Finance Act 1977

Part I — Customs and excise

Spirits, beer, wine, made-wine, cider and tobacco

1

• (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

• (8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Tobacco products

2

• (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

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

• (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Replacement by tobacco products duty of other tobacco duties

3

Hydrocarbon oil etc.

4

Vehicles excise duty: Great Britain

5

• (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

• (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Vehicles excise duty: Northern Ireland

6

Units and methods of measurement in customs and excise Acts

7

• (1) The Treasury may by order amend the customs and excise Acts for the purpose of—

• (a) replacing any unit of measurement by a metric unit;

• (b) replacing the proof system of ascertaining the alcoholic strength of spirits and other liquids by a system of measurement by reference to percentages of alcohol by volume;

• (c) replacing any temperature expressed in degrees Fahrenheit by a temperature expressed in degrees Celsius;

• (d) replacing any pressure expressed in atmospheres by a pressure expressed in millibars.

• (2) Any amendment of an enactment under this section shall be such as to preserve the effect of the enactment except to such extent as the Treasury consider necessary to enable a substituted unit or method of measurement to be applied in a convenient and suitable manner.

• (3) An order under this section may contain such transitional and other supplementary provisions as the Treasury think necessary.

• (4) The power to make orders under this section includes power to vary or revoke a previous order and shall be exercisable by statutory instrument.

• (5) Subject to subsection (6) below, any order under this section shall be laid before the House of Commons after being made; and unless it is approved by that House before the expiration of twenty-eight days beginning with the date on which it was made, it shall cease to have effect on the expiration of that period, but without prejudice to anything previously done thereunder or to the making of a new order.

In reckoning any such period no account shall be taken of any time during which Parliament is dissolved or prorogued or during which the House of Commons is adjourned for more than four days.

• (6) Subsection (5) above shall not apply to any order containing a statement by the Treasury that the order does not involve a greater charge to duty or a reduction of any relief, drawback, rebate or allowance; and any such order shall be subject to annulment in pursuance of a resolution of the House of Commons.

Regulations where duty depends on use

8

Forfeiture of goods relieved from duty

9

• (1) Section 257 of the Customs and Excise Act 1952 (forfeiture of goods relieved from duty) shall be amended in accordance with subsections (2) and (3) below.

• (2) For subsection (1) there shall be substituted—

(1) Where— (a) any goods have been relieved from customs duty or have been charged with duty at a reduced rate; and (b) any condition or other obligation required to be complied with in connection with the relief or with the charge of duty at that rate is not complied with, the goods shall be liable to forfeiture.

• (3) In subsection (2) for the words "the observance of the condition " there shall be substituted the words " compliance with the condition or obligation ".

• (4) Section 10(2) of the Import Duties Act 1958 and paragraph 1(3)(b) of the Schedule to the Agriculture and Horticulture Act 1964 (which become unnecessary in consequence of the above amendments) shall cease to have effect.

Duties or levies on goods passing into free circulation etc.

10

• (1) In any case where—

• (a) goods which are not for the time being in free circulation in member States are imported into the United Kingdom from another member State, and

• (b) in accordance with the Treaties the goods either are allowed to be put on the market in the United Kingdom or to be destroyed or otherwise cease to be subject to special arrangements involving the suspension of, or the giving of relief from, duties or levies in another member State,

then, in such circumstances as may be prescribed, duties of customs or levies shall be charged on or in respect of the goods by virtue of this section.

• (2) Any question whether goods are at any time in free circulation in member States shall be determined in accordance with the Treaties.

• (3) The amount of the duty of customs or levy which, in any particular prescribed circumstances, is charged on or in respect of any goods by virtue of this section shall be such as, in accordance with the Treaties, may either be prescribed or determined in a prescribed manner.

• (4) Duties of customs charged by virtue of this section shall be treated as EU customs duties charged under subsection (1) of section 5 of the European Communities Act 1972 and levies charged by virtue of this section shall be treated as agricultural levies, as defined in subsection (8) of section 6 of that Act; and the provisions of, and of the enactments referred to in, the said section 6 shall apply accordingly.

• (5) In this section “prescribed” means prescribed by regulations made by statutory instrument by the Commissioners which shall be subject to annulment in pursuance of a resolution of either House of Parliament.

• (6) This section and, except in so far as any such regulations otherwise provide, any regulations made under it shall have effect in relation to goods imported into the United Kingdom on or after 1st July 1977.

Recovery of duty etc. due in other member States

11

Conditional reliefs from import duty

12

Continuation of powers under Finance Act 1961 s. 9

13

Part II

Restatement of value added tax

14

Registration limits

15

Goods imported for private purposes

16

PART III — INCOME TAX, CORPORATION TAX AND CAPITAL GAINS TAX

Charge of income tax for 1977-78

17–39

Charge of corporation tax for financial year 1976

18

Corporation tax shall be charged for the financial year 1976 at the rate of 52 per cent.

Rate of advance corporation tax for financial year 1977

19

The rate of advance corporation tax for the financial year 1977 shall be thirty-four sixty-sixths.

Corporation tax: small companies

20

• (1) The small companies rate for the financial year 1976 shall be 42 per cent., and for that year the fraction mentioned in subsection (2) of section 95 of the Finance Act 1972 (marginal relief for small companies) shall be four twenty-fifths.

• (2) For the financial year 1976 and subsequent financial years subsection (3) of the said section 95 shall have effect with the substitution for any reference to £30,000 of a reference to £40,000 and with the substitution for any reference to £50,000 of a reference to £65,000.

• (3) Where by virtue of subsection (2) above the said section 95 has effect with different relevant amounts in relation to different parts of the same accounting period, those parts shall be treated for the purposes of that section as if they were separate accounting periods, and the profits and income of the company for that period (as defined in that section) shall be apportioned between those parts.

Relief for interest: limit for 1977-78

21

In paragraph 5(1) of Schedule 1 to the Finance Act 1974 (limit on relief for interest on certain loans for purchase or improvement of land used as an only or main residence) the references to £25,000 shall have effect for the year 1977-78 as well as for previous years of assessment.

Alteration of personal reliefs

22

• (1) In section 8 of the Taxes Act (personal reliefs)—

• (a) in subsection (1)(a) (married) for " £1,085 " there shall be substituted " £1,295 ";

• (b) in subsection (1)(b) (single) and (2) (wife's earned income relief) for " £735 " there shall be substituted " £845 ";

• (c) in subsection (1A) (age allowance) for " £1,555 " and "£1,010" there shall be substituted " £1,765 " and " £1,120 " respectively, and after the paragraphs in that subsection there shall be inserted the words " and for the purposes of this subsection a person who would have been of the age of sixty-five or upwards within the year of assessment if he had not died in the course of it shall be treated as having been of that age within that year. ";

• (d) in subsection (1B) for "£3,250" there shall be substituted " £3,500 ";

• (e) in subsection (2)(b) (Category A retirement pension eligible for wife's earned income relief) after the word " pension" there shall be inserted the words " or mobility allowance ".

• (2) In the year 1978-79 and subsequent years the personal reliefs allowed in this section shall be changed by not less than the same percentage as the increase in the retail price index for the previous calendar year :

Provided that the Treasury may by order, subject to approval before coming into effect by resolution of the House of Commons, prescribe a lesser relief in respect of any financial year, so long as those reliefs are not less than the levels provided for in subsection (1) above.

• (3) In section 14(2) and (3) of that Act (additional relief for widows and others in respect of children) for " £350 " there shall be substituted " £450 " ; and in the year 1978-79 and subsequent years the additional relief allowed in this section shall be increased by not less than the same percentage as the increase in the retail price index for the previous calendar year :

Provided that the Treasury may by order, subject to approval before coming into effect by resolution of the House of Commons, prescribe a lesser relief in respect of any financial year, so long as that lesser relief is not less than £420.

Child benefit and other benefits in respect of children

23

• (1) In section 219(2) of the Taxes Act (social security benefits exempt from tax) the word " and " shall be omitted and after " 1971 " there shall be inserted the words " and payments of child benefit ".

• (2) The amendments of the Income Tax Acts made by section 32(2), (3)(a) and (d), (4), (5) and (6) of the Finance Act 1976 shall not have effect.

• (3) Where for the year 1977-78 an individual is (or apart from this subsection would be) assessable to income tax in respect of payments in respect of a child, being payments to which this subsection applies, his income shall for the purposes of the Income Tax Acts be deemed to include only so much, if any, of the payments in respect of that child as exceeds £52 or, if the payments in question are payments for a part only of the year, a proportionate part of that amount.

• (4) Subsection (3) above applies to payments by way of—

• (a) child's special allowance or guardian's allowance under the Social Security Act 1975 or the Social Security (Northern Ireland) Act 1975 ; or

• (b) an allowance under section 70 of either of those Acts; or

• (c) an increase under Chapter III of Part II of either of those Acts of a widow's allowance, widowed mother's allowance, child's special allowance, retirement pension or invalid care allowance.

• (5) Subsections (1) and (2) above shall be deemed to have come into force on 4th April 1977.

Child tax allowances for 1977-78

24

• (1) Except in the case of a child to whom section 25 or 26 below applies, the appropriate amount to be deducted from the claimant's total income under subsection (1) of section 10 of the Taxes Act (children) for the year 1977-78 shall, instead of being determined in accordance with subsection (3) of that section, be determined in accordance with subsections (2) and (3) below; and in those subsections " first child " means a child shown by the claimant to be the only or eldest child in respect of whom he is entitled under that section to a deduction of an amount determined in accordance with those subsections.

• (2) The appropriate amount for the child shall vary according to the age of the child at the commencement of the year of assessment and according to whether or not he is a first child and, subject to subsection (5) of the said section 10—

• (a) for a child shown by the claimant to have been over the age of sixteen at the commencement of that year, shall be £261 in the case of a first child and £235 in the case of any other child:

• (b) for a child not so shown but shown by the claimant to have been then over the age of eleven, shall be £231 in the case of a first child and £205 in the case of any other child ;

• (c) for a child not falling within the foregoing paragraphs, shall be £196 in the case of a first child and £170 in the case of any other child.

• (3) Where the appropriate amount for a child is required to be apportioned under section 11 of the Taxes Act between two or more individuals and the child is the first child in relation to any but not each of them, that amount shall be determined as if he were the first child in relation to each of them.

Child tax allowances: children living abroad

25

• (1) If in the case of a child in respect of whom a claim is made under section 10 of the Taxes Act (children) the claimant proves that the conditions in subsection (2) below are fulfilled, the appropriate amount to be deducted from the claimant's income under subsection (1) of that section for the year 1977-78 shall be determined in accordance with subsection (3) of that section as amended for the year 1976-77 by section 29(2) of the Finance Act 1976.

• (2) The conditions referred to in subsection (1) above are—

• (a) that the child is outside the United Kingdom throughout the year of assessment (apart from any visit which does not exceed, or visits which together do not exceed, 30 days) and does not in that year normally live in a country or territory specified in subsection (3) below; and

• (b) that he is under the age of nineteen years at the end of that year ; and

• (c) that no child benefit is paid in respect of the child for any week (as defined in the child benefit legislation) beginning in that year; and

• (d) that no child benefit for any such week is (or if a claim were made would be) payable in respect of the child by virtue of Part II of the Child Benefit (Residence and Persons Abroad) Regulations 1976 or Part II of the Child Benefit (Residence and Persons Abroad) Regulations (Northern Ireland) 1976.

• (3) The countries and territories referred to in subsection (2)(a) above are Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany (Federal Republic), Gibraltar, the Irish Republic, the Isle of Man, Israel, Italy, Jersey, Luxembourg, the Netherlands, New Zealand, Norway, Spain and Sweden.

Child tax allowances: students

26

• (1) If in the case of a child in respect of whom a claim is made under section 10 of the Taxes Act (children) the claimant proves that the conditions in subsection (2) below are fulfilled, the appropriate amount to be deducted from the claimant's income under subsection (1) of that section for the year 1977-78 and the three following years of assessment shall be determined in accordance with subsection (3) of that section as amended for the year 1976-77 by section 29(2) of the Finance Act 1976.

• (2) The conditions referred to in subsection (1) above are—

• (a) that on 31st December 1976 the child was following a full-time course at a university, college, school or other educational establishment; and

• (b) that he was then over the age of nineteen years or that the course was an advanced course ; and

• (c) that he is following such a course as is mentioned in paragraph (a) above in an academic year beginning in the year of assessment and either—

• (i) is not in receipt of a grant from a government department or local authority or otherwise out of public funds in respect of that course for that academic year or any period determined by reference to it; or

• (ii) is in receipt of such a grant as aforesaid, being a grant which is calculated in accordance with provisions for taking account of parental income but the amount of which does not fall to be reduced under those provisions.

• (3) In subsection (2)(b) above " advanced course " means—

• (a) a course in preparation for a degree, a diploma of higher education, a higher national diploma or a teaching qualification;

• (b) a course of post-graduate or post-diploma instruction; or

• (c) any other course, being a course of a standard above ordinary national diploma, general certificate of education (advanced level) or Scottish certificate of education (higher level);

and if any question arises whether a course falls within the above definition, the Board may consult the Secretary of State for Education and Science.

• (4) In the application of subsection (3) above to Scotland and Northern Ireland the Secretary of State and the Department of Education for Northern Ireland shall respectively be substituted for the Secretary of State for Education and Science.

• (5) In its application to the year 1977-78 subsection (1) above shall have effect as if in subsection (2) above there were inserted after paragraph (c)(ii) the words

or (iii) is in receipt of such a grant as is mentioned in sub-paragraph (i) above, being a grant under section 2 of the Education Act 1962, section 49(1) or 51(1)(c) of the Education (Scotland) Act 1962 or regulation 7 of the Students Awards Regulations (Northern Ireland) 1975.

.

Retirement annuities

27

• (1) Sections 227 and 228 of the Taxes Act (which prescribe limits subject to which relief is available for premiums paid under approved retirement annuity contracts etc.) shall be amended as follows—

• (a) in subsections (1A) and (1C) of section 227 and subsections (1) and (4) of section 228 for "£2,250", wherever it occurs, there shall be substituted " £3,000 ";

• (b) in subsections (1B) and (1C) of section 227 for " £750 ", wherever it occurs, there shall be substituted " £1,000 "; and

• (c) in the Table in subsection (4) of section 228 for the second and third columns there shall be substituted—

Sum	Percentage
£3,600	18
£4,200	21
£4,800	24
£5,400	27
£6,000	30

.

• (2) This section does not affect relief for any year of assessment before the year 1977-78.

Maintenance payments

28

In section 15(1) of the Finance Act 1974 (maintenance payments up to £1,000 not to be investment income) for " £1,000 " there shall be substituted " £1,500 ".

Increase in relief for savings bank interest

29

Section 414(1) of the Taxes Act (relief from income tax on first £40 of certain savings bank interest) shall, for the year 1977-78 and subsequent years of assessment, have effect with the substitution of a reference to £70 for each reference to £40.

Job release schemes

30

• (1) A payment on account of any allowance to which this section applies shall not be treated as income for any purposes of the Income Tax Acts.

• (2) This section applies to any allowance paid since the beginning of 1977 by the Secretary of State or the Department of Manpower Services for Northern Ireland under any scheme of the kind described in the Job Release Act 1977, being a scheme which provides for the payment of allowances for periods beginning not earlier than one year before the date on which the recipient attains pensionable age as defined in that Act.

Earnings from work done abroad

31

• (1) Schedule 7 to this Act shall have effect for affording relief from tax under Case I of Schedule E where the duties of an office or employment are performed wholly or partly outside the United Kingdom.

• (2) A deduction shall not be allowed in respect of the same emoluments both under Schedule 7 to this Act and paragraph 3 of Schedule 2 to the Finance Act 1974 (foreign emoluments); and paragraph 4 of Schedule 7 to this Act shall, with the necessary modifications, have effect in relation to the amount of emoluments to be excepted under paragraph 4 of the said Schedule 2 as it has effect in relation to the amount of emoluments in respect of which a deduction is allowed under paragraph 1 of the said Schedule 7.

• (3) In consequence of the foregoing provisions, the Income Tax Acts shall be amended as follows—

• (a) in Case I in paragraph 1 of Schedule E as set out in section 181(1) of the Taxes Act for the words from " subject, however, to the deduction or exception" onwards there shall be substituted the words " subject, however, to the deduction or exception provided for in Schedule 2 to the Finance Act 1974 if the emoluments are foreign emoluments and to the deduction proveded for in Schedule 7 to the Finance Act 1977 if in the chargeable period he performs the duties of the office or employment wholly or partly outside the United Kingdom ";

• (b) in section 184(3) of the Taxes Act after the words "For the purposes of Cases I and II of Schedule E " there shall be inserted the words " , but subject to paragraph 7 of Schedule 7 to the Finance Act 1977, ";

• (c) in paragraph 16 of Schedule 8 to the Taxes Act after the words "the Finance Act 1974" there shall be inserted the words " or paragraph 1 of Schedule 7 to the Finance Act 1977 ";

• (d) section 21(2) of the Finance Act 1974 and paragraphs 1 and 2 of Schedule 2 to that Act shall cease to have effect.

• (4) This section has effect for the year 1977-78 and subsequent years of assessment but without prejudice to any deduction—

• (a) under paragraph 1 of Schedule 7 to this Act for that or a subsequent year by virtue of a period falling partly in a year before the year 1977-78 ; or

• (b) under paragraph 1 of Schedule 2 to the said Act of 1974 for a year before the year 1977-78 by virtue of a period falling partly in that or a subsequent year.

Expenses in connection with work done abroad

32

• (1) Subsections (2) and (3) below apply where a person (" the employee ") who is resident and ordinarily resident in the United Kingdom holds an office or employment (" the overseas employment") the duties of which are performed wholly outside the United Kingdom and the emoluments from which are not foreign emoluments within the meaning of paragraph 1 of Schedule E.

• (2) For the purposes of section 189(1) of the Taxes Act (deduction for certain expenses) there shall be treated as having been necessarily incurred in the performance of the duties of the overseas employment expenses of the employee in travelling from the United Kingdom to take up the overseas employment and in returning to the United Kingdom on its termination; and if travel is partly for a purpose mentioned in this subsection and partly for another purpose this subsection applies only to such part of the expenses as is properly attributable to the former purpose.

• (3) Where, for the purpose of enabling the employee to perform the duties of the overseas employment,—

• (a) board and lodging outside the United Kingdom is provided for him and the cost of it is borne by or on behalf of his employer ; or

• (b) he incurs expenses out of the emoluments of the employment on such board and lodging for himself and those expenses are reimbursed by or on behalf of his employer,

there shall be allowed, in charging tax under Case I of Schedule E on the emoluments from that employment, a deduction of an amount equal to so much of that cost or, as the case may be, those expenses as falls to be included in those emoluments.

Where board and lodging is partly for the purpose mentioned in this subsection and partly for another purpose, this subsection applies only to such part of the cost or expenses as is properly attributable to the former purpose.

• (4) Subsection (5) below applies where a person resident and ordinarily resident in the United Kingdom—

• (a) holds two or more offices or employments the duties of one or more of which are performed wholly or partly outside the United Kingdom ; and

• (b) travels from one place having performed there duties of one office or employment to another place for the purpose of performing duties of another office or employment (the emoluments from which are not foreign emoluments within the meaning of paragraph 1 of Schedule E),

and either or both of those places is outside the United Kingdom.

• (5) For the purposes of section 189(1) of the Taxes Act (deduction for certain expenses) expenses incurred by such a person on such travel shall be treated as having been necessarily incurred in the performance of the duties which he is to perform at his destination ; and if travel is partly for the purpose of performing those duties and partly for another purpose this subsection applies only to such part of the expenses as is properly attributable to the former purpose.

• (6) Subsection (7) below applies where a person is absent from the United Kingdom for a continuous period of 60 days or more for the purpose of performing the duties of one or more offices or employments and applies to travel of the following descriptions between the United Kingdom and the place of performance of those duties, that is to say—

• (a) any journey by his spouse or any child of his—

• (i) accompanying him at the beginning of the period of absence ; or

• (ii) to visit him during that period ;

• (b) any journey by him at the end of that period to visit his spouse or any child of his ;

• (c) any return journey following a journey of a kind described in paragraph (a) or (b) above ;

but that subsection does not extend to more than two journeys in each direction by the same person in any year of assessment.

For the purposes of this subsection " child " includes a stepchild, an adopted child and an illegitimate child but does not include a person who is aged 18 or over at the beginning of the outward journey.

• (7) Where—

• (a) travel facilities are provided for any such journey and the cost of them is borne by or on behalf of the employer; or

• (b) expenses are incurred out of the emoluments of any such office or employment on any such journey and those expenses are reimbursed by or on behalf of the employer,

there shall be allowed, in charging tax under Case I of Schedule E on the emoluments from that office or employment, a deduction of an amount equal to so much of that cost or, as the case may be, those expenses as falls to be included in those emoluments.

• (8) References in the Income Tax Acts to section 189 of the Taxes Act and to deductions allowable under Chapter I of Part VIII of that Act shall be construed as including a reference to subsections (3) and (7) above and to deductions allowable under those subsections.

• (9) This section has effect for the year 1977-78 and subsequent years of assessment.

Living accommodation provided for employee

33

• (1) Subject to the provisions of this section, where living accommodation is provided for a person in any period by reason of his employment, and is not otherwise made the subject of any charge to him by way of income tax, he is to be treated for Schedule E purposes as being in receipt of emoluments of an amount equal to the value to him of the accommodation for the period, less so much as is properly attributable to that provision of any sum made good by him to those at whose cost the accommodation is provided.

• (2) The value of the accommodation to the employee in any period is the rent which would have been payable for the period if the premises had been let to him at an annual rent equal to their annual value as ascertained under section 531 of the Taxes Act; but for a period in which those at whose cost the accommodation is provided pay rent at an annual rate greater than the annual value as so ascertained, the value of the accommodation to the employee is an amount equal to the rent payable by them for the period.

• (3) From any amount to be treated as emoluments under subsection (1) above there are deductible under section 189 or 194(3) of the Taxes Act (necessary expenses etc.) such amounts (if any) as would have been so deductible if the accommodation had been paid for by the employee out of his emoluments.

• (4) Subject to subsection (5), subsection (1) does not apply to accommodation provided for the employee in any of the following cases—

• (a) where it is necessary for the proper performance of the employee's duties that he should reside in the accommodation;

• (b) where the accommodation is provided for the better performance of the duties of his employment, and his is one of the kinds of employment in the case of which it is customary for employers to provide living accommodation for employees;

• (c) where, there being a special threat to his security, special security arrangements are in force and he resides in the accommodation as part of those arrangements;

and in any such case there is no charge to tax under Schedule E (either by virtue of this section or under section 183 of the Taxes Act or otherwise) in respect of a liability for rates on the premises being discharged for or on behalf of the employee or the employee being reimbursed for the discharge of that liability.

• (5) If the accommodation is provided by a company and the employee is a director of the company or of an associated company, then, except in a case where paragraph (c) of subsection (4) applies, no exemption is given by virtue of that subsection unless, for each employment of his which is employment as director of the company or an associated company, the following conditions are fulfilled, that is—

• (a) he has no material interest in the company, and

• (b) either his employment is as a full-time working director or the company is non-profit-making (meaning that neither does it carry on a trade, nor do its functions consist wholly or mainly in the holding of investments or other property) or is established for charitable purposes only.

• (6) If by reason of a person's employment accommodation is provided for others being members of his family or household, he is to be treated under subsections (1) to (3) as if it were accommodation provided for him.

• (7) For the purposes of this section, living accommodation provided for an employee, or for members of his family or household, by his employer is deemed to be provided by reason of his employment unless—

• (a) the employer is an individual, and it can be shown that he makes the provision in the normal course of his domestic, family or personal relationships ; or

• (b) the accommodation is provided by a local authority for an employee of theirs, and it can be shown that the terms on which it is provided are no more favourable than those on which similar accommodation is provided by the authority for persons who are not their employees but are otherwise similarly circumstanced.

• (8) For the purposes of this section—

• (a) a company is an associated company of another if one of them has control of the other or both are under the control of the same person ; and

• (b) the following interpretative provisions of section 72 of the Finance Act 1976, that is to say, subsection (2) (" employment "), subsection (4) (" family or household "), subsections (8) to (10) (" director ", " full-time working director" and " material interest") and subsection (11) (" control ", in relation to body corporate) apply as if this section were included in sections 60 to 71 of that Act.

• (9) This section has effect for the year 1977-78 and subsequent years of assessment.

Expense connected with living accommodation

34

• (1) After section 63 of the Finance Act 1976 (cash equivalent of benefits charged under section 61) there shall be inserted the following section:—

(63A) (1) This section applies where, in the case of a person employed in director's or higher-paid employment, living accommodation is provided by reason of the employment and, accordingly, a charge to tax would arise in his case under section 33 of the Finance Act 1977 (living accommodation for employees) but for the case being one of those specified in subsection (4) of that section (representative occupation). (2) Where, by reason of expenditure incurred in one or more of the following, that is,— (a) heating, lighting or cleaning the premises concerned; (b) repairs to the premises, their maintenance or decoration; (c) the provision in the premises of furniture, or other appurtenances or effects which are normal for domestic occupation, or by reason of such expenditure being reimbursed to the employee, an amount falls to be included in the emoluments of his employment, that amount shall not exceed the limit specified in subsection (3). (3) That limit is— (a) 10 per cent. of the net amount of the emoluments of the employment or, if the accommodation is provided for a period of less than a year, so much of that percentage of the net amount as is attributable to the period, less (b) where the expenditure is incurred by a person other than the employee, so much as is properly attributable to the expenditure of any sum made good by the employee to that other. (4) The net amount of the emoluments of a person's employment for the purposes of subsection (3) is the amount of those emoluments (leaving out of account the expenditure in question) after— (a) any capital allowance, and (b) any deductions allowable under Chapter I of Part VIII of the Taxes Act (Schedule E), section 208(1) of that Act (superannuation) or section 227(1) of that Act (retirement annuities) or section 21(4) or 22(2) of the Finance Act 1970 (approved pension schemes); and, for the purposes of this subsection, in the case of employment by a company there shall be taken into account, as emoluments of the employment, the emoluments of any employment by an associated company. (5) For the purposes of subsection (4), a company is an associated company of another if one of them has control of the other or both are under the control of the same person.

.

• (2) This section has effect for the year 1977-78 and subsequent years of assessment.

Other amendments relating to benefits of employment

35

• (1) For section 69 of the Finance Act 1976 (employments to be treated as " director's or higher-paid ") the following section shall be substituted—

(69) (1) In this Chapter "director's or higher-paid employment" means— (a) subject to subsection (5) below, employment as a director of a company ; or (b) employment with emoluments at the rate of £5,000 a year or more. (2) For this purpose emoluments are to be calculated— (a) on the basis that they include all such amounts as come into charge under this Chapter or section 33 of the Finance Act 1977 in the case of those in director's or higher-paid employment or under section 68 of this Act or under section 36 or 37 of the Finance (No. 2) Act 1975 (cash or other vouchers); and (b) without any deduction under section 189, 192 or 194(3) of the Taxes Act (necessary expenses of employment etc.). (3) But where a person is employed in two or more employments by the same employer and either— (a) the total of the emoluments of those employments (applying this section) is at the rate of £5,000 a year or more ; or (b) one or more of those employments is (apart from this subsection) director's or higher-paid, all the employments are to be treated as director's or higher-paid. (4) All employees of a partnership or body over which an individual or another partnership or body has control are to be treated for the purposes of this section (but not for any other purpose) as if the employment were an employment by the individual or by that other partnership or body as the case may be. (5) A person's employment is not director's or higher-paid by reason only of its being employment as a director of a company (without prejudice to its being so under subsection (1)(b) or (3)) if he has no material interest in the company and either— (a) his employment is as a full-time working director; or (b) the company is non-profit-making (meaning that neither does it carry on a trade, nor do its functions consist wholly or mainly in the holding of investments or other property) or is established for charitable purposes only.

.

• (2) In consequence of sections 33 and 34 above and of this section, the Tax Acts shall be amended as shown in Part I of Schedule 8 to this Act.

• (3) Subsections (1) and (2) above have effect for the year 1977-78 and subsequent years of assessment; and, for the year 1978-79 and subsequent years of assessment, " £7,500" shall be substituted for " £5,000 " in subsections (1)(b) and (3)(a) of section 69 of the Finance Act 1976.

• (4) In Schedule 9 to the Finance Act 1976 (consequential amendments of enactments in connection with revised provisions relating to taxation of directors' benefits etc.), paragraph 15 (substitution of new proviso to section 284(2) of the Taxes Act, about close company distributions) shall be deemed to have been so enacted that in paragraph (b) of the substituted proviso, after the word " annuity " there were inserted the words " lump sum, gratuity or other like benefit to be given ".

Interest relief for those in job-related living accommodation

36

• (1) In Part II of Schedule 1 to the Finance Act 1974 (conditions of allowance of interest relief on loans for purchase or improvement of land), after paragraph 4 there shall be inserted—

(4A) (1) Part I of Schedule 9 to the Finance Act 1972 shall nevertheless apply where the property concerned (that is, the land, caravan or house boat referred to in that Part)— (a) is, at the time the interest is paid, used by the borrower as a residence or, if it is paid less than twelve months after the date on which the loan is made, is so used by him within twelve months after that date ; or (b) is intended at that time to be used in due course as his only or main residence ; and at that time he resides in living accommodation which is for him job-related. (2) In the case of a borrower for whom there are two or more properties falling within sub-paragraph (1) above, he may not by virtue of this paragraph claim relief for any period under section 75 of the Finance Act 1972 in respect of more than one of them. (3) Subject to sub-paragraph (4) below, living accommodation is job-related for a person if it is provided for him by reason of his employment, or for his spouse by reason of hers, in any of the following cases— (a) where it is necessary for the proper performance of the duties of the employment that the employee should reside in that accommodation ; (b) where the accommodation is provided for the better performance of the duties of the employment, and it is one of the kinds of employment in the case of which it is customary for employers to provide living accommodation for employees ; (c) where, there being a special threat to the employee's security, special security arrangements are in force and the employee resides in the accommodation as part of those arrangements. (4) The living accommodation is not job-related, except in a case where sub-paragraph (3)(c) above applies, if it is provided by a company and the employee is a director of the company or an associated company, unless the conditions of sub-paragraph (5) below are satisfied. (5) Those conditions are that— (a) the company of which the employee is a director is one in which he or she has no material interest; and (b) either the employment is as a full-time working director or the company is non-profit-making (meaning that neither does it carry on a trade, nor do its functions consist wholly or mainly in the holding of investments or other property) or is established for charitable purposes only. (6) For the purposes of this paragraph— (a) a company is an associated company of another if one of them has control of the other or both are under the control of the same person; and (b) the following interpretative provisions of section 72 of the Finance Act 1976, that is to say, subsection (2) ("employment"), subsections (8) to (10) " director ", " full-time working director" and "material interest") and subsection (11) ("control ", in relation to body corporate) apply as if this paragraph were included in sections 60 to 71 of that Act. (7) Only interest paid on or after 6th April 1977 is eligible for relief by virtue of this paragraph.

.

• (2) In consequence of subsection (1) above, other provisions of Part II of Schedule 1 to the Finance Act 1974 shall be amended as shown in Part II of Schedule 8 to this Act.

Leave travel facilities for armed forces

37

• (1) No charge to Schedule E tax shall arise in respect of travel facilities provided for members of the naval, military or air forces of the Crown going on, or returning from, leave.

• (2) This applies whether the charge would otherwise have arisen under—

• (a) section 36 of the Finance (No. 2) Act 1975 (certain vouchers treated as benefits in kind);

• (b) section 61 of the Finance Act 1976 (benefits in kind for the higher-paid); or

• (c) Chapter I of Part VIII of the Taxes Act (charge to Schedule E tax);

and applies not only to travel vouchers and warrants for particular journeys but also to allowances and other payments for and in respect of leave travel, whether or not a warrant was available.

• (3) This section has effect for the year 1976-77 and subsequent years of assessment.

Maintenance funds for historic buildings

38

• (1) This section applies to any settlement in relation to which the Treasury have given a direction under section 84 of the Finance Act 1976 (maintenance funds for historic buildings).

• (2) The trustees of the settlement may elect that this subsection shall have effect in relation to any year of assessment, and if they do so—

• (a) any income arising in that year from the property comprised in the settlement which, apart from this subsection, would be treated by virtue of Part XVI of the Taxes Act (settlements) as income of the settlor shall not be so treated; and

• (b) no sum applied in that year out of the property for the purposes mentioned in subsection (3)(a)(i) of the said section 84 (maintenance etc. of a building or land) shall be treated for any purposes of the Income Tax Acts as the income of any person—

• (i) by virtue of any interest of that person in, or his occupation of, the building or land in question; or

• (ii) by virtue of section 451 of the Taxes Act (sums paid to settlor otherwise than as income).

• (3) Where income arising from the property comprised in the settlement in a year of assessment for which no election is made under subsection (2) above is treated by virtue of the said Part XVI as income of the settlor, paragraph (b) of that subsection shall have effect in relation to any sums in excess of that income which are applied in that year as mentioned in that paragraph.

• (4) Any election under subsection (2) above shall be by notice in writing to the Board in such form as the Board may require and shall be made within two years of the end of the year of assessment to which it relates.

• (5) Where—

• (a) circumstances obtain for part of a year of assessment by virtue of which income arising from property comprised in the settlement is treated as income of a settlor under the said Part XVI; and

• (b) no such circumstances obtain for the remainder of that year,

the foregoing provisions of this section shall apply as if each of those parts were a separate year of assessment and separate elections may be made accordingly.

Deduction rate for sub-contractors in the construction industry

39

Subsection (4) of section 69 of the Finance (No. 2) Act 1975 (which requires deductions to be made from payments to certain sub-contractors in the construction industry) shall have effect in relation to payments made on or after 6th November 1977 with the substitution for " 35 per cent. " of " 34 per cent."

Capital gains: company reconstructions and amalgamations involving exchange of shares etc.

40

Capital gains: company reconstructions and amalgamations involving transfer of business assets

41

Capital gains: transfers of assets to non-resident companies

42

Capital gains: value-shifting

43

Capital gains: unit trusts etc.

44

Insurance companies: overseas business

45–48

Conversion etc. of securities held as circulating capital

46

• (1) Subsections (3) and (4) below shall have effect where a transaction to which this section applies occurs in relation to any securities (" the original holding ")—

• (a) to which a person carrying on a banking business, an insurance business or a business consisting wholly or partly in dealing in securities is beneficially entitled; and

• (b) which are such that a profit on their sale would form part of the trading profits of that business.

• (2) This section applies to any transaction which, if the securities were not such as is mentioned in subsection (1)(b) above—

• (a) would result in the original holding being equated with a new holding by virtue of paragraph 4, 5, 6 or 7 of Schedule 7 to the Finance Act 1965 (capital gains tax roll-over relief in cases of conversions etc.); or

• (b) would be treated by virtue of section 53 of the Finance Act 1976 (compensation stock) as an exchange for a new holding which does not involve a disposal of the original holding,

but does not apply to any transaction in relation to which section 326 (exchange of securities in connection with conversion operations, nationalisation etc.) of the Taxes Act applies or would apply if the person concerned had not given a notice under that section.

• (3) Subject to subsection (4) below, in making any computation in accordance with the provisions of the Taxes Act applicable to Case I of Schedule D of the profits or losses of the business—

• (a) the transaction shall be treated as not involving any disposal of the original holding ; and

• (b) the new holding shall be treated as the same asset as the original holding.

• (4) Where under the transaction the person concerned receives or becomes entitled to receive any consideration in addition to the new holding, subsection (3) above shall have effect as if references to the original holding were references to the proportion of it which the market value of the new holding at the time of the transaction bears to the aggregate of that value and the market value at that time (or, if it is cash, the amount) of the consideration.

• (5) Subsections (3) and (4) above shall have effect with the necessary modifications in relation to any computation made for the purposes of section 305(2) of the Taxes Act (restriction on relief for expenses of management) in a case where securities held by the company concerned are equated with a new holding by virtue of any of the provisions mentioned in paragraph (a) of subsection (2) above or are treated as not disposed of by virtue of the provision mentioned in paragraph (b) of that subsection.

• (6) In this section " securities " includes shares, any security within the meaning of paragraph 5 of Schedule 7 to the said Act of 1965 and any rights, interests or options which by virtue of section 45(8) of that Act, paragraph 15 of Schedule 12 to the Finance Act 1968 or section 58(4) of the Finance Act 1971 are treated as shares for the purposes of the provisions mentioned in subsection (2) above.

• (7) In determining for the purposes of subsection (2)(a) above whether a transaction would result in the original holding being equated with a new holding by virtue of paragraph 6 or 7 of Schedule 7 to the said Act of 1965 the reference in section 40(2) above to capital gains tax shall be construed as a reference to income tax.

• (8) This section applies where the securities comprised in the new holding are issued after 19th April 1977.

Police provident benefits

47

• (1) In section 338 of the Taxes Act (exemption of income and gains of certain trade unions if applicable and applied for purpose of provident benefits) references to a registered trade union shall be construed as including references to the Police Federation for England and Wales, the Police Federation for Scotland, the Police Federation for Northern Ireland and any other organisation of persons in police service which has similar functions.

• (2) This section shall have effect in relation to income or gains which are applicable and applied as mentioned in subsection (1) of the said section 338 after 30th September 1971.

Annual payments for non-taxable consideration

48

• (1) Any payment to which this subsection applies shall be made without deduction of income tax, shall not be allowed as a deduction in computing the income or total income of the person by whom it is made and shall not be a charge on income for the purposes of corporation tax.

• (2) Subject to the following provisions of this section, subsection (1) above applies to any payment which—

• (a) is an annuity or other annual payment charged with tax under Case III of Schedule D, not being interest; and

• (b) is made under a liability incurred for consideration in money or money's worth all or any of which is not required to be brought into account in computing for the purposes of income tax or corporation tax the income of the person making the payment.

• (3) Subsection (1) above does not apply to—

• (a) any payment which in the hands of the recipient is income falling within section 457(1)(a) or (c) or (2) of the Taxes Act (partnership agreements, transfers of businesses and maintenance agreements);

• (b) any payment made to an individual under a liability incurred in consideration of his surrendering, assigning or releasing an interest in settled property to or in favour of a person having a subsequent interest;

• (c) any annuity granted in the ordinary course of a business of granting annuities ; or

• (d) any annuity charged on an interest in settled property and granted at any time before 30th March 1977 by an individual to a company whose business at that time consisted wholly or mainly in the acquisition of interests in settled property or which was at that time carrying on life assurance business in the United Kingdom.

• (4) In the application of this section to Scotland the references in subsection (3) above to settled property shall be construed as references to property held in trust.

• (5) Subsection (1) above does not apply to any payment made on or before 29th March 1977 but applies to a payment made after that date irrespective of when the liability to make it was incurred.

Part IV — CAPITAL TRANSFER TAX

Persons domiciled in Channel Islands or Isle of Man

49

Interests in settled property

50

Trusts for persons in receipt of attendance allowance

51

• (1) Paragraph 19 of Schedule 5 to the Finance Act 1975 (trusts for mentally disabled persons) shall be amended as follows.

• (2) In sub-paragraph (1) after the words “a mentally disabled person" there shall be inserted the words “ or of a person in receipt of an attendance allowance".

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

• (5) At the end of Sub-paragragh (4) there shall be added the words “and“ attendance allowance" means an allowance under section 35 of the Social Security Act 1975 or the Social Security (Northern Ireland) Act 1975"

Relief for woodlands

52

Disposals of conditionally exempt property

53

• (1) In sections 32(2) and 34(4) of the Finance Act 1975 and section 78(3) of the Finance Act 1976 (liability of person for whose benefit conditionally exempt property is disposed of) for the words "person for whose benefit" there shall be substituted the words " person by whom or for whose benefit ".

• (2) This section applies where the event by reason of which tax is chargeable under the provisions mentioned in subsection (1) above occurs after 19th April 1977.

PART V — MISCELLANEOUS AND SUPPLEMENTARY

Petroleum revenue tax

54

• (1) After paragraph 6 of Schedule 3 to the Oil Taxation Act 1975 there shall be inserted—

(6A) Where the whole or part of the share of a participator (“the transferor") of oil won from an oil field became the share, or part of the share, of another participator (“the transferee") in pursuance of an agreement between them under which the transferor undertook to remain responsible for carrying out the transferee’s obligations in connection with the field so far as they relate to the transferred share or part, then, for the purposes of this Part of this Act— (a) the shares of the transferor and the transferee of oil won from the field shall be taken to be the same as they would have been if the transfer had not occurred, and (b) any oil comprised in the transferred share or part and taken up by or on the authority of the transferee in pursuance of the agreement shall be regarded as being disposed of and delivered to him by the transferor at the time when it is taken up.

.

• (2) In the said paragraph 6, in sub-paragraph (1), for the words “another person (in this paragraph referred to as “the owner")" there shall be substituted the words “a person (in this paragraph referred to as “the owner") who is not a participator and".

Development land tax

55

Annuities under Tithe Acts 1936 and 1951

56

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

National insurance surcharge

57

Exchange control

58

Citation, interpretation, construction and repeals

59

• (1) This Act may be cited as the Finance Act 1977.

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

• (3) In this Act—

• (a) Part I (except sections 5 and 6) shall be construed as one with such of the Customs and Excise Acts 1979 as the provision in question requires.

• (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 . . .

• (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 9 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

SCHEDULE 4

I — Provisions substituted for Part II of Schedule 1

II — Provisions substituted for Part II of Schedule 2

III — Provisions substituted for Part II of Schedule 3

IV — Provisions substituted for Part II of Schedule 4

Tables showing Annual Rates of Duty on Goods Vehicles

V — Provisions substituted for Part II of Schedule 5

SCHEDULES 7,8

I — Provisions substituted for Part II of Schedule 1

II — Provisions substituted for Part II of Schedule 2

III — Provisions substituted for Part II of Schedule 3

IV — Provisions substituted for Part II of Schedule 4

Tables showing Annual Rates of Duty on Goods Vehicles

V — Provisions substituted for Part II of Schedule 5

SCHEDULE 6

PART I — Substantive Amendments of Finance Act 1972 (c. 41), Part I

1

For sections 2 to 6 of the 1972 Act (scope of tax, deduction of input tax, taxable persons, supply and self-supply) the following sections shall be substituted—

(2) (1) Tax shall be charged on any supply of goods or services made in the United Kingdom, where it is a taxable supply made by a taxable person in the course or furtherance of any business carried on by him. (2) A person who makes or intends to make taxable supplies is a taxable person while he is or is required to be registered under this Part of this Act; and a taxable supply is a supply of goods or services made in the United Kingdom, other than an exempt supply. (3) Tax on any supply of goods or services is a liability of the person making the supply and (subject to provisions about accounting and payment) becomes due at the time of supply. (4) Tax on the importation of goods shall be charged and payable as if it were a duty of customs. (5) Schedule 1 to this Act has effect with respect to registration. (3) (1) A taxable person shall, in respect of supplies made by him, account for and pay tax by reference to such periods (" prescribed accounting periods"), at such time and in such manner as may be determined by or under regulations. (2) Subject to the provisions of this section, he is entitled at the end of each such period to credit for so much of his input tax as is allowable under section 4 below, and then to deduct that amount from any output tax that is due from him. (3) Subject to subsection (4), " input tax ", in relation to a taxable person, means the following tax, that is to say— (a) tax on the supply to him of any goods or services ; and (b) tax paid or payable by him on the importation of any goods, being (in either case) goods or services used or to be used for the purpose of any business carried on or to be carried on by him; and " output tax " means tax on supplies which he makes. (4) Where goods or services supplied to a taxable person, or goods imported by him, are used or to be used partly for the purposes of a business carried on or to be carried on by him and partly for other purposes, tax on supplies and importations is apportioned so that only so much as is referable to his business purposes is counted as his input tax. (5) If either no output tax is due at the end of the period, or the amount of the credit exceeds that of the tax, then the amount of the credit or, as the case may be, the amount of the excess shall be paid to the taxable person by the Commissioners. (6) But the whole or any part of the credit may, subject to and in accordance with regulations, be held over to be credited in and for a subsequent period ; and the regulations may allow for it to be so held over either on the taxable person's own application or in accordance with general or special directions given by the Commissioners from time to time. (7) No deduction shall be made under subsection (2), nor shall any payment be made under subsection (5), except on a claim made in such manner and at such time as may be determined by or under regulations; and, in the case of a person who has made no taxable supplies in the period concerned or any previous period, payment under subsection (5) shall be made subject to such conditions (if any) as the Commissioners think fit to impose, including conditions as to repayment in specified circumstances. (8) Regulations may provide— (a) for tax on the supply of goods or services to a taxable person, or paid or payable by him on the importation of goods, to be treated as his input tax only if and to the extent that the charge to tax is evidenced and quantified by reference to such documents as may be specified in the regulations or the Commissioners may direct either generally or in particular cases or classes of cases; (b) for a taxable person to count as his input tax, in such circumstances, to such extent and subject to such conditions as may be prescribed, tax on the supply to him, or paid by him on the importation, of goods notwithstanding that he was not a taxable person at the time of the supply or payment; (c) in the case of a person who has been, but is no longer, a taxable person, for him to be paid by the Commissioners the amount of any tax on a supply of services made to him for the purposes of the business carried on by him when he was a taxable person. (9) The Treasury may by order provide, in relation to such supplies and importations as the order may specify, that tax charged on them is to be excluded from any credit under this section ; and— (a) any such provision may be framed by reference to the description of goods or services supplied or goods imported, the person by whom they are supplied or imported or to whom they are supplied, the purposes for which they are supplied or imported, or any circumstances whatsoever ; and (b) such an order may contain provision for consequential relief from output tax. (4) (1) The amount of input tax for which a taxable person is entitled to credit at the end of any period shall be determined as follows— (a) if his business is such that all his supplies are taxable supplies, there is allowable the whole of the input tax for the period (that is, input tax on supplies and importations in the period); (b) if it is such that some but not all of his supplies are taxable supplies, there is allowable such proportion of the input tax for the period as, in accordance with regulations, is attributable to taxable supplies ; and (c) if he has made no taxable supplies in that or any previous period of the business, there is allowable such proportion of the input tax for the period as the Commissioners consider in all the circumstances to be fair and reasonable. (2) Regulations may provide for treating all supplies of goods or services by any person as taxable supplies— (a) where the tax attributable to exempt supplies would be less than such amount, or less than such part of the whole of the input tax, as may be prescribed ; or (b) in other prescribed circumstances. (3) The Commissioners shall make regulations for securing a fair and reasonable attribution of input tax to taxable supplies, and any such regulations may provide for— (a) determining a proportion of supplies in any prescribed accounting period which is to be taken as consisting of taxable supplies and provisionally attributing the input tax for that period in accordance with the proportion so determined; (b) adjusting, in accordance with a proportion determined in like manner for any longer period comprising two or more prescribed accounting periods or parts thereof, the provisional attribution for any of those periods ; and (c) dispensing with an adjustment where the amounts allowable for any such longer period in accordance with provisional and adjusted attributions do not differ by more than— (i) an amount equal to such percentage (not exceeding 10 per cent.) of the input tax for that period as may be specified in the regulations ; or (ii) such an amount (not exceeding £10) as may be so specified, whichever is the greater. (4) Regulations under subsection (3) may make different provision for different circumstances and, in particular (but without prejudice to the generality of that subsection) for different descriptions of goods or services ; and may contain such incidental and supplementary provisions as appear to the Commissioners necessary or expedient. (5) (1) The Commissioners may, by means of a scheme embodied in regulations, provide for the repayment, to persons to whom this section applies, of tax on supplies to them in the United Kingdom which would be input tax of theirs if they were taxable persons in the United Kingdom. (2) This section— (a) applies to persons carrying on business in a member State other than the United Kingdom, and (b) shall apply also to persons carrying on business in other countries, if, pursuant to any Community Directive, rules are adopted by the Council of the Communities about refunds of tax to persons established elsewhere than in the member States, but does not apply to persons carrying on business in the United Kingdom. (3) Repayment shall be made in such cases only, and subject to such conditions, as the scheme may prescribe (being conditions specified in the regulations or imposed by the Commissioners either generally or in particular cases); and the scheme may provide— (a) for claims and repayments to be made only through agents in the United Kingdom ; (b) either generally or for specified purposes— (i) for the agents to be treated under this Act as if they were taxable persons ; and (ii) for treating claims as if they were returns under this Act and repayments as if they were repayments of input tax ; and (c) for generally regulating the methods by which the amount of any repayment is to be determined and the repayment is to be made. (6) (1) Schedule 2 to this Act applies for determining what is, or is to be treated as, a supply of goods or a supply of services. (2) Subject to any provision made by that Schedule and to Treasury orders under subsections (3) to (6) below— (a) " supply " in this Part of this Act includes all forms of supply, but not anything done otherwise than for a consideration; (b) anything which is not a supply of goods but is done for a consideration (including, if so done. the granting, assignment or surrender of any right) is a supply of services. (3) The Treasury may by order provide with respect to any description of transaction— (a) that it is to be treated as a supply of goods and not as a supply of services ; or (b) that it is to be treated as a supply of services and not as a supply of goods ; or (c) that it is to be treated as neither a supply of goods nor a supply of services ; and without prejudice to the foregoing, such an order may provide that paragraph 5(3) of Schedule 2 to this Act is not to apply, in relation to goods of any prescribed description used or made available for use in prescribed circumstances, so as to make that a supply of services under that sub-paragraph. (4) Without prejudice to subsection (3) above, the Treasury may by order make provision for securing, with respect to services of any description specified in the order, that where— (a) a person carrying on a business does anything which is not a supply of services only because not done for a consideration, and would (if so done) be a supply of services of a description specified in the order ; and (b) such other conditions as may be specified in the order are satisfied ; such services are treated for the purposes of this Part of this Act as being supplied by him in the course or furtherance of that business. (5) The Treasury may by order make provision for securing, subject to any exceptions provided for by or under the order, that where in such circumstances as may be specified in the order goods of a description so specified are acquired or produced by a person in the course or furtherance of a business carried on by him and— (a) are neither supplied to another person nor incorporated in other goods produced in the course or furtherance of that business ; but (b) are used by him for the purpose of a business carried on by him ; the goods are treated for the purposes of this Part of this Act as being both supplied to him for the purpose of that business and supplied by him in the course or furtherance of it. (6) The Treasury may by order make provision for securing, with respect to services of any description specified in the order, that where— (a) a person, in the course or furtherance of a business carried on by him, does anything for the purpose of that business which is not a supply of services but would, if done for a consideration, be a supply of services of a description specified in the order ; and (b) such other conditions as may be specified in the order are satisfied ; such services are treated for the purposes of this Part of this Act as being both supplied to him for the purpose of that business and supplied by him in the course or furtherance of it. (7) For the purposes of this section, where goods are manufactured or produced from any other goods those other goods shall be treated as incorporated in the first-mentioned goods. (8) An order under subsection (4) or (6) above may provide for the method by which the value of any supply of services which is treated as taking place by virtue of the order is to be calculated.

2

In section 7 of the 1972 Act (time of supply) the following shall be substituted for subsections (7) and (8)—

(7) Where goods are treated as supplied by an order under section 6(5), the supply is treated as taking place when they are appropriated to the use mentioned in that subsection. (7A) Where there is a supply of goods by virtue only of paragraph 5(2) of Schedule 2 to this Act, the supply is treated as taking place when the goods are transferred or disposed of as mentioned in that sub-paragraph. (7B) Where there is a supply of services by virtue only of paragraph 5(3) of Schedule 2, the supply is treated as taking place when the goods are appropriated to the use mentioned in that sub-paragraph. (8) The Commissioners may by regulations make provision with respect to the time at which (notwithstanding subsections (1) to (6) and (7) to (7B) above) a supply is to be treated as taking place in cases where it is a supply— (a) of goods or services for a consideration the whole or part of which is determined or payable periodically, or from time to time, or at the end of any period ; or (b) of goods for a consideration the whole or part of which is determined at the time when the goods are appropriated for any purpose; or where there is a supply of services by virtue of paragraph 5(3) of Schedule 2 or an order under section 6(4) ; and the regulations may, for any such case as is mentioned above in this subsection, provide for goods or services to be treated as separately and successively supplied, at prescribed times or intervals.

3

In section 8 of the 1972 Act (place of supply) the words " or services" in subsection (1), and subsections (4) to (7), shall be omitted ; and after that section there shall be inserted—

(8A) (1) A supply of services is treated as made— (a) in the United Kingdom if the supplier belongs in the United Kingdom ; and (b) in another country (and not in the United Kingdom), if the supplier belongs in that other country; and the following subsections apply for determining, in relation to any supply of services, whether the supplier or, as the case may be, the recipient belongs in one country or another. (2) If the supply is made to an individual in his private capacity (meaning that it is received otherwise than for the purposes of any business carried on by him), he is treated as belonging in whatever country he has his usual place of residence. (3) Otherwise, a person is treated as belonging in a country if— (a) he has there a business establishment or some other fixed establishment and no such establishment elsewhere ; or (b) he has no such establishment (there or elsewhere) but his usual place of residence is there; or (c) he has such establishments both in that country and elsewhere, and he is the supplier of the services, and the establishment of his which is most directly concerned with the supply is there ; or (d) he has such establishments both in that country and elsewhere, and he is the recipient of the services, and the establishment of his at which, or for the purposes of which, the services are most directly used or to be used is in that country. (4) For the purposes of subsections (2) and (3) above (but not for any other purposes)— (a) a person carrying on a business through a branch or agency in any country is treated as having a business establishment there ; and (b) " usual place of residence ", in relation to a body corporate, means the place where it is legally constituted. (5) The Treasury may by order provide, in relation to services generally or to particular services specified in the order, for varying the rules for determining where a supply of services is made. (8B) (1) The following applies where— (a) services of any of the descriptions specified in Schedule 2A to this Act are supplied by a person who belongs in a country other than the United Kingdom ; and (b) they are received by a taxable person for the purposes of any business carried on by him, and he belongs in the United Kingdom. (2) All the same consequences follow under this Part of this Act (and particularly so much as charges tax on a supply and entitles a taxable person to credit for input tax) as if the taxable person had himself supplied the services in the United Kingdom in the course or furtherance of his business, and that supply were a taxable supply. (3) But subsection (2) does not operate where the services are within any of the descriptions specified in Schedule 5 to this Act (exemptions); and supplies which are treated as made by a taxable person under that subsection are not to be taken into account as supplies made by him, when determining the allowance of input tax in his case under section 4(1). (4) In applying subsection (2), the supply of services treated as made by the taxable person is assumed to have been made— (a) for whatever consideration the services were in fact supplied to him ; and (b) at a time to be determined in accordance with regulations prescribing rules for attributing a time of supply in cases within that subsection. (5) The Treasury may by order add to, or vary, Schedule 2A.

4

For section 11 of the 1972 Act (valuation of imported goods) the following shall be substituted—

(11) (1) For the purposes of this Part of this Act, the value of imported goods shall be determined as follows. (2) If the goods are imported at a price in money payable as on a transfer of the property, there being no other consideration, the value is an amount equal to the price, plus (so far as not already included)— (a) all taxes, duties and other charges levied either outside or, by reason of importation, within the United Kingdom (except value added tax); and (b) all costs by way of commission, packing, transport and insurance up to the port or place of importation. (3) Where subsection (2) does not apply, the value of the goods is their open market value as determined in accordance with Community legislation relating to the valuation of goods for customs purposes, plus (so far as not already included in that value) all such taxes, duties, charges and costs as are specified in subsection (2)(a) and (b). (4) This section has effect subject to Schedule 3 to this Act.

5

In section 12 of the 1972 Act (zero-rating), after subsection (7) there shall be inserted—

(7A) Regulations may provide for the zero-rating of a supply of services which is made where goods are let on hire and the Commissioners are satisfied that the goods have been or are to be exported during the period of the letting, and such other conditions, if any, as may be specified in the regulations or the Commissioners may impose are fulfilled.

.

6

In section 13 of the 1972 Act (exemptions), there shall be added at the end of subsection (2)—

and the Schedule may be varied so as to describe a supply of goods by reference to the use which has been made of them or to other matters unrelated to the characteristics of the goods themselves

.

7

In section 16(3) of the 1972 Act (power to remit or repay tax on importation of goods) the words from " to the tax chargeable " to the end shall become paragraph (a), and at the end there shall be added—

(b) to any value added tax which may have become chargeable in another member State in respect of the goods.

8

In section 17 of the 1972 Act (application of customs enactments for the purposes of VAT)—

• (a) in subsection (2) (certain provisions of Customs and Excise Act 1952 not to apply), after paragraph (d), there shall be inserted—

(dd) section 258(1) (valuation of goods imported)

; and

• (b) subsection (3) shall be omitted.

9

In section 30 of the 1972 Act (accounting for, and payment of, tax), subsection (1) shall be omitted and after subsection (2) there shall be inserted—

(2A) The regulations may, where they require a tax invoice to be provided in connection with any description of supply, require it to be provided within a prescribed time after the supply is treated as taking place, and may allow for that time to be extended in accordance with general or special directions given by the Commissioners

.

10

In section 33 of the 1972 Act (recovery of tax) the following shall be substituted for subsection (2)—

(2) Where an invoice shows a supply of goods or services as taking place with tax chargeable on it, there shall be recoverable from the person who issued the invoice an amount equal to that which is shown on the invoice as tax or, if the tax is not separately shown, to so much of the total amount shown as payable as is to be taken as representing tax on the supply. (2A) Subsection (2) above applies whether or not— (a) the invoice is a tax invoice issued in pursuance of section 30(2) of this Act; or (b) the supply shown on the invoice actually takes or has taken place, or the amount shown as tax, or any amount of tax, is or was chargeable on the supply ; or (c) the person issuing the invoice is a taxable person ; and any sum recoverable from a person under the subsection shall, if it is in any case tax, be recoverable as such and shall otherwise be recoverable as a debt due to the Crown.

.

11

In section 40(1) of the 1972 Act (appeal to VAT Tribunal), for paragraph (h) the following paragraph shall be substituted—

(h) any direction under paragraph 1, 2 or 3 of Schedule 3 to this Act

.

12

In section 43 of the 1972 Act (orders, rules and regulations), in subsection (4) before the words " shall be laid " there shall be inserted " and an order under section 6(4) of this Act ".

13

For section 45 of the 1972 Act (meaning of "business" etc.) the following section shall be substituted—

(45) (1) In this Part of this Act "business" includes trade, profession or vocation. (2) The following (without prejudice to the generality of anything else in this Part) are deemed to be the carrying on of a business— (a) the provision by a club, association or organisation (for a subscription or other consideration) of the facilities or advantages available to its members; and (b) the admission, for a consideration, of persons to any premises. (3) Where a body has objects which are in the public domain and are of a political, religious, philanthropic, philosophical or patriotic nature, it is not to be treated as carrying on a business only because its members subscribe to it, if a subscription obtains no facility or advantage for the subscriber other than the right to participate in its management or receive reports on its activities. (4) Where a person, in the course or furtherance of a trade, profession or vocation, accepts any office, services supplied by him as the holder of that office are treated as supplied in the course or furtherance of the trade, profession or vocation. (5) Anything done in connection with the termination or intended termination of a business is treated as being done in the course or furtherance of that business. (6) The disposition of a business as a going concern, or of its assets or liabilities (whether or not in connection with its reorganisation or winding up), is a supply made in the course or furtherance of the business.

.

14

For Schedules 2 and 3 to the 1972 Act there shall be substituted the following Schedules—