Finance Act 1981

• (3) A company shall not be entitled to relief under this paragraph unless a claim for the relief is made within two years after the end of the period of account in respect of which the relief is claimed.

• (4) A company may, in making a claim for relief under this paragraph in respect of any period of account, specify an amount of relief less than that available under sub-paragraph (2) above and, if it does so, the relief to which it is entitled under this paragraph in respect of that period shall be the amount specified in the claim.

Recovery of relief on cessation of trade etc.

13

• (1) Where during or at the end of a period of account a company carrying on a trade ceases to do so, or ceases to be within the charge to corporation tax under Case I of Schedule D in respect of the trade, then, subject to paragraph 20 below—

• (a) it shall not be entitled to relief in respect of that period; and

• (b) a charge by way of recovery of relief shall be made on the company on an amount equal to the unrecovered past relief allowed to it for that trade.

• (2) Sub-paragraph (1) above shall apply also where the scale of the activities of the trade for any period of account is negligible in comparison with their scale for any previous period of account beginning not more than six years before the first-mentioned period.

• (3) Where during or at the end of a period of account a company carrying on a trade ceases (by virtue of ceasing to be resident in the United Kingdom) to be within the charge to corporation tax under Case I of Schedule D in respect of a part of the trade, it shall be treated for the purposes of this Schedule as if that part were a separate trade carried on by it in that period; and all necessary apportionments between the two parts of the trade (including the apportionment of unrecovered past relief allowed for that trade) shall be made by reference to the respective values of the trading stock of each part immediately after that event

14

• (1) Where there is a change of ownership of a company and section 483 of the Taxes Act applies so as to restrict the carrying forward of losses incurred before the change, then relief to which those disallowed losses are attributable shall, although unrecovered in periods of account ending before the change of ownership, nevertheless be disregarded in ascertaining the amount of unrecovered past relief in later periods of account.

• (2) Relief to which disallowed losses are attributable is that which was not given effect in the period of account or base period for which it was allowed or in a subsequent period of account.

• (3) For the purposes of sub-paragraph (2) above—

• (a) relief under Part II of Schedule 5 to the Finance Act 1976 ; and

• (b) Schedule 10 relief as defined in paragraph 18 of that Schedule,

is assumed to be given effect before capital allowances and profits or gains are assumed to be set against losses attributable to that relief before other losses; and any question whether effect has been given to relief under this Part of this Schedule shall be determined as for the purposes of paragraph 17(1) below. Section 483(5) of the Taxes Act has effect subject to this sub-paragraph.

• (4) For the purpose of ascertaining the extent to which relief to which disallowed losses are attributable has been recovered in periods of account ending before the change of ownership, it shall be assumed—

• (a) that relief within sub-paragraph (3)(a) or (b) above is re covered from earlier periods before later periods and that effect is given to that relief from earlier periods before later periods;

• (b) that relief under this Part of this Schedule is recovered from later periods before earlier periods and that effect is given to that relief from later periods before earlier periods.

15

• (1) Where an amount of government investment in a body corporate is set off under section 48 of this Act against that body's losses as at the end of an accounting period, being losses within subsection (3)(a) of that section, then—

• (a) if the whole amount of those losses is extinguished by the set off sub-paragraph (2) below shall have effect in relation to the relief to which that amount is attributable; and

• (b) if a lesser amount of those losses is so extinguished, that sub-paragraph shall have effect in relation to the relief to which that lesser amount is attributable.

• (2) The relief referred to in sub-paragraph (1) above shall, although unrecovered in periods of account ending in or before the accounting period there mentioned, nevertheless be disregarded in ascertaining the amount of unrecovered past relief in later periods of account.

• (3) Subject to sub-paragraph (4) below, relief to which any amount of extinguished losses is attributable shall be identified in accordance with paragraph 14(2) to (4) above as in the case of relief to which disallowed losses are attributable.

• (4) For the purposes of sub-paragraph (1)(b) above

• (a) the set off shall be treated as extinguishing the loss of an earlier accounting period before that of a later accounting period; and

• (b) if the set off extinguishes only part of the loss of an accounting period, the components of that part shall be identified in accordance with paragraph 14(3) above as if that part were profits against which effect could be given to the relief.

Method of giving effect to relief or charge

16

• (1) Relief under paragraph 12 above in respect of any period of account shall, subject to the provisions of this paragraph, be given effect by treating the amount of the relief as a trading expense of the trade in that period.

• (2) A charge under paragraph 13 above in respect of any period of account shall, subject to the provisions of this paragraph, be given effect by treating the amount on which the charge is to be made as a trading receipt of the trade in that period.

• (3) Where a trade is set up and commenced by a company during a period of account, any amount which in accordance with this paragraph falls to be treated as an expense or receipt of the trade in that period, shall be brought into account only in respect of the accounting period, or periods, beginning with or after that commencement.

• (4) Where during a period of account a company carrying on a trade ceases to do so, or ceases in respect of it to be within the charge to corporation tax under Case I of Schedule D, any relief or charge which in accordance with this paragraph falls to be treated as an expense or receipt of the trade in that period, shall be brought into account only in respect of the accounting period, or periods, ending on or before that discontinuance or other event.

Restriction of carry forward of unused relief

17

• (1) Where a company incurs a loss in an accounting period there shall not be carried forward under section 177(1) of the Taxes Act to a subsequent accounting period so much of that loss as consists of relief under this Part of this Schedule for an accounting period which ended six years or more before the beginning of that subsequent accounting period.

• (2) For the purposes of this paragraph the loss incurred by a company in an accounting period shall be taken to consist of—

• (a) the loss, if any, incurred in the trade in that period (calculated without regard to capital allowances or relief under this Part of this Schedule);

• (b) the capital allowances for the accounting period less the amount of the profit, if any, that accrued from the trade in that period (calculated without regard to capital allowances or relief under this Part of this Schedule); and

• (c) the relief under this Part of this Schedule for the accounting period less so much of the profit referred to in paragraph (b) above as remains after deducting the capital allowances referred to in that paragraph.

• (3) Subject to sub-paragraph (4) below, where by virtue of section 177(2) of the Taxes Act (set off against profits), section 254 of that Act (set off against franked investment income) or section 258 of that Act (group relief) a loss falls to be set off against an amount of profits or franked investment income of an accounting period but the loss exceeds that amount, the part of the loss that is so set off shall for the purposes of tins paragraph be taken to consist—

• (a) first of the loss, if any, referred to in sub-paragraph (22a) above;

• (b) next of the capital allowances referred to in sub-paragraph (2)(b) above; and

• (c) lastly of the relief referred to in sub-paragraph (2)(c) above.

• (4) Where subsection (3A) of the said section 177 applies, the part of the loss referred to in sub-paragraph (3) above shall be attributed first to the additional amount allowed by virtue of that subsection under subsections (2) and (3) of that section and then as provided by sub-paragraph (3) above (excluding that amount from paragraph (b)).

• (5) Where by virtue of section 177(1) of the Taxes Act (carry forward of losses) any amount in respect of a loss or losses incurred by a company falls to be set off against the company's trading income in an accounting period but that amount exceeds that income, the part of the amount that is set off shall for the purposes of this paragraph be taken to consist—

• (a) first of capital allowances for previous accounting periods ending not earlier than 14th November 1980 ;

• (b) next of relief under this Part of this Schedule, taking relief in respect of a later period of account before relief in respect of an earlier one ;

• (c) next of losses incurred in the trade in previous accounting periods ending not earlier than 14th November 1980 (calculated without regard to capital allowances or rebel falling within paragraphs (a) and (b) above) and including any losses treated under section 254(5) of the Taxes Act as incurred in such accounting periods ; and

• (d) lastly of other losses, capital allowances and reliefs.

• (6) In this paragraph references to relief under this Part of this Schedule for an accounting period are to relief in respect of any period of account falling wholly within the accounting period and to a proportionate part of the relief in respect of any period of account falling partly within it.

PART IV — General Rules

Partnerships

18

• (1) Where a trade is carried on by persons in partnership, entitiement to relief or liability to charge under this Schedule is a joint entitlement or liability, and any claim for relief under this Schedule shall be a single claim made in the partnership name.

• (2) Where none of those persons is a company, entitlement to relief and liability to charge under this Schedule shall be ascertained and given effect as if the trade were carried on by an individual.

• (3) Where any of those persons is a company, entitlement to relief and liability to charge under this Schedule shall be ascertained as if the partnership were a company and shall be given effect in accordance with the following provisions of this paragraph.

• (4) A company's share in any such entitlement or liability in any accounting period of the partnership shall be determined according to the interests of the partners during that period, and shall be given effect as if the share derived from a trade carried on by the company alone in its corresponding accounting period or periods.

In this sub-paragraph " corresponding accounting period or periods " means the accounting period or periods of the company comprising or together comprising the accounting period of the partnership, and any necessary apportionment shall be made between corresponding accounting periods if more than one.

• (5) The share in any such entitlement or liability of the partner or partners other than companies shall be given as if that share derived from a trade carried on by him, or, as the case may be, by them in partnership, otherwise than in partnership with a company.

New businesses

19

• (1) A person's entitlement to relief under this Schedule for a trade in respect of a period of account shall be determined in accordance with this paragraph if the trade is set up and commenced at the beginning of that period or in the course of it

• (2) The relief to which the person is entitled for the trade in respect of the period of account shall be determined—

• (a) as if the value of his trading stock at the end of that period, as reduced in accordance with sub-paragraph (3) below, were the value of his trading stock at the end of the preceding period of account; and

• (b) if the period of account begins before the date on which the trade is set up and commenced, by reference to the increase, if any, in the all stocks index over the part of that period beginning with that date.

• (3) For the purposes of sub-paragraph (2)(a) above the value of the person's trading stock at the end of the period of account in respect of which the relief is given shall be reduced by multiplying it by the fraction of which—

• (a) the numerator is the figure given by the all stocks index for the month containing the last day before the beginning of that period; and

• (b) the denominator is the figure given by that index for the month containing the last day of that period.

• (4) If the period of account begins before the date on which the trade is set up and commenced the reference in sub-paragraph (3)(a) above to that period of account shall be construed as a reference to the part of it beginning with that date.

• (5) Sub-paragraph (2) has effect subject to paragraph 23 below.

Successions

20

• (1) The provisions of this paragraph apply—

• (a) where the whole or part of a trade carried on by one company (" the predecessor ") is transferred to another company (" the successor ") and section 252 of the Taxes Act (company reconstructions) has effect in relation to that event; or

• (b) where the whole of a trade carried on by an individual or by persons in partnership ("the predecessor") is transferred to a company resident in the United Kingdom ("the successor") and at the date of the transfer not less than three-quarters of the ordinary share capital of the company is held by that individual or those persons,

and, in either case, the trading stock is transferred at cost or at market value.

• (2) Where the whole of a trade is transferred and the predecessor and successor so elect—

• (a) paragraphs 4 and 13 above shall not apply to the predecessor's period of account which ends with or includes the date of transfer but, in ascertaining in the successor's period of account which begins with or includes that date and in any later period of account, the amount of unrecovered past relief allowed to a person in respect of the trade, the successor shall be treated as having carried on the trade since the predecessor began (or is himself treated, by virtue of this sub-paragraph or of any other provision of this Schedule or of Schedule 5 to the Finance Act 1976, as having begun) to do so ;

• (b) the relief to which the predecessor is entitled under this Schedule for that trade in respect of a period of account which begins before and ends after the date of transfer shall be determined by reference to the increase, if any, in the all stocks index over the part of the period before that date;

• (c) the relief to which the successor is entitled under this Schedule for that trade in respect of a period of account which begins with or includes the date of transfer shall be determined—

• (i) as if the value at which the trading stock was transferred were the value of his trading stock at the end of the preceding period of account; and

• (ii) if the period of account begins before the date of the transfer, by reference to the increase, if any, in the all stocks index over the part of that period beginning with that date.

• (3) Where sub-paragraph (2)(a) above has effect in a case within sub-paragraph (1)(b) above the unrecovered past relief shall not include relief to which the predecessor was entitled but to which effect has not been given owing to an insufficiency of profits or gains.

• (4) Sub-paragraph (2)(b) and (c) above has effect subject to paragraph 23 below.

• (5) Where part of a trade is transferred and the predecessor and successor so elect, then, for the purposes of this Schedule the predecessor shall be treated as having carried on in the period of account during or at the end of which the transfer occurred a separate trade consisting of the part transferred; and all necessary apportionments between the two parts of the trade (including the apportionment of unrecovered past relief allowed for the trade) shall be made by reference to the respective values of the trading stock of each part immediately after the transfer.

• (6) An election under this paragraph shall be by notice in writing signed by both the predecessor and the successor and sent to the inspector within two years after the end of the successor's period of account which begins with or includes the date of the transfer.

21

• (1) Subject to the provisions of this paragraph, where there is a change in the persons engaged in carrying on a trade, this Schedule applies as if the trade had been permanently discontinued at the date of the change and a new trade had been then set up and commenced.

For the purposes of this paragraph, a change in the personal representatives of any person, or in the trustees of any trust, shall not be treated as a change in the persons carrying on any trade carried on by those personal representatives or trustees as such.

• (2) Where there is a change of persons but—

• (a) a person engaged in carrying on the trade immediately before the change continues to be so engaged immediately after the change; and

• (b) the trading stock of the trade immediately before the change is the trading stock immediately after the change,

an election may be made to the effect that sub-paragraph (1) above shall not apply to the change.

• (3) An election under this paragraph must be made by all the persons engaged in carrying on the trade before the change ("the predecessors") and all those so engaged immediately after the change (" the successors ") and be signed by them and sent to the inspector within two years after the end of the successors' period of account which begins with or includes the date of the change.

Where those persons have elected under section 154(2) of the Taxes Act that the trade be treated as continuing for income tax purposes, they shall be treated as having also made an election under this paragraph.

• (4) In ascertaining for the purposes of this Schedule the amount of unrecovered past relief allowed to a person in respect of a trade where at an earlier date a change in the persons carrying on that trade has been the subject of an election under the provisions of this paragraph or paragraph 21 of Schedule 5 to the Finance Act 1976, the successors (in relation to that change) shall be treated as having carried on the trade since the predecessors began (or are themselves treated by virtue of this sub-paragraph or any other provision of this Schedule or of Schedule 5 to the said Act of 1976. as having begun) to do so.

• (5) Where during a period of account there is a change in the persons engaged in carrying on a trade, and—

• (a) an election is made under this paragraph; but

• (b) no election is made under section 154(2) of the Taxes Act in relation to that change,

any relief or charge under this Schedule in respect of that period of account shall be apportioned between the predecessors and successors according to the respective lengths of the parts of the period falling before and after the change, and for the purpose of giving effect to that relief or charge each of those parts shall be treated as if it were a separate period of account.

Adjustment for special circumstances

22

• (1) An adjustment shall be made under this paragraph where any arrangements have been effected by a person carrying on a trade, or by him and other persons acting together, such in particular as those mentioned in sub-paragraph (2) below, and it appears that the sole or main benefit which, but for this paragraph, might have been expected to accrue to that person was—

• (a) the obtaining of relief or the reduction of the amount of a charge under this Schedule; or

• (b) a reduction in the amount of relief to which effect cannot be given by virtue of paragraph 10 or 17(1) above.

• (2) The arrangements referred to in sub-paragraph (1) above are—

• (a) any acquisition or disposal of trading stock otherwise than in the normal course of the trade in question ; or

• (b) any change in the normal pattern or method of carrying on the trade; or

• (c) any change in the date to which the accounts of the trade are made up ; or

• (d) any increase in the value of a person's trading stock or any acquisition by a person of trading stock, being an increase or acquisition which is associated with a decrease in the trading stock of another person connected with him (within the meaning of section 533(5) or (6) of the Taxes Act).

• (3) In a case within sub-paragraph (1)(a) above the adjustment is to substitute for the purposes of this Schedule, for the value of the trading stock of the person concerned at the end of any period of account which appears to have been affected by the arrangements, the value which it appears that the trading stock would then have had if those arrangements had not been made.

• (4) In a case within sub-paragraph (1)(b) above the adjustment is to determine the amount of relief to which effect cannot be given by virtue of paragraph 10 or 17(1) above as if the arrangements had not been made.

Long periods of account

23

• (1) Where a person's period of account is longer than eighteen months his entitlement to relief under this Schedule in respect of that period shall be determined by—

• (a) calculating the relief for separate parts of the period as if they were separate periods of account; and

• (b) aggregating the reliefs for those parts.

• (2) Each of the separate parts of the period shall (so far as length of the period permits) consist of twelve months, any remaining months being used to form the last part.

Valuation of stock at intermediate dates

24

• (1) If for the purposes of this Schedule it is necessary to ascertain the value of a person's trading stock at a date other than the end of a period of account and that value has not in fact been ascertained, that person shall be treated as having at that date trading stock of such value as may be attributed in accordance with sub-paragraph (2) below.

• (2) The value to be attributed under sub-paragraph (1) above is such value as is reasonable and just having regard to all the relevant circumstances of the case, and in particular—

• (a) to the values of trading stock of the trade at the beginning and end of the period of account which includes the date in question;

• (b) to movements during that period of account in the costs of items of a kind comprised in the person's trading stock during the period; and

• (c) to changes during that period in the volume of the trade carried on by that person.

• (3) In applying this paragraph for the purposes of paragraph 23 above, the period of account referred to in sub-paragraph (2) above is the period of account which by virtue of that paragraph is treated as consisting of separate parts.

• (4) Sub-paragraph (1) above shall apply also where by virtue of the provisions of section 35(2) of this Act it is necessary to ascertain the value of a person's trading stock at 13th November 1980 ; and for that purpose the period of account referred to in sub-paragraph (2) above shall be the period treated by virtue of those provisions as if it were two separate periods.

Farm animals

25

• (1) Animals treated as trading stock under Schedule 6 to the Taxes Act (farm animals etc.), shall, subject to the provisions of this paragraph, be so treated for the purposes of this Schedule.

• (2) Where a person makes an election for the herd basis under that Schedule which takes effect during a period of account, animals forming part of a herd with respect to which the election has effect shall be treated for the purposes of this Schedule as not having been trading stock of that person at the end of the preceding period of account or at any subsequent time.

• (3) Where a person makes an election for the herd basis under that Schedule, then, at the end of the period of account preceding that in which the election takes effect (" the point of election ") the unrecovered past relief allowed to him for the farming or other trade in question (including the relief in respect of that period of account) shall be apportioned between the herd and the rest of his trading stock by reference to their respective values at the point of election.

• (4) Where a company which has made an election for the herd basis under the said Schedule 6 transfers part of its trade, the part of its unrecovered past relief which represents relief apportioned to the herd under sub-paragraph (3) above or paragraph 25(3) of Schedule 5 to the Finance Act 1976—

• (a) shall not be apportioned in accordance with paragraph 20(5) above; but

• (b) if all the animals or none of them are included in the transfer, shall be allocated to the part of the trade that is transferred or, as the case may be, the part that is retained and, if some of them are included, shall be apportioned between those parts by reference to the respective values of the animals transferred and the animals retained.

• (5) In this paragraph " herd " has the same meaning as in Schedule 6 to the Taxes Act, and this paragraph applies (as does that Schedule), with the necessary adaptations, to animals or other creatures kept singly as it applies in relation to herds.

PART V — Interpretation

" Period of account"

26

In this Schedule "period of account" means a period for which an account is made up in relation to the trade in question.

" Past relief "

27

• (1) References in this Schedule to " past relief", in relation to a trade carried on by any person in any period of account, are to the aggregate amount of the following reliefs allowed to him (or treated as allowed to him)—

• (a) Schedule 10 relief (as defined in paragraph 18 of Schedule 5 to the Finance Act 1976) allowed for that trade;

• (b) relief under Part I or Part II of that Schedule allowed for that trade; and

• (c) relief under Part II or Part III of this Schedule in respect of earlier periods of account.

• (2) Subject to sub-paragraphs (3) to (5) below and to paragraphs 4(3), 14, 15 and 20(3) above, the amount of unrecovered past relief in any period of account is that aggregate amount less the aggregate of the amounts on which charges by way of recovery of relief (whether under this Schedule, Schedule 5 to the said Act of 1976 or paragraph 8 of Schedule 7 to the Finance Act 1980) have been made on that person for that trade in respect of earlier periods of account.

• (3) There shall be excluded from the amount of unrecovered past relief in any period of account so much of that amount (if any) as is attributable to relief allowed under Part I or Part II of Schedule 5 to the said Act of 1976 or under Part II or Part III of this Schedule in respect of any period of account which ended six years or more before the beginning of the first-mentioned period.

• (4) There shall be excluded from the amount of unrecovered past relief in any period of account beginning after—

• (a) the end of the period or the last period of account ending in the financial year 1978 (in the case of a company) or the year 1978-79 (in other cases); or

• (b) if there is no such period of account, the end of the period of account current at the end of that financial year or year of assessment, as the case may be,

so much of that amount (if any) as is attributable to Schedule 10 relief.

• (5) For the purpose of attributing the amount of unrecovered past relief in any period to Schedule 10 relief, to relief allowed under Part I or Part II of Schedule 5 to the said Act of 1976 or to relief allowed under Part II or III of this Schedule in respect of any previous period it shall be assumed that relief is recovered from later periods before earlier periods.

"Trading stock"

28

• (1) Subject to the provisions of this paragraph and of paragraphs 29 and 30 below, in this Schedule " trading stock " means property of any description, whether real or personal, being either—

• (a) property such as is sold in the ordinary course of the trade in question, or would be sold if it were mature or if its manufacture, preparation or construction were complete; or

• (b) materials such as are used in the manufacture, preparation or construction of any such property as is referred to in paragraph (a) above,

and includes work in progress.

• (2) Sub-paragraph (1) above does not apply to—

• (a) securities (which for this purpose includes stocks and shares); or

• (b) land, other than such as is ordinarily sold in the course of the trade only—

• (i) after being developed by the person carrying on the trade, or

• (ii) in the case of a company which is a member of a group, for the purpose of being developed by another company in that group; or

• (c) goods which the person carrying on the trade has let on hire or hire-purchase.

• (3) In sub-paragraph (2) above, references to development are, in relation to land other than a building, references to the construction or substantial reconstruction of buildings on the land and, in relation to a building, references to its construction or substantial reconstruction and "group" shall be construed in accordance with section 272 of the Taxes Act.

• (4) For the purposes of this Schedule the value of a person's trading stock at any time shall be reduced to the extent to which payments on account have been made at or before that time in respect of that stock.

• (5) References in this Schedule to trading stock are to the trading stock brought into account in computing the profits or gains of a trade in accordance with Case I of Schedule D.

• (6) Where a person not resident in the United Kingdom carries on a trade partly within the United Kingdom and partly abroad, references in this Schedule to his trading stock are to the stock attributable to that part of the trade within the charge to United Kingdom tax.

29

• (1) For the purpose of determining under this Schedule whether any property is a person's trading stock anything which—

• (a) is used by a person ("the contractor") in carrying out, or results from the carrying out by him of, a contract for the manufacture, preparation or construction of any property ; and

• (b) by virtue of a provision in the contract or of any rule of law vests in the other party to the contract before the contract has been fully performed by the contractor;

shall, until the contract has been so performed, be treated as belonging to the contractor, and, subject to sub-paragraph (2) below, as not belonging to the other party.

• (2) Where the value of any property treated as belonging to the contractor by virtue of sub-paragraph (1) above falls to be reduced under paragraph 28(4) above by reference to payments made by the other party, sub-paragraph (1) above shall not preclude the property being treated, at a value equal to the payments, as belonging to the other party.

• (3) For the purpose of determining under this Schedule whether any property is a person's trading stock any goods which—

• (a) have been sold to a person subject to a condition reserving ownership to the seller pending full payment by that person ; but

• (b) are treated in the accounts of the seller as sold and in the accounts of the person mentioned in paragraph (a) above as bought,

shall be treated as belonging to that person and not to the seller.

30

• (1) In relation to relief in respect of any period of account beginning on or before 26th March 1980 "trading stock" shall include any assets which by virtue of paragraph 7 of Schedule 7 to the Finance Act 1980 were disqualified from being trading stock in relation to any period of account beginning after that date.

• (2) In relation to unrecovered past relief attributable to such assets—

• (a) paragraphs 20 and 21 above shall not displace the operation of any charge under paragraph 4 or 13 above ; and

• (b) references in paragraphs 4(4) and 13(3) above to unrecovered past relief shall apply as in the case of other unrecovered past relief.

• (3) For the purposes of sub-paragraph (2) above the unrecovered past relief at the beginning of the first period of account beginning after 26th March 1980 shall be apportioned between such assets as are mentioned in sub-paragraph (1) above and other stock by reference to their respective values at the beginning of that period.

" Work in progress "

31

In this Schedule " work in progress " means—

• (a) any services performed in the ordinary course of the trade, the performance of which was partly completed at the material time and for which it would be reasonable to expect that a charge will subsequently be made ; and

• (b) any article produced, and any such material as is used, in the performance of any such services.

Other definitions

32

For the purposes of this Schedule a person is within the charge to income tax or corporation tax in respect of a trade if the profits or gains arising from it are (or if there were any would be) chargeable to that tax, and references to a trade being within the charge to tax shall be similarly construed.

33

Any reference in this Schedule to a period ending in another period includes a reference to a period ending on the same day as the other period.

PART VI — Application to Professions and Foreign Trades

34

The foregoing provisions of this Schedule have effect, with the necessary modifications, in relation to professions and vocations chargeable under Case II of Schedule D as they have effect in relation to trades chargeable under Case I of that Schedule.

35

The foregoing provisions of this Schedule (including paragraph 34 above) have effect, with the necessary modifications, in relation to trades, professions and vocations carried on outside the United Kingdom and chargeable under Case V of Schedule D otherwise than on a remittance basis as they have effect in relation to trades, professions and vocations chargeable under Case I or Case II of that Schedule, except that where, in charging the income from that trade, profession or vocation, a deduction of one quarter of the amount of that income falls to be allowed under section 23(3) of the Finance Act 1974 (income charged to income tax otherwise than on remittance basis) the amount of relief under this Schedule shall be confined to three-quarters of the amount which would have been applicable had the trade, profession or vocation been chargeable under the said Case I or Case II.

SCHEDULE 10

Option for old relief

1

Paragraph 2 below has effect in relation to any period of account which ends on or includes 14th November 1980 and in that paragraph " the new relief " means relief under Schedule 9 to this Act. " the old relief " means relief under Schedule 5 to the Finance Act 1976 and any expression which is also used in the said Schedule 5 has the same meaning as in that Schedule.

2

• (1) If the new relief to which a person is entitled in respect of the period of account is less than the old relief to which he would have been so entitled as modified by paragraph 3 below, he may elect to receive the old relief as so modified instead of the new relief.

• (2) An election under this paragraph shall be by notice in writing sent to the inspector within two years after the end of the period of account (in the case of a company) or the end of the year of assessment in which the period of account ends (in other cases).

• (3) The relief to which a person is entitled by virtue of an election under this paragraph shall, except as to its amount, be treated for the purposes of Schedule 9 to this Act as if it were relief under paragraph 3 or, as the case may be, paragraph 12 of that Schedule.

3

• (1) For the purposes of paragraph 2 above the amount of the old relief shall be determined in accordance with this paragraph.

• (2) If the closing stock value is more than the value of the trading stock on 14th November 1980 the increase in stock value shall be calculated by reference to the value of the trading stock on that date instead of the closing stock value.

• (3) Where the increase in stock value falls to be calculated in accordance with sub-paragraph (2) above the deduction to be made by reference to relevant income shall be made by reference to such part of that income as corresponds to the part of the period of account ending with 14th November 1980.

• (4) Where an election is made under paragraph 20 of Schedule 9 to this Act by reference to a transfer which took place before 14th November 1980, sub-paragraph (2) above shall not apply in relation to the predecessor.

• (5) Paragraph 24 of Schedule 9 to this Act shall apply for the purposes of tins paragraph.

• (6) There shall be deducted from the amount of the old relief an amount equal to one-quarter of the amount of the new relief or £10,000, whichever is the less.

• (7) Where a charge has been deferred as mentioned in paragraph 4 below, the amount of the old relief shall be equal to—

• (a) the amount of that relief as determined under sub-paragraphs (2) to (6) above ; or

• (b) so much of the amount of that relief determined without regard to those sub-paragraphs as does not exceed the amount of the charge,

whichever is the greater.

Recovery of deferred charge

4

Notwithstanding section 35 of this Act any charge which under Part I of Schedule 7 to the Finance Act 1980 has been deferred to a period of account which ends on or includes 14th November 1980 shall be recoverable as if this Act had not been passed.

SCHEDULE 11

PART I

1

The goods are bought by the trader in quantities larger than those in which he sells them.

2

The goods are bought and sold by the trader in different markets.

3

The trader employs staff and incurs expenses in the trade in addition to the cost of the goods and, in the case of a trade carried on by a company, in addition to any remuneration paid to any person connected with it.

PART II

4

There are purchases or sales from or to persons who are connected with the trader.

5

Purchases are matched with forward sales or vice versa.

6

The goods are held by the trader for longer than is normal for goods of the kind in question.

7

The trade is carried on otherwise than at a place or places commonly used for wholesale or retail trade.

8

The trader does not take physical possession of the goods.

SCHEDULE 12

Finance for trade of subsidiary

1

The shares issued by the new qualifying company may, instead of or as well as being issued for the purpose mentioned in subsection (1)(b) of section 52, be issued for the purpose of raising money for a new qualifying trade which is being carried on by a subsidiary or which a subsidiary intends to carry on within the next twelve months ; and where shares are so issued subsections (3) and (6) of that section shall have effect as if references to the company were or, as the case may be, included references to the subsidiary.

Individuals qualifying for relief

2

• (1) Subsections (2) and (3) of section 54 shall have effect as if references to the company included references to any subsidiary of the company; and, without prejudice to the provisions of that section, an individual shall be treated as connected with a company if he directly or indirectly possesses or is entitled to acquire any loan capital of a subsidiary of that company.

• (2) Section 54(5) and (8) shall apply for the purposes of this paragraph.

New qualifying trade

3

In relation to a new qualifying trade carried on by a subsidiary the references in subsections (2)(f) and (6) of section 56 to another person and the reference in subsection (7) of that section to a person having a controlling interest in the trade shall not include references to the company of which it is a subsidiary.

Value received

4

In sections 58(1) and 59(4) references to the receipt of value from the company shall include references to the receipt of value from a subsidiary of the company, and references to the company in the other provisions of section 58 and in section 59(7) shall be construed accordingly.

Claims

5

Where a company has one or more subsidiaries, the reference in subsection (4) of section 61 to a statement by the company shall include a reference to a statement by the subsidiary or each subsidiary and the references in subsection (5) of that section to the company shall be construed accordingly.

Information

6

Where a subsidiary is notified by the inspector that relief has been given in respect of any shares issued by a company of which it is a subsidiary section 63(3) shall apply to the subsidiary as respects any transfer of its shares as it applies to the company as respects any transfer of the shares of the company.

7

Subsections (5) and (6) of section 63 shall have effect in relation to any such arrangements as are mentioned in section 65(2)(c) as they have effect in relation to any such arrangement as is mentioned in section 59(1).

SCHEDULE 13

SCHEDULE 14

Preliminary

1

• (1) In this Schedule " transfer of value " includes a distribution payment and a capital distribution, and references to the value transferred by a transfer of value and to a transferor shall be construed as including respectively the amount of such a payment or distribution and the trustees of the settlement concerned.

• (2) In this Schedule " agricultural property " means agricultural land or pasture and includes woodland and any building used in connection with the intensive rearing of livestock or fish if the woodland or building is occupied with agricultural land or pasture and the occupation is ancillary to that of the agricultural land or pasture ; and also includes such cottages, farm buildings and farm-houses, together with the land occupied with them, as are of a character appropriate to the property.

• (3) For the purposes of this Schedule the agricultural value of any agricultural property shall be taken to be the value which would be the value of the property if the property were subject to a perpetual covenant prohibiting its use otherwise than as agricultural property.

• (4) This Schedule applies to agricultural property only if it is in the United Kingdom, the Channel Islands or the Isle of Man.

Nature of relief

2

• (1) Where the whole or part of the value transferred by a transfer of value is attributable to the agricultural value of agricultural property, the whole or that part of the value transferred shall be treated as reduced by the appropriate percentage, but subject to the following provisions of this Schedule.

• (2) The appropriate percentage is 50 per cent, if either—

• (a) the interest of the transferor in the property immediately before the transfer carries the right to vacant possession or the right to obtain it within the next twelve months, or

• (b) the transferor has been beneficially entitled to that interest since before 10th March 1981 and the conditions set out in sub-paragraph (3) below are satisfied ;

and, subject to sub-paragraph (4) below, it is 20 per cent, in any other case.

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

• (a) that, if the transferor had disposed of his interest by a transfer of value immediately before 10th March 1981 and duly made a claim under paragraph 1 of Schedule 8 to the Finance Act 1975, the value transferred would have been computed in accordance with paragraph 2 of that Schedule and relief would not have been limited by paragraph 5 of that Schedule (restriction to £250,000 or one thousand acres): and

• (b) that the transferor's interest did not at any time during the period beginning with 10th March 1981 and ending with the date of the transfer carry a right mentioned in sub-paragraph (2)(a) above, and did not fail to do so by reason of any act or deliberate omission of the transferor during that period.

• (4) Where the appropriate percentage would be 50 per cent, but for a limitation on relief that would have been imposed (as mentioned in sub-paragraph (3)(a) above) by paragraph 5 of Schedule 8 to the Finance Act 1975, the appropriate percentage shall be 50 per cent, in relation to a part of the value transferred equal to the amount which would have attracted relief under that Schedule and 20 per cent, in relation to the remainder.

• (5) In determining for the purposes of sub-paragraphs (3)(a) and (4) above whether or to what extent relief under Schedule 8 to the Finance Act 1975 would have been limited by paragraph 5 of that Schedule, that paragraph shall be construed as if references to relief given under that Schedule in respect of previous chargeable transfers included references to relief given under this Schedule by virtue of sub-paragraph (2)(b) or (4) above in respect of previous chargeable transfers made on or after 10th March 1981.

• (6) For the purposes of this Schedule the interest of one of two or more joint tenants or tenants in common (or, in Scotland, joint owners or owners in common) shall be taken to carry a right referred to in sub-paragraph (2)(a) above if the interests of all of them together carry that right.

• (7) For the purposes of this paragraph, the value transferred by a transfer of value shall be calculated as a value on which no tax is chargeable.

Minimum period of occupation or ownership

3

Subject to the following provisions of this Schedule, paragraph 2 above does not apply to any agricultural property unless—

• (a) it was occupied by the transferor for the purposes of agriculture throughout the period of two years ending with the date of the transfer ; or

• (b) it was owned by him throughout the period of seven years ending with that date and was throughout that period occupied (by him or another) for the purposes of agriculture.

Replacements

4

• (1) Where the agricultural property occupied by the transferor on the date of the transfer replaced other agricultural property, the condition stated in paragraph 3(a) above shall be treated as satisfied if it, the other property and any agricultural property directly or indirectly replaced by the other property were occupied by the transferor for the purposes of agriculture for periods which together comprised at least two years falling within the five years ending with that date.

• (2) Where the agricultural property owned by the transferor on the date of the transfer replaced other agricultural property the condition stated in paragraph 3(b) above shall be treated as satisfied if it, the other property and any agricultural property directly or indirectly replaced by the other property were, for periods which together comprised at least seven years falling within the ten years ending with that date, both owned by the transferor and occupied (by him or another) for the purposes of agriculture.

• (3) Subject to sub-paragraph (4) below, in a case falling within sub-paragraph (1) or (2) above relief under this Schedule shall not exceed what it would have been had the replacement or any one or more of the replacements not been made.

• (4) For the purposes of sub-paragraph (3) above changes resulting from the formation, alteration or dissolution of a partnership shall be disregarded.

Occupation by company or partnership

5

• (1) For the purposes of paragraphs 3 and 4 above, occupation by a company which is controlled by the transferor shall be treated as occupation by the transferor.

• (2) For the purposes of paragraphs 3 and 4 above, occupation of any property by a Scottish partnership shall, notwithstanding section 4(2) of the Partnership Act 1890, be treated as occupation of it by the partners.

Successions

6

Where the transferor became entitled to his interest on the death of his spouse on or after 10th March 1981—

• (a) he shall for the purposes of paragraph 2(2)(b) above be deemed to have been beneficially entitled to it for any period for which his spouse was beneficially entitled to it;

• (b) the condition set out in paragraph 2(3)(a) shall be taken to be satisfied if and only if it is satisfied in relation to his spouse; and

• (c) the condition set out in paragraph 2(3)(b) shall be taken to be satisfied only if it is satisfied both in relation to him and in relation to his spouse.

7

For the purposes of paragraph 3 above, where the transferor became entitled to any property on the death of another person—

• (a) he shall be deemed to have owned it (and, if he subsequently occupies it, to have occupied it) from the date of the death ; and

• (b) if that other person was his spouse he shall also be deemed to have occupied it for the purposes of agriculture for any period for which it was so occupied by his spouse, and to have owned it for any period for which his spouse owned it

8

• (1) Where—

• (a) the whole or part of the value transferred by a transfer of value (in this paragraph referred to as the earlier transfer) was eligible for relief under this Schedule (or would have been so eligible if such relief had been capable of being given in respect of transfers of value made at that time); and

• (b) the whole or part of the property which, in relation to the earlier transfer, was or would have been eligible for relief became, through the earlier transfer, the property of the person (or of the spouse of the person) who is the transferor in relation to a subsequent transfer of value and is at the time of the subsequent transfer occupied for the purposes of agriculture either by that person or by the personal representative of the transferor in relation to the earlier transfer; and

• (c) that property or part or any property directly or indirectly replacing it would (apart from paragraph 3 above) have been eligible for relief in relation to the subsequent transfer of value; and

• (d) either the earlier transfer was, or the subsequent transfer of value is, a transfer made on the death of the transferor,

the property which would have been eligible for relief but for paragraph 3 above shall be eligible for relief notwithstanding that paragraph.

• (2) Where the property which, by virtue of sub-paragraph (1) above, is eligible for relief replaced the property or part referred to in paragraph (c) of that sub-paragraph, relief under this Schedule shall not exceed what it would nave been had the replacement or any one or more of the replacements not been made, but paragraph 4(4) above shall apply for the purposes of this sub-paragraph as it applies for the purposes of paragraph 4(3).

• (3) Where, under the earlier transfer, the amount of the value transferred which was attributable to the property or part referred to in sub-paragraph (1)(c) above was part only of its value, a like part only of the value which (apart from this sub-paragraph) would fall to be reduced under this Schedule by virtue of this paragraph shall be so reduced.

Shares and securities of companies

9

• (1) Where the whole or part of the value transferred is attributable to the value of shares in or securities of a company it shall be taken for the purposes of this Schedule to be attributable (so far as appropriate) to the agricultural value of agricultural property if and only if—

• (a) the agricultural property forms part of the company's assets and part of the value of the shares or securities can be attributed to the agricultural value of the agricultural property ; and

• (b) the shares or securities gave the transferor control of the company immediately before the transfer.

• (2) Shares or securities shall not be regarded for the purposes of sub-paragraph (1)(b) above as giving the transferor control of a company if—

• (a) they would not have been sufficient, without other property, to give him control of the company immediately before the transfer ; and

• (b) their value is taken by virtue of paragraph 9A of Schedule 10 to the Finance Act 1975 to be less than the value previously determined.

10

Where paragraph 9 above applies, the references in paragraph 2(2)(a) and (3)(b) above to the transferor's interest shall be construed as references to the company's interest and paragraph 11 below shall apply instead of paragraph 3 above.

11

Subject to the following provisions of this Schedule, paragraph 2 does not apply by virtue of paragraph 9 above unless—

• (a) the agricultural property—

• (i) was occupied by the company for the purposes of agriculture throughout the period of two years ending with the date of the transfer ; or

• (ii) was owned by the company throughout the period of seven years ending with that date and was throughout that period occupied (by the company or another) for the purposes of agriculture ; and

• (b) the shares or securities were owned by the transferor—

• (i) in a case within paragraph (a)(i) above, throughout the period there mentioned ;

• (ii) in a case within paragraph (a)(ii) above, throughout the period there mentioned.

12

• (1) Sub-paragraphs (1) and (2) of paragraph 4 above shall apply in relation to the conditions stated in paragraph 11 (a) above as they apply in relation to the conditions stated in paragraph 3 above, taking references to the transferor as references to the company.

• (2) Where the shares or securities owned by the transferor on the date of the transfer replaced other eligible property (that is to say, agricultural property or shares or securities the value of which is wholly or partly attributable to the value of such property) the condition stated in paragraph 11(b) above shall be treated as satisfied if the shares or securities, the other eligible property which they replaced and any eligible property directly or indirectly replaced by the other eligible property were owned by the transferor for periods which together comprised, in a case within paragraph 11(a)(i) above, at least two years falling within the five years ending with that date or, in a case within paragraph 11(a)(ii) above, at least seven years falling within the ten years ending with that date.

• (3) Sub-paragraphs (3) and (4) of paragraph 4 above shall have effect in relation to a case falling within the foregoing provisions of this paragraph as they have effect in relation to a case falling within sub-paragraphs (1) and (2) of that paragraph.

13

For the purposes of paragraph 11 above, a company shall be treated as having occupied the agricultural property at any time when it was occupied by a person who subsequently controls the company.

Contracts for sale

14

• (1) Paragraph 2 above does not apply to agricultural property if at the time of the transfer the transferor has entered into a binding contract for its sale, except where the sale is to a company and is made wholly or mainly in consideration of shares in or securities of the company which will give the transferor control of the company.

• (2) Paragraph 2 above does not apply by virtue of paragraph 9 above if at the time of the transfer the transferor has entered into a binding contract for the sale of the shares or securities concerned, except where the sale is made for the purpose of reconstruction or amalgamation.

Control

15

Paragraph 13(7) of Schedule 4 to the Finance Act 1975 (control of company) applies for the purposes of this Schedule.

Saving

16

Nothing in this Schedule shall be taken to apply to the value included under section 22(5) of the Finance Act 1975 in the value of a person's estate immediately before his death.

Schedule 15

1

Subject to the following provisions of this Schedule, where any part of the value of a person's estate immediately before his death is attributable to the value of the interest of a tenant in agricultural property in Scotland, being an interest held by virtue of tacit relocation, and either he had been tenant of the said property continuously for a period of at least two years immediately preceding his death or he had become tenant of the said property by succession, and the said interest is acquired on his death by a new tenant, the value of the said interest shall be left out of account in determining the value transferred on the death.

2

The value to be left out of account under paragraph 1 above shall not include the value of any rights to compensation in respect of tenant's improvements.

3

• (1) Subject to the following provisions of this paragraph, where, under paragraph 1 above, the value of an interest has been left out of account in determining the value transferred on the death of a person, and the whole or any part of that interest is disposed of before being transferred on the death of any other person, tax shall be charged in accordance with paragraph 4 below.

• (2) The person liable for the tax chargeable under this paragraph shall be the person who is entitled to the consideration for the disposal or who would be so entitled if any consideration passed on the disposal.

• (3) Sub-paragraph (1) above does not apply to a disposal made by any person to his spouse.

• (4) Where tax has been charged under this paragraph on the disposal of the whole of an interest or of any part thereof, tax shall not again be charged in relation to the same death on a further disposal of the whole or, as the case may be, of the same part, of the said interest.

4

• (1) Where tax is chargeable under paragraph 3 above it shall be charged on the following amount, namely—

• (a) if the disposal is a sale for full consideration in money or money's worth, on the net proceeds of the sale ;

• (b) in any other case on the value of the interest or of the part disposed of, as the case may be, immediately before the time of the disposal,

and at the rate or rates at which it would have been chargeable on that death if that amount, and any amount on which tax was previously chargeable under that paragraph in relation to the death, had been included in the value transferred on death and the amount on which the tax is chargeable had formed the highest part of that value.

• (2) The tax chargeable under paragraph 3 above shall not exceed the difference between the tax chargeable on the death and the tax which would have been chargeable on the death had paragraph 1 above not applied and had the value of the interest formed the highest part of the value of the estate.

5

Where a disposal on which tax is chargeable under paragraph 3 above is a chargeable transfer, the value transferred by it shall be calculated as if the value of the interest in the tenancy had been reduced by the tax chargeable under that paragraph.

6

In this Schedule—

• (a) references to the value transferred on a death are references to the value transferred by the chargeable transfer made on that death; and

• (b) references to the net proceeds of sale are references to the proceeds of sale after deduction of any expenses of sale.

7

• (1) This Schedule applies to deaths on or after 15th November 1976.

• (2) Where a person died on or after 15th November 1976 and before the passing of this Act, this Schedule shall apply only if a claim for relief under paragraph 1 above is made within the period of twelve months immediately following the passing of this Act by a person who (apart from the operation of this Schedule) would be liable to pay the whole or part of the tax chargeable on the value transferred on the death and attributable to the said interest.

• (3) Where a person died on or after 15th November 1976, paragraph 3 above shall not apply to any disposal before the passing of this Act.

Schedule 16

Management

1

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

2

• (1) The provisions of the Taxes Managemen Act 1970 which are applied in relation to petroleum revenue tax by paragraph I of Schedule 2 to the principal Act shall apply also in relation to the duty.

• (2) Those provisions shall apply with the same modifications as are specified in the said paragraph 1, taking references to Part I of the principal Act as including references to Part VIII of this Act.

Returns and information

3

The particulars contained in returns made under paragraph 2 or 5 of Schedule 2 to the principal Act (returns by participators and by the responsible person for an oil field) shall be treated as furnished, and the powers conferred on the Board by paragraph 7 of that Schedule (production of accounts etc.) shall be exercisable, for the purposes of the duty as well as for the purposes of petroleum revenue tax, and accordingly references to that tax in paragraphs 3(2) and 8(1) and (2) of that Schedule (penalties) shall include references to the duty.

Assessments and determinations

4

• (1) Where it appears to the Board that, in accordance with Part VIII of this Act, a gross profit has accrued to a participator in a chargeable period from an oil field, they shall make an assessment to the duty on the participator and give him notice of the assessment.

• (2) Where it appears to the Board that, in accordance with Part VIII of this Act, no gross profit has accrued to a participator in a chargeable period from an oil field, they shall make a determination to that effect and give him notice of the determination.

• (3) A notice of assessment shall state that the participator may appeal against the assessment in accordance with paragraph 7 below.

• (4) After the service of the notice of assessment or the notice of determination the assessment or determination, as the case may be, shall not be altered except in accordance with the provisions applied by paragraph 2 above or the subsequent provisions of this Schedule.

5

• (1) Where a participator has under paragraph 2 of Schedule 2 to the principal Act delivered to the Board a return for a chargeable period and the Board are satisfied that the information given in the return is correct in so far as it is material for the purpose of computing his gross profit (if any) for that period, the Board shall (in so far as the computation falls to be made by reference to the matters dealt with in the return) make the assessment or determination under paragraph 4 above in accordance with the return.

• (2) Where the Board are not so satisfied in relation to a participator’s return or a participator fails to deliver to the Board a return for a chargeable period as required by the said paragraph 2, the Board shall, in so far as the computation of his gross profit (if any) for that period falls to be made by reference to the matters which were dealt with in the return or, as the case may be, ought to have been dealt with in a return, make the assessment or determination under paragraph 4 above to the best of their judgment.

• (3) Nothing in sub-paragraph (2) above or in paragraph 5 of Schedule 2 to the principal Act shall be taken, in a case where the participator has delivered a return as to which the Board are not satisfied as mentioned in sub-paragraph (1) above, to prevent the Board from basing their assessment or determination on the participator’s having had an interest in oil won and saved from the field different from that on which he based his return.

6

• (1) Where it appears to the Board—

• (a) that the gross profit charged to the duty by an assessment ought to have been larger or smaller; or

• (b) that for any period they ought to have made an assessment to the duty instead of a determination under paragraph 4(2) above or such a determination instead of an assessment to the duty,

the Board may make any such assessment or determination or any such amendment of an assessment as may be necessary.

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

Appeals

7

• (1) A participator may appeal to the Special Commissioners against an assessment or an amendment of an assessment made on him by notice of appeal in writing given to the Board within thirty days after the date of issue of the notice of assessment or of the amendment.

• (2) The notice of appeal shall specify the grounds of appeal, but on the hearing of the appeal the Commissioners may allow the appellant to put forward any ground not specified in the notice, and may take it into consideration if satisfied that the omission was not wilful or unreasonable.

• (3) The participator may at any time, if the Board do not object, abandon an appeal instituted by him; and for that purpose he shall notify his desire to do so to the Board who may, within thirty days after being so notified, object by notice in writing to the participator.

• (4) Where at any time between—

• (a) the giving of a notice of appeal against the assessment or the amendment of the assessment or from a decision of the Board on a claim under section 33 of the Taxes Management Act 1970 as applied by paragraph 2 above; and

• (b) the determination of the appeal by the Special Commissioners, the Board and the participator agree on how the assessment, amendment or decision should be varied or on what assessment or determination should be substituted in relation to the chargeable period in question, the same consequences shall ensue as if the Commissioners had determined the appeal to that effect.

• (5) If, on the appeal against an assessment or an amendment of an assessment, it appears to the majority of the Commissioners present at the hearing that the assessment or amendment is wrong—

• (a) because no, or a smaller, gross profit has accrued for the chargeable period in question; or

• (b) because a, or a larger, gross profit has accrued for that period,

the Commissioners shall vary the assessment or amendment in such manner, or substitute such determination, as may be required; and it shall be for the participator to satisfy the Commissioners as to anY matters within paragraph (a) above.

• (6) Save as otherwise provided by this Schedule (including the provisions applied by paragraph 2 above) the determination by the Special Commissioners of any appeal shall be final and conclusive.

8

• (1) A participator who has given notice of appeal under paragraph 7 above against an assessment charging him with any duty for a chargeable period may, if he delivered a return for that period as required by paragraph 2 of Schedule 2 to the principal Act, withhold, until the determination or abandonment of the appeal, so much of the duty charged in the assessment as is the smaller of—

• (a) the amount of the duty so charged; and

• (b) duty on the difference between—

• (i) the aggregate of the consideration received or receivable for oil as stated in the participator’s return in pursuance of sub-paragraph (2) of the said paragraph 2 and, subject to sub-paragraph (2) below, the market value of oil so stated; and

• (ii) the aggregate of fhe corresponding consideration and value as included in the assessment.

• (2) Subject to sub-paragraph (3) below, where the market value of all the oil for which a market value is stated in the participator’s return is, as stated in that return, less than the value which is produced for that oil by applying to it the average price mentioned in sub-paragraph (4) below, sub-paragraph (1) above shall have effect as if, for the reference to the market value of oil as so stated, there were substituted a reference to the value which is so produced for that oil.

• (3) The comparison of values and the substitution required by sub-paragraph (2) above shall, in the case of an appeal by a participator whose return relates both to gas and to other oil, be made separately for the gas and for the other oil.

• (4) The average price referred to in sub-paragraph (2) above is the average price at which all oil included in the relevant returns as oil delivered in the period covered by the returns and disposed of in sales at arm’s length was so disposed of.

• (5) The relevant returns for the purposes of sub-paragraph (4) above are all the returns of all the participators in all oil fields which—

• (a) were made for the chargeable period preceding that to which the appeal relates; and

• (b) were delivered before the end of the chargeable period to which the appeal relates.

• (6) Where in determining the gross profit accruing to a participator from a field in a chargeable period the aggregate of the amounts mentioned in section 2(5)(a), (b) and (c) of the principal Act falls to be increased under section 123 of this Act (whether as respects all oil or as respects a particular kind or kinds of oil) the difference mentioned in sub-paragraph (1)(b) above (or as the case may be, the difference so far as relating to oil of the particular kind or kinds in question) shall be increased by multiplying it by the fraction mentioned in subsection (2) of that section.

Payment

9

Subject to paragraphs 7 and 8 above, the duty charged in an assessment made on a participator for any chargeable period, so far as not paid under paragraphs 10 and 11 below, shall be payable by him four months after the end of that chargeable period or, if later, thirty daYs after the date of issue of the notice of assessment.

10

• (1) Every participator in an oil field shall, at the time when he delivers to the Board the return for a chargeable period required by paragraph 2 of Schedule 2 to the principal Act—

• (a) deliver to the Board a statement showing whether any, and if so what, amount of duty is payable by him under this paragraph for that period in respect of the field; and

• (b) pay to the Board a sum equal to the amount of duty, if any, shown in the statement.

• (2) The statement under sub-paragraph (1)(a) above shall be in such form as the Board may prescribe.

• (3) For the purposes of sub-paragraph (1)(a) above the duty payable by a participator for any chargeable period in respect of an oil field shall be determined by him by—

• (a) calculating the gross profit accruing to him for that period from the field by reference to the particulars included in the return in pursuance of the paragraph 2(2) of Schedule 2 to the principal Act (and without regard to sections 123 and 124 of this Act);

• (b) making any addition required by section 123 of this Act;

• (c) making the reduction required by section 124 of this Act; and

• (d) applying to the result the percentage rate at which the duty is chargeable for the period.

• (4) The sum paid under sub-paragraph (1)(b) above shall constitute a payment on account of the duty charged in any assessment made on the participator in respect of the gross profit accruing to him for the chargeable period from the oil field; and if the payment on account exceeds the duty so charged the excess shall be repaid to the participator.

• (5) Where a participator gives notice of appeal under paragraph 7 above against an assessment charging duty in respect of which he has made a payment on account, the amount, if any, to be repaid under sub-paragraph (4) above shall be calculated as if the duty charged in the assessment were limited to the duty which he would not be entitled to withhold under paragraph 8 above.

11

• (1) Subject to sub-paragraphs (4) and (6) below, every participator in an oil field shall, in the third month of each chargeable period and in each of the four succeeding months, make to the Board an advance payment of duty in respect of the field for that period.

• (2) The amount of each payment shall be equal to one-fifth of the amount, if any, shown in the statement delivered by the participator under paragraph 10(1)(a) above as payable by him in respect of the field for the last chargeable period.

• (3) The aggregate of the advance payments of duty made by a participator in respect of a field for a chargeable period—

• (a) shall, to the extent to which it does not exceed the sum which sub-paragraph (1)(b) of paragraph 10 above requires him to pay when delivering his return for that period in respect of the field—

• (i) discharge his liability to pay the whole or a corresponding part of that sum; and

• (ii) be treated for the purposes of sub-paragraph (4) of that paragraph as if it were, or were part of, a sum paid by him under sub-paragraph (1)(b) of that paragraph; and

• (b) shall, to the extent to which it exceeds the sum required to be paid as aforesaid, be repaid to him.

• (4) If in any month in a chargeable period a participator in an oil field—

• (a) has not delivered (otherwise than to the Secretary of State) any of the oil which has been won from the field and disposed of by him at any time in or before that month; and

• (b) has not relevantly appropriated any of the oil which has been so won by him at any such time,

he shall be entitled to withhold the advance payment of duty (if any) in respect of the field for that period which next falls to be made by him after the end of that month.

• (5) An advance payment shall not be withheld by virtue of the conditions in sub-paragraph (4) above being fulfilled in any month unless a notice to that effect, in such form as the Board may prescribe, is given to the Board before the end of the next month and—

• (a) where the Board are not satisfied with any such notice the powers conferred by paragraph 7 of Schedule 2 to the principal Act (production of accounts etc.) shall be exercisable as if the notice were a return under paragraph 2 of that Schedule; and

• (b) paragraph 8 of that Schedule (penalties) shall apply to an incorrect notice as it applies to an incorrect return under paragraph 2.

• (6) No advance Payment of duty shall be made in respect of the first chargeable period to which Part VIII of this Act applies or in respect of the first chargeable period for any oil field.

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Certificates of tax deposit issued by the Treasury under section 12 of the National Loans Act 1968 on terms published on or before 14th May 1979 may be used for making payments of duty; and for that purpose those terms shall have effect with the necessary modifications and as if the duty in or towards the payment of which a certificate is used where due—

• (a) in the case of duty payable under paragraph 9 or 10 above, two months after the end of the chargeable period to which it relates;

• (b) in the case of duty payable under paragraph 11 above, at the end of the month in which it is required to be paid.

Interest

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• (1) Duty charged in an assessment for a chargeable period shall carry interest at the rate applying under paragraph 15 of Schedule 2 to the principal Act from two months after the end of the period until payment.

• (2) Any amount payable by a participator as an advance payment of duty in respect of a field for a chargeable period and not paid by him in the month in which it ought to be paid shall carry interest at the rate applying under paragraph 15 of Schedule 2 to the principal Act from the end of that month until—

• (a) payment of the amount; or

• (b) two months after the end of that period,

whichever is the earlier.

• (3) Where under paragraph 8 above duty may be withheld until the determination or abandonment of an appeal, the interest on that duty may also be withheld until the determination or abandonment of the appeal.

• (4) Where any amount of duty charged by an assessment or paid on account of duty so charged becomes repayable, that amount shall carry interest at the rate applying under paragraph 15 of Schedule 2 to the principal Act from—

• (a) two months after the end of the chargeable period for which the assessment was made; or

• (b) the date on which it was paid,

whichever is the later, until the order for repayment is issued.

• (5) Where any amount of duty paid as an advance payment becomes repayable under paragraph 11(3)(b) above, that amount shall carry interest at the rate applying under paragraph 15 of Schedule 2 to the principal Act from—

• (a) two months after the end of the chargeable period in respect of which it was paid; or

• (b) the date on which it was paid,

whichever is the later, until the order for the repayment is issued.

• (6) For the purposes of sub-paragraph (2) above a payment of overdue duty shall, so far as possible be attributed to the earliest month for which duty is overdue; and for the purposes of sub-paragraphs (4) and (5) above any amount that becomes repayable shall, so far as possible, be regarded as consisting of the duty most recently paid.

• (7) In its application (by virtue of paragraph 2(1) above) to interest payable under sub-paragraph (2) above, section 69 of the Taxes Management Act 1970 shall have effect with the omission of the words “charged and due and payable under the assessment to which it relates”.

• (8) Interest paid to a participator under sub-paragraph (4) or (5) above shall be disregarded in computing his income for the purposes of corporation tax.

Transfers to associated companies

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In paragraph 5(2) and (4) of Schedule 3 to the principal Act (liability for petroleum revenue tax and interest in the case of transfers to associated companies) the references to tax and to interest payable under Part I of that Act shall include references to the duty and to interest payable under paragraph 13 above.

Schedule 17

Part I — The Base Period and Chargeable Deposits

The base period

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• (1) The base period for the purposes of section 134 of this Act (“the principal section”) is the last quarter of 1980; and the average chargeable deposits held by a person in that period shall be determined by—

• (a) aggregating the chargeable deposits held by him at the close of a business on 15th October, 19th November and 10th December 1980; and

• (b) dividing the result by three.

• (2) Where a person regularly prepares statistics of the deposits held by him as at the close of business on a particular day in each month and the day in October, November or December 1980 is not that mentioned in sub-paragraph (1)(a) above, the Board may, on the application of that person, direct that for any of those days there shall be substituted the day in the month in question for which that person has prepared the statistics.

• (3) Any time at which the amount of the chargeable deposits held by a person falls to be ascertained by virtue of this paragraph is in this Schedule referred to as a material time.

Chargeable deposits

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For the purposes of the principal section and this Schedule a deposit is any sum of money paid to a person carrying on a banking business (“a deposit-taker”) on terms—

• (a) under which it will be repaid either on demand or at a time or in circumstances agreed by or on behalf of the person who paid the sum and the deposit-taker; and

• (b) which are not, within the meaning of subsection (6) of section 1 of the Banking Act 1979, referable to the provision of property or services or to the giving of security.

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• (1) Subject to the following provisions of this paragraph, a deposit is a chargeable deposit at a material time if it is then held on terms under which in does not carry interest or a premium.

• (2) The following are not chargeable deposits—

• (a) any deposit not denominated in sterling;

• (b) any deposit paid to the deposit-taker by a company if at the material time the deposit-taker is a subsidiary of that company, or that company is a subsidiary of the deposit-taker, or both are subsidiaries of another company;

• (c) where the deposit-taker is resident in the United Kingdom for the purposes of income or corporation tax, any deposit which at the material time is held at a branch of his situated outside the United Kingdom;

• (d) where the deposit-taker is not so resident, any deposit which at that time is held otherwise than at a branch of his situated in the United Kingdom.

• (3) In sub-paragraph (1) above the reference to interest or a premium shall not be construed as including any allowance made by the deposit-taker in calculating whether any, and if so what, bank or other charges are to be made by him to the person making the deposit.

• (4) In sub-paragraph (2)(b) above “subsidiary” shall be construed in accordance with section 154 of the Companies Act 1948 or section 148 of the Companies Act (Northern Ireland) 1960.

• (5) For the purposes of sub-paragraph (2)(c) and (d) above a deposit is held at a branch of a deposit-taker if it is recorded in his books as a liability of that branch.

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• (1) Where any amount of the chargeable deposits held by a deposit-taker at a material time consists of the credit balance or balances on one or more accounts which the deposit-taker treats as reducing or extinguishing the amount on which he is entitled to interest in respect of the debit balance or balances on one or more other accounts held with him at that time, that amount of chargeable deposits shall be treated as equal to its excess, if any, over that other amount.

• (2) This paragraph applies only if the other account or accounts are denominated in sterling.

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• (1) The amount of chargeable deposits held by a deposit-taker at any material time shall be treated as—

• (a) reduced by an amount equal to 60 per cent. of any sum which has been credited in his books to an account held with him (whether or not an account the balance on which constitutes a chargeable deposit) by reference to a cheque or other authority which is then in course of collection by him; and

• (b) increased by an amount equal to 60 per cent. of any sum which has been debited in his books to such an account by reference to a standing order or other authority which is then in course of transmission by him.

• (2) In this paragraph “sum” means a sum denominated in sterling.

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Where a person was carrying on a banking business at any time in the last quarter of 1980 but was not carrying on such a business on 10th March 1981, then, if his business was, after the first of the material times and before that date, transferred to another person who was carrying on such a business on that date, the principal section and this Schedule shall have effect as if any chargeable deposits held by the first-mentioned person at any material time had then been held by the other person.

Part II — Management and Collection

Management

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

Notice of liability

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• (1) Every person who is chargeable with the tax shall give notice to the Board that he is so chargeable.

• (2) The notice shall be given not later than 1st September 1981.

• (3) If any person fails to give the notice which he is required to give under this paragraph he shall be liable to a penalty not exceeding £1,000.

• (4) Any application under paragraph 1(2) above shall be included in the notice given under this section.

Returns

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• (1) Every person who is chargeable with the tax shall on or before 1st October 1981 deliver to the Board a return complying with the following provisions of this paragraph; and the Board may by notice in writing require any person who—

• (a) has not given a notice under paragraph 8 above; but

• (b) in the opinion of the Board is or may be chargeable with the tax,

to deliver such a return to the Board within such time (not being less than thirty days) as may be specified in the notice.

• (2) Subject to sub-paragraph (3) below, a return delivered under this paragraph by any person shall contain—

• (a) a statement, in relation to each material time, of the chargeable deposits held by him and of—

• (i) any deposits excluded from the chargeable deposits by virtue of paragraph 3(2)(b), (c) or (d) above;

• (ii) any adjustment of the amount of the chargeable deposits made by virtue of paragraph 4 or 5 above;

• (b) a computation of the amount by reference to which he is chargeable with the tax, of the total tax chargeable by reference to that amount and of the respective amounts of the tax due and payable by him on or before each of the dates mentioned in paragraph 11(1) below; and

• (c) such particulars of the aggregate amounts of the different kinds of deposit held by him in his banking business at each material time as the Board may require for the purposes of the tax.

• (3) In sub-paragraph (2)(c) above the reference to a person’s banking business is—

• (a) in the case of a person who is not resident in the United Kingdom for the purposes of income tax or corporation tax, to so much of his banking business as is carried on by his branch or branches situated in the United Kingdom;

• (b) in the case of a person who is so resident, to his banking business exclusive of so much of it as is carried on by any branch of his which is situated outside the United Kingdom.

• (4) A return under this paragraph shall be in such form as the Board may prescribe and shall include a declaration that it is correct and complete.

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• (1) If a person fails to deliver a return within the time within which he is required to deliver it under paragraph 9 above he shall be liable, subject to sub-paragraph (3) below—

• (a) to a penalty not exceeding, except in the case mentioned in sub-paragraph (2) below, £500; and

• (b) if the failure continues after it has been declared by the court or the Special Commissioners before whom proceedings for the penalty have been commenced, to a further penalty not exceeding £100 for each day on which the failure so continues.

• (2) If the failure continues after the end of six months from the time by which the return ought to have been delivered, the penalty under sub-paragraph (1)(a) above shall be an amount not exceeding the aggregate of £500 and the total amount of the tax with which the person in question in chargeable.

• (3) Except in the case mentioned in sub-paragraph (2) above, a person shall not be liable to any penalty incurred under this paragraph for failure to deliver a return if the failure is remedied before proceedings for the recovery of the penalty are commenced.

Payment of tax

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• (1) The tax chargeable in the case of any person shall be due and payable—

• (a) as to one half, on or before 1st October 1981;

• (b) as to one quarter, on or before 1st December 1981; and

• (c) as to the remainder, on or before 1st February 1982,

and shall be so due and payable whether or not an assessment to the tax has been made by the date in question.

• (2) Certificates of tax deposit issued by the Treasury under section 12 of the National Loans Act 1968 on terms published on or before 14th May 1979 may be used for paying the tax; and for that purpose those terms shall have effect with the necessary modifications and as if the tax in or towards the payment of which a certificate is used were due as provided in sub-paragraph (1) above.

Assessments

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• (1) Any tax with which a person is chargeable may be assessed on him whether or not it has been paid (in whole or in part) when the assessment is made.

• (2) The making of an assessment in respect of any tax shall not affect the date when it is due and payable.

• (3) Where a person has under paragraph 9 above delivered to the Board a return and the Board are satisfird that the information given in it with respect to his chargeable deposits is correct and complete, the Board shall make an assessment in accordance with the return.

• (4) Where the Board are not so satisfied in relation to a return, or a person fails to deliver to the Board a return as required under paragraph 9 above, any assessment made by the Board shall be made to the best of their judgment.

• (5) An assessment may be made at any time not later than 30th September 1987 except that where any form of fraud or wilful default or any neglect has been committed by or on behalf of any person in connection with or in relation to the tax, assessments on that person may, for the purpose of making good to the Crown any loss of tax attributable to the fraud, wilful default or neglect, be made at any time.

• (6) An assessment which by virtue of subsection (5) above is made after 30th September 1987 shall require the leave of a Special Commissioner given on being satisfied by an inspector or other officer of the Board that there are reasonable grounds for believing that tax has or may have been lost to the Crown owing to the fraud, wilful default or neglect of any person; and the Special Commissioner giving leave to make such an assessment shall take no part in the proceedings, and shall not be present, when any appeal against the assessment is heard or determined.

• (7) A person who is not resident in the United Kingdom may be assessed and charged with the tax in the name of any branch or agent in the United Kingdom.

• (8) Notice of any assessment shall be served on the person assessed and shall state the date on which it is issued and the time within which any appeal against the assessment may be made.

• (9) After the notice of assessment has been served on the person assessed, the assessment shall not be altered except in accordance with the following provisions of this Schedule.

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