Finance Act 1994

Chapter IVU.K. Changes for Facilitating Self-Assessment

Assessment under Cases I and II of Schedule DU.K.

F1200 Assessment on current year basis.U.K.

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F1201 Basis of assessment at commencement.U.K.

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F1202 Change of basis period.U.K.

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F1203 Conditions for such a change.U.K.

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F1204 Basis of assessment on discontinuance.U.K.

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F1205 Overlap profits and overlap losses.U.K.

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Assessment under Cases III to VI of Schedule DU.K.

F1206 Basis of assessment under Case III.U.K.

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F1207 Basis of assessment under Cases IV and V.U.K.

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F1208 Basis of assessment under Case VI.U.K.

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Loss reliefU.K.

F2209 Loss relief: general.U.K.

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F3210 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.

F4(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.

F5212. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .U.K.

F6213. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .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).

F7(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3)In subsection (1) of section 397 of that Act (restriction of relief in case of farming and market gardening)—

F8(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b)the words from “and where” to the end shall cease to have effect.

F9(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F9(5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F9(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.

F10215 Treatment of partnerships.U.K.

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216 Effect of change in ownership of trade, profession or vocation.U.K.

F11(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).

F12(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.

[F13(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.

(5)This Chapter shall have effect subject to the transitional provisions and savings contained in Schedule 20 to this Act.