Finance Act 1968

• (b) that an election under this paragraph is irrevocable.

• (6) An election under this paragraph shall be made by notice in writing to the inspector not later than the expiration of two years from the end of the year of assessment or accounting period of a company in which the first relevant disposal is made, or such further time as the Board may allow.

• (7) Subject to paragraph 2 below, in this paragraph the "first relevant disposal", in relation to each of the elections referred to in sub-paragraph (3) of this paragraph, means the first disposal after 19th March 1968 by the person making the election of quoted securities of the kind covered by that election.

• (8) In ascertaining the first relevant disposal, and in ascertaining " the relevant time " for the purposes of paragraph 2 below, any disposal chargeable under Case VII of Schedule D shall be disregarded, and " disposal chargeable under Case VII of Schedule D " includes any case where the acquisition and disposal is in circumstances such that no gain accrues, but if a gain had accrued it would have been so chargeable.

• (9) All such adjustments shall be made, whether by way of discharge or repayment of tax, or the making of assessments or otherwise, as are required to give effect to an election under this paragraph.

Election by principal company of group

2

• (1) In the case of companies which at the relevant time are members of a group of companies—

• (a) an election under paragraph 1 above by the company which at that time is the principal company of the group shall have effect also as an election by any other company which at that time is a member of the group, and

• (b) no election under that paragraph may be made by any other company which at that time is a member of the group.

• (2) In this paragraph " the relevant time ", in relation to a group of companies, and in relation to each of the elections referred to in paragraph 1(3) above, is the first occasion after 19th March 1968 when any company which is then a member of a group disposes of quoted securities of a kind covered by that election, and for the purposes of paragraph 1(6) above that occasion is, in relation to the group, " the first relevant disposal".

• (3) This paragraph shall not apply in relation to quoted securities of either kind referred to in paragraph 1(3) of this Schedule which are owned by a company which, in some period after 19th March 1968 and before the relevant time, was not a member of the group if in that period it had made an election under paragraph 1 above in relation to securities of that kind (or was treated by virtue of this paragraph, in relation to another group, as having done so), or had made a disposal of quoted securities of that kind and did not make an election within the time limited by paragraph 1(6) above.

• (4) This paragraph shall apply notwithstanding that a company ceases to be a member of the group at any time after the relevant time.

• (5) In this paragraph " company " and " group " shall be construed in accordance with paragraph 1 of Schedule 13 to the Finance Act 1965.

Pooling at value on 6th April 1965: exchange of securities etc.

3

• (1) Where a person who has made only one of the elections under the preceding provisions of this Schedule disposes of quoted securities which, in accordance with paragraphs 4 to 7 of Schedule 7 to the Finance Act 1965, are to be regarded as being or forming part of a new holding, the election shall apply according to the nature of the quoted securities disposed of, notwithstanding that under the said paragraph 4 the new holding is to be regarded as the same asset as the original holding and that the election would apply differently to the original holding.

• (2) Where the election does not cover the disposal out of the new holding, but does cover quoted securities of the kind comprised in the original holding, then in computing the gain accruing on the disposal out of the new holding (in accordance with the principal section) the question of what remained undisposed of on any disposal out of the original holding shall be decided on the footing that die principal section applied to that earlier disposal.

• (3) In the case converse to that in sub-paragraph (2) above (that is to say where the election covers the disposal out of the new holding, but does not cover quoted securities of the kind comprised in the original holding) the question of how much of the new holding derives from quoted securities held on 6th April 1965, and how much derives from other quoted securities, shall be decided for the purposes of this Schedule as it is decided for the purposes of the principal section.

Underwriters

4

No election under this Schedule shall cover quoted securities comprised in any underwriter's premiums trust fund, or premiums trust fund deposits, or personal reserves, being securities comprised in funds to which paragraph 9 of Schedule 7 to the Finance Act 1965 applies.

SCHEDULE 12

PART I — Capital Gains Tax and Corporation Tax

Exemption for tangible movables which are wasting assets

1

• (1) Subject to the provisions of this paragraph, no chargeable gain shall accrue on the disposal after 19th March 1968 of, or of an interest in, an asset which is tangible movable property and which is a wasting asset.

• (2) Sub-paragraph (1) above shall not apply to a disposal of, or of an interest in, an asset—

• (a) if, from the beginning of the period of ownership of the person making the disposal to the time when the disposal is made, the asset has been used and used solely for the purposes of a trade, profession or vocation and if that person has claimed or could have claimed any capital allowance in respect of any expenditure attributable to the asset or interest under paragraph (a) or paragraph (b) of paragraph 4(1) of Schedule 6 to the Finance Act 1965, or

• (b) if the person making the disposal has incurred any expenditure on the asset or interest which has otherwise qualified in full for any capital allowance.

• (3) In the case of the disposal of, or of an interest in, an asset which, in the period of ownership of the person making the disposal, has been used partly for the purposes of a trade, profession or vocation and partly for other purposes, or has been used for the purposes of a trade, profession or vocation for part of that period, or which has otherwise qualified in part only for capital allowances—

• (a) the consideration for the disposal, and any expenditure attributable to the asset or interest by virtue of the said paragraph 4(1)(a) and (b), shall be apportioned by reference to the extent to which that expenditure qualified for capital allowances, and

• (b) the computation under the said Schedule 6 shall be made separately in relation to the apportioned parts of the expenditure and consideration, and

• (c) sub-paragraph (1) above shall not apply to any gain accruing by reference to the computation in relation to the part of the consideration apportioned to use for the purposes of the trade, profession or vocation, or to the expenditure qualifying for capital allowances.

• (4) Sub-paragraph (1) above shall not apply to a disposal of commodities of any description by a person dealing on a terminal market or dealing with or through a person ordinarily engaged in dealing on a terminal market.

• (5) Paragraph 28 of Schedule 6 to the Finance Act 1965 (assets treated as acquired at value on 6th April 1965: capital allowances to be treated as made in respect of notional expenditure on acquisition on that date) shall apply for the purposes of paragraph 11 of that Schedule (wasting assets qualifying for capital allowances) as it applies for the purposes of paragraph 6 of that Schedule (restriction of losses by reference to capital allowances).

• (6) This paragraph shall be construed as one with Schedule 6 to the Finance Act 1965.

Exemption for private residences

2

• (1) Section 29 of the Finance Act 1965 shall not apply in relation to a gain if the acquisition of, or of the interest in, the dwelling-house or the part of a dwelling-house was made wholly or partly for the purpose of realising a gain from the disposal of it, and shall not apply in relation to a gain so far as attributable to any expenditure which was incurred after the beginning of the period of ownership and was incurred wholly or partly for the purpose of realising a gain from the disposal.

• (2) Sub-paragraph (1) above has effect in substitution for subsection (11) of the said section 29 (which excludes relief unless the acquisition was made for the purpose of residing in, or in the part of, the dwelling-house and not wholly or partly for the purpose of realising a gain).

Replacement of business assets

3

• (1) This paragraph has effect as respects Class I of the classes of assets in section 33(6) of the Finance Act 1965.

• (2) Where the trade is a trade of dealing in or developing land, but a profit on the sale of any land held for the purposes of the trade would not form part of the trading profits, then, as regards that land, the trade shall be treated for the purposes of the said section 33 as if it were not a trade of dealing in or developing land.

• (3) A person who is a lessor of tied premises shall be treated as if he occupied (as well as used) those tied premises only for the purposes of the relevant trade.

This sub-paragraph shall be construed in accordance with section 26(2) of the Finance Act 1952 (income tax and corporation tax on tied premises).

Death of heir of entail or proper liferenter

4

• (1) The provisions of Part III of the Finance Act 1965, so far as relating to the charging of capital gains tax on the death after 19th March 1968 of an heir of entail in possession of any property in Scotland subject to an entail, whether sui iuris or not, or of a proper liferenter of any property, shall have effect subject to the following provisions of this paragraph.

• (2) For the purposes of the said Part III, on the death of any such heir or liferenter—

• (a) the deceased shall be deemed not to have been a person competent to dispose of the entailed or, as the case may be, liferented property;

• (b) the heir of entail next entitled to the entailed property under the entail (hereafter in this paragraph called " the next heir") or, as the case may be, the person (if any) who, on the death of the liferenter, becomes entitled to possession of the property as fiar (hereafter in this paragraph called " the fiar ") shall be deemed to have acquired all the assets forming part of the property—

• (i) in the case of the next heir, at the date on which the deceased succeeded to the property under the entail,

• (ii) in the case of the fiar, at the date on which the instrument under which the deceased was entitled to his liferent came into operation so as to create a liferent of the property,

for a consideration equal to their market value at that date, and to have disposed of, and immediately reacquired, those assets at the date of the deceased's death for a consideration equal to their market value at that date.

• (3) Section 21 of the Finance Act 1965 (alternative charge to capital gains tax) shall not apply in relation to the charging of capital gains tax on gains accruing in consequence of sub-paragraph (2)(b) above.

• (4) Section 25(5) of the Finance Act 1965 (under which, in the case of the death of any individual, the relief provided for by section 24(2) of that Act in respect of capital gains tax chargeable on gains accruing in consequence of section 24(1) of that Act may in certain circumstances become available to the trustees of a settlement) shall, in a case where the deceased was such an heir of entail or life-renter as aforesaid, have effect, for the purpose of making that relief available to the next heir or, as the case may be, the fiar as well as to any such trustees, as if references—

• (a) to the trustees of a settlement, or to a body of trustees,

included references to the next heir or, as the case may be, the fiar,

• (b) to settled property included references to the property of which the deceased was the heir of entail in possession or, as the case may be, the liferenter,

• (c) to the disposal of settled property deemed to be effected in accordance with subsection (3) or subsection (4) of the said section 25 on the termination of a life interest by the death, or otherwise in consequence of the death, included references to the disposal of the property deemed to be effected in accordance with sub-paragraph (2)(b) above,

and subject to any other necessary modification.

• (5) In the case of the death of any such heir or liferenter, section 29 of the Finance Act 1965 (private residences) shall, subject to all necessary modifications, apply in relation to a gain accruing in consequence of sub-paragraph (2)(b) above to the next heir or fiar on the disposal of an asset deemed to be effected in accordance with that sub-paragraph, being an asset within subsection (1) of the said section 29, where the dwelling-house or part of a dwelling-house mentioned in that subsection was the only or main residence of the deceased.

• (6) Where on the death of any such heir the next heir becomes chargeable to capital gains tax on gains accruing in consequence of sub-paragraph (2)(b) above, he shall, for the purpose of paying that tax or of recovering the amount of the tax if he has already paid it, have the like right to sell or charge the entailed property or any part of it as he would have had if the tax had been estate duty leviable on the property.

• (7) Paragraph 4 of Schedule 10 to the Finance Act 1965 (postponement of payment of tax) shall have effect as if—

• (a) after sub-paragraph (1)(b) there were inserted the following words—

or (c) on the disposal of any property deemed to be effected on any occasion in accordance with paragraph 4(2)(b) of Schedule 12 to the Finance Act 1968,

; and

• (b) in sub-paragraph (1), after the word " trustees " there were inserted the words " or, in a case falling within head (c) of this sub-paragraph, of the next heir or of the fiar, ".

• (8) In estimating, for the purposes of estate duty, the value of any-property passing on the death of any such heir or liferenter, being property of which, by virtue of sub-paragraph (2)(b) above, the next heir or, as the case may be, the fiar is deemed to have disposed at the date of the deceased's death, allowance shall be made for any capital gains tax chargeable on gains accruing in consequence of the said sub-paragraph 2(b) on that death in respect of that property.

• (9) This paragraph (except sub-paragraph (8) thereof) shall be construed as one with Part III of the Finance Act 1965, and sub-paragraph (8) shall be construed as one with Part I of the Finance Act 1894.

Election for valuation on 6th April 1965

5

• (1) An election under paragraph 25(1) of Schedule 6 to the Finance Act 1965 shall be made by notice in writing to the inspector given within two years from the end of the year of assessment or accounting period of a company in which the disposal is made or such further time as the Board may by notice in writing allow.

• (2) This paragraph applies to a disposal made before or after the passing of this Act, and has effect in substitution for the time limit of two years in the said paragraph 25(1) whether or not that time limit has expired before the passing of this Act.

• (3) Where the said time limit has expired before the passing of this Act all such adjustments shall be made, whether by way of repayment or discharge of tax, or by assessment, as may be required to give effect to the provisions of this paragraph.

Land in Great Britain : election excluding valuation at current use value

6

In section 33(3) of the Finance Act 1967 after " end of the year of assessment", there shall be inserted " or accounting period of a company " , and the definition of " year of assessment" shall be repealed.

Duration of leases

7

• (1) In ascertaining for the purposes of Part III of the Finance Act 1965 the duration of a lease of land the following provisions shall have effect.

• (2) Where the terms of the lease include provision for the determination of the lease by notice given by the landlord, the lease shall not be treated as granted for a term longer than one ending at the earliest date on which it could be determined by notice given by the landlord.

• (3) Where any of the terms of the lease (whether relating to forfeiture or to any other matter) or any other circumstances render it unlikely that the lease will continue beyond a date falling before the expiration of the term of the lease, the lease shall not be treated as having been granted for a term longer than one ending on that date.

• (4) Sub-paragraph (3) applies in particular where the lease provides for the rent to go up after a given date, or for the tenant's obligations to become in any other respect more onerous after a given date, but includes provision for the determination of the lease on that date by notice given by the tenant, and those provisions render it unlikely that the lease will continue beyond that date.

• (5) Where the terms of the lease include provision for the extension of the lease beyond a given date by notice given by the tenant this paragraph shall apply as if the term of the lease extended for as long as it could be extended by the tenant, but subject to any right of the landlord by notice to determine the lease.

• (6) It is hereby declared that the question what is the duration of a lease is to be decided, in relation to the grant or any disposal of the lease, by reference to the facts which were known or ascertainable at the time when the lease was acquired or created.

• (7) Paragraph 8 of Schedule 8 to the Finance Act 1965 (which is superseded by this paragraph) shall cease to have effect, and this paragraph shall be construed as one with the said Schedule 8 and so that the reference in paragraph 9(1) of that Schedule to the said paragraph 8 shall be taken as a reference to this paragraph.

Disposal of debts

8

• (1) In paragraph 11 of Schedule 7 to the Finance Act 1965—

• (a) in sub-paragraph (1) (exemption for debt in hands of original creditor or his legatee), and

• (b) in sub-paragraph (4) (disallowance of loss on disposal of debt by assignee connected with original creditor or his legatee)

for the words " or his legatee " there shall be substituted the words " or his personal representative or legatee ".

• (2) Where the original creditor is a trustee and the debt, when created, is settled property, the said sub-paragraphs (1) and (4) shall apply as if for the references to the original creditor's personal representative or legatee there were substituted references to any person becoming absolutely entitled, as against the trustee, to the debt on its ceasing to be settled property, and to that person's personal representative or legatee.

Government securities issued at a discount

9

In Schedule 9 to the Finance Act 1965 after the entry relating to " 6% Conversion Stock 1972 " there shall be added the following entry:—

British Transport 3% Stock 1967-72	97 ½	100

Exclusion of short-term gains accruing to trustees

10

• (1) This paragraph has effect as respects a gain accruing to a trustee on a disposal of an asset forming part of settled property, being a disposal deemed to be effected by the trustee under section 25(4) of the Finance Act 1965 (which, as extended by subsections (6) and (7) of that section, creates an occasion of charge on a termination of a life interest and on certain other occasions).

• (2) The gain shall not be a chargeable gain for the purposes of Part III of the Finance Act 1965—

• (a) if the trustee disposes of the asset in circumstances such that the disposal is chargeable under Case VII of Schedule D, or

• (b) if by virtue of paragraph 4(2) of Schedule 9 to the Finance Act 1962 (beneficiary becoming absolutely entitled to settled property) any person is treated as if the acquisition of the asset by the trustee had been his acquisition of it, and that person disposes of the asset in circumstances such that the disposal is chargeable under the said Case VII.

• (3) This paragraph shall be construed as if contained in paragraph 3 of Schedule 6 to the Finance Act 1965.

• (4) There shall be made all such adjustments, whether by way of discharge or repayment of tax, or by the making of assessments, or otherwise, as are required to give effect to the provisions of this paragraph.

Short-term gains on disposals only partly derived from relevant acquisitions

11

• (1) This paragraph has effect where—

• (a) after 10th April 1968 there is a disposal chargeable under Case VII of Schedule D, and

• (b) an interest included in that disposal does not derive, or wholly derive, from a relevant acquisition,

and in this paragraph the interest, or part of an interest, which does not derive from a relevant acquisition is called " the untaxed element".

• (2) For the purposes of Part III of the Finance Act 1965 it shall be assumed that immediately before the said disposal the untaxed element was sold and immediately reacquired by the person making the disposal (but so that the assumed sale is not a disposal chargeable under Case VII of Schedule D for the purposes of paragraph 3(1) of Schedule 6 to the Finance Act 1965 (exclusion of short-term gains)).

• (3) Where the said disposal is a part disposal, the assumption in sub-paragraph (2) above shall be made only as respects such part of the untaxed element as can reasonably and justly be attributed to what is disposed of.

• (4) For the said purposes it shall be assumed that the sale and reacquisition is for a consideration equal to the amount at which the untaxed element fell to be brought into account under section 13(4) of the Finance Act 1962 (which involves valuation at a date immediately before the disposal) in computing the gain accruing on the disposal chargeable under Case VII:

Provided that if the untaxed element is an interest in land section 33 of the Finance Act 1967 (current use value for land in Great Britain) and Schedule 14 to that Act shall have effect as if the definition of " land " in paragraph 17 of that Schedule included what is assumed to be sold.

• (5) In this paragraph references to a disposal chargeable under Case VII of Schedule D are references to cases where the acquisition and disposal is in circumstances such that the gain accruing on it is chargeable under Case VII of Schedule D, or where it would be so chargeable if there were a gain so accruing.

• (6) For the purposes of this paragraph " relevant acquisition" has the meaning given by section 13(8)(a) of the Finance Act 1962, and an interest included in the disposal shall be treated as deriving from an acquisition if without that acquisition the whole interest could not have been so included.

Exclusion of short-term gains : supplemental

12

• (1) Paragraph 10 above, and sub-paragraphs (2), (3) and (4) of paragraph 3 of Schedule 6 to the Finance Act 1965 (which make corresponding provision for cases where a disposal of an asset is followed by another disposal of that asset which is chargeable under Case VII) shall apply if what is disposed of on the second occasion does not consist of or include the whole of what was disposed of on the first occasion, so as to afford relief in respect of so much of it as was comprised in both disposals.

• (2) In paragraph 3 of Schedule 6 to the Finance Act 1965 and in this Schedule references to a disposal chargeable under Case VII shall not include references to a disposal on which by virtue of paragraph 18(1) of Schedule 9 to the Finance Act 1962 neither a gain nor a loss can accrue.

Administration: non-resident trading in United Kingdom

13

The Table at the end of paragraph 1(3) of Schedule 10 to the Finance Act 1965 (income tax provisions applied to capital gains tax) shall include section 374 of the Income Tax Act 1952 (responsibility and indemnification of persons in whose name a non-resident person is chargeable).

Commencement

14

Except as otherwise provided, this Part of this Schedule has effect as respects any disposals of assets after 5th April 1968.

PART II — Companies

Company amalgamations and reconstructions

15

• (1) Paragraph 7 of Schedule 7 to the Finance Act 1965 shall be amended as follows.

• (2) Sub-paragraph (1) (issue of shares or debentures in one company to holders of shares or debentures in another company to be treated as an exchange in certain circumstances) shall apply after 10th April 1968, in relation to a company which has no share capital, as if references to shares in or debentures of a company included references to any interests in the company possessed by members of the company, and paragraphs 4 and 6 of the said Schedule 7 shall apply accordingly.

• (3) Sub-paragraph (2) (reconstruction or amalgamation involving transfer of a company's business) shall only apply to a transfer at a time after 10th April 1968 if both that company and the company to which the business is transferred are at that time resident in the United Kingdom.

Transfer of business to a company

16

Paragraph 8 of Schedule 7 to the Finance Act 1965 shall not apply to a transfer after 10th April 1968 if the person, or any of the persons, to whom any gain accrues on the transfer is a company.

Dividend-stripping: receipt of dividend by member of a group

17

• (1) This paragraph has effect where section 65(3) of the Finance Act 1965 (main provisions about dividend-stripping) or paragraph 3(4) of Schedule 11 to the Finance Act 1967 (transfers between companies and their members or participators) applies so as to treat any amount as a capital distribution paid after 10th April 1968 if the recipient was, at the time when it became entitled to receive that amount, a member of a group of companies and if the holding consists of shares in another member of the group.

• (2) Paragraph 3(2) of Schedule 7 to the Finance Act 1965 (postponement of occasion of charge) shall apply as if the inspector had duly given a direction under that sub-paragraph, and that sub-paragraph shall apply accordingly, but subject to the provisions of paragraph 9 of Schedule 10 to the Finance Act 1966 (no postponement where there is no expenditure against which the distribution can be set off), and the said paragraph 9(1) shall apply as if it referred to the said paragraph 3(2) as extended by this paragraph.

Company ceasing to be member of a group

18

• (1) If a company (in this paragraph called the chargeable company) ceases to be a member of a group of companies at any time after 10th April 1968, this paragraph shall have effect as respects any asset which the chargeable company acquired from another company which was at the time of acquisition a member of that group of companies, but only if the time of acquisition fell—

• (a) on or after 6th April 1965, and

• (b) within the period of six years ending with the time when the company ceases to be a member of the group.

Where two or more associated companies cease to be members of the group at the same time, this sub-paragraph shall not have effect as respects an acquisition by one from another of those associated companies.

• (2) If, when the chargeable company ceases to be a member of the group, the chargeable company, or an associated company also leaving the group, owns, otherwise than as trading stock—

• (a) the asset, or

• (b) property to which a chargeable gain has been carried forward from the asset on a replacement of business assets,

the chargeable company shall be treated for all the purposes of Part III of the Finance Act 1965 as if immediately after its acquisition of the asset it had sold, and immediately reacquired, the asset at market value at that time.

• (3) For the purposes of this paragraph—

• (a) two or more companies are associated companies if, by themselves, they would form a group of companies,

• (b) a chargeable gain is carried forward from an asset to other property on a replacement of business assets if, by one or more claims under section 33 of the Finance Act 1965, the chargeable gain accruing on a disposal of the asset is reduced, and as a result an amount falls to be deducted from the expenditure allowable in computing a gain accruing on the disposal of the other property,

• (c) an asset acquired by the chargeable company shall be treated as the same as an asset owned at a later time by that company or associated company if the value of the second asset is derived in whole or in part from the first asset, and in particular where the second asset is a freehold, and the first asset was a leasehold and the lessee has acquired the reversion.

• (4) If any of the corporation tax assessed on a company in consequence of this paragraph is not paid within six months from the date when it becomes payable then—

• (a) a company which on the said date, or immediately after the chargeable company ceased to be a member of the group, was the principal company of the group, and

• (b) a company which owned the asset on the said date, or when the chargeable company ceased to be a member of the group,

may at any time within two years from the time when the tax became payable, be assessed and charged (in the name of the chargeable company) to all or any part of that tax ; and a company paying any amount of tax under this sub-paragraph shall be entitled to recover a sum of that amount from the chargeable company.

• (5) Notwithstanding any limitation on the time for making assessments, an assessment to corporation tax chargeable in consequence of this paragraph may be made at any time within six years from the time when the chargeable company ceased to be a member of the group, and where under this paragraph the chargeable company is to be treated as having disposed of, and reacquired, an asset, all such recomputations of liability in respect of other disposals, and all such adjustments of tax, whether by way of assessment or by way of discharge or repayment of tax, as may be required in consequence of the provisions of this paragraph shall be carried out.

Shares in subsidiary member of a group

19

• (1) This paragraph has effect if a company (in this paragraph called the subsidiary) ceases to be a member of a group of companies at any time after 10th April 1968, and on an earlier occasion shares in the subsidiary were disposed of by another company (in this paragraph called " the chargeable company") which was then a member of that group in the course of an amalgamation or reconstruction in the group, but only if that earlier occasion fell—

• (a) on or after 6th April 1965, and

• (b) within the period of six years ending with the date on which the subsidiary ceases to be a member of the group.

• (2) The chargeable company shall be treated, for all the purposes of Part III of the Finance Act 1965, as if immediately before the earlier occasion it had sold, and immediately re-acquired, the said shares at market value at that time.

• (3) If, before the subsidiary ceases to be a member of the group, the chargeable company has ceased to exist, or a resolution has been passed, or an order made, for the winding up of the company, or any other act has been done for the like purpose, any corporation tax to which, if the chargeable company had continued in existence, it would have been chargeable in consequence of this paragraph may be assessed and charged (in the name of the chargeable company) on the company which is, at the time when the subsidiary ceases to be a member of the group, the principal company of the group.

• (4) If any of the corporation tax assessed on a company in consequence of this paragraph, or in pursuance of sub-paragraph (3) above, is not paid within six months from the date when it becomes payable, then—

• (a) a company which is on the said date, or was on the earlier occasion, the principal company of the group, and

• (b) any company taking an interest in the subsidiary as part of the amalgamation or reconstruction in the group,

may at any time within two years from the time when the tax became payable, be assessed and charged (in the name of the chargeable company) to all or any part of that tax; and a company paying any amount of tax under this sub-paragraph shall be entitled to recover a sum of that amount from the chargeable company, or as the case may be from the company assessed under sub-paragraph (3) above.

• (5) Notwithstanding any limitation on the time for making assessments, an assessment to corporation tax chargeable in consequence of this paragraph may be made at any time within six years from the time when the subsidiary ceased to be a member of the group and, in relation to any disposal of the property after the earlier occasion, there shall be made all such adjustments of tax, whether by way Of assessment or by way of discharge or repayment of tax as may be required in consequence of the provisions of this paragraph.

• (6) For the purposes of this paragraph there is a disposal of shares in the course of an amalgamation or reconstruction in a group of companies if paragraph 6 or paragraph 7 of Schedule 7 to the Finance Act 1965 (company amalgamations) applies to shares in a company so as to equate them with shares in or debentures of another company, and the companies are members of the same group, or become members of the same group as a result of the amalgamation or reconstruction.

• (7) Where by virtue of paragraph 7 of the said Schedule 7 shares are to be treated as cancelled and replaced by a new issue, references in this paragraph to a disposal of shares include references to the occasion of their being so treated.

Loss on disposal of shares etc. attributable to depreciatory transaction in a group

20

• (1) This paragraph has effect as respects a disposal after 10th April 1968 of shares in, or securities of, a company if the value of the shares or securities has been materially reduced by any disposal of assets, on or after 6th April 1965, at other than market value by one member of a group of companies to another, and in this paragraph any such disposal of assets is called a " depreciatory transaction ":

Provided that no account shall be taken under this sub-paragraph of a disposal of assets if and to the extent that that disposal of assets fell to be treated as giving rise to a capital distribution within the meaning of Part III of the Finance Act 1965, and if the recipient of the capital distribution is the person disposing of the shares and securities.

• (2) If the person making the disposal of the shares or securities is, or has at any time been, a member of the said group of companies, any allowable loss accruing on the disposal shall be reduced to such extent as appears to the inspector, or on appeal the Commissioners concerned, to be just and reasonable having regard to the depreciatory transaction:

Provided that if the person is not a member of the said group when that person disposes of the shares or securities, no reduction of the loss shall be made by reference to a depreciatory transaction which took place when that person was not a member of the said group.

• (3) The inspector or the Commissioners shall make the decision under sub-paragraph (2) above on the footing that the allowable loss ought not to reflect any diminution in the value of the company's assets which was attributable to a depreciatory transaction if and so far as the effect of the transaction was to increase the value of the assets of any other member of the group, but allowance may be made for any other transaction on or after 6th April 1965 which has enhanced the value of the company's assets and depreciated the value of the assets of any other member of the group.

• (4) If, under sub-paragraph (2) above, a reduction is made in an allowable loss, any chargeable gain accruing on a disposal of the shares or securities of any other company which was a party to the depreciatory transaction by reference to which the reduction was made, being a disposal not later than six years after the depreciatory transaction, shall be reduced to such extent as appears to the inspector, or on appeal to the Commissioners concerned, to be just and reasonable having regard to the effect of the depreciatory transaction on the value of those shares or securities at the time of their disposal:

Provided that the total amount of any one or more reductions in chargeable gains made by reference to a depreciatory transaction shall not exceed the amount of the reductions in allowable losses made by reference to that depreciatory transaction.

All such adjustments, whether by way of discharge or repayment of tax, or otherwise, as are required to give effect to the provisions of this sub-paragraph may be made at any time.

• (5) For the purposes of this paragraph—

• " securities " includes any loan stock or similar security whether secured or unsecured, references to the disposal of assets include references to any method by which one company which is a member of a group appropriates the goodwill of another member of the group, a

• " group of companies " may consist of companies some or all of which are not resident in the United Kingdom.

• (6) References in this paragraph to the disposal of shares or securities include references to the occasion of the making of a claim under section 23(4) of the Finance Act 1965 that the value of shares or securities has become negligible, and references to a person making a disposal shall be construed accordingly.

Disposal or acquisition outside a group of companies

21

• (1) In paragraph 4 of Schedule 13 to the Finance Act 1965 (capital allowances) for the words

Where a member of a group of companies disposes of an asset

there shall be substituted the words

Where a company which is or has been a member of a group of companies disposes of an asset

.

• (2) In paragraph 5 of the said Schedule 13 (transitional provisions as to assets held on 6th April 1965) for the words

in relation to a disposal of an asset by a member of a group of companies

there shall be substituted the words

in relation to a disposal of an asset by a company which is or has been a member of a group of companies

.

• (3) References in the said paragraphs 4 and 5 to the acquisition of an asset by one member of a group from another shall, notwithstanding sub-paragraphs (1) and (2) above, continue to be read as references to acquisition at a time when both are members of the group.

• (4) This paragraph applies as respects any disposal after 10th April 1968.

Non-resident group of companies

22

• (1) This paragraph has effect for the purposes of section 41 of the Finance Act 1965 (residents interested in non-resident company).

• (2) Part I of Schedule 13 to the Finance Act 1965 (group of companies resident in the United Kingdom), without paragraph 1 (definition of company and group) and without paragraph 7 (recovery of tax), shall apply in relation to non-resident companies which are members of a non-resident group of companies, as it applies in relation to companies resident in the United Kingdom which are members of a group of companies.

• (3) Paragraphs 18 and 19 above shall apply for the said purposes as if for any reference in those paragraphs to a group of companies there were substituted a reference to a non-resident group of companies, and as if references to companies were references to companies not resident in the United Kingdom.

• (4) This paragraph has effect as respects any disposal after 10th April 1968.

Supplemental

23

• (1) For the purposes of this Part of this Schedule—

• (a) a " non-resident group " of companies—

• (i) in the case of a group, none of the members of which are resident in the United Kingdom, means that group, and

• (ii) in the case of a group, two or more members of which are not resident in the United Kingdom, means the members which are not resident in the United Kingdom;

• (b) " group " and " subsidiary " shall be construed in accordance with sub-paragraphs (b) and (c) of paragraph 1 of Schedule 13 to the Finance Act 1965, with any necessary modifications where applied to a company incorporated under the law of a country outside the United Kingdom,

• (c) except in the definition of " non-resident group " above, or as otherwise expressly provided, " company" shall be construed in accordance with sub-paragraph (a) of the said paragraph 1 (which relates to companies resident in the United Kingdom).

• (2) For the purposes of this Part of this Schedule a group remains the same group so long as the same company remains the principal company of the group, and if at any time the principal company of a group becomes a subsidiary of another company the group of which it was the principal company before that time shall be regarded as the same as the group of which that other company, or one of which it is a subsidiary, is the principal company, and the question whether or not a company has ceased to be a member of a group shall be determined accordingly.

• (3) For the said purposes the passing of a resolution or the making of an order, or any other act, for the winding-up of a company shall not be regarded as the occasion of that company, or of any subsidiary of that company, ceasing to be a member of a group of companies.

• (4) Without prejudice to the provisions of paragraph 2(1) of Schedule 13 to the Finance Act 1965, where any provision in this Part of this Schedule makes the assumption that a member of a group has sold or acquired an asset, it shall be assumed also that it was not a sale to or acquisition from another member of the group.

• (5) Any provision in this Part of this Schedule making the assumption that an asset is sold and reacquired at market value shall have effect subject to the provisions of section 33 of the Finance Act 1967 (current use value of land in Great Britain).

• (6) This Part of this Schedule has effect as respects tax for any accounting period ending after 10th April 1968, and so far as it relates to liability to tax arising on a disposal deemed to have been made on or before 10th April 1968, shall have effect for tax for earlier accounting periods.

Schedule 13.

Exemption for tangible movables which are wasting assets

1

• (1) Chargeable assets for the purposes of Case VII of Schedule D shall not include an asset which is tangible movable property and which is a wasting asset, and shall not include an interest in tangible movable property which is a wasting asset.

• (2) Sub-paragraph (1) above shall not apply to a disposal of commodities of any description by a person dealing on a terminal market or dealing with or through a person ordinarily engaged in dealing on a terminal market.

• (3) In this paragraph " wasting asset" has the meaning given by paragraph 9 of Schedule 6 to the Finance Act 1965.

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

Company amalgamations and reconstructions

2

Paragraph 13(1) of Schedule 9 to the Finance Act 1962 (issue of shares or debentures in one company to holders of shares or debentures in another company to be treated as an exchange in certain circumstances) shall apply after 10th April 1968, in relation to a company which has no share capital, as if references to shares in or debentures of a company included references to any interests in the company possessed by members of the company, and paragraphs 10 and 12 of that Schedule shall apply accordingly.

Husband and wife dealing in shares, etc.

3

• (1) Where, in the case of a man and his wife living with him, one of them—

• (a) disposes of shares to his wife or her husband after 10th April 1968, and

• (b) disposes of other shares, of the same kind as those disposed of to the wife or husband, to another person (in this paragraph called " a third party "),

the provisions of this paragraph shall have effect as respects any shares acquired by the person making those disposals which, but for the provisions of paragraph 8 of Schedule 9 to the Finance Act 1962 (identification of shares), could have been comprised in either of those disposals.

• (2) If, but for the provisions of this sub-paragraph, shares disposed of to a third party—

• (a) would not be taxable shares, and

• (b) but for the disposal to the wife or husband would be taxable shares,

the identification shall be reversed so that the shares disposed of to the third party (or, if the quantity disposed of to the third party was greater than the quantity disposed of to the wife or husband, a part of them equal to the quantity disposed of to the wife or husband) shall be taxable shares.

• (3) If there is more than one disposal to the wife or husband, or more than one disposal to a third party, the provisions of this paragraph shall be applied to shares disposed of on an earlier date before being applied to shares disposed of on a later date, and the re-identification of the shares first disposed of shall accordingly determine the way in which this paragraph applies to the shares comprised in the later disposal.

• (4) In this paragraph " taxable shares " are shares the disposal of which, together with their acquisition, constitutes an acquisition and disposal within the meaning of Chapter II of Part II of the Finance Act 1962.

• (5) This paragraph shall apply in relation to a disposal of any assets as it applies in relation to a disposal of shares, where the assets are of a nature to be dealt in without identifying the particular assets disposed of or acquired.

Husband and wife dealing in shares etc.: sale at a loss and reacquisition

4

• (1) Where, in the case of a man and his wife living with him, a loss accrues to one of them from his or her acquisition and disposal of any shares, and the other of them is to be treated in accordance with this paragraph as acquiring the same shares within the prescribed period after the disposal, that loss shall be allowable under Case VII by deduction from any gain accruing to the other (that is to say the wife or husband of the person to whom the loss accrued) from an acquisition and disposal of the shares beginning with that acquisition by the other, but shall not be so allowable by deduction from any other gain accruing to either of them.

• (2) Shares disposed of by the husband or wife shall not for the purposes of this paragraph be treated as the same as shares acquired by the other if for the purposes of paragraph 9 of Schedule 9 to the Finance Act 1962—

• (a) the person disposing of the shares is to be treated as having reacquired the same shares, or

• (b) the person acquiring the shares is to be treated as thereby reacquiring shares disposed of,

or if the person acquiring the shares acquires them from her husband or his wife.

• (3) Subject to sub-paragraph (2) above, where the husband or wife disposes of shares and the other afterwards acquires the like shares within the prescribed period from the disposal, the other is to be treated for the purposes of this paragraph as acquiring the same shares as those disposed of (or, if the quantity disposed of was greater than the quantity acquired, a part equal to the quantity acquired) and, so far as necessary, the rules in paragraphs (a) to (d) of paragraph 9(2) of Schedule 9 to the Finance Act 1962 (successive disposals and successive acquisitions) shall apply for the purpose of determining which are the same shares, as if the husband and wife were one person, and disregarding all shares excluded by sub-paragraph (2) above.

• (4) For the purposes of this paragraph shares acquired by the wife or husband for transfer or delivery after the date of transfer or delivery of the shares sold by the other shall be deemed to have been acquired after the disposal of the shares sold.

• (5) Where the husband or wife acquires shares and, under paragraph 8 of Schedule 9 to the Finance Act 1962, shares previously disposed of by him or her are identified with those shares, then—

• (a) this paragraph shall not apply in relation to any loss accruing from that acquisition and disposal, and

• (b) that acquisition shall not be treated for the purposes of this paragraph as an acquisition of the same shares as any shares disposed of by the other,

and sub-paragraphs (4) to (6) of paragraph 9 of the said Schedule 9 shall apply as if references in those sub-paragraphs to sub-paragraph (3) of that paragraph included references to this sub-paragraph.

• (6) In this paragraph " the prescribed period " means—

• (a) in the case of an acquisition of shares through a stock exchange, one month, and

• (b) in the case of an acquisition of shares otherwise than through a stock exchange, or in the case of an acquisition of some other kind of asset, six months.

• (7) This paragraph shall apply in relation to acquisitions or disposals of any assets as it applies in relation to acquisitions or disposal of shares, where the assets are of a nature to be dealt in without identifying the particular assets disposed of or acquired.

Construction and commencement

5

• (1) Except as otherwise provided, this Schedule has effect as respects any disposals of assets after 10th April 1968.

• (2) This Schedule shall be construed as one with Chapter II of Part II of the Finance Act 1962,

Schedule 14.

Substitution of seven years for five years

1

List of enactments amended

• Customs and Inland Revenue Act 1881 Section 38(2)(a) except as respects gifts for public or charitable purposes.

• Finance Act 1894 Section 2(3) except as respects gifts for public or charitable purposes.

• Finance Act 1939 Section 31(2).

• Finance Act 1940 Section 43(2). Section 46(1). Section 47(1) (in two places). Section 48(3) (in two places). Section 51(1A). Section 55(1)(a). Section 58(1)(a). In Schedule 7, paragraphs 1(4), 2(1)(3)(5) and 2(6)(c).

• Finance Act 1950 Section 45(2)(a)(b).

• Finance Act 1954 Section 29(1)(2)(4).

• Finance Act 1958 Section 28(1)(8)(10).

Consequential amendments

2

• (1) In section 38(2)(a) of the Customs and Inland Revenue Act 1881 (as applied by section 2(1)(c) of the Finance Act 1894) for " three months " (as originally enacted) substitute " seven years, or in the case of a gift made for public or charitable purposes twelve months ".

• (2) In section 2(3) of the Finance Act 1894 for " twelve months " substitute " seven years, or in the case of a gift made for public or charitable purposes twelve months ".

• (3) In section 59(3) of the Finance (1909-10) Act 1910 the reference to the period provided by that section shall be taken as a reference to seven years, or in the case of a gift made for public or charitable purposes twelve months.

Benefits from companies

3

• (1) In section 46(2) of the Finance Act 1940 for " last five accounting years" substitute " last seven accounting years " , and, where the company came into existence in any of the last seven accounting years mentioned in the said section 46(2) as so amended, the reference to the last seven accounting years shall be construed as a reference to the accounting year in which the company came into existence and all later accounting years.

• (2) In the case of a death on or before 19th March 1970 the exception in subsection (1) of the principal section shall not apply to any of the amendments made by that subsection in section 46 or section 47 of, or Schedule 7 to, the Finance Act 1940 if any benefits accrued to the deceased from the company after 19th March 1963.

• (3) The provisions of the said Act as to what are to be treated as benefits accruing to the deceased from the company, and as to when a benefit is treated as having accrued therefrom, shall, as amended by this Act, apply for the purposes of sub-paragraph (2) above as they apply for the purposes of the said section 46, but as if the references in section 47 of that Act, and paragraph 2 of Schedule 7 to that Act, to the seven years ending with the death of the deceased were treated as references to the said seven years less so much thereof as fell before 20th March 1963.

Surrender of title to benefits from a company : graduation of charge

4

• (1) In section 65(1) of the Finance Act 1960 for " two years " substitute " four years " , and—

• (a) in paragraph (a) of the said subsection (1) for " three years " substitute " five years " , and

• (b) in paragraph (b) of that subsection for " four years" substitute " six years ".

• (2) Sub-paragraph (1) above shall not have effect so as to give a lesser percentage reduction than the percentage reduction (if any) which, assuming that the deceased had died on 19th March 1968, would have fallen to be made under the said subsection (1) without the amendments made by this paragraph.

Schedule 15.

Income out of capital, et ceteralaetc.

1

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

Recovery of charge from trustees

2

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

3

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

4

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

5

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

Income derived from another trust

6

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

Notice to persons answerable for a trust

7

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

Application of trust property in payment of charge

8

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

Foreign trusts

9

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

Limitation of liability of trustees

10

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

Interpretation

11

• (1) The following provisions have effect for the interpretation of this Schedule in a case where the special charge falls to be made in respect of an individual's aggregate investment income and that income includes any amount arising under a trust.

• (2) For the purposes of this Schedule the amount of the special charge attributable to the trust shall be the fraction of the special charge of which—

• (a) the numerator is the individual's investment income arising under the trust, and

• (b) the denominator is the individual's aggregate investment income, ascertained before making any deduction under section 42(7) of this Act.

• (3) Where credit for foreign tax falls to be allowed against the special charge, the amount of the special charge attributable to the trust shall be ascertained—

• (a) by applying the fraction in sub-paragraph (2) above to the special charge without allowing the credit against the amount of the special charge, and

• (b) by deducting from the resulting amount so much of the credit, if any, as is allowable in respect of income arising from the trust.

• (4) For the said purposes " the person originally chargeable" means die individual or other person liable to pay the special charge apart from the provisions of this Schedule.

12

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

13

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

Schedule 16.

Special Apportionments

1

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

2

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

3

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

Recovery of special charge from company

4

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

Schedule 17.

The areas referred to in section 52(1) of this Act are—

SCHEDULE 18

1

Premium Savings Bonds are a Government Security and are eligible for inclusion in draws for cash prizes. These prizes are free from United Kingdom Income Tax, Surtax and Capital Gains Tax.

2

Premium Saving Bonds, (Series B) (hereinafter called Bonds) will be issued in units of £1 by the Treasury and will be subject to regulations made from time to time by the Treasury under section 12 of the National Debt Act 1958, or having effect by virtue of that Act. The principal of the Bonds and the prizes allotted will be a charge on the National Loans Fund with recourse to the Consolidated Fund.

3

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

4

Bonds are not transferable either during the lifetime or on the death of the registered holder. No responsibility can be accepted in respect of their use as security for a loan.

5

There will be a monthly prize fund which will be determined by calculating one month’s interest on each bond eligible for the draws in that month. The rate of interest will be 45/8% per annum or such other rate as may be prescribed under the provisions of paragraph 15 below.

6

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

7

... After a Bond has qualified for its first draw it will be included in each succeeding draw, unless it has been repaid before the first day of the month in which the draw is held or (subject to the provisions of paragraph 15 below) the registered holder has died before the first day of a period of twelve consecutive calendar months preceding the month in which the draw is held.

8

Each £1 unit Bond will have one chance in each draw for which it is eligible. Each £1 unit Bond may win not more than one prize in each draw for which it is eligible and in draws producing more that one prize will be allotted the highest prize for which it is drawn.

9

Notwithstanding the provisions of paragraph 7 above any Bond purchased in contravention of any regulation limiting the number of unit Bonds which may held by any person shall not be eligible for inclusion in any draw until the holding has been reduced to not more than the maximum number permitted by such regulation.

10

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

11

The serial numbers of Bonds which are allotted prizes will be published ... ...

12

All matters relating to the method and conduct of the draw and allotment of prizes shall be at the sole discretion of the Postmaster General, whose decision as to which Bonds have drawn prizes shall be final.

13

The purchase price of a Bond is repayable in full on application to the Bonds and Stock Office.

14

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

15

The Treasury reserve the right ...:—

• (a) to vary the rate of interest specified in paragraph 5 above for determining the amount of the prize fund;

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

• (c) to vary the provisions of paragraph 7 above insofar as they relate to the eligibility of a Bond for inclusion in a draw after the death of the registered holder;

• (d) to declare any Bonds purchased on or before a date specified ... to be ineligible for further draws.

16

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

Schedule 19

The Commissioners of Her Majesty's Treasury and the Ministry of Finance for Northern Ireland, with a view to assimilating the burdens on the Exchequer of the United Kingdom and the Exchequer of Northern Ireland in respect of social and allied services, have entered into the following Agreement which amends as from 28th November 1966 the Agreement of 11th February 1949, relating to social and allied services, set out in the Schedule to the Social Services (Northern Ireland Agreement) Act 1949.

schedule 20

PART I — CUSTOMS AND EXCISE REPEALS

PART II — DOUBLE TAXATION RELIEF REPEALS

PART III — CAPITAL GAINS REPEALS

PART IV — ESTATE DUTY REPEALS

PART V — EXCHANGE CONTROL REPEALS

PART VI — MISCELLANEOUS REPEALS

The special charge.

8

11

24

35

38

ll

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

Editorial notes