Finance Act 1975

PART I — Value Added Tax

VAT: eight per cent. rate

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VAT: special rate for light hydrocarbon oil, etc.

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Relief for " do-it-yourself " builders

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Refund to diplomatic missions, etc., of VAT on importation of hydrocarbon oil

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PART II — INCOME TAX AND CORPORATION TAX

Income tax: alteration of additional rates for 1974-75

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Section 7(1) of the Finance Act 1974 (charge of income tax for 1974-75) shall have effect with the substitution for paragraph (b) of the following provisions, that is to say—

(b) in respect of so much of the investment income included in an individual's total income as exceeds £1,000 at the additional rates of 10 per cent, for the first £1,000 of the excess and 15 per cent, for the remainder; except that, in the case of an individual who shows that, at any time within that year, his age or that of his wife living with him was sixty-five years or more, income tax at the additional rate of 10 per cent, shall not be charged in respect of the first £500 of the excess mentioned in paragraph (b) above.

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Investment of pension funds in building societies

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• (1) Where sums payable to exempt pension funds are among the sums with respect to which arrangements have been entered into with a building society under section 343 of the Taxes Act, paragraph (b) of subsection (3) of that section shall not apply to the sums so payable; but the amounts paid or credited in respect of them shall be treated as paid or credited after deduction of income tax from a corresponding gross amount.

• (2) In this section " building society " has the same meaning as in section 343 of the Taxes Act and " exempt pension fund " means any fund or scheme in the case of which provision is made by the enactments mentioned in subsection (3) below for exempting the whole or part of its income from income tax.

• (3) The enactments referred to in subsection (2) above are sections 208, 211, 212, 213, 214, 216, and 226 of the Taxes Act and section 21(2) of the Finance Act 1970.

Early surrender or conversion of life policies

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• (1) Where a policy of life insurance to which this section applies has been issued and, within four years from the making of the insurance in respect of which it was issued, any of the following events happens, that is to say—

• (a) the surrender of the whole or part of the rights conferred by the policy;

• (b) the falling due (otherwise than on death) of a sum payable in pursuance of a right conferred by the policy to participate in profits ; and

• (c) the conversion of the policy into a paid-up or partly paid-up policy;

the body by whom the policy was issued shall pay to the Board, out of the sums payable by reason of the surrender or, as the case may be, out of the sum falling due or out of the fund available to pay the sums which will be due on death or on the maturity of the policy, a sum determined in accordance with the following provisions of this section, unless the body is wound up and the event is a surrender or conversion effected in connection with the winding-up.

• (2) The sum payable under subsection (1) above shall, subject to the following provisions of this section, be equal to the lower of the following, that is to say—

• (a) the appropriate percentage of the premiums payable under the policy up to the happening of the event; and

• (b) the surrender value of the policy at the time of the happening of the event less the complementary percentage of the premiums mentioned in paragraph (a) above.

• (3) If the event is one of those mentioned below, the sum payable to the Board shall not exceed the following limit, that is to say.—

• (a) if it is the surrender of part of the rights conferred by the policy, the value of the rights surrendered at the time of the surrender ;

• (b) if it is the conversion of the policy into a partly paid-up policy, the surrender value, at the time of the conversion, of so much of the policy as is paid up ; and

• (c) if it is the falling due of a sum, that sum.

• (4) If the event was preceded by the happening of such an event as is mentioned in subsection (1) above, subsection (2) above shall apply—

• (a) as if the lower of the amounts mentioned therein were reduced by the sum paid under this section in respect of the earlier event; and

• (b) if the earlier event was such an event as is mentioned in paragraph (a) or (c) of subsection (3) above, as if the surrender value of the policy were increased by the amount which, under that paragraph, limited or might have limited the sum payable under this section in respect of the earlier event.

• (5) For the purposes of this section, the appropriate percentage, in relation to any event, is the percentage equal to the following fraction of the basic rate of income tax in force for the year of assessment in which the event happens, that is to say.—

• (a) if the event happens in the first two of the four years mentioned in subsection (1) above, three-sixths ;

• (b) if it happens in the third of those years, two-sixths; and

• (c) if it happens in the last of those years, one-sixth;

and the complementary percentage, in relation to any event, is 100 per cent, less the appropriate percentage.

• (6) Where the annual amount of the premiums payable under a policy of life insurance is at any time increased (whether under the policy or by any contract made after its issue) so as to exceed by more than 25 per cent, the first annual amount so payable, the additional rights attributable to the excess shall be treated for the purposes of this section as conferred by a new policy issued in respect of an insurance made at that time, and the excess shall be treated as premiums payable under the new policy.

• (7) Subject to subsection (8) below, this section applies to any policy of life insurance issued in respect of an insurance made after 26th March 1974; but where it applies by virtue of subsection (6) above to a policy treated as having been issued in respect of an insurance made after that date by reason of an increase in the annual amount of the premiums payable under an earlier policy, it shall apply with the modification that the excess referred to in that subsection shall be taken to be the excess over the annual amount of the premiums at 26th March 1974.

• (8) This section does not apply to a policy unless it is a qualifying policy within the meaning of Schedule 1 to the Taxes Act, and does not in any case apply to such a policy as is mentioned in paragraph (b) or (c) of the proviso to section 19(4) of that Act.

Surrender, etc. of policies after four years

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• (1) Where a policy of life insurance to which this section applies has been issued and, in the fifth or any later year from the making of the insurance in respect of which it was issued, either of the following events happens, that is to say—

• (a) the surrender of the whole or part of the rights conferred by the policy ; and

• (b) the falling due (otherwise than on death or maturity) of a sum payable in pursuance of a right conferred by the policy to participate in profits;

then, if either of those events has happened before, the body by whom the policy was issued shall pay to the Board, out of the sums payable by reason of the surrender, or, as the case may be, out of the sum falling due, a sum determined in accordance with the following provisions of this section.

• (2) The sum payable under subsection (1) above shall, subject to the following provisions of this section, be equal to the applicable percentage of the lower of the following—

• (a) the total of the premiums which are payable in that year under the policy; and

• (b) the sums payable by reason of the surrender or, as the case may be, the sum falling due;

and the percentage to be applied for this purpose shall be a percentage equal to one half of the basic rate of income tax in force in the year of assessment in which the event happens.

• (3) Where, after a sum has become payable under subsection (1) above, and within the same year from the making of the insurance, another such event happens as is mentioned therein, the sums payable under that subsection in respect of both or all of the events shall not exceed the applicable percentage of the total mentioned in subsection (2)(a) above.

• (4) Where, on the happening of an event in the fifth or any later year from the making of the insurance, any sum is payable under subsection (1) of section 7 of this Act as applied by subsection (6) of that section, as well as under subsection (1) above, subsection (2) above shall apply as if the sums or sum mentioned in paragraph (b) thereof were reduced by the sum payable under section 7 of this Act.

• (5) This section applies to any policy of life insurance issued in respect of an insurance made after 26th March 1974, but only if it is a qualifying policy within the meaning of Schedule 1 to the Taxes Act; but does not apply to a policy issued in the course of an industrial insurance business, as defined in section 1(2) of the Industrial Assurance Act 1923 or of the Industrial Assurance Act (Northern Ireland) 1924.

Provisions supplementary to sections 7 and 8

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• (1) Where on the happening of an event in relation to a policy of life insurance a sum is payable under section 7 or 8 of this Act, relief under section 19 of the Taxes Act in respect of the relevant premiums paid under the policy shall be reduced by the sum so payable or, as the case may be, by so much of that sum as does not exceed the amount of that relief (or does not exceed so much of that amount as remains after any previous reduction under this section).

• (2) For the purposes of this section the relevant premiums are—

• (a) in relation to a sum payable under section 7 of this Act, the premiums payable under the policy up to the happening of the event by reason of which the sum is payable; and

• (b) in relation to a sum payable under section 8 of this Act, the premiums payable in the year (from the making of the insurance) in which the event happens by reason of which the sum is payable.

• (3) Where the relevant premiums are payable in more than one year of assessment the reduction in relief under this section-shall, so far as possible, reduce relief for an earlier year of assessment before reducing relief for a later one.

• (4) Any sum paid under section 7 or 8 of this Act by reason of any event shall be treated—

• (a) as between the parties, as received by the person by whom the premiums under the policy were paid; and

• (b) for the purposes of income tax, as income tax paid by that person in satisfaction of the increase in liability resulting from the reduction of relief under this section ;

and where that sum exceeds that increase in liability he shall be entitled, on a claim made by him not later than six years after the end of the year of assessment in which the event happens, to repayment of the excess.

• (5) Schedule 1 to this Act shall have effect with respect to the payment of sums payable under section 7 or 8 of this Act and related matters.

Life policies, life annuities and capital redemption policies

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Sections 19 and 21 and Chapter III of Part XIV of the Taxes Act and Schedule 1 to that Act shall have effect subject to the provisions of Schedule 2 to this Act; and in those provisions references to any section not otherwise identified are to sections of that Act and " Schedule 1 " means Schedule 1 to that Act.

Extension of tax exemption for certain savings certificates

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In section 95(1) of the Taxes Act (exemption from tax of accumulated interest payable in respect of certain United Kingdom savings certificates), and in section 96(1) of that Act (corresponding exemption for certain Ulster savings certificates), after the words " accumulated interest", wherever occurring, there shall be inserted the words " and any terminal bonus or other sum ".

Statutory corporation borrowing in foreign currency

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Section 416 of the Taxes Act (local authority borrowing in foreign currency) shall have effect in relation to any securities issued by or loan made to a statutory corporation (as defined in section 26(1) of the Prevention of Fraud (Investments) Act 1958) as it has effect in relation to any securities issued by a local authority, the references to the beneficial owner or holder of the securities being for this purpose read, in the case of such a loan, as references to the person for the time being entitled to repayment or eventual repayment of the loan.

Initial allowances for industrial buildings and structures, etc.

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• (1) In relation to expenditure incurred after 12th November 1974 section 1(2) of the Capital Allowances Act 1968 (initial allowances for industrial buildings and structures, etc.) shall have effect as if for the words " three-twentieths " there were substituted the words " one-half " ; and accordingly section 67(2)(d) of the Finance Act 1972 shall not apply to expenditure so incurred.

• (2) Expenditure shall not be treated for the purposes of this section as having been incurred after the date on which it was in fact incurred by reason only of section 1(6) of the Capital Allowances Act 1968 (expenditure incurred before trade began) or section 5(1) of that Act (purchase of unused buildings or structures).

Expenditure on thermal insulation

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• (1) If a person carrying on a trade has after 12th November 1974 incurred expenditure in adding any insulation against loss of heat to any industrial building or structure occupied by him for the purposes of that trade, Chapter I of Part III of the Finance Act 1971 shall apply as if the expenditure were capital expenditure incurred on the provision of machinery or plant for the purposes of the trade, and as if the machinery or plant had, in consequence of his incurring the expenditure, belonged to him and had been in use for the purposes of the trade, and as if the disposal value of the machinery or plant were nil.

• (2) If a person has after 12th November 1974 incurred expenditure in adding any insulation against loss of heat to any industrial building or structure let by him otherwise than in the course of a trade, Chapter I of Part III of the Finance Act 1971 shall apply as if the expenditure were capital expenditure incurred in providing machinery or plant first let by that person, otherwise than in the course of a trade, at the time when the expenditure was incurred, and as if the property comprised in the lease of the building or structure had as from that time included the machinery or plant, and as if the disposal value of the machinery or plant were nil.

• (3) Any allowance made by virtue of section 46(1) of the Finance Act 1971 in a case where it applies by virtue of subsection (2) above shall (notwithstanding section 48(2) of that Act) be available primarily against the following income, that is to say—

• (a) income taxed under Schedule A in respect of any premises which at any time in the chargeable period for which the allowance falls to be made consist of or include an industrial building or structure; or

• (b) income which is the subject of a balancing charge under Chapter I (industrial buildings and structures, etc.) of Part I of the Capital Allowances Act 1968.

• (4) This section shall be construed as if contained in Chapter I of Part III of the Finance Act 1971 ; and in this section " industrial building or structure " has the meaning given by section 7 of the Capital Allowances Act 1968.

Expenditure on fire safety

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• (1) If a person carrying on a trade has on or after the relevant date incurred expenditure in taking, in respect of any premises used by him for the purposes of the trade—

• (a) steps specified, in a letter or other document sent or given to him by or on behalf of the fire authority on an application for a fire certificate under the Fire Precautions Act 1971 in respect of those premises, as steps that would have to be taken in order to satisfy the authority as mentioned in subsection (4) of section 5 of that Act, being steps that might have been, but were not, specified in a notice under that subsection; or

• (b) steps which, in consequence of the making of an order under section 10 of that Act prohibiting or restricting the use of the premises, had to be taken to enable the premises to be used without contravention of the order,

then, if an allowance or deduction in respect of the expenditure could not, apart from this section, be made in taxing the trade or computing the profits or gains arising from it, Chapter I of Part III of the Finance Act 1971 shall apply as regards the expenditure as it would apply by virtue of section 17 of the Finance Act 1974 if the expenditure fell within the said section 17.

• (2) For the purposes of this section the relevant date, in relation to expenditure incurred in taking steps falling within subsection (1)(a) above, is 1st June 1972 and, in relation to expenditure incurred in taking steps falling within subsection (1)(b) above, is 20th March 1972.

• (3) This section shall be construed as if contained in Chapter I of Part III of the Finance Act 1971.

Trade unions

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• (1) If a trade union entered in the list of trade unions maintained under the Trade Union and Labour Relations Act 1974 was formed after 30th September 1971, it shall be treated as having been a registered trade union within the meaning of section 338 of the Taxes Act (exemption for trade unions) at all times between its formation and its entry in that list.

• (2) If a trade union was a registered trade union on 30th September 1971, it shall be treated for the purposes of the said section 338 as having remained a registered trade union so long as it remained a trade union and was not entered in the said list.

Sales, etc. at undervalue or overvalue

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• (1) In section 485 of the Taxes Act (sales etc. at undervalue or overvalue), after subsection (5) there shall be inserted as subsection (5A)—