Finance Act 1976

• (7) The transferred property is a wasting asset for the purposes of this section if, immediately before the chargeable transfer, it had a predictable useful life not exceeding fifty years, having regard to the purpose for which it was held by the transferor; and plant and machinery shall in every case be regarded as having a predictable useful life of less than fifty years.

Valuation

Liability for tax not in fact paid

100

• (1) In paragraph 9 of Schedule 10 to the Finance Act 1975 after sub-paragraph (2) there shall be inserted—

(2A) If in determining the value of a person's estate immediately before his death a liability for tax is taken into account, then, if that tax or any part of it is not in the event paid out of the estate, the value of the estate immediately before his death shall be treated as increased by an amount equal to that tax or so much of it as is not so paid.

• (2) This section has effect in relation to deaths occurring after 15th April 1976.

Falls in value of land after death

101

• (1) At the end of paragraph 9 of Schedule 10 to the Finance Act 1975 there shall be added—

(4) Part III of this Schedule shall apply with respect to the valuation of interests in land which are comprised in a person's estate immediately before his death and are sold by the appropriate person (as defined in that Part) within the period of three years immediately following the' date of the death.

• (2) After Part II of the said Schedule there shall be added the provisions set out in Schedule 13 to this Act.

• (3) This section has effect in relation to deaths occurring after 6th April 1976.

Sales of related property after a death

102

• (1) After paragraph 9 of Schedule 10 to the Finance Act 1975 there shall be inserted—

(9A) (1) This paragraph has effect where, within three years after the death of any person, there is a qualifying sale of any property (" the relevant property ") comprised in his estate immediately before his death and valued for the purposes of tax— (a) in accordance with paragraph 7 above, or (b) in conjunction with property which was also comprised in the estate but has not at any time since the death been vested in the vendors. (2) If a claim is made for relief under this paragraph then, subject to sub-paragraphs (4) and (5) below, the value of the relevant property immediately before the death shall be taken to be what it would have been if it had not been determined as mentioned in sub-paragraph (1) above. (3) For the purposes of sub-paragraph (1) above a sale is a qualifying sale if— (a) the vendors are the persons in whom the relevant property vested immediately after the death or the deceased's personal representatives; and (b) it is at arm's length for a price freely negotiated at the time of the sale and is not made in conjunction with a sale of any of the related property taken into account as mentioned in sub-paragraph (1)(a) above or any of the property mentioned in sub-paragraph (1)(b) above ; and (c) no person concerned as vendor (or as having an interest in the proceeds of sale) is the same as or connected with any person concerned as purchaser (or as having an interest in the purchase); and (d) neither the vendors nor any other person having an interest in the proceeds of sale obtain in connection with the sale a right to acquire the property sold or any interest in or created out of it. (4) Sub-paragraph (2) above shall not apply unless the price obtained on the sale, with any adjustment needed to take account of any difference in circumstances at the date of the sale and at the date of the death, is less than the value which, apart from this paragraph and apart from Part III of this Schedule, would be the value of the relevant property determined as mentioned in sub-paragraph (1) above. (5) Where the relevant property consists of shares in or securities of a close company, sub-paragraph (2) above shall not apply if at any time between the death and the qualifying sale the value of the shares or securities is reduced by more than 5 per cent. as a result of an alteration in the company's share or loan capital or, in any rights attaching to shares in or securities of the company; and for the purposes of this sub-paragraph— - " alteration " includes extinguishment, and - " close company " has the same meaning as in section 39 of this Act."

• (2) This section has effect in relation to deaths occurring after 6th April 1976

Related property: property given to charities, etc.

103

• (1) In paragraph 7 of Schedule 10 to the Finance Act 1975, at the end of sub-paragraph (2) there shall be added

or (c) it is or has within the preceding five years been— (i) the property of a charity, or held on trust for charitable purposes only, or (ii) the property of a body mentioned in paragraph 11, 12 or 13 of Schedule 6 to this Act, and became so on a transfer of value which was made by him or his spouse after 15th April 1976 and was exempt to the extent that the value transferred was attributable to the property

.

• (2) This section has effect in relation to transfers of value before as well as after the passing of this Act.

Sales of certain securities within twelve months after a death

104

Where the estate of a person who dies after 6th April 1976 comprises shares or securities in respect of which quotation on a recognised stock exchange is suspended at the date of the death, the shares or securities shall be qualifying investments for the purposes of Part II of Schedule 10 to the Finance Act 1975 if they are again quoted on a recognised stock exchange at the time when they are sold as mentioned in paragraph 15 or exchanged as mentioned in paragraph 24 of that Schedule.

Settled property

Survivorship clauses

105

• (1) Schedule 5 to the Finance Act 1975 shall have effect, and subject to subsections (2) and (3) below shall be deemed always to have had effect, as if paragraph 6(7) were omitted and the following paragraph inserted after paragraph 22—

(22A) (1) Where under the terms of a will or otherwise property is held for any person on condition that he survives another for a specified period of not more than six months, this Part of this Act shall apply as if the dispositions taking effect at the end of the period or, if he does not survive until then, on his death (including any such disposition which has effect by operation of law or is a separate disposition of the income from the property) had had effect from the beginning of the period. (2) Sub-paragraph (1) above does not affect the application of this Part of this Act in relation to any distribution or application of property occurring before the dispositions there mentioned take effect. (3) Where the death with which the period mentioned in sub-paragraph (1) above begins occurred before 13th March 1975, that sub-paragraph shall not apply in relation to any property if or to the extent that, by virtue of section 121(1)(c) of the Finance Act 1972 (relief for property given to a surviving spouse), the value attributable to it was disregarded for the purposes of estate duty chargeable on that death.

• (2) Subsection (1) above shall not have effect in a case where the period there mentioned ended before 7th April 1976 if the application at the end of the period of sub-paragraph (2) of paragraph 6 of the said Schedule 5 was excluded by sub-paragraph (7) of that paragraph.

• (3) Where the person for whom property was held as mentioned in subsection (1) above—

• (a) was the spouse of the other person there mentioned, and

• (b) died before the end of 1976 and during the period there mentioned,

that subsection shall not have effect if the persons mentioned in subsection (4) below so elect by written notice given to the Board within twelve months of the second death or such longer time as the Board may allow.

• (4) The persons referred to in subsection (3) above are the personal representatives of each spouse and the trustees of every settlement in which either of the spouses had an interest in possession immediately before his death.

Accumulation and maintenance settlements

106

• (1) In paragraph 15 of Schedule 5 to the Finance Act 1975, at the end of sub-paragraph (1) there shall be added the words

and (c) either— (i) not more than twenty-five years have elapsed since the day on which the settlement was made or, if it was later, since the time (or latest time) when the conditions stated in paragraphs (a) and (b) above became satisfied with respect to the property or part; or (ii) all the persons who are or have been beneficiaries are or were either grandchildren of a common grandparent or children, widows or widowers of such grandchildren who were themselves beneficiaries but died before the time when, had they survived, they would have become entitled as mentioned in paragraph (a) above.

• (2) For sub-paragraphs (4) and (5) of the said paragraph 15 there shall be substituted—

(4) Where the conditions stated in paragraphs (a) and (b) of sub-paragraph (1) above were satisfied on 15th April 1976 with respect to any property comprised in a settlement made before that day, paragraph (c)(i) of that sub-paragraph shall have effect with the substitution of a reference to that day for the reference to the day on which the settlement was made, and the condition stated in paragraph (c)(ii) shall be treated as satisfied if— (a) it is satisfied in respect of the period beginning with 15th April 1976 ; or (b) it is satisfied in respect of the period beginning with 1st April 1977 and either there was no beneficiary living on 15th April 1976 or the beneficiaries on 1st April 1977 include a living beneficiary ; or (c) there is no power under the terms of the settlement whereby it could have become satisfied in respect of the period beginning with 1st April 1977, and the trusts of the settlement have not been varied at any time after 15th April 1976. (5) In sub-paragraph (1) above " persons " includes unborn persons ; but the conditions stated in paragraphs (a) and (b) of that sub-paragraph shall be treated as not satisfied unless there is or has been a living beneficiary. (6) Paragraph 11 above shall apply for the interpretation of this paragraph as it applies for the interpretation of paragraphs 6 to 10 ; and for the purposes of this paragraph a person's children shall be taken to include his illegitimate children, his adopted children and his step-children.

• (3) In paragraph 14(5)(b) of the said Schedule 5, after the word " therein " there shall be inserted the words " living at the time of the capital distribution ".

Employee trusts

107

• (1) Paragraph 17 of Schedule 5 to the Finance Act 1975 shall be amended as follows.

• (2) After sub-paragraph (4) there shall be inserted—

(4A) Where any property to which this paragraph applies ceases to be comprised in a settlement and, either immediately or not more than one month later, the whole of it becomes comprised in another settlement, then, if this paragraph again applies to it when it becomes comprised in the second settlement, it shall be treated for all the purposes of this Part of this Act as if it had remained comprised in the first settlement.

• (3) At the end of sub-paragraph (6) there shall be added the words

except that if more than one relevant anniversary has passed and, accordingly, more than one deferred tax becomes chargeable— (a) the second deferred tax shall be charged on that value less the amount of the first deferred tax ; and (b) the third deferred tax (if any) shall be charged on the amount found under paragraph (a) above less the amount of the second deferred tax ; and so on.

• (4) In sub-paragraph (9)(b) for the words "is chargeable" there shall be substituted the words " would, apart from sub-paragraph (7)(b) above, be chargeable ".

• (5) This section shall be deemed to have come into force on 7th April 1976.

Newspaper trusts

108

• (1) The following paragraph shall be inserted after paragraph 17 of Schedule 5 to the Finance Act 1975—

(17A) (1) In relation to property comprised in a settlement to which this paragraph applies, paragraph 17 above shall have effect as if newspaper publishing companies were included among the persons within paragraphs (a) to (c) of sub-paragraph (1) of that paragraph. (2) This paragraph applies to a settlement if shares in a newspaper publishing company or a newspaper holding company are the only or principal property comprised in the settlement. (3) In this paragraph— - " newspaper publishing company " means a company whose business consists wholly or mainly in the publication of newspapers in the United Kingdom ; and - " newspaper holding company " means a company which— has as its only or principal asset shares in a newspaper publishing company, and has powers of voting on all or most questions affecting the publishing company as a whole which if exercised would yield a majority of the votes capable of being exercised thereon; and for the purposes of this paragraph shares shall be treated as the principal property comprised in a settlement or the principal asset of a company if the remaining property comprised in the settlement or the remaining assets of the company are such as may be reasonably required to enable the trustees or the company to secure the operation of the newspaper publishing company concerned.

• (2) This section shall be deemed to have come into force on 7th April 1976.

Remuneration of trustees

109

After paragraph 19 of Schedule 5 to the Finance Act 1975 there shall be inserted—

(19A) Where under the terms of a settlement a person is entitled by way of remuneration for his services as trustee to an interest in possession in property comprised in the settlement, then, except to the extent that the interest represents more than a reasonable amount of remuneration,— (a) the interest shall be left out of account in determining for the purposes of this Part of this Act the value of his estate immediately before his death, and (b) tax shall not be charged under paragraph 4(2) above when the interest comes to an end.

Settlor's widow

110

• (1) At the end of section 22(3) of the Finance Act 1975 there shall be added—

The references in this subsection to the settlor's spouse include, in a case where the settlor died less than two years before the deceased or the deceased died before 1st April 1977, references to the settlor's widow or widower.

• (2) In paragraph 4 of Schedule 5 to that Act, at the end of sub-paragraph (6) there shall be added—

The references in this sub-paragraph to the settlor's spouse include, in a case where the settlor has died less than two years before the interest comes to an end or the interest comes to an end before 1st April 1977, references to the settlor's widow or widower.

• (3) In paragraph 6 of that Schedule, at the end of sub-paragraph (6) there shall be added—

The references in this sub-paragraph to the settlor's spouse include, in the case of a distribution payment made less than two years after the settlor's death or made before 1st April 1977, references to the settlor's widow or widower

.

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

Distributions to charities etc.

111

• (1) For sub-paragraph (2) of paragraph 10 of Schedule 6 to the Finance Act 1975 there shall be substituted—

(2) Subject to the provisions of Part II of this Schedule, where property comprised in a settlement is given to a charity, the payment or transfer of the property out of the settlement shall not be a distribution payment for the purposes of Schedule 5 to this Act.

• (2) In paragraph 11 of the said Schedule 6, after sub-paragraph (1) there shall be inserted—

(1A) Subject to the provisions of Part II of this Schedule, where property comprised in a settlement becomes the property of a political party qualifying for exemption under this paragraph, the payment or transfer of the property out of the settlement shall not be a distribution payment for the purposes of Schedule 5 to this Act.

• (3) At the end of paragraph 12 of the said Schedule 6 there shall be added—

(2) Subject to the provisions of Part II of this Schedule, where property comprised in a settlement becomes the property of a body mentioned in sub-paragraph (1) above, the payment or transfer of the property out of the settlement shall not be a distribution payment for the purposes of Schedule 5 to this Act.

• (4) In paragraph 13 of the said Schedule 6, after sub-paragraph (1) there shall be inserted—

(1A) Subject to the provisions of Part II of this Schedule, where— (a) property comprised in a settlement becomes at any time the property of a body not established or conducted for profit, and (b) the Treasury so direct (whether before or after that time), the payment or transfer of the property out of the settlement shall not be a distribution payment for the purposes of Schedule 5 to this Act.

;

in sub-paragraphs (3) and (4) for the words " sub-paragraph (1) above " there shall be substituted the words " this paragraph "; and at the end of sub-paragraph (7) there shall be added the words " or if both become the property of the same body on the making of the same payment or transfer out of a settlement ".

• (5) At the end of paragraph 15 of the said Schedule 6 there shall be added—

(6) In a case where property is given by a payment or transfer out of a settlement this paragraph shall have effect as if— (a) any reference to a transfer of value were a reference to the payment or transfer, and (b) paragraphs (b) to (bc) of sub-paragraph (3) above were omitted.

• (6) This section shall be deemed to have come into force on 7th April 1976.

Settled property: other amendments

112

Schedule 14 to this Act (which makes further amendments in relation to settled property) shall have effect.

Application of tax rates

Chargeable transfers made on same day

113

• (1) At the end of section 43 of the Finance Act 1975 there shall be added—

(3) Subject to subsection (2) above, the rate at which tax is charged on the values transferred by two or more chargeable transfers made by the same person on the same day shall be the effective rate at which tax would have been charged if those transfers had been a single chargeable transfer of the same total value. (4) The chargeable transfers referred to in subsections (2) and (3) above do not include a transfer made on the death of the transferor. (5) For the purposes of subsections (2) and (3) above, capital distributions shall be treated as made by the same person if they are made out of property comprised in the same settlement.

• (2) This section has effect in relation to chargeable transfers made after 15th April 1976.

Transfers reported late

114

• (1) This section has effect where a person has made a transfer of value (" the earlier transfer ") which—

• (a) is not notified to the Board in an account under paragraph 2, or by information furnished under paragraph 5, of Schedule 4 to the Finance Act 1975 before the expiration of the period specified in paragraph 2 for the delivery of accounts ; and

• (b) is not discovered until after payment has been accepted by the Board in full satisfaction of the tax on the value transferred by another transfer of value (" the later transfer ") made by him on or after the day on which he made the earlier transfer.

• (2) For the purposes of section 37 of the Finance Act 1975 (except so much of that section as determines the appropriate Table) the earlier transfer shall be treated as if it had been made on the date on which it was discovered or, if the later transfer is made on death, immediately before the later transfer.

• (3) Where the later transfer is the relevant transfer for the purposes of paragraph 7 of Schedule 5 to the said Act of 1975, the earlier transfer shall not by virtue of subsection (2) above be treated for those purposes as made after the later transfer.

• (4) Subsection (2) above shall not increase the amount in respect of which interest is payable under paragraph 19 of Schedule 4 to the said Act of 1975 in relation to the earlier transfer in respect of any period falling before the expiration of six months from the date on which it was discovered.

• (5) Where, apart from this subsection, the earlier transfer would be wholly or partly exempt by reason of some or all of the value thereby transferred falling within a limit applicable to an exemption, then, if tax has been accepted as mentioned in subsection (1)(b) above on the basis that the later transfer is partly exempt by reason of part of the value thereby transferred falling within that limit—

• (a) tax shall not be chargeable on that part of the value transferred by the later transfer; but

• (b) a corresponding part of the value transferred by the earlier transfer shall be treated as falling outside that limit.

• (6) Subsection (1)(b) above shall apply to a transfer in respect of which no tax is chargeable because the rate of tax applicable under the said section 37 is nil as if payment had been accepted when the transfer was notified in an account under paragraph 2 of the said Schedule 4.

• (7) For the purposes of this section a transfer is discovered—

• (a) if it is notified under the provisions mentioned in subsection (1)(a) above after the expiration of the period there mentioned, on the date on which it is so notified ;

• (b) in any other case, on the date on which the Board give notice of a determination in respect of the transfer under paragraph 6 of the said Schedule 4.

• (8) This section shall apply to distribution payments as defined in paragraph 11 of the said Schedule 5 and to capital distributions as it applies to transfers of value; and for the purposes of this section such payments or distributions shall be treated as made by the same person if they are made out of property comprised in the same settlement.

Loans

Free loans etc.

115

• (1) Where an individual (" the lender ") allows another person (" the borrower ") the use of money or other property in any year, then, subject to the provisions of this section and section 116 below, the lender shall be treated as making a disposition as a result of which the value of his estate is reduced by the amount (if any) by which any consideration for the use falls short of the cost to him of allowing it (determined in accordance with section 116 below).

• (2) The disposition under subsection(1) above shall be treated as made at the end of the year or, if earlier, at the time when the use comes to an end.

• (3) Where the use of the property is allowed for a period specified in advance, or where in any other case the lender has no right to terminate the use immediately after it begins, subsection (1) above shall not apply in relation to use before the expiration of the specified period or, as the case may be, before the earliest time when the lender could terminate the use if he exercised his right to do so at the earliest opportunity.

• (4) Subsection (1) above shall not apply in relation to any use of property allowed to the borrower at a time when it is mainly used by the lender or the lender's spouse.

• (5) Subsection (1) above shall not apply in relation to the use of property for a period which is less than twelve months unless that period falls within a period of twenty-four months during which the lender allows the borrower the use of that property or similar property for periods which amount in aggregate to twelve months or more; and in calculating that aggregate no account shall be taken of—

• (a) use to which, by virtue of subsection (3) or (4) above, subsection (1) does not apply, or

• (b) use to which (apart from this subsection) subsection (1) above does apply, if the disposition under that subsection is not a transfer of value.

• (6) Subsection (1) above shall not apply in relation to the use of property where the borrower is a body corporate if—

• (a) it is not a close company; or

• (b) not less than 90 per cent. in nominal value of its issued ordinary shares are shares to which the lender or his spouse is beneficially entitled ; or

• (c) it is not an investment company and either—

• (i) the lender or his spouse is a participator in the company or its holding company or has been such a participator at any time during the year or either of the two preceding years ; or

• (ii) the lender's spouse died during the year or either of the two preceding years and was at any time during the three years ending with the year in which he died a participator in the company or its holding company.

• (7) Subsection (1) above shall not apply in relation to the use of property where the borrower is a firm if—

• (a) the lender or his spouse is a partner or has been a partner at any time during the year or either of the two preceding years; or

• (b) the lender's spouse died during the year or either of the two preceding years and was a partner at any time during the three years ending with the year in which he died.

• (8) Subsection (1) above shall not apply in relation to a loan in respect of which any person is chargeable to income tax under Schedule E by virtue of section 66(1) above.

• (9) For the purposes of this section an individual who makes a revocable gift of any property to another person shall, so long as the gift continues revocable, be taken to allow him the use of that property.

• (10) In this section—

• " close company " and " participator " have the same meanings as in section 39 of the Finance Act 1975 ;

• " firm " has the same meaning as in the Partnership Act 1890;

• " holding company " has the same meaning as in section 154 of the Companies Act 1948 ;

• " investment company " means a company falling within paragraph (a) of paragraph 16(3) of Schedule 4 to the Finance Act 1975 and not falling also within paragraph (b) or (c) of that paragraph ;

• " ordinary shares " has the same meaning as in paragraph 13 of that Schedule ;

• " year " means period of twelve months beginning with 6th April.

• (11) This section has effect, in place of section 41 of the Finance Act 1975, in relation to the year beginning 6th April 1976 and subsequent years.

Free loans etc.: value transferred

116

• (1) The cost to the lender of allowing the use of money or land shall be taken to be equal to the consideration which might be expected in a transaction on the same terms as those on which the use is allowed (apart from terms as to consideration) made at arm's length between persons not connected with each other.

• (2) The cost to the lender of allowing the use of property other than money or land shall be taken to be equal to the aggregate of—

• (a) the annual value of the use of the property or, if the use does not continue throughout the year, a proportionate part of that annual value, and

• (b) any expense incurred by the lender in connection with property during the year or, if the use does not continue throughout the year, a proportionate part of that expense, but excluding expense incurred in the acquisition or production of the property and excluding any hire charges;

except that if the property is hired by the lender and the annual amount of the hire charges is greater than the annual value of the use of the property, paragraph (a) above shall have effect as if it referred to that annual amount instead of to that annual value.

• (3) If the property is money or land, the amount arrived at under section 115(1) above shall be reduced by the income tax which would be chargeable in respect of that amount (after taking account in the case of land of any deductions which might be made for the purposes of Schedule A) if it were the highest part of the lender's total income ; and in calculating that income there shall be disregarded any such sum as is mentioned in paragraphs (a) to (c) of section 529 of the Taxes Act.

Modification of exemptions for loans

117

• (1) Schedule 6 to the Finance Act 1975 shall apply with the following modifications to—

• (a) any transfer of value which is a disposition under section 115 above, and

• (b) any other transfer of value, whether made before or after the passing of this Act, if or to the extent that it is a disposition whereby the use of money or other property is allowed by one person (" the lender") to another (" the borrower ").

• (2) For the purposes of paragraph 1 (transfers between spouses) the borrower's estate shall be treated as increased by an amount equal to the value transferred.

• (3) For the purposes of paragraphs 4 (small gifts) and 6 (gifts in consideration of marriage) the transfer of value shall be treated as made by outright gift.

• (4) Paragraph 5(1) (normal expenditure out of income) shall apply as if for the conditions stated in paragraphs (a) and (b) there were substituted the condition that the transfer was a normal one on the part of the transferor.

• (5) Paragraphs 10 and 11 (gifts to charities and to political parties) shall apply without sub-paragraph (1)(b) (£100,000 limit for transfers within one year of death); and for the purposes of those paragraphs and paragraphs 12 and 13 (gifts for national purposes and for public benefit)—

• (a) the value transferred shall be treated as attributable to the property of which the borrower is allowed the use, and

• (b) that property shall be treated as given to, or as becoming the property of, the borrower unless the use allowed includes use for purposes other than charitable purposes or those of a body mentioned in paragraph 11, 12 or 13.

• (6) Part II (exceptions) shall not apply.

Miscellaneous

Close companies

118

• (1) In section 39 of the Finance Act 1975 the following subsections shall be inserted after subsections (6) and (8) respectively:—

(6A) In determining for the purposes of this section whether a disposition made by a close company is a transfer of value or what value is transferred by such a transfer no account shall be taken of the surrender by the company, in pursuance of section 258 of the Taxes Act or of section 92 of the Finance Act 1972, of any relief or of the benefit of any amount of advance corporation tax paid by it. (8A) Where part of a close company's share capital consists of preference shares (within the meaning of section 234(3) of the Taxes Act) and a transfer of value made by that or any other close company has only a small effect on the value of those shares, compared with its effect on the value of other parts of the company's share capital, the preference shares shall be left out of account in determining the respective rights and interests of the participators for the purposes of this section. (8B) Where a close company (in this subsection and subsection (8C) below referred to as the transferor company) is a member, but not the principal member, of a group; and— (a) a disposal by the transferor company of any asset is a disposal to which section 273(1) of the Taxes Act applies and is also a transfer of value; and (b) the transfer of value has only a small effect on the value of the minority participators' rights and interests in that company compared with its effect on the value of the other participators' rights and interests in the company ; the rights and interests of the minority participators shall be left out of account in determining the respective rights and interests of the transferor company's participators for the purpose of apportioning the value transferred under this section. (8C) For the purposes of subsection (8B) above— (a) the principal member of a group is the member of which all the other members are 75 per cent. subsidiaries; and (b) a minority participator is a participator of the transferor company who is not, and is not a person connected with, a participator of the principal member of the group or of any of the principal member's participators ; and in that subsection and this subsection " group " and " 75 per cent. subsidiary " have the same meanings as in section 272 of the Taxes Act. (8D) Where the value of the estate of a company (in this subsection referred to as the transferee company) is increased as the result of a transfer of value made by a close company (in this subsection referred to as the transferor company) and an individual to whom part of the value transferred is apportioned under this section has an interest in the transferee company (or in a company which is a participator of the transferee company or any of its participators, and so on), then, in computing for the purposes of this section the amount to be offset, that is to say, the amount by which the value of his estate is more than it would be but for the transfer,— (a) the increase in the value of the transferee company's estate shall be taken to be such part of the value transferred as accounts for the increase ; and (b) the increase so computed shall be apportioned among the transferee company's participators according to their respective rights and interests in the company immediately before the transfer (and, where necessary, further apportioned among their participators, and so on), and the amount so apportioned to the individual shall be taken to be the amount to be offset

.

• (2) Where, by virtue of section 39(5) of the Finance Act 1975, an alteration in a close company's share or loan capital or of any rights attaching to shares in or debentures of a close company is treated as a disposition made by the participators, and—

• (a) a person is a participator in his capacity as trustee of a settlement; and

• (b) the disposition would, if the trustee were beneficially entitled to the settled property, be a transfer of value made by him;

subsection (3) below shall apply if at the time of the alteration an individual is beneficially entitled to an interest in possession in the whole or part of so much of the settled property as consists of shares in or securities of the close company which are not quoted on a recognised stock exchange, and subsection (4) below shall apply unless at that time an individual is beneficially entitled to an interest in possession in the whole of so much of the settled property as consists of such shares or securities.

• (3) Where this subsection applies such part of the individual's interest shall be deemed for the purposes of paragraph 4 of Schedule 5 to the Finance Act 1975 to come to an end at the time of the alteration as corresponds to the relevant decrease of the value of the property in which the interest subsists, that is to say the decrease caused by the alteration.

• (4) Where this subsection applies, a capital distribution shall be deemed to be made at the time of the alteration out of so much of the settled property as—

• (a) consists of shares in or securities of the close company which are not quoted on a recognised stock exchange ; and

• (b) is not a part in which at the time of the alteration an interest in possession subsists to which an individual is beneficially entitled;

and the amount of the capital distribution shall be taken to be the amount by which the value of the property out of which it is treated as being made is less than it would be but for the alteration, and that amount shall for the purposes of paragraphs 7 to 9 of Schedule 5 to the Finance Act 1975 be deemed to be a distribution payment made out of that property ; and paragraph 6(4)(a) of that Schedule shall have effect, in relation to a capital distribution treated as made under this subsection as if the words " less the tax payable on it" were omitted.

• (5) In paragraph 24(1)(b) of Schedule 5 to the Finance Act 1975 for the words " subsection (4) " there shall be substituted the words " subsections (4) and (8D) ".

• (6) In section 39(2)(a) of the Finance Act 1975 after the words " corporation tax " there shall be inserted the words " or would fall to be so taken into account but for section 239 of the Taxes Act ".

• (7) At the end of section 39(5) of the Finance Act 1975 there shall be added the words " and shall not be taken to have affected the value immediately before that time of the shares or debentures not so quoted ".

• (8) At the end of paragraph 8 of Schedule 6 to the Finance Act 1975 there shall be added the words " but references in paragraph 2 above to transfers of value made by a transferor and to the values transferred by them (calculated as there mentioned) include references to apportionments made to a person under section 39 of this Act and the amounts for the tax on which (if charged) he would be liable ".

• (9) In paragraph 9(2) of Schedule 10 to the Finance Act 1975 after the words " an increase or decrease of the value of any property so comprised " there shall be inserted the words " other than a decrease resulting from such an alteration as is mentioned in section 39(5) of this Act ".

• (10) The preceding provisions of this section have effect as follows:—

• (a) subsections (1), (5), (6) and (8) in relation to transfers of value or dispositions made after 15th April 1976 ; and

• (b) subsections (2) to (4), (7) and (9) in relation to alterations made or deaths occurring after 27th May 1976.

Liability for tax in respect of transfer by spouse

119

• (1) Section 25(8) of the Finance Act 1975 (which makes the transferor's spouse liable for tax in respect of a chargeable transfer to the extent of the value of property acquired by the spouse on another transfer made by the transferor) shall have effect as if for the reference to the value of the property (" the transferred property ") at the time of the other transfer there mentioned (" the spouse transfer") there were substituted a reference to the market value of the property at that time or, in a case where subsection (2) below applies, to the lower market value mentioned in paragraph (c) of that subsection.

• (2) This subsection applies where—

• (a) the chargeable transfer is made after the spouse transfer ; and

• (b) the transferred property either remains the property of the transferor's spouse (" the transferee ") at the date of the chargeable transfer, or has before that date been sold by the transferee by a qualifying sale; and

• (c) the market value of the transferred property on the relevant date (that is to say, the date of the chargeable transfer or, as the case may be, of the qualifying sale) is lower than its market value at the time of the spouse transfer; and

• (d) the transferred property is not tangible movable property.

• (3) In this section " market value " and " qualifying sale " have the same meanings as in section 99 above; and, subject to subsection (4) below, Schedule 12 to this Act shall have effect for the purposes of this section as it has effect for the purposes of that section.

• (4) In its application by virtue of subsection (3) above Schedule 12 to this Act shall have effect as if—

• (a) references to the chargeable transfer were references to the spouse transfer; and

• (b) references to the transferee's spouse were omitted; and

• (c) references to section 99 above were references to this section.

Excluded property: reversionary interests

120

• (1) In section 24(3) of the Finance Act 1975, after paragraph (a) there shall be inserted—

(aa) it is one to which either the settlor or his spouse is beneficially entitled ; or

.

• (2) This section shall be deemed to have come into force on 16th April 1976, but shall not apply in relation to a reversionary interest under a settlement made before that date.

Deeds of family arrangement, etc.

121

• (1) In section 47 of the Finance Act 1975, after section (1) there shall be inserted—

(1A) Where property comprised in a person's estate immediately before his death is settled by his- will and, within the period of two years after his death and before any interest in possession has subsisted in the property, a distribution payment (within the meaning of paragraph 6 of Schedule 5 to this Act) is made out of the property or an event occurs on the happening of which a capital distribution would (apart from this subsection) be treated as so made under paragraphs 6(2) or 15(3) of that Schedule, then— (a) the making of the distribution payment shall not be a capital distribution, and paragraphs 6(2) and 15(3) shall have effect on the happening of the event as if the references in them to a capital distribution were references to a distribution payment, and (b) this Part of this Act shall apply as if the will had provided that on the testator's death the property should be applied or held as it is applied by the distribution payment or held after the happening of the event. (1B) Where a testator expresses a wish that property bequeathed by his will should be transferred by the legatee to other persons, and the legatee transfers any of the property in accordance with that wish within the period of two years after the death of the testator— (a) the transfer shall not be a transfer of value, and (b) this Part of this Act shall have effect as if the property transferred had been bequeathed by the will to the transferee.

.

• (2) Subsection (1) above applies in relation to deaths before as well as after the passing of this Act, and shall have effect in relation to a death occurring after 9th December 1972 but before 13th March 1975 as if the references to the period of two years after the death were references to the period ending with 13th March 1977.

Inheritance (Provision for Family and Dependants) Act 1975

122

• (1) Where an order is made under section 2 of the Inheritance (Provision for Family and Dependants) Act 1975 in relation to any property forming part of the net estate of a deceased person, then, without prejudice to section 19(1) of that Act, the property shall for the purposes of capital transfer tax be treated as if it had on his death devolved subject to the provisions of the order.

• (2) Where an order is made under section 10 of the said Act of 1975 requiring a person to provide any money or other property by reason of a disposition made by the deceased, then—

• (a) if that disposition was a chargeable transfer and the personal representatives of the deceased make a claim for the purpose—

• (i) tax paid or payable on the value transferred by that chargeable transfer (whether or not by the claimants) shall be repaid to them by the Board or, as the case may be, shall not be payable ; and

• (ii) the rate or rates of tax applicable to the transfer of value made by the deceased on his death shall be determined as if the values previously transferred by chargeable transfers made by him were reduced by that value;

• (b) the money or property shall be included in the deceased's estate for the purpose of the transfer of value made by him on his death.

• (3) Where the money or other property ordered to be provided under the said section 10 is less than the maximum permitted by that section subsection (2)(a) above shall have effect in relation to such part of the value there mentioned as is appropriate.

• (4) The adjustment in consequence of the provisions of this section or of section 19(1) of the said Act of 1975 of the tax payable in respect of the transfer of value made by the deceased on his death shall not affect—

• (a) the amount of any deduction to be made under section 8 of that Act in respect of tax borne by the person mentioned in subsection (3) of that section ; or

• (b) the amount of tax to which regard is to be had under section 9(2) of that Act;

and where a person is ordered under that Act to make a payment or transfer property by reason of his holding property treated as part of the deceased's net estate under section 8 or 9 and tax borne by him is taken into account for the purposes of the order, any repayment of that tax shall be made to the personal representatives of the deceased and not to that person.

• (5) Tax repaid under paragraph (a)(i) of subsection (2) above shall be included in the deceased's estate for the purposes of the transfer of value made by him on his death; and tax repaid under that paragraph or under subsection (4) above shall form part of the deceased's net estate for the purposes of the said Act of 1975.

• (6) A distribution payment made in compliance with an order under the said Act of 1975 shall not be a capital distribution; and where an order under that Act provides for property to be settled or for the variation of a settlement and, apart from this subsection—

• (a) tax would be charged under paragraph 4(2) of Schedule 5 to the Finance Act 1975 on the coming into force of the order; or

• (b) a capital distribution would be treated as made on that occasion under any other provision of the said Schedule 5,

the said paragraph 4(2) shall not apply and any such provision as is mentioned in paragraph (b) above shall apply as if it referred to a distribution payment instead of a capital distribution.

• (7) In subsections (2)(a) and (5) above " tax " includes interest on tax.

• (8) Tax overpaid or underpaid in consequence of subsection (1) above or of the said section 19(1) shall not carry interest for any period before the order there mentioned is made; and tax repayable on a claim under subsection (2) above shall carry interest (which shall not constitute income for any tax purposes) at the rate for the time being applicable under paragraph 19(1)(ii) of Schedule 4 to the Finance Act 1975 from the date on which the claim is made.

• (9) This section applies in relation to deaths after 6th April 1976.

Legitim

123

• (1) Where a testator dies leaving a surviving spouse and a person under the age of 18 entitled to claim legitim, and provision is made in his will or other testamentary document for a disposition to his spouse which, if it could take effect, would leave insufficient property in the estate to satisfy the entitlement of that person in respect of legitim, the following provisions of this section shall apply.

• (2) Subject to subsections (3) and (4) below, tax shall be charged at the testator's death as if the disposition to the spouse did not include any amount in respect of legitim, but if within the period mentioned in subsection (8) below the person or persons concerned renounce their claim to legitim, tax shall be repaid to the estate calculated on the basis that the disposition to the spouse did include the amount renounced, and the tax to be repaid shall carry interest at the rate for the time being set out in paragraph 19(1)(c)(i) of Schedule 4 to the Finance Act 1975 from the date on which the tax was paid.

• (3) The executors or judicial factor of the testator may, in accordance with the provisions of this section, elect that subsection (2) above shall not apply but that subsection (4) below shall apply.

• (4) Tax shall be charged at the testator's death as if the disposition to the spouse had taken effect, but where the person or persons concerned claim legitim within the period mentioned in subsection (8) below, tax shall be charged on the amount so claimed calculated on the basis that the legitim fund had been paid out in full at the testator's death (excluding any part of the fund renounced before any claim has been made) and the tax chargeable thereon had been apportioned rateably among the persons entitled to claim legitim (excluding any who have renounced as aforesaid) and the amount of tax charged shall carry interest at the rate mentioned in subsection (2) above as if paragraph 19(1)(b) of Schedule 4 to the Finance Act 1975 had applied.

• (5) Section 8(3) and (4) of the Finance Act 1894 and section 25(5)(a) of the Finance Act 1975 shall not apply in relation to tax charged by virtue of subsection (4) above but the person liable in respect of that tax shall be the person who claims legitim and any person mentioned in section 25(5)(c) of that Act, and section 27(1) of that Act shall apply in relation to the person who claims legitim as it applies in relation to the personal representatives of a deceased person.

• (6) Where within the period mentioned in subsection (8) below a person renounces his claim to legitim, that shall not be a transfer of value.

• (7) Where the executors or judicial factor of the testator decide to make an election under subsection (3) above they shall give notice in writing of that election to the Board within two years from the date of death of the testator or such longer period as the Board may permit.

• (8) For the purposes of subsections (2) and (4) above, a person shall be treated as having claimed legitim unless he has renounced his claim before attaining the age of 18 or he renounces his claim within two years of his attaining that age or such longer period as the Board may permit.

• (9) Where a person dies before attaining the age of 18 or before making a renunciation under subsection (8) above the provisions of this section shall apply in relation to that person's executors or judicial factor as they would have applied in relation to that person if that person had attained the age of 18 with the substitution of the date of death of that person for the date on which a person attained that age, but where the executors or factor renounce a claim to legitim in respect of a person the amount renounced shall not be treated as part of that person's estate.

• (10) Where subsection (2) above applies in relation to any estate, then notwithstanding anything in paragraph 24 of Schedule 4 to the Finance Act 1975 the Board may repay tax under that subsection without limit of time.

• (11) Where subsection (4) above applies in relation to any estate, then notwithstanding anything in section 11 of the Finance Act 1894 or paragraph 25 of Schedule 4 to the Finance Act 1975 a certificate of discharge may be given under the said section 11 or the said paragraph 25 in respect of the whole estate, and notwithstanding anything in section 8(7) of the Finance Act 1894 or paragraph 23 of Schedule 4 to the Finance Act 1975 the giving of the certificate shall not preclude the Board from claiming tax under subsection (4) above without limit of time.

• (12) In the case of a testator who died before 13th March 1975, any reference in this section to tax includes a reference to estate duty.

• (13) This section has effect in relation to the estate of any testator who died after 12th November 1974 and extends to Scotland only.

Acceptance of property in satisfaction of tax

124

In Schedule 4 to the Finance Act 1975, in paragraph 17(4), for paragraphs (a) and (b) there shall be substituted—

(a) any picture, print, book, manuscript, work of art, scientific object or other thing which the Treasury are satisfied is pre-eminent for its national, scientific, historic or artistic interest;

.

Double taxation relief

125

• (1) For paragraph 8 of Schedule 7 to the Finance Act 1975 (unilateral double taxation relief) there shall be substituted—

(8) (1) Where the Board are satisfied that in any territory outside the United Kingdom (an " overseas territory ") any amount of tax imposed by reason of any disposition or other event is attributable to the value of any property, then, if— (a) that tax is of a character similar to that of capital transfer tax or is chargeable on or by reference to death or gifts inter vivos ; and (b) any capital transfer tax chargeable by reference to the same disposition or other event is also attributable to the value of that property, they shall allow a credit in respect of that amount (" the overseas tax") against that capital transfer tax in accordance with the following provisions. (2) Where the property is situated in the overseas territory and not in the United Kingdom, the credit shall be of an amount equal to the overseas tax. (3) Where the property— (a) is situated neither in the United Kingdom nor in the overseas territory ; or (b) is situated both in the United Kingdom and in the overseas territory, the credit shall be of an amount calculated in accordance with the following formula— $$A A + B × C$ where A is the amount of the capital transfer tax, B is the overseas tax and C is whichever of A and B is the smaller.$ (4) Where tax is imposed in two or more overseas territories in respect of property which— (a) is situated neither in the United Kingdom nor in any of those territories ; or (b) is situated both in the United Kingdom and in each of those territories, sub-paragraph (3) above shall apply as if, in the formula there set out, B were the aggregate of the overseas tax imposed in each of those territories and C were the aggregate of all, except the largest, of A and the overseas tax imposed in each of them. (5) Where credit is allowed under sub-paragraph (2) above or paragraph 7 above in respect of overseas tax imposed in one overseas territory, any credit under sub-paragraph (3) above in respect of overseas tax imposed in another shall be calculated as if the capital transfer tax were reduced by the credit allowed under sub-paragraph (2) or paragraph 7; and where, in the case of any overseas territory mentioned in sub-paragraph (3) or (4) above, credit is allowed against the overseas tax for tax charged in a territory in which the property is situated, the overseas tax shall be treated for the purposes of those paragraphs as reduced by the credit. (6) In this paragraph references to tax imposed in an overseas territory are references to tax chargeable under the law of that territory and paid by the person liable to pay it. (7) Where relief can be given both under this paragraph and paragraph 7 above, relief shall be given under whichever paragraph provides the greater relief.

• (2) This section has effect in relation to dispositions and other events after 6th April 1976.

Part V — Miscellaneous and Supplementary

Stamp duty: exemption for transfers of loan capital

126

Stamp duty: stock exchange transfers

127

• (1) Stamp duty shall not be chargeable on any transfer to a stock exchange nominee which is executed for the purposes of a stock exchange transaction.

• (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (4) In section 33(1) of the Finance Act 1970 (composition by Stock Exchange in respect of transfer duty) after the words “" the heading ” “Conveyance or Transfer on Sale ” there shall be inserted the words “ ““or”Conveyance or Transfer of any kind not hereinbefore described ” ”and the words “being instruments executed for the purposes of stock exchange transactions as defined in section 4(1) of the Stock Transfer Act 1963 ” shall be omitted.

• (5) This section shall be construed as one with the Stamp Act 1891 and in this section—

“jobber” means a member of The Stock Exchange who is recognised by the Council thereof as carrying on the business of a jobber and carries on that business in the United Kingdom;

“stock exchange nominee” means any person designated for the purposes of this section as a nominee of The Stock Exchange by an order made by the Secretary of State;

“stock exchange transaction” has the meaning given in section 4 of the Stock Transfer Act 1963 .

• (6) The power to make an order under subsection (5) above shall be exercisable by statutory instrument and includes power to vary or revoke a previous order.

• (7) Section 33 of the Finance Act 1970 shall extend to Northern Ireland; and in the application of that section and this section to Northern Ireland for any reference to the Stock Transfer Act 1963 there shall be substituted a reference to the Stock Transfer Act (Northern Ireland) 1963 .

Stamp duty: chargeable transactions in respect of capital companies

128

Development gains

129

Petroleum revenue tax

130

• (1) Schedule 2 to the Oil Taxation Act 1975 (management and collection) shall be amended as follows.

• (2) In paragraph 12(1), after paragraph (c) there shall be inserted

or (d) that for any chargeable period they ought to have made an assessment to tax instead of a determination of loss or a determination of loss instead of an assessment to tax;

and for the words “adjustments in assessments or determinations" there shall be substituted the words “assessments or determinations or amendments of assessments or determinations".

• (3) After paragraph 12(2) there shall be inserted—

(3) Where under this paragraph the Board make an assessment or determination or amend an assessment or determination they shall give notice thereof to the participator concerned; and sub-paragraphs (4), (5) and (6) of paragraph 10 above shall apply in relation to any such assessment, determination or amendment as they apply in relation to an assessment or determination under that paragraph.

• (4) In paragraph 14(1) after the words “an assessment or determination" there shall be inserted the words “or an amendment of an assessment or determination" and at the end there shall be inserted the words “or of the notice of the amendment".

• (5) In paragraph 14(9), in paragraph (a), for the words “or determination" there shall be substituted the words “, determination or amendment" and for the words from “on the adjustments" onwards there shall be substituted the words “on how the assessment, determination, amendment or decision should be varied or on what assessment or determination should be substituted in relation to the chargeable period in question, the same consequences shall ensue as if the Commissioners had determined the appeal to that effect."

• (6) For paragraph 14(10) there shall be substituted—

(10) If, on the appeal, it appears to a majority of the Commissioners present at the hearing that the assessment, determination or amendment is wrong— (a) because no, or a smaller, assessable profit or a, or a larger, allowable loss has accrued for the chargeable period in question; or (b) because a, or a larger, assessable profit or no, or a smaller, allowable loss has accrued for that period, the Commissioners shall vary the assessment, determination or amendment in such manner, or substitute such assessment or determination, as may be required; and it shall be for the participator to satisfy the Commissioners as to any matter within paragraph (a) above.

• (7) In paragraph 14(11) for the words “the determination of the Special Commissioners in any proceedings" there shall be substituted the words “the determination by the Special Commissioners of any appeal".

Inter-American Development Bank

131

• (1) The following provisions of this section shall have effect on the United Kingdom’s becoming a member of the Inter-American Development Bank (“the Bank").

• (2) A security issued by the Inter-American Development Bank shall be taken for the purposes of capital transfer tax . . . to be situated outside the United Kingdom.

• (3) No stamp duty shall be chargeable under Schedule 15 to the Finance Act 1999 (bearer instruments) ... on the transfer of the stock constituted by, or transferable by means of, any instrument issued by the Bank.

Citation, interpretation, construction and repeals

132

• (1) This Act may be cited as the Finance Act 1976.

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

• (3) In this Act—

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

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

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

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

• (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 15 to this Act (which include spent enactments) are hereby repealed to the extent specified in the third column of that Schedule, but subject to any provision at the end of any Part of that Schedule.

SCHEDULES 1, 2

SCHEDULE 2

SCHEDULE 3

The Customs and Excise Act 1952

1

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

2–4

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

3

In section 249(5) of that Act for the words " and producers of wine or made-wine " there shall be substituted the words " producers of wine or made-wine and makers of cider ".

4

In section 253(3) of that Act for the words "or licensed producer of wine or made-wine " there shall be substituted the words " licensed producer of wine or made-wine or registered maker of cider ".

5

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

6

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

7

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

The Finance Act 1964

8

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

The Finance (No. 2) Act 1975

9

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

SCHEDULE 5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Preliminary

1

In this Schedule references to any sections not otherwise identified are to sections of the Taxes Act and " Schedule 1 " means Schedule 1 to that Act.

Short-term assurances

2

A policy which secures a capital sum payable only on death or payable either on death or on earlier disability shall not be a qualifying policy within the meaning of Schedule 1 if the capital sum is payable only if the event in question happens before the expiry of a specified term ending less than one year after the making of the insurance.

Relief by deduction from premiums

3

• (1) In section 19(1) for the words " if the claimant " to the end there shall be substituted the words " an individual who pays any such premium as is specified in subsection (2) below shall (without making any claim) be entitled to relief under this section, and Schedule 4 to the Finance Act 1976 shall apply with respect to that relief. "

• (2) In section 19(2)—

• (a) for the words from " by the claimant" to " (ii) with under writers " there shall be substituted the words " by an individual under a policy of insurance or contract for a deferred annuity, where—

• (a) the payments are made to—

• (i) any insurance company legally established in the United Kingdom or any branch in the United Kingdom of an insurance company lawfully carrying on in the United Kingdom life assurance business (as denned in section 323(2) of this Act); or

• (ii) underwriters; "

• (b) in sub-paragraphs (iii) and (iv) of paragraph (a) the word " with " shall be omitted ;

• (c) in paragraph (b) for the word " claimant" there shall be substituted the word " individual "; and

• (d) at the end of paragraph (c) there shall be added the words " or his spouse ".

4

• (1) Relief under section 19 in respect of any premiums paid by an individual in a year of assessment shall be given by making good to the person to whom they are paid any deficiency arising from the deductions authorised under paragraph 5 below.

• (2) Where the individual is not resident in the United Kingdom but is entitled to relief by virtue of subsection (2) of section 27, sub-paragraph (1) above shall not apply but (subject to the proviso to that subsection) the like relief shall be given to him under paragraph 15 below.

5

Subject to the following provisions of this Schedule,—

• (a) an individual resident in the United Kingdom who is entitled to relief under section 19 in respect of any premium may deduct from any payment in respect of the premium and retain an amount equal to 17 ½ per cent. thereof ; and

• (b) the person to whom the payment is made shall accept the amount paid after the deduction in discharge of the individual's liability to the same extent as if the deduction had not been made and may recover the deficiency from the Board.

Limit on deductions authorised under paragraph 5

6

• (1) Where the premiums payable in any year in respect of any policy or contract exceed £1,500 the percentage mentioned in paragraph 5(a) above is a percentage of such part only of any payment as bears to the whole thereof the same proportion as £1,500 bears to the total amount of the premiums so payable ; but without prejudice to the operation of paragraph 15 below in any case where by virtue of this paragraph the relief given under section 19 is reduced below the limit specified in section 21.

• (2) In this paragraph " year " means the twelve months beginning with the making of the assurance or contract and any subsequent period of twelve months.

Husband and wife

7

Subsection (7) of section 19 shall be omitted.

8

The references in section 19 to an individual's spouse shall include any person who was that individual's spouse at the time the insurance or contract was made, unless the marriage was dissolved before 6th April 1979.

9

Where an election under section 23 of the Finance Act 1971 is in force, the relief to which either the husband or the wife is entitled under section 19 in respect of an insurance or contract on the life of the other or made by the other shall not be affected by paragraph 3 of Schedule 4 to that Act (which requires relief to be determined as if the husband and the wife were not married).

10

Where, throughout a year of assessment, a woman is a married woman living with her husband, then—

• (a) if no election under section 38 is in force, section 21 and paragraph 15 below shall apply as if any relief to which the wife is entitled under section 19 were relief to which the husband is entitled ; and

• (b) if an election under section 38 is in force, section 21 and paragraph 15 below shall apply separately to the amounts paid by each of them, but as if for the limit specified in section 21 there were substituted, in relation to each of them, a limit of £750 or one-twelfth of their total income, whichever is the greater, plus any amount by which the payments in respect of which relief can be given to the other fall short of the limit so substituted.

Industrial assurance policies

11

• (1) This paragraph applies to—

• (a) a policy issued in the course of an industrial assurance business as denned in section 1(2) of the Industrial Assurance Act 1923 or the Industrial Assurance Act (Northern Ireland) 1924; and

• (b) a policy issued by a registered friendly society in the course of tax exempt life or endowment business (as denned in section 337(3)).

• (2) If a policy to which this paragraph applies was issued before the passing of this Act section 19 shall have effect in relation to it as if subsections (2)(b), (3) and (4) were omitted ; and if a policy to which this paragraph applies was issued after the passing of this Act, paragraph (b) of section 19(2) shall have effect in relation to it as if it permitted the insurance to be on the life of the individual's parent or grandparent or, subject to sub-paragraph (3) below, on the life of the individual's child or grandchild.

• (3) Relief may be given in respect of premiums under a policy of insurance on the life of an individual's child or grandchild which is issued after the passing of this Act as if paragraph (b) of section 19(3) were omitted, but may be given only if the annual amount of the premiums, together with that of any relevant premiums, does not exceed £52 ; and for this purpose a relevant premium, in relation to an insurance made at any time on the life of an individual's child or grandchild, is any premium under a policy of insurance on the same life, where the insurance is made at the same time or earlier, whether it is made by the individual or any other person.

• (4) In this paragraph " child " has the same meaning as in section 10 and " grandchild ", " parent" and " grandparent " have corresponding meanings.

12

In paragraph 4(1) of Schedule 1, sub-paragraph (iii) of paragraph (d) shall be omitted, together with the " and " preceding it, and after paragraph (d) there shall be inserted the words " or if the policy was issued before 6th April 1976, or was issued before 6th April 1979 and is in substantially the same form as policies so issued before 6th April 1976. ".

Premiums payable to friendly societies and industrial assurance companies

13

• (1) Where a policy is issued by a registered friendly society or a policy to which paragraph 11 above applies is issued by an industrial assurance company, paragraphs 4 and 5 above shall apply in relation to premiums payable under the policy subject to the following modifications.

• (2) References to the deductions authorised under paragraph 5 shall be construed as including references to any amount retained by or refunded to the person paying the premium under any scheme made by the society or company in accordance with regulations made under this paragraph.

• (3) The appropriate authority may make regulations authorising—