Finance Act 1988

(8) Part I shall, save as is otherwise expressly provided therein, be deemed to have come into force and shall take effect as on and from the 6th day of April, 1988.

(9) Part III, other than section 60, shall be deemed to have come into force and shall take effect as on and from the 1st day of March, 1988, and the said section 60 shall take effect as on and from the 1st day of October, 1988.

(10) Any reference in this Act to any other enactment shall, except so far as the context otherwise requires, be construed as a reference to that enactment as amended by or under any other enactment including this Act.

(11) In this Act, a reference to a Part, section or Schedule is to a Part or section of, or Schedule to, this Act, unless it is indicated that reference to some other enactment is intended.

(12) In this Act, a reference to a subsection, paragraph or subparagraph is to the subsection, paragraph or subparagraph of the provision (including a Schedule) in which the reference occurs, unless it is indicated that reference to some other provision is intended.

FIRST SCHEDULE Amendment of Enactments

Amendments Consequential on Changes in Personal Reliefs

(a) in section 138—

(i) in paragraph (a), by the substitution of “£4,100” for “£4,000” (inserted by the Finance Act, 1986),

(ii) in paragraph (b)—

(I) by the substitution in subparagraph (i) of “£2,550” for “£2,500” (inserted by the Finance Act, 1986), and

(II) by the substitution of the following subparagraph for subparagraph (ii):

“(ii) is a widowed person, other than a person to whom paragraph (a) applies, whose spouse has died in that year of assessment, a deduction of £4,100, and”,

and

(iii) in paragraph (c), by the substitution of “£2,050” for “£2,000” (inserted by the Finance Act, 1986),

(b) in section 138A(2) (inserted by the Finance Act, 1985), by the substitution of “£1,550” for “£1,500” (inserted by the Finance Act, 1986) and of “£2,050” for “£2,000” (inserted by the Finance Act, 1986), and

(c) in section 138B(1), by the substitution of “£800” for “£700” (inserted by the Finance Act, 1986) in each place where it occurs.

SECOND SCHEDULE Tax Credits

PART I Amendments Consequential on Changes in Amounts of Tax Credits in respect of Distributions

(a) sections 45 (5), 64 (2), 66 (2), 67, 82 (2), 82 (7), 83 (4), 88 (2) and 178 of the Corporation Tax Act, 1976,

(b) in subparagraph (ii) (as amended by the Finance Act, 1977) of section 66 (3) (b) of the Corporation Tax Act, 1976, the expression “income tax at the standard rate”,

(c) in subparagraph (iii) (inserted by the Finance Act, 1977) of the said section 66 (3) (b), the expression “standard rate per cent.” in each place where it occurs, and

(d) in section 79 (6) of the Corporation Tax Act, 1976, the definition of “A” in paragraph (b).

(a) where an accounting period begins before the 6th day of April, 1988, and ends on or after that date, it shall be divided into one part, beginning on the day on which the accounting period begins and ending on the 5th day of April, 1988, and another part beginning on the 6th day of April, 1988, and ending on the day on which the accounting period ends and both parts shall be treated as separate accounting periods,

and

(b) where an accounting period begins before the 6th day of April, 1989, and ends on or after that day, it shall be divided into one part, beginning on the day on which the accounting period begins and ending on the 5th day of April, 1989, and another part beginning on the 6th day of April, 1989, and ending on the day on which the accounting period ends and both parts shall be treated as separate accounting periods.

(2) As respects any accounting period beginning on or after the 6th day of April, 1988, subsection (5) of section 45 of the Corporation Tax Act, 1976, is hereby amended by the substitution for the words from “but the restriction” to the end of the subsection of “but the amount of the tax credit, or aggregate of tax credits if more than one distribution has been received, which may be so set off shall not exceed an amount determined by the formula

S (AB) ______ 100

where—

S is the standard rate per cent. for the year of assessment in which the distribution is made,

A is the portion of the income from investments which is chargeable to corporation tax by virtue of section 43 (3), or, as the case may be, the portion, determined in accordance with subsection (4), of the income from investments which is included in computing the total amount of the profits of the company arising from its general annuity business, and

B is the aggregate of the payments, the income tax on which, having regard to subsection (3) or (4), as the case may be, the company is entitled to set off against corporation tax by virtue of a claim under section 8 (3).”.

(2) Neither section 28 (7) of the Finance Act, 1978, nor section 28 (3) of the Finance Act, 1983, shall apply to a distribution to which this paragraph applies.

(3) The reference to certain tax credits in the definition of “B” in subsection (2) of section 64 of the Corporation Tax Act, 1976, shall, in relation to distributions which were received by a company which makes a distribution to which this paragraph applies, be construed—

(a) as a reference to such tax credits multiplied by .8739 in so far as they are tax credits in respect of distributions which were made before the 6th day of April, 1978, or after the 5th day of April, 1983, and before the 6th day of April, 1988, and

(b) as a reference to such tax credits multiplied by 1.0980 in so far as they are tax credits in respect of distributions which were made after the 5th day of April, 1978, and before the 6th day of April, 1983.

(2) Neither section 28 (7) of the Finance Act, 1978, nor section 28 (3) of the Finance Act, 1983, shall apply to a distribution to which this paragraph applies.

(3) The reference to certain tax credits in the definition of “B” in subsection (2) of section 64 of the Corporation Tax Act, 1976, shall, in relation to distributions which were received by a company which makes a distribution to which this paragraph applies, be construed—

(a) as a reference to such tax credits multiplied by .7222 in so far as they are tax credits in respect of distributions which were made before the 6th day of April, 1978, or which were made after the 5th day of April, 1983, and before the 6th day of April, 1988,

(b) as a reference to such tax credits multiplied by .9074 in so far as they are tax credits in respect of distributions made after the 5th day of April, 1978, and before the 6th day of April, 1983, and

(c) as a reference to such tax credits multiplied by .8264 in so far as they are tax credits in respect of distributions made in the year 1988-89.

Section 32.

PART II Amendments of Chapter VI (Corporation Tax: Relief in Relation to Certain Income of Manufacturing Companies) of Part I of Finance Act, 1980

(a) by the substitution for subsection (7) of section 45 of the following subsection:

“(7) Where it appears to the inspector, that the amount of the tax credit to which the recipient of a relevant distribution (including part of a distribution which is treated under subsection (2) as a relevant distribution) was shown to be entitled on the statement annexed to or accompanying any warrant or cheque or other order mentioned in section 5 of the Corporation Tax Act, 1976, or in any statement mentioned in section 83 (5) of that Act, exceeds the amount of the tax credit to which the recipient of the statement should have been shown to be entitled on that statement by reference to the provisions of this section, the inspector may make an assessment to income tax on the company under Case IV of Schedule D for the year of the assessment in which the statement is made, on an amount the income tax on which, at the standard rate for the said year of assessment, is equal to the amount by which the tax credit shown in the statement exceeds the tax credit to which the recipient of that statement should have been shown to be entitled on that statement:

Provided that—

(a) any amount on which, by virtue of this subsection, income tax is charged on a company by an assessment under Case IV of Schedule D shall not be regarded as income of the company for any purpose of the Tax Acts, and

(b) the provisions of this subsection shall not apply if the inspector, or, on appeal, the Appeal Commissioners, is or are satisfied that, either by reason of a correction by the company of the statement annexed to or accompanying the relevant warrant or cheque or other order mentioned in section 5 of the Corporation Tax Act, 1976, or of the statement mentioned in section 83 (5) of that Act, or for any other good and sufficient reason, it would be just and reasonable that they should not apply.”,

(b) by the deletion of “or C” from subsection (2) of section 46,

(c) by the substitution for paragraph (i) (as amended by section 26 of, and Part II of Schedule 2 to, the Finance Act, 1982) of section 47 (2) of the following paragraph:

“(i) the amount of the company's income which, apart from this paragraph, falls to be taken into account in the definitions in section 45 (1) of A, in respect of the relevant accounting period and of R, in respect of the accounting period, shall be reduced as follows:

(I) as respects A, by the amount determined by the formula

G		5 _ 4		H _ J

where—

G is the amount of the reduction in the relief in respect of the trade for the accounting period under the provisions of the said paragraph (bb) of the said proviso,

H is the income of the accounting period within the meaning of section 28 (8) of the Corporation Tax Act, 1976, and

J is the relevant corporation tax for the accounting period within the meaning of the said section 182, and

(II) as respects R, by an amount determined by the formula

V		H _ J

where—

H and J have the same meanings as in subparagraph (I) of this paragraph, and

V is the amount of the relief for the accounting period under the said section 182 before any reduction in that relief under paragraphs (b) and (bb) of the proviso to subsection (3) (b) of that section, and”,

(d) by the deletion of “or D” from paragraph (ii) (as amended by section 26 of, and Part II of Schedule 2 to, the Finance Act, 1982) of section 47 (2),

(e) by the substitution for paragraph (i) of subsection (2) of section 48 of the following paragraph:

“(i) the amount of the company's income which, apart from this paragraph, falls to be taken into account in the definition in section 45 (1) of A, in respect of the relevant accounting period, and of R, in respect of the accounting period, shall be reduced as follows:

(I) as respects A, by an amount determined by the formula

K		L _ M		N _ P

where—

K is the amount of the relief for the accounting period under the said section 184 before any reduction in that relief under the provisions of the proviso to subsection (3) (b) of that section,

L is the income of the accounting period within the meaning of section 28 (8) of the Corporation Tax Act, 1976,

M is the relevant corporation tax within the meaning of section 182 of the Corporation Tax Act, 1976, in relation to the accounting period,

N is the income from the sale of goods, within the meaning of section 41, for the relevant accounting period, and

P is the total income brought into charge to corporation tax for the accounting period,

and

(II) as respects R, by an amount determined by the formula

K		L _ M

where—

K, L, and M have the same meanings as in clause (I) of this paragraph,

and”,

(f) by the deletion of “or D” from paragraph (ii) (as amended by section 26 of, and Part II of Schedule 2 to, the Finance Act, 1982) of section 48 (2), and

(g) by the substitution for subsection (2) of section 49 of the following subsection:

“(2) Where the whole or part of a supplementary distribution under subsection (1) which is a relevant distribution within the meaning of section 45 is received by a company in an accounting period, then, for the purposes of that section—

(a) the whole or part, as the case may be, of the supplementary distribution shall be an amount taken into account under the definition of E, and

(b) the whole of the supplementary distribution shall be an amount taken into account under the definition of T

in the formulae in subsections (1) and (1B) of the said section.”.

THIRD SCHEDULE Changes in Rates of Corporation Tax: Consequential Provisions

PART I Application of sections 6 (3), 13 (IB), 28, 79, 182 and 184 of Corporation Tax Act, 1976, for financial years 1988 and 1989

(i) the period beginning on the 1st day of January, 1987, and ending on the 31st day of March, 1988,

(ii) the period beginning on the 1st day of April, 1988, and ending on the 31st day of March, 1989, and

(iii) the period beginning on the 1st day of April, 1989, and ending on the 31st day of December, 1990,

were each a financial year.

(b) Section 13 (1B) of the said Act is hereby amended, as respects accounting periods ending on or after the 1st day of April, 1988, by the substitution for the proviso of the following proviso:

“Provided that, for the purposes of the foregoing provision of this subsection, where part of the accounting period falls in one financial year (referred to hereafter in this proviso as the ‘first-mentioned financial year’) and the other part falls in the financial year succeeding the first-mentioned financial year and different rates are in force under section 1 (1) for each of those years, ‘the rate specified in section 1 (1)’ shall be deemed to be a rate per cent. calculated by the formula

(A C) ______ E		(B D) ______ E

where—

A is the rate per cent. in force for the first-mentioned financial year,

B is the rate per cent. in force for the financial year succeeding the first-mentioned financial year,

C is the length of that part of the accounting period falling in the first-mentioned financial year,

D is the length of that part of the accounting period falling in the financial year succeeding the first-mentioned financial year, and

E is the length of the accounting period.”.

(2) (a) Section 28 (as amended by section 21 of the Finance Act, 1978) of the Corporation Tax Act, 1976, is hereby amended as respects any accounting period ending on or after the 1st day of April, 1988, by the substitution for “25 per cent.” of “17.5 per cent.” in subsection (2).

(b) For the purposes of this subparagraph and the said section 28, where an accounting period begins before the 1st day of April, 1988, and ends on or after that day, it shall be divided into one part, beginning on the day on which the accounting period begins and ending on the 31st day of March, 1988, and another part, beginning on the 1st day of April, 1988 and ending on the day on which the accounting period ends, and both parts shall be treated as if they were separate accounting periods.

(a) where an accounting period begins before the 1st day of April, 1988, and ends on or after that day, it shall be divided into one part, beginning on the day on which the accounting period begins and ending on the 31st day of March, 1988, and another part beginning on the 1st day of April, 1988, and ending on the day on which the accounting period ends, and both parts shall be treated as if they were separate accounting periods, and

(b) where an accounting period begins before the 1st day of April, 1989, and ends on or after that day, it shall be divided into one part beginning on the day on which the accounting period begins and ending on the 31st day of March, 1989, and another part, beginning on the 1st day of April, 1989, and ending on the day on which the accounting period ends, and both parts shall be treated as if they were separate accounting periods.

(2) Where, under subparagraph (1) a part of an accounting period is treated as a separate accounting period, the corporation tax charged for the part which is so treated shall, in so far as it is affected by the rate of corporation tax which is taken to have been charged, be taken, for the purposes of the said section 184, to be the corporation tax which would have been charged if that part were a separate accounting period.

(3) Sections 182 (3) and 184 (3) of the said Act shall have effect for any accounting period beginning on or after the 1st day of April, 1988, as if the standard rate were—

(a) 32 per cent. for the year 1988-89, and

(b) 28 per cent. for the year 1989-90 and each subsequent year of assessment.

PART II Amendment of Chapter VI (Corporation Tax: Relief in Relation to Certain Income of Manufacturing Companies) of Part I of Finance Act, 1980

“shall be reduced—

(a) by four-fifths, in so far as it is corporation tax charged on profits which, under section 6 (3) of the Corporation Tax Act, 1976, are apportioned to the period beginning on the 1st day of January, 1987, and ending on the 31st day of March, 1988, and

(b) by thirty-seven-forty-sevenths, in so far as it is corporation tax charged on profits which, under the said section 6 (3), are apportioned to the period beginning on the 1st day of April, 1988, and ending on the 31st day of March, 1989,

and the corporation tax referable to the income from the sale of those goods—

(i) shall, for the purposes of paragraph (a), be such an amount as bears to the part of the relevant corporation tax charged on profits which, under the said section 6 (3), are apportioned to the period beginning on the 1st day of January, 1987, and ending on the 31st day of March, 1988, the same proportion as the income from the sale of those goods bears to the total income brought into charge to corporation tax for the relevant accounting period, and

(ii) shall, for the purposes of paragraph (b), be such an amount as bears to the part of the relevant corporation tax charged on profits which, under the said section 6 (3), are apportioned to the period beginning on the 1st day of April, 1988, and ending on the 31st day of March, 1989, the same proportion as the income from the sale of those goods bears to the total income brought into charge to corporation tax for the relevant accounting period.”.

(2) As respects any accounting period beginning on or after the 1st day of April, 1988, and ending on or before the 31st day of March, 1989, section 41 (2) shall have effect as if for “four-fifths” there were substituted “thirty-seven-forty-sevenths”.

(3) As respects any accounting period which begins before the 1st day of April, 1989, and ends on or after that date, section 41 (2) shall have effect as if for the words from “shall be reduced by four-fifths” to the end of the subsection there were substituted the following:

“shall be reduced—

(a) by thirty-seven-forty-sevenths, in so far as it is corporation tax charged on profits which, under section 6 (3) of the Corporation Tax Act, 1976, are apportioned to the period beginning on the 1st day of April, 1988, and ending on the 31st day of March, 1989, and

(b) by thirty-three-forty-thirds, in so far as it is corporation tax charged on profits which, under the said section 6 (3), are apportioned to the period beginning on the 1st day of April, 1989, and ending on the 31st day of December, 1990,

and the corporation tax referable to the income from the sale of those goods—

(i) shall, for the purposes of paragraph (a), be such an amount as bears to the part of the relevant corporation tax charged on profits which, under the said section 6 (3), are apportioned to the period beginning on the 1st day of April, 1988, and ending on the 31st day of March, 1989, the same proportion as the income from the sale of those goods bears to the total income brought into charge to corporation tax for the relevant accounting period, and

(ii) shall, for the purposes of paragraph (b), be such an amount as bears to the part of the relevant corporation tax charged on profits which, under the said section 6 (3), are apportioned to the period beginning on the 1st day of April, 1989, and ending on the 31st day of December, 1990, the same proportion as the income from the sale of those goods bears to the total income brought into charge to corporation tax for the relevant accounting period.”.

(4) Section 41 (2) is hereby amended as respects any accounting period beginning on or after the 1st day of April, 1989, by the substitution of “thirty-three-forty-thirds” for “four-fifths”.

(a) in paragraph (i) of section 47 (2), for “5/4” there were substituted “47/37”,

(b) in paragraph (ii) of the said section 47 (2), for “1/4” there were substituted “10/37”, and

(c) in paragraph (ii) of section 48 (2), for “1/4” there were substituted “10/37”.

(2) Sections 47 (2) and 48 (2) of the Finance Act, 1980, are hereby amended as respects any accounting period beginning on or after the 1st day of April, 1989—

(a) in paragraph (i) of section 47 (2), by the substitution of “43/33” for “5/4”,

(b) in paragraph (ii) of the said section 47 (2), by the substitution of “10/33” for “1/4”, and

(c) in paragraph (ii) of the said section 48 (2), by the substitution of “10/33” for “1/4”.

(3) Where by virtue of paragraph 3 (1) of Part 1 a part of an accounting period is treated as a separate accounting period for the purposes of sections 182 and 184 of the Corporation Tax Act, 1976, that part shall also be treated as a separate accounting period for the purposes of this paragraph and for the purposes of sections 47 (2) and 48 (2) of the Finance Act, 1980, and the corporation tax charged for a part of an accounting period which is so treated shall, in so far as it is affected by the rate of corporation tax which is taken to have been charged, be taken, for the purposes of the said sections 47 (2) and 48 (2), to be the corporation tax which would have been charged if that part were a separate accounting period.

FOURTH SCHEDULE Rates of Excise Duty on Tobacco Products

Description of Product	Rate of Duty
Cigarettes	£39.60 per thousand together with an amount equal to 13.33 per cent. of the price at which the cigarettes are sold by retail.
Cigars	£58.444 per kilogram
Sweetened pipe tobacco	£59.059 per kilogram
Hard pressed tobacco	£37.768 per kilogram
Other pipe tobacco	£47.476 per kilogram
Other smoking or chewing tobacco	£49.318 per kilogram