Finance Act 1984

(a) so far as that liability relates to the relevant income, it shall be taken to be reduced by the amount of the credit for foreign tax attributable to that income, as determined in accordance with subsections (4) and (5) above; and (b) subject to paragraph (c) below, the company may for the purposes of this section allocate that advance corporation tax in such amounts and to the corporation tax attributable for that period as it trunks fit; and (c) the amount of advance corporation tax which may be allocated to the corporation tax attributable to the relevant income shall not exceed the amount of corporation tax which remains so attributable after the reduction under paragraph (a) above; and if the limit which is imposed by paragraph (c) above on the amount of advance corporation tax which may be set against the company's liability to corporation tax on its relevant income is lower than the limit which would apply under section 85(2) above if the relevant income were the company's only income for the relevant accounting period, the limit in paragraph (c) above shall apply in relation to the relevant income and section 85(2) above shall have effect in relation only to so much of the income of the company chargeable to corporation tax for that period as does not include the relevant income.

• (2) In section 85(3) of that Act (surplus advance corporation tax) after the words " subsection (2) above" there shall be inserted the words " or section 100(6) below ".

• (3) This section applies to accounting periods ending on or after 1st April 1984.

Exemption from tax of regional development grants

54

• (1) A regional development grant—

• (a) which is made to a person carrying on a trade, and

• (b) which, apart from this subsection, would be taken into account as a receipt in computing the profits of that trade,

shall not be taken into account as a receipt in computing the profits of the trade which are chargeable under Case I of Schedule D.

• (2) A regional development grant which is made to an investment company as defined in subsection (5) of section 304 of the Taxes Act—

• (a) shall not be taken into account as a receipt in computing its profits under Case VI of Schedule D; and

• (b) shall not be deducted, by virtue of the proviso to subsection (1) of that section, from the amount treated as expenses of management.

• (3) In this section " regional development grant" means a payment by way of grant under Part II of the Industrial Development Act 1982 (regional development grants).

• (4) This section applies in relation to a profession or vocation as it applies to a trade, taking the reference in subsection (1) above to Case I of Schedule D as a reference to Case II of that Schedule.

Grants to assist industry in Northern Ireland

55

• (1) In section 42 of the Finance Act 1980 (certain payments by way of grant to be taken into account as receipts in computing profits) in subsection (2), at the end of paragraph (b) there shall be inserted

or (c) any of Articles 7, 9 and 30 of the Industrial Development (Northern Ireland) Order 1982

;

and at the end of the subsection there shall be added the words " and other than a grant falling within subsection (3) below ".

• (2) At the end of the said section 42 there shall be added the following subsection:—

(3) A payment by way of grant which is made— (a) under Article 7 of the Order referred to in subsection (2)(c) above, and (b) in respect of a liability for corporation tax (including a liability which has already been met), shall not be taken into account as mentioned in subsection (1) above, whether by virtue of this section or otherwise.

• (3) This section has effect with respect to payments made on or after 1st April 1984.

Certain reliefs extended to Northern Ireland housing associations and societies

56

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

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

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

Proceedings in magistrates' courts and county courts

57

• (1) In section 65 of the Taxes Management Act 1970 (recovery of assessed tax in magistrates’ courts)—

• (a) in subsection (1) for “£50" in each place where it occurs there shall be substituted “ £250 ”;

• (b) in subsection (4) for the words from “in the manner" to the end there shall be substituted the words “ in proceedings under Article 62 of the Magistrates’ Courts (Northern Ireland) Order 1981 ”; and

• (c) at the end of that section there shall be added the following subsection—

(5) The Treasury may by Order made by statutory instrument increase the sums specified in subsection (1) above; and any such statutory instrument shall be subject to annulment in pursuance of a resolution of the Commons House of Parliament.

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

CHAPTER II — Capital Allowances

Withdrawal of initial and first year allowances

58

Disclaimer of writing-down and first-year allowances

59

• (1) In section 44 of the Finance Act 1971 (writing-down allowances in respect of expenditure on machinery or plant) after subsection (2) there shall be inserted the following subsection:—

(2A) For any chargeable period ending after 13th March 1984 for which a company has qualifying expenditure, the company may, by notice in writing given to the inspector not later than two years after the end of that period, either disclaim a writing-down allowance or require that the allowance be reduced to an amount specified in that behalf in the notice

;

and, in subsection (4) of that section, after " (2)" there shall be inserted " (2A) "

• (2) With respect to expenditure incurred after 13th March 1984, sub-paragraph (1) of paragraph 8 of Schedule 8 to the Finance Act 1971 (special rules for new ships) shall be amended by substituting for the words from " require the postponement " onwards the words—

(a) require the postponement of the whole allowance or, in the case of a company, disclaim it, or (b) require that the amount of the allowance be reduced to an amount specified in the notice, or (c) require the postponement of so much of the allowance as is so specified, and a notice which contains a requirement under paragraph (b) above may also contain a requirement under paragraph (c) above with respect to the reduced amount of the allowance

.

• (3) In consequence of the amendment made by subsection (2) above, the said paragraph 8 shall also be amended, with respect to expenditure incurred after 13th March 1984, as follows—

• (a) in sub-paragraph (2) for the words " in respect" there shall be substituted the words " requiring the postponement of the whole or part "; and

• (b) at the end there shall be added the following sub-paragraph:—

(6) In any case where a notice under sub-paragraph (1) above contains requirements under both paragraphs (b) and (c) of that sub-paragraph, any reference in sub-paragraphs (2) to (5) above to the first-year allowance is a reference to the reduced amount of that allowance as specified in the notice.

• (4) In any case where—

• (a) after 13th March 1984, a company carrying on a trade incurs capital expenditure on the provision of machinery or plant for the purposes of the trade, and

• (b) apart from any disclaimer of the allowance, a first-year allowance would fall to be made for any chargeable period in respect of that expenditure, and

• (c) the company disclaims the allowance by notice under section 41(3) of the Finance Act 1971 or (in the case of new ships) under paragraph 8(1)(a) of Schedule 8 to that Act,

then, for the purposes of section 44 of that Act, that expenditure shall not, by virtue of sub-paragraph (ii) of paragraph (a) of subsection (4) of that section, be excluded from the capital expenditure referred to in that paragraph.

• (5) In any case where—

• (a) after 13th March 1984, a person carrying on a trade, but not being a company, incurs capital expenditure on the provision of machinery or plant for the purposes of the trade, and

• (b) if a claim were made in that behalf, a first-year allowance would fall to be made in respect of that expenditure for the chargeable period related to the incurring of it, and

• (c) no claim is so made but, by notice in writing given to the inspector not later than two years after the end of that chargeable period, the person concerned elects that this subsection shall apply,

then, for the purposes of section 44 of the Finance Act 1971, that expenditure shall not, by virtue of sub-paragraph (ii) of paragraph (a) of subsection (4) of that section, be excluded from the capital expenditure referred to in that paragraph.

• (6) In any case where—

• (a) after 13th March 1984, a person (whether a company or not) carrying on a trade has incurred capital expenditure on the provision of machinery or plant for the purposes of the trade, and

• (b) a first-year allowance falls to be made to that person in respect of that expenditure (and, in the case of a person other than a company, a claim is made for that allowance), and

• (c) for the chargeable period related to the incurring of that expenditure, the amount of that first-year allowance or, as the case may be, the aggregate amount of that and other first-year allowances which fall to be made to that person is required to be reduced by virtue of section 41(3) of the Finance Act 1971 or (in the case of new ships) paragraph 8(1)(b) of Schedule 8 to that Act,

then, for the purposes of section 44 of that Act, an amount equal to the relevant portion of so much of the expenditure giving rise to the first-year allowance or allowances referred to in paragraph (c) above as was incurred after 13th March 1984 shall be treated as expenditure in respect of which no first-year allowance is or could be made for the chargeable period in question.

• (7) In subsection (6) above " the relevant portion " of expenditure giving rise to a first-year allowance or allowances and incurred after 13th March 1984 is that which bears to the whole of that expenditure the same proportion as the amount of the reduction mentioned in paragraph (c) of that subsection bears to what the amount of the allowance or allowances would have been apart from that reduction.

• (8) Subsections (2) to (7) above shall be construed as if they were contained in Chapter I of Part III of the Finance Act 1971.

Transfers under Oil and Gas (Enterprise) Act 1982

60

• (1) This section shall have effect in relation to any transfer of assets made pursuant to a direction under section 11 of the Oil and Gas (Enterprise) Act 1982 by the British Gas Corporation or any relevant subsidiary, within the meaning of that section, other than a transfer of assets made on any transfer of a trade to which section 252 of the Taxes Act applies.

• (2) The transfer shall not give rise to any allowance or charge provided for by Chapter I of Part III of the Finance Act 1971 (capital allowances and charges in respect of machinery and plant) or the Capital Allowances Act 1968.

• (3) Paragraph 3 of Schedule 8 to the 1971 Act and section 78 of, and Schedule 7 to, the 1968 Act (special rules for sales between connected persons) shall not apply in relation to the transfer.

• (4) In respect of any chargeable period beginning after the transfer there shall be made in accordance with the provisions mentioned in subsection (2) above all such further allowances and charges in respect of the assets transferred by the transfer as would have fallen to be made if—

• (a) everything done to or by the transferor in relation to the assets (other than the transfer) had been done to or by the transferee;

• (b) the trade carried on by the transferee, in relation to which the assets are first used by it after the transfer, were the same trade as the trade in relation to which the transferor used the assets at the time of the transfer; and

• (c) that trade had been carried on by the transferee since the transferor began to carry it on.

• (5) This section has effect in relation to transfers whenever made.

First year allowances: recipients of mobility supplement

61

• (1) In section 43(3) of the Finance Act 1971 (by virtue of which restrictions on the making of first-year allowances for vehicles do not apply to vehicles provided wholly or mainly for the use of persons in receipt of certain mobility allowances) and in subsection (12) of section 64 of the Finance Act 1980 (by virtue of which the provisions of that section excluding such allowances for certain leased assets do not apply to such vehicles)—

• (a) the words from " a mobility allowance " onwards shall become paragraph (a); and

• (b) after that paragraph there shall be inserted—

(b) a mobility supplement under a scheme made under the Personal Injuries (Emergency Provisions) Act 1939; or (c) a mobility supplement under an Order in Council made under section 12 of the Social Security (Miscellaneous Provisions) Act 1977 ; or (d) any payment appearing to the Treasury to be of a similar kind and specified by them by order made by statutory instrument. An order made under paragraph (d) above may provide that it has effect in relation to expenditure incurred on or after 21st November 1983 (expenditure being taken to be incurred for this purpose on the date when the sums in question become payable).

.

• (2) The amendment made by paragraph (b) of subsection (1) above applies in relation to expenditure incurred on or after 21st November 1983 and for the purposes of this subsection expenditure is incurred on the date when the sums in question become payable.

Expenditure on production or acquisition of films etc.

62

• (1) Section 72 of the Finance Act 1982 (expenditure on production and acquisition of films etc.) shall be amended in accordance with the provisions of this section.

• (2) In subsection (3) (expenditure to be allocated to relevant periods in accordance with subsection (4)) for the words " subsection (4)", in both places where they occur, there shall be substituted the words " subsections (4) to (4B) " and at the beginning of subsection (4) there shall be inserted the words " Subject to subsection (4A) below ".

• (3) After subsection (4) there shall be inserted the following subsections:—

(4A) In addition to any expenditure which is allocated to a relevant period in accordance with subsection (4) above, if a claim is made in that behalf not later than two years after the end of that period, there shall also be allocated to that period so much of the unallocated expenditure as is specified in the claim and does not exceed the difference between— (a) the amount allocated to that period in accordance with subsection (4) above ; and (b) the value of the film, tape or disc which is realised in that period (whether by way of income or otherwise). (4B) As respects any relevant period, ' the unallocated expenditure' referred to in subsection (4A) above is that expenditure falling within subsection (3) above— (a) which does not fall to be allocated to that period in accordance with subsection (4) above ; and (b) which has not been allocated to any earlier relevant period in accordance with subsection (4) or subsection (4A) above.

• (4) In subsection (5) (exclusion of trading stock) for the words " and (4) " there shall be substituted the words " to (4B) ".

• (5) In subsection (7) (which, as amended by section 32(1) of the Finance Act 1983, provides transitional relief tor certain expenditure incurred on or before 31st March 1987) the words " on or before 31st March 1987 " shall cease to have effect.

• (6) In subsection (8) (conditions for certification) after the words " this section " there shall be inserted the words " unless, by notice in writing given by the person incurring the expenditure, he is requested to do so and ".

CHAPTER III — Capital Gains

Capital gains tax: small gifts, instalments and monetary limits for reliefs etc.

63

Exemption for qualifying corporate bonds

64

Traded options

65

Disposals and acquisitions treated as made at market value: removal of certain exceptions

66

Parallel pooling

67

Maintenance funds for historic buildings

68

Foreign currency accounts

69

Postponement of tax due from beneficiaries on gains of non resident trustees

70

Non-resident settlements: definition of " settlement " and " settlor "

71

CHAPTER IV — Insurance

Withdrawal of life assurance premium relief

72

Insurance business of registered friendly societies

73

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

• (4) In consequence of the preceding provisions of this section and subsection (5) below, in . . . section 7 of the Friendly Societies Act 1974 (societies which may be registered),—

• (a) paragraph (a) of subsection (3), and

• (b) subsection (3A),

shall not have effect with respect to benefits secured by contracts made after 13th March 1984.

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

• (7) If, after 13th March 1984, the committee of a registered society or branch whose rules make provision for it to carry on life or endowment business resolve to accept, in respect of any contract falling within subsection (8) below, premiums of amounts arrived at by deducting 15 per cent. from the premiums provided for by the rules of the society or branch (that is to say by deducting the same amount as, apart from section 72 above, would have been deductible by way of relief under section 19 of the Taxes Act),—

• (a) the resolution shall be deemed to be permitted by the principal Act and the rules of the society or branch; and

• (b) nothing in the principal Act shall require the registration of the resolution; and

• (c) together with the annual return of the society or branch for the year of account ending 31st December 1984, the society or branch shall send a copy of the resolution to the registrar.

• (8) Subsection (7) above applies to any contract entered into by a registered society or branch—

• (a) which is for the assurance under life or endowment business of any gross sum; and

• (b) which is entered into pursuant to a proposal received by the society or branch on or before 13th March 1984; and

• (c) which is one which the society might lawfully have entered into on that date; and

• (d) which is entered into after 13th March 1984 and before 1st May 1984.

• (9) In subsection (7) above “the principal Act” means, according to the enactment under which the society or branch is registered,—

• (a) the Friendly Societies Act (Northern Ireland) 1970; or

• (b) the Friendly Societies Act 1974;

and subsections (7) and (8) shall be construed as one with the principal Act.

Disqualification of certain life insurance policies

74

Life policies: chargeable events

75

• (1) In section 394 of the Taxes Act (chargeable events in relation to life policies) in subsection (3) (maturity of a policy not a chargeable event in certain cases where a new policy is issued in the exercise of an option conferred by the maturing policy) for the words from " if" to " unless" there shall be substituted the words

if— (a) a new policy is issued in consequence of the exercise of an option conferred by the maturing policy, and (b) the whole of the sums becoming payable under the maturing policy are retained by the company with whom the insurance was made and applied in the payment of one or more premiums under the new policy, unless the circumstances are such that

.

• (2) Subsection (1) above has effect, and shall be deemed to have had effect, in any case where the option concerned is exercised after 13th March 1984.

Insurance policies issued outside the United Kingdom

76

• (1) After paragraph 1 of Schedule 2 to the Finance Act 1975 (certification of qualifying insurance policies) there shall be inserted the paragraph set out in Part I of Schedule 15 to this Act.

• (2) In connection with the amendment made by subsection (1) above, Schedule 1 to the Taxes Act and Schedule 2 to the Finance Act 1975 shall have effect subject to the modifications set out in Part II of Schedule 15 to this Act.

• (3) In paragraph 9(3)(a) of Schedule 1 to the Taxes Act (circumstances in which a policy substituted for a policy issued outside the United Kingdom may be a qualifying policy) for the words " person in respect of whom the new insurance is made " there shall be substituted the words " policy holder under the new policy ".

• (4) The provisions of Chapter III of Part XIV of the Taxes Act (additional charges to tax on chargeable events in relation to life insurance policies etc.) shall have effect subject to the modifications set out in Part III of Schedule 15 to this Act, being modifications in relation to—

• (a) insurance policies affected by the amendment made by subsection (1) above ; and

• (b) new offshore capital redemption policies, as defined in subsection (5) below.

• (5) In subsection (4)(b) above and Part III of Schedule 15 to this Act, a " new offshore capital redemption policy " means a capital redemption policy, as defined in section 393(3) of the Taxes Act, which—

• (a) is issued in respect of an insurance made after 22nd February 1984; and

• (b) is so issued by a company resident outside the United Kingdom.

• (6) Subsection (3) above applies where the new policy referred to in paragraph 9(2)(c) of Schedule 1 to the Taxes Act is issued after 22nd February 1984.

CHAPTER V — Oil and Gas Industry

Termination of repayments of ACT under Oil Taxation Act 1975

77

Transfers of interests in oil fields: capital allowances

78

Gains on certain disposals

79

Replacement of business assets used in connection with oil fields

80

Disposals by non-residents etc. of assets used in connection with exploration and exploitation activities

81

CHAPTER VI — Controlled Foreign Companies

Imputation of chargeable profits and creditable tax of controlled foreign companies

82

Limitations on direction-making power

83

• (1) No direction may be given under section 82(1) above with respect to an accounting period of a controlled foreign company if—

• (a) in respect of that period the company pursues, within the meaning of Part I of Schedule 17 to this Act, an acceptable distribution policy ; or

• (b) throughout that period the company is, within the meaning of Part II of that Schedule, engaged in exempt activities; or

• (c) the public quotation condition set out in Part III of that Schedule is fulfilled with respect to that period ; or

• (d) the chargeable profits of the accounting period do not exceed £20,000 or, if the accounting period is less than twelve months, a proportionately reduced amount.

• (2) Without prejudice to any right of appeal, nothing in subsection (1) above prevents the Board from giving a direction with respect to an accounting period after the end of that period but before it is known whether the company has paid such a dividend as establishes that it is pursuing an acceptable distribution policy in respect of the profits arising in that period.

• (3) Notwithstanding that none of paragraphs (a) to (d) of subsection (1) above applies to an accounting period of a controlled foreign company, no direction may be given under section 82(1) above with respect to that accounting period if it appears to the Board that—

• (a) in so far as any of the transactions the results of which are reflected in the profits arising in that accounting period, or any two or more of those transactions taken together, achieved a reduction in United Kingdom tax, either the reduction so achieved was minimal or it was not the main purpose or one of the main purposes of that transaction or, as the case may be, of those transactions taken together to achieve that reduction, and

• (b) it was not the main reason or, as the case may be, one of the main reasons for the company's existence in that accounting period to achieve a reduction in United Kingdom tax by a diversion of profits from the United Kingdom,

and Part IV of Schedule 17 to this Act shall have effect with respect to the preceding provisions of this subsection.

Residence and interests

84

• (1) Subject to subsections (2) and (4) below, in any accounting period in which a company is resident outside the United Kingdom, it shall be regarded for the purposes of this Chapter as resident in that territory in which, throughout that period, it is liable to tax by reason of domicile, residence or place of management.

• (2) If, in the case of any company, there are in any accounting period two or more territories falling within subsection (1) above, the company shall in that accounting period be regarded for the purposes of this Chapter as resident in only one of them, namely,—

• (a) if, throughout the accounting period, the company's place of effective management is situated in one of those territories only, in that territory; and

• (b) if, throughout the accounting period, the company's place of effective management is situated in two or more of those territories, in that one of them in which, at the end of the accounting period, the greater amount of the company's assets is situated ; and

• (c) if neither paragraph (a) nor paragraph (b) above applies, in that one of the territories falling within subsection (1) above in which, at the end of the accounting period, the greater amount of the company's assets is situated ; and

• (d) if paragraph (a) above does not apply and neither paragraph (b) nor paragraph (c) above produces one, and only one, of those territories, in that one of them which may be specified in a direction under section 82(1) above relating to that accounting period.

• (3) If, in the case of any company, there is in any accounting period no territory falling within subsection (1) above, then, for the purposes of this Chapter, it shall be conclusively presumed that the company is in that accounting period resident in a territory in which it is subject to a lower level of taxation.

• (4) In any case where it becomes necessary for the purposes of subsection (2) above to determine in which of two or more territories the greater amount of a company's assets is situated at the end of an accounting period, account shall be taken only of those assets which, immediately before the end of that period, are situated in those territories and the amount of them shall be determined by reference to their market value at that time.

• (5) For the purposes of this Chapter, the following persons have an interest in a controlled foreign company,—

• (a) any person who possesses, or is entitled to acquire, share capital or voting rights in the company,

• (b) any person who possesses, or is entitled to acquire, a right to receive or participate in distributions of the company or any amounts payable by the company (in cash or in kind) to loan creditors by way of premium on redemption,

• (c) any person who is entitled to secure that income or assets (whether present or future) of the company will be applied directly or indirectly for his benefit, and

• (d) any other person who, either alone or together with other persons, has control of the company,

and for the purposes of paragraph (b) above the definition of " distribution " in Part X of the Taxes Act shall be construed without any limitation to companies resident in the United Kingdom.

• (6) References in subsection (5) above to being entitled to do anything apply where a person is presently entitled to do it at a future date, or will at a future date be entitled to do it; but a person whose entitlement to secure that any income or assets of the company will be applied as mentioned in paragraph (c) of that subsection is contingent upon a default of the company or any other person under any agreement shall not be treated as falling within that paragraph unless the default has occurred.

• (7) Without prejudice to subsection (5) above, the Board may, if they think it appropriate, treat a loan creditor of a controlled foreign company as having an interest in the company for the purposes of this Chapter.

Lower level of taxation

85

• (1) Without prejudice to subsection. (3) of section 84 above, a company which, by virtue of subsection (1) or subsection (2) of that section, is to be regarded as resident in a particular territory outside the United Kingdom shall be considered to be subject to a lower level of taxation in that territory if the amount of tax (in this section referred to as " the local tax ") which is paid under the law of that territory in respect of the profits of the company which arise in any accounting period is less than one half of the corresponding United Kingdom tax on those profits.

• (2) For the purposes of this Chapter, the amount of the corresponding United Kingdom tax on the profits arising in an accounting period of a company resident outside the United Kingdom is the amount of corporation tax which, on the assumptions set out in Schedule 16 to this Act and subject to subsection (3) below, would be chargeable in respect of the chargeable profits of the company for that accounting period.

• (3) In determining the amount of corporation tax which, in accordance with subsection (2) above, would be chargeable in respect of the chargeable profits of an accounting period of a company resident outside the United Kingdom—

• (a) it shall be assumed for the purposes of Schedule 16 to this Act—

• (i) that a direction has been given under section 82(1) above in respect of that period ; and

• (ii) that the Board have made any declaration which they could have made under sub-paragraph (3) of paragraph 11 of that Schedule and of which they gave notice in writing as mentioned in that sub-paragraph ; and

• (b) there shall be disregarded so much of any relief from corporation tax in respect of income as would be attributable to the local tax and would fall to be given by virtue of any provision of Part XVIII of the Taxes Act (double taxation relief) other than section 515 (postponement of capital allowances to secure relief); and

• (c) there shall be deducted from what would otherwise be the amount of that corporation tax—

• (i) any amount which (on the assumptions set out in Schedule 16 to this Act) would fall to be set off against corporation tax by virtue of section 240(5) of the Taxes Act (sums received under deduction of income tax); and

• (ii) any amount of income tax or corporation tax actually charged in respect of any of those chargeable profits.

• (4) The references in subsection (3)(c) above to an amount falling to be set off or an amount actually charged do not include so much of any such amount as has been or falls to be repaid to the company whether on the making of a claim or otherwise.

Accounting periods and creditable tax

86

• (1) For the purposes of this Chapter, an accounting period of a company resident outside the United Kingdom shall begin—

• (a) whenever the company comes under the control of persons resident in the United Kingdom;

• (b) whenever the company, not being the subject of an earlier direction under section 82(1) above, commences to carry on business; and

• (c) whenever an accounting period of the company ends without the company then ceasing either to carry on business or to have any source of income whatsoever;

and for the purposes of paragraph (a) above a company which is under the control of persons resident in the United Kingdom immediately before this Chapter comes into force shall be treated as coming under their control immediately after it comes into force.

• (2) For the purposes of this Chapter, an accounting period of a company resident outside the United Kingdom shall end if and at the time when—

• (a) the company ceases to be under the control of persons resident in the United Kingdom ; or

• (b) the company becomes, or ceases to be, liable to tax in a territory; or

• (c) the company ceases to have any source of income whatsoever ;

and for the purposes of paragraph (b) above " liable to tax " means liable to tax by reason of domicile, residence or place of management.

• (3) Without prejudice to subsections (1) and (2) above, subsections (3), (5) and (7) of section 247 of the Taxes Act (end of accounting periods and provisions as to winding up) shall apply for the purposes of this Chapter as they apply for the purposes of corporation tax, but with the omission of so much of those provisions as relates to a company coming or ceasing to be within the charge to corporation tax.

• (4) Where it appears to the Board that the beginning or end of any accounting period of a company resident outside the United Kingdom is uncertain, a direction under section 82(1) above may specify as an accounting period of the company such period, not exceeding twelve months, as appears to the Board to be appropriate, and that period shall be treated for the purposes of this Chapter as an accounting period of the company unless the direction is subsequently amended under subsection (5) below.

• (5) If, on further facts coming to the knowledge of the Board after the making of a direction (including facts emerging on an appeal against notice of the making of the direction), it appears to the Board that any accounting period specified in the direction is not the true accounting period, the Board shall amend the direction so as to specify the true period.

• (6) In this Chapter, in relation to an accounting period of a controlled foreign company in respect of which a direction is given under section 82(1) above, the creditable tax means the aggregate of—

• (a) the amount of any relief from corporation tax in respect of income which (on the assumptions set out in Schedule 16 to this Act and assuming the company to be liable for corporation tax on the chargeable profits of that accounting period) would fall to be given to the company by virtue of any provision of Part XVIII of the Taxes Act (double taxation relief) in respect of foreign tax attributable to any income which is brought into account in determining those chargeable profits; and

• (b) any amount which (on those assumptions) would fall to be set off against corporation tax on those chargeable profits by virtue of section 240(5) of the Taxes Act (sums received under deduction of income tax); and

• (c) the amount of any income tax or corporation tax actually charged in respect of the chargeable profits of that accounting period, less any of that tax which has been or falls to be repaid to the company, whether on the making of a claim or otherwise.

Apportionment of chargeable profits and creditable tax

87

• (1) Where a direction has been given under section 82(1) above in respect of an accounting period of a controlled foreign company, then, subject to subsections (2) and (3) below, the apportionment of the company's chargeable profits and creditable tax (if any) for that period shall be made among, and according to the respective interests of, the persons who at any time during that period had interests in the company.

• (2) In determining for the purposes of this Chapter the respective interests of persons who (in accordance with section 84 above) have interests in a controlled foreign company, the Board may, if it seems to them just and reasonable to do so, attribute to each of those persons an interest corresponding to his interest in the assets of the company available for distribution among those persons in the event of a winding up or in any other circumstances.

• (3) Where the controlled foreign company is not a trading company, the Board may, if it seems to them just and reasonable to do so, treat a loan creditor as having for the purposes of this section an interest in the company to the extent to which the income of the company has been, or is available to be, expended in redemption, repayment or discharge of the loan capital or debt (including any premium thereon) in respect of which he is a loan creditor.

• (4) Subject to subsections (5) and (7) below, as between persons each of whom has an unvarying holding of shares of the same class throughout a particular accounting period of a controlled foreign company, the amount of the company's chargeable profits and creditable tax which is apportioned to each of them by virtue of his holding of those shares shall be in direct proportion to the numbers of shares comprised in each of their holdings; and similar principles shall apply in relation to an apportionment among other persons each of whom holds an interest of the same description in the controlled foreign company.

• (5) Where the same interest in a controlled foreign company is held directly by one person and indirectly by another or others (as in a case where one company has a shareholding in the controlled foreign company and the first company is controlled by a third company or by two or more persons together) then, subject to subsection (6) below, the Board, in apportioning the company's chargeable profits and creditable tax, may treat that interest as held solely by a person who holds that interest indirectly or, as the case may be, by two or more persons (in this subsection referred to as " holders ") who, taken together, hold that interest indirectly and, in particular, if that person or one or more of those holders is resident in the United Kingdom, may treat the interest as held solely by that person or, as the case may be, those holders.

• (6) In a case where the same interest is held directly by one person and indirectly by another and the circumstances are as set out in any of paragraphs (a) to (c) below, the Board shall treat the interest as held solely by the company which is des-scribed in the paragraph concerned as " the assessable company "—

• (a) where the interest is held directly by a company resident in the United Kingdom, that company is the assessable company; and

• (b) where the interest is held directly by a person resident outside the United Kingdom and indirectly by only one company resident in the United Kingdom, that company is the assessable company ; and

• (c) where the interest is held directly by a person resident outside the United Kingdom and indirectly by two or more companies resident in the United Kingdom, the assessable company is that one of those companies which so holds the interest by virtue of holding directly an interest in a foreign holding company ;

and for the purposes of paragraph (c) above a foreign holding company is a company resident outside the United Kingdom which holds directly or indirectly the interest in the controlled foreign company.

• (7) Without prejudice to subsection (5) above, in any case where an interest in a controlled foreign company is held in a fiduciary or representative capacity in such circumstances that there is or are an identifiable beneficiary or beneficiaries, the Board may treat the interest as held by that beneficiary or, as the case may be, as apportioned among those beneficiaries ; and any such apportionment shall be made on such basis as seems to the Board to be just and reasonable.

• (8) Subject to the preceding provisions of this section, the apportionment of the chargeable profits and creditable tax of a controlled foreign company for any accounting period shall be made on such basis as seems to the Board to be just and reasonable.

Notices and appeals

88

• (1) Where the Board have given a direction under section 82(1) above with respect to an accounting period of a controlled foreign company, notice of the making of the direction shall be given to every company resident in the United Kingdom which appears to the Board to have had an interest in the controlled foreign company at any time during that period.

• (2) A notice under subsection (1) above shall—

• (a) specify the date on which the direction was made and the controlled foreign company to which it relates ;

• (b) specify the accounting period to which the direction relates and the amount of the chargeable profits and creditable tax computed for that period;

• (c) specify the reliefs (if any) which it has been assumed that the company has claimed by virtue of paragraph 4(1) of Schedule 16 to this Act;

• (d) specify, in a case where paragraph (d) of subsection (2) of section 84 above applies, the territory which, by virtue of that paragraph, was specified in the direction and, in any other case, specify the territory (if any) in which, by virtue of that section, the Board consider that the company is to be regarded as resident for the purposes of this Chapter;

• (e) inform the recipient of the notice of the right of appeal conferred on him by subsection (4) below and of the right to give notice under paragraph 4(2) of Schedule 16 to this Act; and

• (f) specify any declaration with respect to the accounting period concerned which was made prior to or at the same time as the notice by virtue of paragraph 11(3) of Schedule 16 to this Act or paragraph 3(2) of Schedule 17 to this Act;

and, in the case of a notice given after the direction concerned has been amended by virtue of section 86(5) above, the notice shall specify the date of the amendment and (so far as paragraphs (b) and (c) above are concerned) shall relate to the position resulting from the amendment.

• (3) Where, by virtue of section 86(5) above, the Board have amended a direction so as to specify a revised accounting period, notice of the making of the amendment shall be given to every company which was previously given notice of the making of the direction; and a notice under this subsection—

• (a) shall identify the direction which is amended and state the effect of the amendment, including the extent to which the matters specified in the notice of the making of the direction are superseded ; and

• (b) shall contain the provisions required, by virtue of paragraphs (b) to (f) of subsection (2) above, to be included in a notice under subsection (1) above.

• (4) Any company to which notice is given under subsection (1) or subsection (3) above may, by giving notice of appeal in writing to the Board within sixty days of the date of the notice given to the company, appeal to the Special Commissioners against that notice on all or any of the following grounds,—

• (a) that the direction should not have been given or, where the direction has been amended, that the amendment should not have been made ;

• (b) that the amount of chargeable profits or creditable tax specified in the notice is incorrect;

• (c) that the company did not have an interest in the controlled foreign company concerned at any time during the accounting period in question ;

• (d) that, if the notice specifies a declaration made by virtue of sub-paragraph (3) of paragraph 11 of Schedule 16 to this Act, the condition for the making of that declaration in sub-paragraph (5) of that paragraph was not fulfilled; and

• (e) that, if the notice specifies a declaration made by virtue of paragraph 3(2) of Schedule 17 to this Act, the condition for the making of that declaration was not fulfilled ;

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

• (5) If, after the time at which notice is given under subsection (1) above with respect to an accounting period of a controlled foreign company, the Board make a declaration by virtue of—

• (a) paragraph 11(3) of Schedule 16 to this Act, or

• (b) paragraph 3(2) of Schedule 17 to this Act,

then, unless the effect of the declaration is such that a notice (which, among other matters, will specify the declaration) will be required to be given under subsection (3) above, the Board shall give notice specifying the declaration to every company which was previously given notice of the making of the direction ; and subsection (4) above shall apply in relation to a notice under this subsection as it applies in relation to a notice under subsection (3) above, but with the omission of paragraphs (a) to (c).

• (6) If it appears to the inspector that the amount of the chargeable profits or creditable tax specified in a notice under subsection (1) or subsection (3) above is incorrect, he shall give notice of the revised amount to every company to which notice was given under subsection (1) or subsection (3) above and, except where the revised amount results from—

• (a) an appeal under this section, or

• (b) a notice given to the Board under paragraph 4(2) of Schedule 16 to this Act or by virtue of paragraph 13 of that Schedule,

any company to which notice is given under this subsection may, by giving notice of appeal in writing to the Board within sixty days of the date of the notice given to the company, appeal to the Special Commissioners against the revised amount specified in the notice.

• (7) The jurisdiction of the Special Commissioners on an appeal under this section shall include jurisdiction to review any decision of the Board or the inspector which is relevant to a ground of the appeal.

• (8) The Board may make regulations—

• (a) as respects the conduct of appeals under this section ;

• (b) entitling any person who has received, or is connected or associated with a person who has received, a notice under subsection (1) above with respect to a particular accounting period of a controlled foreign company to appear on an appeal brought by another person who has received such a notice ; and

• (c) with respect to the joinder of appeals brought by different persons with respect to the same direction or the same amount of chargeable profits or creditable tax ;

and any such regulations shall be made by statutory instrument subject to annulment in pursuance of a resolution of the Commons House of Parliament.

Assessment, recovery and postponement of tax

89

• (1) Subject to the following provisions of this section, the provisions of section 82(4)(a) above relating to assessment and recovery of a sum as if it were an amount of corporation tax shall be taken as applying, subject to the provisions of the Taxes Acts, and to any necessary modifications, all enactments applying generally to corporation tax, including those relating to the assessing, collecting and receiving of corporation tax, those conferring or regulating a right of appeal and those concerning administration, penalties, interest on unpaid tax and priority of tax in cases of insolvency under the law of any part of the United Kingdom.

• (2) For the purposes of the Taxes Acts, any sum assessable and recoverable under section 82(4)(a) above shall be regarded as corporation tax which falls to be assessed for the accounting period in which ends that one of the controlled foreign company's accounting periods the chargeable profits of which give rise to that sum; and a notice of assessment relating to such a sum shall (in addition to any other matter required to be contained in such a notice) specify separately—

• (a) the total amount of those chargeable profits and of any creditable tax which has been apportioned to persons falling within each of paragraphs (a) to (d) of subsection (5), or within subsection (7), of section 84 above, and

• (b) where there is more than one class of shares in the controlled foreign company, the total amount apportioned to persons holding shares of each class,

but such a notice shall not identify any particular person (other than the person assessed) as having an interest of any description in the controlled foreign company.

• (3) In subsection (3) of section 31 of the Taxes Management Act 1970 (appeals to Special Commissioners) after paragraph (c) there shall be inserted

or (d) is an assessment to tax under section 82(4)(a) of the Finance Act 1984

;

and, on an appeal against an assessment to tax under section 82(4)(a) above, the jurisdiction of the Special Commissioners shall include jurisdiction to review any relevant decision taken by the Board under section 87 above in connection with the apportionment of chargeable profits or creditable tax.

• (4) No appeal may be brought against an assessment to tax under section 82(4)(a) above on a ground on which an appeal has or could have been brought under subsection (4) or subsection (6) of section 88 above.

• (5) At the end of subsection (1) of section 55 of the Taxes Management Act 1970 (recovery of tax not postponed) there shall be added the following paragraph—

(g) a notice under subsection (1) or subsection (3) of section 88 of the Finance Act 1984 where, before the appeal is determined, the appellant is assessed to tax under section 82(4)(a) of that Act by reference to an amount of chargeable profits specified in that notice

.

• (6) Where an appeal is brought against an assessment to tax under section 82(4)(a) above as well as against a notice under subsection (1) or subsection (3) of section 88 above, section 55 of the Taxes Management Act 1970 shall have effect as follows:—

• (a) an application under subsection (3) of that section may relate to matters arising on both appeals and, in determining the amount of tax the payment of which should be postponed, the Commissioners shall consider matters so arising together; and

• (b) if the Commissioners have determined the amount of tax the payment of which should be postponed solely in relation to one of the appeals, the bringing of the other appeal shall be taken to be a change of circumstances falling within subsection (4) of that section; and

• (c) any reference in that section to the determination of the appeal shall be construed as a reference to the determination of the two appeals, but the determination of one before the other shall be taken to be a change of circumstances falling within subsection (4) of that section.

• (7) Schedule 18 to this Act shall have effect with respect to the reliefs which may be claimed by a company resident in the United Kingdom which has a liability for tax in respect of an amount of chargeable profits; and no reliefs other than those provided for by that Schedule shall be allowed against any such liability.

• (8) In any case where—

• (a) the whole or any part of the tax assessed on a company (in this section referred to as the " assessable company ") by virtue of section 87(6) above is not paid before the date on which it is due and payable in accordance with the Taxes Act or, as the case may be, the Taxes Management Act 1970, and

• (b) the Board serve a notice of liability to tax under this subsection on another company (in this section referred to as the " responsible company") which is resident in the United Kingdom and holds or has held (whether directly or indirectly) the same interest in the controlled foreign company as is or was held by the assessable company,

the tax assessed on the assessable company or, as the case may be, so much of it as remains unpaid shall be payable by the responsible company upon service of the notice.

• (9) Where a notice of liability is served under subsection (8) above,—

• (a) any interest due on the tax assessed on the assessable company and not paid, and

• (b) any interest accruing due on that tax after the date of service,

shall be payable by the responsible company.

• (10) In any case where—

• (a) a notice of liability is served on the responsible company under subsection (8) above, and

• (b) the relevant tax and any interest payable by the responsible company under subsection (9) above is not paid by that company before the expiry of the period of three months beginning on the date of service of the notice,

that tax and interest may, without prejudice to the right of recovery from the responsible company, be recovered from the assessable company.

• (11) In this section " the Taxes Acts " has the same meaning as in the Taxes Management Act 1970.

Information relating to controlled foreign companies

90

• (1) Where it appears to the Board that a company resident outside the United Kingdom (in this section referred to as a " foreign subsidiary ") may be a controlled foreign company, the Board may, by notice in writing given to any company which appears to them to be a controlling company of the foreign subsidiary, require that company to give to the Board, within such time (not being less than thirty days) as may be specified in the notice, such particulars (which may include details of documents) as may be so specified with respect to any matter concerning the foreign subsidiary, being particulars required by the Board for the purposes of this Chapter as being relevant to the affairs of the controlling company, the foreign subsidiary or any connected or associated company.

• (2) In this section " controlling company ", in relation to a foreign subsidiary or any other company, means a company which is resident in the United Kingdom and has, alone or together with other persons so resident, control of the foreign subsidiary or, as the case may be, that other company.

• (3) The Board may by notice in writing given to a company which appears to them to be a controlling company in relation to a foreign subsidiary require that company to make available for inspection any relevant books, accounts or other documents or records whatsoever of the company itself or, subject to subsection (6) below, of any other company, including the foreign subsidiary, in relation to which it appears to the Board to be a controlling company.

• (4) In subsection (3) above " relevant" means relevant to—

• (a) the computation of any profits of the foreign subsidiary ; or

• (b) the question whether a direction should be given under section 82(1) above with respect to the foreign subsidiary or a connected or associated company or whether any such direction should be amended ; or

• (c) any question as to the amount of the chargeable profits or creditable tax for any accounting period of the foreign subsidiary or a connected or associated company ; or

• (d) any question as to the sum which, in accordance with section 82(4)(a) above, should be assessed on and recoverable from any person.

• (5) In subsections (1) and (4) above " connected or associated company " means a controlled foreign company with which the foreign subsidiary or the controlling company is connected or associated.

• (6) In any case where—

• (a) under subsection (3) above a company is by notice required to make available for inspection any books, accounts, documents or records of a company other than itself, and

• (b) it appears to the Board, on the application of the company, that the circumstances are such that the requirement ought not to have effect,

the Board shall direct that the company need not comply with the requirement.

• (7) If, on an application under subsection (6) above, the Board refuse to give a direction under that subsection, the company concerned may, by notice in writing given to the Board within thirty days after the refusal, appeal to the Special Commissioners who, if satisfied that the requirement in question ought in the circumstances not to have effect, may determine accordingly.

• (8) In the Table in section 98 of the Taxes Management Act 1970 (penalties), at the end of the first column there shall be added—

Section 90 of the Finance Act 1984.

Interpretation, construction and commencement of Chapter VI

91

• (1) In this Chapter " trading company " means a company whose business consists wholly or mainly of the carrying on of a trade or trades.

• (2) For the purposes of this Chapter—

• (a) section 533 of the Taxes Act (connected persons) applies ; and

• (b) subsection (10) of section 494 of that Act (associated persons) applies as it applies for the purposes of that section.

• (3) The following provisions of Chapter III of Part XI of the Taxes Act (close companies) apply for the purposes of this Chapter as they apply for the purposes of that Chapter,—

• (a) section 302 (meaning of " control "); and

• (b) subsections (7) and (8) of section 303 (meaning of " loan creditor ");

but, in the application of subsection (6) of section 302 for the purposes of this Chapter, for the words " five or fewer participators " there shall be substituted the words " persons resident in the United Kingdom ".

• (4) This Chapter shall be deemed to have come into force on 6th April 1984.

CHAPTER VII — Offshore Funds

Material interests in non-qualifying funds

Disposal of material interests in non-qualifying offshore funds

92

Offshore fund operating equalisation arrangements

93

• (1) For the purposes of this Chapter, an offshore fund operates equalisation arrangements if, and at a time when, arrangements are in existence which have the result that where—

• (a) a person acquires by way of initial purchase a material interest in the fund at some time during a period relevant to the arrangements, and

• (b) the fund makes a distribution for a period which begins before the date of his acquisition of that interest,

the amount of that distribution which is paid to him (assuming him still to retain that interest) will include a payment of capital which is debited to an account maintained under the arrangements (in this Chapter referred to as " the equalisation account") and which is determined by reference to the income which had accrued to the fund at the date of his acquisition.

• (2) For the purposes of this section, a person acquires an interest in an offshore fund by way of initial purchase if—

• (a) his acquisition is by way of subscription for or allotment of new shares, units or other interests issued or created by the fund ; or

• (b) his acquisition is by way of direct purchase from the persons concerned with the management of the fund and their sale to him is made in their capacity as managers of the fund.

• (3) Without prejudice to section 92(1) above, this Chapter applies, subject to the following provisions of this section, to a disposal by any person of an asset if—

• (a) the disposal occurs on or after 6th April 1984 and, at the time of the disposal, the asset constitutes a material interest in an offshore fund which at the time of the disposal is operating equalisation arrangements ; and

• (b) the fund is not and has not at any material time, within the meaning of section 92 above, been a non-qualifying offshore fund; and

• (c) the proceeds of the disposal do not fall to be taken into account as a trading receipt.

• (4) This Chapter does not, by virtue of subsection (3) above, apply to a disposal if—

• (a) it takes place during such a period as is mentioned in subsection (1)(a) above, and

• (b) throughout so much of that period as precedes the disposal, the income of the offshore fund concerned has been of such a nature as is referred to in paragraph 3(1) of Schedule 19 to this Act.

• (5) An event which, apart from section 78 of the principal Act (re-organisations etc.), would constitute a disposal of an asset shall constitute such a disposal for the purpose of determining whether, by virtue of subsection (3) above, there is a disposal to which this Chapter applies.

• (6) The reference in subsection (5) above to section 78 of the principal Act includes a reference to that section as applied by section 85 of that Act (exchange of securities) but not as applied by section 82 of that Act (conversion of securities).

Material interests in offshore funds

94

• (1) In this Chapter references to a material interest in an offshore fund are references to such an interest in any of the following, namely—

• (a) a company which is resident outside the United Kingdom ;

• (b) a unit trust scheme, as defined in section 26(1) of the Prevention of Fraud (Investments) Act 1958, the trustees of which are not resident in the United Kingdom ; and

• (c) any arrangements which do not fall within paragraph (a) or paragraph (b) above, which take effect by virtue of the law of a territory outside the United Kingdom and which, under that law, create rights in the nature of co-ownership (without restricting that expression to its meaning in the law of any part of the United Kingdom) ;

and any reference in this Chapter to an offshore fund is a reference to any such company, unit trust scheme or arrangements in which any person has an interest which is a material interest.

• (2) Subject to the following provisions of this section, a person's interest in a company, unit trust scheme or arrangements is a material interest if, at the time when he acquired the interest, it could reasonably be expected that, at some time during the period of seven years beginning at the time of his acquisition, he would be able to realise the value of the interest (whether by transfer, surrender or in any other manner).

• (3) For the purposes of subsection (2) above, a person is at any time able to realise the value of an interest if at that time he can realise an amount which is reasonably approximate to that portion which the interest represents (directly or indirectly) of the market value at that time of the assets of the company or, as the case may be, of the assets subject to the scheme or arrangements.

• (4) For the purposes of subsections (2) and (3) above—

• (a) a person is able to realise a particular amount if he is able to obtain that amount either in money or in the form of assets to the value of that amount; and

• (b) if at any time an interest in an offshore fund has a market value which is substantially greater than the portion which the interest represents, as mentioned in subsection (3) above, of the market value at that time of the assets concerned, the ability to realise such a market value of the interest shall not be regarded as an ability to realise such an amount as is referred to in that subsection.

• (5) An interest in a company, scheme or arrangements is not a material interest if—

• (a) it is an interest in respect of any loan capital or debt issued or incurred for money which, in the ordinary course of a business of banking, is lent by a person carrying on that business; or

• (b) it is a right arising under a policy of insurance.

• (6) Shares in a company falling within subsection (1)(a) above (in this subsection referred to as an " overseas company ") do not constitute a material interest if—

• (a) the shares are held by a company and the holding of them is necessary or desirable for the maintenance and development of a trade carried on by the company or a company associated with it; and

• (b) the shares confer at least 10 per cent, of the total voting rights in the overseas company and a right, in the event of a winding-up, to at least 10 per cent, of the assets of that company remaining after the discharge of all liabilities having priority over the shares ; and

• (c) not more than ten persons hold shares in the overseas company and all the shares in that company confer both voting rights and a right to participate in the assets on a winding-up ; and

• (d) at the time of its acquisition of the shares, the company had such a reasonable expectation as is referred to in subsection (2) above by reason only of the existence of—

• (i) an arrangement under which, at some time within the period of seven years beginning at the time of acquisition, that company may require the other participators to purchase its shares; or

• (ii) provisions of either an agreement between the participators or the constitution of the overseas company under which the company will be wound up within a period which is, or is reasonably expected to be, shorter than the period referred to in subsection (2) above; or

• (iii) both such an arrangement and such provisions ;

and in this paragraph " participators " means the persons holding shares falling within paragraph (c) above.

• (7) For the purposes of subsection (6)(a) above, a company is associated with another company if one of them has control of the other within the meaning of section 302 of the Taxes Act or both of them are under the control, within the meaning of that section, of the same person or persons.

• (8) An interest in a company falling within subsection (1)(a) above is not a material interest at any time when the following conditions are satisfied, namely,—

• (a) that the holder of the interest has the right to have the company wound up ; and

• (b) that, in the event of a winding up, the holder is, by virtue of the interest and any other interest which he then holds in the same capacity, entitled to more than 50 per cent, of the assets remaining after the discharge of all liabilities having priority over the interest or interests concerned.

• (9) The market value of any asset for the purposes of this Chapter shall be determined in like manner as it would be determined for the purposes of the principal Act except that, in the case of an interest in an offshore fund for which there are separate published buying and selling prices, subsection (4) of section 150 of that Act (meaning of " market value " in relation to rights of unit holders in a unit trust scheme) shall apply with any necessary modifications for determining the market value of the interest for the purposes of this Chapter.

Non-qualifying offshore funds

95

• (1) For the purposes of this Chapter, an offshore fund is a non-qualifying fund except during an account period of the fund in respect of which the fund is certified by the Board as a distributing fund.

• (2) An offshore fund shall not be certified as a distributing fund in respect of any account period unless, with respect to that period, the fund pursues a full distribution policy, within the meaning of Part I of Schedule 19 to this Act.

• (3) Subject to Part II of Schedule 19 to this Act, an offshore fund shall not be certified as a distributing fund in respect of any account period if, at any time in that period,—

• (a) more than 5 per cent, by value of the assets of the fund consists of interests in other offshore funds; or

• (b) subject to subsections (4) and (5) below, more than 10 per cent, by value of the assets of the fund consists of interests in a single company ; or

• (c) the assets of the fund include more than 10 per cent, of the issued share capital of any company or of any class of that share capital; or

• (d) subject to subsection (6) below, there is more than one class of material interest in the offshore fund and they do not all receive proper distribution benefits, within the meaning of subsection (7) below.

• (4) For the purposes of subsection (3)(b) above, in any account period the value, expressed as a percentage of the value of all the assets of an offshore fund, of that portion of the assets of the fund which consists of an interest in a single company shall be determined as at the most recent occasion (whether in that account period or an earlier one) on which the fund acquired an interest in that company for consideration in money or money's worth; but for this purpose there shall be disregarded any occasion—

• (a) on which the interest acquired constituted the "new holding " for the purposes of section 78 of the principal Act (equation of original shares and new holding), including that section as applied by any later provision of Chapter II of Part IV of that Act (reorganisation of share capital, conversion of securities, etc.); and

• (b) on which no consideration fell to be given for the interest acquired, other than the interest which constituted the " original shares " for the purposes of the said section 78.

• (5) Except for the purpose of determining the total value of the assets of an offshore fund, an interest in a company shall be disregarded for the purposes of subsection (3)(b) above if—

• (a) the company carries on (in the United Kingdom or elsewhere) a banking business providing current or deposit account facilities in any currency for members of the public and bodies corporate ; and

• (b) the interest consists of a current or deposit account provided in the normal course of the company's banking business.

• (6) There shall be disregarded for the purposes of subsection (3)(d) above any interests in an offshore fund—

• (a) which are held solely by persons employed or engaged in or about the management of the assets of the fund ; and

• (b) which carry no right or expectation to participate directly or indirectly, in any of the profits of the fund; and

• (c) which, on a winding up or on redemption, carry no right to receive anything other than the return of the price paid for the interests.

• (7) If in any account period of an offshore fund there is more than one class of material interests in the fund, the classes of interest do not, for the purposes of subsection (3)(d) above, all receive proper distribution benefits unless, were each class of interests and the assets which that class represents interests in and assets of a separate offshore fund, each of those separate funds would, with respect to that period, pursue a full distribution policy, within the meaning of Part I of Schedule 19 to this Act.

• (8) For the purposes of this Chapter, an account period of an offshore fund shall begin—

• (a) whenever the fund begins to carry on its activities or, if it is later, on 1st January 1984 ; and

• (b) whenever an account period of the fund ends without the fund then ceasing to carry on its activities.

• (9) For the purposes of this Chapter, an account period of an offshore fund shall end on the first occurrence of any of the following—

• (a) the expiration of twelve months from the beginning of the period;

• (b) an accounting date of the fund or, if there is a period for which the fund does not make up accounts, the end of that period ; and

• (c) the fund ceasing to carry on its activities.

• (10) For the purposes of this Chapter,—

• (a) an account period of an offshore fund which is a company falling within section 94(1)(a) above shall end if, and at the time when, the company ceases to be resident outside the United Kingdom ; and