Finance Act 1975

Signature of certain requisitions and requests of the Treasury

56

Appointment of General Commissioners in Scotland, and amendment of declaration to be made by certain officers

57

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

Amendments of Vehicles (Excise) Act (Northern Ireland) 1972

58

Citation, interpretation, construction and repeals

59

• (1) This Act may be cited as the Finance Act 1975.

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

• (3) In this Act—

• (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (b) Part II, 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.

• (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• (5) The enactments mentioned in Schedule 13 to this Act are hereby repealed to the extent specified in the third column of that Schedule, but subject to any provision at the end of any Part of that Schedule.

SCHEDULE 1

1

Any body by whom a policy to which section 7 or 8 of this Act applies has been issued shall, within thirty days of the end of the period ending with 31st March 1976 and of every subsequent period of twelve months make a return to the collector of the sums which, in that period, have become payable by it under either of those sections.

2

• (1) Any sum which is to be included in a return made under paragraph 1 above shall be due at the time by which the return is to be made and shall be paid without being demanded.

• (2) Where any sum which was or ought to have been included in such a return is not paid by the end of the period for which the return was to be made it may be recovered by an assessment as if it were income tax for the year of assessment in which that period ends; and where it appears to the inspector that a sum which ought to have been so included had not been included or that a return is not correct he may make such an assessment to the best of his judgment.

• (3) All the provisions of the Income Tax Acts relating to the assessment and collection of tax, interest on unpaid tax, appeals and penalties shall, with the necessary modifications, apply in relation to sums due under this paragraph ; and for the purposes of those provisions so far as they relate to interest on unpaid tax, a sum assessed in pursuance of this paragraph shall be treated as having been payable when it would have been payable had it been included in a return under paragraph 1 above.

• (4) Where, on an appeal against an assessment made in pursuance of this paragraph, it is determined that a greater sum has been assessed than was payable, the excess, if paid, shall be repaid.

3

Where a body has paid a sum which is payable under section 7 or 8 of this Act it shall give within thirty days to the person by whom the sum is, under section 9(4) of this Act, treated as received a statement specifying that sum and showing how it has been arrived at.

4

• (1) The Board or an inspector may, by notice in writing served on the body by whom a policy to which section 7 or 8 of this Act applies has been issued, require the body, within such time, not being less than thirty days, as may be specified in the notice—

• (a) to furnish such particulars; or

• (b) to make available for inspection by an officer authorised by the Board such books and other documents in the possession or under the control of the body ;

as the Board or officer may reasonably require for the purposes of those sections or this Schedule.

• (2) In section 98 of the Taxes Management Act 1970 (penalty for failure to furnish information) there shall be added in the first column of the Table the words " paragraph 4 of Schedule 1 to the Finance Act 1975 ".

SCHEDULE 2

PART I — Qualifying Policies—Certification

1

• (1) A policy of life insurance issued in respect of an insurance made on or after such day as the Treasury may by order made by statutory instrument appoint (in this Schedule referred to as "the appointed day ") or varied on or after the appointed day shall not be a qualifying policy within the meaning of Schedule 1 unless—

• (a) it is certified as such by the Board ; or

• (b) it conforms with a form which, at the time the policy is issued or varied, is either—

• (i) a standard form certified by the Board as a standard form of qualifying policy ; or

• (ii) a form varying from a standard form so certified in no other respect than by making such additions thereto as are, at the time the policy is issued, certified by the Board as compatible with a qualifying policy when made to that standard form and satisfy any conditions subject to which they are so certified ;

and any certificate issued in pursuance of paragraph (a) above shall be conclusive evidence that the policy is a qualifying policy within the meaning of that Schedule.

• (2) In issuing a certificate in pursuance of sub-paragraph (1) above the Board may disregard any provision of the policy, standard form or addition which appears to them insignificant.

• (3) Where the Board refuse to certify a policy as being a qualifying policy within the meaning of Schedule 1, the person to whom it is issued may appeal to the General Commissioners or, if he so elects, to the Special Commissioners.

• (4) The preceding provisions of this paragraph do not apply in relation to such a policy as is mentioned in paragraph 3 of Schedule 1 (friendly societies policies).

2

• (1) In paragraph 11(1) of Schedule 1—

• (a) for the words " which is in its opinion" there shall be substituted the words " which is certified by the Board as being ",

• (b) after the words " Part I of this Schedule " there shall be added the words " or which conforms with such a form as is mentioned in paragraph 1(1)(6) of Schedule 2 to the Finance Act 1975 and is in the opinion of the body issuing it a qualifying policy ".

• (c) after the words "allocated to the policy" there shall be inserted the words " the reference number of the relevant Inland Revenue certificate (if any " )".

• (2) In paragraph 11(2) of Schedule 1 for the words " and is in the opinion of the body by whom it was issued a qualifying policy after the variation " there shall be substituted the words " and, after the variation, it either is certified by the Board as a qualifying policy or conforms with such a form as is referred to in sub-paragraph (1) above and is in the opinion of the body by whom it was issued a qualifying policy ".

• (3) In paragraph 11(3) of Schedule 1 for "£26" there shall be substituted " £52 ".

PART II — Amendment of Qualifying Conditions

3

• (1) The following provisions of this paragraph shall have effect for determining for the purposes of Schedule 1 and this Schedule whether a policy has been varied or whether a policy which confers on the person to whom it is issued an option to have another policy substituted for it or to have any of its terms changed is a qualifying policy.

• (2) If the policy is one issued in respect of an insurance made before the appointed day—

• (a) any such option shall, until it is exercised, be disregarded in determining whether the policy is a qualifying policy ; and

• (b) any change in the terms of the policy which is made in pursuance of such an option shall be deemed to be a variation of the policy.

• (3) If the policy is one issued in respect of an insurance made on or after the appointed day, the policy shall not be a qualifying policy unless it satisfies the conditions applicable to it under Schedule 1 before any such option is exercised and—

• (a) each policy that might be substituted for it in pursuance of such an option would satisfy those conditions under the rules of paragraph 9 of that Schedule ; and

• (b) the policy would continue to satisfy those conditions under the rules of that paragraph as applied by paragraph 10 of that Schedule if each or any of the changes capable of being made in pursuance of such an option had been made and were treated as a variation ;

and it shall not be treated as being varied by reason only of any change made in pursuance of such an option.

4

• (1) In relation to any policy issued in respect of an insurance made on or after the appointed day paragraphs 1 and 2 of Schedule 1 shall have effect subject to the following provisions of this paragraph.

• (2) In paragraph for the words " sub-paragraphs (2) to (4)" there shall be substituted the words " sub-paragraphs (2) to (4A) ".

• (3) In paragraph 1 the following shall be inserted after sub-paragraph (4) :—

(4A) Except where— (a) the capital sum referred to in sub-paragraph (1) above is payable only in the circumstances mentioned in sub-paragraph (3) or (4) above, and (b) the policy does not provide for any payment on the surrender in whole or in part of the rights conferred by it, and (c) the specified term mentioned in sub-paragraph (3) or, as the case may be, (4) above ends at or before the time when the person whose life is insured attains the age of seventy-five years, the capital sum, so far as payable on death, must not be less than 75 per cent, of the total premiums that would be payable if the death occurred at the age of seventy-five years, the age being, if the sum is payable on the death of the first to die of two persons, that of the older of them, if on the death of the survivor of them, that of the younger of them, and, in any other case, that of the person on whose death it is payable; and if the policy does not secure a capital sum in the event of death occurring before the age of sixteen or some lower age, it must not provide for the payment in that event of an amount exceeding the total premiums previously paid under it.

• (4) In determining, for the purposes of sub-paragraph (3) above, whether a capital sum is less than 75 per cent, of the total premiums, any amount included in the premiums by reason of their being payable otherwise than annually shall be disregarded, and if the policy is issued in the course of an industrial assurance business as defined in section 1(2) of the Industrial Assurance Act 1923 or of the Industrial Assurance Act (Northern Ireland) 1924, 10 per cent, of the premiums payable under the policy shall be treated as so included.

• (5) In paragraph 1(5) for the words " carries a guaranteed surrender value " there shall be substituted the words " provides for a payment on the surrender in whole or in part of the rights conferred by the policy ".

• (6) In paragraph 1(7) after the words " by reason of that event" there shall be inserted the words " but where what is so payable is either an amount consisting of one sum or an amount made up of two or more sums, the 75 per cent, mentioned in sub-paragraph (4A) above shall be compared with the smaller or smallest amount so payable ".

• (7) In paragraph 2(1)(d)(i) for the words " three-quarters" there shall be substituted the words " 75 per cent. " and after the words " otherwise than annually " there shall be inserted the words " except that if, at the beginning of that term, the age of the person concerned exceeds fifty-five years, the capital sum so guaranteed may, for each year of the excess, be less by 2 per cent, of that total than 75 per cent, thereof, the person concerned being, if the capital sum is payable on the death of the first to die of two persons, the older of them, if on the death of the survivor of them, the younger of them and, in any other case, the person on whose death it is payable. "

• (8) In paragraph 2(1)(e) after the words "except by surrender" there shall be inserted the words " in whole or in part of the rights conferred by the policy ".

5

Where the new policy referred to in paragraph 9 of Schedule 1 is one issued on or after the appointed day then, in determining under sub-paragraph (2) of that paragraph whether that policy would or would not (apart from that paragraph) be a qualifying policy there shall be left out of account so much of the first premium payable thereunder as is accounted for by the value of the old policy.

PART III — Relief under Section 19 or 20

6

• (1) In section 21—

• (a) subsection (2) shall be omitted ;

• (b) in subsection (3) for the words " those mentioned in subsection (2) above" there shall be substituted the words " capital sums on death ";

• (c) in subsection (4) for the words "subsections (2) and (3)" (in both places) there shall be substituted the words " subsection. (3) "; and

• (d) in subsection (5) the words "or of 7 per cent" shall be omitted.

• (2) This paragraph has effect for the year 1976-77 and subsequent years of assessment

7

• (1) Where a policy issued in the course of an industrial assurance business, as defined in section 1(2) of the Industrial Assurance Act 1923 or of the Industrial Assurance Act (Northern Ireland) 1924, is not a qualifying policy by virtue of paragraph 1 or 2 of Schedule 1 but is a policy with respect to which the conditions in paragraphs (b) and (c) of sub-paragraph (1) of paragraph 4 of Schedule 1 are satisfied, it shall be a qualifying policy whether or not the conditions of paragraphs (a) and (d)(iii) of that sub-paragraph are satisfied with respect to it; but where they are not satisfied relief under section 19 in respect of premiums paid under the policy shall be given only on such amount (if any) as would have been the amount of the premiums had those conditions been satisfied.

• (2) This paragraph has effect in relation to any policy issued in respect of an insurance made after the appointed day.

PART IV — Charges in connection with Policies of Life Insurance, Contracts for Life Annuities and Capital Redemption Policies

8

This Part of this Schedule shall have effect in relation to any event happening in any year (as defined in paragraph 9(9) below) which falls wholly after the passing of this Act, but without prejudice to the operation in relation to earlier events of paragraphs 10(1), 12(2), 16 and 17 below.

9

• (1) In section 394(1)(a)—

• (a) in sub-paragraph (iii) the words " or in part" and in sub-paragraph (iv) the words " or of any share therein " shall be omitted ; and

• (b) after sub-paragraph (iv) there shall be added—

(v) an excess of the reckonable aggregate value mentioned in sub-paragraph (6) of paragraph 9 of Schedule 2 to the Finance Act 1975 over the allowable aggregate amount mentioned in sub-paragraph (7) of that paragraph, being an excess occurring at the end of any year (as defined in sub-paragraph (9) of that paragraph), except, if it ends with another chargeable event, the final year; and

• (2) In section 394(1)(b)(ii) after the word " assignment " there shall be added the words " or such an excess as is mentioned in paragraph (a)(v) above " and after the word " effected " there shall be inserted the words " or occurs ".

• (3) In section 396(1) the words " or in part", where they first occur, and the words " or of any share therein " shall be omitted and after the words " of those rights " there shall be inserted the words " or an excess of the reckonable aggregate value mentioned in sub-paragraph (6) of paragraph 9 of Schedule 2 to the Finance Act 1975 over the allowable aggregate amount mentioned in sub-paragraph (7) of that paragraph, being an excess occurring at the end of any year (as defined in sub-paragraph (9) of that paragraph), except, if it ends with another chargeable event, the final year ".

• (4) In section 398(1)—

• (a) the words "or in part" and the words "or of any share therein " shall be omitted ; and

• (b) at the end of paragraph (iii) there shall be inserted

and (iv) an excess of the reckonable aggregate value mentioned in sub-paragraph (6) of paragraph 9 of Schedule 2 to the Finance Act 1975 over the allowable aggregate amount mentioned in sub-paragraph (7) of that paragraph, being an excess occurring at the end of any year (as defined in sub-paragraph (9) of that paragraph), except, if it ends with another chargeable event, the final year

,

• (5) For the purposes of sections 394, 396 and 398 as amended by the preceding sub-paragraphs there shall be calculated as at the end of each year, but subject to sub-paragraph (8) below.—

• (a) the value, as at the time of surrender or assignment, of any part of or share in the rights conferred by the policy or contract which has been assigned or surrendered up to the end of the year ; and

• (b) the appropriate portion of any payment made up to the end of the year by way of premium or as a lump sum consideration;

and the appropriate portion of any payment shall be one-twentieth for the year in which it is made, increased by a further one-twentieth for each of the subsequent nineteen years, but subject to sub-paragraph (8) below.

• (6) The reckonable aggregate value referred to in those sections shall be—

• (a) the sum of the values calculated under sub-paragraph (5) above; less

• (b) the sum of the values so calculated for a previous year and brought into account on the previous happening of a chargeable event.

• (7) The allowable aggregate amount referred to in those sections shall be—

• (a) the aggregate of the appropriate portions calculated under sub-paragraph (5) above ; less

• (b) the aggregate of the appropriate portions so calculated for a previous year and brought into account on the previous happening of a chargeable event.

• (8) In making the calculations required by sub-paragraph (5) above there shall be excluded—

• (a) from the value mentioned in paragraph (a) thereof, the value of any part of or share in the rights conferred by the policy or contract which has been assigned or surrendered before the commencement of the first year which falls wholly after the passing of this Act; and

• (b) from the appropriate portion mentioned in paragraph (b) thereof, the one-twentieth mentioned therein for any year before that first year.

• (9) In this paragraph "year" means the twelve months beginning with the making of the insurance or contract and any subsequent period of twelve months ; except that—

• (a) death, the maturity of the policy or the surrender of the whole of the rights conferred by the policy or contract shall be treated as ending the final year; and

• (b) if the final year would by virtue of paragraph (a) above begin and end in the same year of assessment, the final year and the year preceding it shall together be one year.

10

• (1) At the end of section 394(4) there shall be added the words " and are not at the time of the event held by the original beneficial owner. "

• (2) In section 394(5) the words from " and references " to the end and, in section 395(4), the words from "and any sum paid" to " under the policy " shall be omitted.

• (3) Sub-paragraph (1) above applies in relation to any event happening on or after 10th December 1974.

11

• (1) In section 395(1)—

• (a) in paragraph (a) for the words from " over" to the end there shall be substituted the words " over the sum of the following—

• (i) the total amount previously paid under the policy by way of premiums ; and

• (ii) the total amount treated as a gain by virtue of paragraph (d) below on the previous happening of chargeable events ".

• (b) in paragraph (b) the words "or in part" shall be omitted and for the words from the first " over " to the end there shall be substituted the words " over the sum of the following—

• (i) the total amount previously paid under the policy by way of premiums ; and

• (ii) the total amount treated as a gain by virtue of paragraph (d) below on the previous happening of chargeable events ";

• (c) for paragraph (c) there shall be substituted the following—

(c) if the event is an assignment, the excess (if any) of the amount or value of the consideration, plus the amount or value of any relevant capital payments or of any previously assigned share in the rights conferred by the policy, over the sum of the following— (i) the total amount previously paid under the policy by way of premiums ; and (ii) the total amount treated as a gain by virtue of paragraph (d) below on the previous happening of chargeable events

;

• (d) after paragraph (c) there shall be added the following paragraph—

(d) if the event is the occurrence of such an excess as is mentioned in section 394(l)(v) above, the amount of the excess.

• (2) After section 395(3) there shall be inserted the following subsection—

(3A) Where there is an assignment, otherwise than for money or money's worth, of all the rights conferred by the policy the calculations required to be made by paragraph 9 of Schedule 2 to the Finance Act 1975 shall be made, in the first instance, without regard to any surrender or assignment of part of or a share in those rights which takes place after the assignment, and any gain treated as arising under subsection (1)(d) above on the calculation so made shall be treated as arising to the assignor.

12

• (1) At the end of section 396(1) there shall be added the words " and where the terms of the contract provide for the payment of a capital sum on death and the contract was made on or after 10th December 1974, the death shall be treated for the purposes of this section and section 397 below as a surrender in whole of the rights conferred by the contract. "

• (2) At the end of section 396(2) there shall be added the words " and are not at the time of the event held by the original beneficial owner ".

• (3) Sub-paragraph (2) above applies in relation to any event happening on or after 10th December 1974.

13

• (1) In section 397(1)—

• (a) in paragraph (a) the words " or in part" shall be omitted, after the words " payable by reason of the event " there shall be inserted the words " plus the amount or value of any relevant capital payments ", and after the word " over " there shall be inserted the words " the sum of the following " and for sub-paragraph (ii) and the word " or " preceding it there shall be substituted

and (ii) the total amount treated as a gain by virtue of paragraph (c) below on the previous happening of chargeable events

;

• (b) for paragraph (b) there shall be substituted the following—

(b) if the event is an assignment, the excess (if any) of the amount or value of the consideration, plus the amount or value of any relevant capital payments or of any previously assigned share in the rights conferred by the contract, over the sum of the following— (i) the amount specified in subsection (l)(a)(i) above ; and (ii) any amount treated as a gain by virtue of paragraph (c) below on the previous happenings of chargeable events

;

• (c) after paragraph (b) there shall be added the following paragraph—

(c) if the event is the occurrence of such an excess as is mentioned in section 396(1) above, the amount of the excess.

• (2) At the end of section 397(2) there shall be added the words 'and subsection (3A) of that section shall apply for the purposes of this section with the substitution of references to the contract for references to the policy'.

• (3) At the end of section 397 there shall be added the following subsection—

(3) In this section "relevant capital payments" means, in relation to any contract, any sum or other benefit of a capital nature paid or conferred under the contract before the happening of the chargeable event.

14

In section 398(1) at the end of sub-paragraph (i), there shall be added the words " except where the sums payable on maturity are annual payments chargeable to tax under Schedule D ".

15

For the purposes of sections 394 to 402 and of this Schedule the falling due of a sum payable in pursuance of a right conferred by a policy or contract to participate in profits shall be treated as the surrender of rights conferred by the policy or contract

16

• (1) Where—

• (a) under section 399, a gain arising in connection with a policy or contract would be treated as forming part of an individual's total income ; and

• (b) the policy was issued in respect of an insurance made after 26th March 1974 or the contract was made after that date and;

• (c) any sum is at any time after the making of the insurance or contract lent to or at the direction of that individual by or by arrangement with the body issuing the policy or, as the case may be, the body with which the contract was made;

then, subject to sub-paragraph (3) below, the same results shall follow under sections 7 to 9 of this Act, this Schedule and sections 394 to 402, as if at the time the sum was lent there had been a surrender of part of the rights conferred by the policy or contract and the sum had been paid as consideration for the surrender (and if the policy is one falling within subsection (2) of section 394, those results shall follow under section 8 of this Act, whether or not a gain would be treated as arising on the surrender).

• (2) If the whole or any part of the sum is repaid the repayment shall be treated, for the purpose of computing any gain arising on the happening, at the end of the final year, of a chargeable event, as a payment of a premium or lump sum consideration.

• (3) The preceding provisions of this paragraph do not apply in relation to a policy if—

• (a) it is a qualifying policy within the meaning of Schedule 1 ; and

• (b) either interest at a commercial rate is payable on the sum lent or the sum is lent to a full-time employee of the body issuing the policy for the purpose of assisting him in the purchase or improvement of a dwelling used or to be used as his only or main residence.

• (4) In this paragraph "final year" has the same meaning as in paragraph 9 above.

17

Where, under section 397, a gain is to be treated as arising in connection with a contract for a life annuity made after 26th March 1974—

• (a) section 399 shall have effect, in relation to the gain, as if subsection (4) were omitted ; and

• (b) the gain shall be chargeable to tax under Case VI of Schedule D; but

• (c) any relief under section 400 shall be computed as if this paragraph had not been enacted.

18

Where a chargeable event on the happening of which an amount is included in an individual's total income by virtue of Section 399(1)(a) follows the happening of another chargeable event in relation to the same policy or contract, and each of the events is such an excess as is mentioned in section 394(1)(a)(v), 396(1) or 398(1)(iv), subsection (3) of section 400 (top slicing relief) shall have effect in relation to that amount as if the number of complete years referred to in it were the number of complete years elapsing between that other event (or, if more than one, the last of diem) and the first-mentioned event.

19

• (1) Where such an excess as is mentioned in paragraph (a) or (b) of section 395(1) or paragraph (a) of section 397(1) would be treated as a gain arising in connection with a policy or contract and would form part of an individual's total income for the year of assessment in which the final year ends, a corresponding deficiency occurring at the end of the final year shall be allowable as a deduction from his total income for that year of assessment, so far as it does not exceed the total amount treated as a gain by virtue of section 395(1)(d) or 397(1)(c) on the previous happenings of chargeable events.

• (2) In this paragraph " final year " has the same meaning as in paragraph 9 above.

20

• (1) Section 402 shall have effect subject to the following provisions of this paragraph.

• (2) Where the chargeable event is an assignment of all the rights conferred by the policy or contract the certificate shall also specify any such excess as is mentioned in section 394(1)(a)(v), 396(1) or 398(l)(iv) which has occurred since the relevant date, the date on which it occurred and the value of the part of or share in the rights which have been surrendered or assigned since the relevant date.

• (3) Where the chargeable event is the occurrence of such an excess as is mentioned in section 394(1)(a)(v), 396(1) or 398(1)(iv), section 402 shall apply with the omission of subsection (2)(b) and the certificate shall also specify the value of the part of or share in the rights surrendered or assigned in any year since the relevant date and the amounts paid by way of premiums in any year since the relevant date.

• (4) In this paragraph "year" has the meaning assigned to it by paragraph 9(9) above and " the relevant date ", in relation to any certificate, means the date of the chargeable event in respect of which the last certificate under section 402 was delivered or, if none was delivered, the commencement of the policy or contract.

SCHEDULE 3

1

• (1) In any case where a company's 1973 accounting period does not coincide with a period of account or with two or more consecutive periods of account, the company's 1973 increase in stock value shall be determined for the purposes of the principal section not in accordance with subsection (1) of that section but by reference to a period (in this Schedule referred to as "the 1973 reference period") determined in accordance with this paragraph.

• (2) In any case where the beginning of a company's 1973 accounting period does not coincide with the beginning of a period of account, the 1973 reference period shall begin at the beginning of the period of account Which is current at the beginning of the company's 1973 accounting period.

• (3) In any case where the end of a company's 1973 accounting period does not coincide with the end of a period of account, the 1973 reference period shall end at the end of the period of account which is current at the end of the company's 1973 accounting period.

• (4) In any case where sub-paragraph (2) above does not apply the 1973 reference period shall begin at the beginning of the company's 1973 accounting period and in any case where sub-paragraph (3) above does not apply the 1973 reference period Shall end at the end of the company's 1973 accounting period.

2

• (1) In any case where paragraph 1(1) applies, a company's 1973 increase in stock value shall be determined for the purposes of the principal section by the formula:—

$$A(C−O)N$ where— " A " is the number of months in the company's 1973 accounting period or 12, whichever is the less ; " C " is the value of the company's trading stock at the end of the 1973 reference period ; " O " is the value of the company's trading stock at the beginning of the 1973 reference period ; and " N " is the number of months in the 1973 reference period.$

• (2) In any case where a company's 1973 increase in stock value falls to be determined in accordance with sub-paragraph (1) above, any reference in subsections (3) to (5) of the principal section or in the following provisions of this Schedule—

• (a) to the company's closing stock value shall be construed as a reference to the value of the company's trading stock at the end of the 1973 reference period; and

• (b) to the company's trading income for its 1973 accounting period shall be construed as a reference to that fraction of its trading income for the 1973 reference period of which the numerator is A and the denominator is N, as defined in sub-paragraph (1) above.

• (3) For the purposes of sub-paragraph (2)(b) above, the company's trading income for the 1973 reference period shall be the aggregate of its trading income for each of the accounting periods comprised in the 1973 reference period.

3

In any case where a company's 1973 accounting period comprises more than 12 months and paragraph 1 above does not apply, then, for the purposes of the principal section.—

• (a) the company's 1973 increase in stock value, as determined in accordance with subsection (1) of that section, and

• (b) the company's trading income for its 1973 accounting period,

shall each be reduced by multiplying them by the fraction of which the numerator is 12 and the denominator is the number of months in the company's 1973 accounting period.

4

• (1) The provisions of this paragraph shall have effect for the purposes of the principal section and the preceding provisions of this Schedule in any case where—

• (a) one or more companies (in this paragraph referred to as " the transferee company or companies ") forming part of a group of companies acquires or acquire trading stock from one or more other companies (in this paragraph referred to as "the transferor company or companies") forming part of the same group ; and

• (b) the acquisition occurs during the 1973 accounting period of the transferee company or companies or, if paragraph 1(1) above applies in relation to that company or those companies, during the 1973 reference period; and

• (c) the acquisition referred to in paragraph (a) above takes place in consequence or as part of a reconstruction, reorganisation, change in trading arrangements or other scheme which is carried out by companies forming part of the group of companies concerned and which results in a reduction in the trading stock held by one or more of those companies and a corresponding increase in the trading stock held by the other or others.

• (2) If a claim for relief under the principal section is made by the transferee company or the transferor company or, as the case may be, by any of the transferee companies or transferor companies, then the company claiming relief and all other companies which—

• (a) are either transferee companies or transferor companies, and

• (b) have the same 1973 accounting period as the company claiming relief,

shall be treated as one company for the purpose of determining the aggregate of the relief to which they are entitled under the principal section:

Provided that if paragraph 1(1) above applies in relation to the company claiming relief, another company shall not be treated as falling within paragraph (b) above unless paragraph 1(1) above also applies in relation to that other company and both that company and the company claiming relief have the same 1973 reference period.

• (3) For the purpose specified in sub-paragraph (2) above, any reference in the principal section or in the preceding provisions of this Schedule to the value of a company's stock at any time or to its trading income for any period shall be construed as a reference to the aggregate of the values of stocks at that time or, as the case may be, the aggregate of the trading incomes for that period, of all the companies which, for that purpose, are treated as one by virtue of that sub-paragraph.

• (4) Where the aggregate of the relief to which two or more companies are entitled under the principal section has been determined in accordance with sub-paragraphs (2) and (3) above, the relief shall be apportioned between them so that the relief to which any one of them is so entitled bears to the relief to which the other or others is or are so entitled the same proportion as the closing stock value of that one of them bears to the closing stock value or values of the other or others.

• (5) For the purposes of this paragraph, companies shall be treated as forming part of a group of companies if and only if they would be deemed to be members of the group for the purposes of section 258 of the Taxes Act (group relief).

5

• (1) A company shall not be entitled to relief under the principal section if its 1973 accounting period or, if that period consists of more than one accounting period, any of those accounting periods ends by virtue of the company—

• (a) ceasing to trade or to be, in respect of the trade concerned or of all the trades carried on by the company, within the charge to corporation tax ; or

• (b) ceasing to be resident in the United Kingdom ; or

• (c) ceasing to be within the charge to corporation tax.

• (2) In any case where a company's 1973 increase in stock value falls to be determined in accordance with paragraph 2(1) above, sub-paragraph (1) above shall have effect as if the reference therein to the company's 1973 accounting period or the accounting periods of which it consists were a reference to any of the accounting periods comprised in the company's 1973 reference period.

6

• (1) Subject to the following provisions of this paragraph, where a company claims relief under the principal section and, immediately before the beginning of its 1973 accounting period, the company was not carrying on the trade to which the claim relates then, unless—

• (a) the company acquired the initial trading stock of that trade on a sale or transfer from another person on that person's ceasing to carry on that trade, and

• (b) the stock so acquired is, or is included in, the company's trading stock as valued at the beginning of its 1973 accounting period,

the company shall be treated for the purposes of the principal section and the preceding provisions of this Schedule as having at the beginning of its 1973 accounting period trading stock of such value as appears to the inspector to be reasonable and just.

• (2) In determining, for the purposes specified in sub-paragraph (1) above, the value of trading stock to be attributed to a company at the beginning of its 1973 accounting period, the inspector shall have regard to all the relevant circumstances of the case and, in particular.—

• (a) to movements during the company's 1973 accounting period in the costs of items of a kind comprised in the company's trading stock during that period ; and

• (b) to changes during that period in the volume of the trade in question carried on by the company.

• (3) Any Commissioners dealing with an appeal from the decision of an inspector on a claim in a case where, in accordance with sub-paragraph (1) above, the inspector has attributed to a company at the beginning of its 1973 accounting period trading stock of a particular value shall, in hearing and determining the appeal, in so far as it relates to the value of the trading stock to be so attributed, determine such value as appears to them to be reasonable and just, having regard to those factors to which the inspector is required to have regard by virtue of sub-paragraph (2) above.

• (4) In any case where paragraph 1(1) above applies to a company's 1973 accounting period, for any reference in sub-paragraphs (1) to (3) above to that accounting period there shall be substituted a reference to the 1973 reference period.

7

• (1) In this Schedule " the principal section " means section 18 of this Act and " 1973 accounting period", " trading stock" and " trading income " have the same meaning as in the principal section.

• (2) In any case where a company's 1973 accounting period or the 1973 reference period consists of a number of complete months and a fraction of a month, any reference in the preceding provisions of this Schedule to the number of months in the period shall be construed as including that fraction of a month (and in any case where any such period is less than one month any such reference shall be construed as a reference to that fraction of a month of which the period consists).

• (3) Subsection (11) of the principal section shall apply for the purposes of this Schedule as it applies for the purposes of the principal section.

SCHEDULE 4

Management of tax

1

The tax shall be under the care and management of the Board.

Accounts by persons liable for tax

2

• (1) Subject to the following provisions of this paragraph, the personal representatives of a deceased person and every person who—

• (a) is liable as transferor for tax on the value transferred by a chargeable transfer, or would be so liable if tax were chargeable on that value, or

• (b) is liable as trustee of a settlement for tax on the value transferred by a transfer of value made after 26th March 1974, or would be so liable if tax were chargeable on that value;

shall deliver to the Board an account specifying to the best of his knowledge and belief all relevant property and the value of that property.

• (2) Where the account is to be delivered by personal representatives (but not where it is to be delivered by a person who is an executor of the deceased only in respect of settled land in England and Wales) the relevant property is all property which formed part of the deceased's estate immediately before his death; but—

• (a) if the personal representatives, after making the fullest enquiries that are reasonably practicable in the circumstances, are unable to ascertain the exact value of any particular property, their account shall in the first instance be sufficient as regards that property if it contains a statement to that effect, a provisional estimate of the value of the property and an undertaking to deliver a further account of it as soon as its value is ascertained ; and

• (b) the Board may from time to time give such general or special directions as they think fit for restricting the property to be specified in pursuance of this sub-paragraph by any class of personal representatives.

• (3) Where sub-paragraph (2) above does not apply the relevant property is any property to the value of which the tax is or would be attributable.

• (4) Except in the case of an account to be delivered by personal representatives, a person shall not be required to deliver an account under this paragraph with respect to any property if a full and proper account of that property, specifying its value, has already been delivered to the Board by some other person who is or would be liable for the tax attributable to the value of the property, unless that other person is or would be liable with him jointly as trustee.

• (5) An account under the preceding provisions of this paragraph shall be delivered—

• (a) in the case of an account to be delivered by personal representatives, before the expiration of the period of twelve months from the end of the month in which the death occurs, or, if it expires later, the period of three months beginning with the date on which the personal representatives first act as such ; and

• (b) in the case of an account to be delivered by any other person, before the expiration of the period of twelve months from the end of the month in which the transfer is made or, if it expires later, the period of three months beginning with the date on which he first becomes liable for tax.

• (6) In the case of a transfer of value made more than six months before the passing of this Act, sub-paragraph (5)(b) above shall have effect with the substitution of a reference to the period of six months from the passing of this Act for the reference to a period of twelve months.

• (7) A person liable for tax under section 32 or 34 of this Act or under paragraph 2 of Schedule 9 to this Act shall deliver an account under this paragraph before the expiration of the period of six months from the end of the month in which the event by reason of which the tax is chargeable occurs.

Corrective and supplementary accounts

3

If a person who has delivered an account under paragraph 2 above discovers at any time that the account is defective in a material respect by reason of anything contained in or omitted from it he shall, within six months of that time, deliver to the Board a further account containing such information as may be necessary to remedy the defect

Returns by certain persons acting for settlors

4

• (1) Subject to sub-paragraph (2) below, where any person, in the course of a trade or profession carried on by him, other than the profession of a barrister, has been concerned with the making, after 26th March 1974, of a settlement and knows or has reason to believe—

• (a) that the settlor was domiciled in the United Kingdom, and

• (b) that the trustees of the settlement are not or will not be resident in the United Kingdom ;

he shall, within three months of the making of the settlement or, if it was made before the passing of this Act, within three months of the passing of this Act, make a return to the Board stating the names and addresses of the settlor and of the trustees of the settlement.

• (2) A person shall not be required to make a return under this paragraph in relation to—

• (a) any settlement made by will, or

• (b) any other settlement, if such a return in relation to that settlement has already been made by another person or if an account has been delivered in relation to it under paragraph 2 above.

• (3) Paragraph 12(5) of Schedule 5 to this Act applies for the purposes of this paragraph.

Power to require information

5

• (1) The Board may by notice in writing require any person to furnish them within such time, not being less than thirty days, as may be specified in the notice with such information as the Board may require for the purposes of this Part of this Act.

• (2) A notice under this paragraph may be combined with one relating to income tax.

• (3) A barrister or solicitor shall not be obliged in pursuance of a notice under this paragraph to disclose, without his client's consent. any information with respect to which a claim to professional privilege could be maintained ; except that—

• (a) a solicitor may be so obliged to disclose the name and address of his client; and

• (b) if his client is resident outside the United Kingdom and carries on outside the United Kingdom a business which includes the provision for persons in the United Kingdom of services or facilities relating to the formation of companies outside the United Kingdom, the making of settlements outside the United Kingdom, or the securing of control over, or the management or administration of, such companies or settlements, a solicitor may also be so obliged to disclose the names and addresses of persons in the United Kingdom for whom such services or facilities have been provided in the course of that business.

Notice of determination of relevant matters

6

• (1) Where it appears to the Board that a transfer of value has been made or where a claim under this Part of this Act is made to the Board in connection with a transfer of value, the Board may give notice in writing to any person who appears to the Board to be the transferor or the claimant or to be liable for any of the tax chargeable on the value transferred, stating that they have determined the matters specified in the notice.

• (2) The matters that may be specified in a notice under this paragraph in relation to any transfer of value are all or any of the following:—

• (a) the date of the transfer ;

• (b) the value transferred and the value of any property to which the value transferred is wholly or partly attributable ;

• (c) the transferor;

• (d) the tax chargeable (if any) and the persons who are liable for the whole or part of it;

• (e) the amount of any payment made in excess of the tax for which a person is liable and the date from which and the rate at which tax or any repayment of tax overpaid carries interest; and

• (f) any other matter that appears to the Board to be relevant for the purposes of this Part of this Act.

• (3) A determination for the purposes of a notice under this paragraph of any fact relating to a transfer of value—

• (a) shall, if that fact has been stated in an account or return under this Schedule and the Board are satisfied that the account or return is correct, be made by the Board in accordance with that account or return; but

• (b) may, in any other case, be made by the Board to the best of their judgment.

• (4) A notice under this paragraph shall state the time within which and the manner in which an appeal against any determination in it may be made.

• (5) Subject to any variation by agreement in writing or on appeal, a determination in a notice under this paragraph shall be conclusive for the purposes of this Part of this Act against the person on whom the notice is served ; and if the notice is served on the transferor and specifies a determination of the value transferred by the transfer of value or previous transfers of value, the determination, so far as relevant to the tax chargeable in respect of later transfers of value (whether or not made by the transferor) shall be conclusive also against any other person, subject however to any adjustment under paragraph 23 or 24 below.

Appeals

7

• (1) A person on whom a notice under paragraph 6 above has been served may, within thirty days of the service, appeal against any determination specified in it by notice in writing given to the Board and specifying the grounds of appeal.

• (2) Subject to the following provisions of this paragraph the appeal shall be to the Special Commissioners.

• (3) Where it is so agreed between the appellant and the Board, or the High Court, on an application made by the appellant, is satisfied that the matters to be decided on the appeal are likely to be substantially confined to questions of law and gives leave for that purpose, the appeal may be to the High Court.

• (4) Neither the Special Commissioners nor the High Court shall determine any question as to the value of land in the United Kingdom on any appeal under this paragraph, but on any such question the appeal shall be to the Lands Tribunal or, as the case may be, the Lands Tribunal for Scotland or for Northern Ireland.

• (5) In the application of this paragraph to Scotland, for references to the High Court there shall be substituted references to the Court of Session.

Appeals out of time

8

An appeal under paragraph 7 above may be brought out of time with the consent of the Board or the Special Commissioners; and the Board—

• (a) shall give that consent if satisfied, on an application for the purpose, that there was a reasonable excuse for not bringing the appeal within the time limited and that the application was made thereafter without unreasonable delay; and

• (b) shall, if not so satisfied, refer the application for determination by the Special Commissioners.

Procedure before Special Commissioners

9

• (1) On an appeal before the Special Commissioners—

• (a) the Board may be represented by any of its officers; and

• (b) any party to the appeal may be represented by a barrister, solicitor or any accountant who has been admitted a member of an incorporated society of accountants or, with the leave of the Special Commissioners, by any other person.

• (2) The Special Commissioners may at any time before the determination of an appeal give notice to any party to the proceedings other than the Board requiring him within the time specified in the notice—

• (a) to deliver to them such particulars as they may require for the purpose of determining the appeal; and

• (b) to make available for inspection by them, or by an officer of the Board, all such books, accounts or other documents in his possession or power as may be specified or described in the notice, being books, accounts or other documents which, in the opinion of the Special Commissioners, contain or may contain information relating to the subject matter of the proceedings;

and any officer of the Board may, at all reasonable times, inspect and take copies of, or extracts from, any particulars delivered under paragraph (a) above and the Commissioners or any officer of the Board may take copies of, or extracts from, any books, accounts or other documents made available for inspection under paragraph (b) above.

• (3) The Special Commissioners may summon any person to appear before them and give evidence, and a witness before the Special Commissioners may be examined on oath.

• (4) On an appeal before the Special Commissioners, the Special Commissioners may allow the appellant to put forward any ground of appeal not specified in the notice of appeal and may take it into consideration if satisfied that the omission was not wilful or unreasonable.

• (5) The Special Commissioners shall on an appeal to them confirm the determination appealed against unless they are satisfied that the determination ought to be varied or quashed.

Statement of case for opinion of High Court

10

• (1) Within thirty days of the determination by the Special Commissioners of an appeal under this Schedule any party to the appeal may question the determination on a point of law by a written request to the Special Commissioners to state and sign a case for the opinion of the High Court.

• (2) A request for a case under this paragraph shall be accompanied by a fee of £1 and any such case shall set forth the facts and the determination of the Commissioners.

• (3) A party requiring a case to be stated under this paragraph shall, within thirty days of receiving it, send it to the High Court and shall at or before the time of sending it to the High Court send a copy of it to every other party.

• (4) The High Court shall hear and determine any question of law arising on the case and may reverse, affirm or amend the determination of the Special Commissioners or make such other order as the court thinks fit.

• (5) The High Court may cause the case to be sent back for amendment, and the special Commissioners shall amend it accordingly.

• (6) This paragraph shall have effect—

• (a) in its application to Scotland, with the substitution of references to the Court of Session for references to the High Court; and

• (b) in its application to Northern Ireland, with the substitution of references to the Court of Appeal in Northern Ireland for references to the High Court.

Inspection for the purposes of valuation

11

• (1) If the Board authorise any person to inspect any property for the purpose of ascertaining its value for the purposes of this Part of this Act the person having the custody or possession of that property shall permit him to inspect it at such reasonable times as the Board may consider necessary.

• (2) If any person wilfully delays or obstructs a person acting in pursuance of this paragraph he shall be liable on summary conviction to a fine not exceeding £20.

Payment of tax

12

• (1) Except as otherwise provided by the following provisions of this Schedule, the tax on the value transferred by a chargeable transfer shall be due six months after the end of the month in which the chargeable transfer is made or, in the case of a transfer made after 5th April and before 1st October in any year otherwise than on death, at the end of April in the next year.

• (2) Personal representatives shall, on delivery of their account, pay all the tax for which they are liable and may, on delivery of that account, also pay any part of the tax chargeable on the death for which they are not liable, if the persons liable therefore request them to make the payment.

• (3) So much of the tax chargeable on the value transferred by a chargeable transfer made within three years or, as the case may be, one year of the death of the transferor as—

• (a) exceeds what it would have been had the transferor died more than three years after the transfer ; or

• (b) is tax for which, by virtue of section 26(3) of this Act, only a charity or only a political party is liable ;

shall be due six months after the end of the month in which the death occurs.

• (4) Tax chargeable under section 32 or 34 of this Act or paragraph 2 of Schedule 9 to this Act shall be due six months after the end of the month in which the event by reason of which it is chargeable occurs.

• (5) The Board may in the first instance, and without prejudice to the recovery of the remainder of the tax, accept or demand payment of an amount by reference to the value stated in an account delivered to the Board under paragraph 2 or 3 above.

• (6) Nothing in this paragraph shall be taken to authorise the recovery from, or require the payment by, any person of tax in excess of his liability as limited by section 27 of this Act.

Payment of tax by instalments

13

• (1) Subject to the following provisions of this paragraph, where any of the tax payable on the value transferred by a chargeable transfer made on death is attributable to the value of.—

• (a) land of any description, wherever situated ; or

• (b) shares or securities of a company which gave the deceased control of the company immediately before his death ; or

• (c) shares or securities of a company not falling under paragraph (b) above and not quoted on a recognised stock exchange, if either the condition stated in sub-paragraph (2) below is fulfilled or the Board are satisfied that the tax attributable to their value cannot be paid in one sum without undue hardship ; or

• (d) shares of a company not falling under paragraph (b) above and not quoted on a recognised stock exchange, if the conditions stated in sub-paragraph (3) below are fulfilled;

the tax so attributable may, if the person paying it by notice in writing to the Board so elects, be paid at his option either by eight equal yearly instalments or by sixteen equal half-yearly instalments, of which the first shall be payable six months after the end of the month in which the death occurred ; and interest under paragraph 19 below on the unpaid portion of the tax shall be added to each instalment and paid accordingly, except as otherwise provided in paragraph 16 below.

• (2) The condition mentioned in sub-paragraph (1)(c) above is that not less than 20 per cent, of so much of the tax chargeable on the value transferred by the chargeable transfer as is tax for which the person paying the tax attributable as mentioned in sub-paragraph (1) above is liable (in the same capacity) consists of tax attributable to the value of those shares or securities or such other tax (if any) as may by virtue of this paragraph or paragraph 14 below be paid by instalments.

• (3) The conditions mentioned in sub-paragraph (1)(d) above are that so much of the value transferred as is attributable to the shares exceeds £5,000 and that either—

• (a) the nominal value of the shares is not less than 10 percent, of the nominal value of all the shares of the company at the time of the death ; or

• (b) the shares are ordinary shares and their nominal value is not less than 10 per cent, of the nominal value of all ordinary shares of the company at the time of the death.

• (4) Notwithstanding the making of an election under this paragraph, the tax for the time being unpaid, with interest to the time of payment, may be paid at any time, and if at any time (whether before or after the expiration of the six months mentioned in sub-paragraph (1) above) the whole or any part of the land, shares or securities is sold, the tax unpaid (or in the case of a sale of part, the proportionate part of that tax) shall become payable forthwith (or, if the said six months have not expired, on their expiration), together with any interest accrued under paragraph 19 below.

• (5) Sub-paragraphs (1) and (4) above shall apply also in relation to a chargeable transfer made otherwise than on death, if either—

• (a) the tax attributable as mentioned in sub-paragraph (1) above is borne by the person benefiting from the transfer ; or

• (b) the transfer is made under paragraph 4, 6(2), 12 or 15 of Schedule 5 to this Act and the land, shares or securities to the value of which the tax is attributable continue to be comprised in the settlement;

and shall then apply subject to the modifications mentioned in sub-paragraph (6) below.

• (6) Where sub-paragraphs (1) and (4) above apply by virtue of sub-paragraph (5) above, they shall apply as if—

• (a) references to the date on which the death occurred were references to the date of the chargeable transfer;

• (b) references to the time six months after the end of the month in which that date falls were references to the time when the tax would be due if it were not payable by instalments ;

• (c) references to the deceased were references to the transferor or, if the transfer is made under paragraph 6, 12 or 15 of Schedule 5 to this Act, to the trustees of the settlement;

• (d) the reference to the land, shares or securities being sold—

• (i) in a case within sub-paragraph (5)(a), included a reference to any chargeable transfer in which the value transferred is wholly or partly attributable to the value of the land, shares or securities, other than a transfer made on death ; and

• (ii) in a case within sub-paragraph (5)(b), were a reference to the land, shares or securities ceasing to be comprised in the settlement; and

• (e) the reference to the condition stated in sub-paragraph (2) were omitted ; and

• (f) the reference in sub-paragraph (3) to the value transferred were a reference to that value calculated as if no tax were chargeable on it;

and the question whether tax could be paid in one sum without undue hardship shall be determined on the assumption that the shares or securities concerned would be retained by the persons liable to pay the tax.

• (7) For the purposes of this paragraph a person has control of a company at any time if he then has the control of powers of voting on all questions, or on any particular question, affecting the company as a whole which if exercised would yield a majority of the votes capable of being exercised thereon ; and—

• (a) shares or securities shall be deemed to give a person control of a company if, together with any shares or securities which are related property within the meaning of paragraph 7 of Schedule 10 to this Act, they would be sufficient to give him control of the company (as defined in the preceding provisions of this sub-paragraph); and

• (b) where shares or securities are comprised in a settlement, any powers of voting which they give to the trustees of the settlement shall be deemed to be given to the person beneficially entitled in possession to the shares or securities (except in a case where no individual is so entitled).

• (8) In this paragraph " ordinary shares" means shares which carry either—

• (a) a right to dividends not restricted to dividends at a fixed rate; or

• (b) a right to conversion into shares carrying such a right as is mentioned in paragraph (a) above.

14

• (1) Where any of the tax payable on the value transferred by a chargeable transfer made on death is attributable to the net value of a business or of an interest in a business, the tax so attributable may, if the person paying the tax by notice in writing to the Board so elects, be paid at his option either by eight equal yearly instalments or by sixteen equal half-yearly instalments, of which the first shall be payable six months after the end of the month in which the death occurred ; and interest under paragraph 19 below on the unpaid portion of the tax shall be added to each instalment and paid accordingly, except as otherwise provided in paragraph 16 below.

• (2) For the purposes of this paragraph the net value of a business is the value of the assets used in the business (including goodwill) reduced by the aggregate amount of any liabilities incurred for the purposes of the business ; and in ascertaining for the purposes of this paragraph the value of an interest in a business, no regard shall be had to assets or liabilities other than those by reference to which the net value of the business would have fallen to be ascertained under this paragraph if the tax had been attributable to the entire business.

• (3) Sub-paragraph (4) of paragraph 13 above applies in relation to this paragraph and any business or interest in a business as it applies in relation to that paragraph and the land, shares or securities mentioned therein ; and—

• (a) in the application of that sub-paragraph to a business, the sale of an interest or part of an interest in the business shall be treated as a sale of part of the business; and

• (b) in its application to an interest in a business, the payment, under a partnership agreement or otherwise, of any sum in satisfaction of the whole or any part of the interest otherwise than on a sale shall be treated as a sale of that interest or part at the time of payment.

• (4) The preceding provisions of this paragraph shall apply also in relation to a chargeable transfer made otherwise than on death, if either—

• (a) the tax attributable as mentioned in sub-paragraph (1) above is borne by the person benefiting from the transfer, or

• (b) the transfer is made under paragraph 4, 6(2), 12 or 15 of Schedule 5 to this Act and the business or interest to the value of which the tax is attributable continues to be comprised in the settlement;

and shall then apply subject to the modifications mentioned in sub-paragraph (5) below.

• (5) Where sub-paragraphs (1) to (3) above apply by virtue of sub-paragraph (4) above they shall apply as if—

• (a) references to the time six months after the end of the month in which the death occurred were references to the time when the tax would be due if it were not payable by instalments ; and

• (b) references to the business or an interest in the business being sold—

• (i) in a case within sub-paragraph (4)(a), included a reference to any chargeable transfer in which the value transferred is wholly or partly attributable to the value of the business or interest other than a transfer made on death ; and

• (ii) in a case within sub-paragraph (4)(b), were a reference to the business or interest ceasing to be comprised in the settlement.

• (6) In this paragraph " business " includes a business carried on in the exercise of a profession or vocation, but does not include a business carried on otherwise than for gain.

15

Tax chargeable on such a chargeable transfer as is mentioned in paragraph 4 of Schedule 9 to this Act may, if the person paying the tax by notice in writing to the Board so elects, be paid at his option either by eight equal yearly instalments or by sixteen equal half-yearly instalments, of which the first shall be payable six months after the end of the month in which the transfer is made.

16

• (1) Subject to the following provisions of this paragraph, where tax payable on the value transferred by a chargeable transfer—

• (a) is payable by instalments under paragraph 13 or 14 above and the tax is attributable to the value of any shares, securities, business or interest in a business ; or

• (b) is payable by instalments under paragraph 15 above ;

it shall, for the purpose of any interest to be added to each instalment, be treated as carrying interest from the date at which the instalment is payable.

• (2) Sub-paragraph (1) above does not apply to tax attributable to the value of shares or securities of a company falling within paragraph (a) of sub-paragraph (3) below unless it also falls within paragraph (b) or (c) of that sub-paragraph.

• (3) The companies referred to in sub-paragraph (2) above are—

• (a) any company whose business consists wholly or mainly of one or more of the following, that is to say, dealing in securities, stocks or shares, land or buildings, or making or holding investments;

• (b) any company whose business consists wholly or mainly in being a holding company (within the meaning of section 154 of the Companies Act 1948) of one or more companies not falling within paragraph (a) above ; and

• (c) any company whose business is that of a jobber (as defined in section 477 of the Taxes Act) or discount house and is carried on in the United Kingdom.

• (4) Sub-paragraph (1) above does not apply to tax attributable to the value included under section 22(5) of this Act in the value of a person's estate immediately before his death.

• (5) Sub-paragraph (1)(a) above applies only to the extent that the value on which the tax concerned is payable, when added to so much of the value transferred by any previous transfer of value made by the same transferor as is value the tax on which also fell within that sub-paragraph, does not exceed £250,000; and if it does exceed that amount the excess shall be attributed to the tax attributable to the values of the shares, securities, business or interest concerned in proportion to those values respectively.

• (6) The reference in sub-paragraph (5) above to the same transferor includes, in relation to chargeable transfers which are made under paragraph 6, 12 or 15 of Schedule 5 to this Act, the assumed transferor referred to in paragraph 6(4) of that Schedule.

• (7) For the purposes of this paragraph transfers of value made by the same transferor on the same day shall be treated as one.

Acceptance of property in satisfaction of tax

17

• (1) The Board may, if they think fit, on the application of any person liable to pay tax, accept in satisfaction of the whole or any part of it any property to which this paragraph applies.

• (2) This paragraph applies to any such land as may be agreed upon between the Board and the person liable to pay tax.

• (3) This paragraph also applies to any objects which are or have been kept in any building—

• (a) if the Board have determined to accept or have accepted that building in satisfaction or part satisfaction of tax or of estate duty; or

• (b) if the building or any interest therein belongs to Her Majesty in right of the Crown or of the Duchy of Lancaster, or belongs to the Duchy of Cornwall or belongs to a Government department or is held for the purposes of a Government department; or

• (c) if the building is one of which the Secretary of State is guardian under the Ancient Monuments Consolidation and Amendment Act 1913 or of which the Department of Finance for Northern Ireland is guardian under the Historic Monuments Act (Northern Ireland) 1971 ; or

• (d) if the building belongs to any body specified in paragraph 12 of Schedule 6 to this Act;

in any case where it appears to the Treasury desirable for the objects to remain associated with the building.

• (4) This paragraph also applies to—

• (a) any work of art which the Treasury are satisfied is preeminent for aesthetic merit or historical value ;

• (b) any picture, print, book, manuscript, scientific object or other thing which the Treasury are satisfied is pre-eminent for its national, scientific or historic interest; and

• (c) any collection or group of pictures, prints, books, manuscripts, works of art, scientific objects or other things if the Treasury are satisfied that the collection or group, taken as a whole, is pre-eminent for its national, scientific, historic or artistic interest.

• (5) In this paragraph "national interest" includes interest within any part of the United Kingdom.

18

• (1) Where a person has power to sell any property in order to raise money for the payment of tax, he may agree with the Board for the property to be accepted in satisfaction of that tax in pursuance of paragraph 17 above ; and, except as regards the nature of the consideration and the receipt and application thereof, any such agreement shall be subject to the same provisions and shall be treated for all purposes as a sale made in the exercise of the said power, and any conveyance or transfer made or purporting to be made to give effect to such an agreement shall have effect accordingly.

• (2) This paragraph shall not affect section 32(4) or 34(6) of this Act.

Interest

19

• (1) If—

• (a) an amount of tax charged on the value transferred by a chargeable transfer made after 5th April and before 1st October in 1975 or any later year and otherwise than on death remains unpaid after the end of the period ending with April in the next year ; or

• (b) an amount of tax charged on the value transferred by any other chargeable transfer remains unpaid after the end of the period of six months beginning with the end of the month in which the chargeable transfer was made (or, if it ends later, the period of six months from the passing of this Act) ; or

• (c) an amount of tax chargeable under section 32 of this Act or paragraph 2 of Schedule 9 to this Act remains unpaid after the end of the period of six months beginning with the end of the month in which the event by reason of which it is chargeable occurs ; it shall carry interest from the end of that period at the following rate per annum, that is to say.—

• (i) if the chargeable transfer was made on death, 6 per cent.;

• (ii) in any other case, 9 per cent.;

or (in either case) at such rate as the Treasury may from time to time by order made by statutory instrument prescribe.

• (2) Sub-paragraph (1) above shall apply in relation to tax for which, under section 26(3) of this Act, only a charity or only a political party is liable, and in relation to such an excess as is mentioned in section 27(4) of this Act, as if the chargeable transfer had been made on the death of the transferor.

• (3) Any repayment of an amount paid in excess of a liability for tax or for interest on tax shall carry interest from the date on which the payment was made at the same rate as that at which the tax, if outstanding, would have carried interest.

• (4) Interest payable under sub-paragraph (1) above shall not be allowed as a deduction in computing any income, profits or losses for any tax purposes ; and interest paid to any person under sub-paragraph (3) above shall not be income of that person for any tax purposes.

• (5) A statutory instrument made under this paragraph shall be subject to annulment in pursuance of a resolution of the House of Commons.

Inland Revenue charge for unpaid tax

20

• (1) Except as otherwise provided, where any tax charged on the value transferred by a chargeable transfer, or any interest on it, is for the time being unpaid a charge for the amount unpaid (to be known as an Inland Revenue charge) is by virtue of this paragraph imposed in favour of the Board on—

• (a) any property to the value of which the value transferred is wholly or partly attributable ; and

• (b) where the chargeable transfer is made by the making of a settlement or is made under Schedule 5 to this Act, any property comprised in the settlement.

• (2) References in sub-paragraph (1) above to any property include references to any property directly or indirectly representing it.

• (3) Where the chargeable transfer is made on death, personal or movable property situated in the United Kingdom which was beneficially owned by the deceased immediately before his death and vests in his personal representatives is not subject to the Inland Revenue charge ; and for this purpose " personal property " includes leaseholds and undivided shares in land held on trust for sale, whether statutory or not, and the question whether any property was beneficially owned by the deceased shall be determined without regard to paragraph 3(1) of Schedule 5 to this Act.

• (4) No heritable property situated in Scotland is subject to the Inland Revenue charge, but where such property is disposed of any other property for the time being representing it is subject to the charge to which the first-mentioned property would have been subject but for this sub-paragraph.

• (5) The Inland Revenue charge imposed on any property shall take effect subject to any incumbrance thereon which is allowable as a deduction in valuing that property for the purposes of the tax.

• (6) Except as provided by paragraph 21 below, a disposition of property subject to an Inland Revenue charge shall take effect subject to that charge.

21

• (1) Where property subject to an Inland Revenue charge, or an interest in such property, is disposed of to a purchaser, then if at the time of the disposition—

• (a) in the case of land in England and Wales, the charge was not registered as a land charge or, in the case of registered land, was not protected by notice on the register; or

• (b) in the case of land in Northern Ireland the title to which is registered under the Local Registration of Title (Ireland). Act 1891, the charge was not entered as a burden on the appropriate register maintained under that Act or was not protected by a caution or inhibition under that Act or, in the case of other land in Northern Ireland, the purchaser had no notice of the facts giving rise to the charge ; or

• (c) in the case of personal property situated in the United Kingdom other than such property as is mentioned in paragraph (a) or (b) above, and of any property situated outside the United Kingdom, the purchaser had no notice of the facts giving rise to the charge ; or

• (d) in the case of any property, a certificate of discharge had been given by the Board under this Schedule and the purchaser had no notice of any fact invalidating the certificate,

the property or interest shall then cease to be subject to the charge but the property for the time being representing it shall be subject to it.

• (2) Where property subject to an Inland Revenue charge, or an interest in such property, is disposed of to a purchaser in circumstances where it does not then cease to be subject to the charge, it shall cease to be subject to it on the expiration of the period of six years beginning with the later of the following dates, namely—

• (a) the date on which the tax became due ; and

• (b) the date on which a full and proper account of the property was first delivered to the Board in connection with the chargeable transfer concerned.

• (3) In this paragraph " the time of the disposition " means—

• (a) in relation to registered land, the time of registration of the disposition; and

• (b) in relation to other property, the time of completion.

• (4) On the coming into operation of section 39 of the Land Registration Act (Northern Ireland) 1970 that Act shall be substituted in sub-paragraph (1)(b) above for the Act mentioned therein.

Recovery of tax

22

• (1) The Board shall not take any legal proceedings for the recovery of any amount of tax or of interest on tax which is due from any person unless the amount has been agreed in writing between that person and the Board or has been determined and specified in a notice under paragraph 6 above.

• (2) Where an amount has been so determined and specified but an appeal to which this sub-paragraph applies is pending against the determination the Board shall not take any legal proceedings to recover the amount determined except such part of it as may be agreed in writing or determined and specified in a further notice under paragraph 6 above to be a part not in dispute.

• (3) Sub-paragraph (2) above applies to any appeal under paragraph 7 above but not to any further appeal; and paragraph 7 above shall have effect, in relation to a determination made in pursuance of sub-paragraph (2) above, as if sub-paragraph (4) of that paragraph were omitted.

Adjustments

23

• (1) Where too little tax has been paid in respect of a chargeable transfer the tax underpaid shall be payable with interest thereon under paragraph 19 above, whether or not the amount that has been paid was that stated as payable in a notice under paragraph 6 above ; but subject to the following provisions of this paragraph and to paragraph 25 below.

• (2) Where tax attributable to the value of any property is paid in accordance with an account duly delivered to the Board under this Schedule and the payment is made and accepted in full satisfaction of the tax so attributable, no proceedings shall be brought for the recovery of any additional tax so attributable after the expiration of the period of six years beginning with the later of the following dates, namely.—

• (a) the date on which the payment (or in the case of tax paid by instalments the last payment) was made and accepted ; and

• (b) the date on which the tax or the last instalment became due;

and on the expiration of that period any liability for the additional tax and any Inland Revenue charge for that tax shall be extinguished.

• (3) In any case of fraud, wilful default or neglect by a person liable for the tax, the period mentioned in sub-paragraph (2) above shall be the period of six years beginning when the fraud, default or neglect comes to the knowledge of the Board.

24

• (1) If it is proved to the satisfaction of the Board that too much tax has been paid on the value transferred by a chargeable transfer or on so much of that value as is attributable to any property, the Board shall repay the excess unless the claim for repayment was made more than six years after the date on which the payment or last payment of the tax was made.

• (2) References in this paragraph to tax include references to interest on tax.

Certificates of discharge

25

• (1) Where application is made to the Board by a person liable for any tax on the value transferred by a chargeable transfer which is attributable to the value of property specified in the application, the Board, on being satisfied that the tax so attributable has been or will be paid, may give a certificate to that effect, and shall do so if the chargeable transfer is one made on death or the transferor has died.

• (2) Where tax is or may be chargeable on the value transferred by a transfer of value and—

• (a) application is made to the Board after the expiration of two years from the transfer (or, if the Board think fit to entertain the application, at an earlier time) by a person who is or might be liable for the whole or part of the tax ; and

• (b) the applicant delivers to the Board, if the transfer is one made on death, a full statement to the best of his knowledge and belief of all property included in the estate of the deceased immediately before his death and, in any other case, a full and proper account under this Schedule ;

the Board may, as the case requires, determine the amount of the tax or determine that no tax is chargeable ; and subject to the payment of any tax so determined to be chargeable the Board may give a certificate of their determination, and shall do so if the transfer of value is one made on death or the transferor has died.

• (3) Subject to sub-paragraph (4) below.—

• (a) a certificate under sub-paragraph (1) above shall discharge the property shown in it from the Inland Revenue charge on its acquisition by a purchaser ; and

• (b) a certificate under sub-paragraph (2) above shall discharge all persons from any further claim for the tax on the value transferred by the chargeable transfer concerned and extinguish any Inland Revenue charge for that tax.

• (4) A certificate under this paragraph shall not discharge any person from tax in case of fraud or failure to disclose material facts and shall not affect any further tax that may be payable if any further property is afterwards shown to have been included in the estate of a deceased person immediately before his death ; but in so far as the certificate shows any tax to be attributable to the value of any property it shall remain valid in favour of a purchaser of that property without notice of any fact invalidating the certificate.

Determination of questions on previous view of law

26

Where any payment has been made and accepted in satisfaction of any liability for tax and on a view of the law then generally received or adopted in practice, any question whether too little or too much has been paid or what was the right amount of tax payable shall be determined on the same view, notwithstanding that it appears from a subsequent legal decision or otherwise that the view was or may have been wrong.

Administration actions

27

Where proceedings are pending in any court for the administration of any property to the value of which any tax charged on the value transferred by a chargeable transfer is attributable, the court shall provide, out of any such property in the possession or control of the court, for the payment of any of the tax so attributable, or interest on it, which remains unpaid.

Penalties

28

• (1) Subject to sub-paragraph (2) below, any person who—

• (a) fails to deliver an account under paragraph 2 or 3 above ; or

• (b) fails to make a return under paragraph 4 above ; or

• (c) fails to comply with a notice under paragraph 5 above; or

• (d) fails to comply with a notice under paragraph 9(2) above:

shall be liable to a penalty not exceeding £50 and, if the failure continues after it has been declared by a court or the Special Commissioners, to a further penalty not exceeding £10 for each day on which it continues.

• (2) A person shall not be liable to a penalty under this paragraph for a failure which is remedied before proceedings in which the failure could be declared are commenced; and where a person has a reasonable excuse for the failure he shall not be liable to a penalty under this paragraph unless he fails to remedy it without unreasonable delay after the excuse has ceased.

29

A person who, after being duly summoned under paragraph 9(3) above, neglects or refuses to appear before the Special Commissioners at the time and place appointed for that purpose or refuses to be sworn or to answer any lawful question concerning the matters under consideration shall be liable to a penalty not exceeding £50.

30

• (1) If any person liable for any tax on the value transferred by a chargeable transfer fraudulently or negligently delivers, furnishes or produces to the Board any incorrect account, information or document, he shall be liable, in the case of fraud, to a penalty not exceeding the aggregate of £50 and twice the difference mentioned in sub-paragraph (2) below and, in the case of negligence, to a penalty not exceeding the aggregate of £50 and that difference.

• (2) The difference referred to in sub-paragraph (1) above is the amount by which the tax for which that person is liable exceeds what would be the amount of that tax if the facts were as shown in the account, information or document

• (3) Any person not liable for tax on the value transferred by a chargeable transfer who fraudulently or negligently furnishes or produces to the Board any incorrect information or document in connection with the transfer shall be liable, in the case of fraud, to a penalty not exceeding £500, and in the case of negligence to a penalty not exceeding £250.

• (4) Any person who assists in or induces the delivery, furnishing or production in pursuance of this Schedule of any account, information or document which he knows to be incorrect shall be liable to a penalty not exceeding £500.

31

• (1) If after any account, information or document has been delivered, furnished or produced by any person without fraud or negligence it comes to his notice that it was incorrect in any material respect it shall be treated for the purposes of paragraph 30 above as having been negligently delivered, furnished or produced unless the error is remedied without unreasonable delay.

• (2) If after any account, information or document has been delivered, furnished or produced by any person in pursuance of this Schedule it comes to the notice of any other person that it contains an error whereby tax for which that other person is liable has been or might be underpaid, that other person shall inform the Board of the error ; and if he fails to do so without unreasonable delay he shall be liable to the penalty to which he would be liable under paragraph 30 above if the account, information or document had been delivered, furnished or produced by him and the case were one of negligence.

Recovery of penalties

32

• (1) All proceedings for the recovery of penalties under this Schedule shall be commenced by the Board or, in Scotland, by the Board or the Lord Advocate.

• (2) Any such proceedings may be commenced either before the Special Commissioners or in the High Court or the Court of Session and shall, if brought in the High Court, be deemed to be civil proceedings by the Crown within the meaning of Part II of the Crown Proceedings Act 1947 or, as the case may be, that Part as for the time being in force in Northern Ireland.

• (3) Where any such proceedings are brought before the Special Commissioners, an appeal shall lie from their decision to the High Court or, as the case may be, the Court of Session—

• (a) by either party, on a question of law ; and

• (b) by the defendant (in Scotland, defender) against the amount of any penalty awarded ;

and on an appeal under paragraph (b) above the Court may either confirm the decision or reduce or increase the sum awarded.

• (4) Proceedings under this paragraph before the Special Commissioners shall be by way of information in writing made to them, and upon summons issued by them to the defendant (or defender) to appear before them at a time and place stated in the summons, and they shall hear and determine each case in a summary way.

• (5) References in this paragraph to the Court of Session are references to that Court as the Court of Exchequer in Scotland.

33

• (1) No proceedings for the recovery of a penalty under this Schedule shall be brought after the expiration of the period of three years beginning with the date on which the amount of the tax properly payable in respect of the chargeable transfer concerned was notified by the Board to the person or one of the persons liable for the tax or any part of it.

• (2) Where the person who has incurred any such penalty has died, any proceedings for the recovery of the penalty which have been or could have been commenced against him may be continued or commenced against his personal representatives, and any penalty awarded in proceedings so continued or commenced shall be a debt due from and payable out of his estate.

34

Any penalty awarded by the Special Commissioners shall be recoverable by the Board as a debt due to the Crown.

Summary award of penalties

35

• (1) Any penalty incurred by a person for a failure to comply with a notice under paragraph 9(2) above or incurred under paragraph 29 above may be awarded summarily by the Special Commissioners, notwithstanding that no proceedings for its recovery have been commenced.

• (2) An appeal shall lie to the High Court or the Court of Session against any award of a penalty under this paragraph and on such an appeal the Court may either confirm or reverse the decision of the Special Commissioners or reduce or increase the sum awarded.

Evidence

36