Finance Act 1972

• (4) Where the inspector receives a request made in accordance with sub-paragraph (1) above in relation to any accounting period, and does not within the time limited by sub-paragraphs (2) and (3) above intimate his intention to make an apportionment in respect of the period, no such apportionment shall be made unless either—

• (a) the information accompanying the request, and any further particulars famished to the inspector in connection therewith, are not such as to make full and accurate disclosure of all facts and considerations which are material to be known to him, or

• (b) within twelve months of the end of the period any of the provisions of paragraph 13 above have effect in relation to the company.

Information

19

• (1) The inspector may, by notice in writing, require any company which is, or appears to him to be, a close company to furnish him within such time (not being less than thirty days) as may be specified in the notice with such particulars as he thinks necessary for the purposes of this Schedule.

• (2) If for the purposes of this Schedule any person in whose name any shares are registered is so required by notice in writing by the inspector, he shall state whether or not he is the beneficial owner of the shares and, if not the beneficial owner of the shares or any of them, shall furnish the name and address of the person or persons on whose behalf the shares are registered in his name.

• (3) Sub-paragraph (2) above shall apply in relation to loan capital as it applies in relation to shares.

• (4) The inspector may, for the purposes of this Schedule, by notice in writing require—

• (a) any company which appears to him to be a close company to furnish him with particulars of any bearer securities issued by the company, and the names and addresses of the persons to whom the securities were issued and the respective amounts issued to each person; and

• (b) any person to whom securities were issued as aforesaid, or to or through whom such securities were subsequently sold or transferred, to furnish him with such further information as he may require with a view to enabling him to ascertain the names and addresses of the persons beneficially interested in the securities.

In this sub-paragraph " securities " includes shares, stocks, bonds, debentures and debenture stock and also any promissory note or other instrument evidencing indebtedness issued to a loan creditor of the company.

• (5) Any power which the inspector may exercise under this paragraph for the purposes of this Schedule may be exercised also for the purposes of sections 286 and 287 of the Taxes Act.

Exercise of powers by Board

20

• (1) Any powers conferred by this Schedule on the inspector may be exercised by the Board; and references in this Schedule to the inspector shall be construed accordingly.

• (2) Where by virtue of this paragraph a notice is served by the Board under paragraph 15(1) above any appeal under that paragraph shall be to the Special Commissioners.

SCHEDULE 17

Meaning of close company

1

• (1) Section 282 of the Taxes Act (which defines " close company ") shall be amended as follows.

• (2) For subsection (2) (company treated as close company if more than half of apportionable income etc. could be apportioned among five or fewer participators or among participators who are directors) there shall be substituted—

(2) Subject to section 283 below, a company resident in the United Kingdom (but not falling within subsection (1)(b) above) is also a close company if— (a) on the assumption that it is so, or (b) on the assumption that it and any other such company or companies are so, more than half of any amount falling to be apportioned under Schedule 16 to the Finance Act 1972 in the case of the company (including any sum which has been apportioned to it, or could on either of those assumptions be apportioned to it, under that Schedule) could be apportioned among five or fewer participators, or among participators who axe directors. In ascertaining under this subsection whether any amount could be apportioned among five or fewer participators or among participators who are directors, account shall, in cases where an original apportionment and any sub-apportionment are involved, be taken only of persons among whom that amount could be finally apportioned as the result of the whole process of original apportionment and sub-apportionment and those persons shall be treated as participators or directors if they are participators or directors of any company in the case of which either an original apportionment or any sub-apportionment could be made.

• (3) For subsection (4) (company not to be treated as close company if under control of any company which is not a close company) there shall be substituted—

(4) A company is not to be treated as a close company— (a) if— (i) it is controlled by a company which is not a close company, or by two or more companies none of which is a close company ; and (ii) it cannot be treated as a close company except by taking as one of the five or fewer participators requisite for its being so treated a company which is not a close company ; (b) if it cannot be treated as a close company except by virtue of paragraph (c) of section 302(2) of this Act and it would not be a close company if the reference in that paragraph to participators did not include loan creditors who are companies other than close companies. (5) References in subsection (4) above to a close company shall be treated as applying to any company which, if resident in the United Kingdom, would be a close company.

Matters treated as distributions

2

In section 284 of the Taxes Act (matters treated as distributions in relation to close company to include certain payments etc. to participators and associates)—

• (a) paragraph (a) of subsection (1) (annuities and other annual payments other than interest) ; and

• (b) paragraph (b) of that subsection (rents, royalties and other consideration for use of property other than money),

shall cease to have effect.

Loans to participators

3

• (1) Section 286 of the Taxes Act (charge of income tax on loans and advances by close company to participators and associates) shall be amended as follows.

• (2) In subsection (1) for the words from "there shall be assessed on and recoverable from the company" onwards there shall be substituted the words " there shall be assessed on and recoverable from the company, as if it were an amount of corporation tax chargeable on the company for the accounting period in which the loan or advance is made, an amount equal to such proportion of the amount of the loan or advance as corresponds to the rate of advance corporation tax in force for the financial year in which the loan or advance is made ".

• (3) In subsection (3) for the words " This section shall not apply " there shall be substituted the words " Subsection (1) of this section shall not apply ".

• (4) In subsection (5) for the words " paid the amount assessed on it" there shall be substituted the words " been assessed to tax " and for the words " the amount paid by the company, or a proportionate part of it, shall be repaid " there shall be substituted the words " relief shall be given from that tax, or a proportionate part of it, by discharge or repayment. "

• (5) Subsection (6) shall be omitted.

Covenants by participators

4

Section 288 of the Taxes Act (charge of income tax on close company in respect of consideration given to participators and associates for restrictive covenants etc.) shall cease to have effect.

Definition of control

5

For subsections (2) to (4) of section 302 of the Taxes Act (definition of control) there shall be substituted—

(2) For the purposes of this Chapter, a person shall be taken to have control of a company if he exercises, or is able to exercise or is entitled to acquire, control, whether direct or indirect, over the company's affairs, and in particular, but without prejudice to the generality of the preceding words, if he possesses or is entitled to acquire— (a) the greater part of the share capital or issued share capital of the company or of the voting power in the company ; or (b) such part of the issued share capital of the company as would, if the whole of the income of the company were in fact distributed among the participators (without regard to any rights which he or any other person has as a loan creditor), entitle him to receive the greater part of the amount so distributed ; or (c) such rights as would, in the event of the winding up of the company or in any other circumstances, entitle him to receive the greater part of the assets of the company which would then be available for distribution among the participators. (3) Where two or more persons together satisfy any of the conditions of subsection (2) above, they shall be taken to have control of the company. (4) For the purposes of subsection (2) above a person shall be treated as entitled to acquire anything which he is entitled to acquire at a future date, or will at a future date be entitled to acquire.

Definition of director

6

In subsection (5) of section 303 of the Taxes Act (under which a manager is treated as a director if he satisfies the conditions specified in that subsection) paragraph (b) (which requires him to be remunerated out of the funds of the company's trade or business) shall cease to have effect.

Definition of loan creditor

7

After section 303(7) of the Taxes Act (definition of loan creditor) there shall be added—

(8) A person who is not the creditor in respect of any debt or loan capital to which subsection (7) above applies but nevertheless has a beneficial interest therein shall, to the extent of that interest, be treated for the purposes of this Chapter as a loan creditor in respect of that debt or loan capital.

Commencement

8

Paragraphs 1 and 5 to 7 above, so fax as relevant for the purposes of Schedule 16 to this Act, have effect in relation to accounting periods ending after 5th April 1973 and, subject as aforesaid, this Schedule has effect from 6th April 1973.

SCHEDULE 18

Expenses of management

1

• (1) In subsection (2) of section 305 of the Taxes Act (restriction on relief for expenses of management) the reference to income tax shall be omitted, but for the purposes of that subsection—

• (a) any tax credit to which the company is entitled in respect of a distribution received by it shall be treated as an equivalent amount of corporation tax borne or paid in respect of that distribution ; and

• (b) any payment in respect of that credit under section 254 of that Act shall be treated as reducing the tax so treated as borne or paid.

• (2) The other reliefs mentioned in the said subsection (2) shall not include any set-off under section 85 of this Act.

• (3) In applying the said subsection (2) to an accounting period in which a company carries on any business in addition to life assurance business, or carries on both ordinary life assurance business and industrial life assurance business, the tax that would have been paid if the company had been charged under Case I of Schedule D in respect of its life assurance business, or its life assurance business of either of those classes, shall be calculated as if any advance corporation tax set against the company's liability to corporation tax for that accounting period were apportioned to the corporation tax attributable to each business in proportion to the profits of that business charged to corporation tax for that accounting period.

Rate relief: investment income reserved for policy holders

2

• (1) For the purposes of subsection (2) of section 310 of the Taxes Act (rate relief from corporation tax) the reliefs to be taken into account shall not include any set-off under section 85 of this Act, and "any relief" in subsection (4)(b) of the said section 310 shall be construed accordingly.

• (2) Subsection (3) of the said section 310 (rate relief from income tax where rate exceeds 37-5 per cent.) shall cease to have effect.

• (3) For subsection (5) of the said section 310 there shall be substituted—

(5) Any such part of the franked investment income from investments held in connection with a company's life assurance business as is specified in subsection (6) below shall not be used under Part V of the Finance Act 1972 to frank distributions made by the company.

• (4) For the purposes of section 85 of this Act the income charged to corporation tax for any accounting period (as defined in subsection (6) of that section) shall be reduced by an amount equal to the part specified in subsection (6) of the said section 310 of any unrelieved income (as defined in subsection (4) of that section) in respect of which a claim may be made under that section.

• (5) Where sub-paragraph (3) or (4) above would deny to a company any relief to which it would have been entitled if it had been charged to tax in respect of its life assurance business under Case I of Schedule D, corresponding relief shall be afforded to the company by repayment of, or set-off against, corporation tax or by payment of tax credit comprised in franked investment income from investments held in connection with that business.

General annuity business

3

In section 313 of the Taxes Act for subsection (4) there shall be substituted—

(4) Subject to subsection (5) below, franked investment income which is taken into account under subsection (2) above to enable annuities referable to general annuity business to be treated as charges on income shall not be used under Part V of the Finance Act 1972 to frank distributions made by the company.

Pension business

4

• (1) In subsection (1) of section 314 of the Taxes Act the reference to income tax shall be omitted, but if in the case of an insurance company the income mentioned in that subsection includes a distribution in respect of which the company is entitled to a tax credit, the company may, subject to sub-paragraph (2) below, claim to have the amount of that credit paid to it.

• (2) If the company mentioned in sub-paragraph (1) above is resident in the United Kingdom (so that the distribution and the tax credit there mentioned constitute franked investment income of that company) no franked investment income comprising any tax credit which is paid under that sub-paragraph shall be used under Part V of the Finance Act 1972 to frank the company's distributions; but where the company makes an election under subsection (4) of the said section 314 neither sub-paragraph (1) above nor the foregoing provisions of this sub-paragraph shall apply to the franked investment income to which the election relates.

• (3) Subsection (3)(b) and (c) of the said section 314 shall cease to have effect and in subsection (4) of that section the words from " If an accounting period " to " periods, and " and the words " or part of an accounting period " shall be omitted.

• (4) In section 315(8)(b) for the words "under provisions of the law of that country corresponding with section 314(1) above exemption from income tax is allowable " there shall be substituted the words " the law of that country makes provision corresponding with section 314(1) above and paragraph 4(1) and (2) of Schedule 18 to the Finance Act 1972 ".

Distributions to be taken into account in computing profits

5

• (1) Distributions which are not qualifying distributions shall not be taken into account—

• (a) in computing under section 312 of the Taxes Act the profits arising to an insurance company or overseas life insurance company from general annuity business or pension business ;

• (b) in computing under section 316 of that Act the income of an overseas life insurance company from the investments there mentioned;

and the only distributions to be taken into account for the purposes of section 320(2) of that Act (distributions treated as franked investment income in case of overseas life insurance company exempt from charge under the said section 316) shall be distributions in respect of which the company is entitled to a tax credit.

• (2) Accordingly in sections 316(2) and 318(1) for the word " distributions " there shall be substituted the words " qualifying distributions " and in section 320(2) after the word " distributions " there shall be inserted the words " (being distributions in respect of which the company receiving them is entitled to a tax credit) ".

Set-off of income tax and tax credit against corporation tax borne by overseas life insurance company

6

Where an overseas life insurance company receives a distribution in respect of which it is entitled to a tax credit the company may claim to have that credit set off against any corporation tax assessed on the company under section 316 or 318 of the Taxes Act for the accounting period in which the distribution is received, but the restriction in section 319(2) and (3) of that Act on the amount of income tax that may be set off against corporation tax assessed under the said section 316 or 318 shall apply to the aggregate of that income tax and of the tax credit that can be so set off by virtue of this paragraph.

SCHEDULE 19

Amendments of section 84 of Finance Act 1965

1

• (1) In subsection (3) of section 84 of the Finance Act 1965 for the words "the amount after deducting income tax borne by the company on franked investment income of the income tax deducted or deductible from the company's dividends " there shall be substituted the words " the amount of the advance corporation tax paid or payable in respect of the company's dividends ".

• (2) In subsection (5) of that section for the words " the company by virtue of an election under section 48 of this Act pays any dividends without deduction of income tax " there shall be substituted the words " any of the dividends paid by the company are dividends to which section 84 of the Finance Act 1972 does not apply by virtue of an election under section 256 of the Income and Corporation Taxes Act 1970 " and for the words " if all the dividends so paid are paid without deduction of income tax " there shall be substituted the words " if all the dividends so paid are dividends to which the said section 84 does not so apply ".

• (3) The expressions " unused credit for foreign tax " and " the current charge to corporation tax " (defined in subsection (8)(b) and (c) of the said section 84) shall be construed as if the rate of corporation tax for any relevant financial year were 40 per cent. and as if the law relating to corporation tax were the same as it was on 1st April 1972.

• (4) For paragraph (d) of subsection (8) of that section there shall be substituted—

(d) ' dividend' does not include a capital dividend or a dividend which is not a qualifying distribution, and in relation to any dividends ' advance corporation tax paid or payable ' includes advance corporation tax which would have been payable but for the dividends being group income, and for the purposes of this section there shall be disregarded any advance corporation tax which a company is treated as having paid by virtue of section 92 of the Finance Act 1972

.

Amendments of Schedule 20 to Finance Act 1965

2

• (1) In paragraph 3(2)(a)(ii) of Schedule 20 to the Finance Act 1965 for the words " abatement in respect of dividends paid without deduction of income tax" there shall be substituted the words " abatement in respect of dividends to which section 84 of the Finance Act 1972 does not apply ".

• (2) In paragraph 3(2)(b) of that Schedule for the words " dividends without deduction of income tax" there shall be substituted the words " dividends to which the said section 84 did not apply by virtue of an election under section 256 of the Income and Corporation Taxes Act 1970 ".

• (3) In paragraph 3(4) of that Schedule, in the words preceding paragraph (a), for the words " income tax deducted or deductible from dividends" there shall be substituted the words " advance corporation tax paid or payable in respect of dividends ".

• (4) For paragraph 3(4)(a) of that Schedule there shall be substituted—

(a) there shall be treated as an amount of advance corporation tax so paid or payable any amount by which the advance corporation tax paid in respect of dividends paid to it by the other member of the group (after deducting a sum equal to any amount of tax credit paid to the company under section 254 or 255 of the Income and Corporation Taxes Act 1970 in respect of the dividends) exceeds the appropriate fraction of the relief falling to be given to the other member in that year, before abatement in respect of dividends to which section 84 of the Finance Act 1972 does not apply

.

• (5) In paragraph 3(5) of that Schedule for the words " income tax deducted or deductible from dividends " there shall be substituted the words " advance corporation tax paid or payable in respect of dividends ".

• (6) In paragraph 3(6) of that Schedule for the words " abatement in respect of dividends paid without deduction of income tax " and " in respect of dividends so paid" there shall be substituted respectively the words " abatement in respect of dividends to which section 84 of the Finance Act 1972 does not apply " and " under subsection (5) of the principal section ".

• (7) In paragraph 4(1) of that Schedule for the words " the amount (before deduction of income tax) of those dividends " there shall be substituted the words " the amount of those dividends (together with such proportion thereof as corresponds to the rate of advance corporation tax applicable to them) ".

SCHEDULE 20

Interpretation

1

In this Schedule "relevant payment" means any payment to which section 104 of this Act applies.

Duty to make returns

2

• (1) A company shall for each of its accounting periods make, in accordance with this Schedule, returns to the collector of the relevant payments made by it in that period and of the income tax for which it is accountable in respect of those payments.

• (2) A return shall be made for—

• (a) each complete quarter falling within the accounting period, that is to say, each of the periods of three months ending with 31st March, 30th June, 30th September or 31st December which falls within that period;

• (b) each part of the accounting period which is not a complete quarter and ends on the first (or only), or begins immediately after the last (or only), of those dates which falls within the accounting period;

• (c) if none of those dates falls within the accounting period, the whole accounting period.

• (3) A return for any period for which a return is required to be made under this paragraph shall be made within fourteen days from the end of that period.

Contents of returns

3

The return made by a company for any period shall show—

• (a) the amount of any relevant payments made by the company in that period ; and

• (b) the income tax in respect of those payments for which the company is accountable.

Payment of tax

4

• (1) Subject to sub-paragraph (4) below, income tax in respect of any payment required to be included in a return under this Schedule shall be due at the time by which the return is to be made, and income tax so due shall be payable by the company without the making of any assessment.

• (2) Income tax which has become due as aforesaid may be assessed on the company (whether or not it has been paid when the assessment is made) if that tax, or any part of it, is not paid on or before the due date.

• (3) If it appears to the inspector that there is a relevant payment which ought to have been and has not been included in a return, or if the inspector is dissatisfied with any return, he may make an assessment on the company to the best of his judgment; and any income tax due under an assessment made by virtue of this sub-paragraph shall be treated for the purposes of interest on unpaid tax as having been payable at the time when it would have been payable if a correct return had been made.

• (4) Where a payment has been included in a return under Schedule 14 to this Act by virtue of paragraph 7(1)(b) of that Schedule and it becomes apparent that the payment is not a qualifying distribution but a relevant payment—

• (a) sub-paragraph (1) above shall not apply to that payment; and

• (b) income tax shall be assessed in respect of it on the company.

Set-off of income tax borne on company income against tax payable

5

• (1) Where in any accounting period a company receives any payment on which it bears income tax by deduction the company may claim to have the income tax thereon set against any income tax which it is liable to pay under this Schedule in respect of payments made by it in that period.

• (2) Any such claim shall be included in a return made under paragraph 2 above for the accounting period in question and (where necessary) income tax paid by the company under this Schedule for that accounting period and before the claim is allowed shall be repaid accordingly.

6

• (1) Where a claim has been made under paragraph 5 above no proceedings for collecting tax which would fall to be discharged if the claim were allowed shall be instituted pending the final determination of the claim, but this sub-paragraph shall not affect the date when the tax is due.

• (2) When the claim is finally determined any tax underpaid in consequence of sub-paragraph (1) above shall be paid.

• (3) Where proceedings are instituted for collecting tax assessed, or interest on tax assessed, under any provision of paragraph 4 above, effect shall not be given to any claim made after the institution of the proceedings so as to affect or delay the collection or recovery of the tax charged by the assessment or of interest thereon, until the claim has been finally determined.

• (4) When the claim is finally determined any tax overpaid in consequence of sub-paragraph (3) above shall be repaid.

• (5) References in this paragraph to proceedings for the collection of tax include references to proceedings by way of distraint or poinding for tax.

7

Income tax set against other tax under paragraph 5 above shall be treated as paid or repaid, as the case may be, and the same tax shall not be taken into account both under this Schedule and under section 240(5) of the Taxes Act.

Items included in error

8

Where any item has been included in a return or claim under this Schedule as a relevant payment but should have been included in a return under Schedule 14 to this Act, the inspector may make such assessments, adjustments or set-offs as may be required for securing that the resulting liabilities to tax (including interest on unpaid tax) whether of the company or of any other person are the same as they would have been if the item had been included in the right return.

Relevant payment made otherwise than in accounting period

9

Where a company makes a relevant payment on a date which does not fall within an accounting period the company shah make a return of that payment within fourteen days from that date, and the income tax for which the company is accountable in respect of that payment shall be due at the time by which the return is to be made.

Assessments and due date of tax

10

• (1) All the provisions of the Income Tax Acts as to the time within which an assessment may be made, so far as they refer or relate to the year of assessment for which an assessment is made, or the year to which an assessment relates, shall apply in relation to any assessment under this Schedule notwithstanding that, under this Schedule, the assessment may be said to relate to a quarter or other period which is not a year of assessment, and the provisions of sections 36 and 37 of the Management Act as to the circumstances in which an assessment may be made out of time shall apply accordingly on the footing that any such assessment relates to the year of assessment in which the quarter or other period ends.

• (2) Income tax assessed on a company under this Schedule shall be due within fourteen days after the issue of the notice of assessment (unless due earlier under paragraph 4(1) or 9 above).

• (3) Sub-paragraph (2) above has effect subject to any appeal against the assessment, but no such appeal shall affect the date when tax is due under paragraph 4(1) or 9 above.

• (4) On the determination of an appeal against an assessment under this Schedule any tax overpaid shall be repaid.

• (5) Any tax assessable under any one or more of the provisions of this Schedule may be included in one assessment if the tax so included is all due on the same date.

Saving

11

Nothing in the foregoing provisions of this Schedule shall be taken to prejudice any powers conferred by the Income Tax Acts for the recovery of income tax by means of an assessment or otherwise ; and any assessment in respect of tax payable under paragraph 9 above shall be treated for the purposes of the provisions mentioned in paragraph 10(1) above as relating to the year of assessment in which the payment is made.

SCHEDULE 21

1

• (1) Where a company makes a distribution which is not a qualifying distribution it shall make a return to the inspector—

• (a) within fourteen days from the end of the accounting period in which the distribution is made; or

• (b) if the distribution is made on a date not falling in an accounting period, within fourteen days from that date.

• (2) The said return shall contain—

• (a) particulars of the transaction giving rise to the distribution ; and

• (b) the name and address of the person, or each of the persons, receiving the distribution, and the amount or value of the distribution received by him or each of them.

2

Where it is not in the circumstances apparent whether a transaction gives rise to a distribution in respect of which a return is required to be made under paragraph 1 above, the company shall—

• (a) within the time within which such a return would be required to be made if the transaction did give rise to such a distribution, make a return to the inspector containing particulars of the transaction in question ; and

• (b) if required by a notice served on the company by the inspector, furnish him within the time specified in the notice with such further information in relation to the transaction as he may reasonably require.

3

If it appears to the inspector that particulars of any transaction ought to have been and have not been included in a return under this Schedule, he may by a notice served on the company require the company to furnish him within the time specified in the notice with such information relating thereto as he may reasonably require.

4

Any power which the inspector may exercise under paragraph 19 of Schedule 16 to this Act for the purposes of that Schedule may be exercised by him for the purposes of this Schedule.

SCHEDULE 22

Distributions out of assets

1

In paragraph (b) of subsection (2) of section 233 of the Taxes Act (distributions out of company's assets otherwise than for new consideration) for the words "new consideration given for the distribution " there shall be substituted the words " new consideration received by the company for the distribution ".

Issues of bonus redeemable share capital and bonus securities

2

• (1) Paragraph (c) of the said subsection (2) (redeemable share capital or security issued by company in respect of shares otherwise than for new consideration) shall apply also to any such capital or security issued after 5th April 1972 as is mentioned in that paragraph but in respect of securities and not shares, and accordingly for that paragraph there shall be substituted—

(c) any redeemable share capital or any security— (i) issued by the company in respect of shares in the company; or (ii) issued by the company after 5th April 1972 in respect of securities of the company, otherwise than wholly for new consideration, or such part of any redeemable share capital or any security so issued as is not properly referable to new consideration;

and paragraph (d)(i) of that subsection (interest on securities mentioned in the said paragraph (c)) shall have effect accordingly.

• (2) For the purposes of the said paragraph (c)—

• (a) the value of any redeemable share capital shall be taken to be the amount of the share capital together with any premium payable on redemption, or in a winding up, or in any other circumstances; and

• (b) the value of any security shall be taken to be the principal amount thereby secured (including any premium payable at maturity or in a winding up or in any other circumstances) ;

and in determining the amount of the distribution constituted by the issue of any redeemable share capital or any security, the capital or security shall be taken at that value.

Interest etc. on certain kinds of securities

3

• (1) Sub-paragraph (ii) of paragraph (d) of the said subsection (2) (securities convertible directly or indirectly into shares, being securities which are not quoted or comparable to any which are quoted) shall apply also to securities issued after 5th April 1972 which are not quoted or comparable as aforesaid and carry any right to receive shares in or securities of the company, and accordingly for that sub-paragraph there shall be substituted—

(ii) securities convertible directly or indirectly into shares in the company or securities issued after 5th April 1972 and carrying any right to receive shares in or securities of the company, not being (in either case) securities quoted on a recognised stock exchange nor issued on terms which are reasonably comparable with the terms of issue of securities so quoted ; or

.

• (2) In the case of any interest or other distribution to which the said paragraph (d) applies by virtue of so much of sub-paragraph (iii) thereof as relates to securities under which the consideration represents more than a reasonable commercial return for the use of the principal secured, that paragraph shall not operate so as to treat as a distribution so much of the interest or other distribution as represents a reasonable commercial return for the use of that principal.

• (3) No amount shall be regarded for the purposes of the said paragraph (d) as representing the principal secured by a security issued after 5th April 1972 in so far as it exceeds any new consideration which has been received by the company for the issue of the security.

This sub-paragraph is without prejudice to section 237(6) of the Taxes Act (calculation of principal secured where securities are issued at a price less than the amount repayable on them).

Transfer of assets and liabilities between resident companies

4

• (1) No transfer of assets (other than cash) or of liabilities between one company and another shall constitute, or be treated as giving rise to, a distribution by virtue of subsection (2)(b) or (3) of the said section 233 if they are companies—

• (a) both of which are resident in the United Kingdom and neither of which is a 51 per cent. subsidiary of a company not so resident; and

• (b) which neither at the time of the transfer nor as a result of it are under common control.

• (2) For the purposes of this paragraph two companies are under common control if they are under the control of the same person or persons, and for this purpose " control" shall be construed in accordance with section 302 of the Taxes Act.

• (3) Any amount which would be a distribution by virtue of subsection (3) of the said section 233 apart from the proviso to that subsection (groups of companies resident in the United Kingdom), shall not constitute a distribution by virtue of subsection (2)(b) of that section.

Bonus issue with or following repayment of share capital

5

• (1) Section 234 of the Taxes Act (which treats a bonus issue of share capital other than redeemable share capital as a distribution if it is made at the same time as or after a repayment of share capital) shall apply whether or not the bonus issue is of redeemable share capital, and accordingly in subsection (1)(b) of that section the words " not being redeemable share capital" shall be omitted.

• (2) Except in relation to a company within paragraph D of section 461 of the Taxes Act (closely controlled companies), the said section 234 shall not apply if the issue of share capital mentioned in paragraph (b) of subsection (1) of that section—

• (a) is of share capital other than redeemable share capital; and

• (b) takes place more than ten years after the repayment of share capital mentioned in paragraph (a) of that subsection.

• (3) This paragraph applies where the issue of share capital mentioned in section 234(1)(b) takes place on or after the 6th April 1973 ; and sub-paragraph (2) above applies whether the repayment of share capital there mentioned takes place before, on or after that date.

Repayment of capital following bonus issue

6

• (1) Subsection (1) of section 235 of the Taxes Act (under which a distribution cannot be treated as a repayment of share capital if it follows a bonus issue which does not itself fall to be treated as a distribution) shall apply where the bonus issue falls to be treated as a distribution other than a qualifying distribution, and accordingly in that subsection for the words " treated as a distribution" and " treated as distributions" there shall be substituted the words " treated as a qualifying distribution " and " treated as qualifying distributions " respectively.

• (2) Except in relation to a company within paragraph D of section 461 of the Taxes Act, subsection (1) of the said section 235 shall not prevent a distribution being treated as a repayment of share capital if it is made—

• (a) more than ten years after the issue of share capital mentioned in paragraph (a) of that subsection ; and

• (b) in respect of share capital other than redeemable share capital.

• (3) Sub-paragraph (1) above applies where the issue of share capital mentioned in section 235(1)(a) takes place on or after 6th April 1973 ; and sub-paragraph (2) above applies whether it takes place before, on or after that date.

Stock dividend options

7

Section 236 of the Taxes Act (which treats as a distribution any share capital taken in lieu of a cash dividend) shall cease to have effect.

New consideration derived from shares or securities etc.

8

• (1) No consideration derived from the value of any share capital or security of a company, or from voting or other rights in a company, shall be regarded for the purposes of Part X of the Taxes Act or this Schedule as new consideration received by the company unless the consideration consists of—

• (a) money or value received from the company as a qualifying distribution;

• (b) money received from the company as a payment which for those purposes constitutes a repayment of that share capital or of the principal secured by that security ; or

• (c) the giving up of the right to that share capital or security on its cancellation, extinguishment or acquisition by the company.

• (2) No amount shall be regarded as new consideration by virtue of sub-paragraph (1)(b) or (c) above in so far as it exceeds any new consideration received by the company for the issue of the share capital or security in question or, in the case of share capital which constituted a qualifying distribution on issue, the nominal value of that share capital.

Reciprocal arrangements

9

• (1) Where two or more companies enter into arrangements to make distributions to each other's members, all parties concerned may for the purposes of Part X of the Taxes Act and this Schedule be treated as if anything done by either of those companies had been done by the other.

• (2) This paragraph applies however many companies participate in the arrangements.

Groups of companies

10

• (1) In Part X of the Taxes Act and this Schedule the expressions " in respect of shares in a company " and " in respect of securities of a company " in relation to a company which is a member of a 90 per cent. group, mean respectively in respect of shares in that company or any other company in the group and in respect of securities of that company or any other company in the group.

• (2) Without prejudice to section 233(2)(b) of that Act as extended by the foregoing sub-paragraph, in relation to a company which is a member of a 90 per cent. group, " distribution" includes anything distributed out of assets of the company (whether in cash or otherwise) in respect of shares in or securities of another company in the group.

• (3) Nothing in this paragraph shall require a company to be treated as making a distribution to any other company which is in the same group and is resident in the United Kingdom.

• (4) For the purposes of this paragraph a principal company and all its 90 per cent. subsidiaries form a "90 per cent. group" and " principal company" means a company of which another company is a subsidiary.

Commencement and interpretation

11

• (1) Paragraphs 5, 6 and 7 above have effect from 6th April 1973 and the other paragraphs of this Schedule from 6th April 1972.

• (2) This Schedule shall be construed as if it were included in Part X of the Taxes Act

SCHEDULE 23

PART I — Advance Corporation Tax Available for Set-off in Transitional Period

Determination of advance corporation tax for straddling accounting periods

1

• (1) Subject to paragraph 7 below, this paragraph applies where a company has an accounting period (in this Schedule referred to as " a straddling period ") which begins before 6th April 1973 and ends after 5th April 1973.

• (2) Section 85 of this Act shall have effect in relation to the straddling period as if the company, instead of having paid the advance corporation tax, if any, actually paid by it in respect of distributions made in the part of that period following 5th April 1973, had paid the advance corporation tax that would have been payable (apart from section 89 of this Act) in respect of a distribution made at the end of that part of an amount which, together with the advance corporation tax so payable in respect of it, is equal to such portion of the distributions made in the whole straddling period as would be attributed to that part on an apportionment of those distributions between that part of the straddling period and the remainder.

• (3) For the purposes of sub-paragraph (2) above the distributions made in a straddling period shall be taken to consist of—

• (a) the excess of the distributions made in that period before 6th April 1973 over the franked investment income received in that period before that date (or, if smaller than that excess, the excess of the distributions made in the year 1972-73 over the franked investment income received in that year); and

• (b) the excess of the franked payments made in that period after 5th April 1973 over the franked investment income received in that period alter that date.

Restriction on advance corporation tax available for set-off in transitional period

2

• (1) Subject to paragraph 6(1) below, this paragraph applies to any company which does not satisfy the following conditions, that is to say—

• (a) that it was resident in the United Kingdom and carried on a trade or business throughout the year 1971-72 and is so resident and carries on a trade or business throughout the year 1972-73 ;

• (b) that the excess of the distributions made by the company in the year 1972-73 over the franked investment income received in that year is not less than the corresponding excess for the year 1971-72 ; and

• (c) that it was not at any time in its base period after 5th April 1972 a 51 per cent. subsidiary of a company resident in the United Kingdom.

• (2) Subject to sub-paragraph (8) below and to the subsequent provisions of this Schedule, section 85 of this Act shall have effect in relation to the relevant accounting period in a distribution period, or, if more than one, all the relevant accounting periods in a distribution period as if the company, instead of having paid the advance corporation tax, if any, actually paid by it in respect of distributions made in that relevant accounting period or those relevant accounting periods, had paid advance corporation tax in respect of distributions made in that relevant accounting period or those relevant accounting periods of an amount which, in the aggregate, is equal to whichever of the following is the less, that is to say—

• (a) the advance corporation tax, if any, which the company is treated under paragraph 1 above or 7 below as having paid for any accounting period to which that paragraph applies which, or part of which, is a relevant accounting period included in the distribution period, plus the advance corporation tax, if any, actually paid by the company (and not repaid) in respect of distributions made in any other relevant accounting period in the distribution period ; or

• (b) the advance corporation tax that would have been payable (apart from section 89 of this Act) in respect of a distribution made at the end of the distribution period which, together with the advance corporation tax so payable in respect of it, is equal to—

• (i) the profit standard for that distribution period; or

• (ii) the distribution standard for that distribution period, whichever is the greater.

• (3) In this Schedule "the profit standard", in relation to any distribution period, means an amount equal to 50 per cent. of the income, if any, of the company charged to corporation tax for that period (as defined in section 85(6) of this Act).

• (4) In this Schedule " the distribution standard " means an amount equal to the distributions, if any, made by the company in the time beginning with its base date and ending with the last day of the distribution period reduced by multiplying by the fraction $AB$ where A is the number of months or parts of months in the distribution period and B is the number of months or parts of months in the base period up to the end of the distribution period.

• (5) For the purposes of sub-paragraph (4) above the distributions made by the company in the time mentioned in that sub-paragraph shall be taken to consist of the aggregate of—

• (a) the excess of the distributions made in that time before 6th April 1973 over the franked investment income received in that time before that date (or, if smaller than that excess, the aggregate of the excess of the distributions made in the year 1971-72 over the franked investment income received in that year and of the corresponding excess for the year 1972-73) ; and

• (b) the excess of the franked payments made in each relevant accounting period falling within that time over the franked investment income received in that period.

• (6) Subject to sub-paragraph (7) and paragraphs 3 and 4 below, in this Schedule—

• " distribution period " means any of the following, that is to say, the period beginning with 6th April 1973 and ending with the first relevant accounting period in the base period, the period beginning with the said 6th April and ending with the second relevant accounting period in the base period and similarly for each period beginning with the said 6th April and ending with a later relevant account-ting period in the base period;

• " relevant accounting period " means any accounting period or part of an accounting period beginning after 5th April 1973 and ending on or before the expiration of the base period;

• " base period " means the period beginning with the company's base date and ending on the last day of the latest accounting period beginning within four years from the base date ;

• " base date " means the day following the end of the company's accounting period or latest accounting period ending in the year 1971-72.

• (7) If, in the case of any company, accounts for no period ending in the year 1971-72 have been adopted before 21st March 1972, then—

• (a) if a terminal date or dates for an accounting period or accounting periods ending in that year has or have been decided, or fixed by a decision, before the said 21st March and there is sufficient evidence of the decision in some document in existence before the said 21st March, the base date of the company shall be the day following that terminal date or the last of those terminal dates, as the case may be;

• (b) where paragraph (a) above does not apply, the base date of the company shall be the day following the anniversary in the year 1971-72 of the end of the company's latest accounting period or, if there is no such accounting period, of the date on which the company commenced business or came within the charge to corporation tax.

• (8) Sub-paragraph (2) above does not apply to a company if in the case of that company the relevant amount for any distribution period does not exceed—

• (a) £1,000 multiplied by the number of years or parts of years in the distribution period ; or

• (b) the income charged to corporation tax (as defined in section 85(6) of this Act) for that period, whichever is the less ;

and for the purposes of this sub-paragraph the relevant amount in relation to a company is—

• (i) in the case of a distribution period that includes all or any part of an accounting period to which paragraph 1 above or 7 below applies, an amount equal to the distribution on which the advance corporation tax mentioned in sub-paragraph (2)(a) above would be calculated (if that sub-paragraph were applied to the company) plus that advance corporation tax ;

• (ii) in the case of any other distribution period, the excess of the franked payments made in that period over the franked investment income received in that period.

New businesses

3

• (1) Where the first accounting period of a company began in the year 1971-72 the base date of the company shall be the first day of that accounting period.

• (2) Where the first accounting period of a company begins in the year 1972-73—

• (a) the base date of the company shall be the first day of that accounting period ;

• (b) the base period of the company shall be the period beginning with that day and ending on the last day of the latest accounting period beginning within three years from the base date; and

• (c) the distribution standard shall not apply to the company.

• (3) Where the first accounting period of a company begins after 5th April 1973—

• (a) the base date of the company shall be the first day of that accounting period;

• (b) the base period of the company shall be the period beginning with the base date and ending on—

• (i) the last day of the latest accounting period beginning within two years from the base date; or

• (ii) the last day of the latest accounting period beginning before 5th April 1976,

whichever is the earlier ;

• (c) any distribution period of the company shall begin with the base date; and

• (d) the distribution standard shall not apply to the company.

• (4) Where a company which has ceased to be a chargeable company (that is to say, a company within the charge to corporation tax or resident in the United Kingdom) at any time before 6th April 1973 again becomes such a company before that date, its first accounting period for the purposes of this paragraph shall be taken to be the accounting period beginning on the occasion (or last occasion) on which it became such a company before that date; and where a company which has ceased to be a chargeable company at any time does not again become such a company until after 5th April 1973 its first accounting period for the purposes of this paragraph shall be taken to be the accounting period beginning on the occasion (or the first occasion) on which it becomes such a company after that date.

Cessation of business

4

• (1) Where after 5th April 1973 a company ceases to be, and does not again before the expiration of the period mentioned in sub-paragraph (2) below come, within the charge to corporation tax, its base period shall end on the day on which it ceases to be within the charge to corporation tax.

• (2) The period mentioned above is—

• (a) in the case of a company with a base date in the year 1971-72, four years from the base date ;

• (b) in the case of a company with a base date in the year 1972-73, three years from the base date ;

• (c) in the case of a company with a base date in the year 1973-74, the period ending 5th April 1976.

Close companies

5

• (1) Where a company is a close company for all the accounting periods in its base period, then, if the effect would be to increase the amount of advance corporation tax which the company is treated as having paid in respect of any distribution period, paragraph 2(2) above shall apply to the company as if for paragraph (b) there were substituted—

(b) the advance corporation tax that would have been payable if the company had made in each accounting period or part of an accounting period in the distribution period a distribution equal to the amount to be taken in accordance with paragraph 9 of Schedule 16 to this Act as the company's relevant income for that accounting period or part of an accounting period

.

• (2) For the purposes of the paragraph (b) mentioned above, the amount to be taken as a company's relevant income for a part of an accounting period shall be arrived at by apportioning the relevant income for the whole of that accounting period between that part and the remainder.

• (3) If a company makes a claim in that behalf and shows that the distributions made by it in an accounting period or part of an accounting period in the distribution period were made for the purpose—

• (a) of avoiding an apportionment under the said Schedule 16 in respect of relevant income (as defined in paragraph 8 of that Schedule) of an earlier accounting period to which that Schedule applies ; or

• (b) of avoiding a shortfall (as defined in section 290 of the Taxes Act) for an accounting period to which that section applies,

the paragraph (b) mentioned in sub-paragraph (1) above shall have effect in relation to the accounting period or part in which the distributions were made as if instead of referring to the amount to be taken as the company's relevant income it referred to the amount of those distributions.

Authorised unit trusts and investment trusts

6

• (1) Paragraph 2 above shall not apply to any authorised unit trust.

• (2) Where a company is an investment trust for all the accounting periods in its base period, then, if the effect would be to increase the amount of advance corporation tax which the company is treated as having paid in respect of any distribution period and the company makes a claim in that behalf, paragraph 2(2) above shall apply to the company as if for paragraph (b) there were substituted—

(b) the advance corporation tax that would have been payable (having regard to section 89 of this Act) if the distributions made by the company in the relevant accounting period or, if more than one, each relevant accounting period in the distribution period had not exceeded the distributions that it was necessary for the company to make in that period in order to comply with subsection (1)(e) of section 359 of the Taxes Act (limit on income that may be retained by investment trust as condition for approval under that section)

.

• (3) In relation to a relevant accounting period which is a fraction of a straddling period, the advance corporation tax to be taken into account for the purposes of the paragraph (b) mentioned above shall be a corresponding fraction of the advance corporation tax that would have been payable (having regard to section 89 of this Act) if the distributions made by the company in the straddling period had all been made at the end of that period and had not exceeded the distributions that it was necessary for the company to make in the straddling period in order to comply with the said subsection (1)(e).

• (4) In this paragraph " authorised unit trust" has the meaning given in section 358 of the Taxes Act and, subject to section 93(6) of this Act, " investment trust" has the meaning given in section 359 of that Act.

Modification of paragraph 1(2) and (3) in case of change of accounting date

7

• (1) This paragraph applies instead of paragraph 1(2) and (3) above where a company has a straddling period—

• (a) which does not begin on the anniversary of the company's base date (as defined in the foregoing provisions of this Schedule); or

• (b) which does not run for twelve months from that anniversary or, in the case of a company within paragraph 3(2) above, from its base date.

• (2) In this paragraph—

• " notional straddling period " means the period beginning on the anniversary in the year 1972-73 of the company's base date, or in the case of a company within paragraph 3(2) above on its base date, and ending after twelve months or at the end of the base period (as defined in the foregoing provisions of this Schedule) whichever is the earlier;

• " the second part of the notional straddling period " means the part of it beginning with 6th April 1973 ;

• " the distributions made in the notional straddling period " shall, subject to sub-paragraph (5) below, be determined in accordance with paragraph 1(3) above as for an actual straddling period.

• (3) Section 85 of this Act shall have effect in relation to any accounting period of the company which includes the whole of the second part of the notional straddling period as if the company, instead of having paid the advance corporation tax, if any, actually paid by it in respect of distributions made in that accounting period, had paid—

• (a) the advance corporation tax that would have been payable (apart from section 89 of this Act) in respect of a distribution made at the end of the second part of the notional straddling period of an amount which, together with the advance corporation tax so payable in respect of it, is equal to such portion of the distributions made in the whole notional straddling period as would be attributed to the second part of that period on an apportionment of those distributions between that part and the remainder; and

• (b) the advance corporation tax, if any, paid by the company (and not repaid) in respect of the excess of franked payments made over the franked investment income received in the accounting period less the advance corporation tax, if any, paid by the company (and not repaid) in respect of any such excess as is by virtue of paragraph 1(3) above included in the distributions made in the notional straddling period.

• (4) Sub-paragraph (3) above shall have effect in relation to any accounting period of the company which includes a fraction of the second part of the notional straddling period as it applies in relation to an accounting period which includes the whole of that part but as if the reference in paragraph (a) to a portion of the distributions made in the whole of the notional period were a reference to a corresponding fraction of that portion.

• (5) The distributions to be included by virtue of paragraph 1(3)(b) above in the distributions made in a notional straddling period shall not exceed—

• (a) in relation to an accounting period which includes the whole of the second part of the notional straddling period, the excess of the franked payments made in that accounting period after 5th April 1973 over the franked investment income received in that period after that date;

• (b) in relation to an accounting period which includes a fraction of the second part of the notional straddling period, the excess of the franked payments made in that accounting period after that date over the franked investment income received in that period after that date plus the excess of the franked payments made after that date in each other accounting period which includes a fraction of the second part of the notional straddling period over the franked investment income received after that date in that other accounting period.

Change of ownership of company

8

• (1) Sub-paragraphs (2) and (3) below apply if—

• (a) within any period of three years there is both a change in the ownership of a company and (either earlier or later in that period, or at the same time) a major change in the nature or conduct of a trade or business carried on by the company; or

• (b) at any time after the scale of the activities in a trade or business carried on by a company has become small or negligible, and before any considerable revival of the trade or business, there is a change in the ownership of the company.

• (2) Where the change of ownership occurs in a straddling period or in a notional straddling period as defined in paragraph 7 above, the advance corporation tax which the company is treated under paragraph 1(2) or 7(3)(a) above as having paid shall not exceed the advance corporation tax actually paid by the company (and not repaid) in respect of distributions made in the straddling period or notional straddling period.

• (3) Where the change of ownership occurs after 5th April 1972—

• (a) paragraph 2 above shall apply to the company even though it satisfies the conditions mentioned in sub-paragraph (1) of that paragraph; and

• (b) the distribution standard shall not apply to the company.

• (4) Where after 5th April 1972 there is a change in the ownership of, or a major change in the nature or conduct of a trade or business carried on by, a company, paragraph 2 above shall apply to the company even though it satisfies the conditions mentioned in sub-paragraph (1) of that paragraph.

• (5) Subsections (4), (5) and (7) of section 101 of this Act shall, so far as applicable, have effect in relation to this paragraph as they have effect in relation to that section.

Groups of companies

9

Regard shall be had to the provisions of this Schedule in determining whether a company has surplus advance corporation tax of which it can surrender the benefit under section 92 of this Act and the amount of any such surplus advance corporation tax, but those provisions shall not affect any advance corporation tax which a company is treated by virtue of that section as having paid in consequence of the surrender to it of any such surplus by another company.

Bonus issues

10

• (1) For the purposes of this Schedule there shall be disregarded any distribution if, by virtue of the following provisions of this paragraph, section 85 of this Act does not apply to the advance corporation tax payable in respect of it; and, subject to sub-paragraph (3) below, references in this Schedule to advance corporation tax paid by a company do not include references to advance corporation tax to which by virtue of those provisions the said section 85 does not apply.

• (2) Subject to sub-paragraph (4) below, section 85 of this Act shall not apply to advance corporation tax payable by a company in respect of any amount treated as a distribution—

• (a) by virtue of section 234 of the Taxes Act (bonus issues following repayment of share capital) where the repayment of share capital mentioned in subsection (1)(a) of that section has taken place before the passing of this Act or takes place thereafter but before 6th April 1973 ;

• (b) by virtue of subsection (1) of section 235 of that Act (matters not to be treated as repayments of share capital) where the issue mentioned in paragraph (a) of that subsection has taken place before the passing of this Act or takes place thereafter but before 6th April 1973 ;

• (c) by virtue of paragraph 3(3) of Schedule 22 to this Act where the security there mentioned was issued before the passing of this Act or is issued thereafter but before 6th April 1973.

• (3) Subject to sub-paragraph (4) below, the said section 85 shall not apply to advance corporation tax payable by a company in respect of any amount treated as a distribution—

• (a) by virtue of the said section 234 where the repayment of share capital mentioned in subsection (1)(a) of that section takes place in a distribution period ;

• (b) by virtue of subsection (1) of the said section 235 where the issue mentioned in paragraph (a) of that subsection takes place in a distribution period ;

• (c) by virtue of paragraph 3(3) of the said Schedule 22 where the security there mentioned was issued in a distribution period,

except to the extent, if any, to which the said section 85 would have applied to that advance corporation tax if it had been included for that distribution period in the advance corporation tax mentioned in paragraph 2(2)(a) above.

• (4) Sub-paragraphs (2) and (3) above do not apply where the distribution on which the advance corporation tax is payable is made more than ten years after the repayment of share capital mentioned in the said section 234(1)(a), the issue mentioned in the said section 235(1)(a) or the issue mentioned in the said paragraph 3(3), as the case may be.

• (5) This paragraph shall be construed as if it were included in Part X of the Taxes Act.

Supplementary

11

• (1) For the purposes of this Schedule there shall be disregarded any distribution consisting of a dividend paid without deduction of income tax by virtue of an election under section 256 of the Taxes Act as originally enacted or a dividend to which section 84 of this Act does not apply by virtue of an election under the said section 256 as amended by this Act.

• (2) Where a company has made a claim or claims under section 254 or 255 of the Taxes Act for an accounting period ending in the year 1972-73, or for an accounting period ending after 6th April 1973 but in a distribution period, the franked investment income to be taken into account under this Schedule shall be calculated as if that claim or those claims had not been made, and the advance corporation tax referred to in paragraph 2(2)(a) and 7(3)(b) above as having been paid by a company (and not repaid) shall be calculated accordingly.

• (3) Where in consequence of the application of this Schedule to any distribution period a company has been denied the benefit of any advance corporation tax and in consequence of the subsequent application of this Schedule to another distribution period it appears that the company ought not have been denied the benefit of that tax, relief shall be given by discharge or repayment of tax.

• (4) In this Schedule references to franked investment income received in any year or period include references to franked investment income treated as received in that year or period; and for the purposes of paragraph 1(3)(b) above in its application to a notional straddling period as defined in paragraph 7 above, franked investment income which is treated by virtue of section 89(3) of this Act as having been received in any accounting period shall be treated as received on the first day of that period.

• (5) In this Schedule references to franked investment income do not include references to franked investment income which by virtue of section 89(5) of this Act cannot be used to frank distributions of a company.

PART II — Other transitional provisions

Limit on set-off of advance corporation tax for accounting period beginning before 1st April 1973 and ending after 3 1st March 1973

12

Subsection (2) of section 85 of this Act shall have effect in relation to an accounting period beginning before 1st April 1973 and ending after 31st March 1973 as if the income charged to corporation tax for that period (determined in accordance with subsection (6) of that section) were such part thereof as would be attributed to the part of that accounting period beginning with the said 1st April if that income were apportioned between that part of the accounting period and the remainder.

Returns for straddling period

13

Schedules 14 and 20 to this Act shall have effect in relation to a straddling period as if the part of it before 6th April 1973 were not included in that period.

Surplus of franked investment income on hand at 5th April 1973

14

Subject to paragraph 15 below, where a company has a surplus of franked investment income (within the meaning of section 240 of the Taxes Act) for the year 1972-73 that surplus shall be treated for the purposes of this Act as an equivalent amount of franked investment income (within the meaning of this Act) received by the company on 6th April 1973.

Set-off of losses etc. against surplus of franked investment income

15

Paragraph 14 above shall not apply for the purposes of a claim under section 254 or 255 of the Taxes Act for any accounting period beginning with 6th April 1973 ; and for the purposes of any such claim for a straddling period that paragraph shall have effect in relation to any such surplus as is there mentioned exclusive of any part thereof which—

• (a) is carried forward from a year of assessment before the year 1972-73 ; or

• (b) would be apportioned, under section 254(3)(a) or 255(2) of that Act as originally enacted, to an accounting period beginning before the straddling period.

16

• (1) For the purposes of this paragraph " a relevant section 240 amount" means any amount which by virtue of paragraphs 14 and 15 above falls to be treated as franked investment income for the purposes of a claim for a straddling period under section 254 or 255 of the Taxes Act.

• (2) Where a company has franked investment income for a straddling period which consists of or includes a relevant section 240 amount, and a surplus of franked investment income for that period falls to be reduced in consequence of a claim under section 254 or 255 of the Taxes Act—

• (a) income tax at 38-75 per cent. shall be repaid to the company in respect of the relevant section 240 amount or the amount of the reduction, whichever is the less ; and

• (b) the amount in respect of which income tax is to be repaid as aforesaid shall be deducted from the amount in respect of which any payment of tax credit falls to be made in consequence of the claim.

• (3) Where a company makes claims under both the said sections 254 and 255 for a straddling period the total amount in respect of which income tax is repayable under this paragraph shall not exceed the relevant section 240 amount.

17

Where in consequence of a claim under section 254 or 255 of the Taxes Act in respect of a surplus of franked investment income for the year 1972-73 a company is entitled to repayment of a sum of income tax, section 90(3) of this Act shall apply as if—

• (a) for the reference to payment of a sum in respect of tax credit there were substituted a reference to repayment of a sum of income tax ; and

• (b) for the reference to the next accounting period there were substituted a reference to the accounting period which begins with or contains 6th April 1973.

Dividends and other distributions at gross rate or of gross amount

18

• (1) Where any right or obligation created before 6th April 1973 is expressed by reference to a dividend at a gross rate or of a gross amount, that right or obligation shall, in relation to a dividend payable on or after that date, take effect as if the reference were to a dividend of an amount which, when there is added to it such proportion thereof as corresponds to the rate of advance corporation tax in force on that date, is equal to a dividend at that gross rate or of that gross amount.

• (2) Sub-paragraph (1) above shall apply with the necessary modifications to a dividend partly at a gross rate or of a gross amount and shall apply to any distribution other than a dividend as it applies to a dividend.

Shortfall assessments

19

• (1) Nothing in this Act shall preclude the making of an assessment under subsection (1) of section 289 of the Taxes Act (shortfall in distributions) for the year 1973-74 in respect of a shortfall in an accounting period ending before 6th April 1973, and for the purposes of any such assessment it shall be assumed that section 232(2) of that Act is in force on the date on which the distribution mentioned in subsection (1) of the said section 289 is to be taken as having been made.

• (2) Subsections (3) and (4) of the said section 289 shall have effect in relation to the year 1973-74 as if references to a surplus of franked investment income were references only to so much, if any, of any such surplus as corresponds to franked investment income treated by virtue of paragraph 14 above as received by the company on 6th April 1973.

• (3) In subsection (5) of the said section 289 references to a later accounting period do not include references to any accounting period beginning with or after 6th April 1973 ; and—

• (a) that subsection shall have effect in relation to a later accounting period which is a straddling period as if for the words " for which there is no such shortfall" and " the required standard" there were substituted respectively the words " for which there is on such excess as is mentioned in paragraph 1(2) of Schedule 16 to the Finance Act 1972 " and " the company's relevant income as defined for the purposes of that Schedule " ; and

• (b) if the distributions for a later accounting period beginning before 6th April 1973 (whether or not a straddling period) include distributions made after 5th April 1973, the amount that would, apart from this sub-paragraph, fall to be deducted under that subsection from the distributions made by the company for that accounting period shall be reduced to such a fraction of that amount as corresponds to the fraction of those distributions made before 6th April 1973 and that amount, as so reduced, shall be deducted rateably from such of those distributions as were made before 6th April 1973.

• (4) This paragraph shall be construed as if it were included in Schedule 16 to this Act.

Small companies, industrial and provident societies etc.

20

Sections 95 and 96 of this Act shall have effect in relation to an accounting period beginning before 1st April 1973 and ending after 31st March 1973 as if the part of that period before the said 1st April and the part after the said 31st March were separate accounting periods, and the profits and income of the company for that accounting period (as defined in those sections) shall be apportioned between those parts.

SCHEDULE 24

Finance Act 1965

1

In section 34(6) of the Finance Act 1965, in the definition of " trading company " for the words " section 292(1) of the Income and Corporation Taxes Act 1970" there shall be substituted the words " paragraph 11 of Schedule 16 to the Finance Act 1972 ".

2

In paragraph 18(1) of Schedule 6 to the said Act of 1965 for the words from " section 297 " to " 1970 " there shall be substituted the words " paragraph 5 of Schedule 16 to the Finance Act 1972 (consequences for income tax of apportionment of income etc. of close company) "; in paragraph 18(2) of that Schedule for the words " subsection (8) of the said section 297 " and " subsection (2)(b) of that section" there shall be substituted respectively the words " sub-paragraph (6) of the said paragraph 5 " and " sub-paragraph (2)(b) of that paragraph " ; and in paragraph 18(5) of that Schedule for the words " the said section 297 " there shall be substituted the words " the said paragraph 5 ".

Provisional Collection of Taxes Act 1968

3

In section 5 of the Provisional Collection of Taxes Act 1968 in subsection (1)(c) after the words “section 243(6) of the Income and Corporation Taxes Act 1970” there shall be inserted the words “or advance corporation tax could be payable or assessed by virtue of section 103(2) of the Finance Act 1972”, and in subsection (2) of that section after the word “Act)” there shall be inserted the words “and the said section 103(2) of the Finance Act 1972”.

Taxes Management Act 1970

4

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

5

In section 11 of the Management Act, after subsection (5) there shall be added—

(6) A notice under this section may require the inclusion in the return of particulars of advance corporation tax paid by the company (and not repaid) and of any surplus advance corporation tax carried forward under section 85(4) of the Finance Act 1972.

6

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

7

In section 31(3)(b) of the Management Act the figure “297” (inserted by the Finance Act 1971) shall be omitted and at the end there shall be inserted “or under paragraph 5 of Schedule 16 to the Finance Act 1972”.

8

In section 55(1)(e) of the Management Act for the words " Schedule 9 to the principal Act (income tax on company distributions etc.)" there shall be substituted the words " Schedule 20 to the Finance Act 1972 (income tax on company payments other than distributions) ".

9

In section 86(1)(d) of the Management Act after the words " corporation tax " there shall be inserted the words " other than advance corporation tax ".

10

For section 87 of the Management Act there shall be substituted—

(87) (1) Any tax assessable in accordance with Schedule 14 or 20 to the Finance Act 1972 shall carry interest at the prescribed rate from the date when the tax becomes due and payable until payment. (2) Where— (a) advance corporation tax paid in respect of distributions made in any return period is repaid under paragraph 4 of the said Schedule 14 in consequence of the receipt of franked investment income in a later return period; or (b) income tax paid in respect of payments made in any return period is repaid or discharged under paragraph 5 of the said Schedule 20 in consequence of the receipt in a later return period of a payment on which income tax is borne by deduction. the repayment or discharge shall not affect interest under this section on the tax so repaid or discharged for such time as is specified in subsection (3) below but, subject to that, this section shall apply as if any such tax which is repaid or discharged had never become payable. (3) The time for which interest is not affected is— (a) any time before the expiration of fourteen days from the end of the later return period, unless the return for that period is made earlier in those fourteen days; and (b) if that return is made earlier in those fourteen days, any time ending before the date on which the return is made. (4) Interest shall not be payable under this section on the tax charged by any assessment unless the total amount of the interest exceeds £10 (5) Subsection (4) above shall have effect as if all advance corporation tax due from a company in accordance with paragraph 3(1) of the said Schedule 14 for any return period, whether or not it is actually assessed, were included in a single assessment, and similarly in the case of all income tax due from a company in accordance with paragraph 4(1) of the said Schedule 20 for any return period. (6) In this section “return period” means a period for which a return is required to be made under the said Schedule 14 or 20. (7) It is hereby declared that this section applies to advance corporation tax and income tax which, in accordance with either of those Schedules, is paid without the making of any assessment (but is paid after it is due). and that where the tax is charged by an assessment (whether or not any part of it has been paid when the assessment is made) this section applies as respects interest running before as well as after the making of the assessment. (8) Tax assessable as mentioned in subsection (1) above shall carry interest from the date when it becomes due and payable even if that date is a non-business day within the meaning of section 92 of the Bills of Exchange Act 1882.

11

In section 88(2) of the Management Act, for the words “Schedule 9 to the principal Act” there shall be substituted the words “Schedule 14 or 20 to the Finance Act 1972.”

12

In section 98 of the Management Act the following shall be added in the first column—

Paragraph 19 of Schedule 16 and paragraphs 2(b), 3 and 4 of Schedule 21 to the Finance Act 1972

;

and the following shall be added in the second column—

Schedules 14 and 20, and paragraphs 1 and 2(a) of Schedule 21, to the Finance Act 1972

.

13

For section 109 of the Management Act there shall be substituted—

(109) (1) The provisions of section 286 of the principal Act (charge of tax in connection with loans by close companies to participators etc.) directing that tax be assessed and recoverable as if it were an amount of corporation tax shall be taken as applying, subject to the provisions of the Taxes Act, and to any necessary modifications, all enactments applying generally to corporation tax, including those relating to the assessing, collecting and receiving of corporation tax, those conferring or regulating a right of appeal and those concerning administration, penalties, interest on unpaid tax and priority of tax in cases of insolvency under the law of any part of the United Kingdom. (2) Section 86 of this Act shall apply in relation to tax under the said section 286 as if the date given by the Table in subsection (4) of the said section 86 were the last day of the three months following the end of the financial year in which the loan or advance was made. (3) For the purposes of section 88 of this Act as applied by subsection (1) above, the date when tax charged under the said section 286 ought to have been paid shall be taken to be the first day of the financial year following that in which the loan or advance was made. (4) Section 91 of this Act shall not apply in consequence of any discharge or repayment of tax under section 286(5) of the principal Act. (5) For the purposes of the said section 91, a relief from tax under the said section 286 shall not be treated as affecting tax charged by any assessment unless the assessment is to tax under that section.

14

In Schedule 3 to the Management Act, in column 1 of rule 8 the words “288 or 289” shall be omitted and at the end there shall be inserted the words “or relating to a notice under paragraph 15 of Schedule 16 to the Finance Act 1972”.

Income and Corporation Taxes Act 1970

15

In section 4(3) of the Taxes Act (as substituted by the Finance Act 1971) after the words " or is treated as having been deducted " there shall be inserted the words " or income chargeable under Schedule F ".

16

In section 53(4) of the Taxes Act for the words " Schedule 9 to this Act" there shall be substituted the words " Schedule 20 to the Finance Act 1972 ".

17

In section 226(9) of the Taxes Act for the words " section 292(1) of this Act" there shall be substituted the words " paragraph 11 of Schedule 16 to the Finance Act 1972 ".

18

For section 232(4) of the Taxes Act there shall be substituted—

(4) A company which makes a qualifying distribution shall, if the recipient so requests in writing, furnish to him a statement in writing showing the amount or value of the distribution and (whether or not the recipient is a person entitled to a tax credit in respect of the distribution) the amount of the tax credit to which a recipient who is such a person is entitled in respect thereof. The duty imposed by this subsection shall be enforceable at the suit or instance of the person requesting the statement.

19

In section 242(1) of the Taxes Act for paragraphs (a) to (c) there shall be substituted—

(a) in the case of interest which is not a qualifying distribution— (i) the gross amount which, after deduction of the income tax appropriate thereto, corresponds to the net amount actually paid, (ii) the rate and the amount of income tax appropriate to such gross amount, and (iii) the net amount actually paid ; (b) in the case of a dividend or of interest which is a qualifying distribution, each of the following amounts— (i) the amount of the dividend or interest paid, and (ii) (whether or not the recipient is a person entitled to a tax credit in respect thereof) the amount of the tax credit to which a recipient who is such a person is entitled in respect thereof.

20

In section 248 of the Taxes Act, in subsection (4)(a) for the words " Schedule 9 to this Act" there shall be substituted the words " Schedule 20 to the Finance Act 1972 ", and in subsection (8) for the words " by reason of section 284(1)(a) or any other provision " there shall be substituted the words " by reason of any provision ".

21

In section 302(1) of the Taxes Act the words " other than section 290 above " shall be omitted and at the end there shall be inserted—

Provided that this subsection shall not by virtue of section 94(3) of the Finance Act 1972 apply to paragraph 9 of Schedule 16 to that Act

.

22

In section 343 of the Taxes Act, in subsection (2)(b), for the words " Schedule 9 to this Act" there shall be substituted the words " Schedule 20 to the Finance Act 1972 " and in subsection (7) for the word " distribution " there shall be substituted the words " qualifying distribution ".

23

In section 393(1) of the Taxes Act for the words " tax under section 289 of this Act (shortfall in distributions of close company)" there shall be substituted the words " tax under Schedule 16 to the Finance Act 1972 (apportionment of income of close companies) ".

24

In section 399(1)(b) of the Taxes Act for the words from " then " onwards there shall be substituted the words

then, for the purposes of Schedule 16 to the Finance Act 1972— (i) the amount of the gain shall be deemed to form part of the company's income for the accounting period in which the event happened, and (ii) the company's distributable income (but not its estate or trading income) for that period shall be treated as increased by the amount of the gain

.

25

In section 432(7) of the Taxes Act the words " section 297(3) (close companies: apportionments)" shall be omitted and there shall be added at the end the words " and paragraph 5(3) of Schedule 16 to the Finance Act 1972 (close companies: apportionments) ".

26

In section 454(1) of the Taxes Act, in paragraph (b) after the words " has been apportioned" there shall be inserted the words " under Schedule 16 to the Finance Act 1972 or (as respects income of accounting periods ending before 6th April 1973) " and at the end there shall be inserted—

Where the income of a body corporate has been, or could have been, apportioned under Schedule 16 to the Finance Act 1972 any amount of that income which by virtue of paragraph (b) above is to be included in the income arising under a settlement shall be increased by such proportion thereof as corresponds to the rate of advance corporation tax applicable to a distribution made at the end of the accounting period to which the apportionment relates.

27

In section 478(8)(d) of the Taxes Act for the words " section 296 of this Act" there shall be substituted the words " paragraph 1 of Schedule 16 to the Finance Act 1972 " and at the end there shall be inserted the words " and that amount shall be treated as increased by such proportion thereof as corresponds to the rate of advance corporation tax applicable to a distribution made at the end of the accounting period to which the apportionment relates ".

28

In section 481(3) of the Taxes Act for the words " section 292(1) of this Act" there shall be substituted the words " paragraph 11 of Schedule 16 to the Finance Act 1972 ".

29

In section 521 of the Taxes Act subsection (3)(a) shall be omitted, and at the end there shall be added—

(4) In this section " interest" and " dividends" do not include any interest or dividend which is a distribution.

30

In section 522 of the Taxes Act for the words " interest on any of its securities, or under section 232(3) of this Act from payments of preference dividends on any of its shares " there shall be substituted the words " interest (not being a distribution) on any of its securities " and the words " or share " (three times) and the words " In this section ' share' includes stock " shall be omitted.

31

In section 526(5) of the Taxes Act for the definition of " franked investment income " there shall be substituted—

• ' franked investment income ' shall be construed in accordance with section 88 of the Finance Act 1972 but subject to section 256(1) of this Act;
• ' franked payment ' shall be construed in accordance with section 84 of the Finance Act 1972 but subject to section 256(1) of this Act and after the definition of " preference dividend " there shall be inserted—

;

• ' qualifying distribution ' has the meaning given in section 84 of the Finance Act 1972 ;
• ' surplus of franked investment income ' has the meaning given in section 89 of the Finance Act 1972 ;
• ' tax credit ' means a credit under section 86 of the Finance Act 1972

.

32

In section 528(3)(a) of the Taxes Act after the words " for any year " there shall be inserted the words " or which for the purposes of Schedule F comprises an amount equal to a tax credit calculated by reference to the rate of advance corporation tax in force for any year ".

33

In Schedule 14 to the Taxes Act, in paragraph 15, for the words " Board may exercise under section 301 of this Act for the purposes of sections 296 to 300 " there shall be substituted the words " inspector may exercise under paragraph 19 of Schedule 16 to the Finance Act 1972 for the purposes of that Schedule ".

SCHEDULE 25

SCHEDULE 26