http://www.legislation.gov.uk/id/ukpga/1997/58

Part I The windfall tax

1 Charge to windfall tax.

1

Every company which, on 2nd July 1997, was benefitting from a windfall from the flotation of an undertaking whose privatisation involved the imposition of economic regulation shall be charged with a tax (to be known as the “windfall tax”) on the amount of that windfall.

2

Windfall tax shall be charged at the rate of 23 per cent.

3

Schedule 1 to this Act (which sets out how to quantify the windfall from which a company was benefitting on 2nd July 1997) shall have effect.

2 The companies benefitting from windfalls.

1

For the purposes of this Part a company in existence on 2nd July 1997 was benefitting on that date from a windfall from the flotation of an undertaking whose privatisation involved the imposition of economic regulation if—

a

that company, or a company of which it was on that date a demerged successor, had before that date been privatised by means of a flotation;

b

there had, before that flotation, been a statutory transfer of property, rights and liabilities from a public corporation to the floated company or to a company which, at the time of the flotation, was a subsidiary undertaking of the floated company; and

c

at the time of the flotation, the floated company was carrying on an undertaking whose privatisation involved the imposition of economic regulation.

2

For the purposes of this Part a company was privatised by means of a flotation if—

a

an offer of shares in that company was at any time made to the public in the United Kingdom;

b

the shares which were the subject-matter of the offer were publicly-owned at the time of the offer;

c

the offer was or included an offer of shares for disposal at a fixed price; and

d

shares in that company were first admitted to listing on the Official List of the Stock Exchange in pursuance of an application made in connection with the offer.

3

In this Part references, in relation to a company privatised by means of a flotation, to the time of the company’s flotation are references to the time when shares in the floated company were first admitted to listing on the Official List of the Stock Exchange.

4

For the purposes of this Part a company in existence on 2nd July 1997 (“the relevant company”) was on that date a demerged successor of a company privatised by means of a flotation if—

a

after the flotation of the floated company but before 2nd July 1997, there had been a statutory transfer of property, rights and liabilities from the floated company to a company (“the transferee company”) which was a subsidiary undertaking of the floated company at the time of the transfer;

b

the transferee company was not a subsidiary undertaking of the floated company on 2nd July 1997 but was, on that date, a subsidiary undertaking of the relevant company; and

c

before 2nd July 1997 shares in the relevant company had been admitted to listing on the Official List of the Stock Exchange in pursuance of an application made in connection with the transaction, or series of transactions, by virtue of which the transferee company ceased to be a subsidiary undertaking of the floated company.

5

For the purposes of this section a company was, at the time of its flotation, carrying on an undertaking whose privatisation involved the imposition of economic regulation if that company, or a company which at that time was a subsidiary undertaking of that company, was at that time—

a

a public telecommunications operator, within the meaning of the M1Telecommunications Act 1984;

b

an airport operator in relation to an airport subject to economic regulation under Part IV of the M2Airports Act 1986;

c

the holder of an authorisation granted under section 7 of the M3Gas Act 1986, as originally enacted (public gas suppliers);

d

the holder of an appointment under section 11 of the M4Water Act 1989 as the water undertaker for any area of England and Wales;

e

the holder of a licence granted under section 6 of the M5Electricity Act 1989 or Article 10 of the M6Electricity (Northern Ireland) Order 1992 (licences authorising generation, transmission and supply of electricity); or

f

a company authorised by a licence under section 8 of the M7Railways Act 1993 to be the operator of a railway asset.

6

In subsection (5) above “airport operator” has the M8same meaning as in the Airports Act 1986.

3 Administration of the windfall tax etc.

1

The windfall tax shall be under the care and management of the Commissioners of Inland Revenue.

2

Schedule 2 to this Act (which makes provision with respect to the management and collection of the windfall tax) shall have effect.

3

Subject to paragraph 19(5) of Schedule 8 to the Taxes Act 1988 (which is the provision about profit-related pay schemes that is amended by section 4 below), nothing in this Act or the Tax Acts shall have the effect of allowing or requiring any amount of windfall tax to be deducted in computing income, profits or losses for any of the purposes of the Tax Acts.

4 The windfall tax and profit-related pay.

1

In paragraph 19 of Schedule 8 to the Taxes Act 1988 (ascertainment of profits for the purposes of profit-related pay schemes)—

a

in sub-paragraph (5)(b), after “1985” there shall be inserted “ or section 3(3) of the Finance (No. 2) Act 1997 ”; and

b

after paragraph (ff) of sub-paragraph (6) there shall be inserted the following paragraph—

fg
windfall tax charged under Part I of the Finance (No. 2) Act 1997;

2

Subsection (1) above has effect in relation to the preparation, for the purposes of any scheme, of a profit and loss account for any period ending on or after 2nd July 1997.

3

Subsection (1) above shall not have effect in relation to an existing scheme unless, before the end of the period of six months beginning with the day on which this Act is passed, the scheme is altered, with effect for all periods ending on or after 2nd July 1997, to take account of that subsection.

4

Provision made, in compliance with paragraph 20(1) of Schedule 8 to the Taxes Act 1988 (consistency in preparation of accounts), by any existing scheme that is altered to take account of subsection (1) above shall not prevent a profit and loss account from being prepared in accordance with the alteration.

5

An alteration of an existing scheme to take account of subsection (1) above shall be treated as being within section 177B of the Taxes Act 1988 (alterations which are registrable and which, when registered, cannot give rise to the Board’s power of cancellation).

6

In this section “existing scheme” means a scheme which at any time in the period beginning with 2nd July 1997 and ending immediately before the day on which this Act is passed was a registered scheme under Chapter III of Part V of the Taxes Act 1988.

7

The preceding provisions of this section shall cease to have effect, in accordance with the notes to Part VI(3) of Schedule 18 to the M9Finance Act 1997, as if they were included in the repeal of Schedule 8 to the Taxes Act 1988.

5 Interpretation of Part I.

1

In this Part—

“company” means a company within the meaning of the M10Companies Act 1985 or the M11Companies (Northern Ireland) Order 1986;
“fixed price”, in relation to any offer of publicly-owned shares in a company, means—
1. a
  a price set out in the offer; or
2. b
  a price subsequently fixed by a Minister of the Crown in a case in which the amount of a first instalment of the price was fixed by the offer;
“the floated company”, in relation to the privatisation of a company by means of a flotation, means the company so privatised;
“public corporation”, in relation to a statutory transfer, means any body corporate in existence at the time of the transfer which—
1. a
  had been established by or in accordance with the provisions of any enactment; and
2. b
  had a membership consisting of, or including, persons appointed as members by a Minister of the Crown;
“publicly-owned”, in relation to any shares, means held by—
1. a
  a Minister of the Crown or the Treasury; or
2. b
  a nominee for a Minister of the Crown or for the Treasury;
“share” includes any right to require the issue of a share;
“statutory transfer” means a transfer under a transferring enactment or by or in accordance with a statutory scheme;
“subsidiary undertaking”—
1. a
  except in relation to a company formed and registered in Northern Ireland, means a subsidiary undertaking within the meaning of Part VII of the Companies Act 1985; and
2. b
  in relation to a company so formed and registered, means a subsidiary undertaking within the meaning of Part VIII of the Companies (Northern Ireland) Order 1986.

2

In this section—

“enactment” means an enactment contained in a public general Act or any provision of Northern Ireland legislation;
“Minister of the Crown” includes a Northern Ireland department or the head of such a department;
“statutory scheme” means any scheme which—
1. a
  has been made in exercise of any power or duty conferred or imposed by any enactment;
2. b
  contains provision for the division of property, rights and liabilities between different persons, or for the transfer of property, rights and liabilities to a company; and
3. c
  would not have taken effect or come into force but for having been approved by a Minister of the Crown;
“transferring enactment” means an enactment under which property, rights and liabilities of a person specified in the enactment became, by virtue of that enactment, the property, rights or liabilities of a company nominated under that enactment.

3

In subsection (2) above the reference, in relation to a scheme, to its having been approved by a Minister of the Crown includes a reference to its having been made by a Minister of the Crown.

4

The reference in subsection (1) above to Part VII of the M12Companies Act 1985 shall be construed, in relation to times in relation to which that Part had effect without the amendments made by the M13Companies Act 1989, as if those amendments did have effect in relation to those times.

Part II Value Added Tax and Excise Duties

Value Added Tax

F16. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Alcoholic liquor duties

7 Rate of duty on spirits.

1

In section 5 of the M14Alcoholic Liquor Duties Act 1979 (spirits), for “£18.99” there shall be substituted “ £19.56 ”.

2

This section shall come into force on 1st January 1998.

8 Rate of duty on beer.

1

In section 36(1) of the Alocoholic Liquor Duties Act 1979 (beer), for “£10.82” there shall be substituted “ £11.14 ”.

2

This section shall come into force on 1st January 1998.

9 Rates of duty on wine and made-wine.

1

For the Table of rates of duty in Schedule 1 to the Alocoholic Liquor Duties Act 1979 (wine and made-wine) there shall be substituted—

Table of Rates of Duty on Wine and Made-Wine
Part I Wine or Made-Wine of a Strength not Exceeding 22 Per Cent.
Description of wine or made-wine
Rates of duty per hectolitre
£
Wine or made-wine of a strength not exceeding 4 per cent.
44.58
Wine or made-wine of a strength exceeding 4 per cent. but not exceeding 5.5 per cent.
61.30
Wine or made-wine of a strength exceeding 5.5 per cent. but not exceeding 15 per cent. and not being sparkling
144.65
Sparkling wine or sparkling made-wine of a strength exceeding 5.5 per cent. but not exceeding 8.5 per cent.
201.50
Sparkling wine or sparkling made-wine of a strength exceeding 8.5 per cent. or of a strength exceeding 8.5 per cent. but not exceeding 15 per cent.
206.66
Wine or made-wine of a strength exceeding 15 per cent. but not exceeding 22 per cent.
192.86
Part II Wine or Made-Wine of a Strength Exceeding 22 Per Cent.
Description of wine or made-wine
Rates of duty per litre of alcohol in the wine or made-wine
£
Wine or made-wine of a strength exceeding 22 per cent.
19.56

Description of wine or made-wine	Rates of duty per hectolitre
	£
Wine or made-wine of a strength not exceeding 4 per cent.	44.58
Wine or made-wine of a strength exceeding 4 per cent. but not exceeding 5.5 per cent.	61.30
Wine or made-wine of a strength exceeding 5.5 per cent. but not exceeding 15 per cent. and not being sparkling	144.65
Sparkling wine or sparkling made-wine of a strength exceeding 5.5 per cent. but not exceeding 8.5 per cent.	201.50
Sparkling wine or sparkling made-wine of a strength exceeding 8.5 per cent. or of a strength exceeding 8.5 per cent. but not exceeding 15 per cent.	206.66
Wine or made-wine of a strength exceeding 15 per cent. but not exceeding 22 per cent.	192.86

Description of wine or made-wine	Rates of duty per litre of alcohol in the wine or made-wine
	£
Wine or made-wine of a strength exceeding 22 per cent.	19.56

2

This section shall come into force on 1st January 1998.

10 Rates of duty on cider.

1

In section 62 of the Alcoholic Liquor Duties Act 1979 (cider), for subsection (1A) there shall be substituted—

1A
The rates at which the duty shall be charged are—
a
£37.54 per hectolitre in the case of sparkling cider of a strength exceeding 5.5 per cent.;
b
£36.74 per hectolitre in the case of cider of a strength exceeding 7.5 per cent. which is not sparkling cider; and
c
£24.49 per hectolitre in any other the case.

2

This section shall come into force on 1st January 1998.

Hydrocarbon oil duties

I111 Rates of hydrocarbon oil duties etc.

1

In relation to times before the coming into force of section 7(2) and (3) of the M15Finance Act 1997 (which makes amendments specifying separate rates of duty for light oil, for ultra low sulphur diesel and for heavy oil which is not ultra low sulphur diesel), section 6(1) of the M16Hydrocarbon Oil Duties Act 1979 (“the 1979 Act”) shall have effect as follows—

a

for “£0.4168” (rate of duty on light oil) there shall be substituted “ £0.4510 ”; and

b

for “£0.3686” (rate of duty on heavy oil) there shall be substituted “ £0.4028 ”.

2

In relation to times after the coming into force of section 7(2) and (3) of the Finance Act 1997, section 6(1A) of the 1979 Act (which is inserted by section 7(3) of the Finance Act 1997) shall have effect as follows—

a

in paragraph (a) (rate of duty on light oil), for “£0.4168” there shall be substituted “ £0.4510 ”;

b

in paragraph (b) (rate of duty on ultra low sulphur diesel), for “£0.3586” there shall be substituted “ £0.3928 ”; and

c

in paragraph (c) (rate of duty on heavy oil that is not ultra low sulphur diesel), for “£0.3686” there shall be substituted “ £0.4028 ”.

3

In section 11(1) of the 1979 Act (rebate on heavy oil), for “£0.0194” (fuel oil) and “£0.0250” (gas oil) there shall be substituted “ £0.0200 ” and “ £0.0258 ”, respectively.

4

In section 14(1) of the 1979 Act (rebate on light oil for use as furnace fuel), for “£0.0194” there shall be substituted “ £0.0200 ”.

5

This section shall be deemed to have come into force at 6 o’clock in the evening of 2nd July 1997.

Tobacco products duty

12 Rates of tobacco products duty.

1

For the Table of rates of duty in Schedule 1 to the M17Tobacco Products Duty Act 1979 there shall be substituted—

TABLE
1. Cigarettes...
An amount equal to 21 per cent. of the retail price plus £72.06 per thousand cigarettes.
2. Cigars...
£105.86 per kilogram.
3. Hand-rolling tobacco...
£87.74 per kilogram.
4. Other smoking tobacco and chewing tobacco...
£46.55 per kilogram.

2

This section shall come into force on 1st December 1997.

Vehicle excise and registration

13 Rates of vehicle excise duty.

1

In Schedule 1 to the M18Vehicle Excise and Registration Act 1994 (annual rates of duty) in paragraph 1(2) (the general rate), for “£145” there shall be substituted “ £150 ”.

2

For the table in paragraph 9(1) of that Schedule (rates of duty for rigid goods vehicles) there shall be substituted the following table—

Revenue weight of vehicle
Rate
(1) Exceeding
(2) Not Exceeding
(3) Two axle vehicle
(4) Three axle vehicle
(5) Four or more axle vehicle
kgs
kgs
£
£
£
3,500
7,500
160
160
160
7,500
12,000
300
300
300
12,000
13,000
470
490
350
13,000
14,000
650
490
350
14,000
15,000
840
490
350
15,000
17,000
1,320
490
350
17,000
19,000
1,320
850
350
19,000
21,000
1,320
1,020
350
21,000
23,000
1,320
1,470
510
23,000
25,000
1,320
2,230
830
25,000
27,000
1,320
2,340
1,470
27,000
29,000
1,320
2,340
2,320
29,000
31,000
1,320
2,340
3,360
31,000
44,000
1,320
2,340
4,400

Revenue weight of vehicle	Rate
(1) Exceeding	(2) Not Exceeding	(3) Two axle vehicle	(4) Three axle vehicle	(5) Four or more axle vehicle
kgs	kgs	£	£	£
3,500	7,500	160	160	160
7,500	12,000	300	300	300
12,000	13,000	470	490	350
13,000	14,000	650	490	350
14,000	15,000	840	490	350
15,000	17,000	1,320	490	350
17,000	19,000	1,320	850	350
19,000	21,000	1,320	1,020	350
21,000	23,000	1,320	1,470	510
23,000	25,000	1,320	2,230	830
25,000	27,000	1,320	2,340	1,470
27,000	29,000	1,320	2,340	2,320
29,000	31,000	1,320	2,340	3,360
31,000	44,000	1,320	2,340	4,400

3

For the table in paragraph 11(1) of that Schedule (rates of duty for tractive units) there shall be substituted the following table—

Revenue weight of tractive unit
Rate for tractive unit with two axles
Rate for tractive unit with three or more axles
(1) Exceeding
(2) Not exceeding
(3) Any no. of semi-trailer axles
(4) 2 or more semi-trailer axles
(5) 3 or more semi-trailer axles
(6) Any no. of semi-trailer axles
(7) 2 or more semi-trailer axles
(8) 3 or more semi-trailer axles
kgs
kgs
£
£
£
£
£
£
3,500
7,500
160
160
160
160
160
160
7,500
12,000
300
300
300
300
300
300
12,000
16,000
460
460
460
460
460
460
16,000
20,000
520
460
460
460
460
460
20,000
23,000
810
460
460
460
460
460
23,000
26,000
1,190
590
460
590
460
460
26,000
28,000
1,190
1,130
460
1,130
460
460
28,000
31,000
1,740
1,740
1,090
1,740
660
460
31,000
33,000
2,530
2,530
1,740
2,530
1,000
460
33,000
34,000
5,170
5,170
1,740
2,530
1,470
570
34,000
36,000
5,170
5,170
2,840
2,530
2,100
860
36,000
38,000
5,170
5,170
3,210
2,820
2,820
1,280
38,000
44,000
5,170
5,170
3,210
2,820
2,820
1,280

Revenue weight of tractive unit	Rate for tractive unit with two axles	Rate for tractive unit with three or more axles
(1) Exceeding	(2) Not exceeding	(3) Any no. of semi-trailer axles	(4) 2 or more semi-trailer axles	(5) 3 or more semi-trailer axles	(6) Any no. of semi-trailer axles	(7) 2 or more semi-trailer axles	(8) 3 or more semi-trailer axles
kgs	kgs	£	£	£	£	£	£
3,500	7,500	160	160	160	160	160	160
7,500	12,000	300	300	300	300	300	300
12,000	16,000	460	460	460	460	460	460
16,000	20,000	520	460	460	460	460	460
20,000	23,000	810	460	460	460	460	460
23,000	26,000	1,190	590	460	590	460	460
26,000	28,000	1,190	1,130	460	1,130	460	460
28,000	31,000	1,740	1,740	1,090	1,740	660	460
31,000	33,000	2,530	2,530	1,740	2,530	1,000	460
33,000	34,000	5,170	5,170	1,740	2,530	1,470	570
34,000	36,000	5,170	5,170	2,840	2,530	2,100	860
36,000	38,000	5,170	5,170	3,210	2,820	2,820	1,280
38,000	44,000	5,170	5,170	3,210	2,820	2,820	1,280

4

This section applies in relation to licences taken out after 15th November 1997.

14 Payments where vehicle information transmitted electronically.

1

In section 7 of the Vehicle Excise and Registration Act 1994 (issue of vehicle licences), in subsection (3B) (conditions that may be imposed in place of requirement to make a declaration), after “include” there shall be inserted “ (a) ” and at the end there shall be inserted

; and
b
a condition requiring such payments as may be specified by the Secretary of State to be made to him in respect of—
i
steps taken by him for facilitating compliance by any person with any condition falling within paragraph (a); and
ii
in such circumstances as may be so specified, the processing of applications for vehicle licences where particulars are transmitted in accordance with that paragraph.

2

Subsection (1) above applies to applications made on or after the day on which this Act is passed.

3

In section 22 of the M19Vehicle Excise and Registration Act 1994, after subsection (2) (regulations about registration and identification of exempt vehicles, etc.) there shall be inserted the following subsections—

2A
Regulations under subsection (2) may, in particular—
a
require a person applying for a nil licence—
i
to make such a declaration, and
ii
to furnish such particulars,
(whether or not with respect to the vehicle for which the licence is to be taken out) as may be prescribed by the regulations, and
b
provide for any requirement to make such a declaration not to apply in such circumstances as may be so prescribed.
2B
The circumstances which may be prescribed by the regulations by virtue of subsection (2A)(b) include where a person applying for a nil licence agrees to comply with such conditions as may be specified in relation to him by the Secretary of State.
2C
The conditions which may be specified by virtue of subsection (2B) include—
a
a condition that particulars for the time being prescribed by the regulations by virtue of subsection (2A)(a) are furnished by being transmitted to the Secretary of State by such electronic means as he may specify; and
b
a condition such as is mentioned in section 7(3B)(b) (treating the references to paragraph (a) of subsection (3B) as references to paragraph (a) of this subsection).

Part III Income tax and corporation tax

Reliefs for interest and private medical insurance

F215 Mortgage interest payments.

F191

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

2

In section 369 of that Act (deduction at source of mortgage interest relief), in subsection (1A) (percentage of interest deductible), for paragraph (a) there shall be substituted—

a
in relation to so much of any payment of relevant loan interest as is not a payment in relation to which paragraph (b) below has effect, means 10 per cent; and

3

Subsection (1) above has effect in relation to any payment of interest (whenever falling due) made in the year 1998-99 or any subsequent year of assessment; and subsection (2) above has effect in relation to any payment of interest which becomes due in the year 1998-99 or any subsequent year of assessment.

F2016 Limit on relief for interest for 1998-99.

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

F4517 Withdrawal of relief on medical insurance premiums.

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

Corporation tax

18 Rates for financial year 1997.

1

The rate at which corporation tax is charged for the financial year 1997 shall be, and shall be deemed always to have been, 31 per cent. (and not 33 per cent. as provided by section 58 of the M20Finance Act 1997).

F372

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

3

All such adjustments shall be made, whether by way of discharge or repayment of tax or otherwise, as may be required in consequence of the provisions of this section.

Distributions, tax credits etc on and after 2nd July 1997

F319 Pension funds no longer entitled to payment of tax credits.

1

In section 231 of the Taxes Act 1988 (tax credits for certain recipients of qualifying distributions)—

a

in subsection (2) (payment of tax credits to companies resident in the United Kingdom) for “Subject to section 241(5)” there shall be substituted “ Subject to sections 231A and 241(5) ”; and

b

at the beginning of subsection (3) (claims by other persons to set tax credits against income tax liability and to receive payment of any excess of tax credit over that liability) there shall be inserted “ Subject to section 231A, ”.

2

After section 231 of the Taxes Act 1988 there shall be inserted—

231A Restrictions on the use of tax credits by pension funds.
1
No claim shall be made under section 231(2) for payment of the amount of a tax credit if or to the extent that the qualifying distribution to which the credit relates is income of a pension fund.
2
In the case of any pension fund, for any year of assessment the aggregate amount of the tax credits in respect of which claims are made under section 231(3) must not exceed the aggregate amount of the tax credits in respect of the qualifying distributions comprised in the income of the pension fund and brought into charge to tax.
3
Accordingly, no payment shall be made under section 231(3) in respect of so much of the excess there mentioned as is referable to a tax credit in respect of a qualifying distribution if or to the extent that the qualifying distribution is income of a pension fund.
4
In this section—
“income”, in relation to a pension fund, means income derived from investments or deposits held for the purposes of the pension fund;
“pension fund” means any scheme, fund or other arrangements established and maintained (whether in the United Kingdom or elsewhere) for the purpose of providing pensions, retirement annuities, allowances, lump sums, gratuities or other superannuation benefits (with or without subsidiary benefits);
“scheme” includes any deed, agreement or series of agreements.
5
For convenience of identification only, the schemes, funds or other arrangements which are “pension funds” for the purposes of this section by virtue of the definition of that expression in subsection (4) above include, in particular, those whose income is, in whole or in part, exempt, or eligible for exemption, from tax under or by virtue of any of the following provisions—
a
section 512(2);
b
section 592(2);
c
section 608(2)(a);
d
section 613(4);
e
section 614(2), (3), (4) or (5);
f
section 620(6);
g
section 643(2).
6
The preceding provisions of this section do not have effect in relation to—
a
claims made in respect of tax credits to which entitlement arises by virtue of section 232(3); or
b
claims made by virtue of arrangements having effect under section 788.

3

This section has effect in relation to qualifying distributions made on or after 2nd July 1997.

20 Losses etc not to be set against surplus franked investment income.

1

No claim shall be made under section 242 or 243 of the Taxes Act 1988 (set off of losses etc against surplus of franked investment income) for any accounting period beginning on or after 2nd July 1997; and section 244(1) of that Act shall cease to have effect accordingly.

2

Sections 242(5) and (6) and 243(4) of the Taxes Act 1988 (restoration of loss etc in later accounting period for which there is a surplus of franked payments) shall not have effect where the later accounting period mentioned in section 242(5)(b) begins on or after 2nd July 1997.

3

No amount shall be deducted under paragraph (a), or carried forward and deducted under paragraph (b), of section 244(2) (deduction of tax credit paid from ACT subsequently available for set off or surrender) for any accounting period beginning on or after 2nd July 1997.

4

For the purposes of sections 242 and 243 of the Taxes Act 1988, if—

a

a company has a surplus of franked investment income for an accounting period beginning before 2nd July 1997 and ending on or after that date, and

b

that surplus exceeds the surplus of franked investment income which the company would have had for that accounting period had it ended on 1st July 1997,

the surplus shall be treated as reduced by the excess.

5

Sections 242 to 244 of the Taxes Act 1988 cease to have effect in consequence of, and in accordance with, the foregoing provisions of this section.

6

In section 237(4) of the Taxes Act 1988 (bonus issue and related tax credit not to be franked investment income for the purposes of sections 241 and 244) for “sections 241 and 244” there shall be substituted “ section 241 ”.

7

Subsection (6) above has effect in accordance with subsection (5) above.

F3121 Estates in administration: distributions to which s.233(1) applies.

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

22 Lloyd’s underwriters.

F491

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

F352

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3

In subsection (4) of that section (subsection (2) applies in relation to distributions and associated tax credits notwithstanding section 11(2)(a) or 208 of the Taxes Act 1988)—

F36a

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

b

the words “(and any associated tax credits)” shall cease to have effect.

4

After that subsection there shall be inserted—

4A
Notwithstanding anything in section 11(2)(a) or 208 of the Taxes Act 1988, UK distributions in respect of any assets of a corporate member which are mentioned in paragraph (a) or (b) of subsection (3) above—
a
shall be taken into account in computing profits of the corporate member for tax purposes; and
b
shall be so taken into account under Case I of Schedule D (and not under any other Schedule or any other Case of Schedule D).
4B
Section 231(1) of the Taxes Act 1988 (entitlement to tax credit) shall not apply where the distribution there mentioned is a distribution in respect of any asset of a corporate member’s premiums trust fund.
4C
In this section “UK distributions” means dividends or other distributions of a company resident in the United Kingdom.

F145

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

6

In section 231(1) of the Taxes Act 1988 (recipient of distribution made by UK resident company entitled to tax credit subject to sections 247 and 441A) after “441A,” there shall be inserted “ section 171(2B) of the Finance Act 1993 and section 219(4B) of the Finance Act 1994, ”.

7

This section has effect in relation to distributions made on or after 2nd July 1997.

23 Insurance companies and friendly societies.

Schedule 3 to this Act (which makes provision in relation to insurance companies and friendly societies) shall have effect.

Distributions, tax credits etc: avoidance

24 Taxation of dealers in respect of distributions etc.

F321

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

F322

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F323

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F324

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F325

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F326

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F327

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F328

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F329

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F1510

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11

In section 234 of the Taxes Act 1988 (information relating to distributions) in subsection (1), the words“but subject to section 95(1A)(c)” shall be omitted.

12

In section 246D(1) of the Taxes Act 1988 (individuals entitled to FIDs treated as receiving grossed-up amount) after “that individual shall be treated” there shall be inserted “ (except for the purposes of section 95(1)) ”.

13

In Schedule 23A to the Taxes Act 1988 (manufactured dividends and interest) paragraph 2A(2) (which provides that if the dividend manufacturer is a company not resident in the UK no amount shall be deductible in the case of that company in respect of the manufactured dividend) shall be omitted (and accordingly paragraph 2(3)(c) of that Schedule has effect instead).

14

In Schedule 7 to the M21Finance Act 1997 (special treatment for certain distributions) in paragraph 2 (distributions treated as FIDs) in sub-paragraph (3)—

a

paragraph (a) (subjection to section 95(1A)(b)) shall be omitted; and

b

in paragraph (b) (subjection to section 247(5B) to (5D)) for “of that Act” there shall be substituted “ of the Taxes Act 1988 ”.

15

This section has effect in relation to—

a

any distribution made on or after 2nd July 1997; and

b

any payment which is representative of such a distribution.

25 Repeal of s.95(5) of the Taxes Act 1988: consequential amendments.

F461

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

F212

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F213

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F214

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F475

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F476

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F487

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8

This section has effect on and after 2nd July 1997.

F3026 Purchase and sale of securities.

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F3827 Payments to companies under section 687 of the Taxes Act 1988.

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F5028 Arrangements to pass on value of tax credit.

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

F2229 Unauthorised unit trusts.

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Distributions, tax credits etc in and after 1999-00

C130 Tax credits.

1

Section 231 of the Taxes Act 1988 (tax credits for certain recipients of qualifying distributions) shall be amended in accordance with subsections (2) to (7) below.

F392

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

F393

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

C2 C3 C44

Subsection (2) (payment of tax credit to company resident in UK) shall cease to have effect.

5

In subsection (3) (which includes provision for payment of excess of tax credit over income tax liability to person not being a company resident in the UK)—

F16a

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

b

the words “and subject to subsections (3A) and (3D) below where the credit exceeds that income tax, to have the excess paid to him” shall cease to have effect.

F176

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

7

In consequence of subsection (5) above, subsections (3A) to (3D) shall cease to have effect.

8

Section 231A of the Taxes Act 1988 (which is superseded by the foregoing provisions of this section) shall cease to have effect.

F519

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

F5110

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

11

This section has effect in relation to distributions made on or after 6th April 1999.

F2331 Rates of tax applicable to Schedule F income etc.

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

F2432 Trusts.

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

33 Estates of deceased persons in administration.

F251

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F332

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F333

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F334

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F335

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F336

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F337

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F338

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F339

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F3310

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F3311

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34 Tax credits and taxation of distributions: miscellaneous provisions.

Schedule 4 to this Act (which contains provisions relating to tax credits and the taxation of distributions) shall have effect.

F4235 Transitional relief for charities etc.

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

36 Foreign income dividends.

1

No election shall be made under section 246A of the Taxes Act 1988 (election for dividend to be treated as foreign income dividend) in respect of any distributions made on or after 6th April 1999.

2

No amount shall be shown as available for distribution as foreign income dividends in the distribution accounts of an authorised unit trust for a distribution period the distribution date for which falls on or after 6th April 1999.

3

No distribution made on or after 6th April 1999 shall be treated as a foreign income dividend by virtue of paragraph 2(1) of Schedule 7 to the M22Finance Act 1997 (Tax Acts to have effect as if qualifying distributions to which Schedule 7 applies were foreign income dividends).

4

Schedule 6 to this Act (which makes provision for and in connection with the repeal of provisions relating to foreign income dividends) shall have effect.

5

In subsection (2) above, “distribution accounts”, “distribution date” and “distribution period” shall be construed in accordance with section 468H of the Taxes Act 1988 (interpretation of sections 468I to 468R of that Act).

Gilt-edged securities

37 Interest to be paid gross.

1

The Taxes Act 1988 shall be amended as follows.

F262

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

F263

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

F264

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

5

Section 51A (interest on gilt-edged securities held under authorised arrangements to be paid without deduction of tax) shall cease to have effect.

F46

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

F277

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

8

F28... this section has effect in relation to payments of interest falling due on or after 6th April 1998.

F299

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

F2910

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F2911

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F2912

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F2913

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F538 Paying and collecting agents.

1

Chapter VIIA of Part IV of the Taxes Act 1988 (paying and collecting agents) shall be amended as follows.

2

Section 118A (interpretation of Chapter) shall become subsection (1) of that section and, in paragraph (k) of that subsection (meaning of “international organisation”), for “has the meaning given by section 51A(8)” there shall be substituted “ means an organisation of which two or more sovereign powers, or the governments of two or more sovereign powers, are members ”.

3

After that subsection there shall be inserted the following subsection—

2
If, in any proceedings, any question arises whether a person is an international organisation for the purposes of this Chapter, a certificate issued by or under the authority of the Secretary of State stating any fact relevant to that question shall be conclusive evidence of that fact.

4

In section 118D(4) (payments of interest payable without deduction of tax not to be chargeable payments), after “by virtue of” there shall be inserted “ section 50(A1) or of ”.

5

In subsection (3) of section 118G (United Kingdom public revenue dividends excluded from being chargeable payments)—

a

paragraphs (b) and (d) to (f) shall be omitted; and

b

for paragraph (c) there shall be substituted the following paragraph—

ca
they are payable in respect of a FOTRA security (within the meaning of section 154 of the M23Finance Act 1996) which—
i
is not registered (within the meaning of section 50 of this Act); and
ii
is, for the time being, beneficially owned by a person who is not ordinarily resident in the United Kingdom.

6

In section 118G(7), for paragraphs (a) and (b) there shall be substituted “ foreign dividends on foreign holdings held by a nominee approved for the purposes of this subsection ”.

7

Section 118G(8) and (10) shall cease to have effect.

8

This section has effect in relation to payments falling due on or after 6th April 1998.

Relief for losses etc

F4039 Carry-back of trading losses.

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

F3440 Carry-back of loan relationship deficits.

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

F4141 Restrictions on group relief.

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

Capital allowances for small and medium-sized businesses

F642. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F743. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Capital allowances and finance leases

F844. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F945. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F1046. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F1147. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Films

F1848 Relief for expenditure on production and acquisition.

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

Part IV Miscellaneous and supplemental

Stamp duty

F1249 Stamp duty on conveyance or transfer on sale.

1

Section 55 of the M24Finance Act 1963 and section 4 of the M25Finance Act Northern Ireland) 1963 (both of which provide for rates of stamp duty on conveyance and transfer on sale) shall each be amended in accordance with the provisions of subsections (2) to (4) below.

2

Subject to the modification mentioned in subsection (5) below, in subsection (1) (which specifies rates of stamp duty), for paragraphs (b) and (c) there shall be substituted—

b
where paragraph (a) above does not apply and—
i
the amount or value of the consideration does not exceed £500, and
ii
the instrument is certified as described in section 34(4) of the M26Finance Act 1958 at £250,000,
the rate of 50p for every £50 or part of £50 of the consideration;
c
where paragraph (a) above does not apply and—
i
the amount or value of the consideration exceeds £500 but does not exceed £250,000, and
ii
the instrument is certified as described in section 34(4) of the Finance Act 1958 at £250,000,
the rate of £1 for every £100 or part of £100 of the consideration;
d
where paragraphs (a) to (c) above do not apply and—
i
the amount or value of the consideration does not exceed £500,000, and
ii
the instrument is certified as described in section 34(4) of the Finance Act 1958 at £500,000,
the rate of £1.50p for every £100 or part of £100 of the consideration; and
e
in any other case the rate of £2 for every £100 or part of £100 of the consideration;

3

In subsection (1A) (disregard of paragraph (a) to paragraph (c) of subsection (1) in relation to conveyances or transfers of stock or marketable securities) for “paragraph (c)” there shall be substituted “ paragraph (e) ”.

4

In subsection (2) (disregard of paragraph (a) for the purposes of leases where consideration includes rent which exceeds £600 a year)—

a

after the words “shall have effect as if” there shall be inserted “ (a) ”, and

b

after the word “omitted” there shall be inserted—

and
b
in paragraph (d) for the words “paragraphs (a) to (c)” there were substituted the words “paragraphs (b) and (c)”.

5

In section 4 of the M27Finance Act Northern Ireland) 1963, for the words “section 34(4) of the M28Finance Act 1958”, wherever they occur, there shall be substituted the words “ section 7(4) of the M29Finance Act Northern Ireland) 1958 ”.

6

This section shall apply to instruments executed on or after 8th July 1997, except where the instrument in question is executed in pursuance of a contract made on or before 2nd July 1997.

7

This section shall be deemed to have come into force on 8th July 1997.

Provisional collection of taxes

50 Statutory effect of resolutions etc.

F431

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

F132

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

F443

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

Supplemental

51 Interpretation.

In this Act “the Taxes Act 1988” means the M30 Income and Corporation Taxes Act 1988.

52 Repeals.

1

The enactments mentioned in Schedule 8 to this Act (which include spent provisions) are hereby repealed to the extent specified in the third column of that Schedule.

2

The repeals specified in that Schedule have effect subject to the commencement provisions and savings contained or referred to in the notes set out in that Schedule.

53 Short title.

This Act may be cited as the Finance (No. 2) Act 1997.

1. Cigarettes...	An amount equal to 21 per cent. of the retail price plus £72.06 per thousand cigarettes.
2. Cigars...	£105.86 per kilogram.
3. Hand-rolling tobacco...	£87.74 per kilogram.
4. Other smoking tobacco and chewing tobacco...	£46.55 per kilogram.