Finance Act 1971

In section 58(9)(b)(ii) for the words “for the purposes of surtax ” there shall be substituted the words “for the purpose of computing total income ”.

24

In section 188(1)(b) for the word “surtax ” there shall be substituted the word “tax ”.

25

In section 204—

• (a) in the proviso to subsection (2) for the words “standard rate ” there shall be substituted the words “basic rate or other rates ”;

• (b) in subsection (3) the words “other than surtax ” shall be omitted.

26

In section 227(5) the words “at the standard rate ” shall be omitted.

27

In section 232—

• (a) in subsection (1), in paragraph 2 of Schedule F, the words “thereon at the standard rate ” shall be omitted ;

• (b) in subsection (2) for the words “standard rate ” there shall be substituted the words “basic rate ”.

28

In section 234(3), in the definition of “preference shares ” for the words “standard rate” there shall be substituted the words “basic rate ”.

29

In section 282(2) for the words from “amount falling” to “company ” there shall be substituted the words " amount of the company's income to be apportioned under this Chapter for the purposes of computing total income ".

30

In section 285(6)(b), for the words “for the purposes of surtax ” there shall be substituted the words “for the purpose of computing total income ”.

31

In section 286—

• (a) in subsection (6) the words from “at the standard rate” to “the standard rate” shall be omitted and at the end there shall be inserted the words “is equal to that amount ”;

• (b) in subsection (7) the words “for the purposes of surtax” shall be omitted.

32

• (1) In section 287(1) for the words from “the person ” to the end there shall be substituted the following words: " then,—

• (a) for the purpose of computing the total income of the person to whom the loan or advance was made a sum equal to the amount so released or written off shall be treated as income received by him after deduction of income tax from a corresponding gross amount;

• (b) no repayment of income tax shall be made in respect of that income and no assessment shall be made on him in respect of income tax at the basic rate on that income ;

• (c) notwithstanding paragraph (a) above, the income included by virtue of that paragraph in his total income shall be treated for the purposes of sections 52 and 53 of this Act as not brought into charge to income tax ;

• (d) for the purpose of determining whether any or what amount of tax is, by virtue of paragraph (a) above, to be taken into account as having been deducted from a gross amount in the case of an individual whose total income is reduced by any deductions so much only of that gross amount shall be taken into account as is part of his total income as so reduced."

• (2) In section 287(2) the words “as regards surtax” shall be omitted and at the end there shall be added the words “and subsection (1) above shall apply accordingly with the necessary modifications ”.

33

• (1) In section 288(1)—

• (a) for the word “surtax ” in both places there shall be substituted the words “income tax ”, and

• (b) for the words “standard rate ” there shall be substituted the words “basic rate ”.

34

In section 296—

• (a) in subsection (1) for the words “for the purposes of surtax ” there shall be substituted the words “for the purpose of computing total income ”;

• (b) in subsection (2) the words “for surtax ” shall be omitted.

35

• (1) Section 297 shall be amended as follows.

• (2) In subsection (1) for the word “surtax ” there shall be substituted the words “income tax ”.

• (3) For subsection (2) there shall be substituted the following subsection:—

(2) Where a sum is so apportioned to a participator— (a) it shall be treated for the purpose of computing his total income as income received by him at the end of the accounting period to which the apportionment relates and, subject to section 529 of this Act, shall be deemed to be the highest part of his total income; (b) no assessment shall be made on the participator in respect of income tax at the basic rate on that sum (nor, in the case mentioned in subsection (4) below, in respect of income tax at any other rate) but he shall be treated as having paid income tax at the basic rate on that sum or, if his total income is reduced by any deductions, on so much of that sum as is part of his total income as so reduced ; (c) no repayment shall be made of the income tax treated by virtue of paragraph (b) above as having been paid ; and (d) the sum so apportioned shall be treated for the purposes of sections 52 and 53 of this Act as not brought into charge to income tax.

• (4) For subsection (3) there shall be substituted the following subsection:—

(3) Where an amount is so apportioned to the personal representatives of a deceased person it shall be treated, in ascertaining the aggregate income of the estate for the purposes of Part XV of this Act, as having been received as mentioned in paragraph (a) of subsection (2) above, and paragraphs (b) to (d) of that subsection shall apply accordingly with the necessary modifications

.

• (5) In subsection (4) for the words “charged to surtax” there shall be substituted the words “assessed to income tax ” and for the words “on which he is so chargeable ” there shall be substituted the words “to which he is so assessable ”.

• (6) In subsection (5) for the word “surtax ”, where it first occurs, there shall be substituted the words “income tax ” and for the words from “relating to surtax” to the end there shall be substituted the words " relating to assessments and the collection and recovery of tax shall, with any necessary modifications, apply to tax chargeable under this section. "

• (7) In subsection (6), for the word “surtax” (in both places) there shall be substituted the word “tax ”, for the words “1st January in the year next following ” there shall be substituted the words “6th July next following the end of ” and for the words “2nd January in the year next following ” there shall be substituted the words “7th July next following the end of ”.

• (8) In subsection (8)—

• (a) for the word “surtax ” where it occurs in paragraph (a), there shall be substituted the word “tax ”, and

• (b) the words “for the purposes of surtax ” shall be omitted.

• (9) In subsection (9) for the word “surtax ” there shall be substituted the word “tax ”.

36

In section 298(3) for the word “surtax”, in the first place where it occurs, there shall be substituted the word “tax ” , and the words “for the purposes of surtax” shall be omitted.

37

In section 299(5) the words “for the purposes of surtax” shall be omitted.

38

In section 310(3) for the words “standard rate” (in both places) there shall be substituted the words “basic rate ”.

39

In section 319, in subsections (2) and (3), for the words “standard rate ” there shall be substituted the words “basic rate ”.

40

In section 343—

• (a) in subsection (1)(a) for the words “standard rate” there shall be substituted the words “basic rate ”;

• (b) in subsection (2)(b) the words “at the standard rate for the year of assessment ” shall be omitted ;

• (c) in subsection (3)(b) for the words preceding “shall be made ” there shall be substituted the words “subject to subsection (2)(b) above no repayment of income tax and, subject to paragraph (i) of the proviso below, no assessment to income tax ”;

• (d) for paragraph (c) of subsection (3) there shall be substituted the following paragraph:

(c) in computing the total income of an individual entitled to any amounts paid or credited in respect of any such dividends or interest those amounts shall be treated as income for that year received by him after deduction of income tax from a corresponding gross amount;

• (e) in subsection (3)(d) for the words “the said amounts” there shall be substituted the words “the amounts so paid or credited ”;

• (f) for paragraphs (i) and (ii) of the proviso to subsection (3) there shall be substituted the following paragraphs:—

(i) paragraph (b) above shall not prevent an assessment in respect of income tax at a rate other than the basic rate ; (ii) for the purpose of determining whether any or what amount of tax is, by virtue of paragraph (c) above, to be taken into account as having been deducted from a gross amount in the case of an individual whose total income is reduced by any deductions (not being an individual entitled to relief under section 7 of this Act) so much only of that gross amount shall be taken into account as is part of his total income as so reduced;

.

41

In section 393(1) for the words “surtax and to ” there shall be substituted the words “tax, including ”.

42

In section 399—

• (a) in subsection (1)(a) the words from “for the purposes ” to “information ”, in subsection (1)(b)(ii) the word “surtax ” and in subsection (1)(c) the words “as regards surtax” shall be omitted ; and

• (b) at the end of the section there shall be added the following subsection:—

(4) Subject to section 400 of this Act, where, by virtue of subsection (1) above, a sum is included in an individual's total income— (a) no assessment shall be made on him in respect of income tax at the basic rate on that sum but he shall be treated as having paid income tax at the basic rate on that sum or, if his total income is reduced by any deductions, on so much of that sum as is part of his total income as so reduced ; (b) no repayment shall be made of the income tax treated by virtue of paragraph (a) above as having been paid ; and (c) the sum so included shall be treated for the purposes of sections 52 and 53 of this Act as not brought into charge to income tax.

43

In section 400—

• (a) in subsections (2) and (5) for the word “surtax ”, wherever it occurs, there shall be substituted the word “tax ”, and

• (b) in subsection (3) for the words from “the rate or rates ” to “nil rate ” there shall be substituted the words " such rate or rates of income tax, other than the basic rate, as would apply if it were reduced to that fraction and, as so reduced, still constituted the highest part of the claimant's total income for the year. "

44

In section 403(1) the words “for the purposes of surtax ” shall be omitted and at the end there shall be added the words " but he shall be entitled to a deduction from the amount of income tax with which he is chargeable for that year of an amount equal to income tax at the basic rate on that interest.

45

In section 407(1) for the words from “in the case of” to “surtax” there shall be substituted the words “any consequential assessment ”.

46

In section 414—

• (a) in subsection (1) the words “surtax or ”, and

• (b) subsection (2)

shall be omitted.

47

In section 417(2)(a) for the words “standard rate ” there shall be substituted the words “basic rate ”.

48

In section 422—

• (a) in subsections (1), (3) and (5) for the words “standard rate ” there shall be substituted the words “basic rate ”, and

• (b) in subsection (2) the words “surtax for the year preceding ” shall be omitted and for the words from “would have been ” to the end there shall be substituted the words " would be sufficient to discharge the liability to income tax at rates other than the basic rate of the person entitled to the payment if the whole of his total income were chargeable at the basic rate, and such part thereof as would have been chargeable to surtax had it been income for the year 1937-38, were chargeable also at the rates of surtax in force for that year. "

49

In section 423 the following shall be substituted for subsections (2) and (3)—

(2) The amount, if any, payable, in a case to which this section applies, to or for the benefit of the recipient of the emoluments in respect of his income tax for any year of assessment shall not exceed the following amount, that is to say— (a) if the provision was limited to income tax other than surtax, the amount that would have been payable if the 1938-1939 rates of income tax, other than surtax, had applied to the year of assessment in question; (b) if the provision was not so limited, the aggregate of the amount specified in paragraph (a) above and the amount that would have been payable in respect of his surtax if surtax had been charged for the year of assessment in question and had been charged on the same part of his income and at the same rates as surtax for the year 1937-1938.

50

In section 424(c) for the words " if the standard rate of tax for the year had been 27.5 per cent “there shall be substituted the words ” if the basic rate for the year had been 27.5 per cent and had applied to all income to the exclusion of any other rate. "

51

In section 425(2) for the words “the standard rate of income tax for the time being in force ” there shall be substituted the words “income tax ”.

52

In section 426—

• (a) in subsection (4)(a), for the words “standard tax ”, in the first place where they occur, there shall be substituted the words “income tax ” and for the words “standard tax ”, in the second place where they occur, there shall be substituted the words “income tax at the basic rate ”;

• (b) in subsection (4)(b), for the words “shall be chargeable to standard tax ” there shall be substituted the words “shall be chargeable to income tax ”,

• (c) in subsection (5) for the words “standard tax ”, in the first place where they occur, there shall be substituted the words “income tax ” , and for the proviso there shall be substituted the following—

Provided that, where relief has been so given, such part of the amount in respect of which he has been charged to income tax as corresponds to the said proportion shall, for the purpose of computing his total income, be deemed to represent income of such an amount as would after deduction of income tax be equal to that part of the amount charged.

53

In section 427—

• (a) in the proviso to subsection (2) for the words from “his residuary income ” to the end there shall be substituted the words “his liability to income tax for that year at the rate or rates determined in pursuance of paragraph (b) of section 32(1) of the Finance Act 1971 shall be computed as if the amount determined in pursuance of that paragraph were increased by the amount of the duty so paid or, if less, by the amount of his residuary income ”;

• (b) in subsection (3) for the words “standard tax ”, where they first and last occur, there shall be substituted the words “income tax at the basic rate ” and for the words “deduction of standard tax ” there shall be substituted the words “deduction of income tax ”.

• (c) in subsection (4)(a), for the words “by reference to the standard rate ”, there shall be substituted the words “at the basic rate ”;

• (d) in subsection (5), for the words “shall be chargeable to standard tax ” there shall be substituted the words “shall be chargeable to income tax ”;

• (e) in subsection (6), for the words “standard tax ” there shall be substituted the words “income tax ”.

54

In section 428(2), for the words “standard tax ” in paragraph (a) and in paragraph (b) there shall be substituted the words “income tax ”.

55

In section 429(2)(a), for the words “standard tax ” there shall be substituted the words “income tax at the basic rate ”.

56

In section 430—

• (a) in subsection (1), for the words “liability to surtax” there shall be substituted the words “excess liability ” and at the end of the subsection there shall be added the words " In this subsection ' excess liability' means the excess of liability to income tax over what it would be if all income tax were chargeable at the basic rate to the exclusion of any other rate ";

• (b) in subsection (2) for the words “standard tax ” there shall be substituted the words “income tax ”, and

• (c) in subsection (4) for the words “standard tax ” there shall be substituted the words “income tax at the basic rate ”.

57

In section 431(4), the words preceding “an inspector ” shall be omitted, for the words “furnish them within such time as they may direct ” there shall be substituted the words “furnish him within such time as he may direct ” and for the words “they think ” there shall be substituted the words “he thinks ”.

58

In section 432—

• (a) in subsection (7) the words “As regards surtax” and “surtax ” shall be omitted ;

• (b) in subsection (10) the words from “in the application ” to “surtax ” shall be omitted ; and

• (c) subsection (11) shall be omitted.

59

In section 435(1)(b) the words from “the Board” to “standard rate ” shall be omitted.

60

In section 440(2) the words “at the standard rate” shall be omitted.

61

In section 441(1)(b) the words from “the Board ” to “standard rate ” shall be omitted.

62

In section 443 the words preceding “an inspector ” shall be omitted, for the words “furnish them within such time as they may direct ” there shall be substituted the words “furnish him within such time as he may direct ” and for the words “they think ” there shall be substituted the words “he thinks ”.

63

In section 449—

• (a) in subsection (1) the words “at the standard rate ” ; and

• (b) in subsection (3)(b) the words from “the Board ” to “standard rate ”

shall be omitted.

64

In section 451—

• (a) in subsection (2)(e) for the words “standard rate ” there shall be substituted the words “basic rate ”;

• (b) in subsection (5) for the words “of tax at the standard rate” there shall be substituted the words “of income tax ”, and

• (c) in subsection (6) the words “at the standard rate ” shall be omitted.

65

In section 453 the words preceding “an inspector” shall be omitted, for the words “furnish them within such time as they may direct ” there shall be substituted the words “furnish him within such time as he may direct ” and for the words “they think ” there shall be substituted the words “he thinks ”.

66

In section 456(4) the words “at the standard rate ” shall be omitted.

67

In section 457(1) for the words following the paragraphs there shall be substituted the words " the income shall, for the purposes of excess liability, be treated as the income of the settlor and not as the income of any other person. In this subsection “excess liability” means the excess of liability to income tax over what it would be if all income tax were charged at the basic rate to the exclusion of any other rate."

68

In section 458(1) for the words from “the income shall be treated” to “any other person” there shall be substituted the words " the income shall, for the purposes of excess liability, be treated as the income of the settlor and not as the income of any other person.

69

In section 460(4) for the word “surtax ” there shall be substituted the words “his total income ”.

70

In section 469(1)(ii) the words “at the standard rate ”, in the first place where they occur, shall be omitted and for the words from “unless ” to the end there shall be substituted the words “but shall be entitled to credit for any tax which that income is shown to have borne ”.

71

In section 470(3) for the words from “shall be chargeable ” to “of this Act” there shall be substituted the words " unless he shows that the proceeds of any sale or other realisation of the right to receive the interest which is deemed to be his income by virtue of this section have been charged to tax under Schedule C or under section 159(3) of this Act, shall be chargeable to tax under Case VI of Schedule D in respect of that interest, but shall be entitled to credit for any tax which that interest is shown to have borne. "

72

In section 480(1) for the words “standard rate”, in the first two places where they occur, there shall be substituted the words “basic rate ” and the words “at the standard rate ” in the last place where they occur shall be omitted.

73

In section 481(1) and (2)(b) the words from “or, for the purpose ” to “inspector ” shall be omitted.

74

At the end of section 497 there shall be added the following subsection—

(10) In so far as any arrangements made before 30th March 1971 provide for the exemption of any income from surtax they shall have effect, unless otherwise modified by subsequent arrangements, as if they provided for that income to bear income tax at the basic rate and to be disregarded for the purpose of computing total income, except in so far as the computation affects the matters mentioned in section 34(3) of the Finance Act 1971, but not to be disregarded for the purpose of determining whether that income or any other income is chargeable as investment income.

75

In section 510(5) for the words “standard rate ” there shall be substituted the words “basic rate ”.

76

In section 522, for the words “standard rate ” there shall be substituted the words “basic rate ”.

77

In section 526(5), in the definitions of “ordinary share capital” and “preference dividend ”, for the words “standard rate ” there shall be substituted the words “basic rate ”.

78

In section 528—

• (a) in subsection (1) for the words from “as the case may be ” to the end there shall be substituted the words “in accordance with the provisions of the Income Tax Acts ”;

• (b) in subsections (3)(a) and (b) for the words “standard rate ” there shall be substituted the words “basic rate ”;

• (c) in subsection (4) the words “at the standard rate ” shall be omitted; and

• (d) in subsection (5) the words “for the purpose of estimating total income for the purposes of surtax ” shall be omitted.

79

In paragraph 6 of Schedule 3 the words “tax at the standard rate on ” shall be omitted.

80

In Schedule 5, in paragraphs 1(c) and 7 for the words “standard rate ” there shall be substituted the words “basic rate ”.

PART II — AMENDMENT OF TAXES MANAGEMENT ACT 1970

81

The Taxes Management Act 1970 shall be amended in accordance with the following provisions of this Part of this Schedule.

82

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

83

In section 22 the words “for the purpose of charging surtax” shall be omitted.

84

In section 29—

• (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (b) in subsection (4) the words “at the standard rate” shall be omitted; and

• (c) in subsection (7) the words “at the standard rate” shall be omitted.

85

In section 31(3)—

• (a) in paragraph (a) the words “assessment to surtax, or any other” shall be omitted;

• (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ; and

• (c) after the paragraphs there shall be added the words “or if the appeal involves any question as to the application of section 30, Part XV or Part XVI of that Act.”.

86

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

87

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

88

In section 91(3)—

• (a) paragraphs (a) and (b)(i) shall be omitted; and

• (b) after paragraph (b) there shall be added the following:—

or (c) affecting tax charged at a rate other than the basic rate on income from which tax has been deducted (otherwise than under section 204 of the principal Act) or is treated as having been deducted, unless it is a relief from tax so charged.

89

In section 93(4) for the words from the beginning to “this Act it” there shall be substituted the words “ In relation to a return required for the purposes of section 9 of this Act the reference in subsection (2) above to tax ”

90

In section 95(3) for the words “include surtax” to “do not” there shall be substituted the words “ do not, in relation to anything done in connection with a partnership ”.

PART III

91

In Schedule 6 to the Finance Act 1965, in paragraph 18, for the word “surtax ” there shall be substituted—

• (a) wherever it occurs in sub-paragraph (1), the words “income tax ”; and

• (b) wherever it occurs in sub-paragraph (2) or (3), the word “tax ”;

and at the end of sub-paragraph (2) there shall be inserted the words “or in relation to tax treated as having been paid by virtue of subsection (2)(b) of that section ”.

92

In section 32(6) of the Finance Act 1968, for the words “standard rate ” there shall be substituted the words “basic rate ”.

93

In section 29 of the Finance Act 1970—

• (a) in subsection (1)(a), the words “(including surtax)” shall be omitted; and

• (b) in subsection (4), the words “exclusive of surtax ” shall be omitted.

SCHEDULE 7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1

Where any of the preceding years mentioned in the proviso to subsection (4) of section 30 of the Taxes Act is a year earlier than 1973-74 the proviso shall have effect, in relation to that year, as if neither the second reference in it to avoidance of surtax nor subsection (3) of that section had been amended by this Act.

2

• (1) Where any provision, however worded, contained in an instrument (of whatever nature) made on or after 3rd September 1939 or in a will or codicil taking effect on or after that date provides for the payment, whether periodically or otherwise,—

• (a) of a stated amount free of income tax other than surtax; or

• (b) of an amount which, after deduction of income tax at the standard rate, is equal to a stated amount;

it shall have effect as follows.

• (2) If it is such a provision as is mentioned in sub-paragraph (1)(a) above it shall have effect as if it provided for the payment of the stated amount free of income tax other than such as exceeds the amount to which the person to whom the payment is made would be liable if all income tax were charged at the basic rate to the exclusion of any other rate.

• (3) If it is such a provision as is mentioned in sub-paragraph (1)(b) above, it shall have effect as if it provided for the payment of an amount which, after deduction of income tax at the basic rate, is equal to the stated amount.

3

Any instrument, however worded, conferring on any person a right to receive a dividend or interest the amount of which depends on the standard rate of income tax shall have effect as if instead of referring to the standard rate it referred to the basic rate.

4

Any reference in a statutory instrument made under the Tax Acts to the standard rate of income tax shall have effect as if it were a reference to the basic rate.

SCHEDULE 8. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Investment grants etc.: exclusion of first-year allowances

1

• (1) No first-year allowance shall be made in respect of so much of any expenditure as is taken into account for the purposes of—

• (a) any grant towards that expenditure made under the Industrial Development Act 1966, or

• (b) any grant towards that expenditure made under the Industrial Investment (General Assistance) Act (Northern Ireland) 1966 by virtue of the Industrial Investment Grant (Addition of Eligible Assets) Order (Northern Ireland) 1967, or

• (c) any grant towards that expenditure made under the last mentioned Act and exceeding 20 per cent. of that expenditure, or

• (d) any grant towards that expenditure made under any agreement under the Industries Development Act (Northern Ireland) 1966 made before 1st August 1971 other than one made after 16th February 1971 and providing that no grant payable thereunder in respect of expenditure on machinery or plant is to exceed 40 per cent. of the expenditure:

Provided that the Treasury may from time to time, by order made by statutory instrument, vary as respects expenditure incurred after the passing of this Act, or any description of such expenditure specified in the order, the percentages specified in paragraphs (c) and (d) above or either of them.

• (2) If any such grant is made after the making of any such allowance, that allowance shall to that extent be withdrawn; and where the amount of any such grant is repaid in whole or in part by the grantee to the grantor, then, to the extent to which it has been so repaid, it shall be deemed never to have been made.

• (3) All such assessments and adjustments of assessments shall be made as may be necessary to give effect to sub-paragraph (2) above ; and, notwithstanding anything in any other provision, the time within which such an assessment or adjustment may be made shall not expire before the expiry of three years from the end of the chargeable period in which the grant or, as the case may be, repayment is made.

• (4) This paragraph does not apply to expenditure on the provision of ships.

Effect of other capital allowances

2

• (1) Expenditure in respect of which a deduction may be allowed under section 91 of the Capital Allowances Act 1968 (which gives a deduction of 100 per cent. in the case of capital expenditure on scientific research) shall be disregarded for all the purposes of Chapter I of Part III of this Act; and where a deduction in respect of any expenditure has been allowed under the said section 91 in taxing a trade carried on by any person, paragraph 7 of this Schedule shall not apply on that person's bringing into use for the purposes of the trade of any machinery or plant representing that expenditure.

• (2) Section 50 of the said Act of 1968 (effect on allowances under Chapter II of Part I of that Act of allowances in respect of machinery or plant used for exploration or in respect of agricultural or forestry works) shall have effect as if references therein to the said Chapter II included references to Chapter I of Part III of this Act.

Effect of sales between connected persons, sale and lease-back etc.

3

• (1) Where a person incurs capital expenditure on the provision by purchase of machinery or plant which has been in use for the purposes of a trade carried on by the seller, and—

• (a) he and the seller are connected with each other within the terms of section 533 of the Taxes Act, or

• (b) the machinery or plant continues to be used for the purposes of a trade carried on by the seller, or

• (c) it appears with respect to the sale, or with respect to transactions of which the sale is one, that the sole or main benefit which, but for this sub-paragraph, might have been expected to accrue to the parties or any of them was the obtaining of an allowance under Chapter I of Part III of this Act,

a first-year allowance shall not be made in respect of the expenditure, or if made shall be withdrawn, and there shall be disregarded for the purposes of section 44 of this Act so much (if any) of the expenditure as exceeds the disposal value to be brought into account under that section by reason of the sale.

• (2) Where a person enters into a contract under which, on the performance thereof, he will or may become the owner of machinery or plant which has been in use for the purposes of a trade carried on by the person to whom the machinery or plant belongs, and—

• (a) he and that person are connected with each other within the terms of section 533 of the Taxes Act, or

• (b) the machinery or plant continues to be used for the purposes of a trade carried on by that person, or

• (c) it appears with respect to the transaction, or with respect to transactions of which it is one, that the sole or main benefit which, but for this sub-paragraph, might have been expected to accrue to the parties or any of them was the obtaining of an allowance under Chapter I of Part III of this Act,

a first-year allowance shall not be made in respect of any expenditure incurred by him under the contract so far as relating to that machinery or plant, or if made shall be withdrawn, and there shall be disregarded for the purposes of section 44 of this Act so much (if any) of the expenditure as exceeds the disposal value to be brought into account under that section by reason of the contract so far as so relating.

• (3) Where a person, being entitled to the benefit of a contract under which, on the performance thereof, he will or may become the owner of any machinery or plant which has been in use for the purposes of his trade, assigns the benefit of the contract so far as it relates to that machinery or plant to another person, and—

• (a) he and the assignee are connected with each other within the terms of section 533 of the Taxes Act, or

• (b) the machinery or plant continues to be used for the purposes of a trade carried on by him, or

• (c) it appears with respect to the assignment, or with respect to transactions of which the assignment is one, that the sole or main benefit which, but for this sub-paragraph, might have been expected to accrue to the parties or any of them was the obtaining of an allowance under Chapter I of Part III of this Act,

a first-year allowance shall not be made in respect of any expenditure incurred by the assignee under the contract so far as so relating, or by way of consideration for the assignment, or if so made shall be withdrawn, and there shall be disregarded for the purposes of section 44 of this Act so much (if any) of the assignee's expenditure as exceeds the disposal value to be brought into account under section 45 of this Act by reason of the assignment.

• (4) All such assessments and adjustments of assessments shall be made as may be necessary to give effect to the preceding provisions of this paragraph.

Further effects of disposal etc. before bringing into use

4

• (1) Subject to sub-paragraph (2) below, the following provisions shall have effect where a person has incurred capital expenditure on the provision of machinery or plant for the purposes of a trade and, by reason of any event, the machinery or plant ceases to belong to him without having been brought into use for those purposes—

• (a) if that expenditure exceeds the disposal value which by reason of the event that person would be required to bring into account under section 44 of this Act if he had previously brought the machinery or plant into use for the purposes of the trade, the amount of the excess shall, for the purposes of that section, be added to his qualifying expenditure for the chargeable period related to the event;

• (b) if the event is one such that, if that person had previously brought the machinery or plant into use for the purposes of the trade any of the provisions of paragraph 3 above would have applied to the allowances to be made under Chapter I of Part III of this Act to another person, there shall be disregarded for the purposes of that Chapter so much (if any) of the expenditure incurred by that other person in acquiring the machinery or plant as exceeds the expenditure incurred by the first-mentioned person in providing it.

• (2) Where the event referred to in sub-paragraph (1) above is the assignment of the benefit of a contract—

• (a) paragraph (a) of that sub-paragraph shall have effect as if the expenditure there referred to were the total capital expenditure which the person in question would have incurred in respect of the machinery or plant if he had wholly performed the contract, and

• (b) paragraph (b) of that sub-paragraph shall have effect as if, for the reference to the expenditure incurred by the other person in acquiring the machinery or plant, there were substituted a reference to the consideration given by that other person for the assignment.

• (3) All such assessments and adjustments of assessments shall be made as may be necessary to give effect to the preceding provisions of this paragraph.

Effect of use partly for trade etc. purposes and partly for other purposes

5

• (1) A first-year allowance may be made to a person in respect of any machinery or plant notwithstanding that it appears that, during the period during which the machinery or plant will be used for the purposes of a trade carried on by him, it will also be used for other purposes ; but the allowance in any such case shall be so much only of the allowance that would fall to be made if the machinery or plant were to be used only for the purposes of the trade as may be just and reasonable having regard to all the relevant circumstances of the case and, in particular, to the extent to which it appears that the machinery or plant is likely to be used for the said other purposes during that period.

• (2) Where any machinery or plant is used partly for the purposes of a trade and partly for other purposes, the following provisions of this paragraph shall have effect with respect to the allowances and charges to be made in the case of the trade (hereafter called “the actual trade”) under section 44 of this Act.

• (3) If the machinery or plant has been used for the purposes of the actual trade at any time before the beginning of the chargeable period or its basis period in which it is first used partly for those purposes and partly for other purposes, it shall be treated for the purposes of the said section 44 as having permanently ceased to be used for the purposes of the actual trade immediately after the beginning of the said chargeable or basis period.

• (4) Whether or not sub-paragraph (3) above applies, it shall be assumed for the purposes of the said section 44—

• (a) that (with paragraph 7 of this Schedule applying where appropriate) immediately after the beginning of the said chargeable or basis period the machinery or plant is brought into use for the purposes of a trade (hereafter called “the notional trade”) carried on by the person carrying on the actual trade separately from that and any other trade carried on by him,

• (b) that from then until it ceases altogether to be used for the purposes of the actual trade the machinery or plant is used solely for the purposes of the notional trade,

• (c) that the notional trade is permanently discontinued on the machinery or plant ceasing altogether to be used for the purposes of the actual trade, and

• (d) that any first-year allowance made in respect of the machinery or plant was made without any reduction in the amount thereof under sub-paragraph (1) above ;

and the allowance or charge under that section which, on the above assumptions and having regard to sub-paragraph (5) below, would fall to be made for any chargeable period in the case of the notional trade—

• (i) shall be reduced to such extent as may be just and reasonable having regard to all the relevant circumstances of the case and, in particular, to the extent to which the machinery or plant was used in that chargeable period or its basis period otherwise than for the purposes of the actual trade, and

• (ii) shall, as so reduced, be made for that chargeable period in the case of the actual trade.

• (5) If an allowance under the said section 44 falling by virtue of this paragraph to be made for any chargeable period in the case of the actual trade is not claimed, or is reduced in amount in accordance with a requirement under the proviso to subsection (2) of that section, then, in determining the allowance or charge under that section which would fall to be made for any subsequent chargeable period in the case of the notional trade, any allowance falling to be made in the case of that trade for the first-mentioned chargeable period shall be treated as not claimed or, as the case may require, proportionately reduced.

Effect of subsidies towards wear and tear

6

• (1) If it appears that, during the period during which any machinery or plant will be used by a person for the purposes of his trade, sums which—

• (a) are in respect of, or take account of, the wear and tear to the machinery or plant occasioned by its use for those purposes, and

• (b) do not fall to be taken into account as income of that person, or in computing the profits or gains of any trade carried on by him,

are, or are to be, payable to that person directly or indirectly by the Crown, or by any government or public or local authority (whether in the United Kingdom or elsewhere), or by any other person, then, unless those sums are in respect of, or take account of, part only of the said wear and tear, any expenditure incurred by the first-mentioned person in providing the machinery or plant shall be wholly disregarded for the purposes of Chapter I of Part III of this Act.

• (2) Where sub-paragraph (1) above would apply to a person's expenditure on the provision of machinery or plant but for the fact that the sums there referred to are in respect of, or take account of, part only of the wear and tear to the machinery or plant, a first-year allowance may be made in respect of the expenditure, but the amount thereof shall be reduced to such extent as may be just and reasonable having regard to all the relevant circumstances of the case.

• (3) Where sums within sub-paragraph (1) above are paid as mentioned in that sub-paragraph to a person carrying on a trade, but are in respect of, or take account of, part only of the wear and tear to the machinery or plant in respect of which they are paid, the following provisions of this paragraph shall have effect with respect to the allowances and charges to be made in the case of the trade (hereafter called “the actual trade”) under section 44 of this Act.

• (4) If the machinery or plant has been used for the purposes of the actual trade at any time before the beginning of the chargeable period or its basis period in which the first such sum is so paid in respect thereof, it shall be treated for the purposes of the said section 44 as having permanently ceased to be used for the purposes of the actual trade immediately after the beginning of the said chargeable or basis period.

• (5) Whether or not sub-paragraph (4) above applies, it shall be assumed for the purposes of the said section 44—

• (a) that (with paragraph 7 of this Schedule applying where appropriate) immediately after the beginning of the said chargeable or basis period the machinery or plant is brought into use for the purposes of a trade (hereafter called “the notional trade”) carried on by the person carrying on the actual trade separately from that and any other trade carried on by him,

• (b) that from then until it ceases altogether to be used for the purposes of the actual trade the machinery or plant is used solely for the purposes of the notional trade, with no sums within sub-paragraph (1) above being paid in respect thereof to the person carrying on that trade,

• (c) that the notional trade is permanently discontinued on the machinery or plant ceasing altogether to be used for the purposes of the actual trade, and

• (d) that any first-year allowance made in respect of the machinery or plant was made without any reduction in the amount thereof under sub-paragraph (2) above ;

and the allowance or charge under that section which, on the above assumptions and having regard to sub-paragraph (6) below, would fall to be made for any chargeable period in the case of the notional trade—

• (i) shall be reduced to such extent as may be just and reasonable having regard to all the relevant circumstances of the case, and

• (ii) shall, as so reduced, be made for that chargeable period in the case of the actual trade.

• (6) If an allowance under the said section 44 falling by virtue of this paragraph to be made for any chargeable period in the case of the actual trade is not claimed, or is reduced in amount in accordance with a requirement under the proviso to subsection (2) of that section, then, in determining the allowance or charge under that section which would fall to be made for any subsequent chargeable period in the case of the notional trade, any allowance falling to be made in the case of that trade for the first-mentioned chargeable period shall be treated as not claimed or, as the case may require, proportionately reduced.

Effect of use after user not attracting capital allowances, or after receipt by way of gift

7

• (1) Subject to sub-paragraph (2) below, where a person—

• (a) brings into use for the purposes of a trade carried on by him machinery or plant which belongs to him in consequence of his having incurred capital expenditure on its provision, but which he has previously used in circumstances such that that expenditure has not been taken into account in computing any allowance falling to be made in the case of the trade under Chapter I of Part III of this Act, or

• (b) brings into use for the purposes of a trade carried on by him machinery or plant which belongs to him in consequence of a disposition by way of gift by reason of which the donor was required by virtue of section 44(5) of this Act to bring into account for the purposes there mentioned a disposal value equal to the price which the machinery or plant would have fetched if sold in the open market at the time of the gift,

the said section 44 shall have effect as if that person had incurred capital expenditure on the provision of the machinery or plant for the purposes of the trade in the chargeable period related to its bringing into use for those purposes, the amount of that expenditure being taken as the price which the machinery or plant would have fetched if sold in the open market on the date when it was so brought into use, and the machinery or plant being treated as belonging to that person in consequence of his having incurred that expenditure.

• (2) Sub-paragraph (1) above shall not apply where a person brings into use for the purposes of a trade carried on by him machinery or plant which belongs to him in consequence of his having incurred capital expenditure on its provision and which he has previously used only for the purposes of activities carried on by him before commencing to work a mine, oil well, or other source of mineral deposits of a wasting nature, being activities consisting of—

• (a) searching for or discovering and testing deposits or winning access thereto, or

• (b) the construction of any works which are likely to be of little or no value when the source is no longer worked, or, where the source is worked under a foreign concession, which are likely to become valueless when the concession comes to an end to the person working the source immediately before the concession comes to an end ;

but, in any such case, the actual expenditure incurred by that person on the provision of the machinery or plant shall be treated for the purposes of the said section 44 as having been incurred by him on its provision for the purposes of the trade in the chargeable period related to its bringing into use for those purposes.

In this sub-paragraph—

• “foreign concession” means a right or privilege granted by the government of, or any municipality or other authority in, any territory outside the United Kingdom, and

• “mineral deposits” includes any natural deposits capable of being lifted or extracted from the earth.

Special rules for new ships

8

• (1) Where for any chargeable period a first-year allowance falls to be made to a person carrying on a trade in respect of expenditure incurred by him on the provision of a new ship, that person may, by notice in writing given to the inspector not later than two years after the end of the period, require the postponement either of the whole allowance or of so much thereof as is specified in the notice.

• (2) Where a notice has been given under sub-paragraph (1) above in respect of any first-year allowance—

• (a) the allowance shall, as the case may require, be withheld or withdrawn, or partially withheld or withdrawn, and

• (b) the expenditure to which the allowance relates shall be disregarded for all the purposes of section 44 of this Act except the purposes of subsections (5) and (6) of that section, and

• (c) the person giving the notice may claim the amount withheld or withdrawn as a first-year allowance for any subsequent chargeable period in which he carries on the trade, or may claim first-year allowances not exceeding that amount in the aggregate for any two or more such periods.

• (3) All such assessments and adjustments of assessments shall be made as may be necessary to give effect to the provisions of this paragraph.

• (4) An allowance which is postponed by virtue of this paragraph shall not by reason only of the postponement fall within the references to allowances or amounts carried forward from an earlier year or period in sections 169(4)(d), 174(6) and 259(2) of the Taxes Act (loss relief and group relief).

Special rules for motor cars

9

In paragraphs 10 to 12 below “motor car” means any mechanically-propelled road vehicle other than one within paragraph (a), (b) or (c) of section 43 of this Act.

10

• (1) The following provisions of this paragraph shall have effect where capital expenditure exceeding £4,000 is incurred, or is treated under any provision of this Schedule as incurred, on the provision of a motor car for the purposes of a trade.

• (2) It shall be assumed for the purposes of section 44 of this Act—

• (a) that, immediately after the beginning of the chargeable period related to the incurring of the expenditure, the person carrying on the trade (hereafter called “the actual trade”) brings the motor car into use for the purposes of a trade carried on by him separately from the actual trade and any other trade he may carry on,

• (b) that the motor car is used for the purposes of the separate trade from then until it ceases altogether to be used for the purposes of the actual trade, and

• (c) that the separate trade is permanently discontinued when the motor car ceases altogether to be used for the purposes of the actual trade ;

and, subject to sub-paragraphs (3) to (5) below, the allowance or charge under that section which, on these assumptions, would fall to be made for any chargeable period in the case of the separate trade shall be made for that period in the case of the actual trade.

• (3) If on the assumptions in sub-paragraph (2) above a writing-down allowance would fall to be made for any chargeable period in the case of the separate trade, the amount thereof shall be treated as not exceeding—

• (a) except in a case falling within paragraph (b) below, £1,000 or, if the period is part only of a year, a proportionate part of £1,000,

• (b) if (by virtue of section 84 of the Capital Allowances Act 1968 as applied by this Schedule) the person carrying on the trade is regarded as having incurred a part only of the expenditure actually incurred on the provision of the motor car, a proportionate part of £1,000 or, if the period is part only of a year, that proportionate part proportionately reduced.

• (4) Where the motor car ceases to be used for the purposes of the actual trade by reason of a transaction to which paragraph 3 of this Schedule applies—

• (a) the disposal value to be brought into account under section 44 of this Act in the case of the separate trade shall be an amount equal to the price which the motor car would have fetched on a sale at the same time in the open market or, if less, the capital expenditure incurred, or treated as incurred, on the provision of the motor car by the person disposing of it, and

• (b) the person acquiring the motor car shall be treated for the purposes of Chapter I of Part III of this Act as having incurred on its provision capital expenditure equal to that disposal value.

• (5) If either of the following events occurs in relation to the motor car—

• (a) it is used partly for the purposes of the actual trade and partly for other purposes, or

• (b) while it is in use for the purposes of the actual trade, there is paid to the person carrying on the trade any sum which is in respect of, or takes account of, part of the wear and tear to it occasioned by that use,

neither paragraph 5 nor paragraph 6 of this Schedule shall apply, but, for the chargeable period related to the event and any subsequent period, instead of there being made in the case of the actual trade the allowance or charge which under the preceding provisions of this paragraph would fall to be made for that period in the case of the separate trade, there shall be made so much of that allowance or charge as, in accordance with the said paragraph 5 or 6, would be just and reasonable if it were one falling to be made for that period in the case of the notional trade referred to in that paragraph.

11

Where capital expenditure exceeding £4,000 is incurred on the provision of a motor car and, by virtue of section 85 of the Capital Allowances Act 1968 as applied by this Schedule, writing-down allowances may be made to a person as if a contribution made by him to the expenditure had been expenditure on the provision of the motor car for the purposes of a trade, the amount of the allowance to be made for any chargeable period—

• (a) shall be determined as if the contribution had been expenditure on the provision of the motor car for the purposes of a trade carried on by that person separately from any other trade carried on by him, and

• (b) shall not exceed an amount bearing to £1,000 the same proportion as that borne by the contribution to the capital expenditure actually incurred on the provision of the motor car or, if the chargeable period is part only of a year, that amount proportionately reduced.

12

Where, apart from this paragraph, the amount of any expenditure on the hiring of a motor car the retail price of which when new exceeds £4,000 would be allowed to be deducted in computing for the purposes of tax the profits or gains of any trade, the said amount shall be reduced in the proportion which £4,000, together with one half of the excess, bears to the said retail price.

Effect of successions to trades between connected persons

13

Where a person (the “successor ”) succeeds to a trade which was until that time carried on by another person (the “predecessor ”) and the two persons are connected with each other within the terms of section 533 of the Taxes Act, those persons may by notice in writing to the inspector elect that the provisions of this paragraph shall have effect; and in that event—

• (a) for the purpose of making allowances and charges under Chapter I of Part III of this Act, the trade shall not be treated as discontinued;

• (b) allowances and charges shall be so made to or on the successor as if everything done to or by the predecessor had been done to or by the successor, but with no account being taken of the sale or transfer from the predecessor to the successor of any machinery or plant which was in use for the purposes of the trade at the time of the succession.

Treatment of demolition costs

14

• (1) Where any machinery or plant which is in use for the purposes of a trade is demolished, then—

• (a) if the person carrying on the trade replaces the machinery or plant by other machinery or plant, the net cost to him of the demolition shall be treated for the purposes of Chapter I of Part III of this Act as expenditure incurred by him on the provision of that other machinery or plant, and

• (b) if the person carrying on the trade does not replace the machinery or plant, his qualifying expenditure for the chargeable period related to the demolition shall be treated for the purposes of section 44 of this Act as increased by the net cost to him of the demolition.

• (2) In this paragraph any reference to the net cost of the demolition of any machinery or plant is a reference to the excess, if any, of the cost of the demolition over any moneys received for the remains of the machinery or plant.

Application of certain provisions of Capital Allowances Act 1968

15

• (1) Section 44 of the Capital Allowances Act 1968 (partnership using property of a partner) shall have effect as if the reference in subsection (1) to Chapter II of Part I of that Act included a reference to Chapter I of Part III of this Act, and as if the references in subsection (2) to section 33 of that Act and an event giving rise to a balancing allowance or balancing charge included references respectively to section 44(5) of this Act and an event requiring any disposal value to be brought into account.

• (2) In section 45 of the said Act of 1968 (building alterations connected with installation of machinery or plant), the reference to the said Chapter II shall include a reference to the said Chapter I.

• (3) Section 48 of the said Act of 1968 (successions to trades) shall, with the omission of the proviso to subsection (4) and subsection (6), have effect as if references therein to initial allowances, the said Chapter II, and section 47(1) of that Act included references respectively to first-year allowances, the said Chapter I and section 47(1) of this Act; but, in its application by virtue of this sub-paragraph, the section shall be modified by substituting, for all the words in subsection (2) from “be deemed to be a reference ” to the end of that subsection, the words "be deemed to be a reference to that price or, if it is less than that price, any excess of qualifying expenditure over disposal value which would have been taken into account under section 44 of the Finance Act 1971 for making an allowance for the chargeable period related to the permanent discontinuance of the deceased person's trade if the machinery or plant had had no disposal value."

• (4) In section 77 of the said Act of 1968 (apportionments etc.) references to Part I of that Act shall include references to the said Chapter I; and the said Chapter I shall be treated as included in the provisions referred to in section 81(2) of that Act (procedure on apportionments etc.).

• (5) In section 84(1) of the said Act of 1968 (subsidies etc.), the reference to Part I of that Act shall include a reference to the said Chapter I.

• (6) Section 85(1) of the said Act (allowances in respect of contributions to capital expenditure) shall have effect as if the references therein to initial allowances and writing-down allowances included references respectively to first-year allowances and writing-down allowances under the said Chapter I, but, in its application by virtue of this sub-paragraph, modified by substituting the words “of that asset ” for the words “of a similar asset” ; and, for the purpose of any allowance under the said Chapter I given by virtue of the said section 85(1) in respect of any asset, that asset shall be treated as belonging to the person making the contribution in respect of which the allowance is given at any time when it belongs, or is treated under the said Chapter I as belonging, to the recipient of the contribution.

Amendments of other enactments

16

• (1) Paragraph 6 of Schedule 6 to the Finance Act 1965 shall be amended by inserting in sub-paragraph (4)(a), after the words “said Act of 1968) ” , the words “or under Chapter I of Part III of the Finance Act 1971 ”, and by adding the following sub-paragraph after sub-paragraph (6)—

(7) Where the disposal is of machinery or plant in relation to expenditure on which allowances or charges have been made under Chapter I of Part III of the Finance Act 1971, and neither paragraph 5 (assets used partly for trade purposes and partly for other purposes) nor paragraph 6 (wear and tear subsidies) of Schedule 8 to that Act applies, the capital allowances to be taken into account under this paragraph are to be regarded as equal to the difference between the capital expenditure incurred, or treated as incurred, under that Chapter on the provision of the machinery or plant by the person making the disposal and the disposal value required to be brought into account in respect of the machinery or plant.

• (2) Any reference in the Capital Allowances Act 1968 to Chapter II of Part I of that Act shall, unless it is in the said Chapter II or in Chapter VI of the said Part I, include a reference to Chapter I of Part III of this Act.

• (3) In the definition of “capital allowance” in section 526(5) of the Taxes Act, there shall be added at the end “and any allowance under Chapter I of Part III of the Finance Act 1971 ”.

• (4) In sections 60(3) and 190(3) of the Taxes Act, for the words from “section 28 ” to the end there shall be substituted the words “such relief shall be given under this section as may be just and reasonable having regard to all the relevant circumstances and, in particular, to the extent of the use for the said other purposes ”.

• (5) In sections 155(8), 174(12), 180(7), 190(1), 227(4), 252(2), 352(4), 485(4) and 528(5)(c) of the Taxes Act, any reference to the Capital Allowances Act 1968, to Part I of that Act, or to Chapter II of that Part, shall include a reference to Chapter I of Part III of this Act.

• (6) Section 177 of the Taxes Act shall be amended by adding the following subsection after subsection (3)—

(3A) Where a company incurs a loss in a trade in an accounting period for which one or more first-year allowances "fall to be made to it under Chapter I of Part III of the Finance Act 1971 in respect of expenditure on the provision for the purposes of the trade of machinery or plant within section 42(2)(b) of that Act, subsections (2) and (3) above shall have effect in relation to so much of the loss as would not have been incurred if the allowance or allowances had been totally disclaimed as if the time specified in the said subsection (3) were a period of three years ending immediately before the accounting period in which the loss is incurred

.

• (7) Section 492 of the Taxes Act shall be amended by adding the following subsection after subsection (8)—

(9) This section shall not apply if the capital sum obtained in respect of the lessee's interest in a lease constituting a hire-purchase agreement for machinery or plant is a sum which is required to be brought into account as the whole or part of the disposal value of the machinery or plant under section 45(2) of the Finance Act 1971.

• (8) The following shall be substituted for the definition of “anticipated normal working life ” in section 493(6) of the Taxes Act—

• ' anticipated normal working life ' means, in the case of any asset, the period which might be expected, when the asset is first put into use, to be going to elapse before it is finally put out of use as being unfit for further use, it being assumed that the asset is going to be used in the normal manner and to the normal extent, and is going to be so used throughout that period.

• (9) In paragraph 14(a) of Schedule 8 to the Taxes Act, after the words “section 33 of the Capital Allowances Act 1968 ” there shall be inserted the words “or under Chapter I of Part III of the Finance Act 1971 ”; and in paragraph 14(b) of that Schedule, for the words “Chapter II of Part I of that Act” there shall be substituted the words “Chapter II of Part I of the said Act of 1968 or Chapter I of Part III of the said Act of 1971 ”.

• (10) In paragraph 9 of Schedule 2 to the Civil Aviation Act 1971, for the words “(which confers” there shall be substituted the words “and Chapter I of Part III of the Finance Act 1971 (which confer ”, and for the words “shall be made under the said Act of 1968 ” there shall be substituted the words “or first-year allowance shall be made under the said Act of 1968 or the said Act of 1971 ”.

Transitional provision as to roll-over relief

17

Where section 40 of the Capital Allowances Act 1968 applies on a person's replacement of any machinery or plant by other machinery or plant on the provision of which his expenditure is capital expenditure to which Chapter I of Part III of this Act applies, it shall so apply with the substitution of the following for all the words from the beginning of paragraph (a) of subsection (1) to the end of the section—

(a) if the amount on which the charge would have been made is greater than the capital expenditure on the provision of the new machinery or plant, the charge shall be made on an amount equal to the difference, and (b) for the purposes of Chapter I of Part III of the Finance Act 1971, except the bringing into account of any disposal value, the capital expenditure on the provision of the new machinery or plant shall be treated as reduced by the amount on which the charge would have been made, or, if paragraph (a) above applies, shall be disregarded. (2) No election shall be made under this section if in relation to the new machinery or plant it appears that the provisions of paragraph 5, 6 or 10 of Schedule 8 to the said Act of 1971 will apply.

.

SCHEDULE 9

Interpretation

1

In this Schedule “the principal section” means section 55 of this Act.

Disposal on compulsory purchase

2

Where a disposal of land is made on the compulsory acquisition of an interest in the land by an authority possessing compulsory purchase powers and the interest became vested in the acquiring authority before 23rd July 1970 the disposal shall be regarded for the purposes of subsection (2) of the principal section as having been made before that date, whether or not it would be so regarded apart from this paragraph.

Replacement of business assets

3

Where section 33 of the Finance Act 1965 applied on the acquisition, before 23rd July 1970, of, or of an interest in, any new assets and the adjustment required to be made under subsection (1)(a) or subsection (2)(a) of that section was, by virtue of paragraph 9(5) of Schedule 14 to the Finance Act 1967, required to be computed as mentioned therein, the adjustment required to be made under subsection (1)(b) or (2)(b) of that section shall also be so computed, notwithstanding the repeals made by this Act.

Mineral royalties

4

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

Allowance for levy under Case B,C or F in calculating chargeable gain on subsequent disposal

5

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

SCHEDULE 10. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Interpretation

1

• (1) In this Schedule—

• “Case VII” means Case VII of Schedule D ;

• “gilt-edged securities” means specified securities within the meaning of section 41 of the Finance Act 1969 ; and

• “securities” includes shares and any assets dealt with without identifying the particular assets disposed of or acquired.

• (2) Shares shall not be treated for the purposes of this Schedule as being of the same kind unless they are treated as being of the same class by the practice of a recognised stock exchange in the United Kingdom or elsewhere or would be so treated if dealt with on such a stock exchange.

Unrelieved Case VII losses

2

Where no relief from income tax (for a year earlier than 1971-72) has been given in respect of a loss or part of a loss allowable under Case VII the loss or part shall, notwithstanding that the loss accrued before that year, be an allowable loss for the purposes of the capital gains tax, but subject to any restrictions imposed by paragraph 17(3) of Schedule 7 to the Finance Act 1965 (transactions between connected persons).

Gains arising out of the United Kingdom

3

Any amount which, if income tax were chargeable under Case VII for a year of assessment later than 1970-71, would be so chargeable for such a year by virtue of section 160 (6) of the Taxes Act (remittance basis for individuals not domiciled in the United Kingdom) shall be chargeable to capital gains tax as a gain arising in that year.

Restriction on exemption or relief with respect to disposal of guaranteed stock or gilt-edged securities

4

• (1) Neither section 27(3) of the Finance Act 1965 (gains and losses on certain guaranteed stock disregarded if disposal within exempt price range), nor paragraph 5(2) of Schedule 7 to that Act (conversion of such stock), nor section 41(1) of the Finance Act 1969 (exemption of gilt-edged securities) shall apply in the case of any disposal of securities which occurs within 12 months after their acquisition.

• (2) Sub-paragraph (1) above shall not exclude the application of the provisions mentioned therein where the person disposing of the securities had acquired them by devolution on death or as legatee or, if they were settled property, on becoming absolutely entitled thereto as against the trustee.

• (3) Where, in the case of a man and his wife, paragraph 20 of Schedule 7 to the Finance Act 1965 applies in relation to the acquisition of any securities by the one from the other, and the one making the acquisition subsequently disposes of the securities by a disposal to which that paragraph does not apply, he shall be treated for the purposes of sub-paragraph (1) above as if he had acquired the securities when the other did.

Identification of certain assets acquired and disposed of

5

Paragraph 2 of Schedule 7 to the Finance Act 1965 (pooling of shares etc.) shall not apply to gilt-edged securities or to securities in the case of which the application of section 27(3) of that Act is excluded by paragraph 4 above and shall, in its application to other assets, have effect subject to paragraph 6 of this Schedule; and paragraphs 22(6) and 26(3) of Schedule 6 to that Act and section 32(5) of the Finance Act 1968 (shares held on 6th April 1965) shall also have effect subject to paragraph 6 of this Schedule.

Disposal on or before day of acquisition

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• (1) The following provisions shall apply where securities of the same kind are acquired or disposed of by the same person on the same day and in the same capacity—

• (a) all the securities so acquired shall be treated as acquired by a single transaction and all the securities so disposed of shall be treated as disposed of by a single transaction ; and

• (b) all the securities so acquired shall, so far as their quantity does not exceed that of the securities so disposed of, be identified with those securities.

• (2) Where the quantity of the securities so disposed of exceeds the quantity of the securities so acquired, then so far as the excess—

• (a) is not required by paragraph 22(6) or 26(3) of Schedule 6 to the Finance Act 1965 or by section 32(5) of the Finance Act 1968 to be identified with securities held on or acquired before 6th April 1965 ; and

• (b) cannot be treated under paragraph 2 of Schedule 7 to the Finance Act 1965 as diminishing a holding ;