Finance Act 1973

PART I — Customs and Excise

Alteration of revenue duties

1

Regulations for determining origin of goods

2

Continuation of powers under section 9 of Finance Act 1961

3

PART II — Value Added Tax and Car Tax

Relief for tax-or duty-paid stock held at commencement of VAT

4

• (1) Where the Commissioners of Customs and Excise are satisfied that purchase tax or a duty to which this section applies was charged on or in respect of goods or on or in respect of parts or ingredients of goods which at the beginning of April 1973 were unused and held by a taxable person for sale in the course of his business, then if—

• (a) before the end of April 1973 or, with the sanction of the Commissioners, at a later date the Commissioners were notified, in the manner required by the notice published by them as Notice No. 748, of the particulars so required; and

• (b) the other conditions mentioned in that Notice are satisfied;

an amount determined or arrived at in accordance with subsection (2) of this section to take account of the tax or duty charged may, in the manner specified in the Notice, be included in the return made by the taxable person under Part I of the Finance Act 1972 for the first prescribed accounting period or, with the sanction of the Commissioners, in such a return made for a later period and shall, if so included, be treated for the purposes of that Part as an amount to be deducted as input tax.

In this subsection " sale " includes any supply under a hire-purchase agreement.

• (2) The amount that may be so included shall be as follows—

• (a) if it is to take account of purchase tax, then, subject to paragraphs (b) and (c) below, it shall be the amount charged;

• (b) if purchase tax was charged at a higher rate than the corresponding rate in force on 7th November 1972 the amount shall be what the amount charged would have been had purchase tax been charged at that corresponding rate;

• (c) if purchase tax was charged in respect of a vehicle which, had purchase tax not been chargeable, would be a chargeable vehicle for the purposes of the car tax, the amount shall be three-fifths of the amount arrived at under paragraphs (a) and (b) above;

• (d) if the amount is to take account of a duty to which this section applies, then, subject to subsection (5) and paragraph (e) below, it shall be the excess of the amount charged over what it would have been had duty been charged at the corresponding rate in force on 1st April 1973;

• (e) if the duty was charged at a rate other than the corresponding rate in force on 7th November 1972, then, subject to subsection (5) below, the amount shall be the excess of the amount that would have been charged at that corresponding rate over the amount that would have been charged at the corresponding rate in force on 1st April 1973;

and such method may be used in determining that amount, or, if it cannot be determined, in arriving at an appropriate amount to be substituted for it, as the Commissioners may allow.

• (3) Where by virtue of this section an amount is treated as input tax to take account of a duty charged, then, if any drawback or repayment falls to be allowed or made in respect of that duty, its amount shall be calculated as if the duty had been charged at the corresponding rate in force on 1st April 1973.

• (4) For the purposes of subsections (2)(d), (2)(e) and (3) above, any country's membership of the European Economic Community shall be disregarded.

• (5) In relation to duty charged on a gas lighter, the rates in force on 1st April 1973 shall be taken for the purposes of subsections (2)(d), (2)(e) and (3) above to be—

• (a) Convention, Republic of Ireland or excise, l0p per lighter,

• (b) other rates, 12 ½ per lighter.

• (6) For the purposes of this section goods shall be deemed to be held by a person at the beginning of April 1973 if, and only if, they were—

• (a) produced by or supplied to him in the United Kingdom ; or

• (b) imported by him ;

before the end of March 1973 and had not then been supplied by him; and any question whether goods were supplied by or to or were imported by any person before the end of March 1973 shall be determined as, under sections 7 and 47 of the Finance Act 1972, it falls to be determined for the purposes of the charge to value added tax.

• (7) This section applies to any duty of customs or excise charged on—

• (a) spirits, other than imported perfumed spirits ;

• (b) beer;

• (c) wine;

• (d) British wine;

• (e) tobacco;

• (f) matches; or

• (g) mechanical lighters.

• (8) This section shall be deemed to have had effect from the beginning of April 1973.

Value added tax-time of supply

5

Section 7(5) of the Finance Act 1972 shall have effect, and be deemed always to have had effect, as if for the words " (notwithstanding the preceding provisions of this section)" there were substituted the words " (to the extent that it is not treated as taking place at the time mentioned in subsection (4) of tins section) ".

Amendment of Finance Act 1972 s. 14

6

Section 14 of the Finance Act 1972 (relief on supply of certain second-hand goods) shall have effect, and be deemed always to have had effect, as if the references to a supply on which no tax was chargeable included references to a transaction treated by virtue of an order under section 5(7) of that Act as neither a supply of goods nor a supply of services.

Supplies through agents

7

In section 24 of the Finance Act 1972 the following subsection shall be inserted after subsection (2):—

(2A) For the purposes of subsection (2) above a person who is not resident in the United Kingdom and whose place or principal place of business is outside the United Kingdom may be treated as not being a taxable person if as a result he will not be required to be registered under this Part of this Act

Membership of value added tax tribunals

8

For paragraph 6 of Schedule 6 to the Finance Act 1972 there shall be substituted the following paragraph:—

(6) For each sitting of a value added tax tribunal the chairman shall be either the President or, if so authorised by the President, a member of the appropriate panel of chairmen constituted in accordance with paragraph 7 of this Schedule; and any other member of the tribunal shall be a person selected from the appropriate panel of other members so constituted, the selection being made either by the President or by a member of the panel of chairmen authorised by the President to make it.

Car tax (exported vehicles)

9

PART III — INCOME TAX, CORPORATION TAX AND CAPITAL GAINS TAX

Surtax rates for 1972-73

10

• (1) Subject to subsection (2) below, income tax for the year 1972-73 shall be charged, in the case of an individual whose total income exceeded £3,000, at the same higher rates in respect of the excess of that income over £2,000 as were charged for the year 1971-72.

• (2) An individual whose total income for the year 1972-73 did not exceed £3,500 shall be entitled to have the surtax chargeable by virtue of subsection (1) above reduced to an amount equal to 40 per cent, of the difference between his total income and £3,000.

Charge of corporation tax for financial year 1972

11

Corporation tax shall be charged for the financial year 1972 at the rate of 40 per cent.

Alteration of personal reliefs

12

• (1) In section 7 of the Taxes Act (relief for persons over sixty-five with small incomes)—

• (a) for the references to £634 and £929 (income limits for exemption) there shall be substituted references to £700 and £1,000 ; and

• (b) for the reference to £245 (excess over those limits beyond which relief by reduction of tax is excluded) there shall be substituted a reference to £340.

• (2) Section 16 of the Taxes Act (relief in respect of dependent relative) shall have effect subject to the following modifications :—

• (a) in subsection (1) (relief limited by reference to total income of dependent relative) for the words "does not exceed £412 a year" there shall be substituted the words " does not in a year exceed by more than £100 a sum equal to the basic retirement pension for that year " and for the words from " deduction " to the end of the subsection there shall be substituted the words " deduction from his total income of £100 reduced, if the total income of the person so maintained exceeds the basic retirement pension, by the amount of the excess ";

• (b) in subsection (2) (modifications of subsection (1) where claimant is a woman) for paragraph (b) there shall be substituted the following paragraph:—

(b) unless she is a married woman living with her husband, for each reference in that subsection to £100 there shall be substituted a reference to £145

;

• (c) at the end of subsection (2) there shall be inserted the following subsections:—

(2A) Subject to subsection (2B) below, for the purposes of this section ' the basic retirement pension ' for any year means the aggregate of the payments to which a person is entitled in that year on account of a Category A retirement pension under subsection (1) of section 24 of the Social Security Act 1973 if, throughout that year.— (a) he fulfils the conditions in paragraphs (a) and (b) of that subsection; and (b) none of those payments is reduced under section 26(1) of that Act (by reference to his earnings) or increased under any provision of subsections (4) to (7) of the said section 24 or under any other provision of that Act. (2B) In relation to any time before the coming into force of section 24 of the Social Security Act 1973, subsection (2A) above shall have effect as if for the words from ' Category A retirement pension ' to ' 1973 ' there were substituted the words ' retirement pension under subsection (1) of section 30 of the National Insurance Act 1965 where the pension is payable by virtue of his own insurance' and as if for paragraph (b) there were substituted the following paragraph:— (b) none of those payments is reduced under subsection (7) of that section (by reference to his earnings) or increased under any other provision of that Act

• (d) in subsection (3) (apportionment of relief where two or more persons jointly maintain a dependent relative) for the words from " the £100 mentioned " to " proviso to that subsection " there shall be substituted the words " the deduction of £100 or less mentioned in that subsection in respect of the person so maintained ".

Increase in relief for savings bank interest

13

Section 414(1) of the Taxes Act (relief from income tax on the first £21 of certain savings bank interest) shall, for the year 1974-75 and subsequent years of assessment, have effect with the substitution of a reference to £40 for each reference to £21.

Lump sum benefits on retirement

14

• (1) A lump sum paid to a person on his retirement from an office or employment shall not be chargeable to income tax under Schedule E if—

• (a) it is paid in pursuance of any such scheme or fund as is described in subsections (1) and (2) of section 221 of the Taxes Act or in section 24(1) of the Finance Act 1970 and is neither a payment of compensation to which section 73 of the Finance Act 1972 applies nor a payment chargeable to tax under paragraph 9 of Schedule 3 to the Finance Act 1971; or

• (b) it is a benefit paid in pursuance of any such scheme or agreement as is referred to in section 220 of the Taxes Act or in pursuance of a retirement benefits scheme within the meaning of section 25 of the Finance Act 1970 and the person to whom it is paid was chargeable to tax under section 220 of the Taxes Act or section 23 of the Finance Act 1970 in respect of sums paid, or treated as paid, with a view to the provision of the benefit.

• (2) This section shall be deemed always to have had effect.

Pensions and payments on retirement etc.-controlling directors

15

The following provisions relating to service of a controlling director shall cease to have effect, namely—

• (a) section 19(2)(f) of the Finance Act 1970 (which excludes approval of a retirement benefits scheme if such service is taken into account); and

• (b) the proviso to paragraph 4 of Schedule 8 to the Taxes Act (which requires such service to be left out of account for the purposes of relief under that Schedule from tax in respect of payments on retirement, etc.).

Charge to additional rate of certain income of discretionary trusts

16

• (1) So far as income arising to trustees is income to which this section applies it shall, in addition to being chargeable to income tax at the basic rate, be chargeable at the additional rate.

• (2) This section applies to income arising to trustees in any year of assessment so far as it—

• (a) is income which is to be accumulated or which is payable at the discretion of the trustees or any other person (whether or not the trustees have power to accumulate it); and

• (b) is neither (before being distributed) the income of any person other than the trustees nor treated for any of the purposes of the Income Tax Acts as the income of a settlor; and

• (c) is not income arising under a trust established for charitable purposes only or income from investments, deposits or other property held for the purposes of a fund or scheme established for the sole purpose of providing relevant benefits within the meaning of section 26 of the Finance Act 1970; and

• (d) exceeds the income applied in defraying the expenses of the trustees in that year which are properly chargeable to income (or would be so chargeable but for any express provisions of the trust).

• (3) This section also applies to sums apportioned to the trustees under paragraph 1 of Schedule 16 to the Finance Act 1972 and treated, under paragraph 5(2) of that Schedule as applied by subsection (4) below, as income received by the trustees.

• (4) Sub-paragraphs (2) and (4) to (8) of paragraph 5 of Schedule 16 to the Finance Act 1972 shall, with the omission in sub-paragraph (2)(a) of the words following " the apportionment relates ", the substitution of " income " for " total income " and all other necessary modifications, apply to a sum apportioned to trustees as they apply to sums apportioned to an individual; and paragraph 6 of that Schedule shall apply accordingly.

• (5) For the purposes of this section amounts paid or credited to trustees in any year of assessment in respect of dividends or interest payable in respect of shares in or deposits with or loans to a building society with which arrangements under section 343 of the Taxes Act are in force for that year shall be treated as income for that year received by the trustees after deduction of income tax from a corresponding gross amount.

In this subsection expressions used in section 343 of the Taxes Act have the same meanings as in that section.

• (6) In this section " trustees" does not include personal representatives ; but where personal representatives, on or before the completion of the administration of the estate, pay to trustees any sum representing income which, if personal representatives were trustees within the meaning of this section, would be income to which this section applies, that sum shall be deemed to be paid to the trustees as income and to have borne income tax (at the basic rate).

This subsection shall be construed as if it were contained in Part XV of the Taxes Act.

• (7) In relation to the year 1973-74 and subsequent years of assessment there shall be substituted in section 451 of the Taxes Act—

• (a) in subsection (2)(e), for the words " tax at the basic rate " the words " the sum of tax at the basic rate and tax at the additional rate " ; and

• (b) in subsection (5), for the words " of income tax for that year " the words " of both tax at the basic rate and tax at the additional rate for that year ".

• (8) A notice given to trustees under section 8 of the Taxes Management Act 1970 may require a return of the income arising to them to include particulars of the manner in which the income has been applied, including particulars as to the exercise of any discretion and of the persons in whose favour it has been exercised.

Payments under discretionary trusts

17

• (1) Where, in any year of assessment, trustees make a payment to any person in the exercise of a discretion exercisable by them or any person other than the trustees, then, if the sum paid is for all the purposes of the Income Tax Acts income of the person to whom it is paid (but would not be his income apart from the payment), the following provisions of this section shall apply with respect to the payment in lieu of section 52 or 53 of the Taxes Act.

• (2) The payment shall be treated as a net amount corresponding to a gross amount from which tax has been deducted at a rate equal to the sum of the basic rate and the additional rate in force for the year in which the payment is made; and the sum treated as so deducted shall be treated—

• (a) as income tax paid by the person to whom the payment is made; and

• (b) so far as not set off under the following provisions of this section, as income tax assessable on the trustees.

• (3) The following amounts, so far as not previously allowed, shall be set against the amount assessable (apart from this subsection) on the trustees in pursuance of subsection (2)(b) above:

• (a) the amount of any tax on income arising to the trustees and charged at the additional as well as at the basic rate in pursuance of section 16 of this Act; and

• (b) the amount of tax at the additional rate on any sum treated, under paragraph 5(2) of Schedule 16 to the Finance Act 1972 as applied by section 16(4) above, as income of the trustees; and

• (c) the amount of tax at the basic rate on any amount taken for the purposes of paragraph 5 of Schedule 16 to the Finance Act 1972 as applied by section 16(4) above to be the amount to be excluded from the income of the trustees in accordance with sub-paragraph (b) of that paragraph; and

• (d) an amount of tax in respect of income found on a claim made by the trustees to have been available to them for distribution at the end of the year 1972-73, which shall be taken to be two-thirds of the net amount of that income;