Finance Act 1967

(b) on an application for the grant of a licence under this Part of this Act, specify, as types of liquor which may be sold under the licence, types other than those in respect of which the application for the licence was made ; or (c) on an application for renewal of a licence under this Part of this Act, do not comply with any request duly made by the applicant for a change in the specification of the types of liquor which may be sold under the licence ; or

.

5

In section 134(2), for the words " an excise licence for the sale of exciseable liquor " there shall be substituted the words " a certificate ".

6

In section 135(2), for the words " an excise licence for the sale of exciseable liquor " there shall be substituted the words " a certificate ".

7

In section 141(1), for the words " an excise licence " there shall be substituted the words " a certificate ".

8

At the end of section 144 there shall be added the following subsection:—

(6) This section shall apply to any premises or place where exciseable liquor is sold under a special permission as it applies to the bar 6f the licensed premises of the holder of the special permission.

.

9

In section 161, for the words from " in respect of which no certificate is held " to " has been granted)" there shall be substituted the words " to which section 198(b) of this Act applies) ".

10

In section 164(4), for the words " no excise licence for the sale of exciseable liquor is in force " there shall be substituted the words " none of the following is in force, that is to say—

• (a) a certificate ;

• (b) a licence under Part III of this Act;

• (c) a certificate of registration under Part XI of this Act."

11

In section 173, in paragraph (1), for the words " an excise licence " there shall be substituted the words " a certificate or a wholesaler's excise licence ".

12

In section 198, for paragraph (a) there shall be substituted the following—

(a) make unlawful trafficking in exciseable liquor in a canteen held under the authority of a Secretary of State;

.

13

In section 198, for paragraph (b) there shall be substituted the following—

(b) make unlawful trafficking in exciseable liquor in a theatre erected before 1st January 1904 ;

.

14

In section 198, for paragraph (d) there shall be substituted the following—

(d) make unlawful trafficking, with passengers in an aircraft, vessel or railway passenger vehicle, in exciseable liquor for consumption on board the aircraft or vessel or in the railway passenger vehicle if the aircraft or vessel is employed for the carriage of passengers and is being flown or navigated from a place in the United Kingdom to another such place or from and to the same place in the United Kingdom on the same day, or, as the case may be, if the railway passenger vehicle is a vehicle in which passengers can be supplied with food;

.

15

In Schedule 3, in the paragraph beginning " Does the applicant hold ", for the words " an excise licence for the sale of exciseable liquor " there shall be substituted the words " a certificate under the Licensing (Scotland) Act 1959, or a licence under Part III of that Act " ; and for the words " that licence " there shall be substituted the words " that certificate or, as the case may be, that licence " ; and, in the paragraph beginning " Has the applicant any interest ", for the words " an excise licence for the sale of exciseable liquor " there shall be substituted the words " a certificate under the Licensing (Scotland) Act 1959 or a licence under Part III of that Act " ,

and for the words " a certificate " there shall be substituted the words " such a certificate or licence ".

16

In Schedule 6, in paragraph 3, for the words " the kind of retailer's on-licence which is desired " there shall be substituted the words " the types of liquor which it is desired to sell under the licence ".

17

In Schedule 8, in paragraph 4(1)(a), for the words " liquors for the sale of which an excise licence is required," there shall be substituted the words " exciseable liquor ".

B. The Licensing (Scotland) Act 1962 (10 & 11 Eliz. 2. c. 51)

18

At the end of section 14 there shall be added the following subsection:—

(9) Subsections (1) to (4), (6) and (7) of this section shall apply to any premises or place where exciseable liquor is sold under a special permission as they apply to the licensed premises of the holder of the special permission.

.

19

In section 16, in subsection (1), for the word " an " there shall be substituted the words " a wholesaler's ".

20

In section 21, for subsection (3) there shall be substituted the following subsection:—

(3) In this section the expression " passenger vessel " means a vessel of any description employed for the carriage of passengers which goes from any place in the United Kingdom to any other such place, or goes from and returns to the same place in the United Kingdom on the same day.

SCHEDULE 9—

1

In section 102(2)(b), for the words from " and delivered " onwards there shall be substituted the words " a proper spirits advice note or spirits consignment note ".

2

In section 146(3), for the words " subsection (6) of section one hundred and eight of this Act " there shall be substituted the words " section 6(3) of the Finance Act 1967 ".

3

In section 241 as amended by Schedule 1 to the Finance Act 1960—

• (a) in subsection (1A), after the word " that " there shall be inserted the words " a spirits advice note or ";

• (b) in subsection (2)—

• (i) for the words from " deliver " to " produce a " there shall be substituted the words " keep or produce a spirits advice note ";

• (ii) for the words " permit or note " there shall be substituted the words " note or, as the case may be, the note and any copy thereof ".

4

In section 242(1) as amended by the said Schedule 1—

• (a) for the words from " permit " where it first occurs to the word " goods " where it first occurs there shall be substituted the words " spirits advice note ";

• (b) in paragraph (aa), after the word " proper " there shall be inserted the words " spirits advice note or ";

• (c) in paragraphs (c), (d) and (e) for the word " permit " there shall be substituted the words " spirits advice note ".

5

In section 242(2)—

• (a) for the words from " required " to " permit " where first occurring there shall be substituted the words " in connection with the removal of which a spirits advice note is required by or under the customs or excise Acts ";

• (b) for the words from " permit " in the second place where it occurs to " permit " in the third place where it occurs there shall be substituted the words " spirits advice note having been duly sent or in contravention of section 6(3) of the Finance Act 1967, or in the case of which an altered or untrue spirits advice note has been sent ".

6

In section 243, for the word " permit " in both places where it occurs, there shall be substituted the words " spirits advice note ".

7

In the proviso to section 253(3), for the words " this Act as to permits for the " there shall be substituted the words " section 6(2) and (3) of the Finance Act 1967 in connection with the sending out or other ".

SCHEDULE 10—

Trading losses

1

• (1) If in any accounting period ending after the passing of this Act the one company has incurred a loss, computed as for the purposes of section 58(2) of the Finance Act 1965 (set-off of loss against total profits), in carrying on a trade, the amount of the loss may be set off for purposes of corporation tax against the total profits of the other company for its corresponding accounting period.

• (2) Sub-paragraph (1) above shall not apply to so much of a loss as is excluded from the said section 58(2) by subsection (4) of that section (trades falling under Case V of Schedule D, trades not carried on on a commercial basis, etc.), or by section 22 of this Act.

• (3) In the case of a claim made by a company as a member of a consortium only a fraction of the amount of the loss may be set off under sub-paragraph (1) above, and that fraction shall be equal to that member's share in the consortium, subject to any further reduction under paragraph 6(2) of this Schedule.

Capital allowances

2

• (1) If for any accounting period ending after the passing of this Act any capital allowances fall to be made to the one company which are to be given by discharge or repayment of tax and are to be available primarily against a specified class of income, so much of the amount of those capital allowances (exclusive of any carried forward from an earlier period) as exceeds its income of the relevant class arising in that accounting period (before deduction of any losses of any other period or of any capital allowances) may be set off for purposes of corporation tax against the total profits of the other company for its corresponding accounting period.

• (2) In the case of a claim made by a company as a member of a consortium only a fraction of the excess referred to in sub-paragraph (1) above may be so set off, and that fraction shall be equal to that member's share in the consortium, subject to any further reduction under paragraph 6(2) of this Schedule.

Expenses of management

3

• (1) If for any accounting period ending after the passing of this Act the one company (being an investment company) may under section 57(1) of the Finance Act 1965 deduct any amount as expenses of management disbursed for that accounting period, so much of that amount (exclusive of any amount only deductible by virtue of subsection (2) of the said section 57) as exceeds the company's profits of that accounting period may be set off for purposes of corporation tax against the total profits of the other company (whether an investment company or not) for its corresponding accounting period.

• (2) The surrendering company's profits of the period shall be determined for the purposes of this paragraph without any deduction under the said section 57 and without regard to any deduction falling to be made in respect of losses or allowances of any other period.

• (3) References in this paragraph to section 57 of the Finance Act 1965 do not include references to that section as applied by section 69 of that Act to companies carrying on life assurance business.

• (4) In the case of a claim made by a company as a member of a consortium only a fraction of the amount of the excess referred to in sub-paragraph (1) above may be set off under that sub-paragraph, and that fraction shall be equal to that member's share in the consortium, subject to any further reduction under paragraph 6(2) of this Schedule.

Charges on income

4

• (1) If in any accounting period ending after the passing of this Act the one company has paid any amount by way of charges on income, so much of that amount as exceeds its profits of the period may be set off for purposes of corporation tax against the total profits of the other company for its corresponding accounting period.

• (2) The surrendering company's profits of the period shall be determined for the purposes of this paragraph without regard to any deduction falling to be made in respect of losses or allowances of any other period, or to expenses of management only deductible by virtue of subsection (2) of section 57 of the Finance Act 1965.

• (3) In the case of a claim made by a company as a member of a consortium only a fraction of the excess referred to in sub-paragraph (1) above may be set off under that sub-paragraph, and that fraction shall be equal to that member's share in the consortium, subject to any further reduction under paragraph 6(2) of this Schedule.

Relation of group relief to other relief

5

• (1) Group relief for an accounting period shall be allowed as a deduction against the claimant company's total profits for the period before reduction by any relief derived from a subsequent accounting period, but as reduced by any other relief from tax.

• (2) The said other relief shall be determined on the assumption that the company makes all relevant claims under section 58(2) and section 56(6) of the Finance Act 1965 (set-off of trading losses and capital allowances against total profits).

• (3) The said other relief includes relief under section 52(1) of the Finance Act 1965 (charges on income), and notwithstanding the requirement in the said section 52(1) that the relief is to be against total profits as reduced by any other relief, group relief shall not affect relief under the said section 52(1).

• (4) For the purposes of this paragraph " relief derived from a subsequent accounting period " means—

• (a) relief under section 58(2) of the Finance Act 1965 in respect of a loss incurred in an accounting period after the accounting period the profits of which are being computed, and

• (b) relief under section 56(6) of that Act in respect of capital allowances falling to be made for an accounting period after the accounting period the profits of which are being computed, and

• (c) relief under section 87 of that Act (transitional relief on cessation of trade etc.) where the company ceases to possess the source of income in question at a time after the end of the accounting period the profits of which are being computed, and

• (d) relief under section 59 of that Act (terminal loss in a trade) in respect of a loss incurred in an accounting period after the end of the accounting period the profits of which are being computed.

• (5) The reductions to be made in total profits of an accounting period against which any relief derived from a subsequent accounting period is to be set off shall include any group relief for that first-mentioned accounting period, and this sub-paragraph shall have effect notwithstanding that under section 87(3) of the Finance Act 1965 relief under that section is to be given in priority to any other relief.

Corresponding accounting periods

6

• (1) For the purposes of this Schedule any accounting period of the claimant company which falls wholly or partly within an accounting period of the surrendering company corresponds to that accounting period.

• (2) If an accounting period of the surrendering company and a corresponding accounting period of the claimant company do not coincide—

• (a) the amount which may be set off against the total profits of the claimant company for the corresponding accounting period shall be reduced by applying the fraction $AB$ (if that fraction is less man unity), and

• (b) the said profits against which the amount mentioned in paragraph (a) above (as reduced where so required) may be set off shall be reduced by applying the fraction $AC$ (if that fraction is less than unity),

where

• " A " is the length of the period common to the two accounting periods,

• " B " is the length of the accounting period of the surrendering company, and

• " C " is the length of the corresponding accounting period of the claimant company.

Companies joining or leaving group or consortium

7

Subject to paragraph 8 below, group relief shall be given if, and only if, the surrendering company and the claimant company are members of the same group, or fulfil the conditions for relief for a consortium, throughout the whole of the surrendering company's accounting period to which the claim relates, and throughout the whole of the corresponding accounting period of the claimant company.

8

• (1) This paragraph has effect where on any occasion two companies become or cease to be members of the same group.

• (2) For the purposes specified below it shall be assumed as respects each company that on that occasion (unless a true accounting period of the company begins or ends then) an accounting period of the company ends, and a new one begins, the new accounting period to end with the end of the true accounting period (unless before then there is a further break under this sub-paragraph), and—

• (a) that the losses or other amounts of the true accounting period are apportioned to the component accounting periods on a time basis according to their lengths, and

• (b) that the amount of total profits for the true accounting period of the company against which group relief may be allowed in accordance with paragraph 5(1) of this Schedule is also so apportioned to the component accounting periods.

• (3) Where the one company is the surrendering company and the other company is the claimant company—

• (a) references to accounting periods, to profits, and to losses, allowances, expenses of management or charges on income of the surrendering company, in paragraphs 1 to 4 of this Schedule shall be construed in accordance with sub-paragraph (2) above,

• (b) references to accounting periods in paragraphs 6 and 7 of this Schedule shall be so construed (so that if the two companies are members of the same group in the surrendering company's accounting period, they must under paragraph 6 also be members of the same group in any corresponding accounting period of the claimant company),

• (c) references to profits, and amounts to be set off against the profits, in the said paragraph 6 shall be so construed (so that an amount apportioned under sub-paragraph (2) above to a component accounting period may fall to be reduced under the said paragraph 6(2)).

• (4) This paragraph shall apply with the necessary modifications where a company begins or ceases to fulfil the conditions for relief for a consortium, either as a surrendering company or as a claimant company, as it applies where two companies become or cease to be members of the same group.

Exclusion of double allowances, etc.

9

• (1) Relief shall not be given more than once in respect of the same amount, whether by giving group relief and by giving some other relief (in any accounting period) to the surrendering company, or by giving group relief more than once.

• (2) In accordance with sub-paragraph (1) above, two or more claimant companies cannot, in respect of any one loss or other amount for which group relief may be given, and whatever their accounting periods corresponding to that of the surrendering company, obtain in all more relief than could be obtained by a single claimant company whose corresponding accounting period coincided with the accounting period of the surrendering company.

• (3) If claims for group relief are made by more than one claimant company which relate to the same accounting period of the same surrendering company, and—

• (a) all the claims so made are admissible only by virtue of paragraph 8 above, and

• (b) there is a part of the surrendering company's accounting period during which none of those claimant companies is a member of the same group as the surrendering company,

those claimant companies shall not obtain in all more, relief than could be obtained by a single claimant company which was not a member of the same group as the surrendering company during that part of the surrendering company's accounting period (but was a member during the remainder of that accounting period).

• (4) If claims for group relief are made by a claimant company as respects more than one surrendering company for group relief to be set off against its total profits for any one accounting period, and—

• (a) all the claims so made are admissible only by virtue of paragraph 8 above, and

• (b) there is a part of the claimant company's accounting period during which none of the surrendering companies by reference to which the claims are made is a member of the same group as the claimant company,

the claimant company shall not obtain in all more relief to be set off against its profits for the accounting period than it could obtain on a claim as respects a single surrendering company (with unlimited losses and other amounts eligible for relief) which was not a member of the same group as the claimant company during that part of the claimant company's accounting period (but was a member during the remainder of that accounting period).

• (5) The provisions of this sub-paragraph have effect as respects a claim for group relief made by a company as a member of a consortium, in this sub-paragraph referred to as a " consortium claim "—

• (a) a consortium claim, and a claim other than a consortium claim, shall not both have effect as respects the loss or other amount of the same accounting period of the same surrendering company, unless each of the two claims is as respects a loss or other amount apportioned under paragraph 8(2)(a) above to a component of that accounting period, and the two components do not overlap.

• (b) in sub-paragraphs (3) and (4) above consortium claims shall be disregarded,

and paragraph (a) above shall take effect according to the order in which claims are made.

• (6) Without prejudice to the provisions of section 331(5) of the Income Tax Act 1952, any reference in Part X of that Act to an allowance made includes a reference to an allowance which would be made but for the granting of group relief, or but for that and but for an insufficiency of profits or other income against which to make it.

Claims and adjustments

10

• (1) A claim for relief under this Schedule—

• (a) need not be for the full amount available,

• (b) shall require the consent of the surrendering company notified to the inspector in such form as the Board may require, and

• (c) must be made within two years from the end of the surrendering company's accounting period to which the claim relates.

• (2) A claim for group relief by a company as a member of a consortium shall require the consent of each other member of the consortium, notified to the inspector in such form as the Board may require, in addition to the consent of the surrendering company.

• (3) If the inspector discovers that any group relief which has been given is or has become excessive he may make an assessment to tax under Case VI of Schedule D in the amount which ought in his opinion to be charged.

This sub-paragraph is without prejudice to the making of an assessment under section 5(3)(c) of the Income Tax Management Act 1964, and to the making of all such other adjustments by way of discharge or repayment of tax or otherwise as may be required where a claimant company has obtained too much relief, or a surrendering company has forgone relief in respect of a corresponding amount.

The three-year surplus

11

Paragraphs 1 to 5 and 9 of this Schedule (as they relate either to a surrendering company or to a claimant company) shall not affect the calculation of the three-year surplus under section 85(6) of the Finance Act 1965 as amended by Schedule 7 to the Finance Act 1966.

Companies with overseas trading income

12

If under paragraph 3(4)(b) of Schedule 20 to the Finance Act 1965 the appropriate fraction of a loss incurred by one company is set off (for the purposes of section 84(3) of that Act) against income of another company, group relief in respect of that part of the loss shall be left out of account in any computation under the said section 84(3) as respects that other company or any other company.

Cancellation of tax advantages from certain transactions in securities

13

• (1) The reference in section 28(2)(a) of the Finance Act 1960 to a person being entitled by reason of any exemption from tax to recover tax in respect of dividends received by him shall include a reference to his being so entitled by reason of the giving of group relief.

• (2) Where a company in the circumstances mentioned in section 28(2)(b) of that Act becomes entitled to a deduction as there mentioned, that section shall apply in relation to any tax advantage which in consequence of that deduction is obtained or obtainable by another company by way of group relief, as if obtained or obtainable by the other company in circumstances falling within the said paragraph (b).

SCHEDULE 11—

PART I — General

Life assurance business: relief for management expenses

1

• (1) In section 69(2) of the Finance Act 1965 (which restricts relief for management expenses for life assurance companies not charged to tax under Case I of Schedule D by reference to the corporation tax which would be payable if they were so charged) the following shall be substituted for the words from the beginning of the subsection to the end of paragraph (b):—

(2) Relief in respect of management expenses shall not be given to any such company, whether under section 62 of this Act or under subsection (1) above, so far as it would, if given in addition to all other reliefs to which the company is entitled, reduce the income tax and corporation tax borne by the company on the income and gains of its life assurance business for any accounting period to less than would have been paid if the company had been charged to tax in respect of that business under Case I of Schedule D ; and where relief has been withheld in respect of any accounting period by virtue of this subsection, the excess to be carried forward by virtue of section 57(2) of this Act shall be increased accordingly.

• (2) Sub-paragraph (1) above shall have effect for accounting periods ending on or after 6th April 1966.

Life assurance business: repayment of tax on investment income

2

• (1) Section 69(7) of the Finance Act 1965 (which prohibits, in general, the repayment of income tax on the policy holders' share of the franked investment income from investments held in connection with a company's life assurance business) shall have effect in relation to any income as if, for the reference to such part of it as belongs or is allocated to, or is reserved for or expended on behalf of, policy holders, there were substituted a reference to the part of it specified in sub-paragraph (3) below.

• (2) Section 427(2) of the Income Tax Act 1952 (under which, where the tax on its investment income exceeds seven shillings and sixpence in the pound, a company is entitled, notwithstanding the said section 69(7), to repayment of the excess on the policy holders' share) shall have effect in relation to any income as if, for the references in paragraphs (a) and (b) to such part of it as, in the opinion of the Commissioners, belongs or is allocated to, or is reserved for or expended on behalf of, policy holders, there were substituted references to the part specified in sub-paragraph (3) below of so much of that income as has not been excluded from charge to tax by virtue of any provision and against which no relief has been allowed by deduction or set-off.

• (3) The said part shall be, in the case of any income, the same fraction of it as the fraction which, on a computation of the profits of the company in respect of its life assurance business in accordance with the provisions applicable to Case I of Schedule D (whether or not the company is in fact charged to tax under that Case for the relevant accounting period or periods) would be connoted by the words in section 427(1) of the said Act of 1952 " such part of those profits as belongs or is allocated to, or is reserved for, or expended on behalf of, policy holders or annuitants ":

Provided that, if the income exceeds the profits as computed in accordance with those provisions other than the said section 427(1), the said part shall be that fraction of the income so far as not exceeding the profits, together with the amount of the excess.

• (4) Sub-paragraph (2) above shall not affect the said section 427(2) as it applies by virtue of the said section 69 to chargeable gains.

• (5) Sub-paragraphs (1) and (2) above shall have effect, as respects income tax, for the year 1966-67 as well as subsequent years of assessment and, as respects corporation tax, for accounting periods ending on or after 6th April 1965.

• (6) For the avoidance of doubt, it is hereby declared that the reference in the said section 69(7) to repayment of income tax includes a reference to the setting off of income tax against tax which the company is liable to pay in respect of its own distributions.

• (7) The said section 69(7), as amended by sub-paragraph (1) above, shall not be taken to apply to repayments of income tax under section 62 of the said Act of 1965.

• (8) Paragraph 9(3) of Schedule 5 to the Finance Act 1966 (which provides that franked investment income by virtue of which annuities have been treated as charges on income shall be left out of account under section 48 of the said Act of 1965) shall have effect, and be deemed always to have had effect, as if, for the words " shall be left out of account under section 48 of the Finance Act 1965 ", there were substituted the words " shall be income the tax on which is not available for set-off against income tax which the company is liable to pay in respect of its own distributions ".

Company distributions: transfers between companies and their members or participators

3

• (1) Schedule 11 to the Finance Act 1965 (which defines company distributions for the purposes of Part IV of that Act) shall have effect, and be deemed always to have had effect, subject to the amendments specified in sub-paragraphs (2) and (3) below.

• (2) At the end of paragraph 1(2) of that Schedule (which relates to the transfer of assets and liabilities between companies and their members) there shall be inserted the following proviso:—

Provided that, where the company and the member receiving the benefit are both resident in the United Kingdom and either the former is a subsidiary of the latter or both are subsidiaries of a third company also so resident (the question whether one body is another's subsidiary being determined as if for the purposes of section 48(3) of this Act, subject to the modification that a body shall be treated as not being the owner of any share capital which it owns directly if a profit on the sale of the shares would be treated as a trading receipt of that body), the said amount shall not be treated as a distribution.

• (3) After the proviso to paragraph 9(2) of that Schedule (which relates to the provision by close companies of benefits for participators) there shall be inserted the following additional proviso:—

And provided also that where— (a) the company and the participator are both resident in the United Kingdom and one is a subsidiary of the other or both are subsidiaries of a third company also so resident (the question whether one body is another's subsidiary being determined as if for the purposes of section 48(3) of this Act, subject to the modification that a body shall be treated as not being the owner of any share capital which it owns directly if a profit on the sale of the shares would be treated as a trading receipt of that body), and (b) the benefit to the participator arises on or in connection with a transfer of assets or liabilities by the company to him or to the company by him, the said amount shall not be treated as a distribution.

• (4) If any amount would, but for sub-paragraph (2) or (3) above, be treated as, or as part of, a distribution made in or after the year 1966-67 and would as so treated constitute also the net amount of a relevant distribution within the meaning of section 65 of the Finance Act 1965 (dividend stripping) then, for the purposes of corporation tax in respect of any chargeable gains, that amount shall be treated as if it were a capital distribution (within the meaning of Part III of the Finance Act 1965) received in respect of the holding.

• (5) Sub-paragraphs (2) and (3) above shall not affect the meaning of 'distribution' for the purposes of paragraphs 5, 6(1) and 7 of Schedule 17 to the Finance Act 1965 (dividend stripping: relation of distributions to profits), except so far as the said sub-paragraphs (2) and (3) relieve the company from liability to account for income tax otherwise falling under paragraph 5(1) of the said Schedule 17 to be included in a distribution.

• (6) There shall be made all such adjustments by way of discharge or repayment of tax as are necessary to give effect to the preceding provisions of this paragraph.

Dividend stripping

4

• (1) Section 65(6) of the Finance Act 1965 (election for treatment of dividends as group income: exclusion of relevant distributions) shall cease to have effect.

• (2) Section 65(3) of the Finance Act 1965 (relevant distribution received by a company which is not a dealer: net amount of relevant distribution to be treated as a capital distribution in respect of the holding) shall apply to group income as if in the phrase " the net amount of the relevant distribution " the word " net " were omitted.

• (3) The said section 65 shall be deemed always to have had effect subject to this paragraph, and there shall be made all such adjustments by way of discharge or repayment of tax as are necessary to give effect to its provisions.

Tax on company in liquidation

5

• (1) In this paragraph references to a company's final year are references to the financial year in which the affairs of the company are completely wound up, and references to a company's penultimate year are references to the last financial year preceding its final year.

• (2) Corporation tax shall be charged on the profits of the company arising in the winding-up in its final year at a rate which, subject to sub-paragraph (3) below, shall be the rate of corporation tax fixed for the penultimate year.

• (3) If the affairs of the company are completely wound up before an Act is passed fixing the rate of corporation tax for its penultimate year, corporation tax shall be charged on the company's profits arising in the winding-up in its final year, and if the winding-up commenced before the final year, on the company's profits arising at any time in its penultimate year, at the rate of corporation tax fixed by the budget resolution for the penultimate year (and without regard to the rate fixed by any subsequent Act); and any assessment made by virtue of section 49(5) of the Finance Act 1965 (provisional rate of tax) shall be subject to any such adjustment, by discharge or repayment of tax or by a further assessment, as may be required to give effect to this sub-paragraph.

• (4) An assessment on the company's profits for an accounting period which falls after the commencement of the winding-up shall not be invalid because made before the end of the accounting period.

• (5) In making an assessment after the commencement of the winding up of the company but before the date when its affairs are completely wound up, the inspector may, with the concurrence of the liquidator, act on an assumption as to when that date will fall, so far as it governs section 51(6) of the Finance Act 1965 (company's accounting period or accounting periods beginning with commencement of winding up).

• (6) The assumption of the wrong date shall not alter the company's final and penultimate year, and if the right date is later an accounting period shall end on the date assumed, and a new accounting period shall begin and the said section 51(6) shall thereafter apply as if that new accounting period began with the commencement of the winding up.

• (7) In this paragraph " budget resolution " means a resolution of the Committee of Ways and Means of the House of Commons, or of the House of Commons, for fixing the rate of corporation tax for the financial year in question, and if there is more than one such resolution, means the first of them.

• (8) This paragraph shall have effect as respects any winding up completed after the passing of this Act.

Close company: 35 per cent. test for quoted shares

6

• (1) In paragraph 1(3) of Schedule 18 to the Finance Act 1965 (under which certain companies with quoted shares are not close companies) " beneficially held by the public " shall be construed in accordance with this paragraph, and a corresponding construction shall be given to the reference to shares which have been allotted unconditionally to, or acquired unconditionally by, the public.

• (2) Shares shall be deemed to be beneficially held by the public if, and only if, sub-paragraph (3) below so provides, and if they are not within the exceptions in paragraph (a), (b) or (c) of the said paragraph 1(3) (shares held by a director of the company or his associate or by certain other companies) or within the exception in sub-paragraph (4) below.

• (3) Shares shall be deemed to be beneficially held by the public—

• (a) if beneficially held by a company resident in the United Kingdom which is not a close company, or by a company not so resident which would not be a close company if it were so resident, or

• (b) if held on trust for a fund or scheme approved under section 379 or section 388 of the Income Tax Act 1952 (superannuation funds and retirement schemes), or

• (c) if they are not comprised in a principal member's holding.

• (4) Shares shall not be deemed to be held by the public if held as part of any fund the capital or income of which is applicable or applied wholly or mainly for the benefit of, or of the dependants of, the employees or directors, or past employees or directors, of the company, or of any company within paragraph (b) or (c) of the said paragraph 1(3).

• (5) In paragraphs (a), (b) and (c) of the said paragraph 1(3) references to shares held by any person include references to any shares the rights or powers attached to which could be attributed to that person under paragraph 3(3) of Schedule 18 to the Finance Act 1965.

• (6) The said paragraph 1(3) shall not apply at any time when the total percentage of the voting power in the company possessed by all the principal members of the company exceeds 85 per cent.

• (7) For the purposes of this paragraph a person is a principal member of a company if he possesses a percentage of the voting power in the company of more than 5 per cent. and, where there are more than five such persons, if he is one of the five persons who possess the greatest percentages or if, because two or more persons possess equal percentages of the voting power in the company, there are no such five persons, he is one of the six or more persons (so as to include those two or more who possess equal percentages) who possess the greatest percentages.

• (8) In arriving at the voting power which a person possesses there shall be attributed to him any voting power which would be attributed to him for the purposes of paragraph 3 of Schedule 18 to the Finance Act 1965 (definition of control) by sub-paragraphs (3) and (4) of that paragraph (nominees, controlled companies and associates).

• (9) A principal member's holding consists of the shares which carry the voting power possessed by him.

• (10) This paragraph shall be deemed to have come into force on 11th April 1967.

Computation of close company's distributable profits

7

• (1) In paragraph 7(1) of Schedule 18 to the Finance Act 1965 for the words

(b) any franked investment income, less the amount of any relief given against it for management expenses or charges on income

there shall be substituted the words

(b) any franked investment income, less the amount of any relief given against it under subsection (1) or subsection (7) of section 62 of this Act

so that paragraph (b) refers to all relief under the said section 62, and not only to relief given under that section against management expenses or charges on income.

• (2) For the purposes of the said paragraph 7 as it applies to any company in any accounting period the amount on which corporation tax falls finally to be borne (but not the amount of that tax) shall be computed as if the said section 62 did not include subsection (5) of that section (which, as extended by subsection (6) of that section, makes an adjustment where in any year of assessment distributions exceed franked investment income so as to allow losses, allowances, management expenses or charges on income against which franked investment income arising in an earlier year of assessment has been set off to be carried forward).

• (3) This paragraph shall have effect as respects franked investment income arising in the year 1966-67 or in subsequent years of assessment.

Close companies in liquidation

8

• (1) Sections 77 and 78 of the Finance Act 1965 (shortfall in distributions of close company, and apportionment for surtax of close company's income) shall, notwithstanding the winding-up of a company, or the passing of any resolution or the making of any order or anything else done for the winding up of a company, continue to apply as if the company were not being wound up.

• (2) Paragraph 12 of Schedule 18 to the Finance Act 1965 (modification of the required standard for ascertaining shortfall in distributions of close company) shall apply for any accounting period ending after the date of a winding-up resolution or other event mentioned in paragraph 13(1) of that Schedule.

• (3) Where any such event occurs in the case of a close company, then any assessment on the company in respect of a shortfall in distributions for an accounting period after that event shall be an assessment as for a distribution made immediately before the end of that accounting period, and the amount due under the assessment shall be recoverable accordingly.

• (4) Paragraph 13(3) of the said Schedule 18 (which is superseded by this paragraph) shall cease to have effect.

• (5) This paragraph has effect as respects accounting periods beginning after 11th April 1967.

Close companies: " director " and " associate "

9

It is hereby declared that in paragraph 6(2)(c) and paragraph 6(3) of Schedule 18 to the Finance Act 1965 (definitions of director) the expression " either on his own or with one or more associates " requires a person to be treated as owning or as the case may be controlling what any associate owns or controls even if he does not own or control share capital on his own, and that—

• (a) in the proviso to the said paragraph 6(3) the expression " apportioned to him together with his associates (if any) ", and

• (b) in paragraph 18(1)(b) of Schedule 5 to the Finance Act 1966 (definition of associate) the expression " either on his own or with his relatives "

have a corresponding meaning.

PART II — Collection of Tax on Company Distributions and other Payments

Assessments

10

• (1) Income tax which has become due in accordance with paragraph 2(3) of Schedule 12 to the Finance Act 1965 (tax in respect of distributions and other payments to which paragraph 1 of that Schedule applies) may be assessed on the company (whether or not it has been paid when the assessment is made) if that tax, or any part of it, is not paid on or before the due date.

• (2) Paragraph 2(4) of the said Schedule 12 (distributions not included in returns, and estimated assessments) shall apply to payments to which paragraph 1 of that Schedule applies which are not distributions as it applies to payments which are distributions.

• (3) Any tax assessable under sub-paragraph (1) above and any tax assessable under the said paragraph 2(4) may be included in one assessment if the tax so included is all due on the same date, and Schedule 12 to the Finance Act 1965, paragraph 17 of Schedule 6 to the Finance Act 1966 and this Part of this Schedule shall apply to tax assessable or assessed under sub-paragraph (1) above as they apply to tax assessable or assessed under the said paragraph 2(4).

• (4) All the provisions of the Income Tax Acts as to the time within which an assessment may be made, so far as they refer or relate to the year of assessment for which an assessment is made, or the year of assessment to which an assessment relates, shall apply to an assessment under the said Schedule 12 (including an assessment under sub-paragraph (1) above) notwithstanding that, under the provisions of the said Schedule 12, the assessment may be said to relate to a month rather than to a year of assessment, and the provisions of section 47(1) of the Income Tax Act 1952 and of section 51 of the Finance Act 1960 as to the circumstances in which an assessment may be made out of time shall apply accordingly on the footing that any such assessment relates to the year of assessment the standard rate for which is the rate at which tax is charged by the assessment.

Relief for income tax on franked investment income and other company income

11

• (1) Where a claim has been made under paragraph 3 of the said Schedule 12 no proceedings for collecting tax which would fall to be discharged if the claim were allowed shall be instituted pending the final determination of the claim, but this sub-paragraph shall not affect the date when the tax is due.

• (2) When the claim is finally determined any tax underpaid in consequence of sub-paragraph (1) above shall be paid.

• (3) Where proceedings are instituted for collecting tax assessed, or interest on tax assessed, under paragraph 10(1) of this Schedule or paragraph 2(4) or (5) of the said Schedule 12, effect shall not be given to any claim made after the institution of the proceedings so as to affect or delay the collection or recovery of the tax charged by the assessment or of interest thereon, until the claim has been finally determined.

• (4) When the claim is finally determined any tax overpaid in consequence of sub-paragraph (3) above shall be repaid.

Due date of tax

12

• (1) An appeal against an assessment under the said Schedule 12 (including an assessment under, paragraph 10(1) above) shall not affect the date when the tax is due under paragraph 2(3) of that Schedule, and in paragraph 5(1) of that Schedule the words " subject to any appeal against the assessment " shall have effect subject to this sub-paragraph:

Provided that this sub-paragraph shall not apply to an appeal of which notice has been given to the inspector before 25th April 1967.

• (2) On the determination of any such appeal any tax overpaid shall be repaid.

• (3) Section 58 of the Finance Act 1960 (interest on tax recovered to make good loss due to a taxpayer's fault) shall not apply in relation to tax under the said Schedule 12.

Adjustments at end of year.

13

Where the amount of any tax payable in accordance with sub-paragraph (2) of paragraph 1 of the said Schedule 12 (adjustment at end of year) is agreed between the company and the inspector—

• (a) the making of an assessment charging that tax, or an appeal against the assessment, shall not affect the date when the tax is due (that is to say, as provided by paragraph 5(1) of the said Schedule 12, fourteen days after the tax is so agreed), and

• (b) the power of making an assessment under sub-paragraph (3) of the said paragraph 1 shall include power to make an assessment of the tax on that company if that tax, or any part of it, is not paid within the said fourteen days after the tax is so agreed (whether or not it has been paid when the assessment is made).

Interest on tax

14

• (1) It is hereby declared that paragraph 5(3) of the said Schedule 12 (which applies section 495 of the Income Tax Act 1952 relating to interest on overdue income tax) applies to income tax which, in accordance with that Schedule, is paid without the making of any assessment (but is paid after it is due), and that where the tax is charged by an assessment (whether or not any part of it has been paid when the assessment is made) it applies as respects interest running before as well as after the making of the assessment.

• (2) Section 495(3)(b) of the Income Tax Act 1952 (exemption where interest on tax charged by an assessment does not exceed one pound, or where the amendment made by this Act has effect, five pounds) shall have effect as so applied—

• (a) as if all tax due from a company in accordance with paragraph 2(3) of the said Schedule 12 for any month, whether or not it is actually assessed, were included in a single assessment, and

• (b) as if all tax due from a company in accordance with paragraph 1(2) of the said Schedule 12 for any year, whether or not it is actually assessed, were included in a single assessment.

• (3) The discharge or repayment of tax in respect of distributions, or payments other than distributions, made in any month in a year of assessment by setting off, under paragraph 3 of the said Schedule 12, income tax in respect of any franked investment income or other payment received in a later month in that year shall not affect interest under section 495 of the Income Tax Act 1952 on the tax so discharged or repaid—

• (a) for any period before the expiration of fourteen days from the end of the later month, unless the claim is made on an earlier date (but after the end of that later month); and

• (b) if the claim is made on an earlier date (but after the end of the later month), any period ending before that earlier date.

• (4) Subject to sub-paragraph (3) above, the said section 495 shall apply as if any such tax which is discharged or repaid had never become payable.

• (5) Paragraph 5(3) of Schedule 12 to the Finance Act 1965 shall not be read as applying section 496 of the Income Tax Act 1952 by applying section 495 of that Act.

• (6) In this paragraph " month " has the same meaning as in paragraph 2(2) of the said Schedule 12.

Exclusion of interest on tax up to 19th November 1966

15

No tax under the said Schedule 12 shall carry interest from a date earlier than 19th November 1966.

Commencement and construction

16

• (1) This Part of this Schedule shall be construed as one with Schedule 12 to the Finance Act 1965 and shall have effect as if it had been enacted when that Act was enacted.

• (2) References in this Part of this Schedule to proceedings for the collection of tax include references to proceedings by way of distraint or poinding for tax.

SCHEDULE 12—

Interpretation

1

In this Schedule, the expression " the principal Act " means the Selective Employment Payments Act 1966.

Restrictions on payments under section 25

2

Subsection (1) or (2) of section 25 of this Act shall not apply—

• (a) if the employment in question of the employed person was in, or carried out from, an establishment for the time being registered under section 7(1) of the principal Act, unless the employer shows that he is not entitled to a payment in respect of that person and the contribution week in question under section 1 or 2 of that Act; or

• (b) if the employer is entitled in respect of the employed person and the week in question to a payment under section 5 or 6 of the principal Act; or

• (c) if the employed person's employment is an excepted employment as defined in section 10(1) of the principal Act other than employment in the Post Office Savings Bank; or

• (d) if the employer is an employer to whom section 3 of the principal Act applies, unless the employed person was employed in the week in question in a part of the employer's business which is specified in Part II of Schedule 1 to that Act; or

• (e) if the employer is, or the employed person is treated for the purposes of section 4 of the principal Act as employed by, an employer to whom the said section 4 applies ; or

• (f) if the employer is a national health service employer, that is to say, is a body specified in Schedule 3 to the Redundancy Payments Act 1965 ;

and subsection (1) of the said section 25 shall not apply in relation to an employed person in respect of whom the employer is entitled in respect of the week in question to a payment under subsection (2) of that section.

3

The Minister shall not be required to make any payment in respect of any employed person and any contribution week under subsection (1) of the said section 25 unless the employer produces such records as the Minister may reasonably require—

• (a) of the payment of selective employment tax;

• (b) of the number of hours worked by that employed person in that week; and

• (c) of the number of hours of work in a week normally involved for that person in consequence of the terms of any contract or by reason of any office held by him.

4

The Minister shall not be required to make any payment in respect of any employed person and any contribution week under subsection (2) of the said section 25 unless the employer produces such records of the payment of selective employment tax and of that employed person's employment outside the United Kingdom as the Minister may reasonably require.

Claims for payments under section 25

5

Any claim for a payment under subsection (1) or (2) of the said section 25 shall be made in such form and manner, contain such particulars, and be made within such period, as the Minister may direct; and any such payments shall be made at such times, in such manner, and subject to such conditions, if any, as the Minister may with the consent of the Treasury determine.

Determination of questions

6

The employer by whom a claim for a payment under subsection (1) or (2) of the said section 25 is made may require any question arising in connection with that claim, other than a question such as is mentioned in paragraph 7 or 8 of this Schedule, to be referred to and determined by a tribunal established under section 12 of the Industrial Training Act 1964.

7

If any question arises under subsection (2) of the said section 25—

• (a) as to whether a person was employed for any week outside both the United Kingdom and any area for the time being designated under section 1(7) of the Continental Shelf Act 1964 and, if so, by whom ; or

• (b) as to whether tax was not payable in respect of an employed person for any contribution week by reason of his being incapable of work as mentioned in that subsection or on unpaid leave,

the claimant may apply to the Minister for the determination of that question in accordance with Part IV of the National Insurance Act 1965, and for that purpose that question shall be treated as being a question such as is mentioned in section 64(1)(a) of that Act.

8

For the avoidance of doubt it is hereby declared that any question arising under Part IV of this Act, under the principal Act, or under Part VI of the Finance Act 1966, as to whether, or as to the person by whom, the tax in respect of any person and any contribution week is payable or has been paid shall be treated for the purpose of its determination as being a question such as is mentioned in section 64(1)(a) of the National Insurance Act 1965.

9

Section 97 of the National Insurance Act 1965 shall apply to any proceedings involving any question which arises as mentioned in paragraph 7 or 8 of this Schedule as it applies to the proceedings referred to in that section.

10

Paragraph 8 of this Schedule, so far as it relates to a question arising under Part VI of the Finance Act 1966, shall extend to Northern Ireland, but with the substitution for the reference to section 64(1)(a) of the National Insurance Act 1965 of a reference to section 63(1)(a) of the National Insurance Act (Northern Ireland) 1966 ; and section 93 of the last-mentioned Act shall apply to any proceedings involving any such question as it applies to the proceedings referred to in that section.

Enforcement

11

Any inspector for the purposes of the National Insurance Act 1965 may, subject to the production if requested of his certificate of appointment (whether furnished under section 90(6) of that Act or under section 49(6) of the National Insurance Act 1946), enter on any premises at or from which a person in relation to whom a claim for a payment under subsection (1) or (2) of section 25 of this Act has been made is or was employed, other than premises occupied as a private dwelling and not used by, or by permission of, the occupier for the purposes of a trade or business, and—

• (a) examine and make copies of or extracts from any such records as are mentioned in paragraph 3 or, as the case may be, paragraph 4 of this Schedule; and

• (b) require any person on those premises to furnish to the inspector such information as may be reasonably required by the Minister in connection with that claim ;

and section 8 of the principal Act (which relates to enforcement) shall have effect as if any reference in subsection (3) thereof to subsection (1) thereof included a reference to this paragraph.

Set-off of payments

12

Where any employer is entitled to the return of any amount paid by him by way of contributions under the National Insurance Act 1965 (including selective employment tax) otherwise than by way of contributions paid on behalf of an employed person, the Minister may, if he thinks fit, deduct from that amount the amount of any payment previously made to that employer under the principal Act or Part IV of this Act which would not have been made if those contributions had not been paid.

13

Any Minister by whom any payment falls to be made under any provision of the principal Act or of Part IV of this Act to an employer in respect of an employed person and a contribution week may deduct from the amount which would otherwise be payable any amount previously paid to that employer in respect of that person and that week by that or any other Minister under any other of those provisions.

14

Where a deduction from any payment to an employer is made under paragraph 12 or 13 of this Schedule in respect of a previous payment to that employer, the amount of that previous payment, or a part thereof equal to the amount of the deduction, shall not be otherwise recoverable from that employer.

SCHEDULE 13—

PART I — Capital Gains Tax and Corporation Tax

Losses of husband and wife

1

• (1) In section 20(5) of the Finance Act 1965 in the passage " any allowable loss accruing in that year of assessment " (which restricts the losses of either husband or wife which may be set off against gains accruing to the other to losses accruing in the current year) the words " accruing in that year of assessment " shall cease to have effect, so as to remove that restriction.

• (2) This paragraph shall have effect for the years 1965-66 and 1966-67 as well as later years of assessment, and, in relation to losses accruing in the year 1965-66, and in the year 1966-67, 31st December 1967 shall be substituted for 6th July (that is 6th July 1966 and 6th July 1967) in the proviso to the said section 20(5) (time for applying for exclusion of set off of losses under the said subsection (5)).

Replacement of business assets

2

• (1) Where section 33(1)(a) of the Finance Act 1965 applies to exclude a gain which, in consequence of Part II of Schedule 6 to that Act, is not all chargeable gain, the amount of the reduction to be made under paragraph (b) of the said section 33(1) (corresponding reduction in allowable expenditure in respect of new asset) shall be the amount of the chargeable gain, and not the whole amount of the gain ; and in subsection (2)(b) of the said section 33 (corresponding reduction in allowable expenditure in respect of the new asset where part only of the consideration in respect of the old asset has been applied as such expenditure) for the reference to the amount by which the gain is reduced under paragraph (a) of that subsection there shall be substituted a reference to the amount by which the chargeable gain is proportionately reduced under the said paragraph (a).

• (2) This paragraph shall be construed as one with the said section 33.

• (3) This paragraph shall have effect for all years of assessment and accounting periods beginning before or after the passing of this Act.

Compensation and insurance money

3

• (1) Where paragraph 13(3)(a) of Schedule 6 to the Finance Act 1965 applies to exclude a gain which, in consequence of Part II of that Schedule, is not all chargeable gain, the amount of the reduction to be made under paragraph (b) of the said paragraph 13(3) (corresponding reduction in allowable expenditure in respect of new asset) shall be the amount of the chargeable gain and not the whole amount of the gain; and in sub-paragraph (4)(b) of the said paragraph 13 (corresponding reduction in allowable expenditure in respect of the new asset where part only of the consideration in respect of the old asset has been applied as such expenditure) for the reference to the amount by which the gain is reduced under paragraph (a) of that sub-paragraph there shall be substituted a reference to the amount by which the chargeable gain is proportionately reduced under the said paragraph (a).

• (2) This paragraph shall have effect for all years of assessment and accounting periods beginning before or after the passing of this Act.

Premiums on conversion of securities

4

• (1) This paragraph applies where, on a conversion of securities, a person receives, or becomes entitled to receive, any sum of money which is by way of consideration (in addition to his new holding) for the disposal of the converted securities.

• (2) If the inspector is satisfied that the sum is small, as compared with the value of the converted securities, and so directs—

• (a) receipt of the sum shall not be treated for the purposes of Part III of the Finance Act 1965 as a disposal of part of the converted securities, and

• (b) the sum shall be deducted from any expenditure allowable under the said Part III as a deduction in computing a gain or loss on the disposal of the new holding by the person receiving or becoming entitled to receive the said sum,

and paragraph (a) above shall have effect notwithstanding paragraph 4(4) of Schedule 7 to the Finance Act 1965 as applied to conversions of securities by paragraph 5 of that Schedule.

• (3) A person who is dissatisfied with the refusal of the inspector to give a direction under this paragraph may appeal to the Commissioners having jurisdiction on an appeal against an assessment to tax in respect of a gain accruing to him on a disposal of the securities.

• (4) Paragraph 9 of Schedule 10 to the Finance Act 1966 (which deals with cases where no expenditure is attributable to the asset or that expenditure is small) shall apply as if this paragraph were mentioned in the said paragraph 9(1).

• (5) In this paragraph " conversion of securities " and " security " shall be construed in accordance with paragraph 5(3) of Schedule 7 to the Finance Act 1965.

• (6) This paragraph has effect as respects sums becoming payable on or after 6th April 1967.

Shares in close company transferring assets at an undervalue

5

• (1) Paragraph 18 of Schedule 7 to the Finance Act 1965 shall not apply where the transfer of the asset is a disposal to which paragraph 2(1) of Schedule 13 to that Act (transfers within a group of companies) applies.

• (2) This paragraph shall have effect for all years of assessment and accounting periods beginning before or after the passing of this Act

Part disposals

6

It is hereby declared that paragraph 7 of Schedule 6 to the Finance Act 1965, and all other provisions for apportioning on a part disposal expenditure which is deductible in computing a gain, are to be operated before the operation of, and without regard to—

• (a) paragraph 20(1) of Schedule 7 to the Finance Act 1965 (husband and wife),

• (b) paragraph 2(1) of Schedule 13 to that Act (transfers within group of companies),

• (c) section 33 of that Act (replacement of business assets), but without prejudice to the provisions of subsection (11) of that section,

• (d) any other enactment making an adjustment to secure that neither a gain nor a loss occurs on a disposal.

Revival of transitory provisions in s.82 of Finance Act 1965

7

The repeal of section 82 of the Finance Act 1965 effected as respects gains and losses accruing on or after 6th April 1966 by section 53(7) of, and Part VI of Schedule 13 to, the Finance Act 1966 shall be deemed never to have extended to subsection (2) or subsection (3) of the said section 82 (exclusion of companies and local authorities from Case VII of Schedule D, and transitional application for corporation tax purposes of Case VII provisions for computing gains and losses).

Exclusion of premiums taxed under Case VIII of Schedule D

8

It is hereby declared that in paragraph 5(1) of Schedule 8 to the Finance Act 1965 (under which the taxed amount of any premium for a lease is to be excluded in the computation under paragraph 7 of Schedule 6 to that Act) the reference to that computation is a reference to the entire computation of the gain or loss, and accordingly the taxed amount is to be excluded from the consideration for the disposal, in addition to being excluded from the numerator of the fraction to be employed in apportioning deductible expenditure.

Expenditure by tenant under terms of lease

9

• (1) Paragraph 7 of Schedule 8 to the Finance Act 1965 (landlord's expenditure deductible in computing his gain on disposal of lease to include tenant's expenditure) shall apply on the disposal by way of grant of the lease and on any subsequent disposal of the asset out of which the lease is granted, and accordingly in that paragraph the words " on a disposal of the lease " shall cease to have effect.

• (2) This paragraph shall have effect as respects all years of assessment and accounting periods ending before or after the passing of this Act.

Chargeable gains accruing to non-resident companies

10

• (1) If any tax payable by any person by virtue of section 41(2) of the Finance Act 1965 (under which shareholders in a non-resident company may be taxed in respect of a chargeable gain accruing to the company) is paid by the company to which the chargeable gain accrues, or in a case under subsection (9) of the said section 41 (chargeable gain traced through a non-resident company holding shares in which a chargeable gain accrues) is paid by any such other company, the amount so paid shall not for the purposes of income tax, capital gains tax or corporation tax be regarded as a payment to the person by whom the tax was originally payable.

• (2) This paragraph shall have effect as from 6th April 1965.

PART II — Short-Term and Long-Term Gains

Foreign bank accounts: short- and long-term gains

11

• (1) Paragraph 11(1) of Schedule 7 to the Finance Act 1965 and paragraph 15(1) of Schedule 9 to the Finance Act 1962 (exemption for debt in hands of original creditor) shall not apply to a debt owed by a bank which is not in sterling and which is represented by a sum standing to the credit of a person in an account in the bank.

• (2) This paragraph shall apply to any disposal on or after 6th April 1967.

Exchange of shares and securities under nationalisation Acts : short-term gains

12

For the purposes of paragraph 11 of Schedule 9 to the Finance Act 1962 (conversion of securities not to involve any disposal of the old holding or any acquisition of the new holding) ' conversion of securities' shall include any exchange of securities effected in pursuance of the Iron and Steel Act 1967 or any other enactment (including an enactment passed after this Act) which provides for the compulsory acquisition of any shares or securities and the issue of securities or other securities instead.

SCHEDULE 14

Definition of current use value

1

• (1) For the purposes of the principal section and this Schedule, the current use value of land shall be ascertained in accordance with this paragraph, and in this paragraph the time as at which current use value is to be ascertained is referred to as " the relevant time ".

• (2) It shall be assumed that planning permission—

• (a) would be granted for any development of the land which does not constitute material development, but

• (b) would not be granted for any development of the land which constitutes material development.

• (3) No account shall be taken of any planning permission in force at the relevant time, in so far as it would authorise the carrying out of any project of material development of the land to be begun after that time (but account shall be taken of any planning permission in force at the relevant time in so far as it would authorise the carrying out of any project of material development of the land begun but not completed at the relevant time).

• (4) The following provisions in or made under Schedule 6 to the Land Commission Act 1967 shall apply, subject to any necessary modifications, for the purposes of this paragraph—

• (a) sub-paragraphs (1) and (2) of paragraph 4 (general principle of valuation, and disregard of charges on land),

• (b) sub-paragraphs (3), (4) and (5) of paragraph 7 (minor provisions relating to planning permission, and exclusion of depreciation of other land),

• (c) any regulations in force at the relevant time under paragraph 11 (extension of categories of material development),

but in ascertaining the current use value of land disposed of to an authority possessing compulsory purchase powers sub-paragraphs (1), (2) and (4) of paragraph 4 of Schedule 9 to the Land Commission Act 1967 shall apply with any necessary modifications.

• (5) The provisions of the Land Commission Act 1967 applied by this paragraph shall have effect for the purposes of this paragraph notwithstanding that at the relevant time they had not come into force for the purposes of that Act, and the Betterment Levy (Planning Assumptions) Regulations 1967 and the Betterment Levy (Planning Assumptions) (Scotland) Regulations 1967 made under paragraph 11 of Schedule 6 to the Land Commission Act 1967 shall have effect for those purposes as if they had come into force on 6th April 1965.

Adjustment for current use value reflecting new development

2

• (1) Where on or after 6th April 1967 a project of material development is begun and in accordance with paragraph 1(3) above account is to be taken of the relevant planning permission so as to increase the current use value of any land, then in computing a gain accruing on any subsequent disposal by the owner of the land—

• (a) the owner of the land shall be deemed at the time when the project of material development was begun to have incurred expenditure in respect of that land of an amount equal to that increase in current use value, being expenditure allowable as a deduction under paragraph 4(1)(b) of Schedule 6 to the Finance Act 1965, and

• (b) the proviso to subsection (1) of the principal section shall not have effect.

• (2) If the planning permission so taken into account affects part only of the land, the expenditure shall be deemed to have been incurred exclusively in respect of that part.

Restrictions on deductions allowable in computing gains

3

• (1) In applying paragraph 4(1)(b) of Schedule 6 to the Finance Act 1965 to any expenditure in computing a gain accruing on a disposal to which subsection (1) of the principal section applies the current use value of the land at the time of the disposal shall be compared with what that current use value would have been if the expenditure had not been incurred and—

• (a) if the current use value of the land would not have been less if the expenditure had not been incurred, the whole of that expenditure shall be excluded, and

• (b) if it would have been less, but the amount of the expenditure exceeds the difference, the excess shall not be allowable as a deduction in making the computation.

• (2) If on or after 6th April 1967 there has been an increase in the current use value of any land as described in paragraph 2(1) of this Schedule sub-paragraph (1) above shall apply as respects expenditure incurred before that increase by reference to the current use value of the land at a time immediately before the increase, and by reference to what the current use value of the land would have been at that time if the expenditure had not been incurred.

Expenses of valuation

4

In paragraph 4(2)(b) of Schedule 6 to the Finance Act 1965 (expenses of ascertaining market value) the reference to market value shall include a reference to current use value, but any costs falling to be allowed under paragraph 19 of Schedule 6 to the Land Commission Act 1967 shall not also be allowed under the said paragraph 4.

Part disposals

5

• (1) In applying paragraph 7(2)(b) of Schedule 6 to the Finance Act 1965 (apportionment of expenditure by reference to market value of what is undisposed of) to the computation of a gain accruing on a disposal to which subsection (1) of the principal section applies current use value shall be substituted for market value in that paragraph.

• (2) Where subsection (1) of the principal section applies to a part disposal—

• (a) if what is acquired from the person making the disposal is land as defined in this Schedule, the reference in subsection (1)(b) of the principal section to the current use value of the land is a reference to the current use value of the land which is so acquired,

• (b) if nothing is so acquired or if what is so acquired is not land as defined in this Schedule, subsection (1)(b) of the principal section shall not apply, and subject to the following provisions of this Schedule, no adjustment shall be made to the amount of the consideration for the part disposal.

• (3) Where subsection (1) of the principal section applies to a part disposal of any land, then in computing a gain accruing on any subsequent disposal by the owner of the land of the remainder of that land, the proviso to subsection (1) of the principal section shall not have effect.

• (4) The amount of the consideration for a part disposal which is or derives from a chargeable act or event within section 33, section 34 or subsection (3) or (5) of section 35 of the Land Commission Act 1967 (Cases D, E and part of Case F) shall be the amount, if any, by which the current use value (called V(1)) of the land out of which the part disposal is made at a time immediately before the part disposal exceeds the current use value (called V(2)) of that land after the part disposal, and accordingly the apportionment under paragraph 7 of Schedule 6 to the Finance Act 1965 shall be made by attributing the fraction $V(1)−V(2)V(1)$ of the apportionable expenditure to what is disposed of.

• (5) In ascertaining in accordance with paragraph 13(1)(c) of Schedule 6 to the Finance Act 1965 (compensation and insurance money) whether the amount of a capital sum derived from land, on a disposal to which subsection (1) of the principal section would apply, is small as compared with the value of the land, its value shall be its current use value.

• (6) Where under paragraph 4 of Schedule 10 to the Finance Act 1966 (part disposal on compulsory acquisition) a transfer is not to be treated as a disposal and, but for that, subsection (1) of the principal section would have applied to the disposal, for references in that paragraph to the amount of the consideration for the transfer, or to the market value of the land transferred, there shall be substituted references to the current use value of the land transferred, and for the reference in that paragraph to the market value of the holding before the transfer there shall be substituted a reference to its current use value at that time.

• (7) Notwithstanding section 45(5) of the Finance Act 1965 (compensation and insurance money: disposal to be treated as made when the money is received), the time when a disposal to which this paragraph applies is made shall for the purposes of—

• (a) comparing under sub-paragraph (4) above current use value before and after a part disposal,

• (b) ascertaining whether, for the purposes of subsection (1) of the principal section or this Schedule a part disposal falls before 6th April 1967, or later, and

• (c) ascertaining whether the proviso to subsection (1) of the principal section applies,

be the time when the value of the land is first affected by the event giving rise to, or constituting, the disposal.

Leases

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• (1) Without prejudice to paragraph 2(2) of Schedule 8 to the Finance Act 1965, or any other provision in Part III of that Act, the current use value of a lease (or of any land subject to a lease) is to be ascertained without regard to any premium due under the lease or any sublease, but with regard to all other rights under the lease (and, for the current use value of a lease subject to a sublease, under that sublease); and where under the preceding provisions a lease would have a negative value, the current use value of the lease shall be zero.

• (2) If a lease is granted out of any land after 5th April 1967 then in computing any gain accruing to the person granting the lease on any disposal of the land at a time after the grant of the lease, but while it subsists, the current use value of the land shall not exceed what its current use value would have been immediately after the grant of the lease if it had not been subject to the lease:

Provided that if any of the enactments mentioned in paragraph 8 of this Schedule (enactments making an adjustment to secure that neither a gain or loss accrues) is applicable by way of adjustment of the gain computed in accordance with this sub-paragraph, this sub-paragraph shall also apply to any disposal of the land by the transferee effected while the lease subsists, and so on if any of those enactments is so applicable on the disposal by that transferee.

• (3) Where there is a part disposal of a lease which is a wasting asset by way of the grant of a sublease then for the purpose of apportioning the expenditure attributable to the lease under paragraph 4(1)(a) and 4(1)(b) of Schedule 6 to the Finance Act 1965 the current use value of the sublease (called V (A)) shall be compared with what its current use value (called V(B)) would be if the rent payable under the sublease were the same as the rent payable under the lease, and out of each item of the expenditure there shall be apportioned to what is disposed of—

• (a) if V(A) is not less than V(B), the fraction which, under paragraph 1(3) of Schedule 8 to the Finance Act 1965 is to be written off over the period which is the duration of the sublease, and

• (b) if V (A) is less than V (B), the said fraction multiplied by $V(A)V(B)$

and if the sublease is a sublease of part only of the land comprised in the lease this sub-paragraph shall apply only in relation to a proportion of the said expenditure which is the same as the proportion which the current use value of the land comprised in the sublease bears to the current use value of that and the other land comprised in the lease; and the remainder of that expenditure shall be apportioned to what remains undisposed of.

This sub-paragraph has effect instead of paragraph 7 of Schedule 6 to the Finance Act 1965, and instead of paragraph 4 of Schedule 8 to that Act.

Substitution of current use value for market value

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• (1) Subsection (1) of the principal section shall apply notwithstanding the provisions of section 22(4) or section 24(1) of the Finance Act 1965 or of any other enactment under which a person is to be treated as acquiring or disposing of land for a consideration equal to its market value (but not so as to prevent the other party to any transaction being treated as disposing of or acquiring land for a consideration equal to its market value unless subsection (1) of the principal section also applies to the disposal by that other party).

• (2) Subsection (1) of the principal section shall not affect the value to be placed on land as constituting the consideration for the disposal of some other asset, and this sub-paragraph applies in particular—

• (a) where an asset is disposed of, and the consideration consists of or includes land, but without prejudice to the application of the principal section to the gain accruing on that disposal of the land, or its disposal by the person acquiring it,

• (b) where a shareholder acquires land by way of a capital distribution constituting a disposal or part disposal of his shares, but without prejudice to the application of the principal section to the disposal of the land by the company, and to the shareholder's disposal of the land,

• (c) where, under paragraph 13(2) of Schedule 7 to the Finance Act 1965, a purchaser of an interest in settled property is treated as disposing of his interest and the consideration consists wholly or partly of land forming part of the settled property, but without prejudice to the application of the principal section to the disposal of the land by the trustee, and to any subsequent disposal of the land by the purchaser of the interest.

• (3) Without prejudice to sub-paragraph (2) above, subsection (1) of the principal section shall not affect the value to be placed on land acquired in satisfaction of a debt as constituting the consideration for disposal of the debt, nor the limitation on that value by reference to market value in paragraph 11(3) of Schedule 7 to the Finance Act 1965, but without prejudice to the application of the principal section to the gain accruing on the disposal of the land by the debtor, and to any subsequent disposal of the land by the creditor ; and where the principal section applies to a subsequent disposal by the creditor (and he is the original creditor) the gain accruing on the disposal shall not be reduced under the said paragraph 11(3).

• (4) In paragraphs (d) and (e) of paragraph 2(1) of Schedule 10 to the Finance Act 1965 (jurisdiction in questions of market value and disclosure of information about market value) references to market value shall, in relation to land, include references to current use value ; and any regulations made under the said paragraph (d) or (e) before the passing of this Act shall, except where the context otherwise requires, be construed accordingly.

Carry forward of gain or loss

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The provisions of the principal section shall have effect subject to, and be operated before the operation of—

• (a) paragraph 20(1) of Schedule 7 to the Finance Act 1965 (husband and wife),

• (b) paragraph 2(1) of Schedule 13 to that Act (transfers within group of companies), and

• (c) without prejudice to the provisions of this Schedule relating to section 33 of the Finance Act 1965, any other enactment making an adjustment to secure that neither a gain nor a loss accrues on a disposal.

Replacement of business assets

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• (1) Sub-paragraphs (2), (3) and (4) below shall apply in determining under subsection (1) or subsection (2) of section 33 of the Finance Act 1965 whether all or part of the consideration for a disposal is applied in acquiring other assets.

• (2) The principal section shall not apply and, accordingly, the amount of the consideration for the disposal of land shall not be restricted by virtue of that section to the current use value of the land.

• (3) Any part of the consideration which is applied in meeting betterment levy payable on the disposal shall be left out of account.

• (4) If part of the consideration is applied as described in subsection (1) of the said section 33 in acquiring land any further part of the consideration which is applied in meeting betterment levy payable in respect of material development of that land shall be treated as having been applied in acquiring that land.

• (5) Without prejudice to subsection (11) of the said section 33, the provisions of the principal section and this Schedule shall be applied in fixing the amount of the consideration for the disposal of, or of the interest in, the old assets, or for acquiring, or acquiring the interest in, the new assets, and in fixing the amount of the gain accruing on the disposal, before section 33 is applied, and accordingly the adjustments to be made under paragraphs (a) and (b) of subsection (1), and paragraphs (a) and (b) of subsection (2), of the said section 33 are adjustments of the amount of consideration or gain as computed, where relevant, in accordance with the principal section and this Schedule.

Transfer of business on retirement

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• (1) Section 34(3)(b) of the Finance Act 1965 (relief by reference to value of chargeable business assets of a family company transferred on retirement), and paragraph 2(2) of Schedule 10 to the Finance Act 1966 (restriction of relief on dissolution of family company where chargeable business assets are distributed to shareholders) shall have effect subject to the provisions of this paragraph.

• (2) For the purposes of the said enactments, as they apply on the disposal of land or of any other assets, the value of any chargeable business assets consisting of land shall be the current use value of that land.

Transfer of business to a company

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Where by virtue of paragraph 8(2) of Schedule 7 to the Finance Act 1965 a gain accruing on a disposal of land is not a chargeable gain and, but for that, subsection (1) of the principal section would apply to the disposal, the transferor shall be treated, notwithstanding anything in the said paragraph 8(2), as if the shares acquired by the transferor and representing consideration for the land transferred were acquired by him for a consideration equal to the market value of the land at the time of the transfer reduced by the amount of the chargeable gain which, but for the said paragraph 8(2), would have accrued to him on the disposal (or as the case may be increased by the amount of the allowable loss which would have so accrued), and except as provided by the preceding provisions of this paragraph, the principal section and this Schedule shall not apply to any disposal of the shares.

Appropriations to and from stock-in-trade

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• (1) The principal section shall not be taken as affecting the reference to market value in paragraph 1(1) of Schedule 7 to the Finance Act 1965 (under which a person who appropriates an asset as trading stock is to be treated as selling it for its market value).

• (2) A person to be treated under sub-paragraph (2) of the said paragraph 1 as having acquired any land (at the time when it is appropriated out of trading stock or is retained on his ceasing to carry on the trade) shall be treated as having acquired it for a consideration equal to its current use value at that time.

Capital allowances and renewals allowances

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• (1) Where any capital allowance or renewals allowance, as defined in paragraph 6 of Schedule 6 to the Finance Act 1965, is claimed or claimable in respect of expenditure on land to which this Schedule applies, and part of that expenditure is, under paragraph 3 of this Schedule, excluded from the sums allowable as a deduction in the computation under the said Schedule 6, it shall be assumed for the purposes of that Schedule that the capital allowance or renewals allowance is to be made, or made primarily, in respect of the part of that expenditure which is not so excluded.

• (2) Paragraph 28 of the said Schedule 6 shall apply where, under this Schedule, it is to be assumed that any land was on 6th April 1965 sold by the owner as it applies where that assumption is to be made under Part II of that Schedule.

Tax on chargeable gains and estate duty

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Section 42(3) of the Finance Act 1966 (relief by reference to estate duty in respect of a gift inter vivos) shall not apply to a gift inter vivos consisting of land unless the current use value of the land at the time of the death exceeds the sums within paragraphs (a) and (b) of paragraph 4(1) of Schedule 6 to the Finance Act 1965 which, if the donee had disposed of the asset at the time of the death, would have been allowable in computing the gain accruing on that disposal and, if the said section 42(3) does so apply, that excess shall be the excess referred to in the expression " the said excess " in the provisions of the said section 42(3) which determine the proportion of estate duty by reference to which relief is to be given.

Transitory provision for short-term gains subject to capital gains tax or corporation tax

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The principal section, without subsections (5) and (6), and with paragraphs 1 and 2 of this Schedule shall, notwithstanding that it is to be construed as one with Part III of the Finance Act 1965, apply with any necessary modifications where by virtue of section 17(15) or section 82(3) of the Finance Act 1965 any gain (or loss) accruing on the disposal is to be determined in accordance with the provisions applicable to income tax chargeable under Case VII of Schedule D (and not in accordance with the provisions of the said Part III).

Uniform application of current use values

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• (1) In the computation of a gain accruing on a disposal to which subsection (1) of the principal section applies, it shall be assumed, where relevant, that that subsection and this Schedule also had effect in relation to any prior disposal or other transaction, notwithstanding that the prior disposal or other transaction fell before 6th April 1967 (but on or after 6th April 1965), or that subsection (1) of the principal section was then displaced by an election.

• (2) This paragraph applies in particular as respects a prior part disposal or a prior disposal to which any of the enactments mentioned in paragraph 8 of this Schedule applied.