not imply a contrary intention for the purposes of section 20(2) of the M9Interpretation Act 1978 in its application to other references to paragraph 5 of Schedule 10 to the Taxes Act 1988.

Employee share ownership trustsU.K.

102 Employee share ownership trusts.U.K.

Schedule 13 to this Act (which contains provisions about employee share ownership trusts) shall have effect.

Retirement benefits schemesU.K.

F18103 The administrator.U.K.

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

F18104 Default of administrator etc.U.K.

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

F18105 Information.U.K.

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

F18106 False statements etc.U.K.

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

F18107 Discretionary approval.U.K.

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

108 Taxation of benefits of non-approved schemes.U.K.

F19(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F19(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F19(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F19(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F19(5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F19(6). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7)Subject to subsection (8) below, in the Taxes Act 1988—

(a)in section 188(1), paragraph (c), and

F19(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(exemption from tax where recipient of benefit or lump sum chargeable to tax in respect of sums paid or treated as paid with a view to the provision of the benefit or lump sum) shall cease to have effect in relation to any benefit provided or lump sum paid on or after 1st December 1993.

(8)The repeals made by subsection (7) above shall not have effect in relation to any benefit provided or lump sum paid on or after 1st December 1993 in pursuance of a scheme or arrangement entered into before that day unless the scheme or arrangement is varied on or after that day with a view to the provision of the benefit or lump sum.

AnnuitiesU.K.

F20109 Annuities derived from personal pension schemes.U.K.

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

F20110 Annuities derived from retirement benefits schemes.U.K.

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

Authorised unit trustsU.K.

F21111. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .U.K.

112 Distributions of authorised unit trusts.U.K.

Schedule 14 to this Act (distributions of authorised unit trusts) shall have effect.

113 Umbrella schemes.U.K.

(1)In section 468 of the Taxes Act 1988 (authorised unit trusts), in subsection (6) (definitions) at the beginning there shall be inserted “ Subject to subsections (7) to (9) below ”.

(2)After that subsection there shall be added—

“(7)Each of the parts of an umbrella scheme shall be regarded for the purposes of this Chapter as an authorised unit trust and the scheme as a whole shall not be so regarded.

(8)In this section, “umbrella scheme” means a unit trust scheme—

(a)which provides arrangements for separate pooling of the contributions of the participants and the profits or income out of which payments are to be made to them;

(b)under which the participants are entitled to exchange rights in one pool for rights in another; and

(c)in the case of which an order under section 78 of the Financial Services Act 1986 is in force;

and any reference to a part of an umbrella scheme is a reference to such of the arrangements as relate to a separate pool.

(9)In relation to a part of an umbrella scheme, any reference—

(a)to investments subject to the trusts of an authorised unit trust, shall have effect as a reference to such of the investments as under the arrangements form part of the separate pool to which the part of the umbrella scheme relates; and

(b)to a unit holder, shall have effect as a reference to a person for the time being having rights in that separate pool.”

(3)In section 469 of the Taxes Act 1988 (other unit trusts)—

(a)in subsection (1)(a) (application of section) for the words “that is not an authorised unit trust” there shall be substituted “ that is neither an authorised unit trust nor an umbrella scheme ”; and

(b)after subsection (6) there shall be inserted—

“(6A)In this section “umbrella scheme” has the same meaning as in section 468.”

(4)Subject to what follows, the amendments made by subsections (1) to (3) above shall have effect on and after 1st April 1994 in relation to unit trust schemes and their participants.

(5)Nothing in those amendments shall have effect before the relevant date in relation to a unit trust scheme which immediately before 1st April 1994 falls within the definition of an umbrella scheme contained in those amendments.

(6)In this section “the relevant date”, means, in relation to a unit trust scheme, the day after the end of the last distribution period of the scheme which commences before 1st April 1994.

(7)On and after the relevant date, the amendments made by subsections (1) to (3) above shall have effect in relation to a scheme—

(a)to which subsection (5) above applies, and

(b)which immediately before the relevant date falls within the definition of an umbrella scheme contained in those amendments,

subject to subsections (8) to (10) below.

(8)The amendments made by subsections (1) to (3) above shall not prevent the trustees of the scheme on and after the relevant date—

(a)making a claim under section 239(3) of the Taxes Act 1988 (carry back of surplus advance corporation tax) in respect of accounting periods of the scheme ending before the relevant date; or

(b)continuing anything which immediately before that date was in the process of being done for the purposes of tax in relation to such accounting periods.

(9)Where immediately before the relevant date the trustees of the scheme are entitled to carry forward an excess under—

(a)section 75(3) of the Taxes Act 1988 (carry forward of management expenses and sums treated as management expenses), or

(b)section 241 of that Act (carry forward of franked investment income),

then, on the relevant date, that right shall be translated into a right in each successor company to carry forward a proportionate part of that excess.

(10)Where immediately before the relevant date the trustees of the scheme have an amount of surplus advance corporation tax which—

(a)has not been dealt with under subsection (3) of section 239 of the Taxes Act 1988, and

(b)is due to be treated under subsection (4) of that section as if it were advance corporation tax paid by them in their next accounting period,

then, on and after the relevant date, a proportionate part of that amount shall be treated as paid under subsection (4) of that section by each successor company in its first accounting period.

(11)In subsections (9) and (10) above “successor company” means, in relation to a scheme, each part of the scheme which on the relevant date becomes an authorised unit trust.

Exchange gains and lossesU.K.

114 Assets and liabilities.U.K.

F22. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

115 Currency contracts: net payments.U.K.

F23. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

116 Currency contracts: matching.U.K.

F24. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Capital allowancesU.K.

F25117. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .U.K.

118 Expenditure on machinery or plant: notification.U.K.

F26(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F26(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F26(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F26(3A). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F26(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F26(5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6)For the purposes of—

[F27F28(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b) section 44(4) of the Finance Act 1971 (provision corresponding to section 25(1) applicable to earlier chargeable periods),]

expenditure which has not formed part of a person’s qualifying expenditure for a previous chargeable period may not form part of his qualifying expenditure for a subsequent chargeable period unless the machinery or plant on which the expenditure was incurred belongs to that person at some time in that subsequent period F29. . .

F26(7). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F26(8). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F26(9). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

119 Transactions between connected persons.U.K.

F30(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2)Paragraph 4(2) of Schedule 7 to the M10Capital Allowances Act 1968 (provision corresponding to section 158(2)) shall be assumed always to have had effect subject to amendments corresponding to those made to section 158(2) of the 1990 Act by section 117(2) and (3) of the Finance Act 1993.

F31120. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .U.K.

F32121. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .U.K.

SecuritiesU.K.

F33122 Sale and repurchase of securities: deemed manufactured payments.U.K.

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

123 Manufactured payments.U.K.

F34(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F35(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F35(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F35(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F35(5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F36(6). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F35(7). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F37124. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .U.K.

PAYEU.K.

F38125 Payment by intermediary.U.K.

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

F38126 Employees working for persons other than their employers, etc.U.K.

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

F38127 Tradeable assets.U.K.

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

F38128 Non-cash vouchers.U.K.

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

F38129 Credit-tokens.U.K.

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

F38130 Cash vouchers.U.K.

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

F38131 Supplementary.U.K.

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

F38132 Payments etc. received free of tax.U.K.

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

133 PAYE regulations: past cases.U.K.

(1)Regulation 4 of the 1993 Regulations (intermediate employers) is hereby revoked; but in relation to any time before its revocation it shall be deemed to have been validly made.

(2)Regulation 3 of the 1973 Regulations (intermediate employers) shall, in relation to any time before its revocation, be deemed to have been validly made.

(3)Where, at any time before the passing of this Act—

(a)a payment has been made of, or on account of, any income of an employee not resident or, if resident, not ordinarily resident in the United Kingdom,

(b)at the time when the payment was made it appeared that some of the income would be assessable to income tax under Case II of Schedule E, but that some of the income might prove not to be assessable to income tax under that Schedule, and

(c)the payment or any proportion of it was treated for the purposes of the 1993 Regulations or the 1973 Regulations as a payment to which the regulations applied,

then the treatment of that payment or that proportion of the payment as being a payment to which the regulations applied shall be deemed to have been lawful.

(4)In this section—

(a)“employee” means a person holding an office or employment under or with any other person;

(b)“the 1993 Regulations” means the M11Income Tax (Employments) Regulations 1993; and

(c)“the 1973 Regulations” means the M12Income Tax (Employments) Regulations 1973.

Miscellaneous provisions about companiesU.K.

134 Controlled foreign companies.U.K.

(1)In Schedule 25 to the Taxes Act 1988, Part I (acceptable distribution policy) shall be amended as follows.

(2)In paragraph 2 (acceptable distribution policies for both trading and non-trading companies)—

(a)in sub-paragraph (1)—

(i)for “sub-paragraph (2)” there is substituted “ paragraph 2A ”,

(ii)in paragraph (a), “or for some other period which, in whole or in part, falls within that accounting period” is omitted,

(iii)in paragraph (b), for “the period for which it is paid” there is substituted “ that period ”,

(iv)in paragraph (d) for “proportion” there is substituted “ amount ” and for “represents at least” there is substituted “ is not less than ”, and

(v)the words following paragraph (d) are omitted,

(b)sub-paragraph (2) is omitted, and

(c)for sub-paragraph (3) there is substituted—

“(3)For the purposes of this paragraph and paragraph 2A below, a dividend which is not paid for the period or periods the profits of which are, in relation to the dividend, the relevant profits for the purposes of section 799 shall be treated (subject to sub-paragraph (3A) below) as so paid.

(3A)For the purposes of this paragraph and paragraph 2A below—

(a)where a dividend is paid for a period which is not an accounting period but falls wholly within an accounting period, it shall be treated as paid for that accounting period, and

(b)where a dividend (“the actual dividend”) is paid for a period which falls within two or more accounting periods—

(i)it shall be treated as if it were a number of separate dividends each of which is paid for so much of the period as falls wholly within an accounting period, and

(ii)the nece contract as regardsssary apportionment of the amount of the actual dividend shall be made to determine the amount of the separate dividends.”

(3)After that paragraph there is inserted—

“2A(1)Paragraph 2 above shall have effect in accordance with this paragraph to determine whether a controlled foreign company which is not a trading company pursues an acceptable distribution policy in respect of a particular accounting period (“the relevant accounting period”).

(2)Subject to sub-paragraph (4) below, where the distribution condition is satisfied in relation to the relevant accounting period, then, in addition to any dividend which falls within paragraph 2(1)(a) above apart from this paragraph—

(a)any dividend which is paid for the accounting period (“the preceding period”) which immediately precedes the relevant accounting period and is not an excluded period shall be treated as falling within that paragraph, and

(b)if the distribution condition is satisfied in relation to the preceding period, any dividend which is paid for the accounting period which immediately precedes the preceding period and is not an excluded period shall be treated as falling within that paragraph,

and so on; and in this sub-paragraph “dividend” means a dividend not paid out of specified profits.

(3)For the purposes of this paragraph, the distribution condition is satisfied in relation to any accounting period if—

(a)a dividend or dividends are paid for the period to persons resident in the United Kingdom,

(b)the amount or, as the case may be, aggregate amount of any dividends falling within paragraph (a) above is not less than—

(i)the relevant profits for that period, or

(ii)where paragraph 2(4) or (5) above applies (with the modifications of paragraph 2 made by sub-paragraph (5) below), the appropriate portion of those profits, and

(c)any dividends falling within that paragraph are paid not later than the time by which any dividend paid for the relevant accounting period is required by paragraph 2(1)(b) above to be paid;

or if there are no relevant profits for the period.

(4)Where, by reason only of the fact that a company pursued an acceptable distribution policy in respect of any accounting period (“the earlier period”) earlier than the relevant accounting period, no direction could be given in respect of the earlier period under section 747(1), sub-paragraph (2) above shall apply to any dividend required to be taken into account for the purpose of showing that the company pursued an acceptable distribution policy in respect of the earlier period only to the extent (if any) to which that dividend was not required to be taken into account for that purpose.

(5)The modifications of paragraph 2 above referred to in sub-paragraph (3)(b) above are that—

(a)the references in sub-paragraphs (4) and (5) to the accounting period in question are to be read as references to the accounting period for which the dividend or dividends are paid,

(b)the references in those sub-paragraphs to sub-paragraph (1)(d) are to be read as references to sub-paragraph (3)(b) above, and

(c)the reference in the definition of “X” in sub-paragraph (6) to available profits is to be read as a reference to relevant profits.

(6)Paragraph 2(1)(d) above shall have effect as if for “50 per cent. of the company’s available profits” there were substituted “90 per cent. of the company’s net chargeable profits”.

(7)In paragraph 2(6) above, the definition of “X” shall have effect as if the reference to available profits were a reference to net chargeable profits.

(8)For the purposes of this paragraph—

(a)a period is an excluded period if it is an accounting period in respect of which a direction is given under section 747(1), and

(b)relevant profits for any accounting period are the profits which would be the relevant profits of that period for the purposes of section 799 if a dividend were actually paid for that period.”

(4)In paragraph 3 of that Schedule (available profits)—

(a)after sub-paragraph (4) there is inserted—

“(4A)Subject to sub-paragraph (5) below, for the purposes of this Part of this Schedule, the net chargeable profits of a controlled foreign company for any accounting period are—

(a)its chargeable profits for that period, less

(b)the amount (if any) which, if a direction were given under section 747(1) in respect of the period, would be the company’s unrestricted creditable tax for that period;

and for the purposes of this sub-paragraph “unrestricted creditable tax” in relation to a company’s accounting period means the amount which would be its creditable tax for that period if the reference in section 751(6)(a) to Part XVIII did not include section 797”, and

(b)in sub-paragraph (5), after “available profits” there is inserted “ or, where the company is not a trading company, the chargeable profits ”.

(5)This section shall apply to determine whether a controlled foreign company pursues an acceptable distribution policy in respect of accounting periods ending on or after 30th November 1993.

135 Prevention of avoidance of corporation tax.U.K.

(1)In the Taxes Act 1988, immediately before section 768 there shall be inserted—

“767A Change in company ownership: corporation tax.

(1)Where it appears to the Board that—

(a)there has been a change in the ownership of a company (“the tax-payer company”),

(b)any corporation tax assessed on the tax-payer company for an accounting period beginning before the change remains unpaid at any time after the relevant date, and

(c)any of the three conditions mentioned below is fulfilled,

any person mentioned in subsection (2) below may be assessed by the Board and charged (in the name of the tax-payer company) to an amount of corporation tax in accordance with this section.

(2)The persons are—

(a)any person who at any time during the relevant period before the change in the ownership of the tax-payer company had control of it;

(b)any company of which the person mentioned in paragraph (a) above has at any time had control within the period of three years before that change.

(3)In subsection (2) above, “the relevant period” means—

(a)the period of three years before the change in the ownership of the tax-payer company; or

(b)if during the period of three years before that change (“the later change”) there was a change in the ownership of the tax-payer company (“the earlier change”), the period elapsing between the earlier change and the later change.

(4)The first condition is that—

(a)at any time during the period of three years before the change in the ownership of the tax-payer company the activities of a trade or business of that company cease or the scale of those activities become small or negligible; and

(b)there is no significant revival of those activities before that change occurs.

(5)The second condition is that at any time after the change in the ownership of the tax-payer company, but under arrangements made before that change, the activities of a trade or business of that company cease or the scale of those activities become small or negligible.

(6)The third condition is that—

(a)at any time during the period of six years beginning three years before the change in the ownership of the tax-payer company there is a major change in the nature or conduct of a trade or business of that company;

(b)there is a transfer or there are transfers of assets of the tax-payer company to a person mentioned in subsection (7) below or to any person under arrangements which enable any of those assets or any assets representing those assets to be transferred to a person mentioned in subsection (7) below;

(c)that transfer occurs or those transfers occur during the period of three years before the change in the ownership of the tax-payer company or after that change but under arrangements made before that change; and

(d)the major change mentioned in paragraph (a) above is attributable to that transfer or those transfers.

(7)The persons are—

(a)any person mentioned in subsection (2)(a) above; and

(b)any person connected with him.

(8)The amount of tax charged in an assessment made under this section must not exceed the amount of the tax which, at the time of that assessment, remains unpaid by the tax-payer company.

(9)For the purposes of this section the relevant date is the date six months from the date on which the corporation tax is assessed as mentioned in subsection (1)(b) above.

(10)Any assessment made under this section shall not be out of time if made within three years from the date on which the liability of the tax-payer company to corporation tax for the accounting period mentioned in subsection (1)(b) above is finally determined.

767B Change of company ownership: supplementary.

(1)In relation to corporation tax assessed under section 767A—

(a)section 86 of the Management Act (interest on overdue tax), in so far as it has effect in relation to accounting periods ending on or before 30th September 1993, and

(b)section 87A of that Act (corresponding provision for corporation tax due for accounting periods ending after that date),

shall have effect as if the references in section 86 to the reckonable date and in section 87A to the date when the tax becomes due and payable were, respectively, references to the date which is the reckonable date in relation to the tax-payer company and the date when the tax became due and payable by the tax-payer company.

(2)A payment in pursuance of an assessment under section 767A shall not be allowed as a deduction in computing any income, profits or losses for any tax purposes; but any person making such a payment shall be entitled to recover an amount equal to the payment from the tax-payer company.

(3)In subsection (2) above the reference to a payment in pursuance of an assessment includes a reference to a payment of interest under section 86 or 87A of the Management Act (as they have effect by virtue of subsection (1) above).

(4)For the purposes of section 767A, “control”, in relation to a company, shall be construed in accordance with section 416 as modified by subsections (5) and (6) below.

(5)In subsection (2)(a) for “the greater part of” there shall be substituted “50 per cent. of”.

(6)For subsection (3) there shall be substituted—

”(3)Where two or more persons together satisfy any of the conditions in subsection (2) above and do so by reason of having acted together to put themselves in a position where they will in fact satisfy the condition in question, each of those persons shall be treated as having control of the company.”

(7)In section 767A(6) “a major change in the nature or conduct of a trade or business” includes any change mentioned in any of paragraphs (a) to (d) of section 245(4); and also includes a change falling within any of those paragraphs which is achieved gradually as the result of a series of transfers.

(8)In section 767A(6) “transfer”, in relation to an asset, includes any disposal, letting or hiring of it, and any grant or transfer of any right, interest or licence in or over it, or the giving of any business facilities with respect to it.

(9)Section 839 shall apply for the purposes of section 767A(7).

(10)Subsection (9) of section 768 shall apply for the purposes of section 767A as it applies for the purposes of section 768.”

(2)Section 769 (rules for ascertaining change of ownership of company) shall be amended as follows.

(3)In subsections (1), (2) and (5) for the words “sections 768”, in each place where they occur, there shall be substituted “ sections 767A, 768 ”.

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

“(2A)Where—

(a)persons, whether company members or not, possess extraordinary rights or powers under the articles of association or under any other document regulating the company, and

(b)because of that fact ownership of the ordinary share capital may not be an appropriate test of whether there has been a change in the ownership of the company,

then, in considering whether there has been a change in the ownership of the company for the purposes of section 767A, holdings of all kinds of share capital, including preference shares, or of any particular category of share capital, or voting power or any other kind of special power may be taken into account instead of ordinary share capital.”

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

“(9)Subsection (8) above shall not apply in relation to section 767A.”

(6)The amendments made by this section shall have effect in relation to any change in ownership occurring on or after 30th November 1993 other than a change occurring in pursuance of a contract entered into before that day.

136 Parts of trades: computations in different currencies.U.K.

(1)The following section shall be inserted after section 94 of the M13Finance Act 1993 (computations in different currencies for different parts of trades)—

“94A Parts of trades: petroleum extraction companies.

(1)If a trade carried on by a petroleum extraction company is a ring fence trade—

(a)subsection (1) of section 94 above shall not apply as regards the trade, but

(b)regulations may make provision under that section as regards a case where in an accounting period the company carries on the trade and the condition mentioned in subsection (2) below is fulfilled.

(2)The condition is that—

(a)part of the trade consists of activities which relate to oil and are carried on under the authority of a petroleum licence in the United Kingdom or a designated area, and

(b)part of the trade consists of activities which relate to gas and are carried on under the authority of a petroleum licence in the United Kingdom or a designated area.

(3)For the purposes of this section—

(a)a petroleum licence is a licence granted under the Petroleum (Production) Act 1934 or the Petroleum (Production) Act (Northern Ireland) 1964;

(b)a petroleum extraction company is a company which carries on activities under the authority of such a licence;

(c)a designated area is an area designated by Order in Council under section 1(7) of the Continental Shelf Act 1964.

(4)For the purposes of this section “ring fence trade” means activities which—

(a)fall within any of paragraphs (a) to (c) of subsection (1) of section 492 of the Taxes Act 1988 (oil extraction etc.), and

(b)constitute a separate trade (whether by virtue of that subsection or otherwise).

(5)For the purposes of this section—

(a)“oil” means such substance as falls within the meaning of oil contained in section 502(1) of the Taxes Act 1988 and is not gas;

(b)“gas” means such substance as falls within the meaning of oil contained in section 502(1) of the Taxes Act 1988 and is gas of which the largest component by volume, measured at a temperature of 15 degrees centigrade and a pressure of one atmosphere, is methane or ethane or a combination of those gases.”

(2)In section 95(6) of the M14Finance Act 1993 (commencement of provisions about currency to be used for computations) for “94” there shall be substituted “ 94A ”.

MiscellaneousU.K.

137 Enterprise investment scheme.U.K.

F39(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F39(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3)The M15Taxation of Chargeable Gains Act 1992 shall have effect with the amendments made by that Schedule.

138 Foreign income dividends.U.K.

Schedule 16 to this Act (which contains provisions about foreign income dividends) shall have effect.

F40F41139 Taxation of incapacity benefit.U.K.

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

140 Restriction on deduction from income.U.K.

(1)Section 808 of the Taxes Act 1988 (restriction on deduction of interest or dividends from trading income) shall be amended as follows—

(a)for “a banking business, an insurance business or a business consisting wholly or partly in dealing in securities” there shall be substituted “ a business ”;

(b)for “or dividend” there shall be substituted “ , dividend or royalties ”;

(c)the words “In this section “securities” includes stocks and shares” shall be omitted.

(2)This section shall apply where it is sought to exclude receipts from income or profits of an accounting period beginning on or after 30th November 1993.

141 Expenditure involving crime.U.K.

(1)Section 577A of the Taxes Act 1988 (certain expenditure involving crime not to be deducted and not to be included in expenses of management) shall be amended as follows.

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

“(1A)In computing profits or gains chargeable to tax under Schedule A or Schedule D, no deduction shall be made for any expenditure incurred in making a payment induced by a demand constituting—

(a)the commission in England or Wales of the offence of blackmail under section 21 of the Theft Act 1968,

(b)the commission in Northern Ireland of the offence of blackmail under section 20 of the Theft Act (Northern Ireland) 1969, or

(c)the commission in Scotland of the offence of extortion.”

(3)In subsection (2) for “Such expenditure” there shall be substituted “ Any expenditure mentioned in subsection (1) or (1A) above ”.

(4)This section shall apply in relation to expenditure incurred on or after 30th November 1993.

142 Mortgage interest payable under deduction of tax: qualifying lenders.U.K.

F42(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2)The following section shall be inserted in the Taxes Act 1988 after section 376—

“376A The register of qualifying lenders.

(1)The Board shall maintain, and publish in such manner as they consider appropriate, a register for the purposes of section 376(4).

(2)If the Board are satisfied that an applicant for registration is entitled to be registered, they may register the applicant generally or in relation to any description of loan specified in the register, with effect from such date as may be so specified; and a body which is so registered shall become a qualifying lender in accordance with the terms of its registration.

(3)The registration of any body may be varied by the Board—

(a)where it is general, by providing for it to be in relation to a specified description of loan, or

(b)where it is in relation to a specified description of loan, by removing or varying the reference to that description of loan,

and where they do so, they shall give the body written notice of the variation and of the date from which it is to have effect.

(4)If it appears to the Board at any time that a body which is registered under this section would not be entitled to be registered if it applied for registration at that time, the Board may by written notice given to the body cancel its registration with effect from such date as may be specified in the notice.

(5)The date specified in a notice under subsection (3) or (4) above shall not be earlier than the end of the period of 30 days beginning with the date on which the notice is served.

(6)Any body which is aggrieved by the failure of the Board to register it under this section, or by the variation or cancellation of its registration, may, by notice given to the Board before the end of the period of 30 days beginning with the date on which the body is notified of the Board’s decision, require the matter to be determined by the Special Commissioners; and the Special Commissioners shall thereupon hear and determine the matter in like manner as an appeal.”

(3)Any body which is, immediately before the date on which this Act is passed, a prescribed body for the purposes of section 376 of the Taxes Act 1988 (by virtue of an order made under subsection (5) of that section) shall be entitled to be entered in the register maintained under section 376A of that Act as a qualifying lender except that if it was, immediately before that date, a qualifying lender only in relation to such description of loan as was specified in the order, it shall be entitled to be entered in the register as a qualifying lender only in relation to that description of loan.

(4)Until such time as the Board enter any such body in the register, that body shall be deemed to have been registered in accordance with its entitlement.

F43143. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .U.K.

144 Debts released in voluntary arrangement: relief from tax.U.K.

F44(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2)The provisions of that section shall become subsection (1) of that section and after that subsection there shall be inserted—

“(2)In paragraph (j) of subsection (1) above “relevant arrangement or compromise” means—

(a)a voluntary arrangement which has taken effect under or by virtue of the Insolvency Act 1986 or the Insolvency (Northern Ireland) Order 1989; or

(b)a compromise or arrangement which has taken effect under section 425 of the Companies Act 1985 or Article 418 of the Companies (Northern Ireland) Order 1986.”

(3)In the Taxes Act 1988—

(a)in section 94 (debts deducted and subsequently released) after the word “released” where it first occurs, and

(b)in section 103(4)(b) (debts deducted before, but released after, discontinuance of trade, etc.) after the word “released”,

there shall be inserted “ otherwise than as part of a relevant arrangement or compromise ”.

(4)The provisions of section 94 of the Taxes Act 1988 shall become subsection (1) of that section and after that subsection there shall be inserted—

“(2)In subsection (1) above “relevant arrangement or compromise” has the same meaning as in section 74.”

F45(5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F46(6). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7)Subsection (3) above shall have effect in relation to the release on or after 30th November 1993 of the whole or any part of any debt.

145 Relief for business donations.U.K.

F47(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2)Section 79A of that Act shall be amended as follows.

(3)In subsection (1), after “training and enterprise council” there shall be inserted “ business link organisation ” and in subsection (3) after “council” there shall be inserted “ organisation ”.

(4)In subsection (5), before paragraph (a) there shall be inserted—

“(aa)“business link organisation” means any person authorised by or on behalf of the Secretary of State to use a service mark (within the meaning of the Trade Marks (Amendment) Act 1984) designated by the Secretary of State for the purposes of this paragraph”.

(5)In subsection (7), after “1st April 1990” there shall be inserted “ or, in the case of a contribution to a business link organisation, 30th November 1993 ”.

146 Minor corrections.U.K.

Schedule 17 to this Act (which corrects various mistakes made in or introduced into the Taxes Act 1988) shall have effect.

Chapter IIU.K. Interest Rate and Currency Contracts

Qualifying contractsU.K.

147 Qualifying contracts.U.K.

F48. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

147A Debt contracts and options to be qualifying contracts.U.K.

F49. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

148 Contracts which may become qualifying contracts.U.K.

F50. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Interest rate and currency contracts and optionsU.K.

149 Interest rate contracts and options.U.K.

F51. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

150 Currency contracts and options.U.K.

F52. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

150A Debt contracts and options.U.K.

F53. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

151 Provisions which may be included.U.K.

F54. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

152 Provisions which may be disregarded.U.K.

F55. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other basic definitionsU.K.

153 Qualifying payments.U.K.

F56. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

154 Qualifying companies.U.K.

F57. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Accrual of profits and lossesU.K.

155 Accrual of profits and losses.U.K.

F58. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

156 Basis of accounting: general.U.K.

F59. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

157 Basis of accounting for linked currency options.U.K.

F60. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

158 Adjustments for changes in basis of accounting.U.K.

F61. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Treatment of profits and lossesU.K.

159 Trading profits and losses.U.K.

F62. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

160 Non-trading profits and losses.U.K.

F63. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Special casesU.K.

161 Termination etc. of qualifying contracts.U.K.

F64. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

162 Exchange gains and losses on currency contracts.U.K.

F65. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

163 Irrecoverable payments.U.K.

F66. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

164 Released payments.U.K.

F67. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Anti-avoidance and related provisionsU.K.

165 Transfers of value by qualifying companies.U.K.

F68. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

166 Transfers of value to associated companies.U.K.

F69. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

167 Transactions not at arm’s length.U.K.

F70. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

168 Qualifying contracts with non-residents.U.K.

F71. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

168A Qualifying contracts for unallowable purposesU.K.

F72. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

MiscellaneousU.K.

169 Insurance and mutual trading companies.U.K.

F73. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

170 Investment trusts.U.K.

F74. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F75171. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .U.K.

172 Partnerships involving qualifying companies.U.K.

F76. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

SupplementalU.K.

173 Prevention of double charging etc.U.K.

F77. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

174 Prevention of deduction of tax.U.K.

F78. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

175 Transitional provisions.U.K.

F79. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

176 Minor and consequential amendments.U.K.

F80(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2)In Schedule 27 to that Act (distributing funds) in paragraph 5 (United Kingdom equivalent profits) the following sub-paragraph shall be substituted for sub-paragraph (2A)—

“(2A)In applying sub-paragraph (1) above the effect of the following shall be ignored, namely—

(a)sections 125 to 133 of the Finance Act 1993 (exchange gains and losses), and

(b)sections 159 and 160 of, and paragraph 1 of Schedule 18 to, the Finance Act 1994 (treatment of profits and losses on interest rate and currency contracts).”

177 Interpretation of Chapter II.U.K.

F81. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Chapter IIIU.K. Management: Self-Assessment etc.

Income tax and capital gains taxU.K.

178 Personal and trustee’s returns.U.K.

(1)For subsection (1) of section 8 of the Management Act (personal return) there shall be substituted the following subsections—

“(1)For the purpose of establishing the amounts in which a person is chargeable to income tax and capital gains tax for a year of assessment, he may be required by a notice given to him by an officer of the Board—

(a)to make and deliver to the officer, on or before the day mentioned in subsection (1A) below, a return containing such information as may reasonably be required in pursuance of the notice, and

(b)to deliver with the return such accounts, statements and documents, relating to information contained in the return, as may reasonably be so required.

(1A)The day referred to in subsection (1) above is—

(a)the 31st January next following the year of assessment, or

(b)where the notice under this section is given after the 31st October next following the year, the last day of the period of three months beginning with the day on which the notice is given.

(1B)In the case of a person who carries on a trade, profession, or business in partnership with one or more other persons, a return under this section shall include each amount which, in any relevant statement, is stated to be equal to his share of any income, loss or charge for the period in respect of which the statement is made.

(1C)In subsection (1B) above “relevant statement” means a statement which, as respects the partnership, falls to be made under section 12AB of this Act for a period which includes, or includes any part of, the year of assessment or its basis period.”

(2)For subsection (1) of section 8A of the Management Act (trustee’s return) there shall be substituted the following subsections—

“(1)For the purpose of establishing the amounts in which a trustee of a settlement, and the settlors and beneficiaries, are chargeable to income tax and capital gains tax for a year of assessment, an officer of the Board may by a notice given to the trustee require the trustee—

(a)to make and deliver to the officer, on or before the day mentioned in subsection (1A) below, a return containing such information as may reasonably be required in pursuance of the notice, and

(b)to deliver with the return such accounts, statements and documents, relating to information contained in the return, as may reasonably be so required;

and a notice may be given to any one trustee or separate notices may be given to each trustee or to such trustees as the officer thinks fit.

(1A)The day referred to in subsection (1) above is—

(a)the 31st January next following the year of assessment, or

(b)where the notice under this section is given after the 31st October next following the year, the last day of the period of three months beginning with the day on which the notice is given.”

179 Returns to include self-assessment.U.K.

For section 9 of the Management Act there shall be substituted the following section—

“9 Returns to include self-assessment.

(1)Subject to subsection (2) below, every return under section 8 or 8A of this Act shall include an assessment (a self-assessment) of the amounts in which, on the basis of the information contained in the return, the person making the return is chargeable to income tax and capital gains tax for the year of assessment.

(2)A person shall not be required to comply with subsection (1) above if he makes and delivers his return for a year of assessment—

(a)on or before the 30th September next following the year, or

(b)where the notice under section 8 or 8A of this Act is given after the 31st July next following the year, within the period of two months beginning with the day on which the notice is given.

(3)Where, in making and delivering a return, a person does not comply with subsection (1) above, an officer of the Board shall if subsection (2) above applies, and may in any other case—

(a)make the assessment on his behalf on the basis of the information contained in the return, and

(b)send him a copy of the assessment so made;

and references in the following provisions of this Act to a person’s self-assessment include references to an assessment made on a person’s behalf under this subsection.

(4)Subject to subsection (5) below—

(a)at any time before the end of the period of nine months beginning with the day on which a person’s return is delivered, an officer of the Board may by notice to that person so amend that person’s self-assessment as to correct any obvious errors or mistakes in the return (whether errors of principle, arithmetical mistakes or otherwise); and

(b)at any time before the end of the period of twelve months beginning with the filing date, a person may by notice to an officer of the Board so amend his self-assessment as to give effect to any amendments to his return which he has notified to such an officer.

(5)No amendment of a self-assessment may be made under subsection (4) above at any time during the period—

(a)beginning with the day on which an officer of the Board gives notice of his intention to enquire into the return, and

(b)ending with the day on which the officer’s enquiries into the return are completed.

(6)In this section and section 9A of this Act “the filing date” means the day mentioned in section 8(1A) or, as the case may be, section 8A(1A) of this Act.”

F82180. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .U.K.

Corporation taxU.K.

F83181. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .U.K.

F84182. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .U.K.

F85183. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .U.K.

PartnershipsU.K.

184 Partnership return.U.K.

After section 12 of the Management Act there shall be inserted the following section—

“ PartnershipsU.K.

12AA Partnership return.

(1)Where a trade, profession or business is carried on by two or more persons in partnership, for the purpose of facilitating—

(a)the assessment to income tax for a year of assessment, and

(b)the assessment to corporation tax for any period,

of each partner who is liable to be so assessed, an officer of the Board may act under subsection (2) or (3) below (or both).

(2)An officer of the Board may by a notice given to the partners require such person as is identified in accordance with rules given with the notice—

(a)to make and deliver to the officer in respect of such period as may be specified in the notice, on or before such day as may be so specified, a return containing such information as may reasonably be required in pursuance of the notice, and

(b)to deliver with the return such accounts and statements as may reasonably be so required.

(3)An officer of the Board may by notice given to any partner require the partner—

(a)to make and deliver to the officer in respect of such period as may be specified in the notice, on or before such day as may be so specified, a return containing such information as may reasonably be required in pursuance of the notice, and

(b)to deliver with the return such accounts and statements as may reasonably be so required;

and a notice may be given to any one partner or separate notices may be given to each partner or to such partners as the officer thinks fit.

(4)In the case of a partnership which includes one or more individuals, the day specified in a notice under subsection (2) or (3) above shall not be earlier than—

(a)the 31st January next following the year of assessment concerned, or

(b)where the notice under this section is given after the 31st October next following the year, the last day of the period of three months beginning with the day on which the notice is given.

(5)In the case of a partnership which includes one or more companies, the day specified in a notice under subsection (2) or (3) above shall not be earlier than—

(a)the first anniversary of the end of the relevant period, or

(b)where the notice under this section is given more than nine months after the end of the relevant period, the last day of the period of three months beginning with the day on which the notice is given;

and the relevant period for the purposes of this subsection and subsection (6) below is the period in respect of which the return is required.

(6)Every return under this section shall include—

(a)a declaration of the name, residence and tax reference of each of the persons who have been partners—

(i)for the whole of the relevant period, or

(ii)for any part of that period,

and, in the case of a person falling within sub-paragraph (ii) above, of the part concerned; and

(b)a declaration by the person making the return to the effect that it is to the best of his knowledge correct and complete.

(7)Every return under this section shall also include, if the notice under subsection (2) or (3) above so requires—

(a)with respect to any disposal of partnership property during a period to which any part of the return relates, the like particulars as if the partnership were liable to tax on any chargeable gain accruing on the disposal, and

(b)with respect to any acquisition of partnership property, the particulars required under section 12(2) of this Act.

(8)A notice under this section may require different information, accounts and statements for different periods or in relation to different descriptions of source of income.

(9)Notices under this section may require different information, accounts and statements in relation to different descriptions of partnership.

(10)In this section “residence”, in relation to a company, means its registered office.”

185 Partnership return to include partnership statement.U.K.

After section 12AA of the Management Act there shall be inserted the following section—

“12AB Partnership return to include partnership statement.

(1)Every return under section 12AA of this Act shall include a statement (a partnership statement) of the following amounts, namely—

(a)in the case of each period of account ending within the period in respect of which the return is made—

(i)the amount of income or loss from each source which, on the basis of the information contained in the return, has accrued to or has been sustained by the partnership for that period, and

(ii)the amount of each charge which, on that basis, was a charge on the income of the partnership for that period; and

(b)in the case of each such period and each of the partners, the amount which, on that basis, is equal to his share of that income, loss or charge.

(2)Subject to subsection (3) below—

(a)at any time before the end of the period of nine months beginning with the day on which a person’s return is delivered, an officer of the Board may by notice to that person so amend that person’s partnership statement as to correct any obvious errors or mistakes in the return (whether errors of principle, arithmetical mistakes or otherwise); and

(b)at any time before the end of the period of twelve months beginning with the filing date, a person may by notice to an officer of the Board so amend his partnership statement as to give effect to any amendments to his return which he has notified to such an officer.

(3)No amendment of a partnership statement may be made under subsection (2) above at any time during the period—

(a)beginning with the day on which an officer of the Board gives notice of his intention to enquire into the return, and

(b)ending with the day on which the officer’s enquiries into the return are completed.

(4)Where a partnership statement is amended under subsection (2) above, the officer shall by notice to the partners so amend their self-assessments under section 9 or 11AA of this Act as to give effect to the amendments of the partnership statement.

(5)In this section—

• “filing date” means the day specified in the notice under subsection (2) or, as the case may be, subsection (3) of section 12AA of this Act;

• “period of account”, in relation to a partnership, means any period for which accounts are drawn up.”

F86186. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .U.K.

Enquiries: procedureU.K.

187 Power to call for documents.U.K.

Immediately before section 20 of the Management Act there shall be inserted the following section—

“19A Power to call for documents for purposes of certain enquiries.

(1)This section applies where an officer of the Board gives notice under section 9A(1), 11AB(1) or 12AC(1) of this Act to any person (the taxpayer) of his intention to enquire into—

(a)the return on the basis of which the taxpayer’s self-assessment or partnership statement was made, or

(b)any amendment of that return on the basis of which that assessment or statement has been amended by the taxpayer.

(2)For the purpose of enquiring into the return or amendment, the officer may at the same or any subsequent time by notice in writing require the taxpayer, within such time (which shall not be less than 30 days) as may be specified in the notice—

(a)to produce to the officer such documents as are in the taxpayer’s possession or power and as the officer may reasonably require for the purpose of determining whether and, if so, the extent to which the return is incorrect or incomplete or the amendment is incorrect, and

(b)to furnish the officer with such accounts or particulars as he may reasonably require for that purpose.

(3)To comply with a notice under subsection (2) above, copies of documents may be produced instead of originals; but—

(a)the copies must be photographic or otherwise by way of facsimile; and

(b)if so required by a notice in writing given by the officer, in the case of any document specified in the notice, the original must be produced for inspection by him within such time (which shall not be less than 30 days) as may be specified in the notice.

(4)The officer may take copies of, or make extracts from, any document produced to him under subsection (2) or (3) above.

(5)A notice under subsection (2) above does not oblige the taxpayer to produce documents or furnish accounts or particulars relating to the conduct of any pending appeal by him.

(6)An appeal may be brought against any requirement imposed by a notice under subsection (2) above to produce any document or to furnish any accounts or particulars.

(7)An appeal under subsection (6) above must be brought within the period of 30 days beginning with the date on which the notice under subsection (2) above is given.

(8)Subject to subsection (9) below, the provisions of this Act relating to appeals shall have effect in relation to an appeal under subsection (6) above as they have effect in relation to an appeal against an assessment to tax.

(9)On an appeal under subsection (6) above section 50(6) to (8) of this Act shall not apply but the Commissioners may—

(a)if it appears to them that the production of the document or the furnishing of the accounts or particulars was reasonably required by the officer of the Board for the purpose mentioned in subsection (2) above, confirm the notice under that subsection so far as relating to the requirement; or

(b)if it does not so appear to them, set aside that notice so far as so relating.

(10)Where, on an appeal under subsection (6) above, the Commissioners confirm the notice under subsection (2) above so far as relating to any requirement, the notice shall have effect in relation to that requirement as if it had specified 30 days beginning with the determination of the appeal.

(11)Neither the taxpayer nor the officer of the Board shall be entitled to require a case to be stated under section 56 of this Act following the determination of an appeal under subsection (6) above.

(12)Where this section applies by virtue of a notice given under section 12AC(1) of this Act, any reference in this section to the taxpayer includes a reference to any predecessor or successor of his.”

F87188. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .U.K.

F88189. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .U.K.

Determinations and assessments to protect revenueU.K.

190 Determination of tax where no return delivered.U.K.

After section 28B of the Management Act there shall be inserted the following section—

“28C Determination of tax where no return delivered.

(1)Where—

(a)a notice has been given to any person under section 8, 8A or 11 of this Act (the relevant section), and

(b)the required return is not delivered on or before the filing date,

an officer of the Board may make a determination of the amounts in which, to the best of his information and belief, the person who should have made the return is chargeable to income tax and capital gains tax for the year of assessment or (as the case may be) is chargeable to corporation tax for the accounting period.

(2)Notice of any determination under this section shall be served on the person in respect of whom it is made and shall state the date on which it is issued.

(3)Until such time (if any) as it is superseded by a self-assessment made under section 9 or 11AA of this Act (whether by the taxpayer or an officer of the Board) on the basis of information contained in a return under the relevant section, a determination under this section shall have effect for the purposes of Parts VA, VI, IX and XI of this Act as if it were such a self-assessment.

(4)Where—

(a)an officer of the Board has commenced any proceedings for the recovery of any tax charged by a determination under this section; and

(b)before those proceedings are concluded, the determination is superseded by such a self-assessment as is mentioned in subsection (3) above,

those proceedings may be continued as if they were proceedings for the recovery of so much of the tax charged by the self-assessment as is due and payable and has not been paid.

(5)No determination under this section, and no self-assessment superseding such a determination, shall be made otherwise than—

(a)before the end of the period of five years beginning with the filing date; or

(b)in the case of such a self-assessment, before the end of the period of twelve months beginning with the date of the determination.

(6)In this section “the filing date” means the day mentioned in section 8(1A), section 8A(1A) or, as the case may be, section 11(4) of this Act.”

191 Assessment where loss of tax discovered.U.K.

(1)For section 29 of the Management Act there shall be substituted the following section—

“29 Assessment where loss of tax discovered.

(1)If an officer of the Board or the Board discover, as regards any person (the taxpayer) and a chargeable period—

(a)that any profits which ought to have been assessed to tax have not been assessed, or

(b)that an assessment to tax is or has become insufficient, or

(c)that any relief which has been given is or has become excessive,

the officer or, as the case may be, the Board may, subject to subsections (2) and (3) below, make an assessment in the amount, or the further amount, which ought in his or their opinion to be charged in order to make good to the Crown the loss of tax.

(2)Where—

(a)the taxpayer has made and delivered a return under section 8, 8A or 11 of this Act in respect of the relevant chargeable period, and

(b)the situation mentioned in subsection (1) above is attributable to an error or mistake in the return as to the basis on which his liability ought to have been computed,

the taxpayer shall not be assessed under that subsection in respect of the chargeable period there mentioned if the return was in fact made on the basis or in accordance with the practice generally prevailing at the time when it was made.

(3)Where the taxpayer has made and delivered a return under section 8, 8A or 11 of this Act in respect of the relevant chargeable period, he shall not be assessed under subsection (1) above—

(a)in respect of the chargeable period mentioned in that subsection; and

(b)in the case of a return under section 8 or 8A, in the same capacity as that in which he made and delivered the return,

unless one of the two conditions mentioned below is fulfilled.

(4)The first condition is that the situation mentioned in subsection (1) above is attributable to fraudulent or negligent conduct on the part of the taxpayer or a person acting on his behalf.

(5)The second condition is that at the time when an officer of the Board—

(a)ceased to be entitled to give notice of his intention to enquire into the taxpayer’s return under section 8, 8A or 11 of this Act in respect of the relevant chargeable period; or

(b)informed the taxpayer that he had completed his enquiries into that return,

the officer could not have been reasonably expected, on the basis of the information made available to him before that time, to be aware of the situation mentioned in subsection (1) above.

(6)For the purposes of subsection (5) above, information is made available to an officer of the Board if—

(a)it is contained in the taxpayer’s return under section 8, 8A or 11 of this Act in respect of the relevant chargeable period (the return), or in any accounts, statements or documents accompanying the return;

(b)it is contained in any claim made as regards the relevant chargeable period by the taxpayer acting in the same capacity as that in which he made the return, or in any accounts, statements or documents accompanying any such claim;

(c)it is contained in any documents, accounts or particulars which, for the purposes of any enquiries into the return or any such claim by an officer of the Board, are produced or furnished by the taxpayer to the officer, whether in pursuance of a notice under section 19A of this Act or otherwise; or

(d)it is information the existence of which, and the relevance of which as regards the situation mentioned in subsection (1) above—

(i)could reasonably be expected to be inferred by an officer of the Board from information falling within paragraphs (a) to (c) above; or

(ii)are notified in writing by the taxpayer to an officer of the Board.

(7)In subsection (6) above—

(a)any reference to the taxpayer’s return under section 8, 8A or 11 of this Act in respect of the relevant chargeable period includes—

(i)a reference to any return of his under that section for either of the two immediately preceding chargeable periods; and

(ii)where the return is under section 8 and the taxpayer carries on a trade, profession or business in partnership, a reference to any return with respect to the partnership under section 12AA of this Act for the relevant chargeable period or either of those periods; and

(b)any reference in paragraphs (b) to (d) to the taxpayer includes a reference to a person acting on his behalf.

(8)An objection to the making of an assessment under this section on the ground that neither of the two conditions mentioned above is fulfilled shall not be made otherwise than on an appeal against the assessment.

(9)Any reference in this section to the relevant chargeable period is a reference to—

(a)in the case of the situation mentioned in paragraph (a) or (b) of subsection (1) above, the chargeable period mentioned in that subsection; and

(b)in the case of the situation mentioned in paragraph (c) of that subsection, the chargeable period in respect of which the claim was made.

(10)In this section “profits”—

(a)in relation to income tax, means income,

(b)in relation to capital gains tax, means chargeable gains, and

(c)in relation to corporation tax, means profits as computed for the purposes of that tax.”

(2)This section, so far as it relates to partnerships whose trades, professions or businesses are set up and commenced before 6th April 1994, has effect as respects the year 1997-98 and subsequent years of assessment.

Payment of taxU.K.

192 Payments on account of income tax.U.K.

After Part V of the Management Act there shall be inserted the following section—

“Part VAU.K. Payment of Tax

59A Payments on account of income tax.

(1)This section applies to any person (the taxpayer) as regards a year of assessment if as regards the immediately preceding year—

(a)he has been assessed to income tax under section 9 of this Act in any amount, and

(b)that amount (the assessed amount) exceeds the amount of any income tax which has been deducted at source, and

(c)the amount of the excess (the relevant amount) is not less than such amount as may be prescribed by regulations made by the Board, and

(d)the proportion which the relevant amount bears to the assessed amount is not less than such proportion as may be so prescribed.

(2)Subject to subsection (3) below, the taxpayer shall make two payments on account of his liability to income tax for the year of assessment—

(a)the first on or before the 31st January in that year, and

(b)the second on or before the next following 31st July;

and, subject to subsection (4) below, each of those payments on account shall be of an amount equal to 50 per cent. of the relevant amount.

(3)If, at any time before the 31st January next following the year of assessment, the taxpayer makes a claim under this subsection stating—

(a)his belief that he will not be assessed to income tax for that year, or that the amount in which he will be so assessed will not exceed the amount of income tax deducted at source, and

(b)his grounds for that belief,

each of the payments on account shall not be, and shall be deemed never to have been, required to be made.

(4)If, at any time before the 31st January next following the year of assessment, the taxpayer makes a claim under this subsection stating—

(a)his belief that the amount in which he will be assessed to income tax for that year will exceed the amount of income tax deducted at source by a stated amount which is less than the relevant amount, and

(b)his grounds for that belief,

the amount of each of the payments on account required to be made shall be, and shall be deemed always to have been, equal to 50 per cent. of the stated amount.

(5)Where the taxpayer makes a claim under subsection (3) or (4) above, there shall be made all such adjustments, whether by the repayment of amounts paid on account or otherwise, as may be required to give effect to the provisions of that subsection.

(6)Where the taxpayer fraudulently or negligently makes any incorrect statement in connection with a claim under subsection (3) or (4) above, he shall be liable to a penalty not exceeding the difference between—

(a)the amount which would have been payable on account if he had made a correct statement, and

(b)the amount of the payment on account (if any) made by him.

(7)The provisions of the Income Tax Acts as to the recovery of income tax shall apply to an amount falling to be paid on account of tax in the same manner as they apply to an amount of tax.

(8)In this section any reference to income tax deducted at source is a reference to—

(a)income tax deducted or treated as deducted from any income or treated as paid on any income, or

(b)any amount which, in respect of the year of assessment, is to be deducted at source under section 203 of the principal Act in a subsequent year, or is a tax credit to which section 231 of that Act applies.”

193 Payment of income tax and capital gains tax.U.K.

After section 59A of the Management Act there shall be inserted the following section—

“59B Payment of income tax and capital gains tax.

(1)Subject to subsection (2) below, the difference between—

(a)the amount of income tax and capital gains tax contained in a person’s self-assessment under section 9 of this Act for any year of assessment, and

(b)the aggregate of any payments on account made by him in respect of that year (whether under section 59A of this Act or otherwise) and any income tax which in respect of that year has been deducted at source,

shall be payable by him or (as the case may be) repayable to him as mentioned in subsection (3) or (4) below.

(2)The following, namely—

(a)any amount which, in the year of assessment, is deducted at source under section 203 of the principal Act in respect of a previous year, and

(b)any amount which, in respect of the year of assessment, is to be deducted at source under that section in a subsequent year, or is a tax credit to which section 231 of that Act applies,

shall be respectively deducted from and added to the aggregate mentioned in subsection (1)(b) above.

(3)In a case where the person—

(a)gave the notice required by section 7 of this Act within six months from the end of the year of assessment, but

(b)was not given notice under section 8 or 8A of this Act until after the 31st October next following that year,

the difference shall be payable or repayable at the end of the period of three months beginning with the day on which the notice under section 8 or 8A was given.

(4)In any other case, the difference shall be payable or repayable on or before the 31st January next following the year of assessment.

(5)Where a person’s self-assessment under section 9 of this Act is amended under section 9(4), section 28A(2), (3) or (4) or section 30B(2) of this Act, any amount of tax which is payable or repayable by virtue of the amendment shall, subject to section 55(6) and (9) of this Act, be payable or (as the case may be) repayable—

(a)in a case where notice of the amendment is given after, or less than 30 days before, the day given by subsection (3) or (4) above, on or before the day following the end of the period of 30 days beginning with the day on which notice is given; and

(b)in any other case, on or before the day given by subsection (3) or (4) above.

(6)Any amount of income tax or capital gains tax which is payable by virtue of an assessment made under section 29 of this Act shall be payable on the day following the end of the period of 30 days beginning with the day on which the notice of assessment is given.

(7)In this section any reference to income tax deducted at source is a reference to income tax deducted or treated as deducted from any income or treated as paid on any income.”

194 Surcharges on unpaid income tax and capital gains tax.U.K.

After section 59B of the Management Act there shall be inserted the following section—

“59C Surcharges on unpaid income tax and capital gains tax.

(1)This section applies in relation to any income tax or capital gains tax which has become payable by a person (the taxpayer) in accordance with section 55 or 59B of this Act.

(2)Where any of the tax remains unpaid on the day following the expiry of 28 days from the due date, the taxpayer shall be liable to a surcharge equal to 5 per cent. of the unpaid tax.

(3)Where any of the tax remains unpaid on the day following the expiry of 6 months from the due date, the taxpayer shall be liable to a further surcharge equal to 5 per cent. of the unpaid tax.

(4)Where the taxpayer has incurred a penalty under section 7, 93(5) or 95 of this Act, no part of the tax by reference to which that penalty was determined shall be regarded as unpaid for the purposes of subsection (2) or (3) above.

(5)An officer of the Board may impose a surcharge under subsection (2) or (3) above; and notice of the imposition of such a surcharge—

(a)shall be served on the taxpayer, and

(b)shall state the day on which it is issued and the time within which an appeal against the imposition of the surcharge may be brought.

(6)A surcharge imposed under subsection (2) or (3) above shall carry interest at the rate applicable under section 178 of the Finance Act 1989 from the end of the period of 30 days beginning with the day on which the surcharge is imposed until payment.

(7)An appeal may be brought against the imposition of a surcharge under subsection (2) or (3) above within the period of 30 days beginning with the date on which the surcharge is imposed.

(8)Subject to subsection (9) below, the provisions of this Act relating to appeals shall have effect in relation to an appeal under subsection (7) above as they have effect in relation to an appeal against an assessment to tax.

(9)On an appeal under subsection (7) above section 50(6) to (8) of this Act shall not apply but the Commissioners may—

(a)if it appears to them that, throughout the period of default, the taxpayer had a reasonable excuse for not paying the tax, set aside the imposition of the surcharge; or

(b)if it does not so appear to them, confirm the imposition of the surcharge.

(10)Inability to pay the tax shall not be regarded as a reasonable excuse for the purposes of subsection (9) above.

(11)The Board may in their discretion—

(a)mitigate any surcharge under subsection (2) or (3) above, or

(b)stay or compound any proceedings for the recovery of any such surcharge,

and may also, after judgment, further mitigate or entirely remit the surcharge.

(12)In this section—

• “the due date”, in relation to any tax, means the date on which the tax becomes due and payable;

• “the period of default”, in relation to any tax which remained unpaid after the due date, means the period beginning with that date and ending with the day before that on which the tax was paid.”

F89195. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .U.K.

Miscellaneous and supplementalU.K.

196 Management: other amendments.U.K.

Schedule 19 to this Act (which makes other amendments relating to the management of tax) shall have effect.

F90197. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .U.K.

F91198. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .U.K.

199 Interpretation and commencement of Chapter III.U.K.

(1)In this Chapter “the Management Act” means the M16Taxes Management Act 1970.

(2)Unless the contrary intention appears, this Chapter—

(a)so far as it relates to income tax and capital gains tax, has effect as respects the year 1996-97 and subsequent years of assessment, and

(b)so far as it relates to corporation tax, has effect as respects accounting periods ending on or after the appointed day.

(3)For the purposes of this Chapter the appointed day is such day, not earlier than 1st April 1996, as the Treasury may by order appoint.

Chapter IVU.K. Changes for Facilitating Self-Assessment

Assessment under Cases I and II of Schedule DU.K.

F92200 Assessment on current year basis.U.K.

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F92201 Basis of assessment at commencement.U.K.

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F92202 Change of basis period.U.K.

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F92203 Conditions for such a change.U.K.

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F92204 Basis of assessment on discontinuance.U.K.

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F92205 Overlap profits and overlap losses.U.K.

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Assessment under Cases III to VI of Schedule DU.K.

F92206 Basis of assessment under Case III.U.K.

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F92207 Basis of assessment under Cases IV and V.U.K.

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F92208 Basis of assessment under Case VI.U.K.

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Loss reliefU.K.

F93209 Loss relief: general.U.K.

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F94210 Relief for losses on unquoted shares.U.K.

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Capital allowancesU.K.

211 Income tax allowances and charges in taxing a trade etc.U.K.

F95(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2)Subject to section 214(7) below, this section and sections 212 to 214 below, in their application to trades, professions or vocations set up and commenced before 6th April 1994 or employments or offices entered into before that date, have effect as respects the year 1997-98 and subsequent years of assessment.

F96212. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .U.K.

F97213. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .U.K.

214 Amendments of other enactments.U.K.

(1)In the Taxes Act 1988, the following provisions shall cease to have effect, namely—

(a)in section 96 (farming and market gardening: relief for fluctuating profits), in subsection (7), paragraph (b);

(b)section 383 (extension of right to set-off to capital allowances);

(c)in section 384 (restrictions on right of set-off), in subsection (1), the words “(including any amount in respect of capital allowances which, by virtue of section 383, is to be treated as a loss)”, and in subsection (2), the words “or an allowance in respect of expenditure incurred”, paragraph (b) and the word “or” immediately preceding that paragraph;

(d)in section 388 (carry-back of terminal losses), in subsection (6), paragraphs (b) and (d) and the word “and” immediately preceding paragraph (d), and in subsection (7), the words from the beginning to “an earlier year: and”; and

(e)in section 389 (supplementary provisions relating to carry-back of terminal losses), subsections (5) to (7).

F98(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3)In subsection (1) of section 397 of that Act (restriction of relief in case of farming and market gardening)—

F99(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b)the words from “and where” to the end shall cease to have effect.

F100(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F100(5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F100(6). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7)Subsection (1)(a) above—

(a)except in its application to a trade set up and commenced on or after 6th April 1994, has effect where the first of the two years of assessment to which the claim relates is the year 1996-97 or any subsequent year, and

(b)in its application to a trade so set up and commenced, has effect where the first of those two years of assessment is the year 1995-96 or any subsequent year.

Miscellaneous and supplementalU.K.

215 Treatment of partnerships.U.K.

(1)For section 111 of the Taxes Act 1988 there shall be substituted the following section—

“111 Treatment of partnerships.

(1)Where a trade or profession is carried on by two or more persons in partnership, the partnership shall not, unless the contrary intention appears, be treated for the purposes of the Tax Acts as an entity which is separate and distinct from those persons.

(2)So long as a trade or profession (“the actual trade or profession”) is carried on by persons in partnership, and each of those persons is chargeable to income tax, the profits or gains or losses arising from the trade or profession shall be computed for the purposes of income tax in like manner as if the partnership were an individual.

(3)A person’s share in the profits or gains or losses of the partnership which for any period are computed in accordance with subsection (2) above shall be determined according to the interests of the partners during that period; and income tax shall be chargeable or, as the case may require, loss relief may be claimed as if—

(a)that share derived from a trade or profession (“the deemed trade or profession”) carried on by the person alone;

(b)the deemed trade or profession was set up and commenced by him at the time when he became a partner or, where the actual trade or profession was previously carried on by him alone, the time when the actual trade was set up and commenced; and

(c)the deemed trade or profession is permanently discontinued by him at the time when he ceases to be a partner or, where the actual trade or profession is subsequently carried on by him alone, the time when the actual trade or profession is permanently discontinued.

(4)Where—

(a)subsections (2) and (3) above apply in relation to the profits or gains or losses of a trade or profession carried on by persons in partnership, and

(b)other income accrues to those persons by virtue of their being partners,

that other income shall be chargeable to tax by reference to the same periods as if it were profits or gains arising from the trade or profession.

(5)Subsections (1) to (3) above apply, with the necessary modifications, in relation to a business as they apply in relation to a trade.”

(2)In section 114 of that Act (special rules for computing profits or losses), after the word “trade”—

(a)in subsection (1), in each place where it occurs;

(b)in subsection (2); and

(c)in subsection (3), in the first place where it occurs,

there shall be inserted the words “ profession or business ”.

(3)The following provisions of that Act shall cease to have effect, namely—

(a)in section 114, in subsection (3), the words from “except that” to the end, and subsection (4);

(b)in section 115 (provisions supplementary to section 114), subsections (1) to (3) and (6); and

(c)in section 277 (personal reliefs: partnerships), in subsection (1), the words “Subject to subsection (2) below”, paragraph (c) and the word “and” immediately preceding that paragraph, and subsection (2).

(4)This section and section 216 below—

(a)except in their application to partnerships mentioned in subsection (5) below, have effect as respects the year 1997-98 and subsequent years of assessment, and

(b)in its application to partnerships so mentioned, have effect as respects the year 1994-95 and subsequent years of assessment.

(5)The partnerships referred to in subsection (4) above are partnerships—

(a)whose trades, professions or businesses are set up and commenced on or after 6th April 1994; F101. . .

F101(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

216 Effect of change in ownership of trade, profession or vocation.U.K.

F102(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2)Subsections (3) to (5) of that section and, in subsection (6) of that section, the words from “and where” to the end shall cease to have effect.

(3)The following provisions of that Act shall cease to have effect, namely—

(a)in section 96 (farming and market gardening: relief for fluctuating profits), in subsection (6) the words from “except that” to the end;

(b)in section 380 (set-off against general income), subsection (3);

(c)in section 381 (further relief in early years of trade), subsection (6);

(d)in section 384 (restrictions on right of set-off), subsection (5);

(e)in section 385 (carry-forward against subsequent profits), subsections (2) and (5);

(f)in section 386 (carry-forward where business transferred to a company), subsection (4); and

(g)in section 389 (supplementary provisions relating to carry-back of terminal losses), subsection (3).

F103(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5)Subsection (3)(a) above—

(a)except in its application to a trade set up and commenced on or after 6th April 1994, has effect where the first of the two years of assessment to which the claim relates is the year 1996-97 or any subsequent year, and

(b)in its application to a trade so set up and commenced, has effect where the first of those two years of assessment is the year 1995-96 or any subsequent year.

217 Double taxation relief in respect of overlap profits.U.K.

(1)In subsection (1) of section 804 of the Taxes Act 1988 (relief against income tax in respect of income arising in years of commencement), for the words “any income arising in the years of commencement” there shall be substituted the words “ any income which is an overlap profit ”.

(2)For subsection (5) of that section there shall be substituted the following subsections—

“(5)Subsections (5A) and (5B) below apply where—

(a)credit against income tax for any year of assessment is allowed by virtue of subsection (1) above in respect of any income which is an overlap profit (“the original income”), and

(b)the original income or any part of it contributes to an amount which, by virtue of section 63A(1) or (3), is deducted in computing the profits or gains of a subsequent year of assessment (“the subsequent year”).

(5A)The following shall be set off one against the other, namely—

(a)the difference between—

(i)the amount of the credit which, under this Part (including this section), has been allowed against income tax in respect of so much of the original income as contributes as mentioned in subsection (5) above, and

(ii)the amount of the credit which, apart from this section, would have been so allowed; and

(b)the amount of credit which, on the assumption that no amount were deducted by virtue of section 63A(1) or (3), would be allowable under this Part against income tax in respect of income arising in the subsequent year from the same source as the original income.

(5B)The person chargeable in respect of the income (if any) arising in the subsequent year from the same source as the original income shall—

(a)if the amount given by paragraph (a) of subsection (5A) above exceeds that given by paragraph (b) of that subsection, be treated as having received in that year a payment chargeable under Case VI of Schedule D of an amount such that income tax on it at the basic rate is equal to the excess; and

(b)if the amount given by paragraph (b) of subsection (5A) above exceeds that given by paragraph (a) of that subsection, be allowed for that year under this Part an amount of credit equal to the excess.

(5C)For the purposes of subsections (5) to (5B) above, it shall be assumed that, where an amount is deducted by virtue of section 63A(1), each of the overlap profits included in the aggregate of such profits contributes to that amount in the proportion which that overlap profit bears to that aggregate.”

(3)In subsection (8) of that section—

(a)immediately before the definition of “overseas tax” there shall be inserted the following definition—

““ “overlap profit” means an amount of profits or gains which, by virtue of sections 60 to 62, is included in the computations for two successive years of assessment;”; and

(b)the definitions of “non-basis period” and “years of commencement” and the words “references to the enactments relating to cessation are references to sections 63, 67 and 113” shall cease to have effect.”

218 Commencement, transitional provisions and savings.U.K.

(1)Unless the contrary intention appears, this Chapter—

(a)except in its application to a trade set up and commenced on or after 6th April 1994 or income from a source arising to a person on or after that date, has effect as respects the year 1996-97 and subsequent years of assessment, and

(b)in its application to a trade so set up and commenced or income from a source so arising, has effect as respects the year 1994-95 and subsequent years of assessment.

[F104(1A)In a case where—

(a)a trade is set up and commenced by a company, and

(b)it is not set up and commenced before 6th April 1994,

sections 213(4) and (8) and 214(4) and (6) have effect only if it is set up and commenced on or after 6th April 1995.]

(2)Any reference in subsection (1) above to a trade includes a reference to a profession, vocation, employment or office.

(3)Where the first underwriting year of the underwriting business of a member of Lloyd’s is the year 1994, subsection (1) above shall have effect in relation to that business as if it had been set up and commenced on 6th April 1994.

(4)Where, as respects income from any source, income tax is to be charged under Case IV or V of Schedule D by reference to the amounts of income received in the United Kingdom, the source shall be treated for the purposes of subsection (1) above as arising on the date on which the first amount of income is so received.