Finance Act 1968

Part I

Spirits, wine, British wine and tobacco

1

• (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Hydrocarbon oils

2

Reduction in customs duty on goods from Republic of Ireland and abolition of customs duty on hops etc.

3

Duties relating to betting or gaming

4

• (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Purchase tax

5

Customs control of persons entering or leaving the United Kingdom

6

Power to provide, in relation to persons entering the United Kingdom, for reliefs from customs duty and purchase tax and for a simplified computation of duty and tax

7

Vehicles excise duty: increase of rates

8

• (1) For the rates of duty set out in Part II of Schedule 1, of Schedule 3, of Schedule 4 and of Schedule 5 to the Vehicles (Excise) Act 1962 as amended by section 5(1) of the Finance Act 1965 (annual rates of duty for licences other than trade licences) there shall be substituted respectively the rates of duty set out in Parts I, II, III and IV of Schedule 7 to this Act.

• (2) In section 12(5) of the said Act of 1962 as amended by section 5(2) of the said Act of 1965 (trade licences)—

• (a) in paragraph (a) (general trade licences) for the words " forty-five pounds " and " nine pounds " there shall be substituted respectively the words " sixty pounds " and " twelve pounds ";

• (b) in paragraph (b) (limited trade licences) for the words " nine pounds " and " two pounds " there shall be substituted respectively the words " twelve pounds " and " two pounds ten shillings ".

• (3) In relation to any hackney carriage or goods vehicle which is partly used for private purposes, the duty chargeable by virtue of Schedule 2 or Schedule 4 to the said Act of 1962, as. the case may be, shall (if apart from this subsection it would be less) be equal to the duty which would be chargeable in respect of that hackney carriage or goods vehicle if Schedule 5 to that Act, and not the said Schedule 2 or 4, were applicable thereto.

• (4) For the purposes of the said Schedule 4, but without prejudice to the last foregoing subsection, a vehicle shall be treated as a farmer's goods vehicle notwithstanding that it is partly used for private purposes if, apart from that use, it would be a farmer's goods vehicle within the meaning of that Schedule.

• (5) In subsections (3) and (4) of this section " used for private purposes " means—

• (a) as respects a hackney carriage, used otherwise than for the purpose of carrying passengers for hire or reward or of being let for hire;

• (b) as respects a goods vehicle, used otherwise than for the conveyance of goods or burden for hire or reward or for or in connection with a trade or business (including the performance by a local or public authority of its functions).

• (6) This section applies to licences taken out after 19th March 1968.

Vehicles excise duty: trade licences for vehicle testing

9

For the purpose of enabling certain persons engaged in the testing of vehicles to take out trade licences under section 12 of the Vehicles (Excise) Act 1962, that section (which at present applies only to motor traders) shall be amended as follows:—

• (a) in subsections (1) and (2) after the words " motor trader " there shall be inserted the words " or vehicle tester " ;

• (b) at the end of subsection (10) there shall be added the words " ; and ' vehicle tester' means a person, other than a motor trader, who regularly in the course of his business engages in the testing on roads of mechanically propelled vehicles belonging to other persons. "

Continuation of powers under s. 9 of Finance Act 1961

10

• (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Part II

Charge of income tax for 1968-69

11

Income tax for the year 1968-69 shall be charged at the standard rate of 8s. 3d. in the pound, and in the case of an individual whose total income exceeds £2,000 at such higher rates in respect of the excess as Parliament may hereafter determine.

Surtax rates for 1967-68

12

Income tax for the year 1967-68 shall be charged, in the case of an individual whose total income exceeded £2,000, at the same higher rates in respect of the excess as were charged for the year 1966-67.

Charge of corporation tax for financial year 1967

13

Corporation tax shall be charged for the financial year 1967 at the rate of 42J per cent.

Alterations in personal reliefs

14

• (1) For the year 1968-69 and subsequent years of assessment, section 13 of the Finance Act 1957 (relief for persons over 65 with small incomes), as amended by section 16(1) of the Finance Act 1967, shall be amended by substituting—

• (a) for the references to £401 and £643 (the income limits for exemption from tax), references to £415 and £665, and

• (b) for the reference to £180 (the excess over those limits beyond which relief by reduction of tax is excluded), a reference to £230.

• (2) Section 210(1) of the Income Tax Act 1952 (married and single relief) shall for the year 1968-69 and subsequent years of assessment have effect in relation to any claim made by a man who becomes married in the year for which the claim is made, and has not previously in that year been entitled to the higher relief specified in paragraph (a) thereof (married relief), as if the sum specified for that year in that paragraph were reduced, for each month of that year ending before the date of the marriage, by one-twelfth of the amount by which it exceeds the sum specified in paragraph (b) (single relief).

In this subsection " month " means a month beginning with the 6th day of a month of the calendar year.

• (3) A man who becomes married during a year of assessment may by notice in writing to the inspector elect that his marriage be disregarded for the purposes of any claim for that year under section 214 or 215 of the Income Tax Act 1952 or section 17 of the Finance Act 1960 (housekeeper etc. relief), and, in that case, the marriage shall also be disregarded for the purposes of any claim for that year under section 210 of the said Act of 1952 (married and single relief).

• (4) Where for the year 1968-69 an individual is assessable to income tax in respect of payments on account of an allowance or allowances under the Family Allowances Act 1965 or the Family Allowances Act (Northern Ireland) 1966, the total deductions from tax to which, apart from this section, the individual (or, if the individual is a wife assessable in respect of the payments by virtue of an application for separate assessment under section 355 of the Income Tax Act 1952, she and her husband together) would be entitled for the year under sections 210 and 212 to 219 of the said Act of 1952 (certain personal reliefs) shall be reduced, for each allowance if more than one, by an amount equal to tax at the standard rate on £36 or, if the payments in question are payments for a part only of the year, by the following amount or amounts—

• (a) so far as the payments consist of or include payments for, or for a period falling within, the first half of the year, by an amount, or a proportionate part of an amount, equal to tax at the standard rate on £15, and

• (b) so far as the payments consist of or include payments for, or for a period falling within, the second half of the year, by an amount, or a proportionate part of an amount, equal to tax at the standard rate on £21.

• (5) The allowances referred to in subsection (4) above shall be treated as including any allowance payable to an individual in the service of the Crown in lieu of an allowance under either of the enactments there specified.

• (6) The said subsection (4) shall not apply in the case of any payments if the individual assessable in respect thereof is entitled in the year—

• (a) to a widow's allowance, widowed mother's allowance, retirement pension or child's special allowance under the National Insurance Act 1965 or the National Insurance Act (Northern Ireland) 1966, or

• (b) to an allowance under section 21 of the National Insurance (Industrial Injuries) Act 1965 or section 21 of the National Insurance (Industrial Injuries) Act (Northern Ireland) 1966 (allowances in respect of children of deceased), or

• (c) to an allowance granted by the Minister of Social Security under a Royal Warrant, Order in Council or order administered by him to widows of members of the armed forces.

• (7) The said subsection (4) shall not affect the construction of any reference in the Income Tax Acts to the deduction allowable under any particular provision of those referred to in that subsection.

• (8) The preceding provisions of this section shall not be deemed to have required any change to be made in the amounts deducted or repaid under section 157 of the Income Tax Act 1952 (pay as you earn) before 27th April 1968.

Aggregation with income of parents of investment, etc income of unmarried infants not regularly working

15

• (1) Subject to the following provisions of this section, an infant's income, so far as it is income for a year of assessment or part of a year of assessment during which he or she is unmarried and not regularly working, shall in the circumstances specified in Schedule 8 to this Act be treated in accordance with that Schedule as income of his or her parent or parents, and the supplemental provisions contained in that Schedule shall also have effect.

• (2) Subsection (1) above does not apply to—

• (a) earned income, or

• (b) income derived from any sum, or from assets representing any sum, paid by way of, or in satisfaction of a claim for, damages in respect of personal injury to the infant (including any disease, and any impairment of his or her physical or mental condition),

but, subject to those exclusions and to subsection (3) below, the said subsection applies to all such amounts as would fall to be included in computing the infant's total income apart therefrom, and so applies notwithstanding anything in any other enactment (including, except so far as the contrary is expressly provided, any enactment passed after this Act) requiring any amount not to be treated as income of anyone other than the infant.

• (3) Section 397(3) of the Income Tax Act 1952 (settlements on children: income not exceeding £5 not to be treated as income of settlor by virtue of section 397(1) of that Act) shall cease to have effect, but neither the said section 397(1) nor subsection (1) above shall have effect in relation to an infant for any year of assessment for which his aggregate income, so far as it would fall within one or other of those provisions but for this exception, does not exceed £5.

• (4) An infant is to be treated for the purposes of this section as working regularly if, and only if, he or she is engaged in a full-time occupation, not being one entered into during an interval not exceeding fifteen months between two periods of full-time education, and intends to be regularly engaged in it or another such occupation.

In this subsection " occupation" means any office, employment, trade, profession or vocation.

• (5) Income falling by virtue of this section and the said Schedule 8 to be treated as income of an infant's parent shall not be taken into account for the purposes of section 212(4) of the Income Tax Act 1952 (reduction in child relief where child entitled in own right to income exceeding £115 per year).

• (6) Section 21 of the Finance Act 1965 (calculation of capital gains tax by reference to liability to income tax) shall have effect as if this section, except so far as it affects the operation of section 397(1) of the Income Tax Act 1952, had not been enacted.

• (7) Any tax falling to be assessed in respect of income which is to be treated by virtue of this section and the said Schedule 8 as income of an infant's parent shall, instead of being assessed on the infant, or on the infant's trustee, guardian, curator or committee, or on the infant's executors or administrators, be assessable on the parent, or, in the appropriate cases, on the parent's trustee, guardian, curator or committee, or on the parent's executors or administrators.

• (8) This section shall have effect for the year 1969-70 and subsequent years of assessment.

Life policies, life annuity contracts and capital redemption policies

16

• (1) Subject to the provisions of this section—

• (a) relief from tax under section 219 of the Income Tax Act 1952 shall be granted in respect of the premiums payable under a policy of life insurance only if the policy is a qualifying policy within the meaning of Part I of Schedule 9 to this Act;

• (b) Part II of that Schedule shall have effect for the purpose of imposing, in the manner and to the extent therein provided, charges to surtax and to tax under section 77 of the Finance Act 1965 (shortfall in distributions of close company) in respect of gains to be treated in accordance with that Part as arising in connection with policies of life insurance, contracts for life annuities, and capital redemption policies ; and

• (c) section 241 of the said Act of 1952 (no surtax deduction for interest etc. on loans used to pay premiums) shall be amended as follows—

• (i) subsection (3)(d) of that section (exemption where annual premiums do not exceed one-eighth of capital sum payable on death) shall not apply to any interest or other sum unless it is shown to the satisfaction of the Board that it is exceptional for the individual in question to apply borrowed money to or towards the payment of premiums to which that provision applies, and that no such money has been so applied by him in any of the three years of assessment immediately preceding that in which he so applies the money on or in respect of which the interest or other sum in question is payable, and

• (ii) subsection (3)(e) of that section (exemption for interest etc. not exceeding £100 in the case of other premiums each of which is one of a series of equal premiums payable at equal intervals of not more than one year) shall have effect without the exclusion of premiums falling within the said subsection (3)(d), and, in the case of premiums payable under a qualifying policy within the meaning of Part I of the said Schedule 9, with the omission of the words from " each of which " to " one year ".

• (2) The supplementary provisions contained in Part III of the said Schedule 9 shall also have effect.

• (3) Nothing in this section or the said Schedule 9 shall apply—

• (a) to any policy of life insurance having as its sole object the provision on an individual's death or disability of a sum substantially the same as any amount then outstanding under a mortgage of his residence, or of any premises occupied by him for the purposes of a business, being a mortgage the principal amount secured by which is repayable by instalments payable annually or at shorter regular intervals, or

• (b) to any policy of life insurance issued in connection with a sponsored superannuation scheme as defined in section 22(10) of the Finance Act 1956, if one-half at least of the cost of the scheme is borne by the person or persons under whom the relevant offices or employments are held.

In the application of this subsection to Scotland, for the reference to a mortgage there shall be substituted a reference to a heritable security within the meaning of the Conveyancing (Scotland) Act 1924 (but including a security constituted by ex facie absolute disposition or assignation).

• (4) In this section and the said Schedule 9 "life annuity" means any annuity to which section 27 of the Finance Act 1956 applies, and " capital redemption policy " means any insurance effected in the course of a capital redemption business as defined in section 431(3) of the Income Tax Act 1952.

• (5) Paragraphs (a) and (c) of subsection (1) above shall have effect for the year 1967-68 and subsequent years of assessment, but, in the case of paragraph (a), only as respects policies of life insurance issued in respect of insurances made after 19th March 1968, and, in the case of paragraph (c), only as respects interest on, and other sums payable in respect of, money borrowed after that date ; and paragraph (b) of that subsection shall have effect for the year 1968-69 and subsequent years of assessment, but only as respects policies of life insurance issued as aforesaid, contracts for life annuities entered into after the said 19th March, and capital redemption policies effected after that date.

• (6) A policy of life insurance issued in respect of an insurance made on or before 19th March 1968 shall be treated for the purposes of subsection (5) above and the said Schedule 9 as issued in respect of one made after that date if it is varied after that date so as to increase the benefits secured or to extend the term of the insurance:

Provided that a variation effected before the end of the year 1968 shall be disregarded for the purposes of this subsection if its only effect is to bring into conformity with paragraph 2 of that Schedule (qualifying conditions for endowment policies) a policy previously conforming therewith except as respects the amount guaranteed on death, and no increase is made in the premiums payable under the policy.

Small maintenance payments

17

• (1) In section 205(1)(i) of the Income Tax Act 1952 (definition of small maintenance payments) for the words from ' to be made weekly' to ' subsection (3) of this section' there shall be substituted the words ' to be made—

• (A) weekly at a rate not exceeding £7 10s. 0d. per week, or

• (B) monthly at a rate not exceeding £32 10s. 0d. per month'.

• (2) Subsection (1) above shall not affect payments falling due before 6th April 1969 under an order made before the coming into force of this section:

Provided that where an order so made is varied or revived at any time after the coming into force of this section, subsection (1) above shall apply in relation to payments falling due under the order after that time.

• (3) Where a court makes an order in consequence of which payments falling due under a previous order which is not already a small maintenance order within the meaning of the said section 205 will be treated as small maintenance payments within the meaning of that section by virtue of the proviso to subsection (2) above, the court shall furnish to the Board, in such form as the Board may prescribe, particulars of those orders, the names of the persons for the time being liable to make, and entitled to, those payments and, so far as known to the court, the addresses of those persons.

• (4) The Treasury may from time to time by order increase the amount of £7 10s. 0d. and the amount of £32 10s. 0d. in the said section 205(1)(i) either as respects payments within paragraph (a) of the said subsection (1) (payments to a person who is or has been a party to a marriage), or as respects payments within paragraph (b) of that subsection (payments for children), or as respects both.

• (5) An order which increases, or further increases, the said amount of £7 10s. 0d. for a class of payments shall increase, or further increase, the amount of £32 10s. 0d. for that class of payments so that it is 52 twelfths of the weekly amount or, if that does not give a convenient round sum, such other amount as appears to the Treasury to be the nearest convenient round sum.

• (6) An order under subsection (4) above may contain provisions corresponding to subsections (2) and (3) above so as to postpone the effect of the order under this section in relation to payments under court orders made before the coming into force, for other purposes, of the order under this section.

• (7) An order under subsection (4) above shall be made by statutory instrument subject to annulment in pursuance of a resolution of the Commons House of Parliament.

• (8) Section 205(3) of the Income Tax Act 1952 and section 40(1)(c) of the Finance Act 1960 (which are superseded by this section) shall cease to have effect, so however that the repeal thereof shall not affect payments in relation to which subsection (1) of this section is excluded by subsection (2) of this section.

• (9) This section shall come into force on the passing of this Act.

Cash basis, etc.: post-cessation and other receipts;

18

• (1) Where any trade, profession or vocation the profits or gains of which are chargeable to tax under Case I or Case II of Schedule D has been permanently discontinued, and the profits or gains for any period before the discontinuance were computed on a conventional basis (that is to say, were computed otherwise than by reference to earnings), tax shall be charged under Case VI of Schedule D in respect of sums to which this subsection applies which are received on or after the discontinuance.

This subsection applies to all sums arising from the carrying on of the trade, profession or vocation during any period before the discontinuance (not being sums otherwise chargeable to tax) in so far as their amount or value was not brought into account in computing the profits or gains for any period before the discontinuance.

• (2) Where, in the case of any trade, profession or vocation the profits or gains of which are chargeable to tax under Case I or Case II of Schedule D there has been—

• (a) a change from a conventional basis to the earnings basis, or

• (b) a change of conventional basis which may result in receipts dropping out of computation,

tax shall be charged under Case VI of Schedule D in respect of sums to which this subsection applies which are received after the change, and before the trade, profession or vocation is permanently discontinued.

This subsection applies to all sums arising from the carrying on of the trade, profession or vocation during any period before the change (not being sums otherwise chargeable to tax) in so far as their amount or value was not brought into account in computing the profits or gains for any period.

• (3) Schedule 10 to this Act shall have effect for supplementing and giving effect to this and the next following section, and in that Schedule " the principal section " means this section.

• (4) Subsection (1) above shall not apply to sums to which section 32 of the Finance Act 1960 (post-cessation receipts) applies despite the words " (not being sums otherwise chargeable to tax)" in subsection (2) of the said section 32, and shall not apply to sums to which the said section 32 would have applied but for paragraphs (a) and (b) of subsection (3) of that section (non-residents and copyright).

• (5) For the purposes of this and the next following section and the said Schedule—

• (a) " by reference to earnings" shall be construed in accordance with section 32(5) of the Finance Act 1960, and " earnings basis " shall be construed accordingly,

• (b) " conventional basis" has the meaning given by subsection (1) above, so that profits or gains are computed on a conventional basis if computed otherwise than by reference to earnings,

• (c) there is a change from a conventional basis to the earnings basis at the end of a period the profits or gains of which were computed on a conventional basis if the profits or gains of the next succeeding period are computed by reference to earnings,

• (d) if the profits or gains of two successive periods are computed on different conventional bases, a change of conventional basis occurs at the end of the earlier period.

• (6) For the said purposes any reference to the permanent discontinuance of a trade, profession or vocation includes a reference to the occurring of any event which, under any of the provisions in the Income Tax Acts or the Corporation Tax Acts, is to be treated as equivalent to the permanent discontinuance of a trade, profession or vocation; and the trade, profession or Vocation carried on before a permanent discontinuance shall not be treated for those purposes as the same as any carried on after the discontinuance.

• (7) Subsection (1) above shall not apply where the permanent discontinuance fell before 19th March 1968, but, subject to that, has effect as respects sums received at any time on or after that date, whether before or after the passing of this Act, and as respects income tax or corporation tax for years of assessment from the year 1967-68 onwards or any accounting period ending on or after 19th March 1968.

• (8) Subsection (2) above shall not apply where the change took place before 19th March 1968 and before that date—

• (a) the decision had been taken to prepare accounts reflecting the change, or

• (b) the trade, profession or vocation had been permanently discontinued,

but, subject to that, has effect as respects sums received at any time before or after that date, and as respects income tax or corporation tax for any past or future year of assessment or accounting period.

Cash basis, etc.: relief for individuals

19

• (1) If an individual born before 6th April 1917, or the personal representative of such an individual, is chargeable to tax under the last preceding section and—

• (a) the individual was engaged in carrying on the trade, profession or vocation on 18th March 1968, and

• (b) the profits or gains of the trade, profession or vocation were not computed by reference to earnings in the period in which the said 18th March fell, or in any subsequent period ending before or with the relevant date,

the net amount with which he is so chargeable to tax shall be reduced by multiplying that net amount by the fraction given below.

• (2) Where subsection (2) of the last preceding section applies in relation to a change of basis taking place on a date before 19th March 1968, then in relation to tax chargeable by reference to that change of basis, that earlier date shall be substituted for the date in paragraph (a) above, and paragraph (b) above shall be omitted.

• (3) The said fraction is—

• (a) where on 5th April 1968 the individual had not attained the age of fifty-two, nineteen-twentieths,

• (b) where on that date he had attained the age of fifty-two, but had not attained the age of fifty-three, eighteen-twentieths, and so on reducing the fraction by one-twentieth for each year he had attained, up to the age of sixty-four,

• (c) where on that date he had attained the age of sixty-five or any greater age, five-twentieths.

• (4) In this section—

• " the net amount " with which a person is chargeable to tax under the last preceding section means the amount with which he is so chargeable after making any deduction authorised by Schedule 10 to this Act, but before giving any relief under this section,

• " relevant date "— in relation to tax under subsection (1) of the last preceding section, means the date of the permanent discontinuance, in relation to tax under subsection (2) of that section, means the date of the change in basis.

Partnerships of companies and individuals

20

• (1) Where one or more of the persons engaged throughout all or any part of a year of assessment in carrying on a trade to which section 73 of the Finance Act 1965 (company partnerships) applies is an individual, this section shall have effect as respects income tax which, in accordance with subsections (3) and (4) of that section, is chargeable for that year.

• (2) Notwithstanding any difference between the partners' interests during the basis period and their interests during the year of assessment, the amount of the individual's income from the partnership for the year of assessment, or the total of the amounts of the individuals' incomes from the partnership for that year, shall be deemed to be not less than the profits of the basis period reduced, where any share was apportioned to a company under subsection (2) of the said section 73, by the amount of that company's share.

• (3) Where there are two or more individuals, and, but for subsection (2) above, the total of the amounts of the individuals' incomes from the partnership for the year would fall short of the profits of the basis period reduced as aforesaid, that amount shall be apportioned—

• (a) according to the individuals' interests during the year of assessment, disregarding any company's interest, and

• (b) in so far as that does not determine or fully determine the apportionment, between the individuals in equal shares.

• (4) In this section—

• (a) " basis period ", in relation to a year of assessment, means any accounting period or part of an accounting period which is, or forms part of, the period on the profits or gains of which income tax for the year of assessment in question falls to be computed under Schedule D in respect of the trade, and

• (b) references to an individual's income from the partnership are references to that income before deduction of capital allowances or charges on income.

• (5) It is hereby declared that in the said section 73 " profits " does not include chargeable gains.

• (6) This section shall be construed as one with the said section 73.

Tax consequences of dealings in know-how

21

• (1) Subject to subsections (3) and (6) below, where after 19th March 1968 a person—

• (a) acquires know-how for use in a trade carried on by him, or

• (b) acquires know-how, and thereafter sets up and commences a trade in which it is used,

writing-down allowances in respect of his expenditure on the acquisition, so far as not otherwise deducted for the purposes of corporation tax or income tax, shall be made in taxing the trade during a writing-down period of six years beginning with the chargeable period related to the expenditure; and if during that period he ceases to carry on the trade, an allowance equal to the amount of that expenditure then unallowed shall be made in taxing the trade for the chargeable period related to the discontinuance.

For the purposes of this subsection, a person incurring expenditure on know-how before the setting up and commencement of the trade in which it is used shall be treated as incurring it on that setting up and commencement.

• (2) Subject to the said subsection (6), where after 19th March 1968 a person disposes of know-how which has been used in a trade carried on by him, and continues to carry on the trade after the disposal, the amount or value of any consideration received by him for the disposal shall, so far as it is not chargeable to tax as a revenue or income receipt, be treated for all purposes as a trading receipt.

• (3) Where after the said 19th March a person disposes of a trade or part of a trade and, together therewith, of know-how used therein, any consideration received by him for the know-how shall be dealt with, in relation both to him and to the person acquiring the know-how, if that person provided the consideration, and for the purposes of corporation tax, income tax and the capital gains tax, as a payment for goodwill :

Provided that this subsection shall not apply—

• (a) to either of the persons concerned if they so elect by notice in writing given jointly to the inspector within two years of the disposal, or

• (b) to the person acquiring the know-how if the trade in question was, before the acquisition, carried on wholly outside the United Kingdom ;

and where know-how is disposed of with a trade or part of a trade, but this subsection is excluded in relation to the person acquiring it, subsection (1) above shall apply as if that person had acquired it for use in a trade previously carried on by him.

• (4) Subject to subsection (6) below, any consideration received by a person for the disposal of know-how shall, if it is neither chargeable to tax under subsection (2) above, or otherwise as a revenue or income receipt, nor dealt with in relation to him as a payment for goodwill as mentioned in subsection (3) above, be treated as a profit or gain chargeable to tax under Case VI of Schedule D:

Provided that, where the person concerned has incurred expenditure wholly and exclusively in the acquisition or disposal of the know-how, the amount which would apart from this proviso be treated as a profit or gain so chargeable shall be reduced by the amount of that expenditure; but a deduction shall not be twice made in respect of the same expenditure, whether under this proviso or otherwise.

• (5) Where subsection (4) above has effect in the case of an individual who devised the know-how in question, whether alone or jointly with any other person, the amount in respect of which he is chargeable to tax by virtue of that subsection shall be treated for all purposes as earned income.

• (6) The preceding provisions of this section, except subsection (3), shall not apply on any sale of know-how where the buyer is a body of persons over whom the seller has control, or the seller is a body of persons over whom the buyer has control, or both the seller and the buyer are bodies of persons and some other person has control over both of them; and the said subsection (3) shall apply on any such sale with the omission of the proviso.

In this subsection, references to a body of persons include references to a partnership.

• (7) In this section " know-how " means any industrial information and techniques likely to assist in the manufacture or processing of goods or materials, or in the working of a mine, oil-well or other source of mineral deposits (including the searching for, discovery, or testing of deposits or the winning of access thereto), or in the carrying out of any agricultural, forestry or fishing operations.

• (8) Where, in connection with any disposal of know-how, a person gives an undertaking (whether absolute or qualified, and whether legally valid or not) the tenor or effect of which is to restrict his or another's activities in any way, any consideration received in respect of the giving of the undertaking or its total or partial fulfilment shall be treated for the purposes of this section as consideration received for the disposal of the know-how.

• (9) Part I of the Capital Allowances Act 1968 shall have effect, and this section shall be construed, as if this section were contained in that Part, with references in that Part to property and its purchase or sale including references to know-how and its acquisition or disposal, with subsection (2) of section 75 (effect of providing for writing-down allowances during a writing-down period of a specified length) applying thereto as it applies to the provisions specified in subsection (1) of that section, and with the omission of section 78 (special provisions as to controlled sales).

Interest payable abroad

22

• (1) Subject to subsection (2) below, in section 52(5) of the Finance Act 1965 (conditions in which payments of interest to non-residents are charges on income for corporation tax) paragraph (b) (under which the liability must have been incurred wholly or mainly for the purposes of activities of the trade carried on outside the United Kingdom) shall apply to interest which is payable in the currency of a territory outside the scheduled territories as if in that paragraph the words " carried on outside the United Kingdom " were omitted.

• (2) Subsection (1) above shall not apply where—

• (a) the trade is carried on by a body of persons over whom the person entitled to the interest has control, or

• (b) the person entitled to the interest is a body of persons over whom the person carrying on the trade has control, or

• (c) the person carrying on the trade and the person entitled to the interest are both bodies of persons, and some other person has control over both of them.

In this subsection the references to a body of persons include references to a partnership, and " control" has the meaning assigned to it by section 87(1) of the Capital Allowances Act 1968.

• (3) In section 138(1) of the Income Tax Act 1952 (income tax provisions comparable to the said section 52(5)(b)) for paragraph (b) (payment of interest to be secured on trading assets abroad) there shall be substituted the following paragraph—

(b) that either— (i) the liability to pay the interest was incurred wholly or mainly for the purposes of activities of the trade carried on outside the United Kingdom, or (ii) the interest is payable in the currency of a territory outside the scheduled territories, and

.

• (4) In this section (including the amendments made by this section) " the scheduled territories " means the territories specified in Schedule 1 to the Exchange Control Act 1947 as for the time being in force.

• (5) This section shall apply for income tax purposes for the year 1968-69 and subsequent years of assessment, and for corporation tax purposes to accounting periods ending on or after 6th April 1968.

Stock dividend options

23

• (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Shortfall in distributions of close company: amendment as respects time limit for dividends

24

• (1) Paragraph 9(1)(a) of Schedule 18 to the Finance Act 1965 (under which, in determining for any accounting period whether there has been a shortfall in the distributions of a close company, dividends may be treated as distributions for that period only if they are paid for the period and during or within twelve months after it) shall be amended so as to read—

(a) any dividends which are declared in respect of the period, and are paid during the period or within eighteen months after it; and

.

• (2) The preceding subsection shall not have effect as respects any accounting period ending before 20th March 1967.

Dividends paid out of pre-1966-67 profits

25

• (1) This section has effect as respects the calculation of the three year surplus under section 85 of the Finance Act 1965.

• (2) If the company's dividends paid in the years 1966-67, 1967-68 and 1968-69 are related to periods of accounts exceeding three years in total, the amount at which those dividends are brought into the calculation shall not exceed the amount of the company's dividends which are related to the first three years of that total period, and which were paid in the years 1966-67, 1967-68 and 1968-69, or earlier:

Provided that if any of the dividends paid in 1966-67, 1967-68 and 1968-69 are related to any period of account ending before 6th April 1965, this subsection shall apply with the substitution, for the first three years of that total period, of a period of three years beginning with the period of account in which that date falls.

• (3) This section shall not apply to a company if before 21st June 1968 a resolution was passed or an order was made for the winding-up of the company, or any other act was done for a like purpose in the case of a winding-up otherwise than under the Companies Act 1948, and, subject to that, subsection (2) above shall apply where, under subsection (7) of the said section 85, the three year surplus is to be computed by reference to the period ending with the last accounting period of a company which is wound up, as if for references to three years there were substituted references to a period equal in length to the period beginning with the financial year 1966 and ending with its last accounting period.

• (4) Any adjustment under the preceding provisions of this section in the amount at which the dividends are brought into the calculation shall be made before taking account, under subsection (6)(a) of the said section 85, of any amount treated under section 83 of the Act as a dividend paid in the year 1966-67, and before applying Part I of Schedule 7 to the Finance Act 1966 (groups of companies) so, however, that—

• (a) this section shall not affect the proportion applicable under paragraph 1 of the said Schedule 7 in reducing a three year surplus as so adjusted,

• (b) in paragraph 2 (increase of three year surplus of principal company where three year surplus of a subsidiary is reduced) sub-paragraph (2) (which refers to the reductions under paragraph 1) shall have effect as if the preceding provisions of this section had not been enacted,

• (c) in applying sub-paragraph (3) of the said paragraph 2 (which attributes to the principal company its share of the excess of dividends over distributable profits of subsidiaries) the principal company's dividends shall be brought in at the adjusted amount, but a subsidiary's dividends shall be brought in at the unadjusted amount.

• (5) For the purposes of this section—

• (a) " dividend " does not include a capital dividend,

• (b) a dividend is related to the period of account for which it is expressed to be payable and, if not expressed to be payable for any period of account, is related to the period of account in which it is paid,

• (c) where under this section it is necessary to ascertain the dividends related to a period of three years which includes part only of a period of account, the two parts of that period of account shall be treated as separate periods of account, and the amount of the dividends related to the entire period of account shall be apportioned to the respective parts on a time basis according to the respective lengths of the parts,

and in the provisions about paragraph 2 of Schedule 7 to the Finance Act 1966 " the principal company " means the company whose three year surplus is being computed and "subsidiary" means any other member of the group mentioned in that paragraph.

Dividends paid out of pre-1966-67 profits: groups of companies

26

• (1) In applying paragraph 2(3)(a) of Schedule 7 to the Finance Act 1966 (which attributes to the principal company its share of the excess of dividends over distributable profits of subsidiaries) where any subsidiary is itself a company having a notional surplus which is a three year surplus which falls to be increased under the said paragraph 2, that subsidiary's excess of dividends over distributable profits shall be the amount produced by the said paragraph 2 (3) (a) in calculating that increase, so that there is attributed to the principal company the appropriate share of the excess of dividends over distributable profits not only of the subsidiary, but also of some one or more other members of the group paying dividends to the subsidiary.

This subsection applies even if the subsidiary's three year surplus as so increased is then reduced or extinguished under paragraph 1 of the said Schedule 7.

• (2) In this section " the principal company " means the company whose three year surplus is being computed under the said paragraph 2 and " subsidiary " means any other member of the group mentioned in that paragraph.

Dividend stripping: time of acquisition of holding

27

• (1) ' In sub-paragraph (3) of paragraph 4 of Schedule 17 to the Finance Act 1965 the words " company and that other company " shall be substituted for the words " three companies " in both places where they occur.

• (2) This section applies to a distribution made after 10th April 1968.

Prevention of double relief in respect of general annuities paid by non-resident assurance companies

28

• (1) A company which is not resident in the United Kingdom but carries on through a branch or agency there any general annuity business within the meaning of section 24 of the Finance Act 1956 shall not be entitled to treat any part of the annuities paid by it which are referable to that business (annuities, that is to say, which either are deductible in computing the profits of that business for corporation tax purposes or constitute for those purposes charges on income) as paid out of profits or gains brought into charge to income tax.

In this subsection " branch or agency " has the meaning given by section 89(2)(b) of the Finance Act 1965.

• (2) Subsection (1) above shall have effect as respects annuities deductible in computing profits or, as the case may be, constituting charges on income for corporation tax accounting periods ending before or with, as well as after, the passing of this Act.

Double taxation relief: credit for foreign tax

29

• (1) Paragraphs 2 and 3 of Schedule 16 to the Finance Act 1965 (computation of income subject to foreign tax, and allowance of credit up to marginal rate of United Kingdom income tax) shall have effect in place of paragraphs 5, 6 and 8 of Schedule 16 to the Income Tax Act 1952, and shall be construed and have effect as if contained in that Schedule.

• (2) Where credit for foreign tax falls to be allowed in respect of any income of a company, then in computing the amount of the income for the purposes of corporation tax paragraph 7 of Schedule 16 to the Income Tax Act 1952 shall not apply, but instead paragraph 2 of Schedule 16 to the Finance Act 1965 shall apply as it applies for the purposes of income tax.

• (3) This section has effect as respects relief from income tax or capital gains tax for the year 1968-69 and subsequent years of assessment, and as respects relief from corporation tax for the financial year 1968 and subsequent financial years.

Double taxation relief: group investment in overseas company

30

• (1) This section applies to any provision in arrangements having effect by virtue of section 347 of the Income Tax Act 1952 which—

• (a) applies to any company which controls, directly or indirectly, not less man a stated fraction of the voting power of a company resident in a specified territory outside the United Kingdom, and

• (b) in allowing credit against United Kingdom tax on dividends paid to any such company by the company so resident, authorises account to be taken of tax payable by the company so resident in respect of the profits out of which the dividends were paid.

• (2) Credit shall be allowed as if the provision treated the subsidiary of a company which owns, directly or indirectly, the stated fraction of the voting power of a company resident in the specified territory as if that subsidiary also owned that fraction of the voting power of the company so resident.

• (3) Credit shall not be allowable both by virtue of this section and under Schedule 17 to the Income Tax Act 1952 in the case of the same income.

• (4) For the purposes of this section a company is a subsidiary of another if the other company controls, directly or indirectly, not less than fifty per cent, of the voting power of the first company, and this section shall be construed as if it formed part of Schedule 16 to the Income Tax Act 1952.

• (5) This section has effect as respects dividends paid (in the sense of section 89(4) of the Finance Act 1965) on or after 1st April 1968.

Part III

Capital gains

Capital gains tax: exemption for small amounts

31

Quoted securities held on 6th April 1965

32

Government securities issued at a discount

33

Other amendments of enactments relating to capital gains

34

Estate duty

Gifts, etc.: period of charge

35

• (1) In the case of a death after 19th March 1968 " seven years " shall be substituted for " five years " in the enactments listed in paragraph 1 of Schedule 14 to this Act, except as respects a period beginning on or before 19th March 1963.

• (2) Where any property is deemed to pass on a death after 19th March 1968 by virtue of a relevant disposition or event (estate duty being chargeable on the property apart from this subsection), and the death takes place in the three last years of the seven-year period, the principal value of the property shall be reduced for estate duty purposes—

• (a) by 15 per cent, thereof, if the death takes place in the first of those three years,

• (b) by 30 per cent, thereof, if the death takes place in the second of those three years,

• (c) by 60 per cent, thereof, if the death takes place in the last of those three years.

In this subsection " the seven-year period " means the period of seven years beginning with the relevant disposition or event.

• (3) Subsection (2) above shall have effect in substitution for subsection (1) of section 64 of the Finance Act 1960, and as if contained in that section, and in subsection (3)(b) of that section " seven-year " and " seven " shall be substituted for " five-year " and " five ".

• (4) Subsection (2) above shall not have effect so as to give a lesser percentage reduction in the principal value of any property than the percentage reduction (if any) which, assuming that the deceased had died on 19th March 1968, would have fallen to be made under subsection (1) or subsection (3)(b) of the said section 64 (without the amendments made by this section) as respects the property:

Provided that this subsection shall not apply unless in the period from 19th March 1968 to the death the deceased was entirely excluded from possession and enjoyment of the property, and of any benefit to him by contract or otherwise.

• (5) The further transitional and consequential provisions of the said Schedule to this Act shall have effect in the case of a death after 19th March 1968, and in that Schedule " the principal section " means this section.

Marriage gifts

36

• (1) Where the deceased made a gift in consideration of marriage, and—

• (a) the gift was an outright gift to a child or remoter descendant of the deceased, or

• (b) the deceased was the parent or remoter ancestor of either party to the marriage, and either the gift was an outright gift to the other party to the marriage or the property comprised in the gift was settled by the gift, or

• (c) the deceased was a party to the marriage, and either the gift was an outright gift to the other party to the marriage or the property comprised in the gift was settled by the gift,

then—

• (i) if the principal value of the property comprised in the gift did not exceed £5,000, section 2(1)(c) of the Finance Act 1894 shall not apply to the gift, and

• (ii) if the principal value of the property comprised in the gift exceeded £5,000, the said section 2(1)(c) shall only apply to the excess.

• (2) Where the deceased made a gift in consideration of marriage and subsection (1) above does not apply, then—

• (a) if the principal value of the property comprised in the gift did not exceed £1,000, the said section 2(1)(c) shall not apply to the gift,

• (b) if the principal value of the property comprised in the gift exceeded £1,000, the said section 2(1)(c) shall only apply to the excess.

• (3) In the case of any one death—

• (a) the total amount of the relief conferred by subsection (1) above in respect of any one marriage shall not exceed £5,000, and

• (b) the total amount of the relief conferred by subsection (2) above in respect of any one marriage shall not exceed £1,000,

and the reductions required to give effect to paragraph (a) or paragraph (b) above shall be made rateably according to the respective principal values of the gifts in respect of which relief may be given.

• (4) For the purposes of this section the principal value of any property shall be arrived at before making any reduction under section 64 of the Finance Act 1960 (graduation of charge).

• (5) In this section " child" includes an illegitimate child, an adopted child and a step-child, and " parent", " descendant" and " ancestor " shall be construed accordingly.

• (6) In section 59(2) of the Finance (1909-10) Act 1910 the words " which are made in consideration of marriage or" shall cease to have effect, and references to the provision so repealed in section 53 of the Finance Act 1963 or elsewhere shall be taken as references to this section.

• (7) This section has effect as respects a gift made after 19th March 1968, and in the case of a death after that date.

• (8) References in this and the next following section to section 2(1)(c) of the Finance Act 1894 are references to so much of that paragraph as makes gifts inter vivos property which is deemed to pass on the death.

Gifts forming part of normal expenditure of deceased

37

• (1) Section 2(1)(c) of the Finance Act 1894 shall not apply to a gift if it is shown to the satisfaction of the Board or, on an appeal under section 10 of the Finance Act 1894, of the court entertaining the appeal that the gift was part of the normal expenditure of the deceased, that the deceased made the gift out of his income and that, after allowing for all gifts forming part of his normal expenditure, the deceased was left with sufficient income to maintain his usual standard of living.

• (2) A payment of a premium on a policy of assurance on the life of the deceased, or a gift of money or money's worth applied, directly or indirectly, in payment of such a premium, shall not for the purposes of subsection (1) above be regarded as part of the normal expenditure of the deceased if, when the insurance was made, or at any earlier or later time, an annuity was purchased on the life of the deceased, unless it is shown to the satisfaction of the Board or, on an appeal under section 10 of the Finance Act 1894, of the court entertaining the appeal, that the purchase of the annuity and the making or any variation of the insurance, or of any prior insurance for which the first-mentioned insurance was directly or indirectly substituted, were not associated operations.

In this subsection " associated operations " has the meaning given by section 59 of the Finance Act 1940.

• (3) In section 59(2) of the Finance (1909-10) Act 1910 the words from " which are proved " to " the circumstances or " (exemption for gifts forming part of normal expenditure) shall cease to have effect.

• (4) This section has effect as respects a gift made after 19th March 1968, and in the case of a death after that date.

Aggregation

38

• (1) For the purposes of aggregation, any property which under section 2(1)(c) of the Finance Act 1894 (gifts inter vivos and other dispositions in life-time of the deceased) passes on the death shall be property in which the deceased had an interest.

• (2) Subsection (1) above applies in particular in relation to—

• (a) section 4 of the Finance Act 1894 (non-aggregation of property in which deceased never had an interest), and

• (b) section 33(2) of the Finance Act 1954 (policies of assurance, etc., in which the deceased never had an interest).

• (3) If any property passes on a death under the said section 2(1)(c), and all or part of the property also passes, as non-aggregable property, on the death otherwise than under the said section 2(1)(c), estate duty shall be charged and levied on the property as if it passed solely under the said section 2(1)(c).

• (4) If part of any property passes on a death under the said section 2(1)(c), and that part is comprised in property which, or part of which, also passes, as non-aggregable property, on the death otherwise than under the said section 2(1)(c), estate duty shall be charged and levied on the part passing under the said section 2(1)(c) as if it passed solely thereunder, and shall be charged and levied separately on any other part of the property.

• (5) For the purposes of subsections (3) and (4) above—

• (a) property passes as non-aggregable property under any estate duty provision if, on the footing that it so passes, it would be property in which the deceased never had an interest,

• (b) the amount or value of any property or part of property shall be ascertained before any reduction under section 64 of the Finance Act 1960 (graduation of charge) and

• (c) references to any property or part of property include references to rights or interests in the property.

• (6) This section shall apply in the case of a death after 19th March 1968.

• (7) Subject to the following subsections, this section shall not apply to property passing on the death as comprised in a gift of, or of rights under, a policy of assurance on the life of the deceased issued in respect of an insurance made before 20th March 1968.

• (8) If the aggregate value of all policies related to the death which were issued in respect of an insurance made before 20th March 1968 exceeds £25,000 the relief given by subsection (7) above shall apply only to a fraction of the said property, and that fraction shall be £25,000 divided by the said aggregate value:

Provided that the rate at which estate duty is to be charged in respect of that fraction of any property shall not be less than the rate at which it would have been charged if the relief given by subsection (7) was not restricted by this subsection.

• (9) The relief given by subsection (7) above in respect of a policy which had matured or been surrendered before 20th March 1968 shall not be reduced under subsection (8) above, and the value of all such matured or surrendered policies shall be left out of account under the said subsection (8).

• (10) If the terms of a policy are varied after 19th March 1968 in such a way that the value of the policy is greater than it would have been if no variation had been made—

• (a) the relief given by subsection (7) above shall apply only to such part of any gift as can justly be attributed to the value the policy would have had if not varied, and

• (b) the policy shall be brought into subsection (8) above at that value, and the fraction in that subsection shall be applied to the said part of the gift.

• (11) Where by virtue of subsection (8) or subsection (10) above, or of both of those subsections, the relief given by subsection (7) above applies only to a part of any gift, the part of the gift to which the relief does not apply shall in accordance with subsection (1) above be property in which the deceased had an interest and shall be aggregated under section 4 of the Finance Act 1894 accordingly.

• (12) The provisions of this section shall apply to a contract for a deferred annuity becoming payable on the death of the deceased as if it were a policy of assurance on the life of the deceased.

• (13) For the purposes of this section—

• (a) the value of a policy is the amount or value, as at the death, of the sums payable or other benefits arising under the policy, whether or not the policy continues on foot until the death, except that the value of a policy which has been surrendered at a time before the death is the value at that time of the consideration for the surrender;

• (b) a policy is related to the death if it is a policy on the life of the deceased, if property comprised in a gift of, or of rights under, the policy passes on the death, and if that property would, if this section had not been enacted, have been property in which the deceased never had an interest.

Discretionary trusts

39

• (1) This section has effect, in the case of a death after 19th March 1968, for all the purposes of the enactments relating to estate duty, and in particular for the purposes of section 2(1)(b) of the Finance Act 1894 (property in which the deceased or any other person had an interest ceasing on the death of the deceased).

• (2) If a discretionary trust is limited to determine on a death then, for the purposes of estate duty leviable on that death, the persons eligible under the discretionary trust to receive the whole or any part of the income of any property shall together be treated as having an interest in the property limited to cease on the death, and as having an interest in the property which is different from any interest which those persons or any of them may have otherwise than under the discretionary trust.

• (3) Subsection (2) above applies whether or not there is a discretion or power to accumulate all or any part of the income and accordingly where only one person is eligible to receive all or any part of the income, but there is such discretion or power, he shall be treated as having an interest in the property.

• (4) Subsections (2) and (3) above shall not apply to a statutory or other trust for the maintenance of a person under the age of 21 limited to determine on his attaining the age of 21, or at any earlier time, as being a trust which is also limited to determine on his death (that is to say on his death before attaining that age or before that time).

• (5) Where in accordance with the preceding provisions of this section any persons are to be treated as having an interest in property, that interest shall be an interest in possession in any period if income of the property arising in that period was or could have been distributed to them or any of them, and references to an interest becoming an interest in possession shall be construed accordingly.

• (6) Where in accordance with the preceding provisions of this section any persons are to be treated as having an interest in property, the value of the benefit accruing or arising from the cesser of the interest shall—

• (a) if the whole of the income of the property was or could have been given to the persons having the interest, or any of them, be the principal value of the property, and

• (b) if less than the whole of the income of the property was or could have been given to the persons having the interest, or any of them, be the principal value of an addition to the property equal to that lesser amount of income.

• (7) References in this section to a trust limited to determine on a death include references to a trust limited to cease in the alternative on the happening of some other event or the expiration of some period, and " discretionary trust" includes a trust under which the disposition of any of the trust income is at the discretion of the trustees or of any other person.

Betterment levy

Minerals: betterment levy, income tax and corporation tax

40

Part IV — The Special Charge

The special charge

41

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

Investment income

42

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

Due date, interest and administration

43

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

Husband and wife

44

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

Close companies

45

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

Relief where income attributable to period of years was received in 1967-68

46

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

Relief where capital is subject to estate duty or capital gains tax

47

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

Relief in respect of error or mistake

48

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

Double taxation relief

49

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

Transactions designed to avoid liability

50

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

Part V

Selective employment tax

51

• (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Selective employment payments

52

Part VI — Miscellaneous

Interest on overdue tax

53

• (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . in section 8(2) of the Finance (No. 2) Act 1947 (remission of interest for tax paid not later than three months from the date on which it becomes due and payable) for the words “three months" there shall be substituted the words “two months".

• (2) Without prejudice to the general interpretative provisions of this Act, this section applies to the enactmemtns mentioned in subsection (1) above as extended by any other enactments, . . .

• (3) This section has effect as respects tax becoming due and payable on or after 1st July 1968.

Premium savings bonds: increase of prize money

54

• (1) The terms of issue of premium savings bonds shall be altered by substituting for the prospectus relating to the issue of bonds of series B the provisions of Schedule 18 to this Act, being provisions which—

• (a) increase the rate of interest at which the prize fund is calculated from 4½ per cent. to 45/8percent. (but subject ... to a power of varying the rate of interest ... )...

• (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (2) Subsection (1) above shall come into force on 1st September 1968 and have effect as respects all bonds issued before that date, whether before or after the passing of this Act.

• (3) If after the coming into force of subsection (1) above the Treasury issue premium savings bonds on the terms set out in the said Schedule to this Act, they may use any stock of forms of bonds which were prepared before the passing of this Act, notwithstanding that the forms refer to the prospectus superseded by subsection (1) above, and bonds issued in that form shall be valid and effectual as if they stated that the bond was issued under the terms in the said Schedule to this Act.

This subsection applies whether or not the bonds are issued after notice has been given, in pursuance of paragraph 15 in the said Schedule, of a variation of its terms.

• (4) In this section “bonds of series B” means the second issue of premium savings bonds, and “premium savings bonds” means both those issued under the National Loans Act 1939 and those issued under the National Loans Act 1968.

Exchange control

55

Stamp duties: amendments as respects loan capital duty

56

Stamp duties: further provisions as to composition by bankers

57

Reliefs from surcharge under Sugar Act 1956

58

Confirmation of social services agreement with Northern Ireland

59

Provisional collection of taxes

60

In section 1(4) of the Provisional Collection of Taxes Act 1968 (circumstances in which a resolution ceases to have statutory effect) paragraph (b) (under which a resolution continues in force if a Bill is amended by the house so as to implement the resolution within twenty-five sitting days from the passing of the resolution) shall have effect as if after the words “is amended by the House" there were added the words “in Committee or on Report, or by any Standing Committee of the House".

Citation, interpretation, construction and extent

61

• (1) This Act may be cited as the Finance Act 1968.

• (2) In this Act, except where the context otherwise requires, “the Board” means the Commissioners of Inland Revenue.

• (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (8) 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 or applied by or under any other enactment, including this Act.

• (9) Except as otherwise expressly provided, such of the provisions of this Act as relate to matters in respect of which the Parliament of Northern Ireland has power to make laws shall not extend to Northern Ireland.

Schedules 1—4.

SCHEDULE 2

SCHEDULE 3

SCHEDULE 4

Schedules 8—10.

Protection of officers

1

Where an officer takes any action in pursuance of instructions of the Commissioners or a Collector given in connection with the enforcement of the enactments relating to the general betting duty or the duty on gaming licences or on gaming machine licences and, apart from the provisions of this paragraph, the officer would in taking that action be committing an offence under the enactments relating to betting or gaming, he shall not be guilty of that offence.

Keeping by bookmaker of record of authorised agents

2

• (1) The provisions of this paragraph shall apply to a bookmaker at any time when any person is for the time being, or has at any time during the immediately preceding two months been, authorised by that bookmaker to act as his agent for receiving or negotiating bets or otherwise conducting betting operations, other than such bets or operations as involve liability only to the pool betting duty.

• (2) The bookmaker shall maintain at any of his premises to which bets received by any such person as aforesaid as the bookmaker's agent are or were transmitted, or, if in the case of any such premises the Commissioners think fit, at such other place as the Commissioners may allow, a record in such form and containing such particulars as the Commissioners may direct in respect of any such person who is for the time being, and any such person who has at any time during the said two months been but is no longer, authorised as aforesaid, being in either case a person by or on whose behalf bets received as aforesaid are or were transmitted to those premises.

• (3) A bookmaker shall not be guilty of contravening or failing to comply with the provisions of sub-paragraph (2) of this paragraph by reason of a failure to make an entry or alteration in the said record if that entry or alteration is made before six o'clock in the evening of the day after that on which the happening which necessitated the entry or alteration took place.

• (4) Paragraph 2(2)(b) of Schedule 3 to the Finance Act 1966 (under which a bookmaker is required to notify the Commissioners of the names and addresses of any persons acting as his agent as mentioned in sub-paragraph (1) of this paragraph) shall cease to have effect.

Form in which books, etc., are to be kept

3

The books, records and accounts kept in pursuance of paragraph 3(a) of Schedule 1 to the Betting Duties Act 1963 by the person for the time being carrying on a general betting business or pool betting business shall be kept in such form as the Commissioners may direct.

Power for officers to remain on premises

4

Where an officer has entered on any premises, being premises used for the purposes of a general betting business on which the person carrying on that business is required by paragraph 3(c) of the said Schedule 1 to permit the officer to enter, that person shall permit that officer to remain on those premises at any time while those premises are being used, or when that officer has reasonable cause to believe that those premises are likely to be used, for the conduct of betting operations.

Penalties

5

Paragraphs 4 to 6 of the said Schedule 1 shall apply to a contravention of or failure to comply with any of the provisions of paragraphs 2 to 4 of this Schedule as they apply to a contravention of or failure to comply with any of the provisions of paragraph 2 or 3 of that Schedule.

Interpretation

6

In this Schedule, the following expressions have the following meanings respectively, that is to say—

• " bookmaker " has the same meaning as for the purposes of the Betting, Gaming and Lotteries Act 1963 ;

• " Collector " means a Collector of Customs and Excise ;

• " general betting business " and " pool betting business " mean a business which involves or may involve any sums becoming payable by the person carrying on that business by way of the general betting duty or, as the case may be, by way of the pool betting duty.

Schedules 11, 12.

1

For any reference to 11% or 16 ½ % there shall be substituted a reference to 12 ½ % or, as the case may be, 20%.

2

Except in the following places, namely, Groups 1, 2, 4, 8, 9, 16 and 17, paragraph (c.) of Group 19, Groups 22, 24 and 25, paragraph (a) of Group 26, Group 29, paragraphs (a) and (b) of Group 30, and Groups 31 and 32, for any reference to 27 ½ % there shall be substituted a reference to 33 ⅓ %.

3

In the following places namely, paragraph (b) of Group 1, paragraph (b) of Group 2, paragraphs (a) and (b) of Group 4, paragraph (a) of Group 8, paragraph (b)(i) of Group 9, paragraph (b) of Group 16, paragraph (c) of Group 19, Groups 22 and 25, paragraph (a) of Group 26, Group 29 and paragraphs (a) and (b) of Group 30, for any reference to 27 ½ % there shall be substituted a reference to 50%.

4

In Group 14, paragraph (2) of the exemptions shall be omitted.

5

In Group 17, for the words " Articles not comprised below in this Group .... 27 ½ % " there shall be substituted the words—

(a) Articles not comprised below in this Group	33 ⅓ %
(b) Articles not comprised below in this Group which are made wholly or partly of gold, silver or other precious metal (not including base metal which is coated or plated with precious metal).	50%

6

After Group 19 there shall be inserted the following:—

GROUP 19A	GROUP 19A
(a) Instruments, whether or not complete, which are, or if complete would be, suitable for the reproduction of sound recorded on magnetic tapes or on other recording material, whether or not those instruments are, or if complete would be, suitable also for so recording sound, and parts thereof and accessories thereto.	33 ⅓ %
(b) Sound records on magnetic tape or on other recording material, other than records of a kind not produced in quantity for general sale.	50%
(c) Containers (not comprised in any other Group) for records falling within paragraph (b) above.	50%
Not chargeable under this Group Tape recorders and reproducers suitable only for scientific or industrial use, and parts and accessories suitable only for use therewith. Instruments suitable only as office appliances for the recording or reproduction of speech, and parts and accessories suitable only for use therewith.	Not chargeable under this Group Tape recorders and reproducers suitable only for scientific or industrial use, and parts and accessories suitable only for use therewith. Instruments suitable only as office appliances for the recording or reproduction of speech, and parts and accessories suitable only for use therewith.
Exempt Sound records for the reproduction of speech, specially adapted for the use of the blind; and instruments specially designed for the reproduction of sound from such records.	Exempt Sound records for the reproduction of speech, specially adapted for the use of the blind; and instruments specially designed for the reproduction of sound from such records.

7

For Group 24 there shall be substituted the following:—

GROUP 24	GROUP 24
(a) Photographic cameras and photographic enlargers, lenses and other parts of and accessories to photographic cameras and photographic enlargers.	50%
(b) Cinematograph projectors, filmstrip and slide projectors, and parts thereof and accessories thereto; projection screens not exceeding 35 square feet in area; and slide viewers and slide containers, except viewers 6r containers for use with slides exceeding 3 inches in width.	50%
(c) Unexposed sensitized photographic paper, cloth, plates and film.	50%
Exempt Cinematograph cameras and cinematograph projectors for film of standard width, and parts and accessories suitable only for use therewith. Cameras, enlargers, cinematograph and filmstrip projectors, and parts thereof, and accessories thereto, being articles suitable only for industrial, scientific or military use. Epidiascopes, projectors for use with slides exceeding 3 inches in width, and parts and accessories suitable only for use therewith. Photographic paper, cloth, plates and film, the following:— cinematograph film of standard width; X-ray plates, film and paper; ferro-prussiate and ferro-gallic paper and cloth; dye-line paper, cloth and film; document base paper, transparent tracing paper base and tracing cloth.	Exempt Cinematograph cameras and cinematograph projectors for film of standard width, and parts and accessories suitable only for use therewith. Cameras, enlargers, cinematograph and filmstrip projectors, and parts thereof, and accessories thereto, being articles suitable only for industrial, scientific or military use. Epidiascopes, projectors for use with slides exceeding 3 inches in width, and parts and accessories suitable only for use therewith. Photographic paper, cloth, plates and film, the following:— cinematograph film of standard width; X-ray plates, film and paper; ferro-prussiate and ferro-gallic paper and cloth; dye-line paper, cloth and film; document base paper, transparent tracing paper base and tracing cloth.

8

In Group 30, in paragraph (a), for the words "comprised in Group 2 " there shall be substituted the words " comprised below or in any other Group ".

9

For Group 31 there shall be substituted the following:—

GROUP 31	GROUP 31
comprising Toilet requisites, except face cloths and towels.	comprising Toilet requisites, except face cloths and towels.
(a) Brushes (other than toothbrushes), combs, scissors, nippers, knives, razors, razor blades, razor strops, razor sharpeners, dry shavers and dry shaver heads, mirrors, sponges, dental sticks and toothpicks.	33 ⅓ %
(b) Other articles not comprised below in this Group.	50%
Exempt Toothbrushes; toilet paper.	Exempt Toothbrushes; toilet paper.

10

For Group 32, there shall be substituted the following:—

GROUP 32	GROUP 32
comprising Perfumery; and toilet preparations, whether medicated or not, including cosmetics.	comprising Perfumery; and toilet preparations, whether medicated or not, including cosmetics.
(a) Perfumery	50%
(b) Soap made up for sale as toilet soap; soap substitutes made up for sale as substitutes for toilet soap; baby dusting powders; shaving creams; shampoos; dentifrices; eye" lotions, mouth washes and antiseptics; calamine lotion and similar alleviating preparations, unperfumed.	33 ⅓ %
(c) Other articles.	50%

Schedule 7.

PART I — Rates of Duty substituted for Rates in Part II of Schedule 1 to Act of 1962

PART II — Rates of Duty substituted for Rates in Part II of Schedule 3 to Act of 1962

PART III — Rates of Duty substituted for Rates in Part II of Schedule 4 to Act of 1962

PART IV — Rates of Duty substituted for Rates in Part II of Schedule 5 to Act of 1962

SCHEDULE 8

General rules about aggregation

1

• (1) Subject to the provisions of this Schedule, income to which section 15(1) of this Act applies shall be treated as follows—

• (a) so far as it is income for a year of assessment or part of a year of assessment during which both parents of the infant are alive, and are married to and living with each other, as income for that year of the father;

• (b) so far as it is income for a year or part during which both parents are alive, but are either not married to each other or not living with each other, as income for that year of the father or, for any period during which the mother has actual custody of the infant, as income for that year of the mother; and

• (c) so far as it is income for a year or part during which one only of the parents is alive, as income for the year of that parent.

• (2) So far as any income to which the said section 15(1) applies is income for a year of assessment, or part of a year of assessment, of an infant who is illegitimate and has not been adopted, sub-paragraph (1) above shall not apply to the income, but it shall be treated instead as income for that year of the mother, or, for any period during which the father has actual custody of the infant, as income for that year of the father.

• (3) For the purposes of this paragraph an infant's parents are to be treated as living with each other unless they are separated under an order of a court of competent jurisdiction, or by deed of separation, or are in fact separated in such circumstances that the separation is likely to be permanent.

• (4) Where a parent appeals against any assessment or decision on a claim on the grounds that an infant was not, or was, in his or her actual custody for any period, or was or was not for any period in the actual custody of the other parent, the other parent shall be entitled to appear and be heard on that question by the Commissioners hearing the appeal; and, as respects that question—

• (a) if the other parent does so appear, the determination of the Commissioners shall for the purposes of income tax be final and conclusive against him or her, save that he or she shall have the same right as the appellant to require the statement of a case for the opinion of the High Court, and

• (b) the determination of the Commissioners shall also be final and conclusive against the other parent if he or she fails without reasonable cause to appear.

2

Income of an infant falling to be treated as income of a parent by virtue of the provisions of this Schedule shall be so treated for all income tax purposes, or for the purposes of income tax other than surtax, or for the purposes of surtax only, according to the purposes for which it would have constituted income of the infant but for those provisions.

Exclusion of aggregation where infant in legal custody of third party

3

Paragraph 1 above shall not apply to any income so far as it is income for a year of assessment or part of a year of assessment during which the infant was in law in the custody of a person or persons other than a parent, and was not in the actual custody of a parent.

Special rules for non-residents

4

• (1) Where, in the case of any income falling within paragraph 1(1)(a) above, one of the infant's parents is, and one is not, resident for the year in the United Kingdom, the said paragraph 1(1)(a) shall have effect in relation thereto as if, instead of specifying the infant's father, it specified the parent resident for the year in the United Kingdom if the infant is so resident, and the other parent if the infant is not so resident.

• (2) Nothing in the preceding provisions of this Schedule shall have effect so as to treat income of an infant resident in the United Kingdom for any year of assessment as income of a parent not so resident for that year, or income of an infant not so resident for any year as income of a parent so resident for that year.

Provisions as to certain payments involving tax reliefs

5

• (1) Where income of an infant for any period is treated by virtue of this Schedule as income of a parent, and the infant has made payments of either of the following descriptions—

• (a) annual payments in respect of which a deduction is permitted in computing for that period total income for the purposes of income tax or surtax, or

• (b) payments in that period of interest in respect of which income tax at the standard rate is repayable,

the said payments shall, to the extent of that income, be treated as having been made thereout by the parent instead of by the infant, and in the order in which they are described above.

• (2) Where income of an infant for any period is so treated, and the infant has during that period made payments qualifying for relief under section 219 of the Income Tax Act 1952 (premiums under certain life policies and annuity contracts), the deductions from tax to which he would apart from this sub-paragraph be entitled by reason of those payments shall, to the extent that the payments could have been made out of the income so treated (or, where sub-paragraph (1) above has effect, out of that income reduced by the payments falling within that sub-paragraph), be made instead from the tax with which the parent is chargeable.

Right of parent to recover tax on infant's income

6

• (1) Where income of an infant is treated by virtue of this Schedule as income of a parent for any year of assessment, the parent shall be entitled to recover from the infant an amount equal to that by which the tax chargeable on and payable by him or her for the year exceeds that which would have been so chargeable and payable if the income had not been so treated:

Provided that, so far as the excess is attributable to trust income which has not been distributed, the right conferred by this paragraph shall be exercisable against that income instead of against the infant.

• (2) A parent may require from the Board a certificate specifying in relation to any income the amount of tax which he or she is entitled to recover under this paragraph from trustees, and any such certificate shall be conclusive evidence of that amount.

Repayments by parents

7

Where income of an infant is treated as income of a parent by virtue of this Schedule, and, by reason thereof, the parent obtains in respect of any allowance or relief a repayment of tax in excess of that to which he would have been entitled if the income had not been so treated, the parent shall pay an amount equal to the excess to the infant, or, if the income arose under a trust, to the trustees.

Loss relief

8

• (1) A claim for relief under section 341 of the Income Tax Act 1952 (set off of trade etc. losses against general income) may require that the relief be given without any reference to income treated by virtue of this Schedule as income of the person sustaining the loss or of that person's spouse.

• (2) Where income so treated is not excluded by virtue of sub-paragraph (1) above, it shall be treated for the purposes of section 15(1) of the Finance Act 1953 (relief to be given by treating loss as reducing claimant's income first, and then income of claimant's spouse) as distinct from that of the claimant, and as if referred to therein after that of the spouse.

Duty of trustees to give information

9

A trustee shall, on being so required in writing by a parent of any beneficiary under the trust, give to the parent details of the trust income arising to the beneficiary for any year of assessment during, or for any part of which, the beneficiary is an infant.

Adopted children

10

In this Schedule " parent" means, in the case of an infant who has been adopted, a parent by adoption, and references to the father and the mother of an infant shall be construed accordingly; and references in this Schedule to adoption include references to adoption under the law of any territory outside the United Kingdom.

SCHEDULE 9

PART I — Life Policies: Qualification for Relief under s.219 of the Income Tax Act 1952

General rules applicable to whole life and term assurances

1

• (1) Subject to the following provisions of this Part of this Schedule, if a policy secures a capital sum which is payable only on death, or one payable either on death or on earlier disability, it is a qualifying policy if—

• (a) it satisfies the conditions appropriate to it under sub paragraphs (2) to (4) below, and

• (b) except to the extent permitted by sub-paragraph (5) below, it does not secure any other benefits.

• (2) If the capital sum referred to in sub-paragraph (1) above is payable whenever the event in question happens, or if it happens at any time during the life of a specified person—

• (a) the premiums under the policy must be payable at yearly or shorter intervals, and either—

• (i) until the happening of the event, or, as the case may require, until the happening of the event or the earlier death of the specified person, or

• (ii) until the time referred to in sub-paragraph (i) above or the earlier expiry of a specified period ending not earlier than ten years after the making of the insurance, and

• (b) the total premiums payable in any period of twelve months must not exceed—

• (i) twice the amount of the total premiums payable in any other such period, or