Finance Act 1980

No person shall be treated for the purposes of paragraph 8 above as ceasing to hold an office or employment by virtue of which he is eligible to participate in the scheme until he ceases to hold an office or employment in the company concerned or any associated company or company of which the company concerned has control.

13

The scheme must provide for a person's contributions under the certified contractual savings scheme to be of such amounts (not exceeding £50 monthly) as to secure as nearly as may be repayment of an amount equal to that for which shares may be acquired in pursuance of rights obtained by him under the scheme ; and for this purpose the amount of repayment under the contractual savings scheme shall be determined as mentioned in paragraph 6 above.

14

The price at which scheme shares may be acquired by the exercise of a right obtained under the scheme must be stated at the time the right is obtained and must not be manifestly less than 90 per cent, of the market value of shares of the same class at that time or, if the Board and the company agree in writing, at such earlier time or times as may be provided in the agreement, but the scheme may provide for such variation of the price so stated as may be necessary to take account of any variation in the share capital of which the scheme shares form part.

Conditions as to scheme shares

15

The scheme shares must form part of the ordinary share capital of—

• (a) the company concerned ; or

• (b) a company which has control of the company concerned ; or

• (c) a company which either is or has control of a company which—

• (i) is a member of a consortium owning either the company concerned or a company having control of that company; and

• (ii) beneficially owns not less than three-twentieths of the ordinary share capital of the company so owned.

16

The scheme shares must be—

• (a) shares of a class quoted on a recognised stock exchange ; or

• (b) shares in a company which is not under the control of another company; or

• (c) shares in a company which is under the control of a company (other than a company which is or would if resident in the United Kingdom be a close company within the meaning of section 282 of the Taxes Act) whose shares are quoted on a recognised stock exchange.

17

The scheme shares must be—

• (a) fully paid up ; and

• (b) not redeemable ; and

• (c) not subject to any restrictions other than restrictions which attach to all shares of the same class.

18

In determining for the purposes of paragraph 17(c) above whether scheme shares which are or are to be acquired by any person are subject to any restrictions, there shall be regarded as a restriction attaching to the shares any contract, agreement, arrangement or condition by which his freedom to dispose of the shares or of any interest in them or of the proceeds of their sale or to exercise any right conferred by them is restricted or by which such a disposal or exercise may result in any disadvantages to him or a person connected with him.

19

Except where the scheme shares are in a company whose ordinary share capital consists of shares of one class only, the majority of the issued shares of the same class must be held by persons other than—

• (a) persons who acquired their shares in pursuance of a right conferred on them or an opportunity afforded to them as a director or employee of the company concerned or any other company and not in pursuance of an offer to the public ;

• (b) trustees holding shares on behalf of persons who acquired their beneficial interests in the shares as mentioned in paragraph (a) above ; and

• (c) in a case where the shares fall within sub-paragraph (c) and do not fall within sub-paragraph (a) of paragraph 16 above, companies which have control of the company whose shares are in question or of which that company is an associated company.

Conditions as to persons eligible to participate

20

• (1) Subject to paragraphs 22 and 23 below every person who—

• (a) is a full-time employee or full-time director of the company concerned or, in the case of a group scheme, a participating company, and

• (b) has been such an employee or director at all times during a qualifying period, not exceeding five years, and

• (c) is chargeable to tax in respect of his office or employment under Case I of Schedule E,

must be eligible to participate in the scheme, that is to say to obtain and exercise rights under it, on similar terms.

• (2) For the purposes of sub-paragraph (1) above, the fact that the rights to be obtained by the persons participating in a scheme vary according to the levels of their remuneration, the length of their service or similar factors shall not be regarded as meaning that they are not eligible to participate in the scheme on similar terms.

21

Except as provided in paragraph 8 above, a person must not be eligible to participate in the scheme at any time unless he is at that time a director or employee of the company concerned or, if the scheme is a group scheme, a participating company.

22

A person must not be eligible to participate in the scheme in any year of assessment if in that year rights have been obtained by him under another scheme approved under this Schedule and established by the company concerned or by—

• (a) a company which controls or is controlled by that company or which is controlled by a company which also controls that company, or

• (b) a company which is a member of a consortium owning that company or which is owned in part by that company as a member of a consortium.

23

• (1) A person must not be eligible to participate in the scheme at any time if at that time he has, or at any time within the preceding twelve months he has had, a material interest in a close company within the meaning of section 282 of the Taxes Act, which is—

• (a) a company the shares of which may be acquired pursuant to the exercise of rights obtained under the scheme ; or

• (b) a company which has control of such a company or is a member of a consortium which owns such a company.

• (2) In determining whether a company is a close company for the purpose of sub-paragraph (1) above, paragraph (a) of subsection (1) of section 282 of the Taxes Act (exclusion of companies not resident in the United Kingdom) and section 283 of the Taxes Act (exclusion of certain companies with quoted shares) shall be disregarded.

Transitional arrangements

24

• (1) This paragraph shall apply in any case where the Board are satisfied that—

• (a) a person has entered into a certified contractual savings scheme within the meaning of section 415 of the Taxes Act before the day appointed for the coming into force of this Schedule ; and

• (b) he has obtained rights under a scheme established before that day to acquire shares in a company of which he is an employee or director (or a company of which such a company has control) using repayments made under the certified contractual savings scheme.

• (2) Subject to sub-paragraph (3) below, where this paragraph applies repayments and interest paid under the certified contractual savings scheme shall be treated as repayments and interest paid under a scheme approved by the Board for the purposes of this Schedule under paragraph 5(b) above and accordingly may be used for the purchase of shares under a savings-related share option scheme approved under this Schedule.

• (3) The repayments and interest to which sub-paragraph (2) above applies shall not exceed the repayments and interest to which the participant would have been entitled if the terms of the scheme had corresponded to those of a scheme approved by the Board for the purposes of this Schedule under paragraph 5(b) above ; and for the purposes of this paragraph the amount of repayments under the certified contractual savings scheme shall be determined as mentioned in paragraph 6 above.

PART III — Supplementary

Information

25

The Board may by notice in writing require any person to furnish them, within such time as the Board may direct (not being less than thirty days), with such information as the Board think necessary for the performance of their functions under this Schedule, and as the person to whom the notice is addressed has or can reasonably obtain, including in particular—

• (a) information to enable the Board to determine whether to approve a scheme or withdraw an approval already given;

• (b) information in relation to the administration of a scheme and any alteration of the terms of a scheme ; and

• (c) information to enable the Board to determine the liability to tax, including capital gains tax, of any person who has participated in a scheme.

Interpretation

26

• (1) In this Schedule—

• “associated company” has the same meaning as in section 302 of the Taxes Act;

• “bonus date” has the meaning assigned by paragraph 6 above ;

• “the company concerned” has the meaning assigned by paragraph 1(1) above ;

• “control” has the same meaning as in section 534 of the Taxes Act;

• “group scheme ” and, in relation to such a scheme, “participating company ” have the meaning assigned by paragraph 1 above ;

• “market value” has the same meaning as in Part VIII of the Capital Gains Tax Act 1979 ;

• “scheme shares” has the meaning assigned by paragraph 5(a) above ;

• “shares” includes stock.

• (2) Subsection (6) of section 285 of the Taxes Act (interest paid to directors and directors' associates) shall have effect, with the substitution of a reference to 25 per cent, for any reference therein to 5 per cent., for the purpose of determining whether a person has or had a material interest in a company.

• (3) Section 303(3) of the Taxes Act (meaning of “associate”) shall have effect—

• (a) in a case where the scheme in question is a group scheme, with the substitution of a reference to all the participating companies for the first reference to the company in paragraph (ii) of the proviso to that subsection, and

• (b) with the substitution of a reference to 25 per cent, for the reference in that paragraph to 5 per cent.

• (4) Section 533 of the Taxes Act (connected persons) shall apply for the purposes of this Schedule.

• (5) For the purposes of this Schedule a company is a member of a consortium owning another company if it is one of not more than five companies which between them beneficially own not less than three-quarters of the other company's ordinary share capital and each of which beneficially owns not less than one-twentieth of that capital.

SCHEDULE 11

Taxation under Case I of Schedule D

1

• (1) In section 304(5) of the Taxes Act (meaning of investment company) for the words “but includes any savings bank or other bank for savings ” there shall be substituted the words “but (with the exception of a trustee savings bank as defined in section 95(1) of the Trustee Savings Banks Act 1969) includes any savings bank or other bank for savings ”.

• (2) This paragraph applies in relation to any accounting period beginning on or after 21st November 1979 (in this Schedule referred to as “the commencement date”).

Investments held on list November 1979

2

• (1) A trustee savings bank shall be treated as having on the commencement date appropriated as trading stock for the purposes of its trade all investments then held by it which are such that a profit on their sale on or after that date would form part of the trading profits of the bank.

• (2) Any gain or loss accruing to a trustee savings bank on the redemption before 21st November 1986 of an exempt investment held by it on the commencement date shall be left out of account in computing its profits, gains or losses under Case I of Schedule D.

• (3) Any gain or loss accruing to a trustee savings bank on a disposal of an exempt investment held by it on the commencement date, not being a gain or loss left out of account under sub-paragraph (2) above, may, if the bank so elects, be computed by reference to the cost of the investment instead of by reference to its market value on that date and, in the case of a loss, without any restriction under section 270(4) of the Taxes Act.

• (4) Any election under sub-paragraph (3) above shall be by notice in writing given to the Board within two years after the commencement date and shall have effect in relation to all exempt investments held by the bank on that date.

• (5) Where a trustee savings bank holds investments which include both exempt investments held by it on the commencement date and other investments of the same class, any investments of that class which are disposed of by the bank shall be treated for the purposes of sub-paragraph (3) above as consisting of the other investments rather than of the exempt investments held on that date.

• (6) In this paragraph references to exempt investments held by a trustee savings bank on the commencement date are to investments on the disposal of which immediately before that date no chargeable gain or allowable loss would have accrued to the bank by virtue of section 67 of the Capital Gains Tax Act 1979 (gilt-edged securities held for more than a year).

Restriction of allowable deductions

3

• (1) Where for any accounting period of a trustee savings bank which begins on or after the commencement date the bank is exempted from tax in respect of any amount of interest by virtue of section 339(1) of the Taxes Act (exemption for trustee savings bank's income from investments with National Debt Commissioners) the bank's allowable deductions for that period shall be treated for tax purposes as reduced by an amount calculated in accordance with sub-paragraph (2) below.

• (2) The amount referred to above shall be calculated by—

• (a) multiplying the bank's allowable deductions for the period by a fraction of which the numerator is the gross amount of exempt interest received by the bank in the period and the denominator is the aggregate of the gross amount of interest received by the bank in the period and of the bank's income in the period from dividends and other distributions ; and

• (b) subtracting from the result an amount equal to 15 per cent, of the gross amount of exempt interest received by the bank in the period.

• (3) In this paragraph “allowable deductions” means the deductions which, apart from this paragraph, would be taken into account for the purpose of computing the bank's profits, gains or losses under Case I of Schedule D for the period in question but excluding any deduction in respect of a loss on the disposal of an investment.

• (4) For the purposes of this paragraph interest on loans made by a trustee savings bank to any of its depositors or customers shall be treated as received by the bank when it is brought to credit by the bank.

Restriction of charges on income

4

Where for any accounting period of a trustee savings bank which begins on or after the commencement date the bank is exempted from tax in respect of any amount of interest by virtue of section 339(1) of the Taxes Act, the charges on income allowed as a deduction from the bank's profits for that period under section 248 of the Taxes Act shall be treated for tax purposes as reduced by an amount calculated by multiplying them by the fraction referred to in paragraph 3(2)(a) above.

Income applied in paying interest to depositors

5

• (1) In section 339(2) of the Taxes Act (savings bank, including trustee savings bank, entitled to exemption from tax in respect of income applied in paying interest to depositors) for the word “including ” there shall be substituted the word “excluding ”.

• (2) This paragraph applies in relation to any accounting period beginning, in the case of a trustee savings bank resident in the United Kingdom, on or after the commencement date and, in the case of a trustee savings bank not so resident, on or after 21st November 1983.

Mergers

6

• (1) Where the business of a trustee savings bank is transferred to another trustee savings bank after the commencement date, those banks shall be treated for the purposes of the Taxes Act as if they were the same person.

• (2) Where the business of a trustee savings bank is transferred to another trustee savings bank after the commencement date—

• (a) any exempt investment which was held on that date by the first bank and was transferred with the business shall be treated for the purposes of sub-paragraphs (2) to (5) of paragraph 2 above as if it had been held on that date by the second bank but without prejudice to any election already made in respect of the investment by the first bank under sub-paragraph (3) of that paragraph ; and

• (b) the cost of the investment shall be taken for the purposes of the said sub-paragraph (3) as equal to the cost of the investment to the first bank.

• (3) Where the business of a trustee savings bank was transferred to another trustee savings bank before the commencement date the cost of any exempt investment held by the second bank on that date which—

• (a) was transferred to it with the business ; and

• (b) was an exempt investment on the date of transfer,

shall be taken for the purposes of sub-paragraph (3) of paragraph 2 above as equal to the cost of the investment to the first bank.

• (4) Sub-paragraph (6) of paragraph 2 above shall apply to subparagraphs (2) and (3) above as it applies to that paragraph and shall so apply as if the references in it to the commencement date and section 67 of the Act of 1979 included references to the date of transfer in sub-paragraph (3)(b) above and section 41 of the Finance Act 1969 respectively.

Accounting periods

7

An accounting period of a trustee savings bank shall end immediately before the commencement date if, apart from this paragraph, it would not have done so.

Interpretation

8

In this Schedule—

• “the commencement date” has the meaning given in paragraph 1(2) above;

• “trustee savings bank” has the same meaning as in the Trustee Savings Banks Act 1969.

SCHEDULE 12

PART I — Expenditure Incurred After 23rd October 1979 and Before 1st June 1980

1

• (1) A first-year allowance in respect of expenditure on the provision of machinery or plant for leasing, whether in the course of a trade or otherwise, shall be of an amount equal to 25 per cent, of the expenditure in respect of which it is made if—

• (a) this Part of this Schedule applies to the machinery or plant; and

• (b) the machinery or plant is at any time in the requisite period used for the purpose of being leased under a finance lease to a person who is not resident in the United Kingdom and does not use the machinery or plant for the purposes of a trade carried on there or for earning profits or gains chargeable to tax by virtue of section 38(4) of the Finance Act 1973.

• (2) Paragraph 8 of Schedule 8 to the Finance Act 1971 (special rules for ships) shall not apply in relation to a first-year allowance the amount of which is restricted by this paragraph.

2

The machinery or plant in relation to which section 44 of the said Act of 1971 (writing-down allowances and balancing adjustments) has effect in accordance with section 65 of this Act shall include machinery or plant in respect of which the amount of a first-year allowance is restricted by paragraph 1 above but subsection (5) of the said section 65 shall not apply in relation to any disposal of such machinery or plant before 18th April 1980.

3

Section 66 of this Act shall apply also where—

• (a) the amount of a first-year allowance in respect of expenditure on the provision of any machinery or plant has been determined otherwise than in accordance with paragraph 1 above; and

• (b) the machinery or plant is at any time in the requisite period used as mentioned in sub-paragraph (1)(b) of that paragraph ;

and where that section applies by virtue of this paragraph subsection (2)(b) of that section shall have effect as if the allowances there mentioned were the maximum first-year allowance and writing-down allowance or allowances that could have been made in respect of the expenditure if the amount of the first-year allowance had been determined in accordance with paragraph 1 above.

4

• (1) Where a person other than a company has claimed a first-year allowance in respect of machinery or plant to which this Part of this Schedule applies, or a deduction on account of such an allowance has been made in computing profits in respect of which a return has been made by a company, then, if the amount of the allowance was determined otherwise than in accordance with paragraph 1 above and the machinery or plant in question is at any time in the requisite period used as mentioned in subparagraph (1)(b) of that paragraph, the person to whom it then belongs shall give written notice of that fact to the inspector, specifying the use to which the machinery or plant has been put, and, subject to sub-paragraph (2) below, any such notice shall—

• (a) be given within three months after the end of the chargeable period or its basis period in which the machinery or plant is first used as aforesaid ; and

• (b) relate to all the items of machinery or plant (if more than one) in respect of which that person is required to give a notice under this sub-paragraph in respect of that period.

• (2) If at the end of the three months mentioned in paragraph (a) of sub-paragraph (1) above the person concerned does not know and cannot reasonably be expected to know that any item of machinery or plant in respect of which he is required to give a notice under that sub-paragraph has been used as mentioned in paragraph 1(1)(b) above he shall in respect of that item give the notice within thirty days of his coming to know that it has been so used.

• (3) Where a first-year allowance has been made in respect of any expenditure the inspector may by notice in writing require—

• (a) any person to whom the machinery or plant belongs or has belonged, or who is or has been in possession of it under a lease, during the requisite period ; and

• (b) the personal representatives of any such person,

to furnish him, within such period (not being less than thirty days) as may be specified in the notice, with such information as he may require and the person to whom the notice is addressed has or can reasonably obtain about the leasing of the machinery or plant or the use to which it is being or has been put.

5

• (1) Subject to sub-paragraph (2) below, a lease is a finance lease for the purposes of this Part of this Schedule if—

• (a) it is for a term which may be expected to cover not less than 75 per cent, of the remaining useful life of the machinery or plant after the date on which it was first brought into use by the lessor; or

• (b) it provides for the whole or a substantial part of the benefit of the value of the machinery or plant when it is sold by the lessor to accrue directly or indirectly to a person other than the lessor or a person who is connected with him; or

• (c) it provides for the renewal or continuation of the lease for a further period for a consideration which is materially less than what would be regarded, at the time when the lease is granted, as the open market rental for that further period.

• (2) A ship is not leased under a finance lease by reason of being let on charter in the course of a trade which consists of or includes operating ships if —

• (a) the person carrying on the trade is resident in the United Kingdom or carries on the trade there ; and

• (b) that person is responsible as principal (or appoints another person to be responsible in his stead) for navigating and managing the ship throughout the period of the charter and for defraying all expenses in connection with the ship throughout that period or substantially all such expenses other than those directly incidental to a particular voyage or to the employment of the ship during that period.

• (3) In determining under sub-paragraph (1) above whether a lease is a finance lease there may be treated as part of the lease any arrangement or agreement made with respect to the leased asset, or in connection with the lease, by the lessor or lessee or by any person who is connected with either of them.

6

• (1) This Part of this Schedule applies to machinery or plant which—

• (a) was manufactured or assembled outside the United Kingdom ; or

• (b) was manufactured or assembled in the United Kingdom but not less than 25 per cent, of the cost of which (exclusive of value added tax) to the lessor is attributable to work done outside the United Kingdom in, or in connection with, its manufacture or assembly or to components manufactured or assembled outside the United Kingdom.

• (2) Section 50(6) of the Finance Act 1971 (references to machinery or plant to include references to parts of machinery or plant) shall not be construed as enabling sub-paragraph (1) above to be applied separately to different parts of any item of machinery or plant acquired as a single unit.

PART II — Expenditure Incurred After 31st May 1980 and Before 1st June 1986

7

• (1) Section 64 of this Act does not preclude the making of a first-year allowance in respect of expenditure on the provision of a television set if the expenditure is incurred and the set is delivered to the person incurring the expenditure before the end of the transitional period.

• (2) In this Part of this Schedule “the transitional period” means—

• (a) in relation to expenditure on the provision of a television set other than a viewdata receiver, the period of four years beginning with 1st June 1980 ;

• (b) in relation to expenditure on the provision of a viewdata receiver, the period of six years beginning with that date.

• (3) In this Part of this Schedule “a viewdata receiver” means a television set constructed for displaying information received by means of a telephone land-line connection in response to a request for specified information communicated by those means to a computer data bank ; and a television set shall not be regarded as a viewdata receiver by reason only of being constructed for receiving teletext transmissions, that it to say, transmissions intended for general reception and consisting of a succession of visual displays (with or without accompanying sound) each capable of being selected and held for separate viewing or other use.

8

Where section 64 of this Act would, apart from paragraph 7 above, have precluded the making of a first-year allowance in respect of any expenditure, the first-year allowance in respect of that expenditure shall—

• (a) if the person who incurs the expenditure has the set delivered to him in the penultimate year of the transitional period, be of an amount equal to 75 per cent, of the expenditure ;

• (b) if that person has the set delivered to him in the last year of that period, be of an amount equal to 50 per cent, of the expenditure.

9

The machinery or plant in relation to which section 44 of the Finance Act 1971 (writing-down allowances and balancing adjustments) has effect in accordance with section 65 of this Act shall include any television set in respect of which the amount of a first-year allowance is determined in accordance with paragraph 8 above.

10

Where section 66 of this Act has effect in relation to expenditure incurred on the provision of a television set which the person who incurs the expenditure has delivered to him in the last two years of the transitional period subsection (2)(b) of that section shall have effect as if the allowances there mentioned were the maximum first-year allowance and the writing-down allowance or allowances that could have been made in respect of the expenditure if the amount of the first-year allowance had been determined in accordance with paragraph 8 above.

11

Section 67 of this Act applies where the claim or deduction referred to in subsection (1) of that section relates to a first-year allowance in respect of a television set which the person who incurs the expenditure has delivered to him in the last two years of the transitional period and the amount of which falls to be determined otherwise than in accordance with paragraph 8 above.

SCHEDULE 13

PART I — Enterprise Zones and Small Workshops

Initial allowances

1

In section 1(2) of the Capital Allowances Act 1968 for the reference to one half of the capital expenditure there shall be substituted a reference to the whole of that expenditure.

2

A person making a claim by virtue of the said section 1(2) (modified by paragraph 1 above) as it applies for income tax purposes may require the initial allowance to be reduced to a specified amount; and a company may by notice in writing given to the inspector not later than two years after the end of the chargeable period for which the allowance falls to be made disclaim the initial allowance or require it to be reduced to a specified amount.

Writing-down allowances

3

In section 2(2) of the said Act of 1968 for the references to one twenty-fifth of the expenditure there shall be substituted references to one quarter of the expenditure.

PART II — Enterprise Zones

Use as a qualifying building or structure

4

For the purposes of sections 2(1)(b) and (3) and 3(1). of the proviso to section 3(4), of sections 4(3) and (5) and of section 12(1) and (2) of the said Act of 1968 a building or structure of any description (including a qualifying hotel) in relation to which Chapter I of Part I of that Act has effect in accordance with section 74 of this Act shall be regarded as continuing to be, or to be used as, a building or structure of that description notwithstanding that it has become a building or structure of another such description.

Definitions

5

None of the provisions of section 7 of the said Act of 1968 except subsection (4) shall be construed as applying by virtue of section 74 of this Act to a qualifying hotel or a commercial building or structure.

SCHEDULE 14

SCHEDULE 15

Interpretation

1

In this Schedule—

• (a) references to a reduction are to a reduction of tax by the substitution of new Tables in section 37(3) of the Finance Act 1975 ;

• (b) references to something happening before or after a reduction are to its happening before or, as the case may be, on or after the date on which the Tables giving effect to the reduction come into force.

Death within three years of chargeable transfer

2

Where a person who has made a chargeable transfer before a reduction dies after that reduction (or after that and one or more subsequent reductions) and within three years of the transfer, additional tax shall be chargeable by reason of his death only if, and to the extent that, it would have been so chargeable if the first of the Tables in section 37(3) as substituted by that reduction (or by the most recent of those reductions) had applied to that transfer.

Capital distribution following chargeable transfer

3

Where the rate of tax applicable to a capital distribution made after a reduction falls to be determined under sub-paragraph (2) of paragraph 7 of Schedule 5 to the said Act of 1975 by reference to a relevant transfer made before that reduction (or before that and one or more previous reductions), the amount of tax referred to in paragraph to) of that sub-paragraph shall be calculated as if the second of the Tables in section 37(3) as substituted by the reduction (or by the most recent of those reductions) had applied to that transfer.

Disposal of trees etc. following exemption on death

4

Where the value of any trees or underwood has been left out of account under Schedule 9 to the said Act of 1975 in determining the value transferred by the chargeable transfer made on a death before a reduction and tax is chargeable under paragraph 2 of that Schedule on a disposal of the trees or underwood after that reduction (or after that and one or more subsequent reductions) the rate or rates mentioned in paragraph 3 of that Schedule shall be determined as if the first of the Tables in section 37(3) as substituted by that reduction (or by the most recent of those reductions) had applied to that transfer.

Conditionally exempt transfers

5

Where tax is chargeable under section 78 of the Finance Act 1976 (works of art etc.) by reason of a chargeable event occurring after a reduction and the rate or rates at which it is charged fall to be determined under the provisions of section 79(1)(b)(ii) or 81(4)(b) of that Act by reference to a death which occurred, or a settlement which ceased to exist, before that reduction (or before that and one or more previous reductions) those provisions shall apply as if the Tables in section 37(3) as substituted by that reduction had been in force at the time of the death or when the settlement ceased to exist.

Maintenance funds

6

Where tax is chargeable under section 89 of this Act on any occasion after a reduction and the rate or rates at which it is charged fall to be determined under the provisions of Schedule 16 to this Act by reference to a death which occurred, or a settlement which ceased to exist, before that reduction (or before that and one or more previous reductions) those provisions shall apply as if the Tables in section 37(3) as substituted by that reduction had been in force at the time of the death or when the settlement ceased to exist.

Mutual transfers

7

Any question whether any, and if so what, tax is repayable or ceases to be payable by virtue of subsection (1)(a) of section 87 of the said Act of 1976 (mutual transfers) in a case where—

• (a) the donor's transfer was before a reduction ; and

• (b) the donee's transfer is after that reduction (or after that and one or more subsequent reductions),

shall be determined as if the Tables in section 37(3) as substituted by that reduction (or by the most recent of those reductions) had applied to the donor's transfer ; but this paragraph shall not be construed as affecting the amount of tax which, under subsection (3) of that section, falls to be taken into account in calculating the cancelled value.

Transfers reported late

8

Where a reduction is expressed to apply to chargeable transfers made on or after a particular date it shall not be taken to apply to any chargeable transfer which by virtue of section 114(2) of the said Act of 1976 (transfers reported late) is treated as made on or after that date but was in fact made before it

SCHEDULE 16

PART I — Rates of Tax

Normal rates

1

• (1) Subject to the provisions of this Schedule, the rate or rates at which tax is chargeable on any amount under section 89 of this Act (“the principal section ”) shall be—

• (a) if the settlor is alive, the rate or rates that would be applicable to that amount under the second Table in section 37 of the Finance Act 1975 if it were the value transferred by a chargeable transfer made by him on the occasion on which the tax becomes chargeable ;

• (b) if the settlor is dead, the rate or rates that would have applied to that amount under the appropriate Table in that section if it had been added to the value transferred on his death and had formed the highest part of that value.

• (2) For the purposes of sub-paragraph (1)(b) above the appropriate Table is, if the settlement was made on death, the first Table and, if not, the second.

Property transferred tax-free from another maintenance fund

2

• (1) This paragraph applies where in the case of any settlement (“the current settlement”) tax is chargeable under the principal section in respect of property which—

• (a) was previously comprised in another settlement; and

• (b) ceased to be comprised in that settlement and became comprised in the current settlement in circumstances such that by virtue of subsection (4)(d) of that section there was no charge to tax by reference to its value.

• (2) If the tax is chargeable by reason of the property being applied for the benefit of or devolving on the settlor or the settlor's spouse, widow or widower, references in paragraph 1 above to the settlor shall be construed as references to either—

• (a) the person who was the settlor in relation to the settlement referred to in sub-paragraph (1)(a) above ; or

• (b) if the Board so determine, any other person selected by them who was the settlor in relation to any settlement in which the property was comprised at any time in the last thirty years.

• (3) If the tax is chargeable by reason of the property being applied or devolving otherwise than as mentioned in sub-paragraph (2) above, references in paragraph 1 above to the settlor shall, if the Board so determine, be construed as references to any person selected by them who was the settlor in relation to any settlement in which the property was comprised at any time in the last thirty years.

• (4) If at any time in the last thirty years the property ceased to be comprised in a settlement (“the original settlement ”) and became comprised in another settlement other than the current settlement in circumstances such as are referred to in paragraph 3(1)(b) below, the Board shall not under sub-paragraph (2)(b) or (3) above select the person who was the settlor in relation to the original settlement but may direct that paragraph 1 above shall not apply and that the rate or rates at which tax is chargeable on the amount in question shall be those referred to in sub-paragraph (2)(a) or (b) of paragraph 3 below, taking the reference to the settlement referred to in sub-paragraph (1)(a) of that paragraph as a reference to the original settlement.

Property transferred tax-free from discretionary trust

3

• (1) This paragraph applies where in the case of any settlement (“the current settlement”) tax is chargeable under the principal section in respect of property which—

• (a) was previously comprised in another settlement; and

• (b) ceased to be comprised in that settlement and became comprised in the current settlement in circumstances such that by virtue of subsection (1) of section 90 of this Act there was no charge to tax by reference to its value or there was a reduced charge to tax by virtue of subsection (3) of that section.

• (2) If the tax is chargeable by reason of the property being applied for the benefit of or devolving on the settlor or the settlor's spouse, widow or widower paragraph 1 above shall not apply and the rate or rates at which the tax is charged on the amount in question shall be—

• (a) if the settlement referred to in sub-paragraph (1)(a) above is still in existence at the time when the tax is chargeable, the rate or rates that would be applicable (under paragraph 7 or, as the case may be, paragraph 8 of Schedule 5 to the Finance Act 1975) to that amount if a capital distribution of that amount were made at that time;

• (b) if that settlement has then ceased to exist—

• (i) subject to sub-paragraph (ii) below, the rate or rates that would be applicable as mentioned in paragraph (a) above but by reference to a capital distribution made on the occasion on which the settlement ceased to exist;

• (ii) if a capital distribution was made or treated as made on that occasion, the rate or rates that would have been applicable to that amount if it had been included in the amount of that distribution and had formed the highest part of it.

PART II — Subsequent Chargeable Transfers, Capital Distributions, Etc

4

Where tax has become chargeable under the principal section on any occasion at a rate or rates determined in accordance with paragraph 1 or 2 above by reference to any settlor, the rate or rates of tax applicable to any subsequent chargeable transfer made by that settlor shall be determined as if the amount on which tax has become chargeable as aforesaid were value transferred by a chargeable transfer made by him on that occasion.

5

Where the rate or rates at which tax is charged on any amount on any occasion under—

• (a) the principal section ; or

• (b) section 78 of the Finance Act 1976 (conditionally exempt transfers),

are determined by reference to the value transferred on a person's death, the rate or rates at which tax is charged by reference to that value on a subsequent occasion under the principal section (or under the said section 78 if tax was charged under the principal section on the previous occasion) shall be determined as if that value were increased by that amount.

6

Where tax has become chargeable under the principal section on any occasion at a rate or rates determined in accordance with paragraph 3(2) above by reference to any settlement—

• (a) the rate or rates applicable to any subsequent capital distribution out of the property comprised in that settlement shall be determined as if the amount on which tax has become chargeable had been the amount of a distribution payment made at the time when the tax became chargeable; and

• (b) where the settlement has ceased to exist and the tax chargeable under the principal section on a subsequent occasion falls to be calculated in accordance with sub-paragraph (i) or (ii) of paragraph 3(2)(b) above the said sub-paragraph (i) or (ii) shall have effect as if the amount of the capital distribution mentioned in that paragraph were increased by the amount on which tax has become chargeable on the previous occasion.

SCHEDULE 17

Part I — Preliminary

Interpretation

1

• (1) For the purposes of this Schedule a participator in an oil field transfers the whole or part of his interest in the field whenever as a result of a transaction or event other than—

• (a) the making of an agreement or arrangement of the kind mentioned in paragraph 5 of Schedule 3 to the Oil Taxation Act 1975; or

• (b) a re-determination under a unitisation agreement,

the whole or part of his share in the oil to be won and saved from the field becomes the share or part of the share of another person who is or becomes a participator in the field.

• (2) In sub-paragraph (1) above a “unitisation agreement” means an agreement for the exploitation of—

• (a) an oil field falling within two or more licensed areas; or

• (b) any such area as is mentioned in subsection (1)(a) of section 107 of this Act,

and a “re-determination” means, in a case within paragraph (a) above, a re-determination of the apportionment of oil from the field as between the different licensed areas and, in a case within paragraph (b) above, a re-determination of the apportionment mentioned in subsection (1)(b) of that section.

• (3) In this Schedule “the old participator” means the participator whose interest is wholly or partly transferred, “the new participator” means the person to whom it is transferred and “the transfer period” means the chargeable period in which the transfer takes place.

2

This Schedule shall be construed as one with Part I of the said Act of 1975, and any reference in this Schedule to a section or Schedule not otherwise identified is a reference to that section or Schedule of that Act.

Notice of transfer

3

• (1) The old and new participators shall within two months after the end of the transfer period deliver to the Board a notice in such form and containing such particulars with respect to the transfer as the Board may prescribe.

• (2) Where as a result of the same transaction or event—

• (a) the whole or part of the interest of two or more persons in an oil field becomes the interest or part of the interest of another person; or

• (b) parts of a participator’s interest in an oil field are transferred to two or more other persons,

a single notice relating to all the transfers shall be given under this paragraph by all the old participators and new participators, and in relation to any such notice references in paragraphs 4 and 5 below to the old and new participators shall be construed accordingly.

Exclusion of transfer rules

4

• (1) Parts II and III of this Schedule shall not apply in relation to a transfer if the old and new participators make an application in that behalf in the notice under paragraph 3 above and the Board consider that those provisions would not materially affect the total tax chargeable in respect of the field.

• (2) The Board shall give notice of their decision under this paragraph to the old and new participators.

Partial transfers

5

• (1) Where the transfer is of part of the old participator’s interest in the field the notice under paragraph 3 above shall state what the old and new participators propose should be the corresponding part of the amounts to be transferred to the new participator under paragraphs 6, 7 and 8 below and of the old participator’s share of oil to be treated as that of the new participator under paragraph 9 below; and subject to the following provisions of this paragraph, the corresponding part shall for the purposes of those provisions be taken to be such part as is determined by the Board and specified in a notice given to the old and new participators.

• (2) If the corresponding part determined by the Board differs from that proposed by the old and new participators they or any of them may appeal by notice in writing given to the Board not more than three months after the notice given by the Board under sub-paragraph (1) above ...; but the bringing of an appeal shall not affect the operation of the notice given by the Board.

• (3) The old participator or the new participator shall, whether or not himself the appellant, be entitled to be a party to the appeal and in any proceedings arising out of it.

• (4) An appeal may be abandonedbefore it is notified to the tribunal by notice in writing to the Board; and if before an appeal is determined the old and new participators agree with the Board on what should be the corresponding part referred to above the Board’s notice under subsection (1) above shall have effect as if that were the part specified in it.

• (5) Where the corresponding part referred to above as specified in the Board’s notice under sub-paragraph (1) is varied on appeal, the Board’s notice shall have effect as if the varied part had been specified in it; and all such assessments or determinations or adjustments shall be made as are necessary in consequence of the variation.

• (6) The provisions of paragraphs 14A to 14I of Schedule 2 to the Oil Taxation Act 1975 shall apply to appeals under this paragraph subject to any necessary modifications.

Part II — Transfer of Old Participator’s Expenditure Relief, Losses and Exemptions

Unused expenditure relief

6

• (1) There shall be transferred to the new participator the whole or, if the transfer is of part of the old participator’s interest in the field, a corresponding part of any amount which—

• (a) would, apart from this paragraph, fall to be taken into account under section 2(9)(b) in computing the assessable profit or allowable loss accruing to the old participator from the field in the transfer period or a later chargeable period; and

• (b) is attributable to expenditure allowed to the old participator under Schedule 5 in accordance with his interest in the field before the transfer.

• (2) If the whole of the old participator’s interest in the field is transferred in the transfer period (whether to one new participator or partly to one and partly to another or others) there shall be transferred to the new participator the whole or, as the case may be, to each of them a corresponding part, of any amount which—

• (a) would, apart from this paragraph, fall to be taken into account under section 2(9)(c) in computing the assessable profit or allowable loss accruing to the old participator from the field in the transfer period or a later chargeable period; and

• (b) is attributable to expenditure incurred by the old participator before the transfer and allowed to him under Schedule 6.

• (3) Any amount transferred to the new participator under this paragraph shall, instead of being taken into account as mentioned in sub-paragraph (1)(a) or (2)(a) above, be taken into account in computing the assessable profit or allowable loss accruing to the new participator from the field.

Unused losses

7

• (1) There shall be transferred to the new participator the whole or, if the transfer is of part of the old participator’s interest in the field, a corresponding part of any loss which the Board have determined under Schedule 2 has accrued to the old participator from the field in the transfer period or any earlier chargeable period to the extent that it has not been relieved against assessable profits accruing to him in the transfer period or an earlier chargeable period.

• (2) Any amount of a loss transferred to the new participator under this paragraph may be relieved under section 7 against assessable profits accruing to the new participator in the transfer period or a later chargeable period and shall not be set off against assessable profits of the old participator and, for the purposes of effecting such relief, subsection (1) of section 7 shall have effect as if the word “succeeding” were omitted.

Accumulated capital expenditure

8

• (1) There shall be transferred to the new participator the whole or, if the transfer is of part of the old participator’s interest in the field, a corresponding part of the amount which under section 9(3) is the old participator’s accumulated capital expenditure at the end of the last chargeable period before the transfer period.

• (2) Subject to paragraph 18 below, any amount transferred under this paragraph shall be treated for the purposes of section 9(3) as, or as part of, the new participator’s accumulated capital expenditure at the end of the transfer period and later chargeable periods and not as, or as part of, the old participator’s accumulated capital expenditure at the end of any such period.

Excluded oil

9

For the purpose of determining under section 10(1)(b) what oil is to be disregarded in computing a participator’s gross profit or loss attributable to oil won from the field after the transfer there shall be treated as if it were the new participator’s, and not the old participator’s, the whole or, if the transfer is of part of the old participator’s interest in the field, a corresponding part of the old participator’s share of oil won and saved from the field before the transfer.

Successive transfers

10

• (1) Where the old participator transfers the whole or part of his interest in a field in which he has himself acquired an interest by a previous transfer, the amounts to be taken into account in determining what is to be transferred to the new participator under paragraphs 6, 7 and 8 above and what is to be the share of oil treated as the new participator’s under paragraph 9 above shall include—

• (a) any amount which falls to be transferred to the old participator under paragraph 6 or 7 above by reference to the previous transfer and has not been taken into account or relieved in relation to him under paragraph 6(3) or 7(2) above; and

• (b) any amount or share which falls to be transferred to the old participator or treated as his under paragraph 8 or 9 above by reference to the previous transfer.

• (2) Where the old participator makes successive transfers of parts of his interest, the amounts to be transferred to the new participator under paragraphs 6, 7 and 8 above and the share of oil to be treated as the new participator’s under paragraph 9 above by reference to each transfer shall be that amount or share after deducting any of it which falls to be so transferred or treated by reference to a previous transfer.

Part III — Other Rules

...

11

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

Royalty payments

12

• (1) Where at the end of the transfer period the old participator has no interest in the field—

• (a) any licence debit or credit which, apart from this paragraph, would fall to be taken into account under subsection (6) of section 2 in computing the assessable profit or allowable loss accruing to him from the field in any later chargeable period in which he has no such interest shall not be so taken into account; but

• (b) that subsection shall have effect in relation to the transfer period as if the amount of—

• (i) any such licence debit or credit as is mentioned in paragraph (a) above; and

• (ii) any licence debit or credit that would have fallen to be taken into account as there mentioned for a later chargeable period if the old participator were still a participator,

were an amount to be included in the sum referred to in paragraph (a) or, as the case may be, paragraph (b) of that subsection.

• (2) Sub-paragraph (1) above does not affect the amount of any loss transferred under paragraph 7 above.

• (3) Notwithstanding anything in section 34 of the Taxes Management Act 1970 (ordinary time limit for assessments) any further assessment or determination or amendment of an assessment or determination required in consequence of sub-paragraph (1) above may be made at any time not later than six years after the end of the later chargeable period referred to in sub-paragraph (1)(a) or (b)(ii) above.

Payments on account and advance payments

13

• (1) For the purpose of computing under the Schedule to the Petroleum Revenue Tax Act 1980 (computation of payment on account) whether any, and if so what, amount of tax is payable under that Act by the old participator and the new participator for the transfer period or any later chargeable period—

• (a) it shall be assumed that any application or proposal made in relation to the transfer under paragraph 4 or 5(1) above and in respect of which the Board have not notified their decision will be accepted by the Board; and

• (b) the computation under that Schedule shall be made as if paragraph 6 above applied in relation to expenditure which under paragraph 2(4) of that Schedule is treated as having been allowed under Schedule 5 or 6 as well as to expenditure which has been so allowed.

• (2) Where at the end of the transfer period the old participator has no interest in the field he shall not be liable under section 105 of this Act to pay any amount as an advance payment of tax in respect of the field for any subsequent chargeable period in which he has no such interest.

• (3) The old participator shall not be entitled to interest under subsection (7) of that section by reason of any such excess as is there mentioned for the transfer period or either of the next two chargeable periods if he and the new participator are connected within the meaning of section 1122 of the Corporation Tax Act 2010.

Losses of new participator

14

• (1) Where the Board have determined under Schedule 2 that an allowable loss has accrued to the new participator from the field in the transfer period or a later chargeable period, then, if—

• (a) the loss has been computed by reference to an amount taken into account by virtue of paragraph 6 above; and

• (b) the old participator has no interest in the field at the end of the transfer period,

the old and new participators may jointly elect that the loss shall be surrendered to the old participator to the extent that it does not exceed whichever is the lesser of the amount referred to in paragraph (a) above and the total assessable profits as reduced under section 7 that accrued to the old participator from the field in chargeable periods up to and including the chargeable period after the transfer period.

• (2) Where any amount of a loss is surrendered under this paragraph it shall be treated—

• (a) in relation to the old participator, as an allowable loss accruing to him in the chargeable period next but one after the transfer period; and

• (b) in relation to the new participator, as if it has been relieved against assessable profits accruing to him from the field in chargeable periods before that in which it accrued.

Terminal losses

15

• (1) This paragraph applies in any case where—

• (a) such an allowable loss as falls to be relieved under section 7(3) accrues to the new participator from the field in a chargeable period ending after 17th March 2004, but

• (b) some or all of the loss cannot be relieved under section 7(3) against assessable profits accruing to him from the field.

• (2) So much of the loss as cannot be so relieved (“the remaining loss”) shall be regarded as an allowable unrelievable field loss in relation to the new participator (“the loss-maker”) only to the extent that—

• (a) so much of it as cannot be relieved in accordance with sub-paragraphs (3) to (6) below,

exceeds

• (b) the aggregate of any relevant previous participators' expenditure unrelated to the field (see sub-paragraphs (10) and (11) below).

• (3) The remaining loss shall be treated as an allowable loss which falls to be relieved under section 7(3) against so much of any assessable profits accruing to the old participator from the field as is attributable to his represented interest (see sub-paragraphs (9) and (12) below).

• (4) Where a person is the new participator in relation to two or more old participators—

• (a) the remaining loss shall be apportioned between those old participators in such manner as is just and reasonable having regard to the interests respectively transferred by them to the new participator,

• (b) sub-paragraph (3) above shall have effect separately in relation to each of them (and the part of the remaining loss apportioned to him).

• (5) Any relief by virtue of sub-paragraph (3) above shall be given against the assessable profits accruing to the old participator in an earlier chargeable period only to the extent to which it cannot be given against the assessable profits accruing to him in a later chargeable period.

• (6) If—

• (a) the old participator acquired some or all of his interest in the field by a previous transfer in relation to which he was the new participator,

• (b) Parts 2 and 3 of this Schedule applied in relation to that previous transfer, and

• (c) some or all of the part of the remaining loss treated as an allowable loss of his cannot be relieved in accordance with sub-paragraph (3) above,

sub-paragraphs (3) to (5) above shall apply in relation to so much of that part of the remaining loss as cannot be so relieved as they apply in relation to the remaining loss, but construing the references in those sub-paragraphs to the new participator and the old participator by reference to that previous transfer and the parties to it, and then applying this sub-paragraph accordingly (and so on).

• (7) But where—

• (a) the person who is the old participator in relation to a transfer made before 17th March 2004 (“ the later transfer ”) is also the new participator in relation to a previous transfer, and

• (b) Parts 2 and 3 of this Schedule applied in relation to both of those transfers,

sub-paragraph (3) above shall not apply by virtue of sub-paragraph (6) above in relation to so much of the assessable profits of the person who is the old participator in relation to that previous transfer as is attributable to so much of his interest as constitutes the whole or part of his represented interest by virtue of the later transfer.

• (8) Where losses accruing to each of two or more participators fall to be relieved by virtue of sub-paragraph (3) above against the same assessable profits, a loss accruing to the person who last had an interest representing the whole or part of the transferred interest at an earlier time shall be so relieved before one accruing to a person who last had such an interest at a later time.

In this sub-paragraph “ the transferred interest ” means the interest transferred by the person against whose assessable profits the losses fall to be relieved.

• (9) In determining for the purposes of this paragraph the assessable profits of a participator that are attributable to his represented interest, the assessable profits shall be apportioned between—

• (a) the represented interest, and

• (b) the remainder of the participator’s interest,

using such method as is just and reasonable, having regard to the respective sizes of those interests.

• (9A) This paragraph is subject to paragraph 6 of Schedule 20B to the Finance Act 1993.

• (10) For the purposes of this paragraph “ relevant previous participators' expenditure unrelated to the field ” means so much of each relevant previous participator’s allowed expenditure unrelated to the field as is referable to his represented interest, other than excepted old expenditure.

• (11) For the purposes of sub-paragraph (10) above—

• “ allowed expenditure unrelated to the field ”, in relation to a participator, is expenditure unrelated to the field which is allowed on a claim or election made by the participator;

• “ excepted old expenditure ”is expenditure which has been allowed in pursuance of a claim or election for its allowance received by the Board before 17th March 2004;

• “ relevant previous participator ” means a participator against any of whose assessable profits relief is given in accordance with sub-paragraphs (3) to (6) above;

• and sub-paragraph (9) above shall apply in relation to allowed expenditure unrelated to the field as it applies in relation to assessable profits.

• (12) In this paragraph—

• “ expenditure unrelated to the field ” has the meaning given by section 6(9);

• “ the loss-maker ” shall be construed in accordance with sub-paragraph (2) above;

• “ previous owner ” means a person from whom the loss-maker directly or indirectly derives his title to the whole or any part of his interest;

• “ represented interest ”, in the case of a previous owner, means so much of the interest which that previous owner transferred, by a transfer to which Parts 2 and 3 of this Schedule apply, as is represented in the loss-maker’s interest by virtue only of— that transfer, orthat transfer and one or more subsequent transfers to which those Parts apply,making, for the purposes of paragraph (b) above, such apportionments as are just and reasonable, having regard to the interests transferred by each of the transferors.

Abortive exploration expenditure

16

• (1) Subject to sub-paragraph (2) below, there shall be allowed under section 5 in the case of the new participator, in connection with any field in which an interest is transferred to him by the old participator, any expenditure incurred—

• (a) by the old participator; or

• (b) if the old participator is a company, by a company which is within the meaning of that section associated with the old participator in respect of the expenditure,

if no claim in respect of it has been made under Schedule 7 by the old participator or any such company and the expenditure would be allowable under that section in the case of the new participator if he had himself incurred it.

• (2) Sub-paragraph (1) above—

• (a) does not apply so long as the old participator or, if the old participator is a company, any company associated with the old participator has an interest in a licence; and

• (b) applies to the new participator only if the transfer to him was the last transfer made by the old participator.

• (3) For the purposes of sub-paragraph (2) above a company is associated with the old participator if—

• (a) one is a 51 per cent. subsidiary of the other and the other is not a 51 per cent. subsidiary of any company; or

• (b) each of them is a 51 per cent. subsidiary of a third company which is not itself a 51 per cent. subsidiary of any company;

and Chapter 3 of Part 24 of the Corporation Tax Act 2010 (subsidiaries) shall apply for the purposes of this sub-paragraph.

• (4) This paragraph is without prejudice to the application of section 5 in cases where the old participator is a company and the new participator is within the meaning of that section a company associated with the old participator in respect of the expenditure in question.

Oil allowance

17

If the transfer period is one of the first three chargeable periods of the field section 8 shall not apply to the old participator for that period or any earlier period.

Limit on tax payable in transfer year

18

• (1) For the purposes of section 9 in its application to the transfer period, the accumulated capital expenditure at the end of that period of the old participator and the new participator respectively shall be treated as equal to the aggregate of—

• (a) the pre-transfer fraction of what (apart from this paragraph) would be the amount of his accumulated capital expenditure for the purposes of that section at the end of that period if any transfer from or to him under paragraph 6 or 8 above were disregarded; and

• (b) the post-transfer fraction of what (apart from this paragraph) would be that amount having regard to any transfer from or to him in that period under those paragraphs.

• (2) For the purposes of this paragraph the pre-transfer and post-transfer fractions are respectively the fractions of the period (reckoned in days) which elapse before and begin with the date of the transfer; and if there are two or more transfers in the period those fractions shall be determined—

• (a) for a participator who is the old participator as respects any of the transfers, by reference to the first transfer as respects which he is the old participator;

• (b) for a participator who is the new participator as respects any of the transfers, by reference to the last transfer as respects which he is the new participator;

• (c) for a participator who is the old participator as respects one or more of the transfers and the new participator as respects another or others, by reference to whichever results in the smallest amount of accumulated capital expenditure under this paragraph.

Disposal of long-term assets

19

• (1) Neither paragraph 4 of Schedule 4 nor section 7 of the Oil Taxation Act 1983 shall apply to the disposal of an asset used in connection with an oil field if the disposal is by the old participator (or a person connected with him) to the new participator (or a person connected with him) and the disposal is in pursuance of the transfer by the old participator to the new participator of an interest in the field.

• (2) Section 839 of the Taxes Act 1988 (connected persons) shall apply for the purposes of this paragraph.

Transfers of oil

20

Where in pursuance of the transfer of the whole or part of his interest in the field the old participator transfers his right to any oil already won from the field to the new participator, that oil—

• (a) shall not be taken into account under section 2(5) in computing the old participator’s assessable profit or allowable loss in the transfer period; but

• (b) shall be taken into account under section 2(5) in computing the new participator’s assessable profit or allowable loss as if it were included in his share of the oil won from the field.

Retention of share of oil

21

Where the old participator retains a share of the oil won from the field in pursuance of an agreement between him and the new participator under which the latter undertakes to be responsible for carrying out the old participator’s obligations in connection with the field so far as they relate to that share—

• (a) that share shall be taken to belong to the new participator; and

• (b) any oil comprised in that share shall be treated as oil acquired by the old participator under an agreement to which paragraph 6 of Schedule 3 applies.

SCHEDULE 18

Part I

Exemption from provisions applying to company distributions

1–8

Relevant distributions

2

• (1) The following distributions fall within this paragraph—

• (a) a distribution consisting of the transfer to all or any of its members by a company (“the distributing company ”) of shares in one or more companies which are its 75 per cent, subsidiaries;

• (b) a distribution consisting of the transfer by a company (“the distributing company”) to one or more other companies (“the transferee company or companies”) of—

• (i) a trade or trades; or

• (ii) shares in one or more companies which are 75 per cent, subsidiaries of the distributing company, and the issue of shares by the transferee company or companies to all or any of the members of the distributing company.

• (2) References in this Schedule to a relevant company are to the distributing company, to each subsidiary whose shares are transferred as mentioned in sub-paragraph (1)(a) or (b)(ii) above and to each transferee company mentioned in sub-paragraph (1)(b) above.

Conditions

3

Each relevant company must be resident in the United Kingdom at the time of the distribution.

4

The distributing company must at the time of the distribution be either a trading company or a member of a trading group and each subsidiary whose shares are transferred as mentioned in paragraph 2(1)(a) or (b)(ii) above must at that time be either a trading company or the holding company of a trading group.

5

• (1) in a case within paragraph 2(1)(a) above—

• (a) the shares must not be redeemable, must constitute the whole or substantially the whole of the distributing company's holding of the ordinary share capital of the subsidiary and must confer the whole or substantially the whole of the distributing company's voting rights in the subsidiary; and

• (b) subject to sub-paragraph (2) and paragraph 8(b) below, the distributing company must after the distribution be either a trading company or the holding company of a trading group.

• (2) Sub-paragraph (1)(b) above does not apply if the transfer relates to two or more 75 per cent, subsidiaries of the distributing company and that company is dissolved without there having been after the distribution any net assets of the company available for distribution in a winding up or otherwise.

6

• (1) In a case within paragraph 2(1)(b) above—

• (a) if a trade is transferred the distributing company must either not retain any interest or retain only a minor interest in that trade ;