Finance Act 1998

Chapter IU.K. Income Tax and Corporation Tax

Income tax charge, rates and reliefsU.K.

F125 Charge and rates for 1998-99.U.K.

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

F226. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .U.K.

27 Married couple’s allowance etc. in and after 1999-00.U.K.

(1)The Taxes Act 1988 shall have effect for the year 1999-00 and subsequent years of assessment with the following amendments—

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

F4(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2)For the purposes only of applying section 257C of the Taxes Act 1988 (indexation) for the year 1999-00, the amounts specified for the year 1998-99 in subsections (2) and (3) of section 257A of that Act (married couple’s allowance for persons of 65 or more) shall be taken to have been £4,965 and £5,025, respectively.

Corporation tax charge and ratesU.K.

28 Charge and rates for financial year 1998.U.K.

(1)Corporation tax shall be charged for the financial year 1998 at the rate of 31 per cent.

F5(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

29 Charge and rates for financial year 1999.U.K.

(1)Corporation tax shall be charged for the financial year 1999 at the rate of 30 per cent.

F6(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Corporation tax: periodic payments etcU.K.

30 Corporation tax: due and payable date.U.K.

(1)After section 59DA of the M1Taxes Management Act 1970 there shall be inserted—

“59E Further provision as to when corporation tax is due and payable.

(1)The Treasury may by regulations make provision, in relation to companies of such descriptions as may be prescribed, for or in connection with treating amounts of corporation tax for an accounting period as becoming due and payable on dates which fall on or before the date on which corporation tax for that period would become due and payable apart from this section.

(2)Without prejudice to the generality of subsection (1) above, regulations under this section may make provision—

(a)for or in connection with the determination of amounts of corporation tax which are treated as becoming due and payable under the regulations;

(b)for or in connection with the determination of the dates on which amounts of corporation tax are treated as becoming due and payable under the regulations;

(c)for or in connection with the making of payments to the Board in respect of amounts of corporation tax which are treated as becoming due and payable under the regulations;

(d)for or in connection with the determination of the amount of any such payments as are mentioned in paragraph (c) above;

(e)for or in connection with the determination of the dates on which any such payments as are mentioned in paragraph (c) above become due and payable;

(f)for or in connection with any assumptions which are to be made for any purposes of the regulations;

(g)for or in connection with the payment to the Board of interest on amounts of corporation tax which are treated as becoming due and payable under the regulations;

(h)for or in connection with the repayment of amounts paid under the regulations;

(i)for or in connection with the payment of interest by the Board on amounts paid or repaid under the regulations;

(j)with respect to the furnishing of information to the Board;

(k)with respect to the keeping, production or inspection of any books, documents or other records;

(l)for or in connection with the imposition of such requirements as the Treasury think necessary or expedient for any purposes of the regulations;

(m)for or in connection with appeals in relation to questions arising under the regulations.

(3)Regulations under this section may make provision—

(a)for amounts of corporation tax for an accounting period to be treated as becoming due and payable on dates which fall within the accounting period;

(b)for payments in respect of any such amounts of corporation tax for an accounting period as are mentioned in paragraph (a) above to become due and payable on dates which fall within the accounting period.

(4)Where interest is charged by virtue of regulations under this section on any amounts of corporation tax for an accounting period which are treated as becoming due and payable under the regulations, the company shall, in such circumstances as may be prescribed, be liable to a penalty not exceeding twice the amount of that interest.

(5)Regulations under this section—

(a)may make such modifications of any provisions of the Taxes Acts, or

(b)may apply such provisions of the Taxes Acts,

as the Treasury think necessary or expedient for or in connection with giving effect to the provisions of this section.

(6)Regulations under this section which apply any provisions of the Taxes Acts may apply those provisions either without modifications or with such modifications as the Treasury think necessary or expedient for or in connection with giving effect to the provisions of this section.

(7)Regulations under this section—

(a)may make different provision for different purposes, cases or circumstances;

(b)may make different provision in relation to companies or accounting periods of different descriptions;

(c)may make such supplementary, incidental, consequential or transitional provision as appears to the Treasury to be necessary or expedient.

(8)Subject to subsection (9) below, regulations under this section may make provision in relation to accounting periods beginning before (as well as accounting periods beginning on or after) the date on which the regulations are made.

(9)Regulations under this section may not make provision in relation to accounting periods ending before the day appointed under section 199 of the M2Finance Act 1994 for the purposes of Chapter III of Part IV of that Act (corporation tax self-assessment).

(10)In this section—

• “modifications” includes amendments, additions and omissions;

• “prescribed” means prescribed by regulations made under this section.

(11)Any reference in this section to corporation tax includes a reference—

(a)to any amount due from a company under section 419 of the principal Act (loans to participators etc) as if it were an amount of corporation tax chargeable on the company;

(b)to any sum chargeable on a company under section 747(4)(a) of the principal Act (controlled foreign companies) as if it were an amount of corporation tax.”

(2)The Treasury may by regulations make provision for or in connection with the payment to the Board of an amount or amounts determined by or under the regulations in any case where, on or after 25th November 1997 and before 30th June 2002, a company takes any action specified in the regulations which has the effect—

(a)of delaying the application, or

(b)of delaying or avoiding the full effect,

in relation to the company of any regulations made under section 59E of the M3Taxes Management Act 1970.

(3)Any amount determined by or under regulations under this section shall be computed as if it were interest on a sum determined by or under the regulations; and any amount so determined shall be treated for the purposes of the Tax Acts as if it were interest due to the Board.

(4)The action which may be specified in regulations under this section includes—

(a)a change by a company in the date or dates on which any of its accounting periods begin or end; or

(b)a transfer by a company of any property, rights or liabilities to a company which belongs to the same group as that company.

(5)In subsection (4) above “group” means a company which has one or more 51 per cent. subsidiaries together with that or those subsidiaries.

(6)Regulations under this section—

(a)may make different provision in relation to different cases or in relation to companies of different descriptions;

(b)may make such supplementary, incidental, consequential or transitional provision as appears to the Treasury to be necessary or expedient.

31 Abolition of advance corporation tax.U.K.

(1)No company resident in the United Kingdom shall be liable to pay advance corporation tax in respect of any qualifying distribution made on or after 6th April 1999.

(2)For the purposes of the Tax Acts, no distribution made on or after 6th April 1999 shall be treated as giving rise to the making of a franked payment.

(3)No franked investment income which is attributable to a distribution made on or after 6th April 1999 shall be used to frank any distributions of a company.

(4)Section 238(3) of the Taxes Act 1988 shall apply for the purposes of subsection (3) above as it applies for the purposes of Chapter V of Part VI of that Act.

(5)Schedule 3 to this Act (which makes provision for and in connection with the abolition of advance corporation tax) shall have effect.

32 Unrelieved surplus advance corporation tax.U.K.

(1)The Treasury may by regulations make provision for or in connection with enabling unrelieved surplus advance corporation tax to be set against liability to corporation tax on profits charged to corporation tax for accounting periods ending on or after 6th April 1999 (and thus to discharge a corresponding amount of any such liability).

(2)Without prejudice to the generality of subsection (1) above, regulations under this section may make provision—

(a)for or in connection with imposing a limit or limits on the amount of unrelieved surplus advance corporation tax which may be set against liability to corporation tax on profits charged to corporation tax for an accounting period;

(b)for or in connection with the carrying forward of unrelieved surplus advance corporation tax from earlier accounting periods to later accounting periods;

(c)for or in connection with the recovery of corporation tax from companies in prescribed circumstances where any such liability as is mentioned in paragraph (a) above is or has been discharged by the set-off of unrelieved surplus advance corporation tax;

(d)for or in connection with the reduction or extinguishment of unrelieved surplus advance corporation tax;

(e)for or in connection with treating notional amounts of advance corporation tax (“shadow ACT") as paid by companies in respect of distributions made on or after 6th April 1999;

(f)for or in connection with the determination of amounts of shadow ACT which are treated as paid by companies in respect of distributions made on or after 6th April 1999;

(g)in relation to the treatment of shadow ACT;

(h)in relation to the treatment of companies which have prescribed relationships or connections with each other;

(i)in relation to the treatment of prescribed events, arrangements or transactions involving companies with unrelieved surplus advance corporation tax.

(3)The provision which may be made by regulations under this section includes provision—

(a)for or in connection with treating shadow ACT as reducing any limit or limits on the amount of unrelieved surplus advance corporation tax which may be set against any such liability as is mentioned in subsection (2)(a) above;

(b)for or in connection with the carrying forward of shadow ACT from earlier accounting periods to later accounting periods;

(c)for or in connection with the carrying back of shadow ACT from later accounting periods to earlier accounting periods;

(d)for or in connection with the transfer of shadow ACT between companies;

(e)for or in connection with the reduction or extinguishment of shadow ACT.

(4)The provision which may be made by virtue of subsection (2)(c) above includes provision for or in connection with the recovery of corporation tax from a company which has a prescribed relationship or connection with a company whose liability to corporation tax is or has been discharged by the set-off of unrelieved surplus advance corporation tax.

(5)The provision which may be made by regulations under this section includes provision for or in connection with enabling unrelieved surplus advance corporation tax to be set against liability to a sum chargeable under section 747(4)(a) of the Taxes Act 1988 (controlled foreign companies) as if it were an amount of corporation tax for an accounting period.

(6)In this section “unrelieved surplus advance corporation tax” means the advance corporation tax (if any) which, apart from sub-paragraph (3) of [F7paragraph 12] of Schedule 3 to this Act but otherwise in accordance with that paragraph, would be treated by virtue of section 239(4) of the Taxes Act 1988 as paid in respect of distributions made by a company in the first accounting period of the company to begin on or after 6th April 1999.

(7)The reference in subsection (6) above to an accounting period beginning on or after 6th April 1999 includes a reference to a separate accounting period mentioned in section 245(2) of the Taxes Act 1988 which begins on 6th April 1999.

(8)Regulations under this section—

(a)may make such modifications of any provisions of the Tax Acts, or

(b)may apply such provisions of the Tax Acts,

as the Treasury think necessary or expedient for or in connection with giving effect to the provisions of this section.

(9)Regulations under this section which apply any provisions of the Tax Acts may apply those provisions either without modifications or with such modifications as the Treasury think necessary or expedient for or in connection with giving effect to the provisions of this section.

(10)Regulations under this section—

(a)may make different provision for different purposes, cases or circumstances;

(b)may make different provision in relation to companies or accounting periods of different descriptions;

(c)may make such supplementary, incidental, consequential or transitional provision as appears to the Treasury to be necessary or expedient.

(11)Regulations under this section may make provision in relation to accounting periods beginning before (as well as accounting periods beginning on or after) the date on which the regulations are made.

(12)In this section—

• “modifications” includes amendments, additions and omissions;

• “prescribed” means prescribed by regulations made under this section.

33 Relief for interest payable under the Tax Acts.U.K.

(1)Section 90 of the M4Taxes Management Act 1970 (interest on overdue tax to be paid without deduction of income tax and not to be allowed as a deduction in computing income, profits or losses) shall be amended as follows.

(2)At the beginning there shall be inserted “(1)" and in the subsection (1) so formed—

(a)after “Interest payable under this Part of this Act" there shall be inserted “ (a) ”; F8...

F8(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F9(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

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

34 Charge to tax on interest payable under the Tax Acts.U.K.

(1)Section 826 of the Taxes Act 1988 (interest on tax overpaid) shall be amended as follows.

(2)In subsection (5) (interest on overpaid tax to be paid without deduction of income tax and not to be brought into account in computing profits or income)—

(a)after “Interest paid under this section" there shall be inserted “ (a) ”; and

(b)after “and" there shall be inserted “ (b) ”.

(3)At the beginning of the paragraph (b) formed by subsection (2)(b) above (interest not to be brought into account in computing profits or income) there shall be inserted “subject to subsection (5A) below,".

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

“(5A)Paragraph (b) of subsection (5) above does not apply in relation to interest payable to a company within the charge to corporation tax.”

(5)The amendments made by subsections (3) and (4) above have effect in relation to interest payable by virtue of any paragraph of section 826(1) of the M5Taxes Act 1988 if the accounting period mentioned in that paragraph is one which ends on or after the day appointed under section 199 of the Finance Act 1994 for the purposes of Chapter III of Part IV of that Act (corporation tax self-assessment).

35 Further provision about interest payable under the Tax Acts.U.K.

Schedule 4 to this Act (which makes further amendments relating to interest payable under the Tax Acts by or to companies) shall have effect.

F1036 Arrangements with respect to payment of corporation tax.U.K.

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Gilt-edged securitiesU.K.

37 Abolition of periodic accounting.U.K.

(1)Section 51B of the Taxes Act 1988 (which enables provision to be made requiring tax on interest on gilt-edged securities to be accounted for periodically) shall cease to have effect.

F11(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3)The preceding provisions of this section have effect in relation only to payments of interest falling due on or after such day as the Treasury may by order appoint.

Rents and other receipts from landU.K.

38 Taxation of rents and other receipts from land.U.K.

(1)The provisions of Schedule 5 to this Act have effect with respect to tax on rents and other receipts from land.

• Part I contains amendments relating to the charge to tax under Schedule A or Case V of Schedule D on rents and other receipts from land.

• Part II contains amendments about relief for losses incurred in a Schedule A business or overseas property business, and the relationship between such relief and other reliefs.

• Part III contains minor and consequential amendments.

(2)So far as relating to income tax, the provisions of Parts I to III of that Schedule have effect for the year 1998-99 and subsequent years of assessment.

(3)So far as relating to corporation tax, the provisions of Parts I to III of that Schedule come into force on 1st April 1998, subject to the transitional provisions in Part IV of the Schedule.

39 Land managed as one estate and maintenance funds for historic buildings.U.K.

Sections 26 and 27 of the Taxes Act 1988 (deductions from rent: land managed as one estate and maintenance funds for historic buildings) shall cease to have effect—

(a)for income tax purposes, on and after 6th April 2001;

(b)for corporation tax purposes, for accounting periods beginning on or after 1st April 2001.

F1240 Treatment of premiums as rent.U.K.

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

41 Tied premises: receipts and expenses treated as those of trade.U.K.

F13(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2)In section 156 of the M6Taxation of Chargeable Gains Act 1992 (replacement of business assets: buildings and land), for subsection (4) substitute—

“(4)Where section 98 of the Taxes Act applies (tied premises: receipts and expenses treated as those of trade), the trader shall be treated, to the extent that the conditions in subsection (1) of that section are met in relation to premises, as occupying as well as using the premises for the purposes of the trade.”.

(3)The above amendments have effect on and after 17th March 1998, subject to the following transitional provisions.

In those provisions—

• “before commencement” and “after commencement” mean, respectively, before 17th March 1998 and on or after that date; and

• “the new section 98” means the section as substituted by subsection (1) above.

F14(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F14(5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F14(6). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F14(7). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Computation of profits of trade, profession or vocationU.K.

F1542 Computation of profits of trade, profession or vocation.U.K.

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F1643 Barristers and advocates in early years of practice.U.K.

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

F1744. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .U.K.

F1845. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .U.K.

46 Minor and consequential provisions about computations.U.K.

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

F20(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3)In the provisions of the Tax Acts which refer to the subject of the charge under Case I or II of Schedule D as “profits or gains” or “profits and gains" of a trade, profession or vocation—

(a)for “profits or gains" or “profits and gains", wherever occurring, substitute “ profits ”, and

(b)for “arising or accruing", in reference to such profits or gains, substitute “ arising ”.

The provisions affected are listed in Schedule 7 to this Act.

Gifts to charitiesU.K.

F2147. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .U.K.

48 Gifts of money for relief in poor countries.U.K.

(1)This section applies to any gift of a sum of money by an individual to a charity that has given the required notification to the Board if that gift is made—

(a)in the period beginning with [F2231st July 1998] and ending with 31st December 2000; and

(b)in circumstances giving rise to a reasonable expectation that the sum given will be applied for, or in connection with, [F23one or more] of the purposes specified in subsection (2) below.

(2)Those purposes are—

(a)the relief of poverty in any one or more [F24countries or territories designated for the purposes of this paragraph,], F25. . .

(b)the advancement of education in any one or more [F24countries or territories designated for the purposes of this paragraph,][F26, and.

(c)the relief of poverty in the case of persons from any country or territory designated for the purposes of this paragraph who are refugees or who have suffered displacement as a result of organised intimidation or oppression or of war or other armed conflict.]

F27(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4)Where—

(a)a relevant gift of less than £100 is made [F28before 6th April 2000]by an individual to a charity that has given the required notification to the Board,

(b)the aggregate of that gift and any one or more subsequent relevant gifts made by that individual to that charity is £100 or more,

[F29(bb)the subsequent gift, or at least one of the subsequent gifts, is made on or after 6th April 2000;]

(c)that individual gives an [F30appropriate declaration]in relation to that aggregate to that charity, and

(d)the condition specified in paragraph (e) of subsection (2) of section 25 of the M7Finance Act 1990 (limit on benefit for the donor) would be satisfied if the aggregated gifts constituted a single gift by that individual to that charity made at the time of the making of the last of them to be made,

the aggregated gifts shall be treated for the purposes of that section [F31(but subject to subsection (4A) below)] as if they together constituted a single qualifying donation made by that individual to that charity at that time.

[F32(4A)Subsection (10) of section 25 of the M8Finance Act 1990 (receipts of gifts by a charity to be treated as payments of grossed-up amounts after deduction of basic rate income tax) shall have effect where—

(a)any aggregated gifts are treated under this section as a single qualifying donation made to a charity, and

(b)the aggregated gifts include gifts made in different years of assessment,

as if that single qualifying donation had been received by the charity in the year of assessment in which the first of the aggregated gifts was made and as if that were the relevant year of assessment for the purposes of that subsection.]

(5)The gifts aggregated for the purposes of subsection (4) above must not include either—

(a)a relevant gift of £250 or more; or

(b)more than one relevant gift of £100 or more.

F27(6). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F27(7). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(8)In this section—

• F33. . .

  • [F34“relevant gift” means a gift to which this section applies—

    (a)

    which satisfies the requirements of subsection (2) of section 25 of the M9Finance Act 1990 (as amended by section 39 of the Finance Act 2000); or

    (b)

    which would satisfy those requirements if paragraph (e) of that subsection were disregarded.]

• “required notification”, in relation to a charity, means a notification (including one given before the passing of this Act) which—

  (i)

  is in such form, and contains such information, as may have been required by the Board, and

  (ii)

  contains a statement to the effect that the charity proposes to accept gifts to which this section applies.

(9)A country or territory is a designated country or territory for the purposes of [F35paragraph (a), (b) or (c) of subsection (2) above] if—

(a)it is designated as such by an order made for those purposes by the Treasury; or

(b)it is of a description specified in an order so made;

and a description specified in such an order may be expressed by reference to the opinion of any person so specified or by reference to the contents from time to time of a document prepared by a person so specified.

(10)Expressions used in this section and in section 25 of the M10Finance Act 1990 have the same meanings in this section as in that section.

Employee share incentivesU.K.

F3649 Employee share options.U.K.

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

F3650 Conditional acquisition of shares.U.K.

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F3651 Convertible shares provided to directors and employees.U.K.

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F3652 Information powers.U.K.

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F3653 Provision supplemental to sections 50 to 52.U.K.

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54 Amendments consequential on sections 50 to 53.U.K.

(1)The M11Taxation of Chargeable Gains Act 1992 shall be amended as follows.

(2)After subsection (5) of section 120 (increase of expenditure by reference to tax charged in relation to shares) there shall be inserted the following subsections—

“(5A)Where an amount is chargeable to tax under section 140A of the Taxes Act in respect of—

(a)the acquisition or disposal of any interest in shares, or

(b)any interest in shares ceasing to be only conditional,

the relevant amount is a sum equal to the amount so chargeable.

(5B)Where an amount is chargeable to tax under section 140D of the Taxes Act in respect of the conversion of shares, the relevant amount is a sum equal to the amount so chargeable.”

(3)In subsection (7) of that section—

(a)after “(5)," there shall be inserted “ , (5A), (5B) ”; and

(b)after “138" there shall be inserted “ , 140A, 140D ”.

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

“(8)For the purposes of subsection (5A) above this section shall have effect as if references in this section to shares included anything referred to as shares in section 140A of the Taxes Act.”

(5)After section 149A there shall be inserted the following section—

“149B Employee incentive schemes: conditional interests in shares.

(1)Where—

(a)an individual has acquired an interest in any shares or securities which is only conditional,

(b)that interest is one which for the purposes of section 140A of the Taxes Act is taken to have been acquired by him as a director or employee of a company, and

(c)by virtue of section 17(1)(b) the acquisition of that interest would, apart from this section, be an acquisition for a consideration equal to the market value of the interest,

section 17 shall not apply for calculating the consideration.

(2)Instead, the consideration for the acquisition shall be taken (subject to section 120) to be equal to the actual amount or value of the consideration given for that interest as computed in accordance with section 140B of the Taxes Act.

(3)This section shall apply in relation only to the individual making the acquisition and, accordingly, shall be disregarded in calculating the consideration received by the person from whom the interest is acquired.

(4)Expressions used in this section and in section 140A of the Taxes Act have the same meanings in this section as in that section.”

(6)This section has effect in relation to disposals on or after 17th March 1998 of interests and shares acquired on or after that date.

Construction industry workersU.K.

55 Construction workers supplied by agencies.U.K.

F37(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F38(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3)Subsections (1) and (2) above have effect in relation to—

(a)any payments made on or after 6th April 1998 other than any made in respect of services rendered before that date; and

(b)any payments made before 6th April 1998 in respect of services to be rendered on or after that date.

56 Transitional provisions in connection with section 55.U.K.

(1)Subject to subsection (6) below, subsection (2) below applies if—

(a)a construction trade is being carried on by a person (“the sub-contractor") at the end of the year 1997-98; and

(b)there are receipts of that trade which, but for section 134(5)(c) of the Taxes Act 1988, would have fallen to be treated for the year 1997-98 as the emoluments of an office or employment.

(2)Where this subsection applies, then, subject to subsections (4) and (5) below—

(a)the trade shall be deemed to have been permanently discontinued at the end of the year 1997-98; and

(b)to the extent (if any) that the trade includes activities in addition to the rendering of services falling by virtue of section 55 to be treated as the duties of an office or employment, a new trade shall be deemed to have been set up and commenced on 6th April 1998.

(3)Subsection (4) below applies if—

(a)a construction trade (“the old trade”) is deemed by virtue of subsection (2)(a) above to have been permanently discontinued; and

(b)a construction trade (“the new trade")—

(i)is deemed by virtue of subsection (2)(b) above to have been set up and commenced; or

(ii)(where sub-paragraph (i) above does not apply) is actually set up and commenced in the year 1998-99.

(4)Where this subsection applies then, notwithstanding the deemed discontinuance, the old trade and the new trade shall be treated as the same for the purposes of [F39section 83 of the Income Tax Act 2007] (carry-forward of losses against subsequent profits).

(5)An officer of the Board shall not become entitled by virtue of anything in this section to give a direction under paragraph 3(2) of Schedule 20 to the M12Finance Act 1994 (power to revise assessment so that made on the actual basis) in the case of a person whose trade is deemed under subsection (2) above to cease on 5th April 1998.

(6)Subsection (2) above does not apply if the sub-contractor by notice to an officer of the Board otherwise elects.

(7)An election under subsection (6) above—

(a)if it relates to a trade carried on by an individual, must be included in a return under section 8 of the M13Taxes Management Act 1970 which is made and delivered in that individual’s case on or before the day on which it is required to be made and delivered under that section; and

(b)if it relates to a trade carried on by persons in partnership, must be included in a return under section 12AA of that Act which is made and delivered in the partners’ case, or in the case of any one or more of them, on or before the day specified in relation to that return under subsection (2) or (3) of that section.

(8)In this section “construction trade” means a trade consisting in or including the rendering of services under contracts relating to construction operations (within the meaning of [F40section 74 of the Finance Act 2004]).

(9)Where at any time on or after 17th March 1998 and before the day on which this Act is passed any election corresponding to an election under subsection (6) above has been made under a resolution of the House of Commons having effect in accordance with the provisions of the M14Provisional Collection of Taxes Act 1968, this section has effect, on and after the day on which this Act is passed, as if that election were an election under subsection (6) above.

F4157 Sub-contractors in the construction industry.U.K.

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

Payments and other benefits in connection with termination of employment etc.U.K.

F4258 Payments and other benefits in connection with termination of employment, etc.U.K.

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

Benefits in kindU.K.

59 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 1998-99 and subsequent years of assessment.

F4360 Reductions for road fuel gas cars.U.K.

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

F4461 Travelling expenses.U.K.

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

Profit-related payU.K.

62 Provision preventing manipulation of profit periods.U.K.

Schedule 11 to this Act (which makes provision to prevent the manipulation of profit periods in relation to the phasing out of relief for profit-related pay) shall have effect.

Foreign earnings deductionU.K.

F4563 Withdrawal except in relation to seafarers.U.K.

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

PAYE: non-cash benefits etc.U.K.

F4564 Transitory provision relating to tradeable assets.U.K.

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

F4565 Payment in the form of a readily convertible asset.U.K.

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

F4566 Enhancing the value of an asset.U.K.

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

F4567 Gains from share options etc.U.K.

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

F4568 Vouchers and credit-tokens.U.K.

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

F4569 Intermediaries, non-UK employers, agencies etc.U.K.

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

The enterprise investment scheme and venture capital trustsU.K.

70 Qualifying trades for EIS and VCTs.U.K.

F46(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F46(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F47(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F48(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F4971 Pre-arranged exits from EIS.U.K.

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

F5072 Qualifying holdings for VCTs after 2nd July 1997.U.K.

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

F5173 Other changes to requirements for VCTs.U.K.

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

74 Other changes to EIS etc.U.K.

(1)Schedule 13 to this Act, which amends the provisions mentioned in subsection (2) below, shall have effect.

(2)The provisions are—

F52(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b)sections 150A and 150B of the M15Taxation of Chargeable Gains Act 1992 (EIS relief in respect of chargeable gains);

(c)Schedule 5B to that Act (EIS deferral of chargeable gains); and

(d)that Chapter as it has effect in relation to shares issued before 1st January 1994 (BES income tax relief) and section 150 of that Act (BES relief in respect of chargeable gains).

(3)Unless the contrary intention appears, the amendments made by that Schedule have effect in relation to shares issued on or after 6th April 1998.

Individual savings accounts etc.U.K.

F5375 Use of PEPs powers to provide for accounts.U.K.

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

76 Tax credits for accounts and for PEPs.U.K.

F54(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F54(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3)The Treasury may by regulations make provision for individuals who—

(a)are not resident in the United Kingdom, but

(b)have made investments under plans for which provision is made by regulations under [F55Chapter 3 of Part 6 of the Income Tax (Trading and Other Income) Act 2005],

to be treated in relation to any such investments as if they were so resident for the purposes of any enactment conferring an entitlement to, or to the payment of, tax credits.

F56(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F56(5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F5777 The insurance element etc.U.K.

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

F5878 Phasing out of TESSAs.U.K.

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

Relief for interest and losses etc.U.K.

79 Relief for loan to acquire interest in a close company.U.K.

F59(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F60(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F6180 Relief for losses on unlisted shares in trading companies.U.K.

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

F6281. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .U.K.

82 Carry forward of non-trading deficit on loan relationships.U.K.

F63(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F64(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F65(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4)The amendments made by this section shall be deemed always to have had effect.

Capital allowancesU.K.

F6683 First-year allowances for investment in Northern Ireland.U.K.

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

F6784 First-year allowances for small businesses etc.U.K.

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

F6885 First-year allowances: consequential amendments etc.U.K.

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

Insurance, insurance companies and friendly societiesU.K.

86 Life policies etc.U.K.

Schedule 14 to this Act (which makes provision in relation to the taxation of life policies etc under Chapter II of Part XIII of the Taxes Act 1988) shall have effect.

87 Non-resident insurance companies: tax representatives.U.K.

After section 552 of the Taxes Act 1988 (duty of insurers to provide certain information) there shall be inserted—

“552A Tax representatives.

(1)This section has effect for the purpose of securing that, where it applies to an overseas insurer, another person is the overseas insurer’s tax representative.

(2)In this section “overseas insurer” means a person who is not resident in the United Kingdom who carries on a business which consists of or includes the effecting and carrying out of—

(a)policies of life insurance;

(b)contracts for life annuities; or

(c)capital redemption policies.

(3)This section applies to an overseas insurer—

(a)if the condition in subsection (4) below is satisfied on the designated day; or

(b)where that condition is not satisfied on that day, if it has subsequently become satisfied.

(4)The condition mentioned in subsection (3) above is that—

(a)there are in force relevant insurances the obligations under which are obligations of the overseas insurer in question or of an overseas insurer connected with him; and

(b)the total amount or value of the gross premiums paid under those relevant insurances is £1 million or more.

(5)In this section “relevant insurance” means any policy of life insurance, contract for a life annuity or capital redemption policy in relation to which this Chapter has effect and in the case of which—

(a)the holder is resident in the United Kingdom;

(b)the obligations of the insurer are obligations of a person not resident in the United Kingdom; and

(c)those obligations are not attributable to a branch or agency of that person’s in the United Kingdom.

(6)Before the expiration of the period of three months following the day on which this section first applies to an overseas insurer, the overseas insurer must nominate to the Board a person to be his tax representative.

(7)A person shall not be a tax representative unless—

(a)if he is an individual, he is resident in the United Kingdom and has a fixed place of residence there, or

(b)if he is not an individual, he has a business establishment in the United Kingdom,

and, in either case, he satisfies such other requirements (if any) as are prescribed in regulations made for the purpose by the Board.

(8)A person shall not be an overseas insurer’s tax representative unless—

(a)his nomination by the overseas insurer has been approved by the Board; or

(b)he has been appointed by the Board.

(9)The Board may by regulations make provision supplementing this section; and the provision that may be made by any such regulations includes provision with respect to—

(a)the making of a nomination by an overseas insurer of a person to be his tax representative;

(b)the information which is to be provided in connection with such a nomination;

(c)the form in which such a nomination is to be made;

(d)the powers and duties of the Board in relation to such a nomination;

(e)the procedure for approving, or refusing to approve, such a nomination, and any time limits applicable to doing so;

(f)the termination, by the overseas insurer or the Board, of a person’s appointment as a tax representative;

(g)the appointment by the Board of a person as the tax representative of an overseas insurer (including the circumstances in which such an appointment may be made);

(h)the nomination by the overseas insurer, or the appointment by the Board, of a person to be the tax representative of an overseas insurer in place of a person ceasing to be his tax representative;

(j)circumstances in which an overseas insurer to whom this section applies may, with the Board’s agreement, be released (subject to any conditions imposed by the Board) from the requirement that there must be a tax representative;

(k)appeals to the Special Commissioners against decisions of the Board under this section or regulations under it.

(10)The provision that may be made by regulations under subsection (9) above also includes provision for or in connection with the making of other arrangements between the Board and an overseas insurer for the purpose of securing the discharge by or on behalf of the overseas insurer of the relevant duties, within the meaning of section 552B.

(11)Section 839 (connected persons) applies for the purposes of this section.

(12)In this section—

• “the designated day” means such day as the Board may specify for the purpose in regulations;

• “tax representative” means a tax representative under this section.

552B Duties of overseas insurers’ tax representatives.

(1)It shall be the duty of an overseas insurer’s tax representative to secure (where appropriate by acting on the overseas insurer’s behalf) that the relevant duties are discharged by or on behalf of the overseas insurer.

(2)For the purposes of this section “the relevant duties” are—

(a)the duties imposed by section 552,

(b)any duties imposed by regulations made under subsection (4A)(a) of that section, and

(c)any duties imposed by regulations made under subsection (4A)(b) of that section by virtue of subsection (4B) of that section,

so far as relating to relevant insurances under which the overseas insurer in question has any obligations.

(3)An overseas insurer’s tax representative shall be personally liable—

(a)in respect of any failure to secure the discharge of the relevant duties, and

(b)in respect of anything done for purposes connected with acting on the overseas insurer’s behalf,

as if the relevant duties were imposed jointly and severally on the tax representative and the overseas insurer.

(4)In the application of this section in relation to any particular tax representative, it is immaterial whether any particular relevant duty arose before or after his appointment.

(5)This section has effect in relation to relevant duties relating to chargeable events happening on or after the day by which section 552A(6) requires the nomination of the overseas insurer’s first tax representative to be made.

(6)Expressions used in this section and in section 552A have the same meaning in this section as they have in that section.”

F6988 Overseas life assurance business.U.K.

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

F7089 Personal portfolio bonds.U.K.

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

90 Distributions to friendly societies.U.K.

(1)The repeal by section 30(4) of the M16Finance (No. 2) Act 1997 of section 231(2) of the Taxes Act 1988 (payment of tax credit to a company resident in the UK) shall not have effect in relation to any distribution made to a friendly society before 6th April 2004 which is—

(a)a distribution to a friendly society all of whose profits are exempt from corporation tax by virtue of section 460(1) of the Taxes Act 1988 (life or endowment business of friendly society); or

(b)a distribution not falling within paragraph (a) above in relation to which exemption is given under section 460(1) of that Act.

(2)In relation to any distribution falling within paragraph (a) or (b) of subsection (1) above—

(a)paragraph 3 of Schedule 4 to the M17Finance (No. 2) Act 1997 (which, from 6th April 1999, repeals certain provisions about claims for tax credits for accounting periods to which self-assessment applies) shall have effect as if the reference in sub-paragraph (2) of that paragraph to 6th April 1999 were a reference to 6th April 2004; and

(b)paragraph 2 of that Schedule (which repeals certain provisions about claims for tax credits for earlier periods) shall have no effect.

F71(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4)Schedule 8 to the M18Finance (No. 2) Act 1997 (repeals), so far as it relates to any repeal referred to in the preceding provisions of this section, shall have effect subject to those provisions.

F7291 Provisional repayments in connection with pension business.U.K.

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

PensionsU.K.

F7392 Approved retirement benefit schemes etc.U.K.

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

F7493 Benefits received under non-approved retirement benefits scheme.U.K.

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

F7594 Approval of personal pension schemes.U.K.

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

F7595 Personal pensions: charge on withdrawal of approval.U.K.

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

F7596 Information relating to personal pension schemes etc.U.K.

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

F7597 Notices to be given to scheme administrator.U.K.

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

98 Assessments on scheme administrators.U.K.

F76(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2)In section 9 of the M19Taxes Management Act 1970 (self-assessment), in subsection (1), for “subsection (2)" there shall be substituted “ subsections (1A) and (2) ”; and after that subsection there shall be inserted the following subsection—

“(1A)The tax to be assessed on a person by a self-assessment shall not include any tax which, under Chapter I or IV of Part XIV of the principal Act, is charged on the administrator of a scheme (within the meaning of section 658A of that Act) and is assessable by the Board in accordance with that section.”

(3)Subsection (2) above shall have effect for the year 1998-99 and subsequent years of assessment and shall be deemed to have had effect for the years 1996-97 and 1997-98.

Futures and optionsU.K.

99 Extension of provisions relating to guaranteed returns.U.K.

F77(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F78(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F78(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F79(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F79(5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

SecuritiesU.K.

F80100 Accrued income scheme.U.K.

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

101 Dealers in securities etc.U.K.

(1)Section 471 of the Taxes Act 1988 (exchange of securities in connection with conversion operations, nationalisation etc.) shall cease to have effect.

(2)Section 472 of that Act (distribution of securities issued in connection with nationalisation etc.) shall cease to have effect.

(3)Subsection (1) above applies in relation to exchanges made after the day on which this Act is passed.

(4)Subsection (2) above applies in relation to issues of securities occurring after that day.

102 Manufactured dividends.U.K.

F81(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F82(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3)In section 737D of the Taxes Act 1988 (power by regulations to provide for manufactured payments to be eligible for relief) in subsection (2) (which defines manufactured payment as any manufactured dividend etc) the words “manufactured dividend" shall cease to have effect.

(4)Schedule 23A to the Taxes Act 1988 (manufactured dividends and interest) shall be amended in accordance with subsections (5) to (8) below.

F83(5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6)In paragraph 2(3) (manufactured dividends to which paragraph 2(2) does not apply) paragraph (a) (duty to account for notional ACT) shall cease to have effect.

F84(7). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(8)In consequence of subsection (6) above, the following provisions shall also cease to have effect—

(a)in paragraph 2, sub-paragraphs (4) and (5) and, in sub-paragraph (6), paragraph (b) and the word “and" immediately preceding it; and

(b)in paragraph 2A (deductibility of manufactured payment in the case of the manufacturer) in sub-paragraph (1), the words “together with an amount equal to the notional ACT" and sub-paragraph (3).

F85(9). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(10)Subsections (2) to (8) above have effect in relation to manufactured dividends paid (or treated for the purposes of Schedule 23A to the Taxes Act 1988 as paid) on or after 6th April 1999.

Double taxation reliefU.K.

103 Restriction of relief on certain interest and dividends.U.K.

(1)For section 798 of the Taxes Act 1988 there shall be substituted the following section—

“798 Restriction of relief on certain interest and dividends.

(1)This section applies where—

(a)in any chargeable period the profits of a trade carried on by a qualifying taxpayer include an amount computed in accordance with section 795 in respect of foreign interest or foreign dividends;

(b)the taxpayer is entitled in accordance with this Chapter to credit for foreign tax on the foreign interest or foreign dividends; and

(c)in the case of foreign dividends, the foreign tax mentioned in paragraph (b) above is or includes underlying tax.

(2)The amount of the credit for foreign tax referred to in subsection (1)(b) above which, in accordance with this Chapter, is to be allowed against income tax or corporation tax—

(a)shall be limited by treating the amount of the foreign interest or foreign dividends (as increased or reduced under section 798A) as reduced (or further reduced) for the purposes of this Chapter by an amount equal to the taxpayer’s financial expenditure in relation to the interest or dividends (as determined in accordance with section 798B); and

(b)so far as the credit relates to foreign tax on interest or foreign tax on dividends which is not underlying tax, shall not exceed 15 per cent. of the interest or dividends, computed without regard to paragraph (a) above or to any increase or reduction under section 798A.

(3)In this section and sections 798A and 798B—

• “interest”, in relation to a loan, includes any introductory or other fee or charge which is payable in accordance with the terms on which the loan is made or is otherwise payable in connection with the making of the loan;

• “foreign dividends” means dividends payable out of or in respect of the stocks, funds, shares or securities of a body of persons not resident in the United Kingdom;

• “foreign interest” means interest payable by a person not resident in the United Kingdom or by a government or public or local authority in a country outside the United Kingdom.

(4)In this section and section 798B “qualifying taxpayer” means, subject to subsection (5) below, a person carrying on a trade which includes the receipt of interest or dividends and is not an insurance business.

(5)Where a company which is connected or associated with a qualifying taxpayer is acting in accordance with a scheme or arrangement the purpose, or one of the main purposes, of which is to prevent or restrict the application of this section to the taxpayer—

(a)the company shall be treated for the purposes of this section as a qualifying taxpayer; and

(b)any foreign interest or foreign dividends received in pursuance of the scheme or arrangement shall be treated for those purposes as profits of a trade carried on by the company.

(6)For the purposes of this section and section 798B—

(a)section 839 applies; and

(b)subsection (10) of section 783 applies as it applies for the purposes of that section.”

(2)This section and sections 104 and 105 do not have effect in relation to foreign interest or foreign dividends paid before 1st January 1999 in pursuance of arrangements which were entered into before, and are not altered on or after, 17th March 1998.

(3)Subject to subsection (2) above, this section and sections 104 and 105 have effect in relation to foreign interest or foreign dividends paid on or after 17th March 1998.

104 Adjustments of interest and dividends for spared tax etc.U.K.

After section 798 of the Taxes Act 1988 there shall be inserted the following section—

“798A Adjustments of interest and dividends for spared tax etc.

(1)In a case where section 798 applies—

(a)subsection (2) below applies if the foreign tax referred to in subsection (1)(b) of that section is or includes an amount of spared tax; and

(b)subsection (3) below applies if the foreign tax so referred to is or includes an amount of tax which is not spared tax.

(2)For the purposes of income tax or corporation tax, the amount which apart from this subsection would be the amount of the foreign interest or foreign dividends shall be treated as increased by so much of the spared tax as does not exceed—

(a)the amount of the spared tax for which, in accordance with any arrangements applicable to the case in question, credit falls to be given as mentioned in section 798(1)(b); or

(b)if it is less, 15 per cent. of the interest or dividends, computed without regard to any increase under this subsection.

(3)If the amount of tax which is not spared tax exceeds—

(a)the amount of the credit which, by virtue of this Chapter (but disregarding subsection (2) of section 798), is allowed for that tax against income tax or corporation tax; or

(b)if it is less in the case of tax on foreign interest, 15 per cent. of the interest, computed without regard to any increase or reduction under this section or that subsection,

then, for the purposes of income tax or corporation tax, the amount which, apart from this subsection, would be the amount of the foreign interest or foreign dividends shall be treated as reduced by a sum equal to the excess.

(4)Subsection (2) above has effect for the purposes of corporation tax notwithstanding anything in section 80(5) of the M20Finance Act 1996 (matters to be brought into account in the case of loan relationships only under Chapter II of Part IV of that Act).

(5)Nothing in subsection (2) above prejudices the operation of section 795 in relation to foreign tax which is not spared tax.

(6)In this section “spared tax” means foreign tax which although not payable falls to be taken into account for the purposes of credit by virtue of section 788(5).”

105 Meaning of “financial expenditure".U.K.

After section 798A of the Taxes Act 1988 there shall be inserted the following section—

“798B Meaning of “financial expenditure".

(1)For the purposes of section 798 “financial expenditure”, in relation to a qualifying taxpayer and any interest or dividends is, subject to the provisions of this section, the aggregate of—

(a)so much of the financial expenses (consisting of interest, discounts or similar sums or qualifying losses) incurred by the taxpayer or a person connected or associated with him as—

(i)is properly attributable to the earning of the interest or dividends; and

(ii)falls to be taken into account in computing the taxpayer’s or person’s liability to income tax or corporation tax; and

(b)so much of any other sum paid by the taxpayer or a person connected or associated with him which—

(i)falls to be taken into account as mentioned in paragraph (a) above; and

(ii)would not, apart from this paragraph, be taken into account in determining the amount of the interest or dividends,

as it is reasonable to regard as attributable to the earning of the interest or dividends (whether or not it would fall, in accordance with normal accountancy practice, to be so treated).

(2)There shall be deducted from the aggregate given by subsection (1) above so much of the qualifying gains and profits accruing to the qualifying taxpayer or a person connected or associated with him as—

(a)is properly attributable to the earning of the interest or dividends; and

(b)falls to be taken into account in computing the taxpayer’s or person’s liability to income tax or corporation tax.

(3)In a case where the amount of a qualifying taxpayer’s financial expenditure in relation to the earning of the interest or dividends is not readily ascertainable—

(a)that amount shall be taken, subject to subsection (4) below, to be such sum as it is just and reasonable to attribute to the earning of the interest or dividends; and

(b)in the case of interest, regard shall be had in particular to any market rates of interest by reference to which the rate of the interest is determined.

(4)The Board may by regulations supplement subsection (3) above—

(a)by specifying matters to be taken into account in determining such a just and reasonable attribution as is referred to in paragraph (a); and

(b)by making provision with respect to the determination of market rates of interest for the purposes of paragraph (b);

and any such regulations may make different provision for different cases.

(5)In this section “qualifying losses” means—

(a)losses falling to be brought into account for the purposes of Chapter II of Part II of the M21Finance Act 1993 (exchange gains and losses) in accordance with sections 125 to 127 of that Act; and

(b)losses falling to be brought into account for the purposes of Chapter II of Part IV of the M22Finance Act 1994 (interest rate and currency contracts) in accordance with sections 155 to 158 of that Act;

and “qualifying gains” and “qualifying profits” shall be construed accordingly.”

F86106 Underlying tax reflecting interest or dividends.U.K.

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F86107 Notification of foreign tax adjustment.U.K.

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Transfer pricing, FOREX and financial instrumentsU.K.

108 New regime for transfer pricing etc.U.K.

F87(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F87(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F88(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4)In the M23Finance Act 1996—

F88(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b)in paragraph 16 of Schedule 9 (imputed interest)—

(i)in sub-paragraph (1), for the words from “sections 770" to “that Act" there shall be substituted “ Schedule 28AA to the Taxes Act 1988 (provision not at arm’s length) ”; and

(ii)in sub-paragraph (2), for “Those sections" there shall be substituted “ That Schedule ”.

(5)Subject to subsection (6) below, this section and Schedule 16 to this Act have effect (in relation to provision made or imposed at any time)—

(a)for the purposes of corporation tax, as respects accounting periods ending on or after the day appointed under section 199 of the M24Finance Act 1994 for the purposes of Chapter III of Part IV of that Act (self-assessment management provisions); and

(b)for the purposes of income tax, as respects any year of assessment ending on or after that day.

(6)The Schedule 28AA to the Taxes Act 1988 that is inserted by subsection (2) above shall not, in the case of any potentially advantaged person, apply as respects the consequences at any time of the difference between the actual provision and the arm’s length provision if—

(a)that time falls before 17th March 2001;

(b)the actual provision is a provision made or imposed by means of contractual arrangements entered into by that person before 17th March 1998;

(c)the requirements of paragraph 1(1)(b) of Schedule 28AA to that Act (control requirements) are satisfied in the case of the actual provision and that person by reference only to paragraph 4(2)(b) of that Schedule (joint ventures etc.);

(d)the rights and obligations of that person by virtue of the actual provision are not ones that have been varied or continued in pursuance of any transaction entered into by that person in the period between 17th March 1998 and that time; and

(e)that person is not a party, and has not been a party, to any transaction by virtue of which he could during that period have secured the variation or termination of those rights and obligations.

(7)Expressions used in subsection (6) above and in Schedule 28AA to the Taxes Act 1988 have the same meanings in that subsection as in that Schedule.

109

F89(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F89(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F90(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F91(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F91(5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F92110 Determinations requiring the sanction of the Board.U.K.

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F93111 Notice to potential claimants.U.K.

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Controlled foreign companiesU.K.

112 Exempt activities.U.K.

(1)Part II of Schedule 25 to the Taxes Act 1988 (exempt activities) shall be amended as follows.

(2)In paragraph 9 (activities which constitute investment business) for sub-paragraph (1A) (definition of “intellectual property") there shall be substituted—

“(1A)In sub-paragraph (1)(a) above “intellectual property” includes (in particular)—

(a)any industrial, commercial or scientific information, knowledge or expertise;

(b)any patent, trade mark, registered design, copyright or design right;

(c)any licence or other right in respect of intellectual property;

(d)any rights under the law of a country outside the United Kingdom which correspond or are similar to those falling within paragraph (b) or (c) above.”

(3)In paragraph 11(1) (activities which constitute wholesale, distributive or financial business) for paragraph (c) (banking or any similar business involving the receipt of deposits, loans or both and the making of loans or investments) there shall be substituted—

“(c)banking, deposit-taking, money-lending or debt-factoring, or any business similar to banking, deposit-taking, money-lending or debt-factoring;”.

(4)In consequence of subsection (3) above—

(a)in paragraph 9(3), for “banking or any similar business" there shall be substituted “ business ”;

(b)in paragraph 11(3), for “banking or other business" there shall be substituted “ business ”.

(5)This section has effect in relation to accounting periods of a controlled foreign company, within the meaning of Chapter IV of Part XVII of the Taxes Act 1988, beginning on or after 17th March 1998.

113 Miscellaneous amendments.U.K.

Schedule 17 to this Act (which makes provision in relation to controlled foreign companies) shall have effect.

Changes in company ownershipU.K.

F94114 Postponed corporation tax.U.K.

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F94115 Information powers where ownership changes.U.K.

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F94116 Provisions supplemental to sections 114 and 115.U.K.

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Corporation tax self-assessmentU.K.

117 Company tax returns, assessments and related matters.U.K.

(1)The provisions of Schedule 18 to this Act have effect in place of—

(a)the provisions of Parts II and IV of the M25Taxes Management Act 1970 (returns, assessment and claims), so far as they relate to corporation tax,

(b)certain related provisions of Part X of that Act (penalties) [F95and]

(c)Schedule 17A to the Taxes Act 1988 (group relief: claims),

[F96 and also make provision in relation to claims for allowances under the Capital Allowances Act]

(2)Schedule 18 to this Act, the M26Taxes Management Act 1970 and the Tax Acts shall be construed and have effect as if that Schedule were contained in that Act.

(3)The enactments mentioned in Schedule 19 to this Act have effect with the amendments specified there, which are minor amendments and amendments consequential on Schedule 18.

(4)Except as otherwise provided, the provisions of Schedules 18 and 19 to this Act have effect in relation to accounting periods ending on or after the self-assessment appointed day.

(5)In this section “the self-assessment appointed day” means the day appointed by the Treasury under section 199 of the M27Finance Act 1994 for the purposes of Chapter III of Part IV of that Act (corporation tax self-assessment).

Telephone claims etc.U.K.

F97118 Claims for income tax purposes.U.K.

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F98119 Evidential provisions in PAYE regulations.U.K.

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