Finance Act 1968

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

• (ii) one-eighth of the total premiums which would be payable if the policy were to continue in force for a period of ten years from the making of the insurance, or, in a case falling within paragraph (a)(ii) above, until the end of the period therein referred to.

• (3) If the capital sum referred to in sub-paragraph (1) above is payable only if the event in question happens before the expiry of a specified term ending more than ten years after the making of the insurance, or only if it happens both before the expiry of such a term and 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 the earlier expiry of the said term, or, as the case may require, until the happening of the event or, if earlier, the expiry of the term or the death of the specified person, or

• (ii) as in sub-paragraph (i) above, but with the substitution for references to the term of references to a specified shorter period, being one ending not earlier than ten years after the making of the insurance of, if sooner, the expiry of three-quarters of the said term, 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

• (ii) one-eighth of the total premiums which would be payable if the policy were to continue in force for the term referred to in paragraph (a)(i) above, or, as the case may require, for the shorter period referred to in paragraph (a)(ii) above.

• (4) If the capital sum referred to in sub-paragraph (1) above is payable only if the event in question happens before the expiry of a specified term ending not more than ten years after the making of the insurance, or only if it happens both before the expiry of such a term and during the life of a specified person, the policy must provide that any payment made by reason of its surrender during that period is not to exceed the total premiums previously paid thereunder.

• (5) Notwithstanding sub-paragraph (1)(b) above, if a policy secures a capital sum payable only on death, it may also secure benefits (including benefits of a capital nature) to be provided in the event of a person's disability ; and no policy is to be regarded for the purposes of that provision as securing other benefits by reason only of the fact that it confers a right to participate in profits, that it carries a guaranteed surrender value, that it gives an option to receive payments by way of annuity, or that it makes provision for the waiver of premiums by reason of a person's disability or for the effecting of a further insurance or insurances without the production of evidence of insurability.

• (6) In applying sub-paragraph (2) or (3) above to any policy—

• (a) no account shall be taken of any provision for the waiver of premiums by reason of a person's disability, and

• (b) if the term of the policy runs from a date earlier, but not more than three months earlier, than the making of the insurance, the insurance shall be treated as having been made on that date, and any premium paid in respect of the period before the making of the insurance, or in respect of that period and a subsequent period, as having been payable on that date.

• (7) References in this paragraph to a capital sum payable on any event include references to any capital sum, or series of capital sums, payable by reason thereof; and a policy secures a capital sum payable either on death or on disability notwithstanding that the amount payable may vary with the event.

General rules applicable to endowment assurances

2

• (1) Subject to the following provisions of this Part of this Schedule, a policy which secures a capital sum payable either on survival for a specified term or on earlier death, or earlier death or disability, including a policy securing the sum on death only if occurring after the attainment of a specified age not exceeding sixteen, is a qualifying policy if it satisfies the following conditions—

• (a) the term must be one ending not earlier than ten years after the making of the insurance,

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

• (i) until the happening of the event in question, or

• (ii) until the happening of that event, or the earlier expiry of a specified period shorter than the term but also ending not earlier than ten years after the making of the insurance, or

• (iii) if the policy is to lapse on the death of a specified person, until one of those times or the policy's earlier lapse,

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

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

• (ii) one-eighth of the total premiums which would be payable if the policy were to run for the specified term,

• (d) the policy—

• (i) must guarantee that the capital sum payable on death, or on death occurring after the attainment of a specified age not exceeding sixteen, will, whenever that event may happen, be equal to three-quarters at least of the total premiums which would be payable if the policy were to run for that term, disregarding any amounts included in those premiums by reason of their being payable otherwise than annually, and

• (ii) if it is a policy which does not secure a capital sum in the event of death before the attainment of a specified age not exceeding sixteen, must not provide for the payment in that event of an amount exceeding the total premiums previously paid thereunder, and

• (e) the policy must not secure the provision (except by surrender) at any time before the happening of the event in question of any benefit of a capital nature other than a payment falling within paragraph (d)(ii) above, or benefits attributable to a right to participate in profits or arising by reason of a person's disability.

• (2) Sub-paragraphs (6) and (7) of paragraph 1 above shall, with any necessary modifications, have effect for the purposes of this paragraph as they have effect for the purposes of that paragraph.

• (3) For the purposes of sub-paragraph (1)(d)(i) above, ten per cent, of the premiums payable under any policy issued in the course of an industrial assurance business as defined in section 1(2) of the Industrial Assurance Act 1923 shall be treated as attributable to the fact that they are not paid annually.

Special types of policy

3

A policy issued by any friendly society, or branch of a friendly society, in the course of its tax exempt life or endowment business, as defined in section 29(9) of the Finance Act 1966, is a qualifying policy notwithstanding that it does not comply with the conditions specified in paragraph 1 or 2 above.

4

• (1) A policy issued in the course of an industrial assurance business, as defined in section 1(2) of the Industrial Assurance Act 1923, and not constituting a qualifying policy by virtue of paragraph 1 or 2 above, is nevertheless a qualifying policy if—

• (a) the sums guaranteed by the policy, together with those guaranteed at the time the assurance is made by all other policies issued in the course of such a business to the same person and not constituting qualifying policies apart from this paragraph, do not exceed £1,000,

• (b) it satisfies the conditions with respect to premiums specified in paragraph 1(2) above,

• (c) except by reason of death or surrender, no capital sum other than one falling within paragraph (d) below can become payable under the policy earlier than ten years after the making of the assurance, and

• (d) where the policy provides for the making of a series of payments during its term—

• (i) the first such payment is due not earlier than five years after the making of the assurance, and the others, except the final payment, at intervals of not less than five years, and

• (ii) the amount of any payment, other than the final payment, does not exceed four-fifths of the premiums paid in the interval before its payment, and

• (iii) if the first such payment is due earlier than ten years after the making of the assurance, or any other such payment except the last is due earlier than ten years after the preceding one, the sums guaranteed by the policy, together with the other sums referred to in paragraph (a) above so far as guaranteed by policies the payments under which also fall within this sub-paragraph, do not exceed £500.

• (2) For the purpose of this paragraph, the sums guaranteed by a policy do not include any bonuses, or, in the case of a policy providing for a series of payments during its term, any of those payments except the first, or any sum payable on death during the term by reference to one or more of those payments except so far as that sum is referable to the first such payment.

5

• (1) The following provisions apply to any policy which is not a qualifying policy apart from those provisions, and the benefits secured by which consist of or include the payment on or after a person's death of—

• (a) one capital sum of an amount which does not vary according to the date of death, plus a series of capital sums payable if the death occurs during a specified period, or

• (b) a capital sum, the amount of which is less if the death occurs in a later part of a specified period man if it occurs in an earlier part of that period.

• (2) A policy falling within sub-paragraph (1)(a) above is a qualifying policy if—

• (a) it would be one if it did not secure the series of capital sums there referred to, and the premiums payable under the policy were such as would be chargeable if that were in fact the case, and

• (b) it would also be one if it secured only that series of sums, and the premiums thereunder were the balance of those actually so payable.

• (3) A policy falling within sub-paragraph (1)(b) above is a qualifying policy if—

• (a) it would be one if the amount of the capital sum there referred to were equal throughout the period to its smallest amount, and the premiums payable under the policy were such as would be chargeable if that were in fact the case, and

• (b) it would also be one if it secured only that capital sum so far as it from time to time exceeds its smallest amount, and the premiums payable thereunder were the balance of those actually so payable.

Other special provisions

6

For the purpose of determining whether any policy is a qualifying policy, there shall be disregarded—

• (a) so much of any premium thereunder as is charged on the grounds that an exceptional risk of death is involved, and

• (b) any provision under which, on those grounds, any sum may become chargeable as a debt against the capital sum guaranteed by the policy on death.

7

Where the terms of any policy provide that it is to continue in force only so long as another policy does so, neither policy is a qualifying policy unless, if they had constituted together a single policy issued in respect of an insurance made at the time of the insurance in respect of which the first-mentioned policy was issued, that single policy would have been a qualifying policy.

8

• (1) Where, in the case of a policy under which a single premium only is payable, liability for the payment of that premium is discharged in accordance with sub-paragraph (2) below, the policy is a qualifying policy notwithstanding anything in paragraph 1(2) or 1(3) above, or in paragraph (b) or (c) of paragraph 2(1); and where, in the case of any other policy, liability for the payment of the first premium thereunder, or of any part of that premium, is so discharged, the premium or part shall be disregarded for the purposes of paragraph 1(2)(b) and 1(3)(b) above, and of paragraph (c) of paragraph 2(1).

• (2) Liability for the payment of a premium is discharged in accordance with this sub-paragraph if it is discharged by the retention by the company with whom the insurance is made of the whole or a part of any sum which has become payable on the maturity of, or on the surrender more than ten years after its issue of the rights conferred by, a policy—

• (a) previously issued by the company to the person making the insurance, or, if it is made by trustees, to them or any predecessors in office, or

• (b) issued by the company when the person making the insurance was an infant, and securing a capital sum payable either on a specified date falling not more than one month after his attaining twenty-five or on the anniversary of the policy immediately following his attainment of that age,

being, unless it is a policy falling within paragraph (b) above and the premium in question is a first premium only, a policy which was itself a qualifying policy, or which would have been a qualifying policy if issued in respect of an insurance made after 19th March 1968.

9

• (1) Where one policy (hereafter referred to as " the new policy ") is issued in substitution for, or on the maturity of and in consequence of an option conferred by, another policy (hereafter referred to as " the old policy " ) the question whether the new policy is a qualifying policy shall, to the extent provided by the rules in sub-paragraph (2) below, be determined by reference to both policies.

• (2) The said rules (for the purposes of which, the question whether the old policy was a qualifying policy shall be determined in accordance with this Part of this Schedule, whatever the date of the insurance in respect of which it was issued) are as follows—

• (a) if the new policy would apart from this paragraph be a qualifying policy, but the old policy was not, the new policy is not a qualifying policy unless the person making the insurance in respect of which it is issued was an infant when the old policy was issued, and the old policy was one securing a capital sum payable either on a specified date falling not later than one month after his attaining twenty-five or on the anniversary of the policy immediately following his attainment of that age ;

• (b) if the new policy would apart from this paragraph be a qualifying policy, and the old policy was also a qualifying policy, the new policy is a qualifying policy unless—

• (i) it takes effect before the expiry of ten years from the making of the insurance in respect of which the old policy was issued, and

• (ii) the highest total of premiums payable thereunder for any period of twelve months expiring before that time is less than one-half of the highest total paid for any period of twelve months under the old policy, or under any related policy issued less than ten years before the issue of the new policy (" related policy " meaning any policy in relation to which the old policy was a new policy within the meaning of this paragraph, any policy in relation to which that policy was such a policy, and so on);

• (c) if the new policy would not apart from this paragraph be a qualifying policy, and would fail to be so by reason only of paragraph 1(2) or 1(3) above, or of paragraph (a), (b) or (c) of paragraph 2(1), it is nevertheless a qualifying policy if the old policy was a qualifying policy and—

• (i) the old policy was issued in respect of an insurance made more than ten years before the taking effect of the new policy, and the premiums payable for any period of twelve months under the new policy do not exceed the smallest total paid for any such period under the old policy, or

• (ii) the old policy was issued outside the United Kingdom, and the circumstances are as specified in sub-paragraph (3) below.

• (3) The said circumstances are—

• (a) that the person in respect of whom the new insurance is made became resident in the United Kingdom during the twelve months ending with the date of its issue,

• (b) that the issuing company certify that the new policy is in substitution for the old, and that the old was issued either by a branch or agency of theirs outside the United Kingdom or by a company outside the United Kingdom with whom they have arrangements for the issue of policies in substitution for ones held by persons coming to the United Kingdom, and

• (c) that the new policy confers on the holder benefits which are substantially equivalent to those which he would have enjoyed if the old policy had continued in force.

10

• (1) Subject to the provisions of this paragraph, where the terms of a policy are varied, the question whether the policy after the variation is a qualifying policy shall be determined in accordance with the rules in paragraph 9 above, with references in those rules to the new policy and the old policy construed for that purpose as references respectively to the policy after the variation and the policy before the variation, and with any other necessary modifications.

• (2) In applying any of those rules by virtue of this paragraph, the question whether a policy after a variation would be a qualifying policy apart from the rule shall be determined as if any reference in paragraphs 1 to 7 of this Schedule to the making of an insurance,

or to a policy's term, were a reference to the taking effect of the variation or, as the case may be, to the term of the policy as from the variation.

• (3) This paragraph does not apply by reason of—

• (a) any variation which, whether or not of a purely formal character, does not affect the terms of a policy in any significant respect, or

• (b) any variation effected before the end of the year 1968 for the sole purpose of converting into a qualifying policy any policy issued (but not one treated by virtue of section 16(6) of this Act as issued) in respect of an insurance made after 19th March 1968.

PART II — Provisions Charging Tax on Gains

Meaning of " chargeable event", and computation of gain arising

11

• (1) Subject to the provisions of this paragraph, in this Part of this Schedule " chargeable event" means, in relation to a policy of life insurance—

• (a) unless it is a policy which falls within sub-paragraph (2) below, any of the following—

• (i) any death giving rise to benefits under the policy,

• (ii) the maturity of the policy,

• (iii) the surrender in whole or in part of the rights conferred by the policy, and

• (iv) the assignment for money or money's worth of those rights or of any share therein ; and

• (b) if it is a policy falling within sub-paragraph (2) below, any of the above events, but—

• (i) in the case of death or maturity, only if the policy is converted into a paid-up policy before the expiry of ten years from the making of the insurance, or, if sooner, of three-quarters of the term for which the policy is to run if not ended by death or disability,

• (ii) in the case of a surrender or assignment, only if it is effected within that time, or the policy has been converted into a paid-up policy within that time.

• (2) A policy falls within this sub-paragraph if (whether or not the premiums thereunder are eligible for relief under section 219 of the Income Tax Act 1952) it is a qualifying policy within the meaning of Part I of this Schedule.

• (3) The maturity of a policy is not a chargeable event in relation thereto if a new policy is issued in consequence of the exercise of an option conferred by the maturing policy unless the person making the insurance in respect of which the new policy is issued was an infant when the former policy was issued, and the former policy was one securing a capital sum payable either on a specified date falling not later than one month after his attaining twenty-five or on the anniversary of the policy immediately following his attainment of that age.

• (4) No event is a chargeable event in relation to a policy if the rights conferred by the policy have at any time before the event been assigned for money or money's worth.

• (5) No account shall be taken for the purposes of this paragraph of any assignment effected by way of security for a debt, or on the discharge of a debt secured by the rights or share concerned, or of any assignment between spouses living together ; and references in sub-paragraph (1) above to the surrender of the rights conferred by a policy do not include references to the surrender of any right to a bonus.

• (6) Where sub-paragraph (1)(b) above applies to a policy which has been varied so as to increase the premiums payable thereunder, it shall so apply as if the references in sub-paragraph (i) to the making of the insurance and the term of the policy were references respectively to the taking effect of the variation and the term of the policy as from the variation.

12

• (1) On the happening of a chargeable event in relation to any policy of life insurance, there shall be treated as a gain arising in connection with the policy—

• (a) if the event is a death, the excess (if any) of the surrender value of the policy immediately before the death, plus the amount or value of any relevant capital payments, over the total amount previously paid under the policy by way of premiums ;

• (b) if the event is the maturity of the policy, or the surrender in whole or in part of the rights thereby conferred, the excess (if any) of the amount or value of the sum payable or other benefits arising by reason of the event, plus the amount or value of any relevant capital payments, over the total amount previously paid under the policy by way of premiums, or, in the case of a partial surrender, over the same proportion of that amount as is borne by the amount or value of the said sum or other benefits to the amount or value of the sum or other benefits which would have been payable, or would have arisen, if the rights had been wholly surrendered;

• (c) if the event is an assignment—

• (i) if it is an assignment of all the rights conferred by the policy, the excess (if any) of the amount or value of the consideration, plus the amount or value of any relevant capital payments, over the total amount previously paid under the policy by way of premiums, and

• (ii) if it is an assignment of a share only in those rights, the excess (if any) of the amount or value of the consideration, plus the amount or value of any relevant capital payments so far as attributable to the share assigned and received by the assignor or by any person at his direction, over the same proportion of the total amount previously paid under the policy by way of premiums as is borne by the amount or value of the consideration to the market value of the rights.

• (2) Where, in a case falling within sub-paragraph (1)(b) above, a right to periodical payments arises by reason of the event, there shall be treated as payable by reason thereof an amount equal to the capital value of those payments at the time the right arises.

• (3) Where, in a case falling within sub-paragraph (1)(c) above, the assignment is between persons who are connected with each other within the meaning of paragraph 21 of Schedule 7 to the Finance Act 1965, the assignment shall be deemed to have been made for a consideration equal to the market value of the rights or share assigned.

• (4) In this paragraph, " relevant capital payments" means, in relation to any policy, any sum or other benefit of a capital nature, other than one attributable to a person's disability, paid or conferred under the policy before the happening of the chargeable event, and any sum paid, or other benefit conferred, by reason of any surrender before that time of a right to a bonus under the policy; and references in this sub-paragraph and (in relation to premiums) in sub-paragraph (1) above to " the policy" include references to any related policy, that is to say, to any policy in relation to which the policy is a new policy within the meaning of paragraph 9 above, any policy in relation to which that policy is such a policy, and so on.

13

• (1) Subject to sub-paragraphs (2) and (3) below, in this Part of this Schedule "chargeable event" means, in relation to any contract for a life annuity, the surrender in whole or in part of the rights conferred by the contract, or the assignment for money or money's worth of those rights or of any share therein.

Where the terms of a contract provide for the payment of a capital sum as an alternative, in whole or in part, to payments by way of annuity, the taking of the capital sum shall be treated for the purposes of this and the next following paragraph as a surrender in whole or in part of the rights conferred by the contract

• (2) An event referred to in sub-paragraph (1) above is not a chargeable event in relation to any contract if the rights conferred by the contract have at any time before the event been assigned for money or money's worth.

• (3) Sub-paragraph (5) of paragraph 11 above shall, with any necessary modification, apply for the purposes of this paragraph as it applies for the purposes of the said paragraph 11.

14

• (1) On the happening of a chargeable event in relation to any contract for a life annuity, there shall be treated as a gain arising in connection with the contract—

• (a) if the event is the surrender in whole or in part of the rights conferred by the contract, the excess (if any) of the amount payable by reason of the event over—

• (i) the total amount previously paid under the contract, whether by way of premiums or as lump sum consideration, reduced, if before the happening of the event one or more payments have been made on account of the annuity, by the capital element in the said payment or payments, as determined in accordance with section 27 of the Finance Act 1956, or

• (ii) in the case of a partial surrender, the same proportion of that amount (as so reduced where appropriate) as is borne by the amount payable by reason of the event to the amount which would have been so payable if the rights had been wholly surrendered;

• (b) if the event is the assignment for money or money's worth of the rights conferred by the contract, or of any share therein, the excess (if any) of the amount or value of the consideration over—

• (i) the amount specified in sub-paragraph (1)(a)(i) above, or

• (ii) if the assignment is of a share only, the same proportion of that amount (reduced as therein mentioned where appropriate) as is borne by the amount or value of the consideration to the market value of the rights.

• (2) Sub-paragraph (3) of paragraph 12 above shall apply for the purposes of sub-paragraph (1) above as it applies for the purposes of sub-paragraph (1)(c) of that paragraph.

15

• (1) Subject to sub-paragraph (2) below, in this Part of this Schedule "chargeable event" means, in relation to a capital redemption policy, any of the following—

• (i) the maturity of the policy,

• (ii) the surrender in whole or in part of the rights conferred by the policy, and

• (iii) the assignment for money or money's worth of those rights or of any share therein.

• (2) Sub-paragraph (5) of paragraph 11 above shall apply for the purposes of this paragraph as it applies for purposes of the said paragraph 11.

16

• (1) The provisions of paragraph 12 above, except sub-paragraph (3) thereof, shall, so far as appropriate and subject to sub-paragraph (2) below, apply to capital redemption policies as they apply to policies of life insurance.

• (2) Where a chargeable event happens in relation to a capital redemption policy which has previously been assigned for money or money's worth, the said paragraph 12 shall have effect in relation thereto as if, for the references to the total amount previously paid under the policy by way of premiums, there were substituted references to the amount or value of the consideration given for the last such assignment, plus the total amount of the premiums paid under the policy since that assignment

Method of charging gain to tax

17

• (1) Where, under the preceding provisions of this Schedule, a gain is to be treated as arising in connection with any policy or contract—

• (a) if, immediately before the happening of the chargeable event in question, the rights conferred by the policy or contract were vested in an individual as beneficial owner, or were held on trusts created by an individual (including trusts arising under section 11 of the Married Women's Property Act 1882, section 2 of the Married Women's Policies of Assurance (Scotland) Act 1880, or section 4 of the Law Reform (Husband and Wife) Act (Northern Ireland) 1964) or as security for a debt owed by an individual, the amount of the gain shall be deemed for the purposes of surtax (but not for any other income tax purpose except the furnishing of information) to form part of that individual's total income for the year in which the event happened ;

• (b) if, immediately before the happening of that event, the said rights were in the beneficial ownership of a close company within the meaning of Part IV of the Finance Act 1965, or were held on trusts created, or as security for a debt owed, by such a company, then—

• (i) for the purposes of section 77 of that Act (shortfall in distributions) the company's distributable income (but not its estate or trading income) for the accounting period in which the event happened shall be treated as increased by the amount of the gain, and

• (ii) the amount of the gain shall also be deemed to form part of the company's income for that period for the purposes of section 78 of that Act (surtax apportionments) ;

• (c) if, immediately before the happening of that event, the said rights were vested in personal representatives within the meaning of Part XIX of the Income Tax Act 1952, the amount of the gain shall, as regards surtax, be deemed for the purposes of the said Part XIX to be part of the aggregate income of the estate of the deceased:

Provided that nothing in this sub-paragraph shall apply to any amount which is chargeable to income tax or to corporation tax apart from this sub-paragraph.

• (2) Where, immediately before the happening of a chargeable event, the rights conferred by any policy or contract were vested beneficially in two or more persons, or were held on trusts created,

or as security for a debt owed, by two or more persons, paragraphs (a) and (b) of sub-paragraph (1) above shall have effect in relation to each of those persons as if he had been the sole owner, settlor or debtor, but with references to the amount of the gain construed as references to the part of it proportionate to his share in the rights at the time of the event or, as the case may require, when the trusts were created.

• (3) References in sub-paragraphs (1) and (2) above to the rights conferred by a policy or contract are, in the case of an assignment of a share only in any rights, references to that share.

Relief where gain charged directly to surtax

18

• (1) The following provisions of this paragraph shall have effect for the purpose of giving relief, on a claim in that behalf being made by him to the Board, in respect of any increase in an individual's liability to tax which is attributable to one or more amounts being included in his total income for a year of assessment by virtue of paragraph 17(1)(a) above.

• (2) Where one amount only is so included, there shall be computed—

• (a) the surtax which would be chargeable in respect of the amount if relief under this paragraph were not available and it constituted the highest part of the claimant's total income for the year, and

• (b) the surtax (if any) which would be chargeable in respect of the amount if calculated, in accordance with sub-paragraph (3) below, by reference to its appropriate fraction,

and the relief shall consist of a reduction or repayment of tax equal to the difference between the two amounts of surtax so computed, or, if surtax would not be chargeable on a calculation by reference to the appropriate fraction, of a reduction or repayment of the tax equal to the surtax computed under paragraph (d) above.

• (3) In sub-paragraph (2) above " appropriate fraction" means, in relation to any amount, such a sum as bears thereto the same proportion as that borne by one to the number of complete years for which the policy or contract has run before the happening of the chargeable event; and the computation required by paragraph (b) of that sub-paragraph shall be made by applying to the amount in question the rate or rates of surtax (if more than one, in corresponding proportions) which would apply if it were reduced to that fraction, treating it, as so reduced, as still constituting the highest part of the claimant's total income for the year, and treating so much of it (if any) as would then not be chargeable to surtax as if it were chargeable thereto at a nil rate.

For the purposes of this sub-paragraph, the number of years for which a policy of life insurance has run before the happening of a chargeable event shall be calculated, where appropriate, from the issue of the earliest related policy, meaning, any policy in relation to which the policy is a new policy within the meaning of paragraph 9 above, any policy in relation to which that policy is such a policy, and so on.

• (4) Where by virtue of the said paragraph 17(1)(a) two or more amounts are included in an individual's total income for any year of assessment, sub-paragraphs (2) and (3) above shall apply as if they together constituted a single amount, but with the appropriate fraction of the whole determined by adding together the appropriate fractions of the individual amounts.

• (5) A provision of this paragraph requiring surtax to be calculated as if an amount constituted the highest part of a claimant's total income shall apply notwithstanding any provision of the Income Tax Acts directing any other amount to be treated as the highest part thereof, but, for the purposes of this paragraph, a claimant's total income shall be deemed not to include any amount in respect of which he is chargeable to tax under section 37 of the Finance Act 1960 (payments on retirement or removal from office or employment) or sections 22 to 24 of the Finance Act 1963 (premiums, &c, treated as rent).

• (6) For the purposes of any provision of the Income Tax Acts, other than this paragraph or Schedule 6 to the Finance Act 1963, requiring an amount to be treated as the highest part of an individual's income, his income shall be calculated without regard to any amount included therein as mentioned in sub-paragraph (1) above ; and where an individual claims relief for any year of assessment under the said Schedule 6 or paragraph 7 of Schedule 4 to the Finance Act 1960, then, in calculating the relief, the claimant's income shall be deemed to include, in respect of any amount which would otherwise be included therein as aforesaid, no greater amount than the appropriate fraction thereof.

• (7) Section 9 of the Income Tax Management Act 1964 shall apply to any claim for relief under this paragraph.

Right of individual to recover tax from trustees

19

• (1) Where an amount is included in an individual's income by virtue of paragraph 17(1)(a) above, and the rights or share in question were held immediately before the happening of the chargeable event on trust, the individual shall be entitled to recover from the trustees, to the extent of any sums, or to the value of any benefits, received by them by reason of the event, an amount equal to that (if any) by which the tax with which he is chargeable for the year of assessment in question, reduced by the amount of any relief available under paragraph 18 above in respect of the amount so included, exceeds the tax with which he would have been chargeable for the year if the said amount had not been so included.

• (2) Where, for the purposes of relief under the said paragraph 18, two or more amounts are to be treated as one, the reduction required by sub-paragraph (1) above on account of the relief available in respect of any of them shall consist of a proportionate part of the relief available in respect of their aggregate.

• (3) An individual may require the Board to certify any amount recoverable by him by virtue of this paragraph, and the certificate shall be conclusive evidence of the amount.

PART III — Supplementary Provisions

Duty of insurers, etc. to certify qualifying policies, and to give information about chargeable events

20

• (1) Subject to sub-paragraph (3) below, where a policy of life insurance issued in respect of an insurance made after 19th March 1968 is, in the opinion of the body by whom it is issued, a qualifying policy within the meaning of Part I of this Schedule, it shall be the duty of that body to give to the policy holder a duly authenticated certificate to that effect.

Any such certificate shall be given within three months of the issue of the policy, or, if later, within three months of the passing of this Act, and shall specify the name of the policy holder, the name of the person whose life is assured, the reference number or other means of identification allocated to the policy, the capital sum or sums assured, and the amounts and dates for payment of the premiums.

• (2) Subject to the said sub-paragraph (3), where a policy of life insurance is varied after the said 19th March and, in the opinion of the body by whom it was issued, is after the variation a qualifying policy within the meaning of the said Part I, it shall be the duty of that body, within three months of the making of the variation, or, if later, within three months of the passing of this Act, to give to the policy holder a like certificate with respect to the policy after the variation.

• (3) Where, in the case of any policy, or any policy after a variation, the total premiums payable in any period of twelve months do not exceed £26, a certificate need be given under sub-paragraph (1) or (2) above only if requested in writing by the policy holder, and, if so requested, shall be given within three months of receipt of the request; and sub-paragraph (2) above shall not apply by reason of—

• (a) any variation which, whether or not of a purely formal character, does not affect the terms of a policy in any significant respect, or

• (b) any variation of a policy issued in respect of an insurance made on or before 19th March 1968, other than a variation by virtue of which the policy falls, under section 16(6) of this Act, to be treated as issued in respect of an insurance made after that date.

• (4) Subject to sub-paragraph (5) below, where a chargeable event within the meaning of Part II of this Schedule has happened in relation to any policy or contract, the body by or with whom the policy or contract was issued, entered into or effected shall, within three months of the event or, if it is a death or an assignment, within three months of their receiving written notification thereof, deliver to the inspector a certificate specifying—

• (a) the name and address of the policy holder,

• (b) the nature of the event, and the date on which it happened,

• (c) as may be required for computing the gain to be treated as arising by virtue of the said Part II—

• (i) the surrender value of the policy, or the sum payable, or other benefits to be conferred, by the body in question by reason of the event,

• (ii) the amount or value of any relevant capital payments,

• (iii) the amounts previously paid under the policy or contract by way of premiums, or otherwise by way of consideration for an annuity, and

• (iv) the capital element in any payment previously made on account of an annuity, and

• (d) the number of years relevant for computing the appropriate fraction of the gain for the purposes of paragraph 18(3) above.

• (5) Sub-paragraph (4) above shall not apply where—

• (a) the body in question are satisfied that no gain is to be treated as arising by reason of the event, or

• (b) the amount of the surrender value or sum, or the value of the other benefits, referred to in paragraph (c)(i) of that sub-paragraph, together with the amount or value of any payments within paragraph (c)(ii) thereof, does not exceed £500,

but the inspector may by notice in writing require a like certificate in any such case, and it shall be the duty of the body to deliver the certificate within thirty days of receipt of the notice.

• (6) Sections 46 and 47 of the Finance Act 1960 (penalties) shall have effect as if sub-paragraphs (4) and (5) above were included in the third column of Schedule 6 to that Act.

Interpretation

21

In this Schedule " assignment", in relation to Scotland, means an assignation.

SCHEDULE 10

Allowable deductions

1

• (1) In computing the charge to tax in respect of sums received by any person which are chargeable to tax by virtue of subsection (1) of the principal section, there shall be deducted from the amount which, apart from this paragraph, would be chargeable to tax—

• (a) any loss, expense or debit (not being a loss, expense or debit arising directly or indirectly from the discontinuance itself) which, if the trade, profession or vocation had not been discontinued, would have been deducted in computing for tax purposes the profits or gains of the person by whom it was carried on before the discontinuance, or would have been deducted from or set off against those profits or gains as so computed, and

• (b) any allowance under the Capital Allowances Act 1968 to which the person who carried on the trade, profession or vocation was entitled immediately before the discontinuance and to which effect has not been given by way of relief before the discontinuance.

• (2) No amount shall be deducted under sub-paragraph (1) above if that amount has been allowed under any other provision of the Income Tax Acts or the Corporation Tax Acts.

• (3) No amount shall be deducted more than once under this paragraph, or both under this paragraph and under section 32(4) of the Finance Act 1960 (post-cessation receipts: allowable deductions), and—

• (a) any expense or debit shall be apportioned between a sum chargeable under subsection (1) of the principal section and a sum chargeable under the said section 32 in such manner as may be just,

• (b) as between sums chargeable, whether under subsection (1) of the principal section or the said section 32, for one year of assessment or accounting period, and sums so chargeable for a subsequent year of assessment or accounting period, any deduction in respect of a loss or capital allowance shall be made against sums chargeable for the earlier year of assessment or accounting period,

• (c) subject to paragraph (b) above, as between sums chargeable for any year of assessment or accounting period under subsection (1) of the principal section and sums so chargeable under the said section 32, any deduction in respect of a loss or capital allowance shall be made under this paragraph rather than under the said section 32,

but, in the case of a loss which by virtue of this paragraph or the said section 32(4) is to be allowed after the discontinuance, not so as to authorise its deduction from any sum chargeable for a year of assessment or accounting period preceding that in which the loss is incurred.

• (4) In section 21(5) of the Finance Act 1964 (body corporate carrying on mutual business: exclusion of double relief), and in section 17(8) of the Finance Act 1967 (relief for sale of copyright), the references to section 32(4) of the Finance Act 1960 shall include references to this paragraph.

2

• (1) In computing the charge to tax in respect of sums received by any person which are chargeable to tax by virtue of subsection (2) of the principal section, there shall be deducted any expense or debit which is not otherwise allowable and which, but for the change in basis, would have been deducted in computing for tax purposes the profits or gains of the trade, profession or vocation.

• (2) No amount shall be deducted more than once under this paragraph.

Transfer of right to receive a payment

3

• (1) Subject to sub-paragraph (2) below, in the case of a transfer for value of the right to receive any sum to which subsection (1) or subsection (2) of the principal section applies, any tax chargeable by virtue of that section shall be charged in respect of the amount or value of the consideration (or, in the case of a transfer otherwise than at arm's length, in respect of the value of the right transferred as between parties at arm's length), and references in the principal section and this Schedule to sums received shall be construed accordingly.

• (2) Where the occasion of the discontinuance is a change in the persons carrying on the trade, profession or vocation, and the right to receive any sum to which subsection (1) of the principal section applies is or was transferred, at the time of the change, to die persons carrying on the trade, profession or vocation after title change, tax shall not be charged by virtue of the principal section, but (except where the change took place before 19th March 1968) any sum received by those persons by virtue of the transfer shall be treated for all purposes as a receipt to be brought into the computation of profits or gains of the trade, profession or vocation in the period in which it is received.

Work in progress

4

• (1) It is hereby declared that where work in progress at the discontinuance of a profession or vocation, or the responsibility for its completion, is transferred, the sums to which subsection (1) of the principal section applies include any sums received by way of consideration for the transfer, and any sums received by way of realisation by the transferee, on behalf of the transferor, of the work in progress transferred.

• (2) Where, in the case of any 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 a change of conventional basis, and

• (b) the value of work in progress at the time of the change was debited in the accounts and allowed as a deduction in computing profits for tax purposes for a period after the change,

then, in so far as no counterbalancing credit was brought into account in computing profits for tax purposes for any period ending before or with the date of the change, tax shall be charged under subsection (2) of the principal section in respect of that amount for the year of assessment in which the change occurred as if that amount were a sum to which the said subsection (2) applies, and the change of basis were a change of the kind described in that subsection.

• (3) In this paragraph " work in progress " at the time of a change of basis shall be construed in the same way as " work in progress " at the discontinuance of a profession or vocation is construed by section 43(5) of the Finance Act 1960, with the substitution in that subsection for references to the discontinuance of references to the change of basis.

Earned income relief

5

Where an individual is chargeable to tax by virtue of the principal section, and the profits or gains of the trade, profession or vocation to which he was entitled before the discontinuance, or as the case may be before the change in basis, fell to be treated as earned income for income tax purposes the sums in respect of which he is so chargeable (after any reduction under section 19 of this Act) shall also be treated for income tax purposes as earned income.

Election for charge to tax at time of discontinuance or change of basis

6

• (1) Where any sum chargeable to tax by virtue of the principal section is received in any year of assessment beginning not later than six years after the discontinuance, or as the case may be after the change of basis, the recipient may, by notice in writing sent to the inspector within two years after that year of assessment, elect that the tax so chargeable shall be charged as if the sum were received on the date on which the discontinuance took place, or as the case may be on the last day of the period at the end of which the change of basis took place and in any such case an assessment shall (notwithstanding anything in the Income Tax Acts or the Corporation Tax Acts) be made on him accordingly, and in connection with that assessment no further deduction or relief shall be made or given in respect of any loss or allowance deducted in pursuance of paragraph 1 or paragraph 2 above.

• (2) In section 33(3) of the Finance Act 1960 (election as respects tax chargeable by virtue of section 32 of that Act corresponding to the election under this paragraph) for the words ' twelve months' there shall be substituted the words ' two years'.

Company surtax

7

Subsections (4) and (5) of section 33 of the Finance Act 1960 (which, as amended by section 63 of the Finance Act 1965, concern the charge to tax on participators in a close company which is wound up) shall have effect as if references to section 32 of that Act included references to subsection (1) of the principal section.

Partnerships

8

• (1) Section 19 of this Act shall apply as follows as respects the net amount of any sum chargeable under the principal section which is assessed by reference to a sum accruing to a partnership.

• (2) The part of that net amount which is apportioned to any partner (who is an individual), or the personal representative of such an individual, shall be a net amount with which that person is chargeable under the principal section.

• (3) If the part of the said net amount which is so apportioned is a greater proportion of that amount than is the individual's share (that is to say the part to be included in his total income) of the total amount of the partnership profits assessed to income tax for the three years of assessment ending with the year in which the discontinuance or change of basis took place, the amount of the reduction to be given by way of relief shall not exceed the amount of relief which would have been so given if the apportionment had been made by reference to his share of that total amount.

SCHEDULE 11

1

• (1) If a person so elects, quoted securities covered by the election shall be excluded—

• (a) from the principal section, and

• (b) from paragraph 22(4) of Schedule 6 to the Finance Act 1965 (which brings into the computation of the gain the cost of acquisition as well as the value on 6th April 1965).

• (2) This paragraph has effect as respects any disposal after 19th March 1968.

• (3) An election made by any person under this paragraph shall be as respects all disposals made by him at any time, including disposals made before the election but after 19th March 1968—

• (a) of quoted securities of kinds other than fixed-interest securities and preference shares, or

• (b) of fixed-interest securities and preference shares,

and references to the quoted securities covered by an election shall be construed accordingly.

Any person may make both of the elections.

• (4) An election under this paragraph shall not cover quoted securities which the holder acquired on a disposal after 19th March 1968 in relation to which either of the following enactments (which secure that neither a gain nor a loss accrues on the disposal) applies, that is—

• (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),

but this paragraph shall apply to the quoted securities so held if the person making the original disposal (that is to say the wife or husband of the holder, or the other member of the group of companies) makes an election covering quoted securities of the kind in question.

For the purpose of identifying quoted securities disposed of by the holder with quoted securities acquired by him on a disposal in relation to which either of the said enactments applies, so far as they are of the same class, quoted securities acquired at an earlier time shall be deemed to be disposed of before quoted securities acquired at a later time.

• (5) For the avoidance of doubt it is hereby declared—

• (a) that where a person makes an election under this paragraph as respects quoted securities which he holds in one capacity, that election does not cover quoted securities which he holds in another capacity, and