Finance Act 1973

• (b) the capital company or, if it is not a body corporate, each of its members jointly and severally shall incur a fine equal to 5 per cent, of the duty chargeable and a similar fine for every month from the date of the transaction, other than the first, during which the duty remains unpaid.

• (8) The supplementary provisions in Part IV of Schedule 19 to this Act shall have effect in relation to chargeable transactions and, in consequence of the provisions of this section, the amendments in Part V of that Schedule shall have effect.

• (9) In this section and in Schedule 19 to this Act—

• " registered office ", in relation to a limited partnership formed in accordance with the Limited Partnerships Act 1907, means the principal place of business of the partnership;

• " the relevant document ", in relation to a chargeable transaction, means the statement required to be delivered under subsection (1) above or, if subsection (2) above applies.— the return or statement required to be delivered or sent to the registrar of companies as mentioned in subsection (2) above, or the statement required to be delivered to the registrar of companies under subsection (3) above.

Capital companies

48

• (1) For the purposes of section 47 above and Schedule 19 to this Act, the expression " capital company " means—

• (a) a company incorporated with limited liability according to the law of any part of the United Kingdom;

• (b) a limited partnership formed in accordance with the Limited Partnerships Act 1907 ;

• (c) a company incorporated according to the law of a member State other than the United Kingdom;

• (d) any other corporation or body of persons the shares in whose capital or assets can be dealt in on a stock exchange in a member State; or

• (e) any other corporation or body of persons operating for profit, whose members have the right to dispose of their shares to third parties without prior authorisation and are responsible for the debts of the corporation or body only to the extent of their shares.

• (2) For the avoidance of doubt, it is hereby declared that a unit trust (whether an authorised unit trust or not) is not, by virtue of paragraph (d) of subsection (1) above, a capital company for the purposes specified in that subsection.

Abolition of stamp duty on statements relating to capital and on issue of marketable securities

49

Temporary statutory effect of House of Commons resolution affecting stamp duties

50

• (1) Where the House of Commons passes a resolution which—

• (a) provides for the variation or abolition of an existing stamp duty . . . ; and

• (b) is expressed to have effect for a period stated in the resolution in accordance with the following provisions of this section; and

• (c) contains a declaration that it is expedient in the public interest that the resolution should have statutory effect under the provisions of this section;

then, subject to subsection (3) of this section, the resolution shall for the period so stated have statutory effect as if contained in an Act of Parliament.

• (2) The period to be stated in a resolution is a period expressed as beginning on a date so stated and ending on, or thirty-one days or such less number of days as may be so stated after, the earliest of the dates mentioned in this subsection; and those dates are—

• (a) the thirtieth day on which, after the day the resolution is passed, the House of Commons sits without a Bill containing provisions to the same effect as the resolution being read a second time and without a Bill being amended (whether by the House or a Committee of the House or a Public Bill Committee) so as to include such provisions;

• (b) the rejection of such provisions during the passage through the House of a Bill containing them;

• (c) the dissolution of Parliament;

• (ca) the prorogation of Parliament in a case where subsection (2B) does not apply; and

• (d) the expiration of the period of seven months beginning with the day on which the resolution takes effect.

• (2A) Subsection (2B) applies where Parliament is prorogued at the end of a session if—

• (a) during the session a Bill containing provisions to the same effect as the resolution is read a second time by the House or a Bill is amended (whether by the House or a Committee of the House or a Public Bill Committee) so as to include such provisions,

• (b) the Standing Orders or Sessional Orders of the House provide, or during the session the House orders, that proceedings on the Bill not completed before the end of the session shall be resumed in the next session, and

• (c) proceedings on the Bill are not completed during the session.

• (2B) A resolution shall cease to have statutory effect under this section if, during the period of thirty sitting days beginning with the first sitting day of the next session, no Bill containing provisions to the same effect as the resolution is presented to the House.

• (2C) In subsection (2B) “sitting day” means a day on which the House sits.

• (2D) Where a Bill is amended as mentioned in subsection (2A)(a), it does not matter for the purposes of subsection (2A)(b) if the House orders as mentioned in subsection (2A)(b) before the amendment to the Bill is made.

• (3) A resolution shall cease to have statutory effect under this section if an Act comes into operation varying or abolishing the duty.

• (4) The ending of the period for which a resolution has statutory effect under the provisions of this section shall not affect the validity of anything done during that period.

PART VI

Determination for estate duty and capital gains tax of open market price of unquoted shares and securities

51

Transitional relief for charities

52

• (1) Where a charity (within the meaning of section 360 of the Taxes Act)—

• (a) was entitled, by virtue of the exemption granted under subsection (1)(c)(ii) of that section, to repayment of tax under Schedule D for the year 1971-72 in respect of an annual payment received by it under a disposition (other than a disposition made for a consideration in money or money's worth) under which the amount actually payable did not vary with the standard rate of income tax ; and

• (b) is so entitled for the year 1973-74 or any of the three subsequent years of assessment in respect of any annual payment received by it under that or a similar disposition which was made before 6th March 1973 and not varied on or after that date;

the charity may, in addition to making a claim under that section for any of the years mentioned in paragraph (b) above for which it is entitled as mentioned therein, claim relief under this section; and on a claim so made it shall be entitled to be paid by the Commissioners of Inland Revenue out of moneys provided by Parliament an amount equal—

• (i) for the first of the years mentioned in paragraph (b) above, to the difference specified in subsection (2) below;

• (ii) for the second of those years, to three-quarters of that difference;

• (iii) for the third of those years, to one-half of that difference ; and

• (iv) for the last of those years, to one-quarter of that difference.

• (2) The difference referred to in subsection (1) above is the difference between—

• (a) the aggregate amount of the repayments to which the charity was entitled as mentioned in paragraph (a) of that subsection; and

• (b) the aggregate of what those repayments would have been if the standard rate for 1971-72 had been 30 per cent.

• (3) A claim for relief under this section must be made not later than two years after the end of the year of assessment to which it relates and, if it relates to the year 1973-74, not earlier than 1st October 1973.

• (4) Where the activities of a charity which has ceased to exist are carried on by another charity, this section shall apply as if that other charity had been entitled to any repayment of tax for the year 1971-72 to which the charity which has ceased to exist was entitled.

Overseas pensions: continuation of certain exemptions from tax

53

• (1) Section 214 of the Taxes Act (tax exemption in respect of certain overseas pensions and pension funds) shall have effect subject to the following modifications:—

• (a) at the end of paragraph (c) of subsection (1) there shall be inserted the following paragraph:—

(d) a pension paid under section 1 of the Overseas Pensions Act 1973, whether or not paid out of a fund established under a scheme made under that section

;

• (b) in the proviso to subsection (1), after the words " paragraph (a) " there shall be inserted the words " or (d) "; and

• (c) in subsections (2) and (4), for the words " paragraph (b) or (c) " there shall be substituted the words " paragraph (b). (c) or (d) ".

• (2) Any provision of sections 213 to 217 of the Taxes Act (special treatment of certain overseas pensions and pension funds) which refers—

• (a) to an enactment which, by virtue of subsection (3) of section 2 of the Overseas Pensions Act 1973, is to have effect as if it constituted a scheme made under that section, or

• (b) to any provision of, or any instrument made under, such an enactment,

shall have effect on and after the commencement of the said Act of 1973 as if it were a reference to the scheme under section 2 of that Act which, as mentioned in paragraph (a) above, is constituted by that enactment or to such other scheme made under that section as is certified by the Secretary of State for the purposes of the Taxes Act to correspond to that enactment; and the reference in section 37(3) of the Finance Act 1958 (estate duty treatment of pensions under the Overseas Service Act 1958) to a pension paid as mentioned in section 215(1) of the Taxes Act shall be construed accordingly.

• (3) If and so long as provision is made by double taxation relief arrangements for a pension of a description specified in subsection (4) below to be exempt from tax in the United Kingdom and, by reason of Her Majesty's Government in the United Kingdom having assumed responsibility for the pension, payments in respect of it are made under section 1 of the Overseas Pensions Act 1973, then, to the extent that those payments are made to, or to the widow or widower of, an existing pensioner, the provision made under the arrangements shall apply in relation to the pension, exclusive of any statutory increases thereof, as if it continued to be paid by the government which had responsibility for it before that responsibility was assumed by Her Majesty's Government in the United Kingdom.

• (4) The pensions referred to in subsection (3) above are pensions paid by—

• (a) the Government of Malawi for services rendered to that Government or to the Government of the Federation of Rhodesia and Nyasaland in the discharge of governmental functions,

• (b) the Government of Trinidad and Tobago in respect of services rendered to that Government in the discharge of governmental functions,

• (c) the Government of the Republic of Zambia for services rendered to that Government or to the Government of Northern Rhodesia or to the Government of the Federation of Rhodesia and Nyasaland in the discharge of governmental functions.

• (5) If, immediately before 6th April 1973, a person resident in the United Kingdom is entitled to receive a pension as, or as the widow or widower of, an existing pensioner, and—

• (a) by virtue of sections 113 and 122 to 124 of the Taxes Act (foreign pensions chargeable to tax under Case V of Schedule D) income tax in respect of sums received on account of the pension in 1972-73 is assessed by reference only to the amount of income received in the United Kingdom, and

• (b) by reason of Her Majesty's Government in the United Kingdom having assumed responsibility for the pension, payments in respect of it are made under section 1 of the Overseas Pensions Act 1973,

then, if and so long as the pension is received by that person or, where that person is an existing pensioner, by his or her widow or widower, the provisions of the Taxes Act shall apply in relation to it, exclusive of any statutory increases thereof, as if it continued to be paid by the government or other body or fund which had responsibility for it before that responsibility was assumed by Her Majesty's Government in the United Kingdom.

• (6) If, by reason of Her Majesty's Government in the United Kingdom having assumed responsibility for a pension, allowance or gratuity, payments in respect of it are made under section 1 of the Overseas Pensions Act 1973, then the enactments relating to estate duty shall apply in relation to the pension, allowance or gratuity, exclusive of any statutory increases thereof, as if it continued to be paid by the government or other body or fund which had responsibility for it before that responsibility was assumed by Her Majesty's Government in the United Kingdom.

• (7) At the end of section 273(5) of the Government of India Act 1935 (pensions payable out of certain family pension funds relating to service in India to be exempt from estate duty) there shall be added the words " or to any fund administered under a scheme made under section 2 of the Overseas Pensions Act 1973 which is certified by the Secretary of State, for the purpose of the exemption conferred by this subsection, to correspond to an Order in Council under subsection (1) of this section. "

• (8) In section 40(4)(a) of the Finance Act 1956 (certain pensions treated for estate duty purposes as if paid by the Government of India or the Government of Pakistan) for the words " the Pensions (India, Pakistan and Burma) Act 1955 " there shall be substituted the words " a scheme made under section 2 of the Overseas Pensions Act 1973 which is constituted by the Pensions (India, Pakistan and Burma) Act 1955 or is certified by the Secretary of State for the purposes of this section to correspond to the said Act of 1955 " and for the words " is paid " there shall be substituted the words " was first paid under the said Act of 1955 ".

• (9) In this section—

• " double taxation relief arrangements " means arrangements specified in an Order in Council making any such provisions as are referred to in section 497 of the Taxes Act;

• " existing pensioner ", in relation to a pension, means a person by virtue of whose service the pension is payable and who retired from that service before 6th April 1973 ; and

• " statutory increases ", in relation to a pension, allowance or gratuity, means so much (if any) of the pension, allowance or gratuity as is paid by virtue of the application to it of any provision of the Pensions (Increase) Act 1971 or any enactment repealed by that Act;

and in this subsection and subsection (6) above " pension, allowance or gratuity " has the same meaning as in section 1 of the Overseas Pensions Act 1973.

Amendments consequential on establishment of The Stock Exchange

54

• (1) In the enactments relating to . . . , . . . , . . . . . . stamp duty—

• (a) references to the Stock Exchange, London or the London Stock Exchange, a stock exchange in the United Kingdom or a recognised stock exchange in the United Kingdom shall be construed as references to The Stock Exchange;

• (b) references to quotation on a stock exchange in the United Kingdom on a recognised stock exchange in the United Kingdom shall be construed as references to listing in the Official List of The Stock Exchange; and

• (c) references to a member of a stock exchange in the United Kingdom shall be construed as references to a member of The Stock Exchange;

and those enactments shall have effect subject to the amendments specified in Schedule 21 to this Act.

• (2) This section shall be deemed to have come into operation on 25th March 1973 but shall not affect the operation of any enactment in relation to anything done before that day.

Disclosure of information for statistical purposes

55

Charges for services, etc., by Government departments

56

• (1) Where a Government department, in pursuance of ... any international agreement or arrangement, provides any services or facilities or issues any authorisation, certificate or other document, it may, in connection therewith, require the payment of such fees or other charges as may be prescribed by, or determined under, regulations made by the Minister in charge of the department with the consent of the Treasury.

• (2) Regulations under this section may provide for the recovery and disposal of any sums payable under the regulations and make different provision for different circumstances.

• (3) The powers conferred by this section are without prejudice to any powers exercisable apart from this section to require the payment of fees or other charges.

• (4) Regulations under this section shall be made by statutory instrument, which shall be subject to annulment in pursuance of a resolution of either House of Parliament.

• (5) In this section “Government department” includes a department of the Government of Northern Ireland, and any regulations which the Minister in charge of such a department is empowered to make under this section may be made either by him or by the department, and with the consent of the Department of Finance for Northern Ireland instead of the Treasury; and in relation to regulations so made subsection (4) of this section shall not apply but they shall be subject to negative resolution, within the meaning of section 41(6) of the Interpretation Act (Northern Ireland) 1954, as if they were a statutory instrument within the meaning of that Act.

• (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Payments to sugar refiners

57

Trustee Investments Act 1961-dividends of water companies

58

• (1) The Treasury may by order make such amendments in paragraph 10 of Part II of Schedule 1 to the Trustee Investments Acts 1961 (under which a trustee’s power to invest in certain securities depends on the amount of dividends paid) and in any enactment or instrument modifying that paragraph as appear to them required in consequence of the repeal by the Finance Act 1972 of the provisions relating to the deduction of income tax from distributions made by companies.

• (2) An order under this section may be varied or revoked by a subsequent order under this section, and any such order shall be made by statutory instrument, which shall be subject to annulment in pursuance of a resolution of either House of Parliament.

Citation, interpretation, construction, extent and repeals

59

• (1) This Act may be cited as the Finance Act 1973.

• (2) In this Act—

• (a) “the Taxes Act 1970” means the Income and Corporation Taxes Act 1970; and

• (b) “the Taxes Act 1988” means the Income and Corporation Taxes Act 1988.

• (3) In this Act—

• (a) Part I shall be construed as one with the Customs and Excise Act 1952;

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

• (c) Part III, so far as it relates to income tax, shall be construed as one with the Income Tax Acts, so far as it relates to corporation tax, shall be construed as one with the COrporation Tax Acts and, so far as it relates to capital gains tax, shall be construed as one with the Capital Gains Tax Act 1979;

• (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (e) Part V shall be construed as one with the Stamp Act 1891.

• (4) Except so far as the context otherwise requires, any reference in this Act to any enactment shall be construed as a reference to that enactment as amended, and as including a reference to that enactment as applied, by or under any other enactment, including this Act.

• (5) Except as otherwise expressly provided, such of the provisions of this Act as relate to matters in respect of which the Parliament of Northern Ireland has power to make laws do not extend to Northern Ireland.

• (6) If the Parliament of Northern Ireland passes provisions amending or replacing any enactment of that Parliament referred to in this Act the reference shall be construed as a reference to the enactment as so amended or, as the case may be, as a reference to those provisions.

• (7) The enactments mentioned in Schedule 22 to this Act (which include certain enactments which had ceased to have effect before the commencement of this Act) are hereby repealed to the extent specified in the third column of that Schedule, but subject to any provision at the end of any Part of that Schedule.

SCHEDULES 1—4.

SCHEDULE 2

Supplementary provision as to drawback

As respects beer the worts whereof before fermentation were of a specific gravity of less than 1,030 degrees the amount of drawback allowable shall not exceed the amount of the customs or excise duty shown to the satisfaction of the Commissioners to have been paid.

SCHEDULES 6 AND 7.

SCHEDULES 8—14.

SCHEDULE 5

SCHEDULE 6

SCHEDULE 7

SCHEDULE 8

PART I — General

Profit-sharing schemes

1

Where an acquisition of shares or of an interest in shares in a body corporate is made as mentioned in subsection (1) of the principal section and the acquisition is made in pursuance of such arrangements as are mentioned in subsection (8) of that section, then, if the arrangements were made or modified after 22nd March 1973, subsections (2)(b) and (3)(b) of that section shall not be sufficient to exclude the application of subsections (4) and (7) of that section unless—

• (a) the arrangements satisfy the condition stated in paragraph 2 below; and

• (b) the shares comply with paragraph 3 of Part II of the principal Schedule and satisfy the condition stated in paragraph 3 below.

2

The condition referred to in paragraph 1(a) above is that the, arrangements allow every full-time employee of the company concerned who—

• (a) has been a full-time employee of that company for a continuous period of not less than five years ; and

• (b) is chargeable to tax in respect of his employment under Case I of Schedule E ; and

• (c) is not less than twenty-five years old ;

to acquire shares or interests in shares of the same class on similar terms.

3

The condition referred to in paragraph 1(b) above is that the shares—

• (a) are not subject to such restrictions as will or may result in the person acquiring the shares or an interest in the shares obtaining a benefit through an increase, subsequent to the acquisition, of the value or the value to him of the shares or interest; and

• (b) cannot (whether by one transaction or a series of transactions) be exchanged for or converted into shares which are subject to such restrictions.

Acquisition of shares on normal terms

4

• (1) In relation to an acquisition of shares in a body corporate made after 22nd March 1973 the principal section shall have effect as if—

• (a) the following were substituted for paragraph (c) of subsection (2):—

(c) the acquisition was an acquisition of shares and either of the following conditions was satisfied immediately after the acquisition, namely— (i) that the shares were not subject to such restrictions as are specified in subsection (2A) below, and were not exchangeable for shares subject to such restrictions, and the majority of the available shares of the same class was acquired otherwise than as mentioned in subsection (1) above ; or (ii) that the shares were not subject to such restrictions as are specified in paragraph (a) or (b) of subsection (2A) below, and were not exchangeable for shares subject to such restrictions, and the majority of the available shares of the same class were acquired by persons who were or had been employees or directors of, or of a body controlled by, the body in which they were shares and who were together able as holders of the shares to control that body. For the purposes of this paragraph shares in a body are available shares if they are not held by or for the benefit of an associated company of that body ; and shares are exchangeable for other shares if (whether by one transaction or a series of transactions) they can be exchanged for or converted into the other shares

; and

• (b) the following were inserted after subsection (2):—

(2A) The restrictions referred to in subsection (2) above are— (a) restrictions not attaching to all shares of the same class ; or (b) restrictions ceasing or liable to cease at some time after the acquisition ; or (c) restrictions depending on the shares being or ceasing to be held by directors or employees of any body corporate (other than such restrictions imposed by a company's articles of association as require shares to be disposed of on ceasing to be so held);

and

• (c) in subsection (6)(c) for the words from " any restriction" to " class " there were substituted the words " such restrictions as are specified in subsection (2A) above.

• (2) Subsection (4) of the principal section shall not apply, and shall be deemed never to have applied, to an acquisition of shares made before 23rd March 1973 if the condition specified in sub-paragraph (ii) of subsection (2)(c) (as substituted by sub-paragraph (1) of this paragraph) was satisfied immediately after the acquisition.

Shares subject to restrictions

5

Subject to paragraph 7 below, in determining for the purposes of the principal section, the principal Schedule and this Schedule (including any valuation made for those purposes) whether shares which, or interests in which, have been acquired after 18th October 1972 or are acquired or to be acquired by any person are subject to any restrictions, there shall be regarded as a restriction attaching to the shares any contract, agreement, arrangement or condition by which his freedom to dispose of the shares or any interest in them or to exercise any right conferred by them is restricted or by which such a disposal or exercise may result in any disadvantages to him or a person connected with him, except where the restriction is imposed as a condition of a loan which is not a related loan as defined by paragraph 6 below.

6

• (1) Subject to sub-paragraph (2) below, a loan made to any person is a related loan for the purposes of paragraph 5 above if it is made, arranged, guaranteed or in any way facilitated by the body corporate of which he is a director or employee, or by an associated company of that body or, if that body or an associated company of it is a close company, by any person having a material interest in the close company ; and a loan made to a person connected with another person is a related loan for the purposes of paragraph 5 above if it would be such a loan had it been made to that other person.

• (2) A loan made to a person by the body corporate or associated company mentioned in sub-paragraph (1) above, or by a person having such a material interest as is mentioned therein, is not a related loan for the purposes of paragraph 5 above if the body or person making the loan carries on a business of making personal loans and the loan is made in the ordinary course of that business.

7

For the purposes of subsection (2)(c) of the principal section, shares acquired by any person shall not, by virtue of paragraph 5 above, be regarded as subject to any restriction by reason only of any contract, agreement, arrangement or condition providing for either or both of the following, that is to say—

• (a) the deposit of the shares with trustees as security for a loan repayable not later than seven years after the acquisition nor later than the time when that person ceases to hold the office or employment by virtue of which he obtained the right or was given the opportunity to acquire the shares ; and

• (b) the disposal of the shares, when that person ceases to hold that office or employment, to a person nominated in accordance with the contract, agreement, arrangement or condition ;

if, in the case of sub-paragraph (a) above, he acquired the shares at market value and, in the case of sub-paragraph (b) above, he is required to dispose of them at a price not exceeding their market value.

Transitional provisions

8

In so far as paragraphs 5 and 6 above apply in relation to a share option scheme or share incentive scheme they shall so apply notwithstanding that the scheme was approved before the commencement of this Act; but in relation to a scheme so approved the power of the Board under paragraph 4 of Part I of the principal Schedule to withdraw their approval shall not be exercised by reason only that by virtue of this paragraph a condition ceases to be satisfied, if before 6th April 1974 the scheme is varied so as to satisfy the condition.

Minimum price of shares

9

In paragraph 5 of Part IV of the principal Schedule the words from " and where part of the price " to the end of sub-paragraph (1) and, in sub-paragraph (2)(b), the words " and that price" and the words from " both " to " thereof and " shall be omitted.

PART II — Savings-Related Share Incentive Schemes

Application of Part II

10

This Part of this Schedule applies to any share incentive scheme under which directors or employees pay for part of the shares or interests acquired by them under the scheme, or repay a loan made to them for the purpose of the acquisition, out of repayments made to them under a certified contractual savings scheme within the meaning of section 415 of the Taxes Act, and for this purpose a repayment may be taken as either including or as not including a bonus or interest.

11

In relation to a scheme to which this Part of this Schedule applies the principal Schedule shall have effect subject to the following provisions of this Part of this Schedule.

Participants

12

Paragraph 6 of Part II of the principal Schedule shall have effect as if at the end there were added the words " and every full-time employee of that company who is chargeable to tax in respect of his employment under Case I of Schedule E must be entitled to participate in the scheme to a reasonable extent if he is not less than twenty-five years old and has been a full-time employee of that company for a continuous period of not less than five years ".

Issue of shares

13

Paragraph 5 of Part II of the principal Schedule (limitation on issue of shares) shall not apply and any shares issued under a scheme to which this Part of this Schedule applies shall be treated for the purposes of that paragraph as issued otherwise than under a scheme approved under that Schedule.

Limitation of rights

14

Paragraph 15 below shall apply in lieu of paragraphs 1 to 3 of Part IV of the principal Schedule.

15

The acquisition by any person of shares or interests in shares under the scheme must be so limited that—

• (a) not less than 95 per cent, of the consideration for the acquisition either is payable after the acquisition or is paid out of a loan which is repayable after the acquisition ; and

• (b) so much of the consideration for the acquisition as is payable after the acquisition or is payable out of a loan must not exceed the repayment due to that person under the certified contractual savings scheme out of which it is payable, the amount of the repayment being taken as the amount payable at the earliest time at which the maximum bonus is payable under the contractual savings scheme and to include that bonus.

Minimum price of shares

16

Paragraph 5(1)(b) of Part IV of the principal Schedule shall have effect as if for " 80 per cent. " there were substituted " 70 per cent. ".

Time limit for special restrictions

17

Paragraph 6 of Part IV of the principal Schedule shall have effect as if for the words " seven years ", in both places, there were substituted the words " eight years ".

Further conditions for approval

18

The conditions mentioned in paragraph 1 of Part I of the principal Schedule shall be deemed to include the conditions stated in paragraphs 19 and 20 below, and the condition stated in paragraph 4 of Part IV of the principal Schedule shall apply only to the extent that it does not prevent the condition stated in paragraph 20 below from being satisfied.

19

Subject to paragraph 20 below the scheme must provide for a participant's contributions under the certified contractual savings scheme to be payable under arrangements made with the company of which he is a director or employee and to be of such amounts as to secure as nearly as may be repayment of the amount required to discharge his obligation to pay the deferred part of the consideration for the shares or interest acquired by him, or, as the case may be, to repay the loan made to him for the purpose of the acquisition, the amount of the repayment under the contractual savings scheme being taken for this purpose as the amount payable at the earliest time at which a bonus or the maximum bonus is payable under it and as either including the bonus or as not including it.

20

A person acquiring shares or an interest in shares under the scheme must have the right, at the time payment of the deferred part of the consideration or repayment of the loan is due, to discharge his obligation by surrendering the shares or his interest.

Further condition to be complied with by director or employee

21

The conditions specified in Part V of the principal Schedule shall be deemed to include the condition that the director or employee must not, while participating in a scheme to which this Part of this Schedule applies, participate in any share incentive scheme which is approved under the principal Schedule but to which this Part of this Schedule does not apply nor in any share option scheme which is approved under the principal Schedule and to which Part III of this Schedule does not apply.

Commencement

22

This Part of this Schedule shall come into force on such day as the Treasury may by order made by statutory instrument appoint.

PART III — Savings-Related Share Option Schemes

Application of Part III

23

This Part of this Schedule applies to any share option scheme under which—

• (a) directors and employees pay for the shares acquired by them in pursuance of rights obtained under the scheme out of repayments made to them under a certified contractual savings scheme within the meaning of section 415 of the Taxes Act; and

• (b) subject to paragraph 24 below, the rights obtained under the share option scheme are not capable of being exercised earlier than at the time when repayments under the certified contractual savings scheme are due.

24

A right obtained by a director or employee under the share option scheme may be capable of being exercised earlier than mentioned in paragraph 23(b) above if he ceases to hold the office or employment by virtue of which he is eligible to participate in the scheme—

• (a) not earlier than three years after obtaining the right, or

• (b) by reason of injury, disability, redundancy or death.

25

For the purposes of paragraph 23 above—

• (a) repayment under a certified contractual savings scheme may be taken as including or as not including a bonus or interest; and

• (b) the time when repayment is due shall be, where repayment is taken as including the maximum bonus, the earliest time at which the maximum bonus is payable and, in any other case, the earliest time at which a bonus is payable under the scheme ;

and the question what is to be taken as so included must be required to be determined at the time when rights under the share option scheme are obtained.

26

In relation to a scheme to which this Part of this Schedule applies the principal Schedule shall have effect subject to the following provisions of this Part of this Schedule and section 78 of the Finance Act 1972 shall have effect as if subsections (2) and (3) thereof were omitted.

Participants

27

Paragraph 6 of Part II of the principal Schedule shall have effect as if at the end there were added the words " and every full-time employee of that company who is chargeable to tax in respect of his employment under Case I of Schedule E must be entitled to participate in the scheme to a reasonable extent if he is not less than twenty-five years old and has been a full-time employee of that company for a continuous period of not less than five years. ".

Issue of shares

28

Paragraph 5 of Part II of the principal Schedule (limitation on issue of shares) shall not apply and any shares issued in pursuance of rights conferred under the scheme shall be treated for the purposes of that paragraph as issued otherwise than in pursuance of such rights.

Limitation of rights

29

Paragraphs 1 to 3 of Part III of the principal Schedule shall not apply.

Exercise of rights

30

Paragraph 4 of Part III of the principal Schedule shall have effect as if for the reference to seven years after a right is obtained there were substituted a reference to six months after the time which, under paragraph 25(b) above, is for the purposes of paragraph 23 above the time when repayment is due.

Minimum price of shares

31

Paragraph 6 of Part III of the principal Schedule shall have effect as if the words " 90 per cent, of" were inserted before the words " the market value ".

Further condition for approval

32

The conditions mentioned in paragraph 1 of Part I of the principal Schedule shall be deemed to include the condition that the scheme must provide for a participant's contributions under the certified contractual savings scheme to be payable under arrangements made with the company of which he is a director or employee and to be of such amounts as to secure as nearly as may be repayment of an amount equal to that for which shares may be acquired in pursuance of rights obtained by him under the share option scheme; and for this purpose the amount of the repayment under the contractual savings scheme shall be determined as mentioned in paragraph 25 above.

Further condition to be complied with by director or employee

33

The conditions specified in Part V of the principal Schedule shall be deemed to include the condition that the director or employee must not, while participating in a scheme to which this Part of this Schedule applies, participate in any share option scheme which is approved under the principal Schedule but to which this Part of this Schedule does not apply nor in any share incentive scheme which is approved under the principal Schedule and to which Part II of this Schedule does not apply.

Commencement

34

This Part of this Schedule shall come into force on such day as the Treasury may by order made by statutory instrument appoint.

PART IV — Supplementary Provisions

35

Paragraphs 6 to 9 of Part VII of the principal Schedule shall apply as if this Schedule were part of that Schedule.

36

In this Schedule " the principal section " means section 79 of the Finance Act 1972 and " the principal Schedule " means Schedule 12 to that Act.

SCHEDULE 9

PART I — Amendments of Finance Act 1972, Schedule 16

1

• (1) Paragraph 5 of Schedule 16 to the Finance Act 1972 (income tax consequences of apportionment of income of close companies) shall be amended, subject to paragraph 8 below, in accordance with this paragraph.

• (2) In sub-paragraph (6) (subsequent distribution to an individual of income previously apportioned to him to be deemed not to form part of his total income) for the words " total income " there shall be substituted the words " income for the purposes of excess liability ".

• (3) At the end of sub-paragraph (6) there shall be inserted the following sub-paragraph:—

(6A) In sub-paragraph (6) above 'excess liability' means the excess of liability to income tax over what it would be if all income tax were chargeable at the basic rate to the exclusion of any other rate

.

• (4) In sub-paragraph (7) (certain amounts specified in paragraph 5 to be taken to consist of the aggregate of the amount concerned and a further sum corresponding to advance corporation tax thereon) in paragraph (c) the word " total " shall be omitted.

2

• (1) Subject to sub-paragraph (2) below, in the application of paragraph 7 of Schedule 16 to the Finance Act 1972 (consequences of apportionment: advance corporation tax) to a close company which was in liquidation on 6th April 1973, sub-paragraph (6) of that paragraph (the excess of the apportioned amount which remains after making certain deductions to be recoverable as if it were advance corporation tax) shall be omitted.

• (2) If at any time the winding-up of a close company which was in liquidation on 6th April 1973 ceases to be proceeded with, sub-paragraph (1) above shall not apply with respect to any accounting period ending at a time when the company is no longer being wound up.

• (3) For the purposes of this paragraph a company is in liquidation on 6th April 1973 if, as a result of its being wound up, the new accounting period referred to in section 247(7) of the Taxes Act (commencement of new accounting period where a company is wound up) began before that date and the winding-up was not completed on or before that date.

3

After paragraph 10 of Schedule 16 to the Finance Act 1972 there shall be inserted the following paragraph:—

(10A) (1) For the purpose of determining whether there is any such excess as is referred to in paragraph 1(2) above, no account shall be taken of a distribution which, in relation to the company making it, is a distribution by virtue only of paragraph (c) of section 233(2) of the Taxes Act (bonus redeemable share capital and bonus securities) unless— (a) it is made to a person other than a close company, or (b) it is made to a close company and the share capital or security of which it consists is subsequently distributed, by that or any other close company, by a distribution falling within paragraph (b) of section 84(4) of this Act to a person other than a close company. (2) Where such a distribution as is referred to in sub-paragraph (1) above has occurred (in this sub-paragraph referred to as a ' bonus distribution') and, by virtue of paragraph (a) or paragraph (b) of that sub-paragraph, the bonus distribution falls to be taken into account for the purpose of determining whether there is any such excess as is referred to in paragraph 1(2) above, no account shall be taken for that purpose of a qualifying distribution which consists of the repayment of the share capital or, as the case may be, the principal of the security, which constituted the bonus distribution.

4

• (1) Paragraph 12 of Schedule 16 to the Finance Act 1972 (certain sums regarded as income of a company available for distribution and not as having been applied, or as being applicable, to the requirements of the company's business) shall be amended in accordance with this paragraph.

• (2) At the end of sub-paragraph (1) there shall be inserted the words

and (d) in the case of a company which is neither a trading company nor a member of a trading group, any sum expended or applied, or available to be expended or applied, out of the income of the company in or towards the acquisition of an estate or interest in land, or the construction or extension of a building, not being a construction or extension which constitutes an improvement or development of farm land or market garden land

.

• (3) After sub-paragraph (2) there shall be inserted the following sub-paragraph:—

(2A) In relation to any loan capital or debt mentioned in sub-paragraph (1)(c) above which was issued or incurred by the company for money borrowed by it for the purpose of financing expenditure on any acquisition, construction or extension falling within sub-paragraph (1)(d) above, the expression ' loan creditor' in sub-paragraph (1)(c) above shall be construed as if, in the definition of that expression in section 303(7) of the Taxes Act, the proviso (which has the effect of excluding banks) were omitted

.

• (4) This paragraph has effect in relation to sums expended or applied, or available to be expended or applied, after 23rd March 1973, except where the acquisition, construction or extension concerned is made in pursuance of a contract entered into on or before that date.

PART II — Transitional Provisions

5

• (1) The provisions of this paragraph shall apply if—

• (a) franked investment income (within the meaning of section 240 of the Taxes Act) forms part of the distributable profits of a close company for an accounting period which ends on or after 6th October 1971 and before 6th April 1973 (in this paragraph referred to as " the relevant accounting period ");

• (b) the total of the distributions of the company for the relevant accounting period determined as at the beginning of 6th April 1973 falls short of the required standard, as determined under section 290 of the Taxes Act; and

• (c) on or after 6th April 1973 a dividend is paid which falls to be included in the distributions of the company for the relevant accounting period.

• (2) Subject to sub-paragraph (4) below, for the purpose of determining in a case where this paragraph applies whether there is a shortfall in the company's distributions for the relevant accounting period, the company's distributable investment income for that period, as determined under section 291(3) of the Taxes Act, shall be reduced by a sum equal to whichever is the less of—

• (a) 30 per cent, of the amount by which the franked investment income included in that distributable investment income exceeds the total of the company's distributions referred to in sub-paragraph (1)(b) above ; and

• (b) 3/7 ths of the total of the dividends paid on or after 6th April 1973 which fall within sub-paragraph (1)(c) above.

• (3) For the purpose of sub-paragraph (2) above, the franked investment income included in a company's distributable investment income for the relevant accounting period means the amount of the franked investment income which, by virtue of subsection (2)(a) of section 291 of the Taxes Act, is included in the company's distributable profits for that period, less—

• (a) the amount which, by virtue of paragraph (a) or paragraph (b) of subsection (3) of that section, is deducted from the distributable income of the company for the relevant accounting period in determining its distributable investment income, and

• (b) any amount of that franked investment income which, by virtue only of subsection (2) of section 25 of the Finance Act 1971 (companies carrying on insurance, banking, money lending and investment businesses etc.), is treated as estate or trading income in arriving at the required standard as mentioned in that subsection.

• (4) If, in a case where this paragraph applies, the close company concerned is neither a trading company nor a member of a trading group and the required standard for the relevant accounting period, as determined under section 290 of the Taxes Act, is equal to so much of the company's distributable income for the relevant accounting period as is not attributable to estate or trading income, sub-paragraphs (2) and (3) above shall have effect as if—

• (a) for any reference to the company's distributable investment income there were substituted a reference to the required standard;

• (b) for the reference in sub-paragraph (2) to section 291(3) of the Taxes Act there were substituted a reference to section 290 of that Act; and

• (c) in sub-paragraph (3) the word " less " and paragraphs (a) and (b) were omitted.

• (5) In any case where, for the purpose specified in sub-paragraph (2) above, a company's distributable investment income or the required standard itself is reduced by virtue of sub-paragraphs (2) to (4) above, the reduction shall have effect also for the purposes of the other provisions of Chapter III of Part XI of the Taxes Act relating to shortfalls in the distributions of a close company other than section 298(2) of that Act (power of Board, if they see fit, to make a surtax apportionment of the whole of a non-trading company's income up to the amount of the required standard).

• (6) Expressions used in this paragraph have the same meanings as in the provisions of Chapter III of Part XI of the Taxes Act relating to shortfalls in the distribution of a close company.

6

• (1) In any case where franked investment income received by a close company before 6th April 1973 forms part of the distributable profits of the company for an accounting period which begins before 6th April 1973 and ends after 5th April 1973 (in this paragraph referred to as a " straddling period ") the provisions of this paragraph shall apply, subject to paragraph 7 below, in determining the company's relevant income for the straddling period.

• (2) If the whole of the company's relevant income for the straddling period falls to be apportioned by virtue of paragraph 2 of Schedule 16 to the Finance Act 1972, then for the purpose of that apportionment, but not otherwise, the company's distributable investment income for that period, as determined under Part II of that Schedule, shall be reduced by a sum equal to 30 per cent, of the amount of the franked investment income included in that distributable investment income.

• (3) If the franked investment income falling within sub-paragraph (1) above exceeds the total of the company's distributions for the straddling period which are paid or made in such part of that period as falls before 6th April 1973, then except, in a case where sub-paragraph (2) above applies, for the purpose of the apportionment referred to in that sub-paragraph, the company's distributable investment income for that period, as determined under Part II of the said Schedule 16, shall be reduced by a sum equal to 30 per cent, of the amount by which the franked investment income included in that distributable investment income exceeds the total of those of the company's distributions for that period which are so paid or made.

• (4) For the purposes of this paragraph the franked investment income included in a company's distributable investment income for the straddling period means the amount of the franked investment income falling within sub-paragraph (1) above which, by virtue of paragraph 10 of the said Schedule 16, forms part of the company's distributable profits for that period less—

• (a) the amount which, by virtue of paragraph (a) or paragraph (b) of sub-paragraph (3) of the said paragraph 10, is deducted from the distributable income of the company for that period in determining its distributable investment income, and

• (b) any amount of that franked investment income which, by virtue only of sub-paragraph (5) of the said paragraph 10 (companies carrying on insurance, banking, money lending and investment businesses etc.), is treated as estate or trading income in arriving at the company's relevant income as mentioned in that sub-paragraph.

• (5) References in this paragraph to franked investment income (being references to such income received before 6th April 1973) shall be construed in accordance with section 240 of the Taxes Act, and other expressions used in this paragraph have the same meanings as in Schedule 16 to the Finance Act 1972.

7

• (1) If, in a case where paragraph 6 above applies.—

• (a) the close company concerned is neither a trading company nor a member of a trading group, and

• (b) the company's relevant income for the straddling period, as determined under paragraph 8 of Schedule 16 to the Finance Act 1972, is equal to so much of the company's distributable income for that period as is not attributable to estate or trading income,

paragraph 6 above shall have effect subject to the following provisions of this paragraph.

• (2) Subject to sub-paragraph (3) below, where sub-paragraph (1) above applies.—

• (a) for any reference in paragraph 6 above to the company's distributable investment income there shall be substituted a reference to its relevant income ; and

• (b) in sub-paragraph (4) of that paragraph, the word " less " and paragraphs (a) and (b) shall be omitted.

• (3) If, in relation to a close company, paragraph (b) of paragraph 2(2) of Schedule 23 to the Finance Act 1972 (restriction on advance corporation tax available for set-off in transitional period) has effect as set out in paragraph 5(1) of that Schedule (modifications in relation to close companies in certain cases) then, notwithstanding that paragraph 6 above applies in relation to that company subject to the modifications in sub-paragraph (2) above, in determining for the purposes of the said paragraph (b) (but not for any other purpose) the amount which is to be taken, in accordance with paragraph 9 of Schedule 16 to that Act, as the company's relevant income for the straddling period or any part of that period, sub-paragraph (2) above shall not apply.

• (4) In this paragraph " straddling period " has the same meaning as in paragraph 6 above and sub-paragraph (5) of that paragraph shall apply in relation to this paragraph as it applies in relation to that.

8

If, in a case where sub-paragraph (b) of paragraph 5 of Schedule 16 to the Finance Act 1972 applies (subsequent distribution to an individual of income of a close company which has been previously apportioned to him to be deemed not to form part of his total income).—

• (a) the later accounting period referred to in that sub-paragraph is an accounting period which begins before 6th April 1973 and ends after 5th April 1973, and

• (b) the distribution of apportioned income referred to in that sub-paragraph is made before 6th April 1973,

the amendments of the said paragraph 5 effected by sub-paragraphs (2) and (3) of paragraph 1 above shall not have effect but the said sub-paragraph (b) shall have effect as if for the words " total income " there were substituted the words " income for the purposes of surtax ".

9

• (1) In any case where—

• (a) the amount of advance corporation tax actually paid by a close company in respect of distributions made in that part of a straddling period following 5th April 1973 exceeds the amount of advance corporation tax which, by virtue of paragraph 1 of Schedule 23 to the Finance Act 1972, the company is treated as having paid for the purposes of section 85 of that Act, and

• (b) the company makes a claim in that behalf,

then, for the purpose of determining the distributable income of the company for the straddling period, the amount of any profits on which corporation tax for that period falls finally to be borne (which, under paragraph 10(2) of Schedule 16 to that Act, is one of the amounts comprised in the company's distributable profits) shall be treated as reduced by an amount equal to the excess referred to in paragraph (a) above.

• (2) If, in a case where paragraph 7 of Schedule 23 to the Finance Act 1972 applies in relation to a close company instead of sub-paragraphs (2) and (3) of paragraph 1 of that Schedule.—

• (a) the amount of advance corporation tax actually paid by the company in respect of distributions made in an accounting period which includes the whole or any fraction of the second part of the notional straddling period exceeds the amount of advance corporation tax which, by virtue of the said paragraph 7, the company is treated for the purposes of section 85 of that Act as having paid in respect of distributions in that accounting period, and

• (b) the company makes a claim in that behalf,

then, for the purpose of determining the distributable income of the company for any accounting period falling within paragraph (a) above, the amount of any profits on which corporation tax for that period falls finally to be borne (which, under paragraph 10(2) of Schedule 16 to that Act, is one of the amounts comprised in the company's distributable profits) shall be treated as reduced by an amount equal to the excess referred to in paragraph (a) above.

• (3) In this paragraph " distributable income " and " distributable profits " have the meanings assigned to them by paragraph 10(2) of Schedule 16 to the Finance Act 1972 ; in sub-paragraph (1) above " straddling period " has the same meaning as in paragraph 6 above ; and in sub-paragraph (2) above " the second part of the notional straddling period" has the same meaning as in paragraph 7 of Schedule 23 to the Finance Act 1972.

SCHEDULE 10

1

In this Schedule " the principal section " means section 22 of this Act.

2

For the purposes of the principal section two or more holdings are associated if they were acquired by persons acting in concert or under arrangements made by any person.

3

For the purposes of the principal section there shall be attributed—

• (a) to the distributions made by a company at any time (whether or not later than 5th April 1973) in respect of any class of shares, securities or rights such of its relevant profits arising after the date of acquisition and before that time as remain after allowing for earlier distributions made in respect of that or any other class of shares, securities or rights, and for distributions made at or to be made after that time in respect of other classes of shares, securities or rights ; and

• (b) to any part of a distribution made at any time to which a person is entitled by virtue of any part of his holding of any class of shares, securities or rights, such proportion of the profits attributable under sub-paragraph (a) above to the distributions made at that time in respect of that class as corresponds to that part of his holding.

4

For the purposes of paragraph 3 above profits arising in part of an accounting period shall be taken to be a proportionate part of the profits arising in the whole of the accounting period except where a different method of arriving at the profits arising in that part can be shown to be fair and reasonable.

5

For the purposes of this Schedule the relevant profits of a company are, subject to paragraph 6 below, its profits computed on a commercial basis after allowing for any provision properly made for corporation tax ; and the computation shall be made without regard to any capital gains or losses or to any such amount as is mentioned in subsection (5) of the principal section, and—

• (a) shall include franked investment income received from any company not related to the first-mentioned company ; and

• (b) shall exclude group income and franked investment income received from a company related to the first-mentioned company.

6

There shall be treated as included in the relevant profits of a company the appropriate portion of the relevant profits of any company related to it

7

For the purposes of this Schedule a company (in this paragraph referred to as " the owned company ") is related to another company (in this paragraph referred to as " the owning company ") if—

• (a) the owning company owns not less than 10 per cent, of any one class of shares in the owned company ; or

• (b) any company related to the owning company owns not less than 10 per cent, of any one class of snares in the owned company ;

and the appropriate proportion of the relevant profits of a related company is that proportion of those profits which the owning company would receive by virtue of the shares, securities or rights owned by it, if all the relevant profits of the owned company were distributed and, so far as received directly or indirectly by a company related to the owning company, were distributed by that related company, no account being taken of any profits arising at a time when the owned company was not related to the owning company.

SCHEDULE 11

1

• (1) For subsection (4) of section 460 of the Taxes Act (cancellation of tax advantage) there shall be substituted the following subsections:—

(4) Where, by virtue of an assessment under subsection (3) above to counteract a tax advantage obtained in circumstances falling within paragraph D or paragraph E of section 461 below and consisting of the avoidance of a charge to income tax, income tax has been paid by any person on an amount specified in the assessment and it appears to the Board that, as a result of that payment, it is just and reasonable in the circumstances that an amount should be treated as having been paid by way of advance corporation tax, the Board shall serve a notice in writing under subsection (4A) below on every company which appears to them to be concerned in the transaction or transactions in consequence of which the tax advantage was obtained. (4A) A notice under this subsection— (a) shall provide that, for the purposes of section 85 of the Finance Act 1972 (but not for the purposes of entitling any person to a tax credit under section 86 thereof), such company or each of such companies as may be specified in the notice is to be treated as having paid, on such date as may be so specified, such amount of advance corporation tax as may be so specified in relation to that company; (b) shall specify the amount which is equal to income tax at the basic rate on the amount on which income tax has been paid as mentioned in subsection (4) above ; and (c) may contain such supplementary or incidental directions as appear to the Board to be appropriate ; but the total amount of advance corporation tax which, by virtue of paragraph (a) above, a notice under this subsection may treat as having been paid shall not exceed the amount specified in accordance with paragraph (b) above. (4B) If, in a case falling within subsection (4) above, it does not appear to the Board that any amount should be treated as having been paid by way of advance corporation tax, the Board shall serve on every company which appears to them to be concerned in the transaction or transactions in consequence of which the tax advantage was obtained a notice in writing informing the company of the Board's decision that no amount is to be treated as having been paid by way of advance corporation tax.

• (2) This paragraph has effect with respect to consideration received after 5th April 1973 and, where the circumstances in which the tax advantage is obtained fall within sub-paragraph (2) of paragraph E of section 461 of the Taxes Act, with respect to the repayment after that date of share capital received on or before that date.

2

In section 461 of the Taxes Act, paragraph A shall be amended as follows:—

• (a) for the words " being entitled by reason of" there shall be substituted the words " receives an abnormal amount by way of dividend, and the amount so received is taken into account for any of the following purposes "; and

• (b) at the end of paragraph (c) there shall be added the words

or (d) the application of franked investment income in calculating a company's liability to pay advance corporation tax, or (e) the application of a surplus of franked investment income under section 254 or section 255 of this Act, or (f) the computation of profits or gains out of which are made payments falling within section 52 or section 53 of this Act, or (g) the deduction from or set-off against income of interest under section 75 of the Finance Act 1972

; and

• (c) the words from " to recover tax " to the end of the paragraph shall be omitted.

3

• (1) After section 462 of the Taxes Act there shall be inserted the following section:—

(462A) (1) A company on which a notice has been served under subsection (4A) or subsection (4B) of section 460 above may within thirty days by notice to the Board appeal to the Special Commissioners on the ground that it is just and reasonable in the circumstances that the company should be treated, for the purposes specified in the said subsection (4A), as having paid an amount of advance corporation tax or, as the case may require, a greater amount of advance corporation tax than is specified in the notice. (2) Notwithstanding that a company on which a notice has been served as mentioned in subsection (1) above has made no appeal under that subsection, the company— (a) shall be entitled, to the same extent as the appellant, to receive notice of, and to appear and be heard in, any proceedings arising from the notice under subsection (1) above, whether the proceedings are before the Special Commissioners, by way of further appeal or otherwise ; (b) if it does appear, shall be treated as a party to the proceedings and as having the same rights in respect of those proceedings and any decision made therein as the appellant; and (c) whether or not it so appears, shall be bound by any order made in any such proceedings ; and no agreement under section 54 of the Taxes Management Act 1970 (settling of appeals by agreement) shall have effect except with the consent of each company which, by virtue of this subsection, would have been entitled to appear and be heard on the appeal if it had been proceeded with. (3) On an appeal under subsection (1) above, the Special Commissioners— (a) may cancel or vary any notice served under section 460(4A) above, or (b) if no such notice was served, may by order make any provison which could have been made by the Board in such a notice.

• (2) This paragraph has effect on and after 6th April 1973.

4

• (1) In section 466 of the Taxes Act (meaning of "tax advantage ")—

• (a) in subsection (1) after the words " avoidance or reduction of " there shall be inserted the words " a charge to tax or "; and

• (b) subsection (2) (which relates to income tax for which a company had to account under section 232(2) of the Taxes Act) shall cease to have effect.

• (2) This paragraph has effect for the year 1973-74 and subsequent years of assessment.

5

• (1) In section 467 of the Taxes Act (interpretation), in subsection (1), after the words " references to dividends include references" there shall be inserted the words " to other qualifying distributions (as defined in section 84(4) of the Finance Act 1972) and " . :

• (2) In subsection (3) of that section, in paragraph (b) (amount received by way of dividend to be treated as abnormal if it substantially exceeds a normal return on the price paid for the securities) for the words " price paid for the securities " there shall be substituted the words

consideration provided by the recipient for the relevant securities, that is to say, the securities in respect of which the dividend was received and, if those securities are derived from securities previously acquired by the recipient, the securities which were previously acquired ; and for the purposes of this paragraph— (i) if the consideration provided by the recipient for any of the relevant securities was in excess of their market value at the time he acquired them, or if no consideration was provided by him for any of the relevant securities, the recipient shall be taken to have provided for those securities consideration equal to their market value at the time he acquired them ; and (ii) in determining whether an amount received by way of dividend exceeds a normal return, regard shall be had to the length of time previous to the receipt of that amount that the recipient first acquired any of the relevant securities and to any dividends and other distributions made in respect of them during that time

.

6

In subsection (6) of section 471 of the Taxes Act (definitions relating to provisions about purchase and sale of securities).—

• (a) in paragraph (a) for the word "dividend" there shall be substituted the words " qualifying distribution and any dividend which is not a qualifying distribution, and in applying references to interest in relation to a qualifying distribution ' gross interest' means the qualifying distribution together with the tax credit to which the recipient of the distribution is entitled in respect of it and ' net interest' means the qualifying distribution exclusive of any such tax credit "; and

• (b) at the end of the subsection there shall be added the words " and in paragraph (a) above ' qualifying distribution ' and ' tax credit' have the same meanings as in Part V of the Finance Act 1972 ".

7

At the end of section 474 of the Taxes Act (application of provisions about purchase and sale of securities to persons other than dealers in securities) there shall be added the following subsection:—

(3) In applying references in this section to interest in relation to a qualifying distribution, references to any tax paid on or in respect of an amount shall be construed as references to so much of any related tax credit as is attributable to that amount; and for this purpose ' related tax credit', in relation to an amount, means the tax credit to which, under section 86 of the Finance Act 1972, the recipient of the distribution of which that amount is a proportion is entitled.

8

In section 477 of the Taxes Act (manufactured dividends: treatment of tax deducted)—

• (a) in subsection (1), for the words " Schedule 9 to this Act" there shall be substituted the words " Schedule 20 to the Finance Act 1972 ";

• (b) in subsection (6) (interpretation), for the word "dividend" there shall be substituted the words " qualifying distribution, as denned in section 84(4) of the Finance Act 1972, and any dividend which does not fall within that definition "; and

• (c) at the end of subsection (6) there shall be inserted the following subsection:—

(6A) In the application of this section in a case where the references in subsection (1) above to a periodical payment of interest are construed as references to a qualifying distribution, subsection (2) above shall be omitted.

SCHEDULE 12

PART I — Profits or Assets Available for Distribution

1

• (1) For the purposes of section 28 of this Act and this Schedule, an equity holder of a company is any person who—

• (a) holds ordinary shares in the company, or

• (b) is a loan creditor of the company in respect of a loan which is not a normal commercial loan,

and any reference in that section to profits or assets available for distribution to a company's equity holders does not include a reference to any profits or assets available for distribution to any equity holder otherwise than as an equity holder.