Legalize / United Kingdom / Public General Act

Finance Act 1982

Type Public General Act

Publication 2016-10-01

State In force

Department Statute Law Database

Source legislation.gov.uk

articles Not indexed

Reform history JSON API

(3) In the case of a notice under paragraph (a) of sub-paragraph (1) above, the relevant date is the date the notice is given and, in the case of a notice under paragraph (b) of that paragraph, the relevant date is a date specified in the notice as being the relevant date (which may be earlier than the date so specified as the date from which the interest may be paid under deduction of tax).

(4) In the case of relevant loan interest—

(a) which falls within sub-paragraph (2) of paragraph 2 above, and

(b) to which sub-paragraph (4) or sub-paragraph (5) of that paragraph does not apply, for the reference in sub-paragraph (1)(4) above to 1st April 1983 there shall be substituted a reference to 6th April 1983.

(5) In the case of relevant loan interest—

(a) which falls within sub-paragraph (2) of paragraph 2 above, and

(b) to which sub-paragraph (5) of that paragraph applies,

for the reference in sub-paragraph (1)(d) above to 1st April 1983 there shall be substituted a reference to the date specified by the Board and notified under sub-paragraph (6) of paragraph 2 to the qualifying lender to whom the interest is payable.

8

(1) If at any time—

(a) the interest on a loan ceases to be relevant loan interest, or

(b) a person making payments of relevant loan interest ceases to be a qualifying borrower,

the borrower shall give notice of that fact to the lender.

(2) Without prejudice to sub-paragraph (3) below, in relation to a payment of interest—

(a) which is due after the time referred to in sub-paragraph (1) above and before the date on which notice is given under that sub-paragraph, and

(b) from which a deduction was made as mentioned in subsection (1) of the principal section,

the principal section, except subsection (8), shall have effect as if the payment were a payment of relevant loan interest made by a qualifying borrower.

(3) Nothing in sub-paragraph (2) above entitles the borrower to any relief from tax or other benefit and, accordingly, where the amount of any such relief or other benefit which is allowed by virtue of that sub-paragraph exceeds that which ought to have been allowed, he shall be liable to make good the excess and an inspector may make such assessments as may in his judgment be required for recovering the excess.

(4) The Taxes Management Act 1970 shall apply to an assessment under this paragraph as if it were an assessment to tax for the year of assessment in which the relief was given and as if—

(a) the assessment were among those specified in sections 55(1) (recovery of tax not postponed) and 86(2) (interest on overdue tax) of that Act; and

(b) the sum charged by the assessment were tax specified in paragraph 3 of the Table in section 86(4) of that Act (reckonable date).

9

(1) If, as a result of receiving a notice under paragraph 8 above or otherwise, a qualifying lender has reason to believe that any interest is no longer relevant loan interest or that a borrower is no longer a qualifying borrower, the lender shall furnish the Board with such information as is in his possession with respect to those matters.

(2) At the end of the second column of the Table in section 98 of the Taxes Management Act 1970 (penalty for failure to furnish information etc.) there shall be inserted—

Paragraph 9(1) of Schedule 7 to the Finance Act 1982

10

(1) Where it appears to the Board that any of the provisions of Part I of this Schedule is not or may not be fulfilled with respect to any interest, or that a qualifying borrower has or may have ceased to be a qualifying borrower, they shall give notice of that fact to the lender and the borrower specifying the description of relevant loan interest concerned or, as the case may be, that the borrower has or may have ceased to be a qualifying borrower.

(2) The principal section shall not apply to any payment of relevant loan interest of a description to which a notice under sub-paragraph (1) above relates and which becomes due or is made after such date as may be specified in the notice and before such date as may be specified in a further notice given by the Board to the lender and the borrower.

11

In any case where—

(a) the principal section applies to any relevant loan interest by virtue of a notice under paragraph 7(1)(b) above, and

(b) the relevant date specified in the notice is earlier than the date from which the interest begins to be paid under deduction of tax, and

regulations may provide for a sum to be paid by the Board of an amount equal to that which the borrower would have been able to deduct from that payment by virtue of the principal section if it had been made after the relevant date.

12

(1) No obligation as to secrecy imposed by statute or otherwise on persons employed in relation to Inland Revenue shall prevent information relating to any loan in respect of which an option notice has been given as mentioned in paragraph 2(3)(a) above from being disclosed to the Secretary of State or the Department of the Environment for Northern Ireland, or to an officer of either of them authorised to receive such information, in connection with the exercise by the Secretary of State or that Department of any of his or their functions in relation to any such loan.

(2) Sub-paragraph (1) above extends only to disclosure by or under the authority of the Inland Revenue; and information which is disclosed to any person by virtue of sub-paragraph (1) above shall not be further disclosed to any other person unless—

(a) it could have been disclosed to that other person in accordance with sub-paragraph (1) above ; or

(b) the disclosure is made for the purposes of any civil or criminal proceedings concerned with the loan to which the disclosure relates.

PART III — Qualifying Borrowers

13

(1) Subject to the provisions of this paragraph, an individual is for the purposes of the principal section and this Schedule a qualifying borrower with respect to the interest on any loan.

(2) In relation to interest paid at a time when the borrower or the borrower's husband or wife holds an office or employment in respect of the emoluments of which he or she would but for some special exemption or immunity from tax be chargeable to tax under Case I, Case II or Case III of Schedule E, the borrower is not a qualifying borrower.

(3) In sub-paragraph (2) above references to the borrower's husband or wife do not include references to a separated husband or wife, and for this purpose " separated " has the same meaning as in Part II of the 1974 Schedule.

PART IV — Qualifying Lenders

14

(1) The following bodies are qualifying lenders for the purposes of the principal section and Parts I to III of this Schedule: —

(a) a building society within the meaning of the Building Societies Act 1962 or the Building Societies Act (Northern Ireland) 1967;

(b) a local authority ;

(d) the Post Office ;

(e) a company which is authorised under section 3 or section 4 of the Insurance Companies Act 1981 to carry on in the United Kingdom any of the classes of business specified in Schedule 1 to that Act;

(f) a trustee savings bank within the meaning of the Trustee Savings Bank Act 1981 ;

(g) a registered friendly society or branch, within the meaning of the Friendly Societies Act 1974 or the Friendly Societies Act (Northern Ireland) 1970 ;

(h) a development corporation within the meaning of the New Towns Act 1981 or the New Towns (Scotland) Act 1968 ;

((j)) the Commission for the New Towns ;

(k) the Housing Corporation;

(l) the Northern Ireland Housing Executive ;

(m) the Scottish Special Housing Association ;

(n) the Development Board for Rural Wales ;

(o) any of the following which is prescribed under sub-paragraph (2) below, namely, a recognised bank or licensed institution, within the meaning of the Banking Act 1979, a company which is authorised as mentioned in paragraph (e) above to carry on in the United Kingdom any of the classes of business specified in Schedule 2 to the Insurance Companies Act 1981, and a 90 per cent, subsidiary of any such bank, institution or company or of a company within paragraph (e) above.

(2) The Treasury may by order prescribe for the purposes of this Part of this Schedule generally or in relation to any specified description of loan any of the bodies referred to in paragraph (o) of sub-paragraph (1) above ; and a body which is prescribed by such an order shall become a qualifying lender for the purposes referred to in that sub-paragraph generally or, as the case may be, in relation to such description of loan as is specified in the order with effect from the beginning of the first year of assessment which begins after the date on which the order is made.

15

Without prejudice to paragraph 14 above, in relation to interest to which sub-paragraph (3) of paragraph 2 above applies, the person who, as a qualifying lender for the purposes of Part II of the 1967 Act or Part VIU of the 1981 Order, was the lender in relation to the loan referred to in that sub-paragraph shall also be a qualifying lender for the purposes of the principal section and Parts I to III of this Schedule.

Schedules 11, 12. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1

In section 70 of the Finance (No. 2) Act 1975, at the beginning of subsection (1) there shall be inserted the words " Subject to the provisions of regulations under this section or section 70A of this Act ".

2

In subsection (2)(c) of that section, for the words "by virtue of " there shall be substituted the words " in accordance with ".

3

In subsection (4) of that section, at the end there shall be added the words " (not being a certificate to the holder of which section 70A below would apply) ".

4

In subsection (7) of that section, after paragraph (g) there shall be inserted the words

and (h) excluding payments from the operation of this section where, in such circumstances as may be specified in the regulations, the requirements of regulations relating to the production of certificates or the obtaining, production or surrender of vouchers have not been complied with ;

5

After that section there shall be inserted—

(70A) (1) This section applies to the holder of a certificate in force under section 70 of this Act if it was issued to him on the basis— (a) that the condition in paragraph 2 of Part I of Schedule 12 to this Act was inapplicable to him by reason of sub-paragraph (1)(b) of that paragraph, or (b) that he satisfied that condition by virtue of sub-paragraph (5) of that paragraph. (2) The Board may make regulations securing that a person to whom this section applies shall not be excepted from section 69 of this Act in relation to a payment to the extent that the amount of the payment, or the aggregate amount of the payment and such other payments as may be prescribed by the regulations, exceeds a limit so prescribed. (3) Regulations under this section shall be made by statutory instrument which shall be subject to annulment in pursuance of a resolution of the House of Commons.

6

In section 71 of that Act, for subsection (5) there shall be substituted—

(5) A payment (including a payment by way of loan) that has the effect of discharging an obligation under a contract relating to construction operations shall be taken to be made under the contract; and if— (a) the obligation is to make a payment to a person within paragraphs (i) to (iii) of section 69(1) of this Act, but (b) the payment discharging that obligation is made to a person not within those paragraphs, the payment shall be taken to be made to the first-mentioned person.

7

In paragraph 2 of Part I of Schedule 12 to that Act, in sub-paragraph (1) for the words from the beginning to " must" there shall be substituted the words

Unless the applicant— (a) is the holder of a certificate in force under section 70 of this Act (other than a holder to whom section 70A applies), or (b) supplies the Board with a guarantee by such person, for such amount and in such form as may be prescribed in regulations made by the Board, he must

8

In sub-paragraph (2) of that paragraph for the words from " who " to " this condition" there shall be substituted the words " shall be treated as satisfying the condition in sub-paragraph (1) above ".

9

(1) At the end of that paragraph there shall be added—

(5) If the applicant satisfies the Board that he has during any period within six years before the date of his application attended a school or other establishment for the purpose of receiving full-time education or full-time training, this paragraph shall have effect as if that period were one during which he was employed as mentioned in sub-paragraph (1) above.

(2) This paragraph shall not have effect in relation to applications made before the coming into operation of regulations under section 70A of the Finance (No. 2) Act 1975.

10

After paragraph 2 of Part I of Schedule 12 to that Act there shall be inserted—

(2A) The applicant must not be receiving full-time education or full-time training

11

In paragraph 3 of Part I of that Schedule, in sub-paragraph (1) for the words " the Income Tax Acts " there shall be substituted the words " the Tax Acts ".

12

After sub-paragraph (1) of that paragraph there shall be inserted—

(1A) An applicant who at any time in the qualifying period had control of a company shall be taken not to satisfy the condition in sub-paragraph (1) above unless the company has satisfied that condition in relation to periods ending at a time within that period when he had control of it; and for this purpose " control" has the meaning assigned to it by section 534 of the Taxes Act.

13

In sub-paragraph (2) of that paragraph for the word " who " there shall be substituted the words " or company that ".

14

In paragraph 1 of Part II of that Schedule, in sub-paragraph (1) after the words "this Act" where they first appear there shall be inserted the words " (other than a holder to whom section 70A applies) ".

15

In paragraph 2 of Part IV of that Schedule, in sub-paragraph (1) for the words " the Income Tax Acts, the Corporation Tax Acts " there shall be substituted the words " the Tax Acts ".

SCHEDULE 9

Conditions for application of section 53(1)

1

(1) The vendor must be resident and ordinarily resident in the United Kingdom in the year of assessment in which the purchase is made and if the shares are held through a nominee the nominee must also be so resident and ordinarily resident.

(2) The residence and ordinary residence of trustees shall be determined for the purposes of this paragraph as they are determined under section 52 of the Capital Gains Tax Act 1979 for the purposes of that Act.

(3) The residence and ordinary residence of personal representatives shall be taken for the purposes of this paragraph to be the same as the residence and ordinary residence of the deceased immediately before his death.

(4) The references in this paragraph to a person's ordinary residence shall be disregarded in the case of a company.

2

(1) The shares must have been owned by the vendor throughout the period of five years ending with the date of the purchase.

(2) If at any time during that period the shares were transferred to the vendor by a person who was then his spouse living with him then, unless that person is alive at the date of the purchase but is no longer the vendor's spouse living with him, any period during which the shares were owned by that person shall be treated for the purposes of sub-paragraph (1) above as a period of ownership by the vendor.

(3) Where the vendor became entitled to the shares under the will or on the intestacy of a previous owner—

(a) any period during which the shares were owned by the previous owner or his personal representatives shall be treated for the purposes of sub-paragraph (1) above as a period of ownership by the vendor, and

(b) that sub-paragraph shall have effect as if it referred to three years instead of five.

(4) Where the vendor is a personal representative of a deceased owner—

(a) any period during which the shares were owned by the deceased shall be treated for the purposes of sub-paragraph (1) above as a period of ownership by the vendor, and

(b) that sub-paragraph shall have effect as if it referred to three years instead of five.

(5) In determining whether the condition in this paragraph is satisfied in a case where the vendor acquired shares of the same class at different times—

(a) shares acquired earlier shall be taken into account before shares acquired later, and

(b) any previous disposal by him of shares of that class shall be assumed to be a disposal of shares acquired later rather than of shares acquired earlier.

(6) If for the purposes of capital gains tax the time when shares were acquired would be determined under any provision of Chapter II of Part IV of the Capital Gains Tax Act 1979 (reorganisation of share capital, conversion of securities, etc.) then, subject to sub-paragraph (7) below, it shall be determined in the same way for the purposes of this paragraph.

(7) Sub-paragraph (6) above shall not apply to shares allotted for payment or comprised in share capital to which section 34 of the Finance (No. 2) Act 1975 (stock dividends) applies.

3

(1) If immediately after the purchase the vendor owns shares of the company, then, subject to paragraph 9 below, his interest as a shareholder must be substantially reduced.

(2) Subject to sub-paragraph (3) below the vendor's interest as a shareholder shall be taken to be substantially reduced if and only if the total nominal value of the shares owned by him immediately after the purchase, expressed as a fraction of the issued share capital of the company at that time, does not exceed 75 per cent, of the corresponding fraction immediately before the purchase.

(3) The vendor's interest as a shareholder shall not be taken to be substantially reduced where—

(a) he would, if the company distributed all its profits available for distribution immediately after the purchase, be entitled to a share of those profits, and

(b) that share, expressed as a fraction of the total of those profits, exceeds 75 per cent, of the corresponding fraction immediately before the purchase.

(4) In determining for the purposes of sub-paragraph (3) above the division of profits among the persons entitled to them, a person entitled to periodic distributions calculated by reference to fixed rates or amounts shall be regarded as entitled to a distribution of the amount or maximum amount to which he would be entitled for a year.

(5) In sub-paragraph (3) above " profits available for distribution " has the same meaning as it has for the purposes of Part III of the Companies Act 1980, but subject to sub-paragraph (6) below.

(6) For the purposes of sub-paragraph (3) above the amount of the profits available for distribution (whether immediately before or immediately after the purchase) shall be treated as increased—

(a) in the case of every company, by £100, and

(b) in the case of a company from which any person is entitled to periodic distributions of the kind mentioned in sub-paragraph (4) above, by a further amount equal to that required to make the distribution to which he is entitled in accordance with that sub-paragraph :

and where the aggregate of the sums payable by the company on the purchase and on any contemporaneous redemption, repayment or purchase of other shares of the company exceeds the amount of the profits available for distribution immediately before the purchase, that amount shall be treated as further increased by an amount equal to the excess.

(7) References in this paragraph to entitlement are, except in the case of trustees and personal representatives, references to beneficial entitlement.

4

(1) If immediately after the purchase any associate of the vendor owns shares of the company then, subject to paragraph 9 below, the combined interests as shareholders of the vendor and his associates must be substantially reduced.

(2) The question whether the combined interests as shareholders of the vendor and his associates are substantially reduced shall be determined in the same way as is (under paragraph 3 above) the question whether a vendor's interest as a shareholder is substantially reduced, except that the vendor shall be assumed to have the interests of his associates as well as his own.

5

(1) This paragraph applies where the company making the purchase is immediately before the purchase a member of a group and either—

(a) immediately after the purchase the vendor owns shares of one or more other members of the group (whether or not he then owns shares of the company making the purchase), or

(b) immediately after the purchase the vendor owns shares of the company making the purchase and immediately before the purchase he owned shares of one or more other members of the group;

and in the following provisions of this paragraph "relevant company" means the company making the purchase and any other member of the group in which the vendor owns shares immediately before or immediately after the purchase.

(2) Where this paragraph applies then, subject to paragraph 9 below, the vendor's interest as a shareholder in the group must be substantially reduced.

(3) The vendor's interest as a shareholder in the group shall be ascertained by-

(a) expressing the total nominal value of the shares owned by him in each relevant company as a fraction of the issued share capital of the company,

(b) adding together the fractions so obtained, and

(4) Subject to sub-paragraph (5) below, the vendor's interest as a shareholder in the group shall be taken to be substantially reduced if and only if it does not exceed 75 per cent, of the corresponding interest immediately before the purchase.

(5) The vendor's interest as a shareholder in the group shall not be taken to be substantially reduced if—

(a) he would, if every member of the group distributed all its profits available for distribution immediately after the purchase (including any profits received by it on a distribution by another member), be entitled to a share of the profits of one or more of them, and

(b) that share, or the aggregate of those shares, expressed as a fraction of the aggregate of the profits available for distribution of every member of the group which is—

(i) a relevant company, or

(ii) a 51 per cent, subsidiary of a relevant company,

exceeds 75 per cent, of the corresponding fraction immediately before the purchase.

(6) Sub-paragraphs (4) to (6) of paragraph 3 above shall apply for the purposes of sub-paragraph (5) above as they apply for the purposes of paragraph 3(3).

(7) Subject to the following sub-paragraphs, in this paragraph " group " means a company which has one or more 51 per cent, subsidiaries, but is not itself a 51 per cent, subsidiary of any other company, together with those subsidiaries.

(8) Where the whole or a significant part of the business carried on by an unquoted company (" the successor company ") was previously carried on by—

(a) the company making the purchase, or

(b) a company which is (apart from this sub-paragraph) a member of a group to which the company making the purchase belongs,

the successor company and any company of which it is a 51 per cent, subsidiary shall be treated as being a member of the same group as the company making the purchase (whether or not, apart from this sub-paragraph, the company making the purchase is a member of a group).

(9) Sub-paragraph (8) above shall not apply if the successor company first carried on the business there referred to more than three years before the time of the purchase.

(10) For the purposes of this paragraph a company which has ceased to be a 51 per cent, subsidiary of another company before the time of the purchase shall be treated as continuing to be such a subsidiary if at that time there exist arrangements under which it could again become such a subsidiary.

6

(1) This paragraph applies where the company making the purchase is immediately before the purchase a member of a group and at that time an associate of the vendor owns shares of any member of the group.

(2) Where this paragraph applies then, subject to paragraph 9 below, the combined interests as shareholders in the group of the vendor and his associates must be substantially reduced.

(3) The question whether the combined interests as shareholders in the group of the vendor and his associates are substantially reduced shall be determined in the same way as is (under paragraph 5 above) the question whether a vendor's interest as a shareholder in a group is substantially reduced, except that the vendor shall be assumed to have the interests of his associates as well as his own (and references in paragraph 5(3) to (5) to a relevant company shall be construed accordingly).

(4) For the purposes of this paragraph "group" has the same meaning as it has for the purposes of paragraph 5 above.

7

(1) The vendor must not immediately after the purchase be connected with the company making the purchase or with any company which is a member of the same group as that company.

(2) For the purposes of this paragraph "group" has the same meaning as it has for the purposes of paragraph 5 above.

(3) This paragraph has effect subject to paragraph 9 below.

8

(1) The purchase must not be part of a scheme or arrangement which is designed or likely to result in the vendor or any associate of his having interests in any company such that, if he had those interests immediately after the purchase, any of the conditions in paragraphs 3 to 7 above could not be satisfied.

(2) A transaction occurring within one year after the purchase shall be deemed for the purposes of sub-paragraph (1) above to be part of a scheme or arrangement of which the purchase is also part.

(3) This paragraph has effect subject to paragraph 9 below.

9

(1) Where—

(a) any of the conditions in paragraphs 3 to 8 above which are applicable are not satisfied in relation to the vendor, but

(b) he proposed or agreed to the purchase in order that the condition in paragraph 4(1) or 6(2) could be satisfied in respect of the redemption, repayment or purchase of shares owned by a person of whom he is an associate,

this paragraph applies to the purchase to the extent that that result is produced by virtue of the purchase.

(2) Where this paragraph applies, section 53(1) of this Act shall have effect as if the conditions in paragraphs 3 to 8 above were satisfied in relation to the vendor.

Administration

10

(1) A payment made by a company on the redemption, repayment or purchase of its own shares shall be deemed to be one to which section 53 of this Act applies if, before it is made, the Board have on the application of the company notified the company that they are satisfied that the section will apply.

(2) A payment made by a company on the redemption, repayment or purchase of its own shares shall be deemed to be one to which section 53 of this Act does not apply if, before it is made, the Board have on the application of the company notified the company that they are satisfied that the section will not apply.

(3) An application under this paragraph shall be in writing and shall contain particulars of the relevant transactions ; and the Board may, within thirty days of the receipt of the application or of any further particulars previously required under this sub-paragraph, by notice require the applicant to furnish further particulars for the purpose of enabling the Board to make their decision.

(4) If a notice under sub-paragraph (3) above is not complied with within thirty days or such longer period as the Board may allow, the Board need not proceed further on the application.

(5) The Board shall notify their decision to the applicant within thirty days of receiving the application or, if they give a notice under sub-paragraph (3) above, within thirty days of the notice being complied with.

(6) If particulars furnished under this paragraph do not fully and accurately disclose all facts and circumstances material for the decision of the Board, any resulting notification by the Board shall be void.

11

(1) A company which treats a payment made by it as one to which section 53 of this Act applies shall within sixty days after making the payment make a return to the inspector giving particulars of the payment and of the circumstances by reason of which section 53 is regarded as applying to it.

(2) Where a company treats a payment made by it as one to which section 53(1) of this Act applies, any person connected with the company who knows of any such scheme or arrangement affecting the payment as is mentioned in paragraph 8 above shall, within sixty days after he first knows of both the payment and the scheme or arrangement, give a notice in writing to the inspector containing particulars of the scheme or arrangement.

12

(1) Where the inspector has reason to believe that a payment treated by the company making it as one to which section 53(1) of this Act applies may form part of a scheme or arrangement of the kind referred to in subsection (1)(b) of that section or in paragraph 8 above, he may by notice in writing require the company or any person who is connected with the company to furnish him within such time, not being less than sixty days, as may be specified in the notice with—

(a) a declaration in writing stating whether or not, according to information which the company or that person has or can reasonably obtain, any such scheme or arrangement exists or has existed, and

(b) such other information as the inspector may reasonably require for the purposes of the provision in question and the company or that person has or can reasonably obtain.

(2) The recipient of a payment treated by the company making it as one to which section 53 of this Act applies, and any person on whose behalf such a payment is received, shall if so required by the inspector state whether the payment received by him or on his behalf is received on behalf of any person other than himself and, if so, the name and address of that person.

13

(1) The Table in section 98 of the Taxes Management Act 1970 shall be amended as follows.

(2) At the end of the first column there shall be added—

Paragraph 12 of Schedule 9 to the Finance Act 1982.

(3) At the end of the second column there shall be added—

Paragraph 11 of Schedule 9 to the Finance Act 1982.

Interpretation

14

(1) Any question whether a person is an associate of another in relation to a company shall be determined for the purposes of this Schedule in accordance with the following provisions of this paragraph.

(2) A husband and wife living together are associates of one another.

(3) A person under the age of eighteen is an associate of his parents, and his parents are his associates.

(4) A person connected with a company is an associate of the company and of any company controlled by it, and the company and any company controlled by it are his associates.

(5) Where a person connected with one company has control of another company, the second company is an associate of the first.

(6) Where shares of a company are held by trustees (other than bare trustees) then in relation to that company, but subject to sub-paragraph (9) below, the trustees are associates of—

(a) any person who directly or indirectly provided property to the trustees or has made a reciprocal arrangement for another to do so, and

(b) any person who is, by virtue of sub-paragraph (2) or (3) above, an associate of a person within paragraph (a) above, and

and any such person is an associate of the trustees.

(7) Where shares of a company are comprised in the estate of a deceased person, then in relation to that company the deceased's personal representatives are associates of any person who is or may become beneficially entitled to a significant interest in the shares, and any such person is an associate of the personal representatives.

(8) Where one person is accustomed to act on the directions of another in relation to the affairs of a company, then in relation to that company the two persons are associates of one another.

(9) Sub-paragraph (6) above shall not apply to shares held on trusts which—

(a) relate exclusively to an exempt approved scheme as defined in Chapter II of Part II of the Finance Act 1970, or

(b) are exclusively for the benefit of the employees, or the employees and directors, of the company referred to in that sub-paragraph or of companies in a group to which that company belongs, or their dependants (and are not wholly or mainly for the benefit of directors or their relatives);

and for the purposes of this sub-paragraph " group " means a company which has one or more 51 per cent, subsidiaries, together with those subsidiaries.

(10) For the purposes of sub-paragraphs (6) and (7) above a person's interest is significant if its value exceeds 5 per cent, of the value of all the property held on the trusts or, as the case may be, comprised in the estate concerned, excluding any property in which he is not and cannot become beneficially entitled to an interest.

15

(1) Any question whether a person is connected with a company shall be determined for the purposes of this Schedule in accordance with the following provisions of this paragraph.

(2) A person is connected with a company if he directly or indirectly possesses or is entitled to acquire more than 30 per cent, of—

(a) the issued ordinary share capital of the company, or

(b) the loan capital and issued share capital of the company, or

(3) Where a person—

(a) acquired or became entitled to acquire loan capital of a company in the ordinary course of a business carried on by him, being a business which includes the lending of money, and

(b) takes no part in the management or conduct of the company,

his interest in that loan capital shall be disregarded for the purposes of sub-paragraph (2) above.

(4) A person is connected with a company if he directly or indirectly possesses or is entitled to acquire such rights as would, in the event of the winding up of the company or in any other circumstances, entitle him to receive more than 30 per cent, of the assets of the company which would then be available for distribution to equity holders of the company; and for the purposes of this sub-paragraph—

(a) the persons who are equity holders of the company, and

(b) the percentage of the assets of the company to which a person would be entitled,

shall be determined in accordance with paragraphs 1 and 3 of Schedule 12 to the Finance Act 1973, taking references in paragraph 3 to the first company as references to an equity holder and references to a winding up as including references to any other circumstances in which assets of the company are available for distribution to its equity holders.

(5) A person is connected with a company if he has control of it.

(6) References in this paragraph to the loan capital of a company are references to any debt incurred by the company—

(a) for any money borrowed or capital assets acquired by the company, or

(b) for any right to receive income created in favour of the company, or

(c) for consideration the value of which to the company was (at the time when the debt was incurred) substantially less than the amount of the debt (including any premium thereon).

(7) For the purposes of this paragraph a person shall be treated as entitled to acquire anything which he is entitled to acquire at a future date or will at a future date be entitled to acquire.

(8) For the purposes of this paragraph a person shall be assumed to have the rights or powers of his associates as well as his own.

16

(1) In section 53 of this Act and in this Schedule—

" control" has the meaning assigned to it by section 534 of the Taxes Act;

"holding company" means a company whose business (disregarding any trade carried on by it) consists wholly or mainly of the holding of shares or securities of one or more companies which are its 75 per cent, subsidiaries ;

" personal representatives " means persons responsible for administering the estate of a deceased person ;

" quoted company" means a company whose shares (or any class of whose shares) are listed in the official list of a stock exchange ;

" shares " includes stock ;

" trade " does not include dealing in shares, securities, land or futures and " trading activities " shall be construed accordingly ;

" trading company " means a company whose business consists wholly or mainly of the carrying on of a trade or trades ;

" trading group " means a group the business of whose members, taken together, consists wholly or mainly of the carrying on of a trade or trades, and for this purpose "group" means a company which has one or more 75 per cent, subsidiaries together with those subsidiaries ;

" unquoted company" means a company which is neither a quoted company nor a 51 per cent, subsidiary of a quoted company.

(2) References in section 53 of this Act and in this Schedule to the owner of shares are references to the beneficial owner except where the shares are held on trusts (other than bare trusts) or are comprised in the estate of a deceased person, and in such a case are references to the trustees or, as the case may be, to the deceased's personal representatives.

(3) References in section 53 of this Act and in this Schedule to a payment made by a company include references to anything else that is, or would but for section 53 be, a distribution.

Schedules 14—17. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Finance Act 1977

1

(1) Section 38 of the Finance Act 1977 shall be amended as follows.

(2) In subsection (1) for the words from "the Treasury" to " 1976 " there shall be substituted the words " a direction has effect under section 93 of the Finance Act 1982 ".

(3) For subsection (5) there shall be substituted—

(5) Where— (a) for part of a year of assessment a direction under the said section 93 has effect and circumstances obtain by virtue of which income arising from property comprised in the settlement is treated as income of a settlor under the said Part XVI; and (b) for the remainder of that year either no such direction has effect, or no such circumstances obtain, or both, the foregoing provisions of this section shall apply as if each of those parts were a separate year of assessment and separate elections may be made accordingly.

Finance Act 1980

2

(1) Section 52 of the Finance Act 1980 shall be amended as follows.

(2) In subsection (1)—

(a) for the words from " the Treasury " to " 1976 " there shall be substituted the words " a direction has effect under section 93 of the Finance Act 1982 ";

(b) after paragraph (b) there shall be inserted the words " or (c) the direction ceases to have effect".

(3) In subsections (2) and (3) for the words " subsection (3)(a)(i) or (ii) of the said section 84" there shall be substituted the words " subsection (3)(a)(i) or (ii) of the said section 93 ".

(4) In subsection (7) for the words from "if" to the end there shall be substituted the words "if either—

(a) it ceases to be comprised in the first-mentioned settlement and becomes comprised in the other settlement in circumstances such that by virtue of paragraph 3(1) of Schedule 16 to the Finance Act 1982 there is (or, but for paragraph 3(4), there would be) no charge to capital transfer tax in respect of the property, or

(b) both immediately before and immediately after the transfer it is property in respect of which a direction has effect under section 93 of that Act.".

3

(1) Section 53 of the Finance Act 1980 shall be amended as follows.

(2) In subsection (1)—

(a) for the words " subsection (3) of section 84 of the Finance Act 1976" there shall be substituted the words " subsection (3) of section 93 of the Finance Act 1982 ";

(b) in paragraph (a) for the words " section 84 " there shall be substituted the words " section 93 "; and

(3) In subsection (2) after the word "shall" there shall be inserted the words " (while such a direction has effect) ".

(4) In subsection (4) for the words from " if " to the end there shall be substituted the words " if either—

(a) it becomes comprised in another settlement in circumstances such that by virtue of paragraph 3(1) of Schedule 16 to the Finance Act 1982 there is (or, but for paragraph 3(4), there would be) no charge to capital transfer tax in respect of the property so ceasing, or

(b) both immediately before and immediately after its so ceasing it is property in respect of which a direction has effect under section 93 of that Act."

SCHEDULE 11

Interpretation

1

In this Schedule " the principal section " means section 70 of this Act.

Separate pooling of writing-down allowances

2

In any case where section 44 of the Finance Act 1971 has effect as mentioned in paragraphs (a) to (e) of subsection (2) of the principal section, section 44 shall apply separately with respect to expenditure falling within subsection (1) of the principal section and with respect to other expenditure.

Recovery of excess relief

3

(1) In relation to expenditure falling within subsection (1) of the principal section, section 66 of the Finance Act 1980 shall apply subject to the following modifications:—

(a) any reference in that section to machinery or plant (or a new ship) being used otherwise than for a qualifying purpose shall be construed as a reference to its being used as mentioned in paragraphs (a) and (b) of subsection (3) of the principal section ; and

(b) any reference in section 66 to a first-year allowance shall be construed as including a reference to a writing-down allowance of an amount determined without regard to subsection (2) of the principal section ; and

(c) the reference in subsection (1)(b) of section 66 to section 44 of the Finance Act 1971, as it has effect in accordance with section 65 of the Finance Act 1980, shall be construed as including a reference to section 44 as it has effect as mentioned in paragraphs (b) to (e) of subsection (2) of the principal section; and

(d) in determining the amount of any excess relief under section 66 in a case where that section had previously applied, account shall be taken of the relief already recovered.

(2) If subsection (7) of section 66 of the Finance Act 1980 has already applied in relation to expenditure on a new ship before subsection (1) of the principal section applied to that expenditure, then, on the subsequent application of the said subsection (7) by virtue of sub-paragraph (1)(a) above, paragraph (b) of that subsection shall not again apply.

4

(1) Subject to sub-paragraph (3) below, the provisions of sub-paragraph (2) below apply where—

(a) by virtue of subsection (5) of the principal section any amount falls to be treated as if it were a balancing charge, and

(b) the person on whom the balancing charge is, by virtue of that subsection, to be made acquired the machinery or plant in question as a result of a transaction which was, or a series of transactions each of which was, between connected persons, and

(c) a first-year allowance, a balancing allowance, or a writing down allowance in respect of expenditure on the provision of that machinery or plant has been made to any of those persons.

(2) Where this sub-paragraph applies—

(a) subsection (5) of the principal section shall have effect as if it referred to the allowances specified in sub-paragraph (1)(c) above; and

(b) for the purposes of that subsection any consideration paid or received on a disposal of the machinery or plant between connected persons shall be disregarded ; and

(c) if a balancing allowance or balancing charge is made in respect of the machinery or plant, there shall be made such adjustments of the relief falling to be taken into account by virtue of paragraph (a) above as are just and reasonable in the circumstances.

(3) Sub-paragraph (2) above does not apply where section 154(2), section 155(1), or section 255 (2) of the Taxes Act or sub-paragraph

(a) or sub-paragraph (b) of paragraph 13 of Schedule 8 to the Finance Act 1971 (succession to trades) applied on the occasion of the transaction or transactions referred to in sub-paragraph (1)(6).

(4) Section 533 of the Taxes Act (connected persons) applies for the purposes of this paragraph.

Information

5

(1) The obligation to give notice by virtue of subsection (2) or subsection (3) of section 67 of the Finance Act 1980 where machinery or plant becomes used otherwise than for a qualifying purpose shall arise a second time where machinery or plant which has been used otherwise than for a qualifying purpose but not as mentioned in paragraphs (a) and (b) of subsection (3) of the principal section subsequently becomes used as mentioned in those paragraphs.

(2) In the case of any expenditure in respect of which a first-year allowance has not been made but a writing-down allowance of an amount determined without regard to subsection (2) of the principal section has been or may be made, then—

(a) any reference in subsections (2), (3) and (4) of section 67 of the Finance Act 1980 to a first-year allowance shall be construed as a reference to a writing-down allowance of an amount so determined ; and

(b) any reference in those subsections to the use of machinery or plant otherwise than for a qualifying purpose shall be construed as a reference to the use of machinery or plant as mentioned in paragraphs (a) and (b) of subsection (3) of the principal section.

Joint lessees

6

(1) The provisions of this paragraph have effect where machinery or plant is leased to two or more persons jointly and at least one of the joint lessees is a person falling within paragraphs (a) and (b) of subsection (1) of the principal section (in this paragraph referred to as a " non-resident lessee ").

(2) Where this paragraph applies, any reference in section 68 of the Finance Act 1980 to the requisite period shall be construed in accordance with subsection (3) of the principal section, whether or not there is also a joint lessee who is not a non-resident lessee.

(3) If the circumstances are such that no first-year allowance has been or may be made in respect of any part of the expenditure on the provision of the machinery or plant in question, the principal section shall apply in relation to that expenditure as if all the joint lessees were non-resident lessees.

(4) Where, by virtue of subsection (3), subsection (4) or subsection (5) of section 68 of the Finance Act 1980 (cases of joint lessees where first-year allowances may be or have been made) section 44 of the Finance Act 1971 has effect (directly or through the operation of section 66 of the Finance Act 1980) in relation to the whole or any part of the expenditure on the machinery or plant in question, it shall have effect, in accordance with subsection (2) of the principal section, as if that expenditure were expenditure falling within subsection (1) of that section.

SCHEDULE 12

Initial allowances

1

(1) Subject to the provisions of this Schedule, where an approved body incurs capital expenditure on the construction of a building which is to be or to include a qualifying dwelling-house, then, for the chargeable period related to the incurring of that expenditure an allowance (in this Schedule referred to as an "initial allowance ") shall be made to that body in respect of each qualifying dwelling-house to be comprised in the building.

(2) An initial allowance in respect of a qualifying dwelling-house shall be of an amount equal to three-quarters of the capital expenditure appropriate to that dwelling-house.

(3) No initial allowance shall be made in respect of any expenditure if, when the dwelling-house to which it relates comes to be used, it is not a qualifying dwelling-house ; and where an initial allowance has been granted in respect of any expenditure otherwise than in accordance with the provisions of this paragraph, all such assessments shall be made as are necessary to secure that effect is given to those provisions.

(4) For the purposes of this Schedule, the capital expenditure appropriate to a dwelling-house shall be determined as follows: —

(a) if the building concerned consists of a single qualifying dwelling-house, then, subject to the relevant limit, the whole of the capital expenditure referred to in sub-paragraph (1) above is appropriate to that dwelling-house ; and

(b) in the case of a dwelling-house which forms part of a building, the capital expenditure appropriate to it is, subject to the relevant limit, the aggregate of—

(i) that proportion of the capital expenditure referred to in sub-paragraph (1) above which is properly attributable to the construction of that dwelling-house ; and

(ii) where there are common parts of the building, such proportion of the capital expenditure on those common parts as it is just and reasonable to attribute to the dwelling-house and as does not exceed one-tenth of that proportion of the capital expenditure referred to in paragraph (i) above;

and in this Schedule " the relevant limit" means £60,000, if the dwelling-house is in Greater London, and £40,000 if it is elsewhere

(5) In sub-paragraph (4) above " common parts ", in relation to a building, means common parts of the building which—

(a) are not intended to be in separate occupation (whether for domestic, commercial or other purposes); and

(b) are intended to be of benefit to some or all of the qualifying dwelling-houses included in the building;

and the capital expenditure on any such parts of the building is so much of the expenditure referred to in sub-paragraph (1) above as it is just and reasonable to attribute to those parts.

Writing-down allowances

2

(1) Subject to the provisions of this Schedule, where—

(a) an approved body or a body which has been an approved body is, at the end of a chargeable period or its basis period, entitled to an interest in a building, and

(b) at the end of that chargeable period or its basis period, the building is or includes a qualifying dwelling-house or two or more qualifying dwelling-houses, and

(c) that interest is the relevant interest in relation to the capital expenditure incurred on the construction on that building,

an allowance (in this Schedule referred to as " a writing-down allowance ") shall be made to that body for that chargeable period in respect of the dwelling-house or, as the case may be, each dwelling-house falling within paragraph (b) above.

(2) The writing-down allowance in respect of a dwelling-house shall be equal to one twenty-fifth of the capital expenditure which is appropriate to that dwelling-house, except that for a chargeable period of less than a year that fraction shall be proportionately reduced.

(3) If, in the case of a building which is or includes a qualifying dwelling-house.—

(a) the interest which is the relevant interest in relation to any expenditure is sold, and

(b) the sale is an event to which paragraph 4(1) below applies,

then (subject to any further adjustment under this sub-paragraph on a later sale) the writing-down allowance in respect of that dwelling-house for any chargeable period, if that chargeable period or its basis period ends after the time of the sale, shall be the residue, as denned in paragraph 7(1) below, of that expenditure immediately after the sale, reduced in the proportion (if it is less than one) which the length of the chargeable period bears to the part unexpired at the date of the sale of the period of 25 years beginning with the time when the building was first used.

(4) Notwithstanding anything in the preceeding provisions of this paragraph, in no case shall the amount of a writing-down allowance made to a body for any chargeable period in respect of any expenditure exceed what, apart from the writing-off falling to be made by reason of the making of that allowance, would be the residue of that expenditure at the end of that chargeable period of its basis period.

Qualifying dwelling-house

3

(1) In this Schedule " qualifying dwelling-house " means, subject to the following provisions of this paragraph, a dwelling-house let on a tenancy which is for the time being an assured tenancy, within the meaning of section 56 of the Housing Act 1980.

(2) Without prejudice to section 57 of the Housing Act 1980 (by virtue of which certain tenancies continue to be treated as assured tenancies notwithstanding that the landlord has ceased to be an approved body by reason of a variation in the description of bodies for the time being approved) a dwelling-house which has been a qualifying dwelling-house by virtue of sub-paragraph (1) above shall be regarded as a qualifying dwelling-house at any time when—

(a) it is for the time being subject to regulated tenancy or a housing association tenancy ; and

(b) the landlord under that tenancy either is an approved body or was an approved body but has ceased to be such for any reason.

(3) Notwithstanding that a dwelling-house is let as mentioned in sub-paragraph (1) or sub-paragraph (2) above, it is not a qualifying dwelling-house for the purposes of this Schedule—

(a) unless the landlord is for the time being entitled to the relevant interest in the dwelling-house or is the person who incurred the capital expenditure on the construction of the building in which the dwelling-house is comprised ; or

(b) if the landlord is a housing association which is approved for the purposes of section 341 of the Taxes Act (cooperative housing associations) or is a self-build society, within the meaning of Part I of the Housing Act 1974 ; or

(d) if the tenant is a director of a company which is or is connected with the landlord ; or

(e) if the landlord is a close company and the tenant is, for the purposes of Chapter III of Part XI of the Taxes Act, a participator in that company or an associate of such a participator ; or

(f) if the tenancy is entered into as part of an arrangement between the landlords (or owners) of different dwelling houses under which one landlord takes a person as a tenant in circumstances where, if that person was the tenant of a dwelling-house let by the other landlord, that dwelling-house would not be a qualifying dwelling-house by virtue of any of paragraphs (c) to (e) above ;

and section 533 of the Taxes Act (connected persons) applies for the purposes of this sub-paragraph.

(4) In this paragraph " regulated tenancy " and " housing association tenancy " have the same meaning as in the Rent Act 1977.

Balancing allowances and balancing charges

4

(1) Where any capital expenditure has been incurred on the construction of such a building as is referred to in paragraph 1(1) above and any of the following events occur while a dwelling-house comprised in that building is a qualifying dwelling-house, that is to say—

(a) the relevant interest in the dwelling-house is sold, or

(b) that interest, being a leasehold interest, comes to an end otherwise than on the person entitled to it aquiring the interest which is reversionary on it, or

(c) the dwelling-house is demolished or destroyed or, without being demolished or destroyed, ceases altogether to be used,

then, subject to sub-paragraph (2) below, for the chargeable period related to that event an allowance or charge (in this Schedule referred to as a " balancing allowance " or a " balancing charge ") shall, in the circumstances mentioned below, be made to or, as the case may be, on the person entitled to the relevant interest immediately before that event occurs.

(2) No balancing allowance or balancing charge shall be made by reason of any event occurring more than twenty-five years after the dwelling-house was first used.

(3) Subject to paragraph 5 below, where there are no sale, insurance, salvage or compensation moneys, or where the residue of the expenditure immediately before the event exceeds those moneys, a balancing allowance shall be made and the amount of it shall be the amount of that residue or, as the case may be, of the excess of that residue over those moneys.

(4) Subject to paragraph 5 below, if the sale, insurance, salvage or compensation moneys exceed the residue, if any, of the expenditure immediately before the event, a balancing charge shall be made, and the amount on which it is made shall be an equal amount to the excess or, where the residue is nil, to those moneys.

(5) The provisions of section 78 of and Schedule 7 to the Capital Allowances Act 1968 (special provisions as to certain sales) apply for the purposes of this Schedule as they apply in relation to the sale of an industrial building and as if—

(a) any reference in those provisions to Part I of that Act included a reference to this Schedule; and

(b) for the words in sub-paragraph (2)(a) of paragraph 4 of that Schedule following " the case of" there were substituted the words " a qualifying dwelling-house, the residue of the expenditure immediately before the sale, computed in accordance with paragraph 7 of Schedule 12 to the Finance Act 1982 "; and

(c) for paragraphs (a) and (b) of sub-paragraph (3) of paragraph 4 of that Schedule there were substituted the words " both the seller and the buyer are at the time of the sale approved bodies, as denned in section 56(4) of the Housing Act 1980 ".

(6) For the purposes of this Schedule, any transfer of the relevant interest in a dwelling-house, otherwise than by way of sale, shall be treated as a sale of that interest for a price other than that which it would have fetched if sold on the open market; and if Schedule 7 to the Capital Allowances Act 1968 would not, apart from this sub-paragraph have effect in relation to a transfer treated as a sale by virtue of this sub-paragraph, that Schedule shall have effect in relation to it as if it were a sale falling within paragraph 1(1)(a) of that Schedule.

(7) Notwithstanding anything in the preceding provisions of this paragraph (or in paragraph 5 below), in no case shall the amount on which a balancing charge is made on any person in respect of any expenditure on the construction of a dwelling-house comprised in a building exceed the amount of the initial allowance, if any, made to him in respect of the expenditure appropriate to that dwelling-house together with the amount of any writing-down allowances made to him in respect of that expenditure for chargeable periods which end on or before the date of the event giving rise to the charge or of which the basis periods ends on or before that date.

5

(1) If, in a case where paragraph 4(1) above applies, a dwelling-house which had been a qualifying dwelling-house was not, for any part of the relevant period, such a dwelling-house, the provisions of this paragraph shall have effect instead of sub-paragraphs (3) and (4) of paragraph 4 above.

(2) Subject to sub-paragraph (4) below, where the sale, insurance, salvage or compensation moneys are not less than the capital expenditure appropriate to the dwelling-house, a balancing charge shall be made and the amount on which it is made shall be an amount equal to the allowances given.

(3) Subject to sub-paragraph (4) below, where there are no sale, insurance, salvage or compensation moneys or where those moneys are less than the capital expenditure appropriate to the dwelling-house, then—

(a) if the adjusted net cost of the dwelling-house exceeds the allowances given, a balancing allowance shall be made and the amount thereof shall be an amount equal to the excess ;

(b) if the adjusted net cost of the dwelling-house is less than the allowances given, a balancing charge shall be made and the amount on which it is made shall be an amount equal to the shortfall.

(4) No balancing charge or allowance shall be made under this paragraph on the occasion of a sale if, by virtue of paragraph 4 of Schedule 7 to the Capital Allowances Act 1968, as applied by paragraph 4(5) above, the dwelling-house is treated as having been sold for a sum equal to the residue of the expenditure before sale.

(5) In this paragraph—

" the relevant period " means the period beginning at the time when the dwelling-house was first used for any purpose and ending with the event giving rise to the balancing allowance or balancing charge, except that where there has been a sale of the dwelling-house after that time and before that event the relevant period shall begin on the day following that sale or, if there has been more than one such sale, the last such sale ;

" the capital expenditure " means— where paragraph (b) of this definition does not apply, the capital expenditure incurred (or by virtue of paragraph 8 below deemed to have been incurred) on the construction of the dwelling-house ; where the person to or on whom the balancing allowance or balancing charge falls to be made is not the person who incurred (or is deemed to have incurred) that expenditure the residue of that expenditure at the beginning of the relevant period, together (in either case) with any amount to be added to the residue of that expenditure by virtue of paragraph 7(9) below;

" the allowances given" means the allowance referred to in paragraph 4(7) above ;

" the adjusted net cost " means— where there are no sale, insurance, salvage or compensation moneys, the capital expenditure appropriate to the dwelling-house ; and where those moneys are less than that expenditure, the amount by which they are less, reduced (in either case) in the proportion that the part or the aggregate of the parts, of the relevant period for which the building is a qualifying dwelling-house bears to the whole of that period.

6

(1) If a dwelling-houses ceases to be a qualifying dwelling-house otherwise than by reason of a sale or transfer of the relevant interest in it, that relevant interest shall be treated for the purposes of this Schedule as having been sold, at the time the dwelling-house ceases to be a qualifying dwelling-house, for the price which it would have fetched if sold in the open market.

(2) For the purposes of this Schedule, a dwelling-house shall not be regarded as ceasing altogether to be used by reason that it falls temporarily out of use, and where, immediately before any period of temporary disuse, it is a qualifying dwelling-house, it shall be regarded as continuing to be a qualifying dwelling-house during the period of temporary disuse.

Writing off of expenditure and meaning of " residue of expenditure "

7

(1) Any expenditure appropriate to a qualifying dwelling-house shall be treated for the purposes of this Schedule as written off to the extent and as at the times specified below, and the references in this Schedule to the residue of any such expenditure shall be construed accordingly.

(2) Where an initial allowance is made in respect of a qualifying dwelling-house, the amount of that allowance shall be treated as written off as at the time when the qualifying dwelling-house is first used.

(3) Where, by reason of the whole or part of a building being at any time a qualifying dwelling-house, a writing-down allowance is made for any chargeable period in respect of the expenditure, the amount of that allowance shall, subject to sub-paragraph (4) below, be treated as written off as at that time.

(4) Where, at a time which is material for the purposes of sub-paragraph (3) above, an event occurs which gives rise or may give rise to a balancing allowance or balancing charge, the amount directed to be treated as written off by that sub-paragraph as at that time shall be taken into account in computing the residue of that expenditure immediately before that event for the purpose of determining whether any and if so what balancing allowance or balancing charge is to be made.

(5) If, for any period or periods between the time when the whole or part of a building was first used for any purpose and the time at which the residue of the expenditure falls to be ascertained, the building or part, as the case may be, has not been a qualifying dwelling-house, there shall in ascertaining that residue be treated as having been previously written off in respect of the said period or periods amounts equal to writing-down allowances made for chargeable periods of a total length equal thereto at such rate or rates as would have been appropriate having regard to any sale on which paragraph 2(3) above operated.

(6) Where, on the occasion of a sale, a balancing allowance is made in respect of the expenditure, there shall be treated as written off as at the time of the sale the amount by which the residue of the expenditure before the sale exceeds the net proceeds of the sale.

(7) Where, on the occasion of a sale, a balancing charge is made in respect of the expenditure, the residue of the expenditure shall be deemed for the purposes of this Schedule to be increased as at the time of the sale by the amount on which the charge is made.

(8) Where, on the occasion of a sale, a balancing charge is made under paragraph 5(3)(b) above in respect of the expenditure and, apart from this sub-paragraph, the residue of the expenditure immediately after the sale would by virtue of sub-paragraph (7) above be deemed to be greater than the net proceeds of the sale, the residue immediately after the sale shall be deemed for the purposes of this Schedule to be equal to the net proceeds.

(9) Where a dwelling-house is demolished, and the demolition gives rise, or might give rise, to a balancing allowance or charge under this Schedule to or on the person incurring the cost of demolition, the net cost to him of the demolition (that is to say the excess, if any, of the cost of the demolition over any moneys received for the remains of the property) shall be added for the purposes of this Schedule to the residue, immediately before the demolition, of the expenditure appropriate to the dwelling-house; and if this sub-paragraph applies to the net cost to a person of the demolition of any property, the cost or net cost shall not be treated, for the purpose of this Schedule, as expenditure incurred in respect of any other property by which that property is replaced.

Buildings bought unused

8

(1) Subject to sub-paragraph (2) below, where expenditure is incurred on the construction of such a building as is referred to in paragraph 1(1) above and the relevant interest in that building is sold before any of the dwelling-houses comprised in it are used.—

(a) the expenditure actually incurred on the construction of the building shall be left out of account for the purposes of the preceding provisions of this Schedule ; but

(b) the person who buys that interest shall be deemed for those purposes to have incurred, on the date when the purchase price becomes payable, expenditure on the construction of the building equal to the expenditure actually incurred or to the net price paid by him for that interest, whichever is the less.

(2) Where the relevant interest in such a building as is referred to in paragraph 1(1) above is sold more than once before any of the dwelling-houses comprised in it is used, the provisions of sub-paragraph (1)(b) above shall have effect only in relation to the last of those sales.

(3) Where the expenditure incurred on the construction of such a building as is referred to in paragraph 1(1) above was incurred by a person carrying on a trade which consists, as to the whole or any part thereof, in the construction of buildings with a view to their sale, and, before any of the dwelling-houses comprised in it is used, he sells the relevant interest in the building in the course of that trade, or, as the case may be, of that part of that trade, paragraph (b) of sub-paragraph (1) above shall have effect subject to the following modifications—

(a) if that sale is the only sale of the relevant interest before any of the dwelling-houses comprised in the building is used that paragraph shall have effect as if the words " the expenditure actually incurred or to " and the words " whichever is the less " were omitted, and

(b) in any other case, that paragraph shall have effect as if the reference to the expenditure actually incurred on the construction of the building were a reference to the price paid on that sale.

Manner of making allowances and charges

9

(1) Any allowance under this Schedule shall be made to a person by way of discharge or repayment of tax and shall be available primarily against the following income, that is to say—

(a) income taxed under Schedule A in respect of any premises which at any time in the chargeable period consist of a qualifying dwelling-house ; or

(b) income which is subject of a balancing charge under this Schedule.

(2) Effect shall be given to a balancing charge to be made on a person—

(a) if it is a charge to income tax, by making the charge under Case VI of Schedule D,

(b) if it is a charge to corporation tax, by treating the amount on which the charge is to be made as income of the description in sub-paragraph (1)(a) above.

Expenditure on repair of buildings

10

This Schedule shall have effect in relation to capital expenditure incurred by a person on repairs to any part of a building as if it were capital expenditure incurred by him in the construction for the first time of that part of the building.

Exclusion of double allowances

11

No allowance shall be made under this Schedule in respect of any expenditure on a building or in respect of a dwelling-house if for the same or any other chargeable period an allowance is or can be made under any provisions of Chapter V of Part I of the Capital Allowances Act 1968 (agricultural land or buildings) in respect of that expenditure or that dwelling-house.

Holding over by lessee etc.

12

(1) Where the relevant interest in relation to the capital expenditure incurred on the construction of a building is an interest under a lease, this Schedule shall have effect subject to the following provisions of this paragraph, and in those provisions—

(a) except in sub-paragraph (5), any reference to a lessor or lessee is a reference to the lessor or lessee under that lease ; and

(b) in sub-paragraph (5) the reference to the first lease is a reference to that lease.

(2) Where, with the consent of the lessor, a lessee of any building remains in possession thereof after the termination of the lease without a new lease being granted to him, that lease shall be deemed for the purposes of this Schedule to continue so long as he remains in possession as aforesaid.

(3) Where, on the termination of a lease, a new lease is granted to the lessee in pursuance of an option available to him under the terms of the first lease, the provisions of this Schedule shall have effect as if the second lease were a continuation of the first lease.

(4) Where, on the termination of a lease, the lessor pays any sum to the lessee in respect of a building comprised in the lease, the provisions of this Schedule shall have effect as if the lease had come to an end by reason of the surrender thereof in consideration of the payment.

(5) Where, on the termination of a lease, another lease in granted to a different lessee and, in connection with the transaction, that lessee pays a sum to the person who was the lessee under the first lease, the provisions of this Schedule shall have effect as if both leases were the same lease and there had been an assignment thereof by the lessee under the first lease to the lessee under the second lease in consideration of the payment.

Meaning of " the relevant interest"

13

(1) Subject to the provisions of this paragraph, in this Schedule " the relevant interest" means.—

(a) in relation to any expenditure incurred on the construction of a building, the interest in that building to which the person who incurred the expenditure was entitled when he incurred it; and

(b) in relation to a dwelling-house comprised in such a building as is referred to in paragraph 1(1) above, that interest, to the extent that it subsists in the dwelling-house, which is the relevant interest in relation to the capital expenditure incurred on the construction of that building.

(2) Where, when it incurs expenditure on the construction of a building, a body is entitled to two or more interests in the building and one of those interests is an interest which is reversionary on all the others, that interest shall be the relevant interest for the purposes of this Schedule.

(3) An interest shall not cease to be the relevant interest for the purposes of this Schedule by reason of the creation of any lease or other interest to which that interest is subject, and where the relevant interest is a leasehold interest and is extinguished by reason of the surrender thereof or on the body entitled thereto acquiring the interest which is reversionary on it, the interest into which that leasehold interest merges shall thereupon become the relevant interest.

Application of provisions of Capital Allowances Act 1968

14

The following provisions of the Capital Allowances Act 1968, namely—

section 71 to 74 (income tax and corporation tax allowances and charges),

section 76 (companies not resident in the United Kingdom), subsections (1) to (3) of section 77 (apportionment of consideration etc.),

section 81 (procedure on apportionments),

subsections (1) and (3) of section 82 (interpretation of certain references to expenditure etc.), section 84 (subsidies),

section 86 (meaning of " sale, insurance, salvage or compensation moneys "), and

subsections (1), (3) and (6) of section 87 (interpretation of Part I).

shall apply for the purposes of this Schedule as they apply for the purposes of Part I of that Act and, accordingly, any reference in those provisions to Part I of that Act shall include a reference to this Schedule.

Interpretation

15

(1) In this Schedule—

" approved body " has the meaning given by section 56(4) of the Housing Act 1980 ;

" building", except where the context otherwise requires, includes part of a building ;

" dwelling-house " except where the context otherwise requires, has the same meaning as in the Rent Act 1977 ;

" expenditure appropriate to a dwelling-house" has the meaning given by paragraph 1(4) above ; and

" qualifying dwelling-house " has the meaning given by paragraph 3 above.

(2) References in this Schedule to expenditure incurred on the construction of a building do not include any expenditure incurred on the acquisition of, or of rights in or over any land.

(3) A person who has incurred expenditure on the construction of a building shall be deemed, for the purposes of any provision of this Schedule referring to his interest therein at the time when the expenditure was incurred, to have had the same interest therein as if the construction thereof had been completed at that time.

(4) Without prejudice to any of the other provisions of this Schedule relating to the apportionment of sale, insurance, salvage or compensation moneys, the sum paid on the sale of the relevant interest in a building or structure, or any other sale, insurance, salvage or compensation moneys payable in respect of any building or structure, shall, for the purposes of this Schedule, be deemed to be reduced by an amount equal to so much thereof, as, on a just apportionment, is attributable to assets representing expenditure other than expenditure in respect of which an allowance can be made under this Schedule.

Schedule 13

Part I

Part disposals

1

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

Disposals on a no-gain / no-loss basis

2

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

Subsequent disposals following no-gain / no-loss disposals

3

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

Receipts etc. which are not treated as disposals but affect relevant allowable expenditure

4

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

Reorganisations, reconstructions etc.

5

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

Calls on shares etc.

6

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

Options

7

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

Part II

8

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

9

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

10

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

11

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

SCHEDULE 21. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

SCHEDULE 15

Settlements Commencing Before 27th March 1974

PART I — Permanent Provisions

Introductory

1

In relation to settlements which commenced before 27th March 1974, sections 109 to 111 of this Act shall have effect subject to the following provisions of this Part of this Schedule.

Rate of ten-yearly charge

2

(1) Section 109(4) shall have effect with the omission of paragraphs (b) and (c).

(2) Where tax is chargeable under section 107 by reference to a settlement's first ten-year anniversary, section 109(5) shall have effect with the substitution of the following paragraph for paragraph (a)—

(a) the amounts of any distribution payments (determined in accordance with the rules applicable before 9th March 1982 under paragraph 11 of Schedule 5 to the Finance Act 1975) made out of the settled property after 26th March 1974 but before 9th March 1982 and within the period of ten years before the anniversary concerned

(3) Where tax is chargeable under section 107 by reference to the second or a subsequent ten-year anniversary of a settlement, section 109(5) shall have effect with the omission of paragraph (a).

3

Section 110 shall have effect with the substitution of the following for subsection (3)—

(3) Where subsection (1) above applies section 109(5) above shall have effect as if there were added to the aggregate value there mentioned the aggregate of the values transferred by any chargeable transfers made by the settlor in the period of ten years ending with the day on which the chargeable transfer falling within subsection (1) above was made, disregarding transfers made on that day and excluding the values mentioned in subsection (4) below ; and where the settlor made two or more chargeable transfers falling within subsection (1) above, this subsection shall be taken to refer to the transfer in relation to which the aggregate to be added is the greatest.

Rate before first ten-year anniversary

4

(1) For the reference in section 111(1) to the appropriate fraction there shall be substituted a reference to three tenths or, in the case of a charge to which sub-paragraph (2) below applies, one fifth.

(2) This sub-paragraph applies to a charge imposed under section 108 on an occasion before 1st April 1983 or, where the event occasioning the charge could not have occurred except as the result of some proceedings before a court, before 1st April 1984, if the occasion is one on which settled property ceases to be relevant property either—

(a) on becoming property to which, or to an interest in possession in which, a qualifying person becomes beneficially entitled, or

(b) on becoming property to which section 114 applies in circumstances where each of the beneficiaries mentioned in section 114(1)(a) and living when the charge is imposed is a qualifying person.

(3) A person is a qualifying person for the purposes of sub-paragraph (2) above if he is an individual who is domiciled in the United Kingdom when the charge is imposed and has not at or before that time acquired an interest under the settlement for a consideration in money or money's worth directly or indirectly from a person not so domiciled.

(4) For the purposes of this paragraph a person shall be treated as acquiring an interest for a consideration in money or money's worth from a person not domiciled in the United Kingdom if he becomes entitled to it as a result of transactions which include a disposition of that interest or of other property made for such consideration (whether to him or another) by a person not so domiciled.

5

Section 111(4) shall have effect with the substitution of the following paragraphs for paragraphs (a) and (b)—

(a) the value transferred by which is equal to the amount on which tax is charged under section 108 above; (b) which is made at the time of that charge to tax by a transferor who has in the period of ten years ending with the day of the occasion of the charge made chargeable transfers having an aggregate value equal to the aggregate of— (i) any amounts on which any charges to tax have been imposed under section 108 above in respect of the settlement in that period of ten years ; and (ii) the amounts of any distribution payments (determined in accordance with the rules applicable before 9th March 1982 under paragraph 11 of Schedule 5 to the Finance Act 1975) made out of the settled property after 26th March 1974 but before 9th March 1982 and within the said period of ten years

PART II — Election During Transitional Period

6

(1) This paragraph shall apply to a settlement which commenced before 27th March 1974 if—

(a) an event occurs before 1st April 1983 on which tax would (apart from this paragraph) be chargeable under this Chapter in respect of the settlement, and

(b) a person who would be liable for the tax gives to the Board, not later than the permitted time, written notice that this paragraph is to apply.

(2) Where this paragraph applies this Chapter shall have effect in relation to events after 31st March 1983 (and not 8th March 1982); and accordingly—

(a) for the references to 8th March 1982 in sections 93(10), 95(4), 98(7) and 99(1) of this Act there shall be substituted references to 31st March 1983,

(b) for the references to 9th March 1982 in sections 109(5)(a), 111(4)(b)(ii) and 113(8)(b) of this Act there shall be substituted references to 1st April 1983, and

(c) sections 62(3), 85 and 131 of this Act and Schedule 10 shall have effect in relation to events after 31st March 1983.

7

(1) This paragraph shall apply to a settlement in respect of which a notice is duly given under paragraph 6 above if—

(a) after 31st March 1983 and before 1st April 1984 an event occurs in respect of the settlement which could not have occurred except as the result of some proceedings before a court,

(b) the event is one on which tax would (apart from this paragraph) be chargeable under this Chapter, and

(c) the Board have not, before the event occurs, accepted a payment in full satisfaction of tax charged under this Chapter in respect of the settlement on another event.

(2) Where this paragraph applies, paragraph 6(2) above shall have effect with the substitution of " 1984 " for " 1983 ".

8

(1) This paragraph shall apply to a settlement which commenced before 27th March 1974 if—

(a) no event occurs before 1st April 1983 on which tax would (apart from paragraph 6 above) be chargeable under this Chapter in respect of the settlement,

(b) after 31st March 1983 and before 1st April 1984 an event occurs in respect of the settlement which could not have occurred except as the result of some proceedings before a court,

(d) a person who would be liable for the tax gives to the Board, not later than the permitted time, written notice that this paragraph is to apply.

(2) Where this paragraph applies, this Chapter shall have effect in relation to events after 31st March 1984 (and not 8th March 1982); and accordingly—

(a) for the references to 8th March 1982 in sections 93(10), 95(4), 98(7) and 99(1) of this Act there shall be substituted references to 31st March 1984,

(b) for the references to 9th March 1982 in sections 109(5)(a), 111(4)(b)(ii) and 113(8)(b) of this Act there shall be substituted references to 1st April 1984, and

(c) sections 62(3), 85 and 131 of this Act and Schedule 10 shall have effect in relation to events after 31st March 1984.

9

In paragraphs 6 and 8 above " the permitted time ", in relation to an event, means the latest time at which an account could be delivered in respect of the event in accordance with paragraph 2 of Schedule 4 to the Finance Act 1975 or, if earlier, the time when the Board first accept a payment in full satisfaction of tax charged under this Chapter in respect of the settlement on that or another event.

SCHEDULE 16

Property becoming comprised in maintenance funds

1

(1) Subject to sub-paragraphs (2) and (3) below, tax shall not be charged under section 108 of this Act in respect of property which ceases to be relevant property on becoming property in respect of which a direction under section 93 of this Act then has effect.

(2) If the amount on which tax would be charged apart from sub-paragraph (1) above in respect of any property exceeds the value of the property immediately after it becomes property in respect of which the direction has effect (less the amount of any consideration for its transfer received by the trustees of the settlement in which it was comprised immediately before it ceased to be relevant property), that sub-paragraph shall not apply but the amount on which tax is charged shall be equal to the excess.

(3) Sub-paragraph (1) above shall not apply in relation to any property if, at or before the time when it becomes property in respect of which the direction has effect, an interest under the settlement in which it was comprised immediately before it ceased to be relevant property is or has been acquired for a consideration in money or money's worth by the trustees of the settlement in which it becomes comprised on ceasing to be relevant property.

(4) For the purposes of sub-paragraph (3) above trustees shall be treated as acquiring an interest for a consideration in money or money's worth if they become entitled to the interest as a result of transactions which include a disposition for such consideration (whether to them or to another person) of that interest or of other property.

(5) Subject to sub-paragraphs (7) and (8) below, tax shall not be charged under section 108 of this Act in respect of property which ceases to be relevant property if within the permitted period an individual makes a transfer of value—

(a) which is exempt under section 95 of this Act, and

(b) the value transferred by which is attributable to that property.

(6) In sub-paragraph (5) above " the permitted period" means the period of thirty days beginning with the day on which the property ceases to be relevant property except in a case where it does so on the death of any person, and in such a case means the period of two years beginning with that day.

(7) Sub-paragraph (5) above shall not apply if the individual has acquired the property concerned for a consideration in money or money's worth; and for the purposes of this sub-paragraph an individual shall be treated as acquiring any property for such consideration if he becomes entitled to it as a result of transactions which include a disposition for such consideration (whether to him or another) of that or other property.

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