Legalize / United Kingdom / Public General Act

Income and Corporation Taxes Act 1970 (repealed 6.4.1992)

Type Public General Act

Publication 1970-03-12

State In force

Department Statute Law Database

Source legislation.gov.uk

articles Not indexed

Reform history JSON API

(b) in determining, as respects a society resulting from an amalgamation and coming within section 335(2) above by virtue of proviso (a) above, the questions in that subsection in the period immediately following the amalgamation, the activities of the amalgamated societies in the period immediately preceding the amalgamation shall be treated as if they were the activities then being carried on by the society resulting from the amalgamation.

(5) In the application of the said provisions to a friendly society which is for the time being registered or deemed to be registered in Northern Ireland under the enactments relating to friendly societies in Northern Ireland—

(a) for references to section 1(2) and section 24 of the Industrial Assurance Act 1923 there shall be substituted references to section 1(2) and section 24 respectively of the Industrial Assurance Act (Northern Ireland) 1924,

(b) for references to the Friendly Societies Act 1896 or to any provision of that Act there shall be substituted references to that Act or provision as it applies in Northern Ireland,

(c) for references to the Chief Registrar of Friendly Societies there shall be substituted references to the registrar having corresponding functions under the law of Northern Ireland.

Trade unions

Exemption for trade unions

338

(1) A registered trade union which is precluded by Act of Parliament, or by it's rules, from assuring to any person a sum exceeding £500 by way of gross sum or £104 a year by way of annuity shall, on the making of a claim, be entitled—

(a) to exemption from income tax and corporation tax in respect of its income which is not trading income and which is applicable and applied for the purpose of provident benefits,

(b) to exemption from tax in respect of chargeable gains which are applicable and applied for the purpose of provident benefits.

(2) In this section " provident benefits " includes any payment, expressly authorised by the registered rules of the trade union, which is made to a member during sickness or incapacity from personal injury or while out of work, or to an aged member by way of superannuation, or to a member who has met with an accident, or has lost his tools by fire or theft, and includes a payment in discharge or aid of funeral expenses on the death of a member or the wife of a member or as provision for the children of a deceased member.

(3) In determining for the purposes of this section whether a registered trade union is by Act of Parliament or by its rules precluded from assuring to any person a sum exceeding £104 a year by way of annuity, there shall be disregarded any approved annuities (as defined in section 226(13) of this Act).

CHAPTER IV — Savings Banks, Industrial and Provident Societies, Building Societies and Mutual Business

Savings banks

339

(1) Any trustee savings bank within the meaning of section 95(1) of the Trustees Saving Banks Act 1969 shall, on making a claim, be entitled to exemption from income tax and corporation tax in respect of its income arising from investments with the National Debt Commissioners.

(2) Any savings bank, including any such trustee savings bank, shall, on making a claim, be entitled to exemption from income tax and corporation tax in respect of the income of its funds, to the extent that such income is applied in the payment or credit of interest to any depositor:

Provided that, subject to section 414 of this Act (relief for first £15 of deposits), any such interest shall be chargeable under Case III of Schedule D.

Industrial and provident societies, etc.

340

(1) Notwithstanding anything in the Corporation Tax Acts, share interest or loan interest paid by a registered industrial and provident society shall not be treated as a distribution; and, subject to subsection (6) below, any share or loan interest paid in an accounting period of the society—

(a) shall be deductible in computing, for the purposes of corporation tax, the income of the society for that period from the trade carried on by the society, or

(b) if the society is not carrying on a trade, shall be treated for the said purposes as a charge on the income of the society.

(2) Notwithstanding anything in Part II of this Act, any share interest or loan interest paid by a registered industrial and provident society shall be paid without deduction of income tax:

Provided that this subsection shall not apply to any share interest or loan interest payable to a person whose usual place of abode is not within the United Kingdom, and in any such case section 54 of this Act shall apply to the payment as it applies to a payment of yearly interest, and income tax shall be deducted accordingly.

(3) Any share interest or loan interest paid by a registered industrial and provident society shall be chargeable under Case III of Schedule D.

(4) Where at any time, by virtue of this section, the income of a person from any source, not having previously been chargeable by direct assessment on that person, becomes so chargeable, section 120(3) of this Act shall apply as if the source of that income were a new source of income acquired by that person at that time.

(5) Every registered industrial and provident society shall, within three months after the end of any accounting period of the society, deliver to the inspector a return showing—

(a) the name and place of residence of every person to whom the society has by virtue of this section paid without deduction of income tax sums amounting to more than £15 in that period, and

(b) the amount so paid in that period to each of those persons.

(6) If for any accounting period a return under subsection (5) above is not duly made by a registered industrial and provident society, share and loan interest paid by the society in that period shall not be deductible in computing its income, or be treated as a charge on income.

(7) If in the course of, or as part of, a union or amalgamation of two or more registered industrial and provident societies, or a transfer of engagements from one registered industrial and provident society to another, there is a disposal of an asset by one society to another, both shall be treated for the purposes of corporation tax in respect of chargeable gains as if the asset were acquired from the society making the disposal for a consideration of such amount as would secure that neither a gain nor a loss would accrue to that society on the disposal.

(8) Subsections (1) and (7) of this section shall have effect as if references to a registered industrial and provident society included any co-operative association established and resident in the United Kingdom, and having as its object or primary object to assist its members in the carrying on of agricultural or horticultural businesses on land occupied by them in the United Kingdom or in the carrying on of businesses consisting in the catching or taking of fish or shellfish.

(9) In this section—

" co-operative association " means a body of persons having a written constitution from which the Minister is satisfied, having regard to the provision made as to the manner in which the income of the body is to be applied for the benefit of its members and all other relevant provisions, that the body is in substance a co-operative association,

" the Minister " means— the Minister of Agriculture, Fisheries and Food, as regards England or Wales, the Secretary of State, as regards Scotland, and the Ministry of Agriculture for Northern Ireland, as regards Northern Ireland,

" registered industrial and provident society " means a society registered or deemed to be registered under the Industrial and Provident Societies Act 1965 or under the Industrial and Provident Societies Act (Northern Ireland) 1969,

" share interest " means any interest, dividend, bonus or other sum payable to a shareholder of the society by reference to the amount of his holding in the share capital of the society,

" loan interest " means any interest payable by the society in respect of any mortgage, loan, loan stock or deposit, and

references to the payment of share interest or loan interest include references to the crediting of such interest.

Co-operative housing associations

341

(1) Where a housing association makes a claim in that behalf for any year or part of a year of assessment during which the association was approved for the purposes of this section.—

(a) rent to which the association was entitled from its members for the year or part shall be disregarded for tax purposes, and

(b) any yearly interest payable by the association for the year or part shall be treated for tax purposes as payable not by the association but severally by the members of the association who during the year or part were tenants of property of the association, in the proportion which the rents payable by those members for the year or part bear to the aggregate of the rents to which the association was entitled for the year or part from the properties to which the interest relates, and

(c) each member of the association shall be treated for the purposes of section 57 of this Act (relief for interest on loans for purchase or improvement of land) as if he were the owner of the association's estate or interest in the property of which he is the tenant.

(2) Where the property, or any of the properties, to which any such interest as aforesaid relates is for any period not subject to a tenancy, subsection (1)(b) above shall not apply in relation to so much of the interest as is attributable to the property not subject to a tenancy, but for the purposes of the said subsection (1)(b) as it applies in relation to a tenant of any other property to which the interest relates the association shall be deemed to have received, in respect of the property not subject to a tenancy, rent at the rate payable therefor when it was last let by the association.

(3) In computing the income of the association no payments shall be deductible under subsections (2), (3) or (4) of section 72 of this Act in so far as attributable to a period as respects which a claim under subsection (1) of this section had effect.

(4) Where a claim under subsection (1) of this section has effect, any adjustment of the liability to tax of a member or of the association which is required in consequence of the claim may be made by an assessment or by repayment or otherwise, as the case may require.

(5) Where a housing association makes a claim in that behalf for an accounting period or part of an accounting period during which it was approved for the purposes of this section, the housing association shall be exempt from corporation tax on chargeable gains accruing to it in the accounting period or part thereof on the disposal by way of sale of any property which has been or is being occupied by a tenant of the housing association.

(6) References in this section to the approval of an association shall be construed as references to approval—

(a) by the Minister of Housing and Local Government, in the case of an association in England (excluding Monmouthshire),

(b) by the Secretary of State in the case of an association in Scotland, Wales or Monmouthshire,

and an association shall not be approved unless the approving authority is satisfied—

(i) that the association is, or is deemed to be, duly registered under the Industrial and Provident Societies Act 1965 or the Industrial and Provident Societies Act (Northern Ireland) 1969, and is a housing association within the meaning of the Housing Act 1957, the Housing (Scotland) Act 1950 or section 12 of the Housing and Local Government (Miscellaneous Provisions) Act (Northern Ireland) 1946,

(ii) that the rules of the association restrict membership to persons who are tenants or prospective tenants of the association, and preclude the granting or assignment (or in Scotland the granting or assignation) of tenancies to persons other than members, and

(iii) that the association satisfies such other requirements as may be prescribed by the approving authority, and will comply with such conditions as may for the time being be so prescribed.

(7) An approval given for the purposes of this section shall have effect as from such date (whether before or after the giving of the approval) as may be specified by the approving authority, and shall cease to have effect if revoked by him.

(8) The Minister of Housing and Local Government and the Secretary of State as respects England and Wales and Scotland, or the Minister of Development for Northern Ireland as respects Northern Ireland, may make regulations for the purpose of carrying out the provisions of this section ; and from the coming into operation of regulations under this subsection prescribing requirements or conditions for the purposes of subsection (6)(iii) above, " prescribed " in the said subsection (6)(iii) shall mean prescribed by or under such regulations.

The power to make regulations conferred by this subsection on the Minister of Housing and Local Government and the Secretary of State shall be exercisable by statutory instrument.

(9) A claim under this section shall be made to the inspector, and shall be made not later than two years after the end of the year of assessment or accounting period to which, or to a part of which, it relates.

Section 42 of the Taxes Management Act 1970 shall not apply to a claim under this section.

(10) No claim under this section shall have effect unless it is proved that during the year or accounting period, or part thereof, to which the claim relates—

(a) no property belonging to the association making the claim was let otherwise than to a member of the association;

(b) no property let by the association, and no part of such property, was occupied, whether solely or as joint occupier, by a person not being a member of the association;

(c) the association making the claim satisfies the conditions specified in subsection (6)(i) and (ii) above and has complied with the conditions prescribed under subsection (6)(iii) above for the time being in force; and

(d) any covenants required to be included in grants of tenancies by those conditions have been observed :

Provided that where the Board are satisfied that the requirements of paragraphs (a) to (d) of this subsection are substantially complied with they may direct that the claim shall have effect, but if subsequently information comes to the knowledge of the Board which satisfies them that the direction was not justified they may revoke the direction and thereupon the liability of all persons concerned to tax for all relevant years or accounting periods shall be adjusted by the making of assessments or otherwise.

For the purposes of paragraph (b) above occupation by any other person in accordance with the will, or the provisions applicable on the intestacy, of a deceased member, shall be treated during the first six months after the death as if it were occupation by a member.

(11) A claim under this section shall be in such form and contain such particulars as may be prescribed by the Board, and, without prejudice to the generality of this provision, the required particulars may include an authority granted by all members of the association for any relevant information contained in any return made by a member under the provisions of the Income Tax Acts to be used by the Board in such manner as the Board may think fit for determining whether the claim ought to be allowed.

Disposals of land between the Housing Corporation and housing societies

342

Where—

(a) in accordance with a scheme approved under section 5 of the Housing Act 1964 the Housing Corporation acquires from a housing society the society's interest in all the land held by the society for carrying out its objects, or

(b) after the Housing Corporation has so acquired from a housing society all the land so held by it the Corporation disposes to a single housing society of the whole of that land (except any part previously disposed of or agreed to be disposed of otherwise than to a housing society), together with all related assets,

then both parties to the disposal of the land to or, as the case may be, by the Housing Corporation shall be treated for the purposes of corporation tax in respect of chargeable gains as if the land and any related assets disposed of therewith (and each part of that land and those assets) were acquired from the party making the disposal for a consideration of such an amount as would secure that on the disposal neither a gain nor a loss accrued to that party.

Building societies

343

(1) The Board and any building society may, as respects any year of assessment, enter into arrangements whereby—

(a) on such sums as may be determined in accordance with the arrangements the society is liable to account for and pay an amount representing income tax calculated in part at the standard rate and in part at a reduced rate which takes into account the operation of the subsequent provisions of this section ; and

(b) provision is made for any incidental or consequential matters,

and any such arrangements shall have effect notwithstanding anything in this Act:

Provided that in exercising their powers of entering into arrangements under this section, the Board shall at all times aim at securing that (if the amount so payable by the society under the arrangements is regarded as income tax for the year of assessment) the total income tax becoming payable to, and not becoming repayable by, the Crown is, when regard is had to the operation of the subsequent provisions of this section, as nearly as may be the same in the aggregate as it would have been if those powers had never been exercised.

(2) Where for any year of assessment a building society enters into arrangements under this section, dividends or interest payable in respect of shares in, or deposits with or loans to, the society shall be dealt with for the purposes of corporation tax as follows:—

(a) in computing for any accounting period ending in the year of assessment the total profits of the society there shall be allowed as a deduction the actual amount paid or credited in the accounting period of any such dividends or interest, together with the amount accounted for and paid by the society in respect thereof as representing income tax,

(b) in computing the income of a company which is paid or credited in the year of assessment with any such dividends or interest, the company shall be treated as having received an amount which, after deduction of income tax at the standard rate for the year of assessment, is equal to the amount paid or credited, and shall be entitled to a set off or repayment of income tax accordingly, except that the dividends or interest shall not be brought into account under Schedule 9 to this Act (method by which companies are to account for income tax due from them),

(c) no part of any such dividends or interest paid or credited in the year of assessment shall be treated as a distribution of the society or as franked investment income of any company resident in the United Kingdom.

(3) Where any arrangements under this section are in force in the case of any society as respects any year of assessment—

(a) notwithstanding anything in Part II of this Act, income tax shall not be deducted from any dividends or interest payable in that year in respect of shares in or deposits with or loans to that society,

(b) no assessment to income tax or (subject to subsection (2)(b) above) repayment of income tax shall be made in respect of any such dividends or interest on or to the person receiving or entitled to the dividends or interest,

(c) subject to subsection (2)(b) above, the amounts actually paid or credited in respect of any such dividends or interest (and no more) shall be treated as income for that year of the person entitled thereto, and

(d) subject to section 240(4) of this Act (payments by companies not to be treated as paid out of profits or gains brought into charge to income tax), the said amounts (and no more) shall, in applying section 52 and section 53 of this Act to other payments, be treated as profits or gains which have been brought into charge to income tax:

Provided that—

(i) any such dividends or interest shall be taken into account for the purposes of assessment to surtax; and

(ii) the amount actually paid or credited in respect of any such dividends or interest shall be deemed for surtax purposes to be a net amount corresponding to a gross amount from which tax at the standard rate for that year has been duly deducted, and the amount on which surtax is to be charged in the case of any person shall be calculated accordingly ; and

(iii) the provisions of this subsection shall not apply in relation to interest on any bank loan; and

(iv) the provisions of this subsection shall not apply in relation to any interest which is payable in respect of a loan to the society under a contract made before the beginning of the first year of assessment as respects which the society enters into arrangements under subsection (1) of this section, if and to the extent that, both at the time of the making of the contract and at the time when the interest becomes payable, it is contemplated by the parties that tax shall be deducted on payment of the interest.

(4) Where any arrangements under this section are in force in the case of any society as respects any year of assessment then, notwithstanding anything in Part II of this Act, income tax shall not be deducted upon payment to the society of any interest on advances, being interest payable in that year.

(5) If in the course of, or as part of, a union or amalgamation of two or more building societies, or a transfer of engagements from one building society to another, there is a disposal of an asset by one society to another, both shall be treated for purposes of corporation tax in respect of chargeable gains as if the asset were acquired from the one making the disposal for a consideration of such amount as would secure that on the disposal neither a gain nor a loss would accrue to the one making the disposal.

(6) Any arrangements made under this section as respects any year of assessment shall, if made after the beginning of that year, be deemed to have come into force at the beginning thereof, and any necessary adjustments shall be made in relation to any sums paid or credited before the date of the making of the arrangements.

(7) In this section "dividend" includes any distribution as defined for the purposes of the Corporation Tax Acts, whether described as a dividend or otherwise.

(8) In this section "building society" means a building society within the meaning of the Building Societies Act 1962 or the Building Societies Act (Northern Ireland) 1967.

(9) This section shall apply in relation to a company within the meaning of the Companies Act 1948, or the corresponding enactments in force in Northern Ireland, which carries on a business which in the opinion of the Board is similar to that carried on by a building society as it applies in relation to a building society, except that in subsections (2) and (3) the references to dividends and shares shall be deemed to be omitted.

Building societies: time for payment of corporation tax

344

(1) Where a building society which had for the year 1965-66 entered into arrangements under section 445 of the Income Tax Act 1952 (which is re-enacted in section 343 above) would but for the arrangements have been assessed for that year by reference to a period ending before that year, but under the arrangements (and without any election thereunder by the society) was so assessed by reference to a period ending in that year, then this section shall apply to the society in place of the provisions of Chapter I of Part XI of this Act as to the time for payment of corporation tax.

(2) Where this section applies to a building society, then—

(a) corporation tax assessed on the society for any accounting period shall be paid within one month from the making of the assessment, except that if the society's basis period for the year 1965-66 did not extend into the year 1966, the tax shall not be payable before the like time after the last day of the accounting period as 1st January 1966 is after the last day of that basis period; but

(b) if corporation tax has not become payable by the society for an accounting period by the like time from the beginning of that period as there is between the beginning of the said basis period and 1st January 1966, the society shall at that time from the beginning of the accounting period make a provisional payment of tax computed on the amount on which the society is chargeable to corporation tax for the accounting period last ended with such adjustments, if any, as may be required for periods of different length or as may be agreed between the society and the inspector.

References in this subsection to a society's basis period for the year 1965-66 are references to the period by reference to which the society was assessed to income tax for that year under the arrangements referred to in subsection (1) above.

Companies trading with their members, and certain industrial and provident societies

345

(1) In the application to any company of any provision of the Tax Acts relating to profits or gains chargeable under Case I of Schedule D, any reference to profits or gains shall be deemed to include a reference to a profit or surplus arising from transactions of the company with its members which would be included in profits or gains for the purposes of that provision if those transactions were transactions with non-members, and the profit or surplus aforesaid shall be determined for the purposes of that provision on the same principles as those on which profits or gains arising from transactions with non-members would be so determined.

(2) It is hereby declared that, in computing, for the purposes of any provision of the Tax Acts relating to profits or gains chargeable under Case I of Schedule D, any profits or gains of—

(a) any registered industrial and provident society which does not sell to persons not members thereof; or

(b) any registered industrial and provident society the number of the shares whereof is not limited by its rules or practice ; or

(c) any other company, being a company the profits or gains whereof include any income which is chargeable to tax by virtue of subsection (1) of this section,

there are to be deducted as expenses any sums which—

(i) represent a discount, rebate, dividend or bonus granted by the company to members or other persons in respect of amounts paid or payable by or to them on account of their transactions with the company, being transactions which are taken into account in the said computation ; and

(ii) are calculated by reference to the said amounts or to the magnitude of the said transactions and not by reference to the amount of any share or interest in the capital of the company.

(3) No dividends or bonus deductible in computing income as mentioned in subsection (2) above shall be regarded as a distribution.

(4) In this section " registered industrial and provident society " means a society registered or deemed to be registered under the Industrial and Provident Societies Act 1965 or under the Industrial and Provident Societies Act (Northern Ireland) 1969.

Companies carrying on mutual business, or not carrying on a business

346

(1) Subject to subsection (2) below, where a company carries on any business of mutual trading or mutual insurance or other mutual business the provisions of the Corporation Tax Acts relating to distributions shall apply to distributions made by the company notwithstanding that they are made to persons participating in the mutual activities of that business and derive from those activities, but shall so apply only to the extent to which the distributions are made out of profits of the company which are brought into charge to corporation tax or out of franked investment income (including group income).

(2) In the case of a company carrying on any mutual life assurance business, the provisions of the Corporation Tax Acts relating to distributions shall not apply to distributions made to persons participating in the mutual activities of that business and derived from those activities ; but if the business includes annuity business, the annuities payable in the course of that business shall not be treated as charges on the income of the company to any greater extent than if the business were not mutual but were being carried on by the company with a view to the realisation of profits for the company.

(3) Subject to the preceding subsections, the fact that a distribution made by a company carrying on any such business is derived from the mutual activities of that business and the recipient is a person participating in those activities shall not affect the character which the payment or other receipt has for purposes of corporation tax or income tax in the hands of the recipient.

(4) Where a company does not carry on, and never has carried on, a trade or a business of holding investments, and is not established for purposes which include the carrying on of a trade or of such a business, the provisions of the Corporation Tax Acts relating to distributions shall apply to distributions made by the company only to the extent to which the distributions are made out of profits of the company which are brought into charge to corporation tax or out of franked investment income.

Distribution of assets of body corporate carrying on mutual business

347

(1) Where any person receives any money or money's worth—

(a) forming part of the assets of a body corporate, other than assets representing capital, or

(b) forming part of the consideration for the transfer of the assets of a body corporate, other than assets representing capital, as part of a scheme of amalgamation or reconstruction which involves the winding up of the body corporate, or

(c) consisting of the consideration for a transfer or surrender of a right to receive anything falling under paragraph (a) or (b) above, being a receipt not giving rise to any charge to tax on the recipient apart from this section,

and the body corporate has at any time carried on a trade which consists of or includes the conducting of any mutual business (whether confined to members of the body corporate or not), and is being or has been wound up or dissolved, the provisions of this section shall apply to the receipt.

(2) If a transfer or surrender of a right under subsection (1)(c) of this section is not at arm's length, the person making the transfer or surrender shall, for the purposes of this section, be deemed then to have received consideration equal to the value of the right.

(3) If in respect of a payment of any amount made to the body corporate for the purposes of its mutual business any deduction has been allowed for the purposes of tax in computing the profits or gains or losses of a trade, then—

(a) if at the time of the receipt the recipient is the person, or one of the persons, carrying on that trade, the amount or value of the receipt shall be treated for the purposes of tax as a trading receipt of that trade, and

(b) if at the time of the receipt the recipient is not the person, or one of the persons, carrying on that trade, but was the person, or one of the persons carrying on that trade when any payment was made to the body corporate for the purposes of its mutual business in respect of which a deduction was allowed for the purposes of tax in computing the profits or gains or losses of the trade, the recipient shall, subject to the provisions of subsection (5) of this section, be charged under Case VI of Schedule D for the chargeable period in which the receipt falls on an amount equal to the amount or value of the receipt.

Paragraph (a) of this subsection applies notwithstanding that, as a result of a change in the persons carrying on the trade, the profits or gains are under section 154 or section 251(1) of this Act (income tax and corporation tax rules for commencement or discontinuance of trade), determined as if it had been permanently discontinued and a new trade set up and commenced.

(4) Where an individual is chargeable to tax by virtue of subsection (3)(b) of this section and the profits or gains of the trade there mentioned fell to be treated as earned income for the purposes of the Income Tax Acts, the sums in respect of which he is so chargeable shall also be treated for those purposes as earned income.

(5) If the trade mentioned in subsection (3)(b) of this section was permanently discontinued before the time of the receipt, then in computing the charge to tax under the said subsection (3)(b) there shall be deducted from the amount or value of the receipt—

(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 had not been discontinued, would have been deducted in computing for tax purposes the profits or gains or losses of the person by whom it was carried on before the discontinuance, or would have been deducted from or set off against those profits as so computed, and

(b) any capital allowance to which the person who carried on the trade was entitled immediately before the discontinuance and to which effect has not been given by way of relief before discontinuance.

Relief shall not be given under this subsection or under section 145(1) of this Act (post-cessation receipts: allowable deductions) in respect of any loss, expense, debit or allowance if and so far as it has been so given by reference to another charge to tax under this section or under section 143 of this Act (post-cessation receipts).

(6) For the purposes of subsection (1) of this section assets representing capital consist of—

(a) assets representing any loan or other capital subscribed, including income derived from any investment of any part of that capital, but not including profits from the employment of that capital for the purposes of the mutual business of the body corporate,

(b) assets representing any profits or gains charged to tax as being profits or gains of any part of the trade carried on by the body corporate which does not consist of the conducting of any mutual business,

(7) In this section " mutual business " includes any business of mutual insurance or mutual trading.

(8) Subsections (3), (4) and (5) of this section shall apply with any necessary modifications—

(a) to a profession or vocation, and

(b) to the occupation of woodlands the profits or gains of which are assessable under Schedule D,

as they apply to a trade.

(9) It is hereby declared that the description of trades in subsection (1) of this section does not include any trade all the profits or gains of which are chargeable to tax and, in particular, does not include such a trade carried on by any registered industrial and provident society.

CHAPTER V — Statutory Bodies

Reserves of marketing boards

348

(1) Where a marketing board to which this section applies carries on a trade which includes the buying and selling of the board's commodity, and the board is required in connection with arrangements for maintaining guaranteed prices to producers of that commodity to pay the whole or part of any surplus derived from dealings in the commodity into a reserve fund satisfying the conditions of the next following subsection, then—

(a) in computing for the purposes of tax the profits or gains or losses of the said trade there shall be allowed as deductions any sums required to be paid by the board into the reserve fund out of the profits or gains of the trade, and there shall be taken into account as trading receipts any sums withdrawn by the board from the fund except in so far as the sums withdrawn are required to be paid to a Minister of the Crown or Government department or are distributed to producers of the board's commodity, and

(b) in computing for the purposes of tax the profits or gains or losses of a trade carried on by any person there shall be taken into account as a trading receipt any payment made to him on a distribution by the board to producers of the board's commodity of sums withdrawn from the fund.

(2) The conditions to be satisfied by the reserve fund are—

(a) that no sum may be withdrawn from it by the board without the authority or consent of a Minister of the Crown or Government department, and

(b) that, where money has been paid to the board by a Minister of the Crown or Government department in connection with the arrangements for maintaining guaranteed prices to producers of the board's commodity, sums afterwards standing to the credit of the fund are required to be applied in whole or in part in repaying that money, and

(c) that the sums standing to the credit of the fund and not otherwise applied become, at intervals fixed by or under any scheme or arrangements approved by or made with a Minister of the Crown or Government department, available for distribution to producers of the board's commodity.

(3) In this section—

(a) " marketing board to which this section applies " means any body of persons established by or under any enactment and having for its object or one of its objects to regulate in the interests of producers in the United Kingdom or any class of them the marketing of a particular commodity, and " the board's commodity " refers to that commodity,

(b) " required " means required by or under any scheme or arrangements approved by or made with a Minister of the Crown or Government department,

(c) " Minister of the Crown or Government department" includes a Minister of the Crown or Government department in Northern Ireland,

(d) " producer " includes a person who produces one type or quality of the commodity from another and (except in so far as the context otherwise requires) a person who has been a producer and the personal representatives of a producer who has died.

(4) For the purposes of subsection (1)(b) of this section, a payment made to a person in respect of a trade he has ceased to carry on, and a payment made to a person's personal representatives but referable to his having carried on the trade in respect of which it is made, shall be treated as if it had been made to him on the last day on which he was engaged in carrying on the trade.

Electricity Council and Boards

349

(1) For the purposes of the Corporation Tax Acts the Electricity Council shall be treated as carrying on a trade, and those Acts shall have effect as if the trade carried on by the Central Electricity Authority at any time before 1st January 1958 had been the trade of the Electricity Council.

(2) For the purposes of the Corporation Tax Acts—

(a) any trade carried on by a Board shall be treated as if it were part of the trade carried on by the Electricity Council,

(b) subject to paragraph (c) below, any property, rights or liabilities of a Board shall be treated as property, rights or liabilities of the Electricity Council, and anything done by or to a Board shall be deemed to have been done by or to the Electricity Council,

(i) of, by or to the Electricity Council against, to or by a Board, or

(ii) of, by or to a Board against, to or by the Electricity Council or any other Board,

shall be left out of account,

and corporation tax shall be charged accordingly.

(3) For the purposes of the operation of the Corporation Tax Acts in accordance with the preceding provisions of this section, the Electricity Council shall be deemed to have been in existence as from 1st April 1948, and anything done by, to or in relation to the Central Electricity Authority shall be treated as if it had been done by, to or in relation to the Electricity Council.

(4) In this section " Board " means—

(a) any Area Board established by or under the provisions of the Electricity Act 1947, and

(b) in relation to any time on or after 1st January 1958, the Central Electricity Generating Board.

Gas Council and Area Boards

350

(1) Subject to the provisions of this section, for the purposes of the Corporation Tax Acts the Gas Council shall be treated as carrying on a trade from the beginning of April 1962, and from the beginning of that month—

(a) any trade carried on by an Area Board within the meaning of the Gas Act 1948 shall be treated as part of the trade carried on by the Gas Council;

(b) subject to paragraph (c) below, any property, rights or liabilities of any such Board shall be treated as property, rights or liabilities of the Gas Council, and any thing done by or to any such Board shall be deemed to have been done by or to the Gas Council,

(i) of, by or to the Gas Council against, to or by any such Board, or

(ii) of, by or to any such Board against, to or by the Gas Council or any other such Board,

shall be left out of account,

and corporation tax shall be charged accordingly.

(2) Any losses of the trade of an Area Board for any year of assessment earlier than the year 1962-63 may be carried forward and set off against the profits or gains of the trade of the Gas Council as if incurred by the Gas Council in carrying on that trade.

(3) The Corporation Tax Acts shall apply in relation to the trade of the Gas Council as if before the beginning of April 1962 it had consisted of the trades of the Area Boards, and (without prejudice to the generality of the foregoing) allowances and balancing charges shall be made to or on the Gas Council accordingly by reference to the capital expenditure of Area Boards and to the allowances made to Area Boards in respect of that expenditure.

Atomic Energy Authority and National Radiological Protection Board

351

(1) The United Kingdom Atomic Energy Authority and the National Radiological Protection Board shall be entitled to exemption from income tax and corporation tax—

(a) under Schedules A, B and C,

(b) under Schedule D in respect of any yearly interest or other annual payment received by the Authority or Board,

(d) in respect of chargeable gains.

(2) Income arising from investments or deposits held for the purposes of any pension scheme provided and maintained by the said Atomic Energy Authority shall be treated for the purposes of this section as if that income and the source thereof belonged to the Authority, and similarly with chargeable gains (the exemptions from corporation tax conferred on the Authority having effect as exemptions from income tax or capital gains tax).

Harbour reorganisation schemes

352

(1) This section has effect where the trade of any body corporate other than a limited liability company is transferred to a harbour authority by or under a certified harbour reorganisation scheme which provides also for the dissolution of the transferor.

(2) For the purposes of the Corporation Tax Acts, the trade shall not be treated as permanently discontinued, nor shall a new trade be treated as set up and commenced.

(3) The transferee shall be entitled to relief from corporation tax under section 177(1) of this Act, as for a loss sustained by it in carrying on the transferred trade or any trade of which it comes to form part, for any amount which, if the transferor had continued to carry it on, would have been available to the transferor for carry forward against chargeable profits of succeeding accounting periods, but subject to any claim made by the transferor under subsection (2) of the said section 177.

(4) There shall be made to or on the transferee in accordance with the Capital Allowances Act 1968 all such allowances and charges as would, if the transferor had continued to carry on the trade, have fallen to be made to or on it under that Act and the amount of any such allowance or charge shall be computed as if the transferee had been carrying on the trade since the transferor had begun to do so and as if everything done to or by the transferor had been done to or by the transferee.

No sale or transfer which on the transfer of the trade is made by the transferor to the transferee of any assets in use for the purposes of the trade shall be treated as giving rise to any such allowance or charge.

(5) The transferor shall not be entitled to relief under section 178 of this Act or section 87 of the Finance Act 1965 (transitional relief for existing companies on cessation of trade) in respect of the trade.

(6) The transferee shall be entitled to relief from corporation tax in respect of chargeable gains for any amount for which the transferor would have been entitled to claim relief in respect of allowable losses if it had continued to carry on the trade.

(7) For the purposes of Part III of the Finance Act 1965 any asset transferred on the transfer of the trade shall be deemed to be for a consideration such that no gain or loss accrues to the transferor on its transfer ; and for the purposes of Part II of Schedule 6 to that Act the transferee shall be treated as if the acquisition by the transferor of any asset so transferred had been the transferee's acquisition thereof.

(8) Where a part only of such trade is transferred to a harbour authority by or under a certified harbour reorganisation scheme, and the transferor continues to carry on the remainder of the trade, or any such trade is, by or under a certified harbour reorganisation scheme which provides also for the dissolution of the transferor, transferred in parts to two or more harbour authorities, this section shall apply as if the transferred part, or each of the transferred parts, had been at all times a separate trade.

(9) Where a part of any trade is to be treated by virtue of subsection (8) above as having been a separate trade over any period there shall be made any necessary adjustments of accounting periods, and such apportionments as may be just of receipts, expenses, allowances or charges.

Subsection (9) of section 252 of this Act shall apply to any apportionment under this subsection as it applies to an apportionment under subsection (8) of that section.

(10) This section shall not apply to a transfer of a trade or part of a trade before 3rd August 1966 (the date of the passing of the Finance Act 1966) except that where the trade carried on by any body corporate was, by or under a certified harbour reorganisation scheme, transferred to a harbour authority in the year 1965-66—

(a) for all purposes of corporation tax the transferee and all other persons affected shall be treated as if the transferee had carried on the trade from the end of the basis period for that year of the trade as carried on by the transferor, and as if anything done to or by the transferor in carrying on the trade since the end of that period had been done to or by the transferee, and

(b) subsections (3), (4), (6) and (7) of this section shall apply.

(11) In this section—

" harbour authority " has the same meaning as in the Harbours Act 1964,

" harbour reorganisation scheme " means any statutory provision providing for the management by a harbour authority of any harbour or group of harbours in the United Kingdom, and " certified ", in relation to any harbour reorganisation scheme, means certified by a Minister of the Crown or Government department as so providing with a view to securing, in the public interest, the efficient and economical development of the harbour or harbours in question,

" limited liability company " means a company having a limit on the liability of its members,

" statutory provision " means any enactment, or any scheme, order or other instrument having effect under an enactment, and includes an enactment confirming a provisional order,

" transferor ", in relation to any trade, means the body from whom the trade is transferred, whether or not the transfer is effected by that body.

Local authorities

353

(1) A local authority in the United Kingdom—

(a) shall be exempt from all charge to income tax in respect of its income, and

(b) shall be exempt from corporation tax and capital gains tax,

and so far as the exemption from income tax conferred by this subsection calls for repayment of tax, effect shall be given thereto by means of a claim.

This subsection shall apply to a local authority association as it applies to a local authority.

(2) In this section " local authority " means—

(a) in relation to England and Wales, any authority being, within the meaning of the Local Loans Act 1875, an authority having power to levy a rate, and includes a joint board or joint committee of such authorities ;

(b) in relation to Scotland, any county council, town council or district council, and any statutory authority, commissioners or trustees having power to levy a rate as defined in section 379 of the Local Government (Scotland) Act 1947, or to issue a requisition for payment of money to be raised out of such a rate, and includes any joint board or joint committee of such authorities appointed under any enactment, order or scheme;

(c) in relation to Northern Ireland, the council of any county, county or other borough, or urban or rural district, any other body of which all or substantially all the members are elected by local government electors and which is established for public local purposes and has power to raise money for those purposes by rates leviable on the basis of assessments in respect of land, and any committee or board appointed wholly or partly by a county or district council or by several such councils jointly.

(3) In subsection (2)(a) and (b) above any reference to a joint board or joint committee of such authorities as are there mentioned applies, and applies only, to a joint board or joint committee of which all the constituent members are such authorities or which, having such authorities and other bodies corporate as its constituent members, is authorised by or under any enactment to require from those authorities, but not from other constituent members, the payment of sums to meet or towards meeting the amount or estimated amount by which its revenue for any period falls short or may fall short of its expenditure for that period; and for this purpose, if a member of a joint board or joint committee is a representative of or appointed by any authority or body, that authority or body (and not he) is to be treated as a constituent member of the board or committee.

(4) In this section " local authority association " means any incorporated or unincorporated association of which all the constituent members are local authorities, groups of local authorities or local authority associations and which has for its object or primary object the protection and furtherance of the interests in general of local authorities or any description of local authorities ; and for this purpose, if a member of an association is a representative of or appointed by any authority, group of authorities or association, that authority, group or association (and not he) is to be treated as a constituent member of the association.

CHAPTER VI — Unit Trusts and Investment Trusts

Unit trusts

Authorised unit trusts

354

(1) In respect of income and chargeable gains arising to the trustees of an authorised unit trust, the Tax Acts shall have effect—

(a) as if the trustees were a company, resident in the United Kingdom, whose business consists mainly in the making of investments and the principal part of whose income is derived therefrom, and

(b) as if the rights of the unit holders were shares in the company, and

(c) as if so much of the income arising to the trustees as is available for payment to unit holders or for investment were dividends on such shares paid to them in proportion to their rights, the date of payment, in the case of income not paid to unit holders, being taken to be—

(i) the date or latest date provided by the terms of the authorised unit trust for any distribution in respect of the distribution period in question,

(ii) if no date is so provided, the last day of the distribution period;

and references in the Corporation Tax Acts to a body corporate shall be construed in accordance with this subsection.

(2) Without prejudice to the generality of the preceding provisions—

(a) sums periodically appropriated out of income or chargeable gains arising as aforesaid for managers' remuneration shall be treated for the purposes of section 304 of this Act as sums disbursed as expenses of management,

(b) the proportion of income attributable to any unit holder, being income not paid to unit holders but available for investment, shall be treated as an amount paid to the unit holder after such deduction of tax as is authorised by section 232(3) of this Act (Schedule F),

(c) section 242 of this Act (explanation of income tax deductions to be annexed to dividend warrants, etc.) shall apply with any necessary modifications.

(3) In ascertaining the amount available for distribution to unit holders in respect of any distribution period the trustees of an authorised unit trust may make such adjustments as may be reasonably required to allow for liabilities to and reliefs from tax where the amount of the liability or relief is not yet ascertained.

(4) In this section " distribution period " means a period over which income from the investments subject to the trusts is aggregated for the purposes of ascertaining the amount available for distribution to unit holders.

Cancellation and creation of units

355

Where in an accounting period of an authorised unit trust the aggregate of the capital sums paid in respect of the cancellation of units exceeds the aggregate of the capital sums received in respect of the creation of units, then the amount (as computed apart from this section) of any chargeable gain or allowable loss accruing to the unit trust in that period shall be taken as reduced by the fraction of $AB$ it where—

A is the said excess,

B is the total net consideration received by the unit trust on the disposal of chargeable assets during the period after deduction of the incidental costs of making the disposal;

and if A exceeds B no chargeable gain or allowable loss shall accrue to the unit trust in that period.

Unit trusts and investment trusts

Rate of tax on chargeable gains

356

The rate of tax payable by an authorised unit trust or by an investment trust on any chargeable gains accruing in any accounting period (as calculated in accordance with section 265 of this Act) shall not exceed that payable in that period by an individual under section 20(3) of the Finance Act 1965.

Apportionment of chargeable gains

357

(1) For the purposes of section 37 of the Finance Act 1965 (relief for unit holders in respect of chargeable gains of unit trust) the total net gains of an authorised unit trust for an accounting period are the excess, if any, of the chargeable gains accruing to the unit trust in the period over the allowable losses deductible from those gains (as those gains and losses are computed for the charge to tax on the unit trust), after deduction from that excess of the tax which will be charged on the unit trust for the period in respect of chargeable gains, and the proportion attributable to any unit holder of the total net gains for any accounting period shall be determined by the unit trust, regard being among other things had, as between units of different classes, to the proportion of the assets of the unit trust representing gains on capital which would be attributable to the respective classes in a liquidation of the unit trust; and no apportionment which the unit trust makes under this section shall be questionable in any proceedings by the unit holders or by any other person.

(2) After carrying out an apportionment under subsection (1) of this section the unit trust shall give any unit holder to whom part of the total net gains is attributable a notice referring to the provisions of this section and certifying—

(a) the total net gains (employing that term) of the unit trust for the accounting period, so far as known ; and

(b) the amount apportioned to him ;

and the unit holders between whom the total net gains are to be apportioned shall (except on an apportionment made in accordance with subsection (3) below) be determined by reference to the same date as the right to payment of the first dividend after the end of the accounting period, and that date shall be deemed to be the date when the apportionment is made and shall be specified in the notice.

(3) The apportionment under subsection (1) of this section shall be carried out separately for each accounting period but a notice may be issued in respect of part of an accounting period apportioned in the light of the information available at the time, and an apportionment (or final apportionment) for an accounting period may be made at or after the end of the period, notwithstanding that any amounts are not finally ascertained; but if at any time it is found that too much or too little has been apportioned it shall be corrected as soon as may be by deduction from or addition to the total net gains of a later accounting period or periods.

(4) A notice under subsection (2) of this section may be combined with the statement in writing required to be given under section 242 of this Act (explanation of income tax deductions to be annexed to dividend warrants, etc.).

(5) Before the notices under subsection (2) of this section are sent out, particulars of the apportionments shall be submitted to the inspector, and the notices shall not be sent out without his approval, but subject to a right of appeal to the General Commissioners having jurisdiction in any assessment on the unit trust, being a right of appeal against the refusal of the inspector to give his approval.

In the application of this subsection to Northern Ireland for the reference to the General Commissioners there shall be substituted a reference to the Special Commissioners.

(6) Anything required by this section to be done by a unit trust shall be done by the managers of the unit trust with the approval of the trustee.

(7) Subsections (1) to (5) above shall apply to an investment trust as they apply in relation to a unit trust with the necessary adaptations of references to units and unit holders.

Interpretation

Definitions of authorised unit trust and unit holder

358

In this Chapter—

" authorised unit trust " means, as respects any accounting period, a unit trust scheme in the case of which an order of the Board of Trade under section 17 of the Prevention of Fraud (Investments) Act 1958 or of the Ministry of Commerce for Northern Ireland under section 16 of the Prevention of Fraud (Investments) Act (Northern Ireland) 1940 is in force during the whole or some part of that accounting period,

" unit holder " means a person entitled to a share of the investments subject to the trusts of a unit trust scheme.

Definition of investment trust

359

(1) For the purposes of this Chapter " investment trust" means, as respects any accounting period, a company which is not a close company and which is approved for the purposes of this section for that accounting period by the Board, and the Board shall not approve any company unless it is shown to their satisfaction—

(a) that the company's income is derived wholly or mainly from shares or securities ; and

(b) subject to subsection (2) of this section, that no holding in a company, other than an investment trust or a company which would qualify as an investment trust but for paragraph (c) of this subsection, represents more than 15 per cent. by value of the investing company's investments, and

(c) that the shares or securities of the company, or a class of them, are quoted on a recognised stock exchange in the United Kingdom, and

(d) that the distribution as dividend of surpluses arising from the realisation of investments is prohibited by the company's memorandum or articles of association, and

(e) that the company does not retain in respect of any accounting period more than 15 per cent of the income it derives from shares and securities.

(2) Subsection (1)(b) above shall not apply—

(a) to a holding in a company acquired before 6th April 1965 which on that date represented not more than 25 per cent. by value of the investing company's investments, or

(b) to a holding in a company which, when it was acquired, represented not more than 15 per cent. by value of the investing company's investments,

so long as no addition is made to the holding.

(3) For the purposes of subsection (2) above—

(a) " holding " means the shares or securities (whether of one class or more than one class) held in any one company, and

(b) an addition is made to a holding whenever the investing company acquires shares or securities of that one company, otherwise than by being allotted shares or securities without becoming liable to give any consideration, and if an addition is made to a holding that holding is acquired when the addition, or the latest addition, is made to the holding, and

(c) where in connection with a scheme of reconstruction or amalgamation, a company issues shares or securities to persons holding shares or securities in a second company in respect of and in proportion to (or as nearly as may be in proportion (a) their holdings in the second company, without those persons becoming liable to give any consideration, a holding of the shares or securities in the second company and a corresponding holding of the shares or securities so issued shall be regarded as the same holding.

(4) In this section " company " and " shares " shall be construed in accordance with subsections (1) and (8) of section 45 of the Finance Act 1965.

PART XIII — Special Exemptions

Charities

360

(1) The following exemptions shall be granted on a claim in that behalf to the Board—

(a) exemption from tax under Schedules A and D in respect of the rents and profits of any lands, tenements, hereditaments or heritages belonging to a hospital, public school or almshouse, or vested in trustees for charitable purposes, so far as the same are applied to charitable purposes only,

(b) exemption from tax under Schedule B in respect of any lands occupied by a charity,

(i) from tax under Schedule C in respect of any interest, annuities, dividends or shares of annuities,

(ii) from tax under Schedule D in respect of any yearly interest or other annual payment, and

(iii) from tax under Schedule F in respect of any distribution,

where the income in question forms part of the income of a charity, or is, according to rules or regulations established by Act of Parliament, charter, decree, deed of trust or will, applicable to charitable purposes only, and so far as it is applied to charitable purposes only,

(d) exemption from tax under Schedule C in respect of any interest, annuities, dividends or shares of annuities which are in the names of trustees and are applicable solely towards the repairs of any cathedral, college, church or chapel, or of any building used solely for the purpose of divine worship, so far as the same are applied to those purposes,

(e) exemption from tax under Schedule D in respect of the profits of any trade carried on by a charity, if the profits are applied solely to the purposes of the charity and either—

(i) the trade is exercised in the course of the actual carrying out of a primary purpose of the charity, or

(ii) the work in connection with the trade is mainly carried out by beneficiaries of the charity.

(2) A charity shall be exempt from tax chargeable under Case VII of Schedule D on any gain accruing from its acquisition and disposal of any assets, and in respect of tax on chargeable gains shall be allowed exemption in accordance with section 35 of the Finance Act 1965.

(3) In this section " charity " means any body of persons or trust established for charitable purposes only.

Agricultural societies

361

(1) Profits or gains arising to an agricultural society from any exhibition or show held for the purposes of the society shall be exempt from tax if applied solely to the purposes of the society.

(2) In this section " agricultural society " means any society or institution established for the purpose of promoting the interests of agriculture, horticulture, livestock breeding or forestry.

Scientific research associations

362

(1) Where—

(a) an Association which has as its object the undertaking of scientific research which may lead to or facilitate an extension of any class or classes of trade is approved for the purposes of this section by the Minister of Technology, and

(b) the memorandum of association or other similar instrument regulating the functions of the Association precludes the direct or indirect payment or transfer to any of its members of any of its income or property by way of dividend, gift, division, bonus or otherwise howsoever by way of profit,

there shall, on a claim in that behalf to the Board, be allowed in the case of the Association—

(i) such exemption from tax as falls to be allowed under section 360 above in the case of a charity the whole income of which is applied to charitable purposes, and

(ii) exemption from tax in respect of chargeable gains.

(2) The condition specified in paragraph (b) of subsection (1) above shall not be deemed not to be complied with in the case of any Association by reason only that the memorandum or other similar instrument regulating its functions does not prevent the payment to its members of reasonable remuneration for goods, labour or power supplied, or for services rendered, of reasonable interest for money lent, or of reasonable rent for any premises.

(3) In this section "scientific research " means any activities in the fields of natural or applied science for the extension of knowledge.

(4) For the purposes of subsection (1)(a) above any approval given before the passing of this Act under section 449(1)(a) of the Income Tax Act 1952 (which is reproduced in the said subsection (1)(a)) by the Committee of the Privy Council for Scientific and Industrial Research shall be treated as given by the Minister of Technology.

British Museum

363

The Trustees of the British Museum, and the Trustees of the British Museum (Natural History), shall each be entitled, on a claim in that behalf to the Board, to the following exemptions—

(a) exemption from tax under Schedules A and D in respect of any land, or interest in or right over land, vested in them,

(b) the like exemptions in respect of any dividends of stock vested in them, or in any other person for their use, and in respect of distributions charged under Schedule F, as are granted to charities under section 360 above, and

Funds for reducing National Debt

364

Where any property is held upon trust in accordance with directions which are valid and effective under section 9 of the Superannuation and other Trust Funds (Validation) Act 1927 (which provides for the validation of trust funds for the reduction of the national debt), any income arising from that property or from any accumulation of any such income, and any profits of any description otherwise accruing to the property and liable to be accumulated under the trust, shall be exempt from income tax, and a gain shall not be a chargeable gain for the purposes of capital gains tax if accruing on the disposal by the trustees of any settled property held on trusts to which this section applies.

Armed forces and Victoria Cross and other awards

Wounds and disability pensions

365

(1) Income from wounds and disability pensions to which this subsection applies shall be exempt from income tax and shall not be reckoned in computing income for any of the purposes of the Income Tax Acts.

(2) Subsection (1) above applies to—

(a) wounds pensions granted to members of the naval, military or air forces of the Crown,

(b) retired pay of disabled officers granted on account of medical unfitness attributable to or aggravated by naval, military or air-force service,

(c) disablement or disability pensions granted to members, other than commissioned officers, of the naval, military or air forces of the Crown on account of medical unfitness attributable to or aggravated by naval, military or air-force service,

(d) disablement pensions granted to persons who have been employed in the nursing services of any of the naval, military or air forces of the Crown on account of medical unfitness attributable to or aggravated by naval, military or air-force service, and

(e) injury and disablement pensions payable under any scheme made under the Injuries in War (Compensation) Act 1914, the Injuries in War Compensation Act 1914 (Session 2), and the Injuries in War (Compensation) Act 1915, or under any War Risks Compensation Scheme for the Mercantile Marine:

Provided that, where the amount of any retired pay or pension to which subsection (1) above applies is not solely attributable to disablement or disability, the relief conferred by the said subsection (1) shall extend only to such part as is certified by the Secretary of State for Social Services, after consultation with the appropriate Government Department, to be attributable to disablement or disability.

(3) Allowances granted by the Secretary of State for Social Services under a Royal Warrant, Order in Council or order administered by him to widows of members of the naval, military or air forces of the Crown in respect of their children shall not be reckoned in computing the income of such widows for any of the purposes of the Income Tax Acts.

Allowances, bounties and gratuities

366

(1) Where, under the scheme relating to men in the Armed Forces of the Crown announced on behalf of His Majesty's Government in the United Kingdom on 15th April 1946, or under any other scheme certified by the Treasury to make analogous provision for classes of persons to whom the first mentioned scheme does not apply, a person who has served in the armed forces of the Crown at any time during the continuance in force of the Emergency Powers (Defence) Act 1939 voluntarily undertakes to serve therein for a further period, any sum payable to him in pursuance of the scheme out of moneys provided by Parliament by way of gratuity at the end of his further period of service shall not be regarded as income for any income tax purposes.

(2) Where, under the scheme relating to members of the Women's Royal Naval Service, the Auxiliary Territorial Service and the Women's Auxiliary Air Force announced on behalf of His Majesty's Government in the United Kingdom on 20th November 1946, or under any other scheme certified by the Treasury to make analogous provision for classes of persons to whom the first mentioned scheme does not apply, a woman who has served in or with the armed forces of the Crown at any time during the continuance in force of the Emergency Powers (Defence) Act 1939 voluntarily undertakes to serve in or with those forces for a further period, any sum payable to her in pursuance of the scheme out of moneys provided by Parliament by way of gratuity at the end of her further period of service shall not be regarded as income for any income tax purposes.

(3) Any allowance payable out of the public revenue to or in respect of any class of persons, being either members of the armed forces of the Crown or women serving in any of the capacities mentioned at the end of this subsection, as respects which the Minister for the Civil Service certifies either—

(a) that it is payable to the persons in question in lieu of food or drink normally supplied in kind to members of the armed forces or women serving in any of the capacities so mentioned, or

(b) that it is payable in respect of the persons in question as a contribution to the expenses of a mess,

shall not be regarded as income for any income tax purposes.

Women's Services Member of Queen Alexandra's Royal Naval Nursing Service or any reserve thereof. Member of the Women's Royal Naval Service or any reserve thereof. Woman medical or dental practitioner serving in the Royal Navy or any naval reserve. Member of Queen Alexandra's Royal Army Nursing Corps. Member of Women's Royal Army Corps. Woman employed with the Royal Army Medical Corps or the Royal Army Dental Corps with relative rank as an officer. Member of the Princess Mary's Royal Air Force Nursing Service and Reserve. Member of the Women's Royal Air Force. Woman officer of the Medical and Dental Branch of the Royal Air Force. Member of the Voluntary Aid Detachment Reserves employed under the Admiralty Board of the Defence Council.

(4) The sums known as training expenses allowances payable out of the public revenue to members (whether men or women) of the reserve and auxiliary forces of the Crown, and the sums payable by way of bounty out of the public revenue to such members in consideration of their undertaking prescribed training and attaining a prescribed standard of efficiency, shall not be treated as income for any income tax purpose.

(5) Any sum which, in pursuance of the scheme as to service emoluments contained in the Command Paper laid before Parliament in August 1950, becomes payable out of moneys provided by Parliament by way of bounty to a person who, having served in the armed forces of the Crown, voluntarily undertakes to serve for a further period shall not be regarded as income for any income tax purpose.

Visiting forces

367

(1) The emoluments paid by the government of any designated country to a member of a visiting force of that country who is not a citizen of the United Kingdom and colonies shall be exempt from income tax.

(2) A period during which a member of a visiting force to whom subsection (1) above applies is in the United Kingdom by reason solely of his being a member of that force shall not be treated for the purposes of income tax or capital gains tax either as a period of residence in the United Kingdom or as creating a change of his residence or domicile:

Provided that this subsection shall not affect the operation of section 27 of this Act (personal reliefs to be granted, subject to certain exceptions, to United Kingdom residents only) in relation to any person for any year of assessment.

(3) In subsections (1) and (2) above, references to a visiting force shall apply to a civilian component of a visiting force as they apply to the force itself; and the said subsections shall be construed as one with Part I of the Visiting Forces Act 1952, but so that, for the purposes of this section, references to a designated country shall be substituted in that Act for references to a country to which a provision of that Act applies.

(4) For the purpose of conferring on persons attached to any designated allied headquarters the like benefits as are conferred by the said subsections (1) and (2) on members of a visiting force or civilian component, any members of the armed forces of a designated country shall, while attached to any such headquarters, be deemed to constitute a visiting force of that country, and there shall be a corresponding extension of the class of persons who may be treated as members of a civilian component of such a visiting force.

(5) In the case of persons of any category for the time being agreed between Her Majesty's Government in the United Kingdom and the other members of the North Atlantic Council—

(a) employment by a designated allied headquarters shall be treated for the purposes of subsection (2) above as if it were service as a member of a visiting force of a designated country, and

(b) the emoluments paid by a designated allied headquarters to persons employed by such a headquarters shall be exempt from income tax:

Provided that the exemption conferred by paragraph (b) of this subsection shall cease to apply to citizens of the United Kingdom and colonies if it becomes unnecessary that it should so apply for the purpose of giving effect to any agreement between parties to the North Atlantic Treaty.

(6) For the purposes of this section—

" allied headquarters " means any international military headquarters established under the North Atlantic Treaty, and

" designated " means designated for the purpose in question by or under any Order in Council made for giving effect to any international agreement.

(7) Any Order in Council under this section may be varied or revoked by a subsequent Order in Council.

Victoria Cross and other awards

368

The following shall be disregarded for all the purposes of the Income Tax Acts:

(a) annuities and additional pensions paid to holders of the Victoria Cross,

(b) annuities paid to holders of the George Cross,

where paid by virtue of holding the award.

Crown servants

Foreign service allowance

369

Where any allowance to any person in the service of the Crown is certified by the Minister for the Civil Service to represent compensation for the extra cost of having to live outside the United Kingdom in order to perform his duties, that allowance shall not be regarded as income for any income tax purpose.

Central banks

Government securities held by non-resident central banks

370

(1) Tax shall not be chargeable on dividends (within the meaning of Schedule C) paid out of the public revenue of the United Kingdom where they are income of any bank or issue department of a bank to which this section for the time being applies:

Provided that this subsection shall not prevent any such dividends being taken into account in computing profits or gains or losses of a business carried on in the United Kingdom.

(2) A bank or issue department of a bank to which this section for the time being applies shall be exempt from tax in respect of chargeable gains accruing to it:

Provided that subsection (1) above may be applied to a bank or issue department without this subsection, or this subsection without that.

(3) Her Majesty may by Order in Council direct that this section shall apply to any bank, or to its issue department, if it appears to Her Majesty that the bank is not resident in the United Kingdom and is entrusted by the government of a territory outside the United Kingdom with the custody of the principal foreign exchange reserves of that territory; and Her Majesty may by a further Order in Council revoke or vary any direction so given.

(4) No recommendation shall be made to Her Majesty in Council to make an order under this section unless a draft of the order has been laid before the House of Commons and has been approved by resolution of that House.

Issue departments of Reserve Bank of India and State Bank of Pakistan

371

There shall be exempt from tax any profits or income or chargeable gains arising or accruing to the issue department of the Reserve Bank of India constituted under an Act of the Indian legislature called the Reserve Bank of India Act 1934, or to the issue department of the State Bank of Pakistan constituted under certain orders made under section 9 of the Indian Independence Act 1947.

Commonwealth and foreign representatives

Commonwealth Agents-General and official agents, etc.

372

(1) An Agent-General who is resident in the United Kingdom shall be entitled to the same immunity from income tax and capital gains tax as that to which the head of a mission so resident is entitled under the Diplomatic Privileges Act 1964.

(2) Any person having or exercising any employment to which this subsection applies (not being a person employed in any trade, business or other undertaking carried on for the purposes of profit) shall be entitled to the same immunity from income tax and capital gains tax as that to which a member of the staff of a mission is entitled under the Diplomatic Privileges Act 1964.

The employments to which this subsection applies are the employment in the United Kingdom as—

(a) a member of the personal staff of any Agent-General, or

(b) an official agent for, or for any state or province of, any of the countries for the time being mentioned in section 1(3) of the British Nationality Act 1948 or the Republic of Ireland, or

of a person certified by the High Commissioner of the country in question or, as the case may be, by the Agent-General for the state, province or self-governing colony in question to be ordinarily resident outside the United Kingdom and to be resident in the United Kingdom solely for the purpose of the performance of his duties as such member or official agent.

(3) In this section—

" Agent-General " means the Agent-General for any state or province of a country within subsection (2)(b) above or for any self-governing colony ;

" High Commissioner " includes the head of the mission of a country within subsection (2)(b) above, by whatever name called;

" mission " has the same meaning as in the Diplomatic Privileges Act 1964, and references to the head of a mission and a member of the staff of a mission shall be construed in accordance with that Act;

" self-governing colony " means any colony certified by a Secretary of State to be a self-governing colony.

Consuls and other official agents

373

(1) Income arising from any office or employment to which this section applies shall be exempt from income tax, and no account shall be taken of any such income in estimating the amount of income for any income tax purposes.

(2) The offices and employments to which this section applies are the following, that is to say—

(a) the office of a consul in the United Kingdom in the service of any foreign state ; and

(b) the employment of an official agent in the United Kingdom for any foreign state, not being an employment exercised by a British subject or a citizen of the Republic of Ireland or exercised in connection with any trade, business or other undertaking carried on for the purposes of profit.

(3) In this section—

" consul " means a person recognised by Her Majesty as being a consul-general, consul, vice-consul or consular agent; and

" official agent " means a person, not being a consul, who is employed on the staff of any consulate, official department or agency of a foreign state, not being a department or agency which carries on any trade, business or other undertaking for the purposes of profit.

Consular officers and employees

374

(1) Where a consular officer or employee in the United Kingdom of any foreign state to which this section applies—

(a) is not a citizen of the United Kingdom and colonies, and

(b) is not engaged in any trade, profession, vocation or employment in the United Kingdom, otherwise than as such a consular officer or employee, and

(c) either is a permanent employee of that state or was not ordinarily resident in the United Kingdom immediately before he became a consular officer or employee in the United Kingdom of that state ;

then any income of his falling within Case IV or V or VII of Schedule D (which relate to income from overseas property and to short-term capital gains) shall be exempt from income tax, and he shall be treated as not resident in the United Kingdom for the purposes of sections 100 and 159(4) of this Act (which exempt certain dividends of non-residents).

(2) A gain shall not be a chargeable gain for the purposes of capital gains tax if accruing to a consular officer or employee of any foreign state to which this section applies on the disposal of assets which at the time of the disposal were situated outside the United Kingdom.

(3) Without prejudice to section 373 above, the income arising from a person's employment in the United Kingdom as a consular employee of any foreign state to which this section applies shall be exempt from income tax, except in the case of a person who is not a national of that state but is a citizen of the United Kingdom and colonies.

(4) For the purposes of this section, " consular employee " includes any person employed, for the purposes of the official business of a consular officer, at any consulate or consular establishment or at any other premises used for those purposes.

(5) This section shall apply to any foreign state to which Her Majesty by Order in Council directs that it shall apply for the purpose of giving effect to any consular convention or other arrangement with that state making similar provision in the case of Her Majesty's consular officers or employees in that state:

Provided that any such Order in Council may limit the operation of this section in relation to any state in such manner as appears to Her Majesty to be necessary or expedient having regard to the arrangement with that state.

(6) Any Order in Council under this section may be made so as to have effect from a date earlier than the making of the Order or the passing of this Act (but not earlier than the coming into force of the arrangement with regard to which it is made), may be varied or revoked by a subsequent Order in Council and may contain such transitional provisions as appear to Her Majesty to be necessary or expedient.

(7) Any statutory instrument under this section shall be subject to annulment in pursuance of a resolution of the Commons House of Parliament.

Other exemptions

Scholarship income

375

(1) Income arising from a scholarship held by a person receiving full-time instruction at a university, college, school or other educational establishment shall be exempt from income tax, and no account shall be taken of any such income in computing the amount of income for income tax purposes.

(2) In this section " scholarship" includes an exhibition, bursary or any other similar educational endowment.

(3) If any question arises whether any income is income arising from a scholarship held as aforesaid, the Board may consult the Secretary of State for Education and Science.

In the application of this subsection to Scotland and Northern Ireland, the Secretary of State and the Governor of Northern Ireland shall respectively be substituted for the Secretary of State for Education and Science.

Housing grants

376

Where, under any enactment relating to the giving of financial assistance for the provision, maintenance or improvement of housing accommodation or other residential accommodation, a payment is made to a person by way of grant or other contribution towards expenses incurred, or to be incurred, by that or any other person, the payment shall not be treated as a receipt in computing income for any tax purpose:

Compensation for National-Socialist persecution

377

(1) Annuities payable under the law of the Federal German Republic relating to the compensation of victims of National-Socialist persecution, being annuities which under any such law relating to the taxation of such compensation are specifically exempted from tax of a character similar to that of income tax, shall not be regarded as income for any income tax purpose.

(2) The preceding subsection shall apply to annuities payable under the law of any part of the Federal German Republic as it applies to annuities payable under the law of that Republic.

PART XIV — Miscellaneous Special Provisions

CHAPTER I — Patents and Know-How

Patents

Writing-down allowances for capital expenditure on purchase of patent rights

378

(1) Where a person incurs capital expenditure on the purchase of patent rights, there shall, subject to and in accordance with the following provisions of this Chapter, be made to him writing-down allowances in respect of that expenditure during the writing-down period as hereinafter defined:

Provided that no writing-down allowance shall be made to a person in respeot of any expenditure unless—

(a) the allowance falls in accordance with section 385(1) of this Act to be made to him in taxing his trade; or

(b) any income receivable by him in respect of the rights-would be liable to tax.

(2) The writing-down period shall be the seventeen years beginning with the chargeable period related to the expenditure:

Provided that—

(a) where the rights are purchased for a specified period, the preceding provisions of this subsection shall have effect with the substitution for the reference to seventeen years of a reference to seventeen years or the number of years comprised within that period, whichever is the less ; and

(b) where the rights purchased begin one complete year or more after the commencement of the patent and paragraph (a) of this proviso does not apply, the said provisions shall have effect with the substitution for the reference to seventeen years of a reference to seventeen years less the number of complete years which, when the rights begin, have elapsed since the commencement of the patent, or, if seventeen complete years have elapsed as aforesaid, of a reference to one year; and

(c) any expenditure incurred for the purposes of a trade by a person about to carry it on shall be treated for the purposes of this subsection as if it had been incurred by that person on the first day on which he does carry it on, unless, before the said first day, he has sold all the rights on the purchase of which the expenditure was incurred.

Reading this document does not replace reading the official text published on legislation.gov.uk. Contains public sector information licensed under the Open Government Licence v3.0. We assume no responsibility for any inaccuracies arising from the conversion of the original CLML XML to this format.

This text is published under legislation.gov.uk's own terms of reuse, not a Legalize or public-domain licence. legislation.gov.uk
Open Government Licence v3.0 (attribution required)
© Crown and database right. Derived from content available under the Open Government Licence v3.0 from legislation.gov.uk.