Legalize / United Kingdom / Public General Act

Finance Act 1984

Type Public General Act

Publication 1984-07-26

Last updated 2024-02-22

State In force

Department Statute Law Database

Source legislation.gov.uk

articles Not indexed

Reform history JSON API

(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

(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

(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

(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

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

(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

(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

(b) an account period of an offshore fund which is a unit trust scheme falling within section 94(1)(b) above shall end if, and at the time when, the trustees of the scheme become resident in the United Kingdom.

(11) The provisions of Part III of Schedule 19 to this Act shall have effect with respect to the procedure for and in connection with the certification of an offshore fund as a distributing fund, and the supplementary provisions in Part IV of that Schedule shall have effect.

Charge to tax of offshore income gains

Charge to income or corporation tax of offshore income gain

96

(1) If a disposal to which this Chapter applies gives rise, in accordance with section 93 above or Schedule 20 to this Act, to an offshore income gain, then, subject to the provisions of this section, the amount of that gain shall be treated for all the purposes of the Tax Acts as income arising at the time of the disposal to the person making the disposal and as constituting profits or gains chargeable to tax under Case VI of Schedule D for the chargeable period in which the disposal is made.

(2) Subject to subsection (3) below, sections 2 and 12 of the principal Act (persons chargeable to tax in respect of chargeable gains) and section 246(2)(b) of the Taxes Act (chargeable gains accruing to certain companies not resident in the United Kingdom) shall have effect in relation to income tax or corporation tax in respect of offshore income gains as they have effect in relation to capital gains tax or corporation tax in respect of chargeable gains.

(3) In the application of section 12 of the principal Act in accordance with subsection (2) above, paragraphs (a) and (b) of subsection (1) of that section (which define the assets on the disposal of which chargeable gains are taxable) shall have effect with the omission of the words " situated in the United Kingdom and ".

(4) In a case where section 12 of the principal Act has effect as modified by subsection (3) above, section 246 of the Taxes Act shall have effect as if, in subsection (2)(b), the words " situated in the United Kingdom " were omitted.

(5) In the case of individuals resident or ordinarily resident but not domiciled in the United Kingdom, section 14 of the principal Act (which provides for taxation on a remittance basis) shall have effect in relation to income tax chargeable by virtue of subsection (1) above on an offshore income gain as it has effect in relation to capital gains tax in respect of gains accruing to such individuals from the disposal of assets situated outside the United Kingdom.

(6) Section 360(2) of the Taxes Act (exemption for charities from tax on chargeable gains by reference to section 145 of the principal Act) shall apply in relation to income tax chargeable by virtue of subsection (1) above on an offshore income gain as it applies in relation to tax on chargeable gains.

(7) In any case where—

(a) a disposal to which this Chapter applies is a disposal of settled property, within the meaning of the principal Act, and

(b) for the purposes of the principal Act, the general administration of the trusts is ordinarily carried on outside the United Kingdom and the trustees or a majority of them for the time being are not resident or not ordinarily resident in the United Kingdom,

subsection (1) above shall not apply in relation to any offshore income gain to which the disposal gives rise.

(8) In Schedule 10 to the Finance Act 1975 (capital transfer tax: valuation) in paragraph 9 (value transferred on death) at the end of sub-paragraph (1) there shall be added the words

and (e) allowance shall be made for a liability for income tax in respect of an offshore income gain, within the meaning of Chapter VII of Part II of the Finance Act 1984, arising on a disposal which is deemed to occur on the death by virtue of section 92(3) of that Act.

Offshore income gains accruing to persons resident or domiciled abroad

97

(1) Section 15 of the principal Act (chargeable gains accruing to certain non-resident companies) shall have effect in relation to offshore income gains subject to the following modifications—

(a) for any reference to a chargeable gain there shall be substituted a reference to an offshore income gain;

(b) for the reference in subsection (7) to capital gains tax there shall be substituted a reference to income tax or corporation tax ; and

(2) Subject to subsections (3) and (4) below, sections 80 to 84 of the Finance Act 1981 (gains of non-resident settlements) shall have effect in relation to offshore income gains subject to the following modifications,—

(a) for any reference to chargeable gains, other than the reference in section 80(5), there shall be substituted a reference to offshore income gains ;

(b) in section 80(2) for the words " tax under section 4(1) of the Capital Gains Tax Act 1979" there shall be substituted the words " income tax by virtue of section 96 of the Finance Act 1984 ";

(d) sections 80(8) and 83(6) shall be omitted.

(3) In subsection (5) of section 80 of the Finance Act 1981, both as originally enacted and as applied by subsection (2) above, the reference to chargeable gains shall be construed as including a reference to offshore income gains.

(4) If, in any year of assessment,—

(a) under subsection (3) of section 80 of the Finance Act 1981, as originally enacted, a chargeable gain falls to be attributed to a beneficiary, and

(b) under that subsection, as applied by subsection (2) above, an offshore income gain also falls to be attributed to him,

subsection (4) of that section (gains attributed in proportion to capital payments received) shall have effect as if it required offshore income gains to be attributed before chargeable gains.

(5) Subject to subsection (6) below, for the purpose of determining whether an individual ordinarily resident in the United Kingdom has a liability for income tax in respect of an offshore income gain which arises on a disposal to which this Chapter applies where the disposal is made by a person resident or domiciled outside the United Kingdom, the following enactments (which relate to the avoidance of tax by the transfer of assets abroad)—

(a) section 478 of the Taxes Act, and

(b) section 45 of the Finance Act 1981,

shall apply as if the offshore income gain arising to the person resident or domiciled outside the United Kingdom constituted income becoming payable to him and, accordingly, any reference in those enactments to income of (or payable or arising to) such a person includes a reference to the offshore income gain arising to him by reason of the disposal to which this Chapter applies.

(6) To the extent that an offshore income gain is treated, by virtue of subsection (1) or subsection (2) above, as having accrued to any person resident or ordinarily resident in the United Kingdom, that gain shall not be deemed to be the income of any individual for the purposes of—

(a) either of the enactments referred to in subsection (5) above; or

(b) any provision of Part XVI of the Taxes Act (settlements).

Deduction of offshore income gain in determining capital gain

98

(1) The provisions of this section apply where a disposal to which this Chapter applies gives rise to an offshore income gain; and, if that disposal also constitutes the disposal of the interest concerned for the purposes of the principal Act, then that disposal is in the following provisions of this section referred to as " the 1979 Act disposal ".

(2) So far as relates to an offshore income gain which arises on a material disposal, within the meaning of Part I of Schedule 20 to this Act, subsections (3) and (4) below shall have effect in relation to the 1979 Act disposal in substitution for section 31(1) of the principal Act (deduction of consideration chargeable to tax on income).

(3) Subject to the following provisions of this section, in the computation under Chapter II of Part II of the principal Act of any gain accruing on the 1979 Act disposal, a sum equal to the offshore income gain shall be deducted from the sum which would otherwise constitute the amount or value of the consideration for the disposal.

(4) Where the 1979 Act disposal is of such a nature that, by virtue of section 35 of the principal Act (part disposals) an apportionment falls to be made of certain expenditure, no deduction shall be made by virtue of subsection (3) above in determining, for the purposes of the fraction in subsection (2) of that section, the amount or value of the consideration for the disposal.

(5) If the 1979 Act disposal forms part of a transfer to which section 123 of the principal Act applies (roll-over relief on transfer of business in exchange wholly or partly for shares) then, for the purposes of subsection (4) of that section (determination of the amount of the deduction from the gain on the old assets) " B " in the fraction in that subsection (the value of the whole of the consideration received by the transferor in exchange for the business) shall be taken to be what it would be if the value of the consideration other than shares so received by the transferor were reduced by a sum equal to the offshore income gain.

(6) Where the disposal to which this Chapter applies constitutes such a disposal by virtue of section 92(6) or section 93(5) above, the principal Act shall have effect as if an amount equal to the offshore income gain to which the disposal gives rise were given (by the person making the exchange concerned) as consideration for the new holding, within the meaning of section 79 of that Act (consideration given or received for new holding on a reorganisation).

(7) In any case where—

(a) a disposal to which this Chapter applies by virtue of subsection (3) of section 93 above is made otherwise than to the offshore fund concerned or the persons referred to in subsection (2)(b) of that section, and

(b) subsequently, a distribution which is referable to the asset disposed of is paid ether to the person who made the disposal or to a person connected with him, and

then, for the purposes of the Tax Acts, the amount of the first distribution falling within paragraph (b) above shall be taken to be reduced or, as the case may be, extinguished by deducting therefrom an amount equal to the offshore income gain referred to in paragraph (c) above and, if that amount exceeds the amount of that first distribution, the balance shall be set against the second and, where necessary, any later distribution falling within paragraph (b) above, until the balance is exhausted.

(8) Section 533 of the Taxes Act (connected persons) applies for the purposes of subsection (7)(b) above.

Offshore income gains of insurance companies

99

(1) An offshore income gain accruing to an insurance company carrying on life assurance business shall, if it accrues in respect of investments held in connection with that business, be treated for the purposes of sections 310 (rate relief: investment income reserved for policy holders) and 315 (foreign life assurance funds) of the Taxes Act as if it were income from investments held in connection with that business.

(2) Income attributable to offshore income gains shall be left out of account in computing under section 312 of the Taxes Act (general annuity business and pension business: separate charge on profits) the profits arising to an insurance company from general annuity business and, accordingly, in subsection (2)(a) of section 313 of the Taxes Act (general annuity business) after the words " development gains" there shall be inserted the words " or offshore income gains, within the meaning of Chapter VII of Part II of the Finance Act 1984 ".

(3) In section 316 of the Taxes Act (overseas life insurance companies: charge on investment income) in subsection (1A) (exclusion of income attributable to development gains) after the words " development gains " there shall be inserted the words " or offshore income gains, within the meaning of Chapter VII of Part II of the Finance Act 1984 ".

(4) Section 323 of the Taxes Act (interpretation of Chapter II of Part XII of that Act) has effect in relation to this section as if it were included in that Chapter.

Offshore income gains of trustees

100

(1) Income arising in a year of assessment by virtue of section 96(1) above to trustees shall be chargeable to income tax at a rate equal to the sum of the basic rate and the additional rate for that year.

(2) In section 17 of the Finance Act 1973 (payments under discretionary trusts), in subsection (3) (amounts to be set against tax assessable on trustees in connection with such payments), at the end of paragraph (e) there shall be inserted the words

and (f) the amount of any tax on income arising to the trustees by virtue of section 96(1) of the Finance Act 1984 (offshore income gains) and charged at a rate equal to the sum of the basic rate and the additional rate by virtue of section 100(1) of that Act

(3) Where an offshore income gain accrues in respect of a disposal of assets made by a person holding them as trustee for a person who would be absolutely entitled as against the trustee but for being an infant, the income which by virtue of section 96(1) above is treated as arising by reference to that gain shall for the purposes of Chapter II of Part XVI of the Taxes Act (settlements on children) be deemed to be paid to the infant; and in this subsection " infant", in relation to Scotland, means a pupil or minor.

PART III — Capital Transfer Tax

Reduction of tax

101

Special discretionary trusts: excluded property

102

(1) In section 113 of the Finance Act 1982 (charge to tax in respect of property leaving temporary charitable trusts), the following subsection shall be inserted after subsection (6) and will accordingly be applied by sections 114 (accumulation and maintenance trusts), 116 (property leaving employee trusts and newspaper trusts) and 118 (protective trusts and trusts for disabled persons) of that Act—

(6A) Where the whole or part of the amount on which tax is charged under this section is attributable to property which was excluded property at any time during the relevant period then, in determining the rate at which tax is charged under this section in respect of that amount or part, no quarter throughout which that property was excluded property shall be counted.

(2) In subsection (7) of section 113 (which defines " relevant period " for the purposes of subsection (6)) for the words " subsection (6) " there shall be substituted the words " subsections (6) and (6A) ".

(3) This section has effect in relation to events on or after 9th March 1982.

Discretionary trusts: distributions made within two years of testator's death

103

(1) After subsection (1A) of section 47 of the Finance Act 1975 (certain distributions made within two years of testator's death to be treated as made under his will) there shall be inserted the following subsection—

(1AA) This Part of this Act shall also apply as mentioned in subsection (1A)(b) above in any case where the circumstances are as mentioned in subsection (1A) but the event in question is one on which tax would be so chargeable apart from— (a) section 115 of the Finance Act 1982 (property becoming subject to employee trusts); (b) section 119 of that Act (property becoming held for charitable purposes or by exempt bodies); or (c) paragraph 1(1) of Schedule 16 to that Act (property becoming comprised in maintenance funds for historic buildings).

(2) This section has effect in relation to deaths occurring on or after 13th March 1984.

Property moving between settlements

104

(1) In section 121 of the Finance Act 1982 (property moving between settlements), the following subsection shall be added at the end—

(3) Subsection (1) above does not apply where a reversionary interest in the property expectant on the termination of a qualifying interest in possession subsisting under the first settlement was settled on the trusts of the other settlement before 10th December 1981.

(2) In paragraph 3 of Schedule 7 to the Finance Act 1975 (certain government securities to be excluded property if person beneficially entitled is domiciled and ordinarily resident abroad) the following sub-paragraph shall be inserted after sub-paragraph (2A)—

(2AA) Sub-paragraph (2A) above does not apply where a reversionary interest in the property expectant on the termination of a qualifying interest in possession subsisting under the first settlement was settled on the trusts of the second settlement before 10th December 1981.

(3) This section has effect in relation to events on or after 15th March 1983.

Adjustment of tax

105

(1) In paragraph 23(3) of Schedule 4 to the Finance Act 1975 (adjustment of tax in cases of fraud, wilful default or neglect), for the words " a person liable for the tax, the period " there shall be substituted the words

any of the following— (a) a person liable for the tax ; and (b) in the case of tax chargeable under Chapter II of Part IV of the Finance Act 1982, the person who is the settlor in relation to the settlement; the period

(2) With effect from 1st April 1983, subsection (8) of section 114 of the Finance Act 1976 (transfers reported late) shall cease to have effect.

(3) Subsection (1) above has effect in relation to any fraud, wilful default or neglect coming to the knowledge of the Board on or after 1st April 1983.

Recovery of tax

106

(1) In Schedule 4 to the Finance Act 1975, after paragraph 22 there shall be inserted—

(22A) —In Scotland, tax and interest on tax may, without prejudice to any other remedy, and if the amount of the tax and interest does not exceed the sum for the time being specified in section 35(1)(a) of the Sheriff Courts (Scotland) Act 1971, be sued for and recovered in the sheriff court. (22B) An officer of the Board who is authorised by the Board to do so may address the court in any proceedings in a county court or sheriff court for the recovery of tax or interest on tax.

(2) After paragraph 36 of that Schedule there shall be inserted—

(36A) In any proceedings for the recovery of tax or interest on tax, a certificate by an officer of the Board— (a) that the tax or interest is due, or (b) that, to the best of his knowledge and belief, it has not been paid, shall be sufficient evidence that the sum mentioned in the certificate is due or, as the case may be, unpaid; and a document purporting to be such a certificate shall be deemed to be such a certificate unless the contrary is proved.

Relief for stud farms

107

(1) For the purposes of Schedule 14 to the Finance Act 1981 (capital transfer tax: relief for agricultural property) the breeding and rearing of horses on a stud farm and the grazing of horses in connection with those activities shall be taken to be agriculture and any buildings used in connection with those activities to be farm buildings.

(2) In paragraph 12 of Schedule 10 to the Finance Act 1975 (farm cottages) the existing provisions shall become sub-paragraph (1) and at the end there shall be inserted—

(2) Expressions used in sub-paragraph (1) above and in Schedule 14 to the Finance Act 1981 have the same meaning in that sub-paragraph as in that Schedule.

(3) In section 97 of the Finance Act 1981 (grant of tenancies of agricultural property) for subsection (2) there shall be substituted—

(2) Expressions used in subsection (1) above and in Schedule 14 to this Act have the same meaning in that subsection as in that Schedule.

(4) This section has effect in relation to transfers of value and other events occurring on or after 10th March 1981.

Pre-consolidation amendments

108

Schedule 21 to this Act (which contains amendments designed to facilitate, or otherwise desirable in connection with, the consolidation of the law relating to capital transfer tax) shall have effect.

PART IV — STAMP DUTY

Reduction of duty on conveyances and transfers

109

Extension of stamp duty relief on sales at discount

110

(1) Section 107 of the Finance Act 1981 (sales of houses at discount by local authorities etc.) shall be amended in accordance with the following provision of this section.

(2) At the end of subsection (3) of that section (which lists the bodies a conveyance or transfer by which is affected by the section) there shall be added the following paragraph:—

(n) the United Kingdom Atomic Energy Authority

(3) After subsection (3) of that section there shall be added the following subsection:—

(3A) This section also applies to any conveyance or transfer on sale of a dwelling house where the conveyance or transfer is made pursuant to a sub-sale made at a discount by a body falling within subsection (3)(f) above.

(4) Subsections (2) and (3) above have effect with respect to instruments—

(a) executed on or after 20th March 1984, or

(b) executed on or after 13th March 1984 and stamped on or after 20th March 1984,

and, for the purposes of section 14(4) of the Stamp Act 1891 (instruments not to be given in evidence etc. unless stamped in accordance with the law in force at the time of first execution), the law in force at the time of execution of an instrument falling within paragraph (b) above shall be deemed to be that as varied in accordance with subsections (2) and (3) above.

(5) With respect to instruments executed on or after the passing of this Act, at the end of subsection (3) of that section, and after the paragraph inserted by subsection (2) above, there shall be added the following paragraph:—

(o) such other body as the Treasury may, by order made by statutory instrument, prescribe for the purposes of this section

Agreements for leases

111

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

(2) In any case where—

(a) an interest in land is conveyed or transferred subject to an agreement for a lease or tack for a term exceeding 35 years, or

(b) a lease or tack is granted subject to an agreement for a lease or tack for a term exceeding 35 years,

then, whether or not the conveyance, transfer, lease or tack is expressed to be so subject, it shall not be taken to be duly stamped unless there is denoted upon the conveyance, transfer, lease or tack the duty paid on the agreement; and section 11 of the Stamp Act 1891 shall have effect for this purpose as if the duty chargeable on the conveyance, transfer, lease or tack depended on the duty paid on the agreement.

(3) For the purposes of subsection (2) above, an interest conveyed or transferred or, as the case may be, a lease or tack granted is not to be regarded as subject to an agreement for a lease or tack if that agreement is directly enforceable against another interest in the land in relation to which the interest conveyed or transferred or, as the case may be, the lease or tack granted is a superior interest.

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

(5) This section applies to any agreement for a lease or tack entered into on or after 20th March 1984 and shall be deemed to have come into force on that date.

Sub-sales

112

(1) In subsection (4) of section 58 of the Stamp Act 1891 (in case of a sub-sale to a single purchaser, duty chargeable only on consideration moving from the sub-purchaser) after the words “conveyed immediately to the sub-purchaser" there shall be inserted the words “then, except where—

(a) the chargeable consideration moving from the sub-purchaser is less than the value of the property immediately before the contract of sale to him, and

(b) the conveyance is not one to which section 107 of the Finance Act 1981 (sales of houses at discount by local authorities etc.) applies".

(2) In subsection (5) of section 58 of the Stamp Act 1891 (in case of a sub-sale in parts or parcels to different sub-purchasers, each conveyance chargeable with duty only on consideration moving from the sub-purchaser) after the words “to different persons in parts or parcels" there shall be inserted the words “ then, except where the aggregate of the chargeable consideration for the sale of all such parts or parcels is less than the value of the whole of the property immediately before the contract for their sale or, as the case may be, the first contract for the sale of any of them ”.

(3) At the end of the said section 58 there shall be inserted the following subsection:—

(7) Any reference in subsection (4) or subsection (5) of this section to chargeable consideration is a reference to consideration which falls to be brought into account in determining the duty (if any) chargeable on the conveyance to the sub-purchaser or, as the case may be, on the conveyance of each of the parts or parcels in question; and in any case where it is necessary for the purposes of either of those subsections to determine the value of any property, that value shall be determined as for the purposes of section 74 of the Finance (1909-10) Act 1910 (gifts inter vivos).

(4) This section applies where the contract for the sub-sale or, as the case may be, the first contract for sub-sale of a part or parcel is entered into on or after 20th March 1984, and shall be deemed to have come into force on that date.

PART V — OIL TAXATION

Restriction on PRT reliefs

113

(1) Subject to subsection (3) below, in determining whether any . . . expenditure is allowable in the case of a participator in an oil field under section 5 or section 5A or section 5B of the principal Act, no account shall be taken of any expenditure incurred before his qualifying date.

(2) Subject to subsection (3) below, in determining whether any unrelievable field losses are allowable in the case of a participator in an oil field under section 6 of that Act, no account shall be taken of any allowable loss falling within subsection (1B) of that section unless the date on which the winning of oil from the abandoned field permanently ceased fell on or after his qualifying date.

(3) Subsections (1) and (2) above do not apply in the case of a participator in an oil field if his qualifying date falls before 14th September 1983 or before the end of the first chargeable period in relation to the field.

(4) In this section “qualifying date”, in relation to a participator in an oil field, means (subject to subsection (6) below)whichever of the following dates is applicable in his case or (if there is more than one) the earliest of them—

(a) the date on which the participator first qualified in respect of any licensed area, being an area which is wholly or partly included in the field;

(b) if the participator is a company, the date on which another company first satisfied both of the following conditions, that is to say—

(i) it qualified in respect of any licensed area, being an area which is wholly or partly included in the field; and

(ii) it was connected with the participator; and

(c) if he is a participator in the field by reason of an arrangement between him and another company, being an arrangement to which paragraph 5 of Schedule 3 to the principal Act applies (transfer of rights etc. to associated company), the date on which the arrangement was made or, if later, the date on which that other company first qualified in respect of any licensed area, being an area which is wholly or partly included in the field.

(5) For the purposes of subsection (4) above, a person qualifies in respect of a licensed area when, in respect of that area—

(a) he is, or is one of those, entitled to the benefit of a licence, or

(b) he enjoys rights under an agreement, being an agreement which has been approved by the Board and certified by the OGA to confer on him rights which are the same as, or similar to, those conferred by a licence.

(6) Where (apart from this section) expenditure would be allowable under section 5 or section 5A or section 5B of the principal Act in the case of a participator in an oil field (in this subsection referred to as “the new participator") by virtue only of paragraphs 16 to 16B of Schedule 17 to the Finance Act 1980 (transfers of interests in oil fields) then, for the purpose of determining whether the expenditure is allowable in his case in accordance with this section, the date which was the qualifying date in relation to the old participator (within the meaning of that Schedule) , rather than the date given by subsection (4) above, shall be taken to be the qualifying date in relation to the new participator..

(7) For the purposes of subsection (2) above the date on which the winning of oil from an oil field has permanently ceased is the date stated in a decision (whether of the Board or on appeal from the Board) under Schedule 8 to the principal Act to be that date.

(8) For the purposes of this section, one company is connected with another if—

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

(b) each of them is a 51 per cent. subsidiary of a third company which is not itself a 51 per cent. subsidiary of any company; and section Chapter 3 of Part 24 of the Corporation Tax Act 2010 (subsidiaries) applies for the purposes of this subsection.

(9) In this section—

(a) “company” means any body corporate; and

(b) any reference to the winning of oil from an oil field permanently ceasing includes a reference to the permanent cessation of operations for the winning of oil from the field.

(10) This section shall have effect in relation to any expenditure or losses in respect of which a claim is made after 13th September 1983.

Sales of gas: treatment of certain payments

114

(1) This section applies only in relation to oil consisting of gas and references in the following provisions of this section to oil shall be construed accordingly.

(2) In any case where, under a contract for the sale of oil won from an oil field, the consideration includes any sum—

(a) which is payable by the buyer in respect of a quantity of oil to be delivered at a specified time or in a specified period, and

(b) which is payable whether or not the buyer takes delivery of the whole of the oil at that time or in that period, and

(c) which, in the event that the buyer does not take delivery of the whole of the oil, entitles the buyer to delivery of oil free of charge at a later time or in a later period,

then, to the extent that the sum is payable in respect of oil which is not delivered at the time or in the period in question, the sum shall be treated for the purposes of the principal Act as an advance payment for the oil to be delivered free of charge and, accordingly, that oil shall be treated for those purposes as sold for a price which (subject to any additional element arising under the following provisions of this section) is equal to that advance payment.

(3) Where, in a case falling within subsection (2) above, an amount of oil is delivered free of charge in pursuance of the entitlement referred to in paragraph (c) of that subsection, the proportion of the advance payment referred to in that subsection which is to be attributed to that amount of oil shall be that which that amount of oil bears to the total quantity of oil of which the buyer is entitled to delivery free of charge by virtue of the payment of the sum in question.

(4) In any case where—

(a) by virtue of subsection (2) above a sum falls to any extent to be treated as an advance payment for oil to be delivered free of charge, but

(b) at the latest date at which oil could be delivered free of charge in pursuance of the entitlement referred to in paragraph (c) of that subsection, the whole or any part of the oil to which that entitlement relates has not been so delivered,

then at that latest date, one tonne of oil shall be deemed to be delivered as mentioned in paragraph (b) above and so much of the advance payment as has not, under subsection (3) above, been attributed to oil actually delivered shall be attributed to that one tonne.

(5) Where, under a contract for the sale of oil won from an oil field, the consideration includes any sums (in this section referred to as “capacity payments")—

(a) which are payable by the buyer at specified times or in respect of specified periods, and

(b) which, though they may vary in amount by reference to deliveries of oil or other factors, are payable whether or not oil is delivered under the contract at particular times or in particular periods, and

(c) which do not, under the terms of the contract or by virtue of subsection (2) above, fall to be treated, in whole or in part, as advance payments for oil to be delivered at some time after the times or periods at or in respect of which the sums are payable,

then, in so far as they would not do so apart from this subsection, the capacity payments shall be treated for the purposes of the principal Act as an additional element of the price received or receivable for the oil sold under the contract.

(6) For the purpose of determining, in a case where there are capacity payments under a contract for the sale of oil won from an oil field, the assessable profit or allowable loss accruing in a particular chargeable period to the participator by whom oil is sold under the contract, each capacity payment shall be treated as an additional element of the price received or receivable for the oil delivered by him under the contract in the chargeable period in which the capacity payment is paid or payable; and if no oil is in fact so delivered in a chargeable period in which a capacity payment is paid or payable, one tonne of oil shall be deemed to be so delivered in that period and, accordingly, the capacity payment shall be treated for the purposes of the principal Act as the price for which that tonne is sold.

(7) If, by virtue of subsection (4) or subsection (6) above, one tonne of oil is deemed to be delivered in any chargeable period of the oil field referred to in subsection (2) or, as the case may be, subsection (5) above, a return for that period by the participator concerned under paragraph 2 of Schedule 2 to the principal Act shall give the like information in relation to that tonne as in relation to any other oil falling within sub-paragraph (2)(a) of that paragraph.

Information relating to sales at arm's length and market value of oil

115

(1) The Board may, by notice in writing given to a company which is or has been a participator in an oil field, 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 relevant documents) as may be so specified of any related transaction which appears to the Board to be relevant for the purpose of—

(a) determining whether a disposal of any oil is a sale at arm’s length, or

(b) ascertaining the market value of any oil.

(2) For the purposes of a notice under subsection (1) above a transaction is a related transaction if, but only if, it is one to which the company to whom the notice is given or a company associated with that company was a party; and for the purposes of this subsection two companies are associated with one another if—

(a) one is under the control of the other; or

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