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

Region in which premises are situated	Date on which licence first has effect	Period for which licence is to be granted
1. First.	(a) Before 1st May 1985.	Seven months beginning with 1st October 1984.
	(b) After 30th April 1985 but before 1st December 1985.	Seven months beginning with 1st May 1985.
2. Second.	(a) Before 1st June 1985.	Eight months beginning with 1st October 1984.
	(b) After 31st May 1985 but before 1st February 1986.	Eight months beginning with 1st June 1985.
3. Third.	Before 1st June 1985.	Eight months beginning with 1st October 1984.
4. Fourth.	Before 1st August 1985.	Ten months beginning with 1st October 1984.

References in this Table to named regions shall be construed as in section 21 of the Betting and Gaming Duties Act 1981.

(2) Where, by virtue of sub-paragraph (1) above, a whole-year licence is granted for a period of 7, 8 or 10 months, the duty payable on the licence shall be 7/12ths, 8/12ths or, as the case may be, 10/12ths of the appropriate amount set out in the relevant Table in section 23 of the Act of 1981.

(3) In relation to a whole-year licence falling within sub-paragraph (1) above, paragraph 11 of Schedule 4 to the Act of 1981 shall have effect as if—

(a) in a case falling within paragraph 11(1)(b), the appropriate fraction were 17/35ths for a seven-month licence, 11/20ths for an eight-month licence and 16/25ths for a ten-month licence;

(b) in a case falling within paragraph 11(1)(c), the appropriate fraction were 2/35ths for a seven-month licence, 7/40ths for an eight-month licence and 17/50ths for a ten-month licence; and

Schedule 4

Part I — Provisions Inserted in Customs and Excise Management Act 1979 as Part VIIIA

Part II — Further Amendments of 1979 Act

1

In section 1 (interpretation) the following definitions shall be inserted at the appropriate places—

“designation order” has the meaning given by section 100A(5); “free zone” has the meaning given by section 100A(2); “free zone goods” has the meaning given by section 100B(2); “free zone regulations” has the meaning given by section 100B(1);.

2

In section 31(1) (power to make regulations controlling the movement of goods)—

(a) in paragraph (a) after the words “clearance out of charge of such goods" there shall be inserted the words “ , a free zone ”; and

(b) after paragraph (a) there shall be inserted—

(aa) the movement of goods between— (i) a free zone and a place approved by the Commissioners for the clearance out of charge of such goods, (ii) such a place and a free zone, and (iii) a free zone and another free zone;

3

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4

In section 119(1) (delivery of imported goods on giving of security for duty) after “warehouse" there shall be inserted the words “ or free zone ”.

5

In section 159 (power to examine and take account goods), in subsection (1) there shall be inserted after paragraph (b)—

(bb) which are in a free zone; or

6

In section 164 (power to search persons) in subsection (4) there shall be inserted after paragraph (e)—

(ee) any person in, entering or leaving a free zone;

Schedule 5

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2

The following sections shall be inserted after section 37—

(37A) (1) Without prejudice to section 37 above, a direction under that section may— (a) provide that where the importer is authorised for the purposes of this section, the entry may consist of an initial entry and a supplementary entry; and (b) may make such supplementary provision in connection with entries consisting of initial and supplementary entries as the Commissioners think fit. (2) Where an initial entry of goods has been accepted the goods may, on the importer giving security by deposit of money or otherwise to the satisfaction of the Commissioners for payment of the unpaid duty, be delivered without payment of any duty chargeable in respect of the goods, but any such duty shall be paid within such time as the Commissioners may direct. (3) An importer who makes an initial entry shall complete the entry by delivering the supplementary entry within such time as the Commissioners may direct. (4) For the purposes of the customs and excise Acts an entry of goods shall be taken to have been delivered when an initial entry of the goods has been delivered, and accepted when an initial entry has been accepted. (37B) the goods may be delivered before an entry of them has been delivered or any duty chargeable in respect of them has been paid. (1) The Commissioners may, if they think fit, direct that where— (a) such goods as may be specified in the direction are imported by an importer authorised for the purposes of this subsection; (b) the importer has delivered a document relating to the goods to the proper officer, in such form and manner, containing such particulars and accompanied by such documents as the Commissioners may direct; and (c) the document has been accepted by the proper officer. the goods may be delivered before an entry of them has been delivered or any duty chargeable in respect of them has been paid. (2) The Commissioners may, if they think fit, direct that where— (a) such goods as may be specified in the direction are imported by an importer authorised for the purposes of this subsection; (b) the goods have been removed from the place of importation to a place approved by the Commissioners for the clearance out of charge of such goods; and (c) the conditions mentioned in subsection (3) below have been satisfied, (3) The conditions are that— (a) on the arrival of the goods at the approved place the importer delivers to the proper officer a notice of the arrival of the goods in such form and containing such particulars as may be required by the directions; (b) within such time as may be so required the importer enters such particulars of the goods and such other information as may be so required in a record maintained by him at such place as the proper officer may require; and (c) the goods are kept secure in the approved place for such period as may be required by the directions. (4) The Commissioners may direct that the condition mentioned in subsection (3)(a) above shall not apply in relation to any goods specified in the direction and such a direction may substitute another condition. (5) No goods shall be delivered under this section unless the importer gives security by deposit of money or otherwise to the satisfaction of the Commissioners for the payment of any duty chargeable in respect of the goods which is unpaid. (6) Where goods of which no entry has been made have been delivered under this section, the importer shall deliver an entry of the goods under section 37(1) above within such time as the Commissioners may direct. (7) For the purposes of section 43(2)(a) below such an entry shall be taken to have been accepted— (a) in the case of goods delivered by virtue of a direction under subsection (1) above, on the date on which the document mentioned in that subsection was accepted; and (b) in the case of goods delivered by virtue of a direction under subsection (2) above, on the date on which particulars of the goods were entered as mentioned in subsection (3)(b) above. (37C) (1) The Commissioners may, if they think fit— (a) authorise any importer for the purposes of section 37A, or 37B(1) or (2) above; and (b) suspend or cancel the authorisation of any importer where it appears to them that he has failed to comply with any requirement imposed on him by or under this Part of this Act or that there is other reasonable cause for suspension or cancellation. (2) The Commissioners may give directions— (a) imposing such requirements as they think fit on any importer authorised under this section; or (b) varying any such requirements previously imposed. (3) If any person without reasonable excuse contravenes any requirement imposed by or under section 37A, 37B or this section he shall be liable on summary conviction to a penalty of level 4 on the standard scale.

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Schedule 6

Part I — Food

1

In Group 1 (Food), in Note (3) (which provides that a supply in the course of catering includes a supply for consumption on the premises) after the word “includes" there shall be inserted “(a)" and at the end of the Note there shall be added

and (b) any supply of hot food for consumption off those premises; and for the purpose of paragraph (b) above “hot food" means food which, or any part of which,— (i) has been heated for the purpose of enabling it to be consumed at a temperature above the ambient air temperature; and (ii) is at the time of the supply above that temperature.

Part II

2

3

In item 2 (supply of services in the course of certain operations relating to buildings and civil engineering works), for paragraphs (a) and (b) there shall be substituted the words " in the course of the construction or demolition of ".

4

In item 3 (supply, by a person supplying services within item 2 and in connection with those services, of certain materials etc. and services relating to them) after the words " item 2 " there shall be inserted the words " of this Group or of Group 8A below ".

5

After Note (1) there shall be inserted the following Note:—

(1A) Any reference in item 2 or the following Notes to the construction of any building or the construction of any civil engineering work does not include a reference to the conversion, reconstruction, alteration or enlargement of any existing building or civil engineering work, and the reference in item 1 to a person constructing a building shall be construed accordingly.

6

(1) In Note (2) (matters excluded from item 2), for paragraph (a) (which excluded repair or maintenance and is rendered unnecessary by the removal from item 2 of the reference to alteration) there shall be substituted the following paragraph:—

(a) the supply of any services in the course of the construction of any building ("the secondary building") within the grounds or garden of another building ("the main building ") which is used or to be used wholly or mainly as a private residence except— (i) where the secondary building is itself to be so used; or (ii) where the secondary building is a garage which is to be used and occupied together with another building which is being constructed at the same time as the secondary building and which is either the main building or another secondary building which is to be used wholly or mainly as a private residence.

(2) In that Note—

(a) in paragraph (b), the words " or alteration ", and

(b) paragraph (c) (supply of services otherwise than in the course or furtherance of a business),

shall be omitted.

7

After Note (2) there shall be inserted the following Note:—

(2A) In item 3, the goods referred to in paragraph (a) do not include— (a) finished or prefabricated furniture, other than furniture designed to be fitted in kitchens; or (b) materials for the construction of fitted furniture, other than kitchen furniture; or (c) domestic electrical or gas appliances, other than those designed to provide space heating or water heating or both.

Part III — Protected Buildings

8

After Group 8 there shall be inserted the following—

Item No. (1) The granting by a person substantially reconstructing a protected building, of a major interest in, or in any part of, the building or its site. (2) The supply, in the course of an approved alteration of a protected building, of any services other than services of an arcitect, surveyor or any person acting as consultant or in a supervisory capacity. Notes (1) “Protected building” means a building which is— (a) a listed building, within the meaning of— (i) the Town and Country Planning Act 1971; or (ii) the Town and Country Planning (Scotland) Act 1972; or (iii) the Planning (Northern Ireland) Order 1972 or (b) a scheduled monument, within the meaning of— (i) the Ancient Monuments and Arcaelogical Areas Act 1979; or (ii) the Historic Monuments Act (Northern Ireland) 1971. (2) For the purposes of item 1, a protected building shall not be regarded as substantially reconstructed unless the reconstruction is such that at least one of the following conditions is fulfilled when the reconstruction is completed— (a) that, of the works carried out to effect the reconstruction, at least three-quarters, measured by reference to cost, are of such a nature that the supply of services (other than excluded services) materials and other items to carry out the works, would, if supplied by a taxable person, be within either item 2 of this Group or item 3 of Group 8 above, as it applies to a supply by a person supplying services within item 2 of this Group; and (b) that the reconstructed building incorporates no more of the original building (that is to say, the building as it was before the reconstruction began) than the external walls, together with other external features of architectural or historic interest; and, in paragraph (a) above “excluded services” means the services of an architect, surveyor or other person acting as consultant or in a supervisory capacity. (3) “Approved alteration” means,— (a) in the case of a protected building which is an ecclesiastical building which is for the time being used for ecclesiastical purposes or would be so used but for the works in question, any works of alteration; and (b) in the case of a protected building which is a scheduled monument within the meaning of the Historic Monuments Act (Northern Ireland) 1971 and in respect of which a protection order, within the meaning of that Act, is in force, works of alteration for which consent has been given under section 10 of that Act; and (c) in any other case, works of alteration which may not, or but for the existence of a Crown interest or Duchy interest could not, be carried out unless authorised under, or under any provision of,— (i) Part IV of the Town and Country Planning Act 1971, (ii) Part IV of the Town and Country Planning (Scotland) Act 1972, (iii) Part V of the Planning (Northern Ireland) Order 1972, or (iv) Part I of the Ancient Monuments and Archaelogical Areas Act 1979, and for which, except in the case of a Crown interest or Duchy interest, consent has been obtained under any provision of that Part; and in paragraph (c) above “Crown interest" and “Duchy interest" have the same meaning as in section 50 of the said Act of 1979. (4) For the purposes of paragraph (a) of Note (3), a building used or available for use by a minister of religion wholly or mainly as a residence from which to perform the duties of his office shall be treated as not being an ecclesiastical building. (5) Where the benefit of the consideration for the grant of a major interest as described in item 1 accrues to the person substantially reconstructing the protected building but that person is not the grantor, he shall be treated for the purposes of that item as the person making the grant. (6) In item 2 “alteration" does not include repair or maintenance; and where any work consists partly of an approved alteration and partly of other work, an apportionment shall be made to determine the supply which falls within item 2. (7) Note (2) to Group above applies in relation to item 2 of this Group as it applies in relation to item 2 of that Group.

Schedules 7—9

1

In subsection (1) of section 32 of the Finance Act 1971, for the words following paragraph (b) there shall be substituted the words " and, in relation to any year of assessment, any reference in the Income Tax Acts to the additional rate is a reference to a rate determined by subtracting the basic rate for that year from the rate of tax which, for that year, is applicable to the second higher rate band ".

2

(1) In the definition of " excess liability" or, as the case may be, "excess amount" wherever it appears in the enactments specified in sub-paragraph (2) below, the words " or additional" shall be omitted.

(2) The enactments referred to in sub-paragraph (1) above are the following, namely—

(a) sections 30(3), 36(1), 403(1), 424(c), 430(1), 457(1) and 458(1) of the Taxes Act;

(b) section 87(6) of and paragraph 5(6A) of Schedule 16 to the Finance Act 1972 ; and

3

(1) In the Taxes Act, in section 38(2), the words from " and in determining " to " investment income " shall be omitted.

(2) In the Finance Act 1971, sections 32(3) and (4) and 34(4) and, in paragraph 2(2) of Schedule 7, the words "or additional" shall be omitted.

(3) In the Finance Act 1973, in section 44, the words " or additional " and, in section 59(2), the words from " the additional rate " to " them, and " shall be omitted.

(4) In the Finance Act 1974, there shall be omitted—

(a) section 15;

(b) in section 16(1), the words following " subsection (2) below";

(d) in Schedule 7, paragraph 1 and, in paragraph 9(5), the words from " and " onwards.

(5) In section 24(3) of the Finance Act 1980, for the word " amounts" there shall be substituted the word " amount " ; and the words from "or over which" to "additional rate", the word "respectively", where it first occurs, and the words "and the investment income threshold " shall be omitted.

SCHEDULE 8

General

1

(1) In this Schedule "the principal section" means section 27 of this Act

(2) Any amount which is credited as interest in respect of a relevant deposit shall, for the purposes of the principal section and (his Schedule, be treated as a payment of interest

Meaning of " deposit-taker "

2

(1) In the principal section and in this Schedule "deposit-taker " means any of the following—

(a) the Bank of England ;

(b) any recognised bank, licensed institution or municipal bank (within die meaning of the Banking Act 1979);

(d) any trustee savings bank within the meaning of the Trustee Savings Banks Act 1981 ;

(e) any bank formed under the Savings Bank (Scotland) Act 1819; and

(f) any person or class of person which receives deposits in the course of his business or activities and which is for the time being prescribed by order made by the Treasury by statutory instrument for the purposes of this section.

(2) Where the Treasury makes an order under sub-paragraph (1)(f) above, the order shall have effect from the beginning of the first year of assessment which begins after the date on which the order is made.

(3) An order under sub-paragraph (1)(f) above shall be subject to annulment in pursuance of a resolution of the Commons House of Parliament.

Meaning of " deposit" and " relevant deposit"

3

(1) In the principal section and in this Schedule " deposit" means a sum of money paid on terms under which it will be repaid with or without interest and either on demand or at a time or in circumstances agreed by or on behalf of the person making the payment and the person to whom it is made.

(2) For the purposes of the principal section and this Schedule, a deposit is a " relevant deposit" if, but only if—

(a) the person who is beneficially entitled to any interest in respect of the deposit is an individual or, where two or more persons are so entitled, all of them are individuals ; or

(b) the person entitled to any such interest receives it as a personal representative in his capacity as such ;

and the deposit is not prevented from being a relevant deposit by sub-paragraph (3) below.

(3) A deposit is not a relevant deposit if—

(a) a qualifying certificate of deposit has been issued in respect of it or it is a qualifying time deposit;

(b) it is a debt on a debenture (" debenture " having the meaning given in section 455 of the Companies Act 1948) issued by the deposit-taker ;

(d) it is a debt on a security which is listed on a recognised stock exchange (within the meaning of section 535 of the Taxes Act);

(e) it is made by a Stock Exchange money broker (recognised by the Bank of England) in the course of his business as such a broker;

(f) in the case of a deposit-taker resident in the United Kingdom for the purposes of income or corporation tax, it is held at a branch of his situated outside the United Kingdom ;

(g) in the case of a deposit-taker who is not so resident, it is held otherwise than at a branch of his situated in the United Kingdom ; or

(h) the appropriate person has declared in writing to the deposit-taker liable to pay interest in respect of the deposit that—

(i) at the time when the declaration is made, the person who is beneficially entitled to the interest is not, or, as the case may be, all of the persons who are so entitled are not, ordinarily resident in the United Kingdom ;

(ii) in a case falling within sub-paragraph (2)(b) above, the deceased was, immediately before his death, not ordinarily resident in the United Kingdom.

(4) A declaration under sub-paragraph (3)(h)(i) shall contain an undertaking by the person making it that if the person, or any of the persons, in respect of whom it is made becomes ordinarily resident in the United Kingdom he will notify the deposit-taker accordingly.

(5) A deposit-taker shall, on being so required by notice given to him in writing by an inspector, make all declarations which have been made to him under sub-paragraph (3) above available for inspection by the inspector or by a named officer of the Board.

(6) Where a notice has been given to a deposit-taker under sub-paragraph (5) above, the declarations shall be made available within such time as may be specified in the notice; and the person to whom they are to be made available may take copies of, or extracts from, them.

(7) A deposit-taker shall treat every deposit made with him as a relevant deposit unless satisfied that it is not a relevant deposit; but where he has satisfied himself that a deposit is not a relevant deposit he shall be entitled to continue to so treat it until such time as he is in possession of information which can reasonably be taken to indicate that the deposit is, or may be, a relevant deposit.

(8) In sub-paragraph (3) above—

" appropriate person", in relation to a deposit, means any person who is beneficially entitled to any interest in respect of the deposit or entitled to receive any such interest as a personal representative in his capacity as such or to whom any such interest is payable ;

" qualifying certificate of deposit" means a certificate of deposit, as denned in section 55(3) of the Finance Act 1968, which is issued by a deposit-taker and under which— the amount payable by the deposit-taker, exclusive of interest, is not less than £50,000 (or, for a deposit denominated in foreign currency, not less than the equivalent of £50,000 at the time when the deposit is made); and the obligation of the deposit-taker to pay that amount arises after a period of not less than 28 days beginning with the date on which the deposit is made ; and

" qualifying time deposit" means a deposit which is made by way of loan for an amount which is not less than £50,000 (or, for a deposit denominated in foreign currency, not less than the equivalent of £50,000 at the time when the deposit is made) and on terms which— prevent repayment of the deposit before the expiry of the period of 28 days beginning with the date on which the deposit is made, but which require repayment at the end of a specified period ; do not make provision for the transfer of the right to repayment; and prevent partial withdrawals of, or additions to, the deposit.

(9) For the purposes of sub-paragraph (3)(f) and (g) above, a deposit is held at a branch of a deposit-taker if it is recorded in his books as a liability of that branch.

Assessments to income tax etc.

4

(1) Where in relation to any payment of interest (the "payment ") a deposit-taker is liable to account for and pay an amount under the principal section—

(a) subject to sub-paragraph (2) below, no assessment to income tax shall be made on, and no repayment of income tax shall be made to, the person receiving or entitled to the payment in respect of it;

(b) the payment shall, in computing the total income of the person entitled to it, be treated as income for that year received by him after deduction of income tax at the basic rate from a corresponding gross amount; and

(c) the payment (and no more) shall, in applying sections 52 and 53 of the Taxes Act to other payments be treated as profits or gains which have been brought into charge to income tax.

(2) Sub-paragraph (1)(a) above shall not prevent an assessment in respect of income tax at a rate other than the basic rate.

(3) For the purpose of determining whether any or what amount of tax is, by virtue of sub-paragraph (1)(b) above, to be taken into account as having been deducted from a gross amount in the case of an individual whose total income is reduced by any deductions, so much only of that gross amount shall be taken into account as is part of his total income as so reduced.

Collection

5

(1) Any payment of interest in respect of which an amount is payable under the principal section shall be a relevant payment for the purposes of Schedule 20 to the Finance Act 1972 (collection of income tax on company payments which are not distributions) whether or not the deposit-taker making the payment is resident in the United Kingdom.

(2) Schedule 20 to that Act shall apply in relation to any payment which is a relevant payment by virtue of sub-paragraph (1) above—

(a) with the substitution for any reference to a company of a reference to a deposit-taker ;

(b) as if any amount payable under the principal section were payable as income tax ;

(c) as if paragraph 5 (set-off of income tax on deposit-taker's income against liability under the principal section) applied only in relation to payments received by the deposit-taker after 5th April 1985 and falling to be taken into account in computing his income chargeable to corporation tax; and

(d) as if in paragraph 7 (amounts set-off under paragraph 5 not to be set-off also under section 240(5) of the Taxes Act) the reference to section 240(5) included a reference to sections 53 and 246(3) of that Act.

(3) In relation to any deposit-taker who is not a company Schedule 20 shall have effect as if—

(a) paragraph 5 were omitted ; and

(b) references to accounting periods were references to periods for which the deposit-taker makes up his accounts.

Transitional provisions

6

(1) Any deposit denominated in a foreign currency shall not be treated, at any time before 6th April 1986, as a relevant deposit.

(2) A certificate of deposit, as defined in section 55(3) of the Finance Act 1968, which was issued before 13th March 1984 on terms which provide for interest to be payable on the deposit at any time after 5th April 1985 (whether or not interest is payable on it before that date) shall, if it is not a qualifying certificate of deposit, be treated for the purposes of paragraph 3(3) of this Schedule as if it were a qualifying certificate of deposit.

(3) Any deposit which was made before 6th July 1984 but which is not a qualifying time deposit shall, where it is made on terms which—

(a) do not make provision for the transfer of the right to repayment;

(b) prevent partial withdrawals of, or additions to, the deposit; and

(i) the deposit-taker to repay the sum at the end of a specified period which ends after 5th April 1985 ; or

(ii) in a case where interest is payable only at the time of repayment of the deposit, the deposit-taker to repay the sum on demand or on notice ;

be treated, for the purposes of paragraph 3(3) of this Schedule, as if it were a qualifying time deposit.

(4) A declaration made before 6th July 1984 under section 17(4) of the Taxes Management Act 1970 which contains an undertaking of the kind referred to in sub-paragraph (4) of paragraph 3 of this Schedule shall, at all times before 6th April 1988, be treated as a declaration made for the purposes of that paragraph.

(5) Where a deposit which is a source of income of any person (the " lender") is not a composite rate deposit but at any time becomes such a deposit, section 121 of the Taxes Act (special rules where source of income ceases) shall apply as if the deposit were a source of income which the lender ceased to possess immediately before it became a composite rate deposit.

(6) Where a deposit becomes a composite rate deposit on 6th April 1985, section 121 of the Taxes Act shall apply in relation to it with the omission from subsection (1)(b) of the words from " and shall" to " this provision ".

(7) Where a deposit which is a source of income of any person ceases to be a composite rate deposit, section 120(3) of the Taxes Act shall apply as if the deposit were a new source of income acquired by him immediately after it ceased to be a composite rate deposit.

(8) For the purposes of sub-paragraphs (5) to (7) above a deposit is at any time a composite rate deposit if, were the person holding it to make a payment of interest in respect of it at that time, he would be liable to account for and pay an amount on that payment under the principal section.

Penalties

7

The Table in section 98 of the Taxes Management Act 1970 (penalties) shall be amended by inserting at the end of the first column—

Paragraph 3(3)(h) and (5) of Schedule 8 to the Finance Act 1984

SCHEDULE 9

Charge to tax

1

(1) On the disposal by any person of any deep discount security—

(a) an amount which represents the accrued income attributable to the period between his acquisition and disposal of the security (the " period of ownership") shall be treated as income chargeable to tax under Case III or, as may be, Case IV of Schedule D ;

(b) the tax shall (notwithstanding anything in sections 119 to 121 or, as may be, 122 to 124 of the Taxes Act but subject to sub-paragraph (5) below) be computed on the income so arising from any disposal made in the year of assessment ; and

(i) section 31 of the Capital Gains Tax Act 1979 shall not apply but the consideration for the disposal shall be treated as reduced by the amount mentioned in paragraph (a) above ; and

(ii) where that amount exceeds the consideration for the disposal, the amount of the excess shall be treated as expenditure within section 32(1)(b) of that Act incurred by him on the security immediately before the disposal.

(2) The amount which represents the accrued income attributable to any period of ownership is the aggregate of the income elements for each income period or part of an income period in the period of ownership.

(3) In relation to any security, the income element for any income period shall be determined by applying the formula—

$$(A×B100)−C$ where A is the adjusted issue price ; B is the yield to maturity; and C is the amount of interest (if any) attributable to the income period.$

(4) The income element for any period (the "short period") falling within an income period shall be determined by applying the formula—

$$PY×I$ where I is the income element for the income period in which the short period falls ; P is the number of days in the short period ; and Y is the number of days in that income period.$

(5) Where—

(a) by virtue of sub-paragraph (1) above income tax is chargeable under Case IV of Schedule D, and

(b) the person making the disposal satisfies the Board, on a claim in that behalf, that he is not domiciled in the United Kingdom, or that, being a British subject or a citizen of the Republic of Ireland, he is not ordinarily resident in the United Kingdom,

the tax shall be computed on the amounts, if any, received in the United Kingdom in the year of assessment in question in respect of the sum mentioned in sub-paragraph (1)(a) above (any such amounts being treated as income arising when they are received in the United Kingdom).

(6) For the purposes of subsection (5) above—

(a) there shall be treated as received in the United Kingdom all amounts paid, used or enjoyed in, or in any manner or form transmitted or brought to, the United Kingdom ; and

(b) subsections (4) to (7) of section 122 of the Taxes Act shall apply as they apply for the purposes of subsection (3) of that section.

(7) In this Schedule—

" adjusted issue price ", in relation to any security in a particular income period, is the aggregate of the issue price of the security and the income elements for all previous income periods;

" income period " means— in the case of a security carrying a right to interest, any period to which a payment of interest which falls to be made in respect of the security is attributable; and in any other case, any year ending immediately before the anniversary of the issue of the security or any period of less than a year which begins on such an anniversary and ends on the redemption date ;

"yield to maturity", in relation to any security, means a rate (expressed as a percentage) such that if a sum equal to the issue price of the security were to be invested at that rate on the assumption that— the rate would be applied on a compounding basis at the end of each income period ; and the amount of any interest attributable to an income period would be deducted after applying the rate, the value of that sum at the redemption date would be equal to the amount payable on redemption of the security.

(8) Every company which issues deep discount securities shall cause to be shown on the certificate of each such security the income element for each income period between the date of issue of the security and the redemption date.

(9) Sections 52 to 54 of the Taxes Act (deduction of income tax by persons making certain payments) and section 159 of that Act (foreign dividends) shall not apply to so much of the proceeds of redemption of a deep discount security as represents income chargeable to tax under Case III or, as may be, Case IV of Schedule D.

Meaning of " disposal"

2

(1) Subject to sub-paragraph (2) and paragraph 8 below, there is a disposal of a deep discount security for the purposes of this Schedule if there would be such a disposal for the purposes of the Capital Gains Tax Act 1979.

(2) Notwithstanding anything in section 49(1)(b) of the Act of 1979 (no deemed disposal on death), where the assets of which a deceased person was competent to dispose include any deep discount security that security shall, for the purposes of this Schedule, be deemed to have been disposed of by the deceased immediately before his death.

Deduction of income element from total profits of company and allowance as charge on income

3

(1) In computing the corporation tax chargeable for any accounting period of a company which has issued any deep discount security, the income element in respect of that security for any income period ending in or with that accounting period shall be allowed as a deduction against the total profits of the company for the accounting period as reduced by any relief other than group relief.

(2) The income element for any income period ending in or with an accounting period of a company which has issued a deep discount security shall be treated for the purposes of the Corporation Tax Acts, other than those of section 248(1) of the Taxes Act (which makes provision, in relation to charges, similar to that made by sub-paragraph (1) above) as a charge on income paid by the company in the accounting period.

(3) No income element in respect of any deep discount security shall be so allowed or treated unless—

(a) the cost of paying so much of the amount payable on redemption as represents the discount is ultimately borne by the company;

(b) the income element would not otherwise be deductible in computing the issuing company's profits or any description of those profits for purposes of corporation tax ; and

(4) The conditions are that—

(a) the company exists wholly or mainly for the purpose of carrying on a trade ;

(b) the deep discount security was issued wholly and exclusively to raise money for purposes of a trade carried on by the company;

(5) Where, on redemption of any deep discount security any part of the amount payable on redemption is, by virtue of section 233(2)(d) of the Taxes Act, a distribution of the company for the purposes of the Corporation Tax Acts, sub-paragraphs (1) and (2) above shall not apply to any income element in respect of that security.

(6) Without prejudice to its application apart from this paragraph section 38 of the Finance Act 1980 (incidental costs of obtaining loan finance to be deductible in computing profits or gains to be charged under Case I or Case II of Schedule D and to be treated for certain purposes as expenses of management) shall apply in relation to any qualifying security as it applies in relation to loan stock the interest on which is deductible as mentioned in subsection (2) of that section.

(7) In sub-paragraph (6) above, " qualifying security " means any deep discount security in respect of which the income elements are deductible under sub-paragraph (1) above in computing the total profits of the company by which the incidental costs in question are incurred.

(8) Sub-paragraphs (6) and (7) above shall have effect in relation to expenditure incurred after 13th March 1984.

(9) Relief shall not be given under any provision of the Tax Acts in respect of any income element if (at any time) a scheme has been effected or arrangements have been made such that the sole or main benefit that might be expected to accrue to the company from the issue of the security in question is the obtaining of a reduction in tax liability by means of that relief.

(10) Subsections (2) and (3) of section 38 of the Finance Act 1976 (restriction of relief for payment of interest) shall apply in relation to sub-paragraph (9) above as they apply in relation to subsection (1) of that section.

4

(1) Section 15 of the Oil Taxation Act 1975 (oil extraction activities etc. ; charges on income) shall apply in relation to income elements in respect of deep discount securities and paragraph 3 above as it applies in relation to interest and section 248 of the Taxes Act (allowance of charges on income).

(2) In the application of section 15 to any deep discount security, subsection (2)(b) shall have effect as if the references to the rate at which interest was payable were references to the aggregate of the rate of interest payable and the amount of any income element in respect of the security for the period in question.

Securities issued and owned by associated companies or companies belonging to same group

5

(1) Where a deep discount security issued by a company is at any time beneficially owned by another company which is—

(a) an associated company (within the meaning of section 302 of the Taxes Act) of the issuing company ; or

(b) a member of a group of companies of which the issuing company is also a member;

sub-paragraphs (1) and (2) of paragraph 3 of this Schedule shall apply to any linked income element with the addition, after the words " the accounting period ", of the words " in which the security is redeemed ".

(2) In this paragraph " linked income element" means the income element in respect of the security in question for any income period in which the security is at any time beneficially owned by the other company.

(3) For the purposes of this paragraph, two companies shall be deemed to be members of a group of companies if one is a 51 per cent subsidiary of the other or both are 51 per cent, subsidiaries of a third company.

Close companies

6

(1) Where a deep discount security issued by a close company is at any time beneficially owned by—

(a) a participator in the company ;

(b) an associate of such a participator ; or

(2) In sub-paragraph (1) above " linked income element" means the income element in respect of the security in question for any income period in which the security is at any time beneficially owned by a person mentioned in that sub-paragraph.

(3) Any amount which a close company is allowed, by virtue of paragraph 3(1) of this Schedule, to deduct from its total profits for any accounting period shall be treated for the purposes of paragraph 3A of Schedule 16 to the Finance Act 1972 (apportionment amongst participators of interest paid by close company as if it were income of the company) as if it were interest paid by the company in that period.

(4) In this paragraph—

"associate" has the meaning given in section 303(3) of the Taxes Act;

" control " shall be construed in accordance with section 302(2) to (6) of that Act; and

" participator " means a person who is, in relation to a company, a participator for the purposes of Chapter III of Part XI of the Taxes Act (by virtue of section 303 of that Act) other than a person who is a participator for those purposes by virtue only of his holding a deep discount security issued by the company.

(5) In determining whether a person who carries on a business of banking is a participator in a company for the purposes of this paragraph, there shall be disregarded any securities of the company acquired by him in the ordinary course of his business.

Early redemption

7

(1) Where any deep discount security is redeemed before the redemption date by the company which issued it, the preceding paragraphs shall have effect subject to the provisions of this paragraph.

(2) The accrued income attributable to the period between the acquisition of the security by the person who, immediately before its redemption, was the beneficial owner of the security and its redemption shall be the amount paid to him on redemption of the security less the issue price of the security or, in a case where he did not acquire it on its issue, less the aggregate of—

(a) the issue price; and

(b) the accrued income attributable to the period beginning with the issue, and ending with his acquisition, of the security.

(3) The deduction allowed under paragraph 3(1) above in relation to the accounting period in which the deep discount security is redeemed shall be the amount paid by the company on redemption less the aggregate of—

(a) the issue price of the security; and

(b) the accrued income attributable to the period beginning with the issue of the security and ending with the last income period to end in or with the accounting period of the company which precedes that in which the security is redeemed.

(4) Where paragraph 5 or 6 above has applied to the deep discount security at any time, the amount mentioned in sub-paragraph (3)(b) above shall not include any linked income element (within the meaning of that paragraph).

(5) Where the aggregate mentioned in sub-paragraph (3) above exceeds the amount paid by the company on redemption of the security, the amount of the excess or, if it is less, the amount mentioned in paragraph (b) of that sub-paragraph shall be treated as income of the company—

(a) arising in the accounting period in which the security is redeemed; and

(b) chargeable to tax under Case VI of Schedule D.

(6) Where a resolution is passed, an order made or any other act takes place for the winding up of a company which has issued a deep discount security before the security is redeemed, this paragraph shall have effect in relation to any payment made in respect of the security in the course of the winding up as if the payment were made on redemption.

Reorganisations, conversions, reconstructions and amalgamations

8

(1) This paragraph applies where—

(a) there is a conversion of securities to which section 82 of the Capital Gains Tax Act 1979 applies and those securities include deep discount securities ; or

(b) securities including deep discount securities are exchanged (or by virtue of section 86(1) of that Act are treated as exchanged) for other securities in circumstances in which section 85(3) of that Act applies.

(2) Where this paragraph applies—

(a) the securities converted or exchanged shall (subject to sub-paragraph (3) below and notwithstanding section 78 of the Act of 1979) be treated for the purposes of the charge to tax under paragraph 1 of this Schedule as having been disposed of immediately before the time of the conversion, or, as the case may be, exchange, by the person who was the beneficial owner of the securities at that time ;

(b) sub-paragraph (1)(c) of that paragraph and section 31 of the Act of 1979 shall not apply, but any sum payable to the beneficial owner of the deep discount securities by way of consideration for their disposal (in addition to his new holding) shall be treated for the purposes of capital gains tax as reduced by the amount of the accrued income on which he is chargeable to income tax by virtue of paragraph (a) above ; and

(c) where that amount exceeds any such sum, the excess shall be treated as expenditure within section 32(1)(b) of that Act incurred by him on the security immediately before that time.

(3) Where a person would (but for this sub-paragraph) be treated by sub-paragraph (2)(a) above as having, for tie purposes of paragraph 1 of this Schedule, disposed of deep discount securities which are converted into, or exchanged for, other deep discount securities—

(a) he shall not be so treated—

(i) if the date which is the redemption date in relation to the new securities is not later than the date which was the redemption date in relation to the converted or exchanged securities ; and

(ii) no consideration is given for the conversion or exchange other than the new securities ; but

(b) the amount of the accrued income attributable to his period of ownership of the converted or exchanged securities (including any amount added by virtue of the previous operation of this paragraph) shall be added to the amount of the accrued income attributable to his period of ownership of the new securities.

Disposals on a no-gain J no-loss basis

9

Where a disposal of a deep discount security is to be treated for the purposes of capital gains tax as one on which neither a gain nor a loss accrues to the person making the disposal, the consideration for which the person acquiring the security would, apart from this paragraph, be treated for the purposes of capital gains tax as having acquired the security shall be increased by the amount mentioned in paragraph 1(1)(a) of this Schedule.

Time of disposal and acquisition where securities disposed of under contract

10

(1) Where any deep discount security is disposed of and acquired under a contract, the time at which the disposal and acquisition is made is the time at which the contract is made (and not, if different, the time at which the security is transferred).

(2) If the contract is conditional (and in particular if it is conditional on the exercise of an option) the time at which the disposal and acquisition is made is the time when the condition is satisfied.

Identification of securities disposed of

11

(1) The rules contained in sections 88 and 89 of the Finance Act 1982 (identification, for the purposes of capital gains tax, of securities disposed of) shall apply for the purposes of this Schedule as they apply for the purposes of capital gains tax.

(2) In paragraph 1(2) of Schedule 6 to the Finance Act 1983 (exclusion of certain securities from provisions relating to election for pooling for purposes of capital gains tax), there shall be added, after paragraph (a)—

; nor (aa) deep discount securities (within the meaning of section 36 of the Finance Act 1984)

Exemption for charities

12

Section 360(2) of the Taxes Act (exemption for charities from tax on chargeable gains) shall apply in relation to tax chargeable by virtue of paragraph 1 above as it applies in relation to tax on chargeable gains.

Consequential amendments

13

In section 254 of the Taxes Act (1osses and charges etc. for which claim to set-off against surplus of franked investment income may be made), the words " or paragraph 3 of Schedule 9 to the Finance Act 1984 " shall be inserted—

(a) at the end of paragraph (b) in subsection (2); and

(b) after the words " 248 of this Act " in subsection (7)(b).

14

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 (f) allowance shall be made for any liability to income tax arising under paragraph 1 of Schedule 9 to the Finance Act 1984 (deep discount securities) on a disposal which is deemed to occur by virtue of paragraph 2(2) of that Schedule.

SCHEDULE 10

Approval of schemes

1

(1) On the application of a body corporate (in this Schedule referred to as " the grantor ") which has established a share option scheme, the Board shall approve the scheme if they are satisfied that it fulfils the requirements of this Schedule; but shall not approve it if it appears to them that there are features of the scheme which are neither essential nor reasonably incidental to the purpose of providing for employees and directors benefits in the nature of rights to acquire shares.

(2) An application under sub-paragraph (1) above shall be made in writing and contain such particulars and be supported by such evidence as the Board may require.

(3) Where the grantor has control of another company or companies, the scheme may be expressed to extend to all or any of the companies of which it has control and in this Schedule a scheme which is expressed so to extend is referred to as a " group scheme ".

(4) In relation to a group scheme the expression "participating company" means the grantor or any other company to which for the time being the scheme is expressed to extend.

(5) Where the provisions of a scheme are approved in pursuance of an application made under this paragraph before 1st January 1985, section 38 of this Act shall apply in relation to any right obtained before 1st July 1985 as if the scheme containing those provisions had always been approved.

2

(1) If, at any time after the Board have approved a scheme, any of the requirements of this Schedule cease to be satisfied or the grantor fails to provide information requested by the Board under paragraph 14 below, the Board may withdraw the approval with effect from that time or such later time as the Board may specify.

(2) If an alteration is made in the scheme at any time after the Board have approved the scheme, the approval shall not have effect after the date of the alteration unless the Board have approved the alteration.

3

If the grantor is aggrieved by—

(a) the failure of the Board to approve the scheme or to approve an alteration in the scheme ; or

(b) the withdrawal of approval;

it may, by notice in writing given to the Board within thirty days from the date on which it is notified of the Board's decision, require the matter to be determined by the Special Commissioners, and the Special Commissioners shall hear and determine the matter in like manner as an appeal.

Eligibility

4

(1) The scheme must not provide for any person to be eligible to participate in it, that is to say to obtain and exercise rights under it—

(a) unless he is a full-time director or qualifying employee of the grantor or, in the case of a group scheme, of a participating company;

(b) at any time when he has, or has within the preceding twelve months had, a material interest in a close company within the meaning of Chapter III of Part XI of the Taxes Act, which is—

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

(ii) a company which has control of such a company or is a member of a consortium which owns such, a company.

(2) Notwithstanding sub-paragraph (1)(a) above, the scheme may provide that a person may exercise rights obtained under it despite having ceased to be a full-time director or qualifying employee.

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

(4) In determining for the purposes of this paragraph whether a person has or has had a material interest in a company, subsection (6) of section 285 of the Taxes Act (interest paid to directors and directors' associates) and paragraph (ii) of the proviso to section 303 (3) of that Act (meaning of " associate ") shall have effect with the substitution for the references in those provisions to 5 per cent, of references to 10 per cent.

Limitation of rights

5

(1) The scheme must provide that no person shall obtain rights under it which would, at the time they are obtained, cause the aggregate market value of the shares which he may acquire in pursuance of rights obtained under the scheme or under any other scheme approved under this Schedule and established by the grantor or by any associated company of the grantor (and not exercised) to exceed or further exceed the appropriate limit.

(2) The appropriate limit is the greater of—

(a) £100,000; or

(b) four times the amount of the relevant emoluments for the current or preceding year of assessment (whichever of those years gives the greater amount).

(3) Where there were no relevant emoluments for the preceding year of assessment, sub-paragraph (2) above shall apply with the following paragraph substituted for paragraph (b)—

(b) four times the amount of the relevant emoluments for the period of twelve months beginning with the first day during the current year of assessment in respect of which there are relevant emoluments

(4) For the purposes of sub-paragraph (1) above, the market value of shares shall be calculated as at the time when the rights in relation to those shares were obtained or, in a case where an agreement relating to them has been made under paragraph 13 below, such earlier time or times as may be provided in the agreement.

(5) For the purposes of sub-paragraph (2) above the relevant emoluments are such of the emoluments of the office or employment by virtue of which the person in question is eligible to participate in the scheme as are liable to be paid under deduction of tax pursuant to section 204 of the Taxes Act (pay-as-you-earn), after deducting from them amounts included by virtue of Chapter II of Part III of the Finance Act 1976.

Scheme shares

6

The scheme must provide for directors and employees to obtain rights to acquire shares (in this Schedule referred to as "scheme shares") which satisfy the requirements of paragraphs 7 to 11 below.

7

Scheme shares must form part of the ordinary share capital of—

(a) the grantor ; or

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

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

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

8

Scheme shares must be—

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

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

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

9

Scheme shares must be—

(a) fully paid up;

(b) not redeemable ; and

10

(1) In determining for the purposes of paragraph 9(c) above whether scheme shares which are or are to be acquired by any person are subject to any restrictions, there shall be regarded as a restriction attaching to the shares any contract, agreement, arrangement or condition by which his freedom to dispose of the shares or of any interest in them or of the proceeds of their sale or to exercise any right conferred by them is restricted or by which such a disposal or exercise may result in any disadvantage to him or to a person connected with him.

(2) Sub-paragraph (1) above does not apply to so much of any contract, agreement, arrangement or condition as contains provisions similar in purpose and effect to any of the provisions of the Model Rules set out in the Model Code for Securities Transactions by Directors of Listed Companies issued by the Stock Exchange in April 1981.

11

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

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

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

(c) in a case where the shares fall within sub-paragraph (c) and do not fall within sub-paragraph (a) of paragraph 8 above, companies which have control of the company whose shares are in question or of which that company is an associated company.

Transfer of rights

12

(1) The scheme must not permit any person obtaining rights under it to transfer any of them but may provide that if such a person dies before exercising them, they may be exercised after, but not later than one year after, the date of his death.

(2) Where the scheme contains the provision permitted by sub-paragraph (1) above and any rights are exercised—

(a) after the death of the person who obtained them ; but

(b) before the expiry of the period of ten years beginning with his obtaining them ;

subsection (3) of section 38 of this Act shall apply with the omission of the reference to the conditions mentioned in subsection (4).

13

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

Information

14

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

(a) to enable the Board to determine—

(i) whether to approve a scheme or withdraw an approval already given; or

(ii) the liability to tax, including capital gains tax, of any person who has participated in a scheme ; and

(b) in relation to the administration of a scheme and any alteration of the terms of a scheme.

Interpretation

15

(1) In this Schedule—

" associated company " has the same meaning as in section 302 of the Taxes Act;

" control" has the same meaning as in section 534 of the Taxes Act;

" grantor " has the meaning given by paragraph 1(1) ;

" group scheme" and, in relation to such a scheme, " participating company" have the meanings given by paragraph 1;

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

" qualifying employee" in relation to a company, means an employee of the company (other than one who is a director of the company or, in the case of a group scheme, of a participating company) who is required, under the terms of his employment, to work for the company for at least twenty hours a week;

" scheme shares " has the meaning given by paragraph 6 ; and

" shares " includes stock.

(2) Section 303(3) of the Taxes Act (meaning of "associate") shall have effect in a case where the scheme is a group scheme, with the substitution of a reference to all the participating companies for the first reference to the company in paragraph (ii) of the proviso to that subsection.

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

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

SCHEDULE 11

Treatment of lettings as a trade for certain purposes

1

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

Losses and pre-trading expenditure

2

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

Expenditure

3

In computing the profits or gains arising from the commercial letting of furnished holiday accommodation which are chargeable to tax under Case VI of Schedule D, such expenditure may be deducted as would be deductible if the letting were a trade and those profits or gains were accordingly to be computed in accordance with the rules applicable to Case I of that Schedule.

Capital gains tax

4

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

5

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

Power to make apportionments

6

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

Adjustments of tax charged

7

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

SCHEDULE 12

PART I — Withdrawal of Allowances

Initial allowances for industrial buildings and structures

1

(1) In section 1(2) of the Capital Allowances Act 1968 (rate of initial allowances for capital expenditure on the construction of industrial buildings or structures) for the words " three-quarters" there shall be substituted,—

(a) with respect to capital expenditure incurred after 13th March 1984 and before 1st April 1985, the words " one half" ; and

(b) with respect to capital expenditure incurred on or after 1st April 1985 and before 1st April 1986, the words "one quarter " ;

and no initial allowance shall be made in respect of expenditure incurred on or after 1st April 1986.

(2) Nothing in sub-paragraph (1) above applies to capital expenditure which—

(a) is incurred after 13th March 1984 and before 1st April 1987 ; and

(b) consists of the payment of sums under a contract entered into on or before 13th March 1984 by the person incurring the expenditure.

(3) Sub-paragraphs (1) and (2) above shall be construed as if they were contained in Part I of the Capital Allowances Act 1968 except that—

(a) expenditure shall not be treated for the purposes of those sub-paragraphs as having been incurred after the date on which it was in fact incurred by reason only of section 1(6) of that Act (expenditure incurred before a trade begins); and

(b) expenditure falling within subsection (1)(b) of section 5 of that Act (purchase price of building or structure bought unused) shall be treated for the purposes of those sub-paragraphs as having been incurred at the latest time when any expenditure falling within subsection (1)(a) of that section (expenditure on the construction of the building or structure) was incurred.

First-year allowances for machinery and plant

2

(1) In section 42(1) of the Finance Act 1971 (rate of first-year allowance for capital expenditure incurred on provision of machinery or plant) for the words " the whole " there shall be substituted,—

(a) with respect to capital expenditure incurred after 13th March 1984 and before 1st April 1985, the words "three-quarters" ; and

(b) with respect to capital expenditure incurred on or after 1st April 1985 and before 1st April 1986, the words "one half " ;

and no first-year allowance shall be made in respect of expenditure incurred on or after 1st April 1986.

(2) Nothing in sub-paragraph (1) above applies to capital expenditure which—

(a) is incurred after 13th March 1984 and before 1st April 1987 ; and

(b) consists of the payment of sums under a contract entered into on or before 13th March 1984 by the person incurring the expenditure or by a person whose contractual obligations that person has assumed with a view to entering into leasing arrangements.

(3) For the purposes of sub-paragraph (2)(b) above, a person incurring expenditure on the provision of machinery or plant (in this sub-paragraph referred to as " the lessor ") shall be taken to have assumed, with a view to entering into leasing arrangements, the contractual obligations of a person who entered into a contract for the provision of that machinery or plant (in this sub-paragraph referred to as " the lessee ") if, and only if,—

(a) arrangements exist under which the lessor will lease the machinery or plant to the lessee ; and

(b) the obligations of the lessee under the contract either have been taken over by the lessor or have been discharged on the lessor's entering into a new contract for the provision of the machinery or plant concerned ;

and, where there is such a new contract as is referred to in paragraph (b) above, sums paid under that contract shall be treated for the purposes of sub-paragraph (2)(b) above and Part II of this Schedule as paid under the contract referred to in that sub-paragraph.

(4) Sub-paragraphs (1) to (3) above shall be construed as if they were contained in Chapter I of Part III of the Finance Act 1971, except that expenditure shall not be treated for the purposes of those sub-paragraphs as having been incurred after the date on which it was in fact incurred by reason only of so much of section 50(4) of that Act as relates to expenditure incurred before a trade begins.

Initial allowances in respect of dwelling-houses let on assured tenancies

3

(1) In paragraph 1(2) of Schedule 12 to the Finance Act 1982 (rate of initial allowance in respect of qualifying dwelling-house on the construction of which capital expenditure is incurred) for the words " three-quarters " there shall be substituted,—

(a) with respect to capital expenditure incurred after 13th March 1984 and before 1st April 1985, the words " one half " ; and

(b) with respect to capital expenditure incurred on or after 1st April 1985 and before 1st April 1986, the words " one quarter " ;

and no initial allowance shall be made in respect of expenditure incurred on or after 1st April 1986.

(2) Nothing in sub-paragraph (1) above applies to capital expenditure which—

(a) is incurred after 13th March 1984 and before 1st April 1987 ; and

(b) consists of the payment of sums under a contract entered into on or before 13th March 1984 by the person incurring the expenditure.

(3) Sub-paragraphs (1) and (2) above shall be construed as if they were contained in Schedule 12 to the Finance Act 1982 except that expenditure falling within sub-paragraph (1)(b) of paragraph 8 of that Schedule (purchase price of building bought unused) shall be treated for the purposes of those sub-paragraphs as having been incurred at the latest time when any expenditure falling within sub-paragraph (1)(a) of that paragraph (expenditure on the construction of the building) was incurred.

PART II — Supplementary

Transitional relief for regional projects

4

(1) The provisions of Part I of this Schedule do not apply to so much of any expenditure as is certified by the Secretary of State for the purposes of this paragraph to be expenditure which, in his opinion, qualifies for a regional development grant or a grant under Part IV of the relevant Order and consists of the payment of sums on a project—

(a) either in an area which on 13th March 1984 was a development area, within the meaning of the Industrial Development Act 1982, or in Northern Ireland ; and

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