Finance Act 1974

• “authorised unit trust” has the meaning given by section 358of the Taxes Act, and “unauthorised unit trust” means a unit trust scheme which is not an authorised unit trust;

• “chargeable period” means an accounting period of a company or a year of assessment;

• “close company”, except for the purposes of Schedule 7 to this Act, has the meaning given by subsections (1)to (3) (disregarding (1)(d)of section 282of the Taxes Act, and (except as aforesaid)the exceptions made by subsections (4)and (5)of that section and section 283of that Act shall not apply;

• “interest in land” means any estate or interest in land, any right in or over land or affecting the use or disposition of land, and any right to obtain such an estate, interest or right from another which is conditional on that other’s ability to grant the estate, interest or right in question, except that it does not include the interest of a creditor (other than a creditor in respect of a rentcharge)whose debt is secured by way of a mortgage, an agreement for a mortgage or a charge of any kind over land, or, in Scotland, the interest of a creditor in a charge or security of any kind over land;

• “land” includes buildings;

• “securities” includes securities as defined in section 82of the Capital Gains Tax Act 1979 except that it does not include a security for a normal commercial loan as defined in paragraph 1of Schedule 12to the Finance Act 1973;

• “shares”does not include fixed-rate preference shares as defined in paragraph 1of Schedule 12 to the Finance Act 1973,but includes securities (as well as, by virtue ofsection 64(1) of the Capital Gains Tax Act 1979 stock)and, in relation to a company not limited by shares (whether or not it has a share capital),also includes the interest of a member of the company as such, whatever the form of that interest, and this Chapter shall apply in relation to any disposal of rights attached to or forming part of a share as if the rights included in the disposal and those not included were separate shares;

• “unit trust scheme” means a unit trust scheme as defined in section 26(1)of the Prevention of Fraud (Investments)Act 1958,or, for Northern Ireland, in section 22(1)of the Prevention of Fraud (Investments)Act (Northern Ireland) 1940.

• (2) In this Chapter references to the net proceeds of a disposal of an interest in land to which section 38 of this Act applies are . . . )references to the amount which, in the computation of the chargeable gain accruing on the disposal, falls to be taken as the consideration, less any sum allowable in that computation as a deduction on account of the incidental costs to the person making the disposal of making it.

• (3) Where a person disposing of an interest in land acquired it in circumstances such that, by virtue of any enactment, he and the person from whom he acquired it (“the previous disposer”)fall to be treated as if the acquisition were for a consideration of such amount as would secure that on the disposal under which he acquired it neither a gain nor a loss would accrue to the previous disposer, any reference in this Chapter to the acquisition of the interest by the person making the disposal shall be construed as a reference to its acquisition by the previous disposer, or, if the previous disposer himself acquired it in such circumstances as aforesaid, as a reference to its acquisition by the person from whom the previous disposer acquired it (and likewise for any number of previous acquisitions of the interest each made in the like circumstances).

• (4) Schedule 7 to this Act shall have effect with respect to the treatment of development gains under the Tax Acts; and the enactments relating to the taxation of capital gains shall have effect subject to the provisions of Schedule 8 to this Act (being provisions for adapting or amending those enactments in connection with this Chapter).

• (5) This Chapter shall be deemed to have come into force on 18th December 1973.

CHAPTER II — FIRST LETTING OR OCCUPATION OF BUILDING AFTER MATERIAL DEVELOPMENT

Charge to tax; first letting or occupation of building after material development

45

• (1) Subject to the provisions of this section and Schedule 9to this Act, where after 17th December 1973 a chargeable building is first let or occupied to a material extent after the commencement of the relevant development, any person who on the material date has an interest in the relevant land shall be deemed for the purposes ofthe Capital Gains Tax Act 1979 and Chapter Iof this Part of this Act to have on that date disposed of and immediately reacquired that interest for a consideration equal to its market value.

• (2) For the purposes of this Chapter a chargeable building is first let or occupied to a material extent after the commencement of the relevant development on the first occasion thereafter on which either—

• (a) the floor area of the part or parts let under one or more leases granted after the commencement of that development; or

• (b) the floor area of the part or parts occupied as of right otherwise than under any lease so granted (whether or not the occupation began before the commencement of that development);or

• (c) the aggregate of the floor area of the part or parts let as aforesaid and the floor area of the part or parts occupied as aforesaid,

is more than 25per cent. of what was or is the floor area of the whole chargeable building on the date on which the relevant development was or is substantially completed.

• (3) Subsection (1)above shall not apply in the case of a chargeable building which was wholly or partly let or occupied before 18th December 1973 if at any time before that date either—

• (a) the floor area of the part or parts let under one or more leases granted after the commencement of the relevant development; or

• (b) the floor area of the part or parts occupied as of right otherwise than under any lease so granted; or

• (c) the aggregate of the floor area of the part or parts let as aforesaid and the floor area of the part or parts occupied as aforesaid,

was more than 25per cent. of what was or is the floor area of the whole chargeable building on the date on which the relevant development was or is substantially completed.

For the purposes of this subsection a building or part of a building shall not be treated as let at a particular time unless it was then let under a lease granted by an instrument executed before that time.

• (4) Schedule 9 to this Act shall have effect for supplementing this section.

Interpretation, etc.

46

• (1) In this Chapter—

• “chargeable building” has the meaning given by subsections (3)to (5)below;

• “interest in land” and “land” have the same meaning as in Chapter Iof this Part of this Act;

• “lease” includes an underlease, sublease or tenancy, and “lessor”, “lessee”, “let” and “rent” shall be construed accordingly;

• “material development” has the meaning given by paragraph 6of Schedule 3to this Act;

• “the material date”, in relation to a chargeable building which after 17th December 1973 is first let or occupied to a material extent after the commencement of the relevant development, means the later of the following dates, namely the date after 17th December 1973on which the chargeable building was first let or occupied as aforesaid and the date on which the relevant development is substantially completed;

• “the relevant development”, in relation to a chargeable building, means the material development from which the building has resulted or of which it has been the subject, so far as that development directly concerns that building ;

• “the relevant land”, in relation to a chargeable building, means the chargeable building and its site (including in the site, subject to subsection (6)below, any land occupied for purposes ancillary to the use of the chargeable building).

• (2) For the purposes of this Chapter a person shall be treated as occupying land if, but only if, his occupation of it is or, but for any exemption from rates which he enjoys, would be such as to render him or some other person liable to be assessed to rates in respect thereof under the law relating to rating in the part of the United Kingdom in which the land is situated, and references to occupation shall be construed accordingly.

• (3) Subject to subsections (4) and (5)below, every separate building in the United Kingdom that has resulted from or been the subject of material development (whenever carried out)shall be a chargeable building for the purposes of this Chapter, except that for those purposes—

• (a) a separate building constructed or adapted for use wholly as one or more private dwellings shall not be a chargeable building; and

• (b) a separate building constructed or adapted for use only partly as one or more private dwellings shall be a chargeable building but shall be deemed not to include any part constructed or adapted for use as a private dwelling.

• (4) For the purposes of the preceding subsection a building which is physically connected with another building—

• (a) shall, although so connected, be treated as a separate building if it is so constructed as to be capable of remaining in position and being used independently of the other building or as to require only minor modification to render it so capable; and

• (b) shall not be treated as other than a separate building merely because it is so connected with the other building at or below ground level or by means of a bridge or similar structure (whether affording access or accommodation or both).

• (5) Where—

• (a) subsection (1)of section 45 of this Act has operated in the case of a chargeable building or would have so operated if that section had been enacted and come into force before the commencement of the relevant development, and had been so enacted with the omission of subsection (3)and of the words “after 17th December 1973” in subsection (1); and

• (b) after the material date there is carried out in relation to that building further material development which, apart from this subsection, would make the said subsection (1) liable to operate as regards the whole of any chargeable building (“the resulting chargeable building”)consisting of or including the whole or part of the first-mentioned chargeable building; and

• (c) one or more parts, but not the whole, of the resulting chargeable building has or have directly resulted from or been directly the subject of the further material development,

then, without prejudice to subsection (3)(a)and (b)above, the resulting chargeable building shall for the purposes of this Chapter be deemed not to include any part which has not directly resulted from or been directly the subject of the further material development.

• (6) Where land is occupied for purposes ancillary to the use of two or more chargeable buildings, it shall for the purposes of this Chapter be apportioned between those buildings in a fair and reasonable manner; and so much of the land as is apportioned to any one chargeable building shall for those purposes be taken to form part of the site of that, and of no other, chargeable building.

• (7) For the purposes of this Chapter “floor area” means gross floor area as ascertained by external measurement; and where different parts of a building are separately let or occupied, floor space used in common shall be apportioned rateably.

• (8) In relation to a chargeable building, references in this Chapter to the commencement of the relevant development are references to the date on which that development was begun, determined in accordance with paragraph 9 of Schedule 3 to this Act.

• (9) Where a lease of land is granted for a term commencing later than the date of the grant, the land shall for the purposes of this Chapter not be taken to become let under that lease until the commencement of the term.

• (10) This Chapter shall be deemed to have come into force on 18th December 1973 .

CHAPTER III — OTHER PROVISIONS ABOUT CAPITAL GAINS FROM LAND

Matters arising out of Chapters I and II of this Part

47

Schedule 10 to this Act shall have effect with respect to the payment and recovery of tax payable by virtue of Chapter Ior IIof this Part, the obtaining of information for purposes of those Chapters, and other matters arising out of those Chapters.

Disposals of interests in land in United Kingdom reflecting development value

48

PART IV — MISCELLANEOUS AND GENERAL

Increase of certain stamp duties

49

Vehicle excise duty-disabled persons

50

In section 7 of the Finance Act 1971 for the words “specifically and extensively adapted” there shall be substituted the word “suitable” and the words from “conspicuous” to “and where” shall be omitted.

Gifts to Historic Churches Preservation Trust

51

Definition of " local authority " for certain tax purposes

52

Regional employment premiums

53

Grants towards duty charged on bus fuel

54

• (1) In relation to fuel used in operating any bus service on or after 12th February 1974, subsection (2) of section 92 of the Finance Act 1965 shall have effect as if for the words from “but” onwards (which specify the maximum amount of any grant under subsection (1) of that section by the Secretary of State to the operator of a bus service towards defraying customs or excise duties charged on bus fuel) there were substituted (instead of the words substituted by section 33(1) of the Transport Act 1968) the words “but the amount of a grant shall not exceed such sum for every gallon of fuel used or estimated to have been used in operating the bus service during the period to which the grant relates as the Treasury may from time to time approve, being a sum not greater than the rate per gallon of the duty of excise chargeable on hydrocarbon oil produced in the United Kingdom at the date of use of the fuel, including any addition to that duty by virtue of an o\rder under section 9 of the Finance Act 1961.”.

• (2) The preceding subsection shall be deemed to have come into operation on 12th February 1974.

• (3) The preceding provisions of this section shall not extend to Northern Ireland, but it is hereby declared that for the purposes of the Northern Ireland Constitution Act 1973 a provision for purposes similar to the purposes of those provisions is not a provision dealing with an excepted matter.

Power to authorise amendment of taxi fare byelaws

55

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

Trustee savings banks-special investments

56

In section 18(1) of the Trustee Savings Banks Act 1969 (which provides that a special investment may be made only on behalf of a person who is a depositor to the extent of not less than £50) after “£50” there shall be inserted “or such smaller amount as may be specified in the rules of the bank”

Citation, interpretation, construction and repeals

57

• (1) This Act may be cited as the Finance Act 1974.

• (2) In this Act “the Taxes Act” means the Income and Corporation Taxes Act 1970.

• (3) In this Act—

• (a) Part I, . . ., so far as it relates to value added tax, shall be construed as one with Part I of the Finance Act 1972;

• (b) Part II, 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 . . . ;

• (c) PartIII,so far as it relates to capital gains tax or the computation of development gains, shall be construed as one withthe Capital Gains Tax Act 1979 so far as it relates to income tax shall be construed as one with the Income Tax Acts and, so far as it relates to corporation tax, shall be construed as one with the Corporation Tax Acts; and

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

• (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) If the Northern Ireland Assembly passes provisions amending or replacing any enactment of the Parliament of Northern Ireland, or any Order in Council made under section 1(3) of the Northern Ireland (Temporary Provisions) Act 1972, referred to in this Act, the reference shall be construed as a reference to the enactment or order as so amended or, as the case may be, as a reference to those provisions.

• (6) The enactments mentioned in Schedule 14 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, 2

PART I — Amendment of Schedule 9 to Finance Act 1972

1

In Schedule 9 to the Finance Act 1972, for the words " protected interest" wherever they occur (in paragraph 1, 5, 10, 11, 12, 13 or 15) there shall be substituted the words " eligible for relief under section 75 of this Act " ; and the relief referred to in the words so substituted in paragraph 1(c) of that Schedule shall include any relief by virtue of section 19(4) of this Act.

2

In paragraph 1 of that Schedule, after the words " this Part of this Schedule " there shall be inserted the words " and to Part II of Schedule 1 to the Finance Act 1974 ".

3

After paragraph 5 of that Schedule there shall be inserted the following paragraph:—

(5A) References in this Part of this Schedule to an estate or interest in land include references to the property in a house boat, that is to say, a boat or similar structure designed or adapted for use as a place of permanent habitation

.

PART II — Restriction on Relief for Loans for Purchase or Improvement of Land

4

• (1) Subject to the following provisions of this Part of this Schedule, Part I of Schedule 9 to the Finance Act 1972 shall not apply unless the land, caravan or house boat referred to therein either—

• (a) is at the time the interest is paid used as the only or main residence of the person by whom it is paid (in this Part of this Schedule referred to as " the borrower") or of a dependent relative or former or separated spouse of his, or, if the interest is paid less than twelve months after the date on which the loan is made, is so used within twelve months after that date ; or

• (b) is, in any period of fifty-two weeks comprising the time at which the interest is payable and falling wholly or partly within the year of assessment, let at a commercial rent for more than twenty-six weeks and, when not so let, either available for letting at such a rent or used as mentioned in paragraph (a) above or prevented from being so available or used by any works of construction or repair ;

and shall, in a case falling within paragraph (a) above, apply only within the limit imposed by paragraph 5 below.

• (2) If it appears to the Board reasonable to do so, having regard to all the circumstances of a particular case, they may direct that in relation to that case sub-paragraph (1) above shall have effect as if for the references to twelve months there were substituted references to such longer period as meets the circumstances of that case.

• (3) Where the land, caravan or house boat is used as the only or main residence of a dependent relative of the borrower it does not thereby fall within sub-paragraph (1)(a) above unless it is provided rent-free and without any other consideration.

• (4) In this Part of this Schedule—

• (a) " dependent relative " means, in relation to any person, a relative of his, or of his spouse, who is incapacitated by old age or infirmity from maintaining himself, or the mother of that person, or of his spouse, if the mother is widowed or living apart from her husband, or, in consequence or dissolution or annulment of marriage, a single woman; and

• (b) " separated " means separated under an order of a court of competent jurisdiction or by deed of separation or in such circumstances that the separation is likely to be permanent.

5

• (1) Where Part I of Schedule 9 to the Finance Act 1972 applies to a loan (in this sub-paragraph referred to as " the limited loan ") by virtue of paragraph 4(1)(a) above interest on it is eligible for relief under section 75 of that Act only to the extent that the amount on which it is payable does not exceed the following limit, that is to say, £25,000 for 1974-75 reduced by the amount on which interest is payable under any loan taken into account under sub-paragraph (2) below ; so that—

• (a) if the amount on which interest is payable under the limited loan exceeds the limit, so much only of that interest is eligible for the relief as bears to the whole of that interest the same proportion as that part of that amount which does not exceed the limit bears to the whole of that amount; and

• (b) if the amount on which interest is payable under loans taken into account under sub-paragraph (2) below is £25,000 or more none of the interest on the limited loan is eligible for the relief.

• (2) If interest is payable by the borrower—

• (a) on any earlier loan to which Part I of Schedule 9 to the Finance Act 1972 applies by virtue of paragraph 4(1)(a) above ; or

• (b) on any loan to which that Part as originally enacted applies by virtue of section 19(4) of this Act, other than a loan to which, if it had been raised after 26th March 1974, that Part as amended would have applied by virtue of paragraph 4(1)(b) above; or

• (c) on any loan which is subsidised under Part II of the Housing Subsidies Act 1967 ;

that loan shall be taken into account for the purposes of sub-paragraph (1) above.

• (3) Where a loan on which interest is payable by the borrower was made jointly to the borrower and another person, not being the borrower's husband or wife, then, if—

• (a) the land, caravan or house boat concerned is used as the main or only residence of that other person, or of a dependent relative or former or separated spouse of his, and

• (b) that other person owns an estate or interest in the land or the property in the caravan or house boat, and

• (c) that other person pays part of the interest payable on the loan,

the amount on which interest is payable under the loan shall be treated for the purposes of this paragraph as being such part only of that amount as bears to the whole thereof the same proportion as the amount of interest paid by the borrower bears to the whole of the interest paid on the loan.

• (4) For the purposes of this paragraph—

• (a) any interest payable on a loan made to the borrower's husband or wife shall be treated as payable on a loan made to the borrower ; and

• (b) where interest is payable on more than one loan made or treated as made to the borrower and the loans were made simultaneously it shall be treated as payable on one loan.

• (5) References in this paragraph to the borrower's husband or wife do not include references to a separated husband or wife.

6

• (1) Where Part I of Schedule 9 to the Finance Act 1972 applies to a loan by reason of the land, caravan or house boat concerned being used as a person's only or main residence, and the borrower raises another loan to defray money to be applied as mentioned in paragraph 1 of that Schedule with a view to the use of other land or another caravan or house boat as that person's only or main residence and the disposal of the first-mentioned land, caravan or house boat, then in relation to interest payable within twelve months from the making of the other loan, that Part of that Schedule—

• (a) shall continue to apply to the first-mentioned loan, whether or not the first-mentioned land, caravan or house boat continues to be so used ; and

• (b) shall apply to the other loan to the same extent (if any), as if no interest were payable on the first-mentioned loan.

• (2) If it appears to the Board reasonable to do so, having regard to all the circumstances of a particular case, they may direct that in relation to that case sub-paragraph (1) above shall have effect as if for the reference to twelve months there were substituted a reference to such longer period as meets the circumstances of that case.

7

Relief under section 75 of the Finance Act 1972 for interest eligible for it by virtue of Part I of Schedule 9 to that Act in a case where the land, caravan or house boat referred to in it falls under paragraph 4(1)(b) above shall be given only against income from the letting of that or any other land, caravan or house boat, but may, if and to the extent that such income for the year of assessment is insufficient, be given against such income for the following year, and so on, provided the first-mentioned land, caravan or house boat continues to fall under that paragraph.

8

• (1) Where any interest paid by persons as the personal representatives of a deceased person or as trustees of a settlement made by his will would, on the assumptions required by sub-paragraph (2) below, be eligible for relief under section 75 of the Finance Act 1972 by virtue of Part I of Schedule 9 to that Act and, in a case where the condition stated in that sub-paragraph applies, that condition is satisfied, that interest shall be so eligible notwithstanding the preceding provisions of this Part of this Schedule.

• (2) For the purposes of sub-paragraph (1) above it shall be assumed that the deceased would have survived and been the borrower ; and if, at his death, the land, caravan or house boat concerned was used as his only or main residence, it shall be further assumed that he would have continued so to use it and the following condition shall then apply, namely, that the land, caravan or house boat is, at the time the interest is paid, used as the only or main residence of the deceased's widow or widower or of any dependent relative of the deceased.

• (3) In this paragraph " personal representatives " has the meaning assigned to it by section 432 of the Taxes Act.

PART III — Further Cases of Interest Eligible for Relief

Loan appplied in acquiring interest in close company

9

• (1) Subject to the following provisions of this Part of this Schedule, interest is eligible for relief under section 75 of the Finance Act 1972 if it is interest on a loan to an individual to defray money applied—

• (a) in acquiring any part of the ordinary share capital of a close company satisfying any of the conditions of paragraph 3A(2) of Schedule 16 to the Finance Act 1972 ; or

• (b) in lending money to such a close company which is used wholly and exclusively for the purposes of the business of the company or of any associated company of it which is a close company satisfying any of those conditions ; or

• (c) in paying off another loan interest on which would have been eligible for relief under section 75 of the Finance Act 1972 had the loan not been paid off (on the assumption, if the loan was free of interest, that it carried interest);

and the conditions stated in paragraph 10 below are satisfied.

• (2) The relief referred to in sub-paragraph (1)(c) above includes any relief by virtue of section 19(4) of this Act.

10

The conditions referred to in paragraph 9 above are—

• (a) that, when the interest is paid, the company continues to satisfy any of the conditions of paragraph 3A(2) of Schedule 16 to the Finance Act 1972 and the individual has a material interest in the company, and

• (b) that in the period from the application of the proceeds of the loan to the payment of the interest the individual has worked for the greater part of his time in the actual management or conduct of the business of the company, or of an associated company of the company, and

• (c) that he shows that in that period he has not recovered any capital from the company, apart from any amount taken into account under paragraph 13 below.

Loan applied in acquiring interest in partnership

11

• (1) Subject to the following provisions of this Part of this Schedule, interest is eligible for relief under section 75 of the Finance Act 1972 if it is interest on a loan to an individual to defray money applied—

• (a) in purchasing a share in a partnership ; or

• (b) in contributing money to a partnership by way of capital or premium, or in advancing money to a partnership, where the money contributed or advanced is used wholly for the purposes of the trade, profession or vocation carried on by the partnership; or

• (c) in paying off another loan interest on which would have been eligible for relief under that section had the loan not been paid off (on the assumption, if the loan was free of interest, that it carried interest) ;

and the conditions stated in paragraph 12 below are satisfied.

• (2) The relief referred to in sub-paragraph (1)(c) above includes any relief by virtue of section 19(4) of this Act.

12

The conditions referred to in paragraph 11 above are—

• (a) that, throughout the period from the application of the proceeds of the loan until the interest was paid, the individual has personally acted in the conduct of the trade, profession or vocation carried on by the partnership ; and

• (b) that he shows that in that period he has not recovered any capital from the partnership, apart from any amount taken into account under paragraph 13 below.

Provisions supplementary to paragraphs 9 to 12

13

If at any time after the application of the proceeds of the loan the individual has recovered any amount of capital from the close company or partnership without using that amount in repayment of the loan, he shall be treated for the purposes of section 75 of the Finance Act 1972 and this Part of this Schedule as if he had at that time repaid that amount out of the loan, so that out of the interest otherwise eligible for relief (or, where paragraph 15 of Schedule 9 to that Act applies, out of the proportion so eligible) and payable for any period after that time there shall be deducted an amount equal to interest on the amount of capital so recovered.

14

• (1) The individual shall be treated as having recovered an amount of capital from the close company or partnership if—

• (a) he receives consideration of that amount or value for the sale, exchange or assignment of any part of the ordinary share capital of the company or of his interest in the partnership, or any consideration of that amount or value by way of repayment of any part of that ordinary share capital; or

• (b) the close company or partnership repays that amount of a loan or advance from him or the partnership returns that amount of capital to him ; or

• (c) he receives consideration of that amount or value for assigning any debt due to him from the close company or partnership ;

and where a sale or assignment is not a bargain made at arm's length, the sale or assignment shall be deemed to be for a consideration of an amount equal to the market value of what is disposed of.

• (2) In the application of this paragraph to Scotland for the word " assignment ", wherever it occurs, there shall be substituted the word "" assignation ".

15

Paragraph 10 or, as the case may be, 12 and paragraphs 13 and 14 above shall apply to a loan within paragraph 9(c) or 11(c) above as if it, and any loan it replaces, were one loan, and so that—

• (a) references to the application of the proceeds of the loan are references to the application of the proceeds of the original loan; and

• (b) any restriction under paragraph 13 above which applies to any loan which has been replaced shall apply to the loan which replaces it.

16

In paragraphs 9 and 10 above expressions to which a meaning is assigned by Chapter III or Part XI of the Taxes Act have that meaning.

Loan to pay estate duty

17

• (1) Interest is eligible for relief under section 75 of the Finance Act 1972 if it is interest on a loan to the personal representatives of a deceased person, the proceeds of which are applied—

• (a) in paying, before the grant of representation or confirmation, estate duty in accordance with section 6(2) of the Finance Act 1894, being estate duty which is payable in respect of the personal property of which the deceased was competent to dispose at his death and is payable on delivery of the Inland Revenue affidavit; or

• (b) in paying off another loan interest on which would have been eligible for that relief by virtue of this paragraph if the loan had not been paid off (on the assumption, if the loan was free of interest, that it carried interest);

and the interest is paid in respect of a period ending within one year from the making of the loan within sub-paragraph (a) above.

• (2) The reference in sub-paragraph (1)(b) above to relief by virtue of this paragraph shall be construed as including any relief by virtue of section 19(4) of this Act.

18

If or to the extent that any relief in respect of interest eligible for it under paragraph 17 above cannot be given against income of the year in which the interest is paid because of an insufficiency of income in that year, it may instead be given against income of the preceding year of assessment, and so on ; and if or to the extent that it cannot be so given it may instead be given against income of the year following that in which the interest is paid, and so on.

19

Paragraph 17 above does not apply to interest on so much of any loan as is applied in paying estate duty in respect of property situate in Great Britain which did not pass to the personal representatives as such, or in respect of property situate elsewhere which, had it been situate in Great Britain, would not have passed to the personal representatives as such.

20

Sufficient evidence of the amount of estate duty paid in accordance with section 6(2) of the Finance Act 1894 in respect of any particular description of property, and of any statements relevant to its computation in the Inland Revenue affidavit, may be given by the production of a document purporting to be a certificate from the Board.

21

For the purposes of the preceding paragraphs—

• (a) " estate duty " means estate duty leviable under the law in force in Great Britain or the law in force in Northern Ireland together with any interest payable on the duty; and

• (b) references to interest in respect of a period ending within a given time apply whether or not interest continues to run after that time.

22

The preceding paragraphs shall apply to estate duty leviable under the law of Northern Ireland with the substitution for the estate duty enactments mentioned therein of the corresponding enactments forming part of the law of Northern Ireland and with the substitution in paragraph 19 of " Northern Ireland " for " Great Britain ".

Supplementary

23

Paragraphs 2, 14 and 15 of Schedule 9 to the Finance Act 1972 shall (with the necessary modifications) apply for the purposes of the preceding provisions of this Part of this Schedule.

Loan to purchase life annuity

24

• (1) Subject to the following provisions of this paragraph, interest is eligible for relief under section 75 of the Finance Act 1972 if it is interest on a loan in respect of which the following conditions are satisfied—

• (a) that the loan was made as part of a scheme under which not less than nine-tenths of the proceeds of the loan were applied to the purchase by the person to whom it was made of an annuity ending with his life or with the life of the survivor of two or more persons (in this paragraph referred to as " the annuitants ") who include the person to whom the loan was made ;

• (b) that at the time the loan was made the person to whom it was made or each of the annuitants had attained the age of sixty-five years ;

• (c) that the loan was secured on land in the United Kingdom or the Republic of Ireland and the person to whom it was made or one of the annuitants owns an estate or interest in that land ; and

• (d) that, if the loan was made after 26th March 1974, the person to whom it was made or each of the annuitants uses the land on which it was secured as his only or main residence at the time the interest is paid.

• (2) Interest is not eligible for relief by virtue of this paragraph unless it is payable by the person to whom the loan was made or by one of the annuitants.

• (3) If the loan was made after 26th March 1974, interest on it is eligible for relief by virtue of this paragraph only to the extent that the amount on which it is payable does not exceed £25,000 ; and if the interest is payable by two or more persons the interest payable by each of them is so eligible only to the extent that the amount on which it is payable does not exceed such amount as bears to £25,000 the same proportion as the interest payable by him bears to the interest payable by both or all of them.

PART IV — Amendment of Schedule 10 paragraph 7 of Finance Act 1972

25

• (1) In paragraph 7 of Schedule 10 to the Finance Act 1972 for sub-paragraphs (a) and (b) and the word " which" preceding them there shall be substituted the words " showing—

• (a) the date when the debt was incurred,

• (b) the amount of the debt when incurred,

• (c) the interest paid in the year of assessment for which the claim is made (or in the case of relief by virtue of paragraph 7 or 18 of Schedule 1 to the Finance Act 1974 the year of assessment for which the claim would be made but for an insufficiency of income), and

• (d) the name and address of the debtor."

• (2) In relation to claims for relief in respect of interest excepted from subsection (3) of section 19 of this Act by subsection (4)(a) of that section the statement to be furnished under paragraph 7 of Schedule 10 to the Finance Act 1972 shall be a statement showing—

• (a) the debit balance of the account on 26th March 1974 ;

• (b) the amount of interest that would have been payable on that balance after 26th March 1974 and before 6th April 1975 at the rate at which interest on that balance was chargeable on 26th March 1974 ;

• (c) so much of the interest paid in the year of assessment for which the claim is made as was payable after 26th March 1974 and before 6th April 1975 ; and

• (d) the name and address of the claimant.

PART V — Amendment of Schedule 16 to Finance Act 1972

26

In Schedule 16 to the Finance Act 1972, in paragraph 1(2) for the words " paragraphs 2 and 3 " there shall be substituted the words " paragraphs 2 to 3A ", in paragraph 5(7) after the words " paragraph 3 " there shall be inserted the words " or 3A " and after paragraph 3 there shall be inserted the following paragraph:—

(3A) (1) Subject to the following provisions of this paragraph, there may be apportioned under paragraph 1 above as if it were income of a close company for an accounting period any interest paid by the company in that period. (2) Sub-paragraph (1) above does not apply to a company— (a) if it is a trading company, or (b) if it is a member of a trading group, or (c) if more than 75 per cent, of its income is of one or more of the following descriptions, that is— (i) estate or trading income, (ii) interest, and dividends or other distributions, received from a 51 per cent, subsidiary of it (both companies being bodies corporate) if the subsidiary is itself within any of paragraphs (a), (b) and (c) of this sub-paragraph ; and for the purposes of paragraph (c) above no account shall be taken of any deduction from the company's profits for charges on income, expenses of management or other amounts which can be deducted from or set against or treated as reducing profits of more than one description. (3) Sub-paragraph (1) above shall not apply— (a) to interest which would be eligible for relief under section 75 of this Act if paid by an individual; or (b) to interest which is money wholly and exclusively laid out or expended for the purposes of a trade carried on by the company. (4) If any amount of interest apportionable by virtue of this paragraph is interest paid to a participator in the close company or is (apart from this paragraph) treated for the purposes of income tax as the income of such a participator, the amount so apportionable to that participator shall be reduced by the first-mentioned amount (and without requiring the reduction to be reflected in the amount apportioned to any other person). (5) Any amount apportionable by virtue of this paragraph shall be in addition to the amount (if any) apportionable under paragraph 1 above without this paragraph, and nothing in sub-paragraph (2) of that paragraph shall apply to any apportionment made by virtue of this paragraph. (6) In determining for the purposes of this Schedule the person to whom any amount is to be apportionable by virtue of this paragraph, any interest which any person possesses as a loan creditor shall be disregarded (but without prejudice to the making of an apportionment to him in any other capacity). (7) In determining for the purposes of sub-paragraph (2)(c)(ii) above whether one body corporate is a 51 per cent, subsidiary of another, that other shall be treated as not being the owner— (a) of any share capital which it owns directly or indirectly in a body corporate not resident in the United Kingdom, or (b) of any share capital which it owns indirectly and which is owned directly by a body corporate for which a profit on the sale of the shares would be a trading receipt.

PART VI — Amendment of Taxes Act

27

The provisions of the Taxes Act specified in the first column of the following Table shall have effect—

• (a) so far as they were amended by paragraph 2, 4 or 9 of Schedule 11 to the Finance Act 1972, as if those amendments had not been made ; and

• (b) so far as they or any words contained in them were repealed by the Finance Act 1972, as if those repeals had not been made;

but subject to any amendment specified in the second column of that Table.

Provisions of Taxes Act restored	Amendment
Section 64A.
Section 122(1)	For paragraph (c) there shall be substituted:— c to a deduction on account of any annual interest payable out of the income to a person not resident in the United Kingdom, being interest payable before 6th April 1980 on a debt incurred on or before 26th March 1974 .
Section 248	In subsection (6) the following shall be substituted for paragraph (d):— d the payment of interest would, on the assumptions made below, be eligible for relief under section 75 of the Finance Act 1972 by virtue of Part I of Schedule 9 to that Act if it were made by an individual , and after that paragraph there shall be inserted the words For the purposes of paragraph (d) above it shall be assumed that if the land concerned is occupied by the company the conditions of paragraph 4(1) of Schedule 1 to the Finance Act 1974 are satisfied if the land either— i is not used as a residence, or ii is used as an individual's main or only residence; but the limit imposed by paragraph 5 of that Schedule shall apply only in a case falling within paragraph (ii) above and shall then apply without regard to any loan made in connection with any other land. .
Section 440.
Section 455.
Section 456.
Section 469(6).
Section 496(3) to (7).
Schedule 12, Part III paragraph 2(1).	For paragraph (c) there shall be substituted:— c to a deduction on account of any annual interest payable out of the income to a person not resident in the United Kingdom, being interest payable before 6th April 1980 on a debt incurred on or before 26th March 1974 .
Schedule 12, Part III paragraph 3(1).	At the end there shall be inserted the words " and to a deduction on account of any annual interest so payable to such a person before 6th April 1980 which is interest on a debt incurred on or before 26th March 1974 ".

28

In section 175(2)(a) of the Taxes Act for the word " relief" there shall be substituted the words " payments of interest eligible for relief ".

29

In paragraph 2(2) of Part III of Schedule 12 to the Taxes Act, for the words " annual interest or any annuity or other annual payment" there shall be substituted the words " annuity or other annual payment (not being interest) " and after the words " resident in the United Kingdom" there shall be added the words " and to a deduction on account of any annual interest so payable to such a person before 6th April 1980 which is interest on a debt incurred on or before 26th March 1974 ".

SCHEDULE 2

Duties wholly performed outside the United Kingdom

1

• (1) Where the duties of an office or employment are performed wholly outside the United Kingdom and are performed wholly or partly while the holder of the office or employment is absent from the United Kingdom for a continuous period, a deduction shall be allowed in charging tax on the emoluments from that office or employment under Case I of Schedule E.

• (2) The deduction shall, in a case falling within sub-paragraph (3) below, be equal to the whole, and, in any other case, be equal to one-quarter, of so much of the amount of the emoluments as is attributable to the continuous period.

• (3) A case falls within this sub-paragraph if the continuous period during which the holder of the office or employment is absent from the United Kingdom, including any part of it falling outside the year of assessment, includes 365 or more qualifying days ; and for this purpose a day is a qualifying day if on that day he is the holder of that or any other office or employment the duties of which are, in the year of assessment to which that day belongs, performed wholly outside the United Kingdom.

• (4) Where emoluments from an office or employment the, duties of which are wholly performed outside the United Kingdom are paid for a period of leave immediately following a period of continuous absence from the United Kingdom, they shall be attributed for the purposes of this paragraph to that period of absence but shall for other purposes of Case I of Schedule E be treated as emoluments for duties performed outside the United Kingdom during the period of leave.

2

For the purposes of paragraph 1 above a period in which the holder of an office or employment is absent from the United Kingdom is continuous unless during that period he is present in the United Kingdom—

• (a) on more than sixty-three consecutive days ; or

• (b) on more days (whether consecutive or not) than one-sixth of the number of days in the period ;

and he shall be treated as present in the United Kingdom throughout any day on which he arrives there but as absent from the United Kingdom on any day on which he departs from there.

Foreign emoluments

3

• (1) Subject to paragraph 4 below, where the emoluments from an office or employment are foreign emoluments within the meaning of paragraph 1 of Schedule E, a deduction shall be allowed in charging tax on them under Case I or II of that Schedule.

• (2) The deduction, except in a case falling within sub-paragraph (3) below, shall be equal to one-half of the amount of the foreign emoluments.

• (3) Where the year of assessment is the year 1976-77 or a subsequent year and the holder of the office or employment—

• (a) is in that year resident in the United Kingdom ; and

• (b) was resident in the United Kingdom in the preceding ten years of assessment or in nine of them ;

the deduction shall be equal to one-quarter of the amount of the foreign emoluments.

4

Where the duties of an office or employment are performed wholly outside the United Kingdom and the emoluments from the office or employment are foreign emoluments within the meaning of paragraph 1 of Schedule E, the emoluments shall be excepted from Case I of that Schedule.

Amount of emoluments

5

For the purposes of the preceding paragraphs the amount of any emoluments shall be taken to be the amount remaining after any capital allowance and after any deductions allowable under Chapter I of Part VIII or section 208(1) of the Taxes Act, section 21(4) or 22(2) of the Finance Act 1970, or under paragraph 6 below.

6

Where the emoluments from an office or employment are foreign emoluments within the meaning of paragraph 1 of Schedule E and it appears to the Board, on a claim made by the holder of the office or employment, that out of those emoluments he has made payments in circumstances corresponding to those in which the payments would have reduced his liability to income tax, the Board may allow those payments as a deduction in computing the amount of the emoluments.

SCHEDULE 3

PART I — DEFINITIONS OF CURRENT USE VALUE, MATERIAL DEVELOPMENT, ETC.

Definition of current use value

1

• (1) For the purpose of the principal section and this Schedule the current use value of an interest in land shall be ascertained in accordance with this Part of this Schedule; and in this Part of this Schedule the time as at which current use value is to be ascertained is referred to as “the relevant time”.

• (2) Subject to the following provisions of this Part of this Schedule, the current use value of an interest in land at the relevant time is the market value of that interest at that time calculated on the assumption that it was at that time, and would continue to be, unlawful to carry out any material development of the land other than any material development thereof which, being authorised by planning permission in force at that time, was begun before that time .

• (3) In this paragraph “planning permission”has the same meaning as in the Town and Country Planning Act 1971, or, in Scotland, theTown and Country Planning ( Scotland) Act 1972, or, in Northern Ireland, thePlanning ( Northern Ireland) Order 1972; and in determining for the purposes of this paragraph what material development of any land was authorised by planning permission at a time when there was in force in respect of the land planning permission granted on an outline application ( that is to say, an application for planning permission subject to subsequent approval on any matters), any such development of the land which at that time—

• (a) was authorised by that permission without any requirement as to subsequent approval; or

• (b) not being so authorised, had been approved in the manner applicable to that planning permission,

but no other material development, shall for the purposes be taken to have been authorised by that permission at that time.

Current use value—part disposals

2

• (1) Subject to sub-paragraphs (5) to (7) below, this paragraph shall apply as regards the current use value of an interest in land which has been disposed of by way of a part disposal of an asset ( in this paragraph referred to as “the relevant asset”) consisting of an interest in land.

• (2) The current use value at the relevant time of the interest disposed of shall be the relevant fraction of the current use value of the relevant asset at that time, calculated on the same assumptions as to the lawfulness or otherwise of any material development as fall to be made under this Schedule in calculating the current use value at that time of the interest disposed of.

• (3) For the purposes of the preceding sub-paragraph “the relevant fraction”means that fraction of the sums mentioned in the following sub-paragraph which under [ subsection (2) of section 35 of the Capital Gains Tax Act 1979 ] is, or would but for [ subsection (4) of that section] be, allowable as a deduction in computing under [ Chapter II of Part II of that Act] the amount of the gain accruing on the part disposal.

• (4) The sums referred to in the preceding sub-paragraph are the sums which, if the entire relevant asset had been disposed of at the time of the part disposal, would be allowable by virtue of [ section 32 (1)(a) and (b) of the Capital Gains Tax Act 1979 ] as a deduction in computing under [ Chapter II of Part II of that Act] the gain accruing on that disposal of the relevant asset.

• (5) Sub-paragraphs (2) to (4) above shall not apply—

• (a) in the case of a disposal of an interest in land by way of a part disposal if, on making the disposal, the person doing so no longer has any interest in the land which is subject to that interest; or

• (b) in a case to which the following provisions of this paragraph apply.

• (6) In computing under this Chapter any gain accruing to a person on a part disposal of a lease which is a wasting asset by way of the grant of a sub-lease for a premium, the current use value of the lease at the time of its acquisition by the person making the disposal shall be the relevant fraction of what its current use value at that time would be apart from sub-paragraphs (2) to (4) above.

• (7) For the purposes of the preceding sub-paragraphs “the relevant fraction” means that fraction of the expenditure attributable to the lease under [ section 32(1)(a) and (b) of the Capital Gains Tax Act 1979 ] which under paragraph 4 of [ Schedule 3 to that Act ( sub-leases out of short leases) falls to be apportioned to what is disposed of.

3

In computing under this Chapter any gain accruing to a person on a part disposal of an interest in land resulting under [ subsection (1) of section 20 of the Capital Gains Tax Act 1979 ] from the receipt as mentioned in paragraph (a), (c) or (d) of that subsection of a capital sum, the current use value at the relevant time of the interest out of which the part disposal was made shall be taken to be what it would have been at that time if the circumstances which caused the capital sum to be received had not arisen.

Current use value—leases and reversions

4

• (1) The current use value of an interest in land which is either—

• (a) a freehold interest which is subject to a lease or an agreement for a lease; or

• (b) an interest under a lease or agreement for a lease,

shall be ascertained without regard to any premium required under the lease or agreement for a lease or any sublease, or otherwise under the terms subject to which the lease or sublease was or is to be granted, but with regard to all other rights under the lease or prospective lease ( and, for the current use value of an interest under a lease subject to a sublease, under the sublease).

• (2) If under the preceding sub-paragraph an interest under a lease or agreement for a lease would have a negative value, the current use value of the interest shall be nil.

• (3) If a lease is granted out of any interest in land after 17 th December 1973, then, in computing under this Chapter any gain accruing on any disposal of the reversion on the lease made while the lease subsists, the current use value of the reversion at any time after the grant of the lease shall not exceed what would have been at that time the current use value of the interest in the land of the person then owning the reversion if that interest had not been subject to the lease.

• (4) In the application of this paragraph to Scotland, “freehold”means the estate or interest of the proprietor of the dominium utile or, in the case of property other than feudal property, of the owner, and “reversion”means the interest of the landlord in property subject to a lease.

5

• (1) In computing under this Chapter any gain accruing to a person on a disposal of a lease which is a wasting asset, the current use value of the lease at the time of its acquisition by the person making the disposal shall be the relevant fraction of what its current use value at that time would be apart from this paragraph.

• (2) For the purposes of the preceding sub-paragraph “the relevant fraction”means the fraction of which the numerator is equal to so much of the expenditure attributable to the lease under [ section 32(1)(a) and (b) of the Capital Gains Tax Act 1979 ] as is not under paragraph 1 of [ Schedule 3 ] to that Act excluded therefrom for the purposes of the computation under [ Chapter II of Part II of that Act] of the gain accruing on the disposal, and the denominator is equal to the whole of the expenditure which would be so attributable to the lease for those purposes apart from the said paragraph 1.

Definition of material development

6

In this Schedule, subject to the following paragraph, “material development”,in relation to any land, means the making of any change in the state, nature or use of the land .

7

• (1) The doing of any of the following things in the case of any land shall not be taken for the purposes of this Schedule to involve material development of the land, that is to say—

• (a) the carrying out of works for the maintenance, improvement, enlargement or other alteration of any building, so long as the cubic content of the original building is not exceeded by more than one-tenth;

• (b) the carrying out of works for the rebuilding, as often as occasion may require, of any building which was in existence at the relevant time, or of any building which was in existence in the period of ten years immediately preceding the day on which that time falls but was destroyed or demolished before the relevant time, so long as ( in either case) the cubic content of the original building is not exceeded by more than one-tenth;

• (c) the use of any land for the purposes of agriculture or forestry, the use for any of those purposes of any building occupied together with land so used, and the carrying out on any land so used of any building or other operations required for the purposes of that use;

• (d) the carrying out of operations on land for, or the use of land for, the display of an advertisement, announcement or direction of any kind;

• (e) the carrying out of operations for, or the use of the land for, car parking, provided that such use shall not exceed three years;

• (f) in the case of a building or other land which at the relevant time was used for a purpose falling within any class specified in paragraph 8 below or which, being unoccupied at that time, was last used for any such purpose, the use of that building or land for any other purpose falling within the same class;

• (g) in the case of a building or other land which at the relevant time was in the occupation of a person by whom it was used as to part only for a particular purpose, the use for that purpose of any additional part of the building or land not exceeding one-tenth of the cubic content of the part of the building used for that purpose at the relevant time or, as the case may be, one-tenth of the area of the land so used at that time;

• (h) in the case of land which at the relevant time was being temporarily used for a purpose other than the purpose for which it was normally used, the resumption of the use of the land for the last-mentioned purpose;

• (i) in the case of land which was unoccupied at the relevant time, the use of the land for the purpose for which it was last used before that time.

• (2) In determining for the purposes of sub-paragraph (1)(a) or (b) above whether or not the cubic content of the original building has been exceeded by more than one-tenth, the cubic content of the building after the carrying out of the works in question shall be treated as reduced by the amount ( if any) by which so much of that cubic content as is attributable to one or more of the matters mentioned in the following sub-paragraph exceeds so much of the cubic content of the original building as was attributable to one or more of the matters so mentioned.

• (3) The matters referred to in the preceding sub-paragraph are the following, that is to say—

• (a) means of escape in case of fire;

• (b) car-parking or garage space;

• (c) accommodation for plant providing heating, air-conditioning or similar facilities.

8

The classes of purposes mentioned in paragraph 7(1)(f) above are the following—

• Class A—Use as a dwelling-house or for the purpose of any activities which are wholly or mainly carried on otherwise than for profit, except use for a purpose falling within Class B, C or E.

• Class B—Use as an office or retail shop.

• Class C—Use as a hotel, boarding-house or guest-house, or as premises licensed for the sale of intoxicating liquors for consumption on the premises.

• Class D—Use for the purpose of any activities wholly or mainly carried on for profit, except—use as a dwelling-house or for the purposes of agriculture or forestry; anduse for a purpose falling within Class B, C or E.

• Class E—Use for any of the following purposes, namely—the carrying on of any process for or incidental to any of the following purposes, namely—the making of any article or of any part of any article, or the production of any substance;the altering, repairing, ornamenting, finishing, cleaning, washing, packing or canning, or adapting for sale, or breaking up or demolishing of any article; orwithout prejudice to (i) or (ii) above, the getting, dressing or treatment of minerals,being a process carried on in the course of a trade or business other than agriculture or forestry, but excluding any process carried on at a dwelling-house or retail shop;storage purposes ( whether or not involving use as a warehouse or repository) other than storage purposes ancillary to a purpose falling within Class B or C.

Date when material development is begun

9

• (1) For the purposes of this Schedule material development shall be taken to be begun on the earliest date on which any specified operation comprised in the material development is begun.

• (2) In this paragraph “specified operation”means any of the following, that is to say—

• (a) any work of construction in the course of the erection of a building;

• (b) the digging of a trench which is to contain the foundations, or part of the foundations, of a building;

• (c) the laying of any underground main or pipe to the foundations, or part of the foundations, of a building or to any such trench as is mentioned in (b) above;

• (d) any operation in the course of laying out or constructing a road or part of a road;

• (e) any change in the use of any land .

Interpretation

10

• (1) In this Part of this Schedule, unless the context otherwise requires—

• “agriculture”includes horticulture, fruit growing, seed growing, dairy farming, the keeping and breeding of livestock ( including any creature kept for the production of food, wool, skins or fur, or for the purpose of its use in the farming of land), the use of land as grazing land, meadow land, osier land, market gardens and nursery grounds, and the use of land for woodlands where that use is ancillary to the farming of land for other agricultural purposes, and “agricultural”shall be construed accordingly;

• “article”means an article of any description;

• “building”includes part of a building, and references to a building may include references to land occupied therewith and used for the same purposes;

• “forestry”includes afforestation;

• “minerals”includes all minerals and substances in or under land of a kind ordinarily worked for removal by underground or surface working;

• “retail shop”includes any premises of a similar character where retail trade or business ( including repair work) is carried on;

• “substance”means any natural or artificial substance or material, whether in solid or liquid form or in the form of a gas or vapour.

• (2) Any reference in this Part of this Schedule to the cubic content of a building is a reference to that content as ascertained by external measurement.

• (3) For the purposes of paragraph 7(1)(a) and (b) of this Schedule where two or more buildings are included in a single development the whole of that development may be regarded as a single building, and where two or more buildings result from the redevelopment of a single building the new buildings may together be regarded as a single building.

For the purposes of this sub-paragraph two or more buildings shall not be treated as included in a single development unless they are or were comprised in the same curtilage.

PART II — OTHER PROVISIONS SUPPLEMENTARY TO SECTION 38

Computation of development gain in respect of disposal of interest in land after material development has been carried out

11

• (1) This paragraph shall apply in relation to a disposal of an interest in land to which the principal section applies if material development of the land has been carried out after 17 th December 1973 [ and] since the person making the disposal acquired the interest [ but before the appointed day, within the meaning of the Development Land Tax Act 1976 ].

• (2) Subsection (3) of the principal section shall apply in relation to the disposal as if paragraph (b) were omitted, and as if for the words “whichever is the least”there were substituted the words “whichever is the smaller”.

• (3) For the purpose of computing the amount given by subsection (3)(c) of the principal section, the amount by which the current use value of the interest in land at the time of the disposal exceeds the current use value of the interest at the time of its acquisition by the person making the disposal or, if the interest was acquired by him before 6 th April 1965, its current use value at that date shall be taken to be equal to the sum of the amounts mentioned in the following sub-paragraph ( or, if both those amounts are nil, to be nil).

• (4) The amounts referred to in the preceding sub-paragraph are the following, that is to say—

• (a) the amount ( if any) by which the current use value of the interest immediately before the date on which the material development mentioned in sub-paragraph (1) above was begun exceeds the current use value of the interest at the time of its acquisition by the person making the disposal or on 6 th April 1965, as the case may be; and

• (b) the amount ( if any) by which the current use value of the interest at the time of the disposal exceeds the aggregate of the amounts mentioned in the following sub-paragraph.

• (5) The amounts referred to in sub-paragraph (4)(b) above are the following, that is to say—

• (a) the current use value of the interest immediately after the date on which the material development mentioned in sub-paragraph (1) above was begun, calculated on the assumption that it was lawful for that development to be carried out; and

• (b) the amount of any expenditure attributable to that development which is allowable under [ section 32(1)(b) of the Capital Gains Tax Act 1979 ] as a deduction from the consideration for the disposal in computing the chargeable gain accruing thereon.

• (6) Where material development of the land in question has been carried out on two or more different occasions after 17 th December 1973 [ and] since the person making the disposal acquired the interets [ but before the appointed day, within the meaning of the Development Land Tax Act 1976 ], then for the purposes of this paragraph—

• (a) there shall be calculated for the first of those occasions the amount mentioned in sub-paragraph (4)(a) above ( the reference there to the material development mentioned in sub-paragraph (1) above being for this purpose read as a reference to the material development carried out on that occasion);

• (b) there shall be calculated for each of those occasions other than the first the amount ( if any) by which the current use value of the interest immediately before the date on which the material development carried out on that occasion was begun exceeds the aggregate of the amounts mentioned in sub-paragraph (5) above ( the references there to the material development mentioned in sub-paragraph (1) above being for this purpose read as references to the material development carried out on the occasion preceding the one for which the calculation is being made); and

• (c) there shall be calculated the amount ( if any) by which the current use value of the interest at the time of the disposal exceeds the aggregate of the amounts mentioned in sub-paragraph (5) above ( the references there to the material development mentioned in sub-paragraph (1) above being for this purpose read as references to the material development carried out on the last of those occasions);

and sub-paragraph (3) above shall apply as if for the words from “the sum of the amounts mentioned in the following sub-paragraph”to the end of the paragraph there were substituted the words “the sum of the amounts calculated under sub-paragraph (6)(a) to (c) below (or, if those amounts are each nil, to be nil)”.

Computation of development gain in respect of disposal of interest in land reflecting expenditure on enhancement

12