Finance Act 1986

• (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

(4A) A trade licence taken out by a person who is not a motor trader or vehicle tester (having satisfied the Secretary of State as mentioned in subsection (1A) above) shall be for a period of six months only. (4B) The Secretary of State may require that a trade licence taken out by a motor trader or vehicle tester who does not hold any existing trade licence shall be for a period of six months only.

• (7) Subsection (5) (fees) shall be amended as follows—

• (a) for the words “four months” and “eleven thirtieths” there shall be substituted respectively “six months” and “eleven twentieths”; and

• (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (8) In subsection (8), in the definition of “motor trader”, for the words from “means” to “this section” there shall be substituted

means— (a) a manufacturer or repairer of, or dealer in, mechanically propelled vehicles, or (b) any person not falling within paragraph (a) above who carries on a business of such description as may be prescribed; and a person shall be treated for the purposes of paragraph (a) above

.

Surrender of licences

5

In section 17(2) of the 1971 Act (surrender of licences) as set out in paragraph 13 of Part I of Schedule 7 to the Act, paragraph (a) and, in paragraph (b), the words from the beginning to “class” shall be omitted.

Removal of fee for duplicate registration document

6

Section 23 of the 1971 Act (regulations with respect to the transfer and identification of vehicles) shall be amended as follows—

• (a) in paragraph (f) (replacement documents) the words “and as to the fee payable in prescribed circumstances in respect of any replacement” shall be omitted; and

• (b) in the section as set out in paragraph 20 of Part I of Schedule 7 to the Act in subsection (1)(e) (replacement books) the words “and for the fee to be paid on the issue of a new registration book” shall be omitted.

Part II

Additional days to be included in duration of certain licences

7

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

Tower wagons used by street lighting authorities etc.

8

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

Trade licences

9

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

Surrender of licences

10

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

Removal of fee for duplicate registration document

11

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

SCHEDULE 3

1

Section 93 of the Customs and Excise Management Act 1979 (warehousing regulations) shall be amended in accordance with paragraphs 2 to 7 below.

2

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

3

The following shall be inserted after subsection (2)(e)—

(ee) providing that goods which are to be warehoused, or which have been lawfully permitted to be removed from a warehouse without payment of duty, are to be treated as if, for all or any prescribed purposes of the customs and excise Acts, they were warehoused;

.

4

The following shall be substituted for subsection (2)(g) (business records)—

(g) imposing or providing for the imposition under the regulations of requirements on the occupier of a warehouse or the proprietor of goods in a warehouse or goods which have been in or are to be deposited in a warehouse to keep and preserve such records as may be prescribed relating to his occupation of the warehouse or proprietorship of the goods; (h) imposing or providing for the imposition under the regulations of requirements on such an occupier or proprietor to preserve all other records kept by him for the purposes of any relevant business or activity, except any records which (or records of a class which) the Commissioners specify as not needing preservation; (j) imposing or providing for the imposition under the regulations of requirements on such an occupier or proprietor to produce or cause to be produced any records which he has been required to preserve by virtue of paragraph (g) or (h) above to an officer when required to do so for the purpose of allowing the officer to inspect them, to copy or take extracts from them or to remove them at a reasonable time and for a reasonable period; (k) imposing or providing for the imposition under the regulations of requirements on such an occupier or proprietor to furnish the Commissioners with any information relating to any relevant business or activity which they specify as information which they think it is necessary or expedient for them to be given for the protection of the revenue; (l) allowing a requirement to preserve any records which has been imposed by virtue of paragraph (h) above to be discharged by the preservation in a form approved by the Commissioners of the information contained in the records.

5

The following shall be inserted at the end of subsection (2)—

In this subsection ”relevant business or activity’ means, in relation to an occupier or proprietor, any business or activity of his which includes occupation of a warehouse or (as the case may be) proprietorship of goods in a warehouse or goods which have been in or are to be deposited in a warehouse, where the goods are of a kind in which the proprietor trades or deals.

6

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

7

The following shall be substituted for subsection (7) (interpretation)—

(7) In this section— (a) “prescribed” means prescribed by warehousing regulations; (b) references to goods which are to be warehoused are references to goods which have been entered for warehousing on importation, which have been removed from a producer’s premises for warehousing without payment of duty or which are to be warehoused on drawback.

8

In consequence of the amendments made by the preceding provisions of this Schedule, the following provisions of section 15 of the Alcoholic Liquor Duties Act 1979 (which relate to regulations about distillers’ warehouses) shall cease to have effect—

• (a) subsections (6A) and (6B), and

• (b) the words “restriction or requirement” in subsection (7) and in subsection (8).

SCHEDULE 4

Part I — Amendments of the Betting and Gaming Duties Act 1981

General betting duty and pool betting duty

1

• (1) In section 1 (general betting duty) in subsection (1) for the words “Great Britain” there shall be substituted “the United Kingdom”.

• (2) In subsection (3) of that section after the words “Act 1963” there shall be inserted the words “or Article 37 of the Betting, Gaming, Lotteries and Amusements (Northern Ireland) Order 1985”.

2

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

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

3

• (1) In section 9 (prohibitions for protection of revenue) for the words “Great Britain”, wherever they occur, there shall be substituted “the United Kingdom”.

• (2) In subsection (3)(a) of that section the words “Northern Ireland or” and “of the Parliament of Northern Ireland or, as the case may be,” shall be omitted.

4

In section 12(4) (interpretation of provisions relating to betting duties)—

• (a) before the definition of “meeting” there shall be inserted the following definitions—

“betting office licence”— (a) in Great Britain, has the meaning given by section 9(1) of the Betting, Gaming and Lotteries Act 1963, and (b) in Northern Ireland, means a bookmaking office licence as defined in Article 2(2) of the Betting, Gaming, Lotteries and Amusements (Northern Ireland) Order 1985; “bookmaker”— (a) in Great Britain, has the meaning given by section 55(1) of the said Act of 1963, and (b) in Northern Ireland, has the meaning given by Article 2(2) of the said Order of 1985; and (in either case) the expression ”bookmaking’ shall be construed accordingly; “bookmaker’s permit”— (a) in Great Britain, has the meaning given by section 2(1) of the said Act of 1963, and (b) in Northern Ireland, means a bookmaker’s licence as defined in Article 2(2) of the said Order of 1985;

;

• (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (c) the words from “and ”betting office licence”’to the end shall be omitted.

Bingo duty

5

In section 17(1) (charge of bingo duty) for the words “Great Britain” there shall be substituted “the United Kingdom”.

6

In section 19(2) (bingo played in more than one place)—

• (a) for the words “Great Britain”, in both places where they occur, there shall be substituted “the United Kingdom”; and

• (b) the words “Northern Ireland or” and the words “the Parliament of Northern Ireland or, as the case may be,” shall be omitted.

7

In section 20(2) (interpretation of provisions relating to bingo duty) the definition of “Great Britain” shall be omitted and after the definition of “the promoter” there shall be inserted the following definition—

”United Kingdom’ includes the territorial waters of the United Kingdom;

.

General

8

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

9

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

10

• (1) In section 35, for subsection (3) (extent) there shall be substituted—

(3) The following provisions of this Act do not extend to Northern Ireland— (a) sections 13 to 16; (b) sections 29 and 30; (c) Schedule 2; (d) paragraph 15 of Schedule 4; and sections 27 and 31 do not extend there in their application to the enactment relating to gaming licence duty.

• (2) Subsection (4) of that section shall be omitted.

Administration of betting duties

11

• (1) In Schedule 1 (betting duties) ....

• (2) In paragraph 15 of that Schedule—

• (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (c) after that sub-paragraph there shall be inserted the following sub-paragraphs—

(5) Subject to sub-paragraph (6) below, where under sub-paragraph (1) above a court orders that a betting office licence held by a person in respect of premises in Northern Ireland shall be forfeited and cancelled, no court of summary jurisdiction shall entertain an application by that person for the grant (or provisional grant) of a new betting office licence in respect of those premises or any other premises situated in the same petty sessions district as those premises made less than twelve months after that forfeiture and cancellation. (6) Sub-paragraph (5) above— (a) shall not prejudice the right of such a person as is mentioned in that sub-paragraph to seek the renewal of any betting office licence (other than that which is forfeited) which he holds; and (b) applies notwithstanding anything in Article 12 of the Betting, Gaming, Lotteries and Amusements (Northern Ireland) Order 1985.

.

Exemptions from, and administration of, bingo duty

12

• (1) In Schedule 3 in paragraph 2(1) (small-scale bingo) after the words “Act 1968” there shall be inserted the words “or under Chapter II of Part III of the Betting, Gaming, Lotteries and Amusements (Northern Ireland) Order 1985”.

• (2) In paragraph 5 of that Schedule (small-scale amusements provided commercially) in sub-paragraph (1) after paragraph (a) there shall be inserted the following paragraph—

(aa) on any premises in Northern Ireland in respect of which an amusement permit under Article 111 of the Betting, Gaming, Lotteries and Amusements (Northern Ireland) Order 1985 or a pleasure permit under Article 157 of that Order has been granted;

.

• (3) In paragraph 10(2) of that Schedule (registration of bingo-promoters) after the words “Act 1968” there shall be inserted the words “or under Chapter II of Part III of the Betting, Gaming, Lotteries and Amusements (Northern Ireland) Order 1985”.

Part II — Consequential Amendments of Northern Ireland Legislation

13

In section 287(1)(a) of the Companies Act (Northern Ireland) 1960 (preferential payments), for head (iv) there shall be substituted the following head—

(iv) any amount due from the company at the relevant date by way of general betting duty or bingo duty, or by virtue of section 12(1) of the Betting and Gaming Duties Act 1981, which became due within 12 months next before that date;

.

14

In Article 19(a) of the Bankruptcy Amendment (NorthernIreland) Order 1980 (preferential payments), for head (v) there shall be substituted the following head—

(v) any amount due from the bankrupt at the relevant date by way of general betting duty or bingo duty, or by virtue of section 12(1) of the Betting and Gaming Duties Act 1981, which became due within 12 months next before that date;

.

15

• (1) The Betting, Gaming, Lotteries and Amusements (Northern Ireland) Order 1985 shall be amended as follows.

• (2) In Article 7, after paragraph (4), there shall be inserted the following paragraph—

(4A) In considering the fitness of any applicant to hold a bookmaker’s licence, the court shall have regard to— (a) any failure of the applicant or of any other person mentioned in paragraph (3)(b); and (b) where the applicant is a body corporate, any failure of any director of the applicant or of any other person mentioned in paragraph (4); to pay any amount due from him or it by way of general betting duty or pool betting duty.

.

• (3) In Article 61, after paragraph (4) there shall be inserted the following paragraph—

(4A) In considering the fitness of any applicant to hold a bingo club licence, a court shall have regard to— (a) any failure of the applicant or of any other person mentioned in paragraph (3)(b); and (b) where the applicant is a body corporate, any failure of any director of the applicant or of any other person mentioned in paragraph (4); to pay any amount due from him or it by way of bingo duty.

.

• (4) In Article 174 (registration of licences, etc)—

• (a) in paragraph (2), after head (g) there shall be inserted the following head—

(gg) particulars of the forfeiture and cancellation of any bookmaking office licence in consequence of an order made under paragraph 15(1) of Schedule 1 to the Betting and Gaming Duties Act 1981;

;

• (b) in paragraph (4), after head (b) there shall be inserted the following—

or (c) orders the forfeiture and cancellation of a book-making office licence under paragraph 15(1) of Schedule 1 to the Betting and Gaming Duties Act 1981;

.

• (5) In the following provisions, namely—

• (a) Article 2(16), in so far as it is relevant for the purposes of the provisions mentioned in heads (b) and (c);

• (b) Article 185(3) and Schedule 7, in so far as those provisions relate to a bookmaker’s licence, a bookmaking office licence or a bingo club licence; and

• (c) Schedules 1 to 6 and Schedules 9 and 10;

any reference to the sub-divisional commander of the police sub-division shall be construed as including a reference to the Collector of Customs and Excise for the area, and any reference to the police sub-division shall be construed as including a reference to the area for which the Collector is responsible.

Part III — Subordinate Legislation

16

• (1) Any regulations made under Schedule 1 (betting duties) to the Betting and Gaming Duties Act 1981, in so far as they have effect immediately before the betting commencement date, shall have effect on and after that date in relation to Northern Ireland as if—

• (a) that Act extended to Northern Ireland at the time when the regulations were made, and

• (b) the regulations were made in relation to Northern Ireland as well as to Great Britain.

• (2) Any orders or regulations made under Schedule 3 (bingo duty) to that Act, in so far as they have effect immediately before the bingo commencement date, shall have effect on and after that date in relation to Northern Ireland as if—

• (a) that Act extended to Northern Ireland at the time when the orders or regulations were made, and

• (b) the orders or regulations were made in relation to Northern Ireland as well as to Great Britain.

SCHEDULE 5

General provisions as to payment of duty on excise licences

1

In section 101 of the Customs and Excise Management Act 1979 (grant of excise licences)—

• (a) in subsection (1), for the words “the appropriate duty” there shall be substituted “any appropriate duty”; and

• (b) in subsection (3), for the words “taken out” there shall be substituted “held” and for the words “in any one licence year” there shall be substituted “at any one time”.

2

In sections 102(1) and 104(3) of the Customs and Excise Management Act 1979 (payment for and transfer of excise licences), for the words “the duty” there shall be substituted “any duty”.

Licences to manufacture spirits

3

• (1) Section 12 of the Alcoholic Liquor Duties Act 1979 (distillers’ licences) shall be amended in accordance with this paragraph.

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

• (3) At the end of subsection (5) there shall be added the words “and where the largest still so used on any premises in respect of which a licence is held is of less than that capacity, the Commissioners may revoke the licence or attach to it such conditions as they see fit to impose”.

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

Licences relating to hydrocarbon oil etc.

4

In Schedule 3 to the Hydrocarbon Oil Duties Act 1979 (subjects for regulations under section 21 of that Act), in paragraphs 2, . . . and 18 (which relate to licences for the production etc. of hydrocarbon oil, petrol substitutes and road fuel gas respectively) for the words “Fixing the date of expiration of any such licence” there shall be substituted “Specifying the circumstances in which any such licence may be surrendered or revoked”.

Licences to manufacture mechanical lighters

5

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

SCHEDULE 6

1

This Schedule has effect to determine the consideration referred to in subsection (7) of section 9 of this Act in respect of any one vehicle; and in this Schedule—

• (a) “the principal section” means that section;

• (b) “the prescribed accounting period” means that in respect of supplies in which the consideration is to be determined; and

• (c) “the individual” means the individual to whom those supplies are treated as made.

2

• (1) . . .Where the prescribed accounting period is a period of three months, the consideration appropriate to any vehicle is that specified in relation to a vehicle of the appropriate description in the second column of Table A below.

• (2) . . .Where the prescribed accounting period is a period of one month, the consideration appropriate to any vehicle is that specified in relation to a vehicle of the appropriate description in the third column of Table A below.

Description of vehicle (Type of engine and cylinder capacity in cubic centimetres)	3 month period	1 month period
	£	£
Diesel engine	Diesel engine	Diesel engine
2000 or less	145	48
More than 2000	187	62
Any other type of engine	Any other type of engine	Any other type of engine
1400 or less	160	53
More than 1400 but not more than 2000	202	67
More than 2000	300	100

3

4

The Treasury may by order taking effect from the beginning of any prescribed accounting period beginning after the order is made substitute a different Table for either of the Tables set out above.

5

• (1) Where, by virtue of subsection (8) of the principal section, subsection (7) of that section has effect as if, in the prescribed accounting period, supplies of fuel for private use made in respect of two or more vehicles were made in respect of only one vehicle, the consideration appropriate shall be determined as follows—

• (a) if each of the two or more vehicles falls within the same description of cubic capacity specified in Table A or Table B above, the Table in question shall apply as if only one of the vehicles were to be considered throughout the whole period; and

• (b) if one of those vehicles falls within a description of cubic capacity specified in those Tables which is different from the other or others the consideration shall be the aggregate of the relevant fractions of the consideration appropriate for each description of vehicle under the Table in question.

• (2) For the purposes of sub-paragraph (1)(b) above, the relevant fraction in relation to any vehicle is that which the part of the prescribed accounting period in which fuel for private use was supplied in respect of that vehicle bears to the whole of that period.

6

• (1) In the case of a vehicle having an internal combustion engine one or more reciprocating pistons, its cubic capacity for the purposes of Tables A and B above is the capacity of its engine as calculated for the purposes of the Vehicles (Excise) Act 1971 or the Vehicles (Excise) Act (Northern Ireland) 1972.

• (2) In the case of a vehicle not falling within sub-paragraph (1) above, its cubic capacity shall be such as may be determined for the purposes of Tables A and B above by order by the Treasury.

SCHEDULES 7, 8. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART I — Qualifying expenditure

1

• (1) In the principal section "qualifying expenditure", in relation to a chargeable period of a charity, means, subject to sub-paragraph (3) below, expenditure incurred in that period for charitable purposes only.

• (2) For the purposes of the principal section (and sub-paragraph (1) above), where expenditure which is not actually incurred in a particular chargeable period properly falls to be charged against the income, of that chargeable period as being referable to commitments (whether or not of a contractual nature) which the charity has entered into before or during that period, it shall be treated as incurred in that period.

• (3) A payment made (or to be made) to a body situated outside the United Kingdom shall not be qualifying expenditure by virtue of this Part of this Schedule unless the charity concerned has taken such steps as may be reasonable in the circumstances to ensure that the payment will be applied for charitable purposes.

PART II — Qualifying Investments

2

Investments specified in any of the following paragraphs of this Part of this Schedule are qualifying investments for the purposes of the principal section.

3

Any investment falling within Part I, Part II, apart from paragraph 13 (mortgages etc.), or Part III of Schedule I to the Trustee Investments Act 1961.

4

Any investment in a common investment fund established under section 22 of the Charities Act 1960 or section 25 of the Charities Act (Northern Ireland) 1964 or in any similar fund established for the exclusive benefit of charities by or under any enactment relating to any particular charities or class of charities.

5

Any interest in land, other than an interest held as security for a debt of any description.

6

Shares in, or securities of, a company which are quoted on a recognised stock exchange (within the meaning of section 535 of the Taxes Act), or which are dealt in on the Unlisted Securities Market.

7

• (1) Units, or other shares of the investments subject to the trusts, of a unit trust scheme within the meaning of the Financial Services Act 1986.

• (2) Until the passing of the Financial Services Act 1986, the reference in sub-paragraph (1) above to that Act shall have effect as a reference to the Prevention of Fraud (Investments) Act 1958.

8

• (1) Deposits with a recognised bank or licensed institution (within the meaning of the Banking Act 1979) in respect of which interest is payable at a commercial rate.

• (2) A deposit mentioned in sub-paragraph (1) above is not a qualifying investment if it is made as part of an arrangement under which a loan is made by the recognised bank or licensed institution to some other person.

9

Certificates of deposit as defined in section 55(3) of the Finance Act 1968.

10

• (1) Any loan or other investment as to which the Board are satisfied, on a claim made to them in that behalf, that the loan or other investment is made for the benefit of the charity and not for the avoidance of tax (whether by the charity or any other person).

• (2) The reference in sub-paragraph (1) above to a loan includes a loan which is secured by a mortgage or charge of any kind over land.

PART III — Qualifying Loans

11

For the purposes of the principal section, a loan which is not made by way of investment is a qualifying loan if it consists of—

• (a) a loan made to another charity for charitable purposes only; or

• (b) a loan to a beneficiary of the charity which is made in the course of carrying out the purposes of the charity; or

• (c) money placed on a current account with a recognised bank or licensed institution (within the meaning of the Banking Act 1979) otherwise than as part of such an arrangement as is mentioned in paragraph 8(2) above; or

• (d) any other loan as to which the Board are satisfied, on a claim made to them in that behalf, that the loan is made for the benefit of the charity and not for the avoidance of tax (whether by the charity or any other person).

PART IV — Attribution of Excess Non-Qualifying Expenditure to earlier Chargeable Periods

12

This part of this Schedule applies in the circumstances specified in subsection (6) of the principal section; and in this Part of this Schedule—

• (a) "the primary period" means the chargeable period of the charity concerned in which there is such an excess as is mentioned in that subsection;

• (b) "unapplied non-qualifying expenditure" means so much of the excess referred to in that subsection as does not exceed the non-qualifying expenditure of the primary period; and

• (c) "earlier period", in relation to an amount of unapplied nonqualifying expenditure, means any chargeable period of the charity concerned which ended not more than six years before the end of the primary period.

13

• (1) So much of the unapplied non-qualifying expenditure as is not shown by the charity to be the expenditure of non-taxable sums received by the charity in the primary period shall be treated in accordance with paragraph 14 below as non-qualifying expenditure of earlier periods.

• (2) In sub-paragraph (1) above "non-taxable sums" means donations, legacies and other sums of a similar nature which, apart from any provision of the enactments conferring exemption from tax, are not within the charge to tax.

14

• (1) Where, in accordance with paragraph 13 above, an amount of unapplied non-qualifying expenditure (in this paragraph referred to as "the excess expenditure") falls to be treated as non-qualifying expenditure of earlier periods.—

• (a) it shall be attributed only to those earlier periods (if any) in which, apart from the attribution (but taking account of any previous operation of this paragraph) the relevant income and gains exceed the aggregate of the qualifying and non-qualifying expenditure incurred in that period; and

• (b) the amount to be attributed to any such earlier period shall not be greater than the excess of that period referred to in paragraph (a) above.

• (2) Where there is more than one earlier period to which the excess expenditure can be attributed in accordance with sub-paragraph (1) above, it shall be attributed to later periods in priority to earlier periods.

• (3) In so far as any of the excess expenditure cannot be attributed to earlier periods in accordance with this paragraph, it shall be disregarded for the purposes of subsection (6) of the principal section (and this Part of this Schedule).

15

All such adjustments shall be made, whether by way of the making of assessments or otherwise, as are required in consequence of the provisions of this Part of this Schedule.

SCHEDULE 8

1

• (1) The Treasury may make regulations providing that an individual who invests under a plan shall be entitled to relief from income tax and capital gains tax in respect of the investments.

• (2) The regulations shall set out the conditions subject to which plans are to operate and the extent to which investors are to be entitled to relief from tax.

• (3) In particular, the regulations may—

• (a) specify the description of individuals who may invest and the kind of investments they may make;

• (b) specify maximum investment limits and minimum periods for which investments are to be held;

• (c) provide that investments are to be held by persons (plan managers) on behalf of investors;

• (d) specify how relief from tax is to be claimed by, and granted to, investors or plan managers on their behalf;

• (e) provide that plans and plan managers must be such as are approved by the Board;

• (f) specify the circumstances in which approval may be granted and withdrawn.

2

• (1) The regulations may include provision that in prescribed circumstances—

• (a) an investor under a plan shall cease to be, and be treated as not having been, entitled to relief from tax in respect of the investments, and

• (b) he or the plan manager concerned (depending on the terms of the regulations) shall account to the Board for tax from which relief has already been given on the basis that the investor was so entitled.

• (2) The regulations may include provision that an investor under a plan or the plan manager concerned (depending on the terms of the regulations) shall account to the Board for tax from which relief has been given in circumstances such that the investor was not entitled to it.

• (3) The regulations may include provision adapting, or modifying the effect of, any enactment relating to income tax or to capital gains tax in order to—

• (a) secure that investors under plans are entitled to relief from tax in respect of investments;

• (b) secure that investors under plans cease to be, and are treated as not having been, so entitled;

• (c) secure that investors under plans or plan managers account for tax as mentioned in sub-paragraph (1) or (2) above.

• (4) The regulations may provide that a person who is, or has at any time been, either an investor under a plan or a plan manager—

• (a) shall comply with any notice which is served on him by the Board and which requires him within a prescribed period to make available for the Board's inspection documents (of a prescribed kind) relating to a plan or to investments which are or have been held under it;

• (b) shall, within a prescribed period of being required to do so by the Board, furnish to the Board information (of a prescribed kind) about a plan or about investments which are or have been held under it.

• (5) The regulations may include provision generally for the purpose of bringing plans into existence, and generally for the purpose of the administration of plans and the administration of income tax, corporation tax and capital gains tax in relation to them.

• (6) The words "Regulations under Schedule 8 to the Finance Act 1986" shall be added at the end of each column in the Table in section 98 of the Taxes Management Act 1970 (penalties for failure to furnish information etc.).

3

• (1) The power to make regulations under this Schedule shall be exercisable by statutory instrument subject to annulment in pursuance of a resolution of the House of Commons.

• (2) In this Schedule "prescribed" means prescribed by the regulations.

SCHEDULE 9

Part I

1

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

Relevant period

2

In paragraph 2(7)(b), after "5" there shall be inserted "5A, 5B, 5C".

Research and development companies

3

In paragraph 2A—

• (a) in sub-paragraph (1)(a), for the words from "from" to the end there shall be substituted the words "to be carried on by the company or by any subsidiary of the company and from which it is intended that a qualifying trade (to be so carried on) will be derived; or";

• (b) in sub-paragraph (2) for the words from "at the time" to "by it; or" there shall be substituted the words "by the company or by any subsidiary of the company on the date on which the shares are issued, or begins so to be carried on immediately thereafter, and from which it is intended that a qualifying trade (to be so carried on) will be derived; or";

• (c) in sub-paragraph (3), after the word "company" there shall be inserted the words "or (as the case may be) subsidiary"; and

• (d) in sub-paragraph (4), the words "and the words 'by the company' shall be omitted" shall be added at the end.

4

• (1) After paragraph 2A there shall be inserted the following paragraph—

(2B) (1) Where eligible shares in a company are issued for the purpose of enabling the company to raise money for oil exploration— (a) to be carried on by the company, or by any subsidiary of the company; and (b) from which it is intended that a qualifying trade (to be so carried on) will be derived; paragraph 2 above shall apply in relation to the company with the modifications set out in this paragraph. (2) For paragraph (b) of sub-paragraph (1) there shall be substituted the following paragraphs— (b) those shares are issued to him for the purpose of raising money for oil exploration which— (i) is being carried on by the company, or by any subsidiary of the company, on the date on which the shares are issued; or (ii) begins so to be carried on immediately thereafter; and from which it is intended that a qualifying trade (to be so carried on) will be derived; (c) throughout the period of three years beginning with that date, the company, or any subsidiary of the company, holds an exploration licence which was granted to it, or to another such subsidiary; (d) the exploration is carried out solely within the area to which the licence applies; and (e) on the date on which the shares are issued, neither the company nor any subsidiary of the company holds an appraisal licence or a development licence relating to that area or any part of that area. (3) After sub-paragraph (1) there shall be inserted the following sub-paragraph— (1A) Where, at any time after the issue of the shares, but before the end of the period mentioned in paragraph (c) of sub-paragraph (2) above, the company, or any subsidiary of the company, comes to hold an appraisal licence or development licence which relates to the area, or any part of the area, to which the exploration licence relates, the exploration licence and that other licence shall be treated for the purposes of that paragraph as a single exploration licence. (4) For sub-paragraph (4) there shall be substituted the following sub-paragraph— (4) The relief shall be given on a claim and shall not be allowed unless and until the company has carried on the exploration for four months (5) In sub-paragraph (5), for the word 'trade' there shall be substituted the word 'exploration'. (6) In sub-paragraph (7)(b), for the words from 'either' to the end there shall be substituted the words 'three years after that date'. (7) A trade which consists to any substantial extent of oil extraction activities shall, if it would be a qualifying trade were it not for paragraph 6(2)(d) below, be treated as a qualifying trade for the purposes of this paragraph (including those of paragraph 2(1)(b) as modified).

• (2) This paragraph has effect in relation to shares issued at any time after the passing of" this Act.

Individuals qualifying for relief

5

• (1) In paragraph 4, the following sub-paragraph shall be added at the end—

(5) An individual who is at any time performing duties which are treated by virtue of section 184(3)(a) of the Taxes Act (Crown employees serving overseas) as performed in the United Kingdom shall be treated, for the purposes of this paragraph, as resident and ordinarily resident in the United Kingdom at that time.

• (2) This paragraph shall have effect in relation to shares issued on or after 6th April 1986.

Qualifying companies

6

• (1) Paragraph 5 shall be amended as follows.

• (2) In sub-paragraph (1) the words "Subject to paragraph 5A below" shall be inserted at the beginning.

• (3) After sub-paragraph (3) there shall be inserted the following subparagraph—

(3A) Where a company has one or more qualifying subsidiaries, it shall not be a qualifying company if the qualifying trade or trades carried on by the company and its subsidiaries, taken as a whole, are not carried out wholly or mainly in the United Kingdom

.

• (4) Sub-paragraphs (8) to (11) shall cease to have effect.

7

The following paragraphs shall be inserted after paragraph 5—

(5A) (1) Subject to paragraph 5C below, a company is not a qualifying company if at any time during the relevant period— (a) the value of the interests in land held by the company at that time; or (b) where lower, the value of the interests in land which were held by the company immediately after the issue of the shares (adjusted in accordance with paragraph 5B below); is greater than half the value of the company's assets as a whole. (2) For the purposes of this paragraph, the value of the interests in land held by a company on any date shall be arrived at by first aggregating the market value on that date of each of those interests and then deducting— (a) the amount of any debts of the company which are secured on any of those interests (including any debt secured by a floating charge on property which comprises any of those interests); (b) the amount of any unsecured debts of the company which do not fall due for payment before the expiry of the period of twelve months beginning with that date; and (c) the amount paid up in respect of those shares of the company (if any) which carry a present or future preferential right to the company's assets on its winding up. (3) For the purposes of this paragraph, the value of a company's assets as a whole shall be arrived at by first aggregating the market value of each of those assets and then deducting the amount of the debts and liabilities of the company. (4) For the purposes of sub-paragraph (3) above, the amount paid up in respect of those shares of a company (if any) which carry a present or future preferential right to the company's assets on its winding up shall be treated as a debt of the company, but otherwise a company's share capital, share premium account and reserves shall not be treated for those purposes as debts or liabilities of the company. (5) In this paragraph "interest in land" means any estate or interest in land, any right in or over land or affecting the use or disposition of land, and any right to obtain such an estate, interest or right from another which is conditional on that other's ability to grant the estate, interest or right in question, except that it does not include— (a) the interest of a creditor (other than a creditor in respect of a rentcharge) whose debt is secured by a mortgage, an agreement for a mortgage or a charge of any kind over land; or (b) in Scotland, the interest of a creditor in a charge or security of any kind over land. (6) In arriving at the value of any interest in land for the purposes of this paragraph— (a) it shall be assumed that there is no source of mineral deposits in the land of a kind which it would be practicable to exploit by extracting them from underground otherwise than by means of opencast mining or quarrying; and (b) any borehole on the land shall be disregarded if it was made in the course of oil exploration. (7) Where a company is a member of a partnership which holds any interest in land— (a) that interest shall, for the purposes of this paragraph and paragraphs 5B and 5C below, be treated as an interest in land held by the company; but (b) its value at any time shall, for those purposes, be taken to be such fraction of its value (apart from this subparagraph) as is equal to the fraction of the assets of the partnership to which the company would be entitled if the partnership were dissolved at that time. (8) Where a qualifying company has one or more subsidiaries, the company and its subsidiaries ("the group") shall be treated as a single company for the purposes of this paragraph and paragraphs 5B and 5C below; but any debt owed by, or liability of, one member of the group to another shall be disregarded for those purposes. (9) The Treasury may by order made by statutory instrument amend sub-paragraph (1) above by substituting a different fraction for the fraction for the time being specified there; and any such order shall be subject to annulment in pursuance of a resolution of the Commons House of Parliament. (10) Where a company has ceased to be a qualifying company in consequence of the operation of this paragraph, section 62(6) of Chapter II shall apply as if the relief was withdrawn in consequence of an event which occurred at the time when the company so ceased to be a qualifying company. (5B) (1) For the purposes of paragraph 5A(1)(b) above, the value of the interests in land held by a company immediately after the issue of the shares in question ("the original interests") shall be adjusted by— (a) adding— (i) the cost of any interests in land subsequently acquired by the company ("the later interests"); and (ii) any expenditure (whenever payable) incurred by the company wholly and exclusively in enhancing the value of any of the original or later interests; (b) deducting any consideration for the disposal by the company of any of the original or later interests or for the grant by the company of any interest in land out of any of those interests; and (c) deducting any consideration otherwise derived by the company from its ownership of any of the original or later interests. (2) Any sum which is received by a company by way of rent, or which is attributable to the use of any premises by the company, shall be disregarded for the purposes of sub-paragraph (1)(c) above. (3) For the purposes of this paragraph— (a) the cost of an interest in land acquired by a company shall be taken to be the amount or value of the consideration given by the company, or on its behalf, wholly and exclusively for the acquisition of the interest; (b) consideration shall be brought into account without any discount for the postponement of the right to receive any part of it; and (c) the grant of an interest in land out of any of the original interests shall be treated as a disposal of the original interest in question. (4) Where— (a) the interest of a company as lessee under a lease ("the lease") falls to be valued at any time for the purposes of paragraph 5A above or the cost of acquiring that interest falls to be calculated for the purposes of this paragraph; and (b) the aggregate amount of the rent payable by the lessee under the lease before the end of the relevant period exceeds that which would be so payable under a lease of the premises at a full market rent (but otherwise on the same terms and conditions as the lease); the value of the company's interest at that time shall be calculated on the assumption that the aggregate amount payable as mentioned in paragraph (b) above is a nominal amount and, where the interest was acquired after the issue of the shares in question, it shall be assumed that the company paid the appropriate premium when acquiring the interest. (5) In determining, for the purposes of this paragraph, the consideration for the disposal or acquisition of an interest in land, no account shall be taken in the first instance of any contingent liability assumed by the company or by any other person. (6) If it is subsequently shown to the satisfaction of the Board that a contingent liability which was not taken into account in determining the consideration for a disposal or acquisition has become enforceable and is being or has been enforced, such adjustment, whether by way of a further assessment or the discharge or repayment of tax or otherwise, shall be made as is required in consequence. (7) Where the relief obtainable under sub-paragraph (6) above requires a discharge or repayment of tax, it shall be given on a claim to the Board and such a claim may be made at any time. (5C) (1) Where a company raises any amount through the issue of eligible shares, paragraph 5A above— (a) shall not have effect to deny relief in relation to those shares if the aggregate of that amount and of all other amounts (if any) so raised within the period of twelve months ending with the date of that issue does not exceed £50,000; and (b) where that aggregate exceeds £50,000, shall have effect to deny relief only in relation to the excess. (2) Where— (a) at any time within the relevant period, the company in question or any of its subsidiaries carries on any trade or part of a trade in partnership, or as a party to a joint venture, with one or more other persons; and (b) that other person, or at least one of those other persons, is a company; the reference to £50,000, both in sub-paragraph (1)(a) and (1)(b) above, shall have effect as if it were a reference to— $$£50,0001+A$ "A" being the total number of companies (apart from the company in question or any of its subsidiaries) which are members of any such partnership or parties to any such joint venture during the relevant period.$ (3) Where paragraph 5A, as read with this paragraph, requires a restriction to be placed on the relief given on claims in respect of shares issued to two or more individuals, the available relief shall be divided between them in proportion to the amounts which have been respectively subscribed by them for the shares to which their claims relate and which would, apart from the restriction, be eligible for the relief. (4) A claimant who is dissatisfied with the manner in which the available relief is divided under this paragraph between him and any other claimant or claimants may apply to the appropriate Commissioners who shall, after giving the other claimant or claimants an opportunity to appear and be heard or to make representations in writing, determine the question for all the claimants in the same way as an appeal. (5) In this paragraph "the appropriate Commissioners" means— (a) in a case where the same body of General Commissioners has jurisdiction with respect to all the claimants, those Commissioners, unless all the claimants agree that the question should be determined by the Special Commissioners; (b) in a case where different bodies of General Commissioners have jurisdiction with respect to the claimants, such of those bodies as the Board may direct, unless all the claimants agree that the question should be determined by the Special Commissioners; and (c) in any other case, the Special Commissioners. (6) In calculating the aggregate mentioned in sub-paragraph (1)(a) above in respect of any period of twelve months which begins on or before 18th March 1986, any amount raised by the issue of eligible shares on or before that date shall be disregarded.

Qualifying trades

8

• (1) Paragraph 6 shall be amended as follows.

• (2) For sub-paragraph (2) there shall be substituted the following sub-paragraph—

(2) The trade must not at any time in the relevant period consist of one or more of the following activities if that activity amounts, or those activities when taken together amount, to a substantial part of the trade— (a) dealing in commodities, shares, securities, land or futures; (b) dealing in goods otherwise than in the course of an ordinary trade of wholesale or retail distribution; (c) banking, insurance, money-lending, debt-factoring, hire-purchase financing or other financial activities; (d) oil extraction activities; (e) leasing (including letting ships on charter or other assets on hire) or receiving royalties or licence fees; (f) providing legal or accountancy services; or (g) providing services or facilities for any trade carried on by another person which consists to any substantial extent of activities within any of paragraphs (a) to (f) above and in which a controlling interest is held by a person who also has a controlling interest in the trade carried on by the company.

• (3) For sub-paragraph (2B) there shall be substituted the following sub-paragraphs—

(2B) A trade shall not be treated as failing to comply with this paragraph by reason only of its consisting of letting ships, other than oil rigs or pleasure craft, on charter if— (a) every ship let on charter by the company carrying on the trade is beneficially owned by the company; (b) every ship beneficially owned by the company is registered in the United Kingdom; (c) throughout the relevant period the company is solely responsible for arranging the marketing of the services of its ships; and (d) the conditions mentioned in sub-paragraph (2C) below are satisfied in relation to every letting on charter by the company, but where any of the requirements mentioned in paragraphs (a) to (d) above are not satisfied in relation to any lettings of such ships, the trade shall not thereby be treated as failing to comply with this paragraph if those lettings and any other activity of a kind falling within paragraph 6(2) above do not, when taken together, amount to a substantial part of the trade. (2C) The conditions are that— (a) the letting is for a period not exceeding twelve months and no provision is made at any time (whether in the lease or otherwise) for extending it beyond that period otherwise than at the option of the lessee; (b) during the period of the letting there is no provision in force (whether made in the lease or otherwise) for the grant of a new letting to end, otherwise than at the option of the lessee, more than twelve months after that provision is made; (c) the letting is by way of a bargain made at arm's length between the company and a person who is not connected with it; (d) under the terms of the charter the company is responsible as principal— (i) for taking, throughout the period of the charter, management decisions in relation to the ship, other than those of a kind generally regarded by persons engaged in trade of the kind in question as matters of husbandry; and (ii) for defraying all expenses in connection with the ship throughout that period, or substantially all such expenses, other than those directly incidental to a particular voyage or to the employment of the ship during that period; and (e) no arrangements exist by virtue of which a person other than the company may be appointed to be responsible for the matters mentioned in paragraph (d) above on behalf of the company; but this sub-paragraph shall have effect, in relation to any letting between the company in question and its subsidiary, or between it and another company of which it is a subsidiary or between it and a company which is a subsidiary of the same company of which it is a subsidiary, as if paragraph (c) were omitted.

• (4) For sub-paragraph (4) there shall be substituted the following sub-paragraphs—

(4) For the purposes of sub-paragraph (2)(b) above— (a) a trade of wholesale distribution is one in which the goods are offered for sale and sold to persons for resale by them, or for processing and resale by them, to members of the general public for their use or consumption; (b) a trade of retail distribution is one in which the goods are offered for sale and sold to members of the general public for their use or consumption; (c) a trade is not an ordinary trade of wholesale or retail distribution if— (i) it consists to a substantial extent of dealing in goods of a kind which are collected or held as an investment or of that activity and any other activity of a kind falling within paragraph 6(2) above, taken together; and (ii) a substantial proportion of those goods are held by the company for a period which is significantly longer than the period for which a vendor would reasonably be expected to hold them while endeavouring to dispose of them at their market value; and, in determining for the purposes of sub-paragraph (2)(b) whether a trade is an ordinary trade of wholesale or retail distribution, regard shall be had to the extent to which it has the features mentioned in Schedule 11 to the Finance Act 1981, those in Part I being regarded as indications that the trade is such an ordinary trade and those in Part II being regarded as indications of the contrary. (5) For the purposes of this paragraph a person has a controlling interest in a trade— (a) in the case of a trade carried on by a company if— (i) he controls the company; (ii) the company is a close company for the purposes of the Corporation Tax Acts and he or an associate of his is a director of the company and the beneficial owner of, or able directly or through the medium of other companies or by any other indirect means to control, more than 30 per cent, of the ordinary share capital of the company; or (iii) not less than half of the trade could, in accordance with section 253(2) of the Taxes Act, be regarded as belonging to him; (b) in any other case, if he is entitled to not less than half of the assets used for, or the income arising from, the trade. (6) For the purposes of sub-paragraph (5) above there shall be attributed to any person any rights or powers of any other person who is an associate of his. (7) References in this paragraph to a trade shall be construed without regard to so much of the definition of "trade" in section 526 (5) of the Taxes Act as relates to adventures or concerns in the nature of trade; but the foregoing provisions do not affect the construction of references in sub-paragraph (2)(g) or (5) above to a trade carried on by a person other than the company and those references shall be construed as including references to any business, profession or vocation. (8) The Treasury may by order made by statutory instrument amend this paragraph in such manner as they consider expedient. (9) Any order under sub-paragraph (8) above shall be subject to annulment in pursuance of a resolution of the Commons House of Parliament. (10) In this paragraph— - "film" means an original master negative of a film, an original master film disc or an original master film tape; - "oil rig" means any ship which is an offshore installation for the purposes of the Mineral Workings (Offshore Installations) Act 1971; - "pleasure craft" means any ship of a kind primarily used for sport or recreation; and - "sound recording" means, in relation to a film, its sound track, original master audio disc or, as the case may be, original master audio tape.

• (5) Sub-paragraph (2) above, so far as it relates to oil extraction, has effect in relation to shares issued at any time after the passing of this Act.

Disposal of shares

9

• (1) Paragraph 7 shall be amended as follows.

• (2) The following sub-paragraph shall be inserted after sub-paragraph (1)—

(1A) Where an option, the exercise of which would bind the grantor to purchase any shares, is granted to an individual during the relevant period, the individual shall not be entitled to any relief in respect of the shares to which the option relates.

• (3) In sub-paragraph (2), for the words "company shall" there shall be substituted the words "company, and any option of the kind mentioned in sub-paragraph (1A) above, shall",

and after the word "given", in each place, there shall be inserted the words "(and not withdrawn)".

• (4) In sub-paragraph (2A) the words "(and not withdrawn)" shall be inserted after the word "given" and the words "(subject to subparagraph (2) above)" shall be inserted after the words "class shall".

• (5) The following sub-paragraph shall be substituted for sub-paragraph (4)—

(4) For the purposes of this paragraph and of Chapter II as applied by this paragraph— (a) references to a disposal of shares include references to the grant of an option the exercise of which would bind the grantor to sell the shares; and (b) shares in a company shall not be treated as being of the same class unless they would be so treated if dealt with on The Stock Exchange.

• (6) The amendment made by sub-paragraph (4) above, which is enacted for the avoidance of doubt, shall be deemed to have been incorporated in Schedule 5 to the Finance Act 1983 as originally enacted but otherwise this paragraph has effect in relation to options granted at any time after 18th March 1986.

Value received from company

10

• (1) Paragraph 8 shall be amended as follows.

• (2) In sub-paragraph (1), the words "Subject to paragraph 7 above" shall be inserted at the beginning.

• (3) For sub-paragraph (2) there shall be substituted the following sub-paragraph—

(2) Subject to sub-paragraph (3) below, section 58(2) to (4) and (6) to (9) of Chapter II shall apply but— (a) with the addition, at the end of subsection (2)(e), of the words 'which has not been repaid in full before the issue of the shares in respect of which relief is claimed'; (b) with the substitution, in subsection (3), of a reference to paragraph 5(5) above for the reference to section 55(5); and (c) with the addition, at the end of subsection (4)(c), of the words 'reduced by the amount of any repayment made before the issue of the shares in respect of which relief is claimed'.

• (4) The following sub-paragraph shall be added at the end—

(4) Where relief to which an individual is entitled in respect of eligible shares is reduced by virtue of this paragraph, effect shall be given to the reduction by apportioning it, as between the eligible shares held by him, in such a way as appears to the inspector, or on an appeal to the Commissioners concerned, to be just and reasonable.

• (5) The amendment made by sub-paragraph (2) above, which is enacted for the avoidance of doubt, shall be deemed to have been incorporated in Schedule 5 to the Finance Act 1983 as originally enacted.

Value received by persons other than claimants

11

• (1) Paragraph 10 shall be amended as follows.

• (2) In sub-paragraph (1)(b), after "thereby" there shall be inserted the words "withdrawn or reduced by virtue of paragraph 7 above or".

• (3) For sub-paragraph (5A) there shall be substituted the following sub-paragraph—

(5A) Where relief to which an individual is entitled in respect of eligible shares is reduced by virtue of this paragraph, effect shall be given to the reduction by apportioning it as between the eligible shares held by him in such a way as appears to the inspector, or on an appeal to the Commissioners concerned, to be just and reasonable.

.

Parallel trades

12

After paragraph 10 there shall be inserted the following paragraph—

(10A) (1) An individual is not entitled to relief in respect of any shares in a company where, at the date mentioned in subparagraph (2) below— (a) he is one of a group of persons— (i) who control the company; or (ii) to whom belongs an interest amounting in the aggregate to more than a half share in the trade carried on by the company; (b) he is also an individual, or one of a group of persons— (i) controlling another company; or (ii) to whom belongs an interest amounting in the aggregate to more than a half-share in another trade; and (c) the trade carried on by the company, or a substantial part of it— (i) is concerned with the same or similar types of property or parts thereof or provides the same or similar services or facilities; and (ii) serves substantially the same or similar outlets or markets; as the other trade or (as the case may be) the trade carried on by the other company. (2) The date mentioned in sub-paragraph (1) above is— (a) the date on which the shares are issued; or (b) if later, the date on which the company begins to carry on the trade. (3) For the purposes of sub-paragraph (1) above— (a) the persons to whom a trade belongs, and (where a trade belongs to two or more persons) their respective shares in that trade, shall be determined in accordance with subsections (1)(a) and (b), (2) and (3) of section 253 of the Taxes Act; and (b) any interest, rights or powers of a person who is an associate (as denned by section 67(1) of Chapter II) of another person shall be treated as those of that other person. (4) For the purposes of this paragraph— (a) references to a company's trade include references to the trade of any of its subsidiaries; and (b) "trade", in the expressions "another trade", "other trade" and "trade carried on by the other company", includes any business, profession or vocation.

Claims

13

In paragraph 13, the following sub-paragraph shall be added at the end—

(10) For the purposes of the provisions of the Taxes Management Act 1970 relating to appeals against decisions on claims, the refusal of the inspector to authorise the issue of a certificate under sub-paragraph (2) above shall be taken to be a decision refusing a claim made by the company.

Assessments for withdrawing relief

14

In paragraph 14(2)(a), for the words "or 10(1)" there shall be substituted the words "10(1) or 16A".

Information

15

• (1) After paragraph 15 there shall be inserted the following paragraph—

(15A) (1) Where— (a) a company has issued a certificate under paragraph 13(2) above in respect of any eligible shares in the company; and (b) it appears to the company, or to any person connected with the company who has knowledge of the matter, that paragraph 5A above may have effect to deny relief in respect of those shares; the company or (as the case may be) that person or (where it so appears to each of them) both the company and that person shall give notice in writing to the inspector setting out the particulars of the case. (2) If the inspector has reason to believe that a person has not given a notice which he is required to give under sub-paragraph (1) above, the inspector may by notice in writing require that person to furnish him within such time (not being less than sixty days) as may be specified in the notice with such information relating to the case as the inspector may reasonably require for the purposes of this Part.

Capital gains tax

16

• (1) Paragraph 16 shall be amended as follows.

• (2) For sub-paragraph (1) there shall be substituted the following sub-paragraph—

(1) Where— (a) an individual to whom relief has been given in respect of eligible shares disposes of those shares (within the meaning of the Capital Gains Tax Act 1979); and (b) the relief is not withdrawn; any gain or loss which accrues to him on that disposal shall not be a chargeable gain or (as the case may be) allowable loss for the purposes of capital gains tax.

• (3) In sub-paragraph (3) after the word "given" in both places, there shall be inserted the words "(and not withdrawn)".

• (4) After sub-paragraph (3) there shall be inserted the following subparagraphs—

(3A) Where section 44 of the Act of 1979 (disposals between husband and wife to be on a no gain/no loss basis) has applied to any eligible shares disposed of by an individual to his or her spouse ("the transferee"), sub-paragraph (1) above shall apply in relation to the subsequent disposal of the shares by the transferee to a third party. (3B) Where section 85 (exchange of securities for those in another company) or 86 (reconstruction or amalgamation involving issue of securities) of the Act of 1979 would, but for this subparagraph, apply in relation to eligible shares in respect of which an individual has been given relief, that section shall apply only if the relief is withdrawn.

Reorganisation of share capital

17

• (1) After paragraph 16 there shall be inserted the following paragraph—

(16A) (1) Where shares in respect of which relief has been given and not withdrawn have by virtue of any such allotment, otherwise than for payment, as is mentioned in section 77(2)(a) of the Capital Gains Tax Act 1979 fallen to be treated under section 78 of that Act as the same asset as a new holding— (a) a disposal of the whole or part of the new holding shall be treated for the purposes of this Schedule as a disposal of the whole or a corresponding part of those shares; and (b) the new holding shall be treated for the purposes of paragraph 7(2) above as shares in respect of which relief has been given and not withdrawn. (2) Sections 78 to 81 of the Act of 1979 shall not apply in relation to any ordinary shares in respect of which relief has been given if— (a) there is, by virtue of any such allotment for payment as is mentioned in section 77(2)(a) of that Act, a reorganisation affecting those shares; and (b) immediately following the reorganisation, the relief has not been withdrawn in respect of those shares or relief has been given in respect of the allotted shares and not withdrawn. (3) Where— (a) any such reorganisation as is mentioned in sub-paragraph (2) above affects ordinary shares in respect of which relief has been given; (b) immediately before the reorganisation the relief had not been withdrawn; and (c) the amount of relief (or, where the relief has been reduced, the amount remaining) and the market value of the shares immediately before the reorganisation, exceeds their market value immediately after the reorganisation; the relief shall be reduced by an amount equal to whichever is the smaller of those excesses. (4) Sub-paragraph (3) above shall also apply where— (a) an individual who has received, or become entitled to receive, in respect of any ordinary shares in a company, a provisional allotment of shares in or debentures of the company disposes of his rights; and (b) sub-paragraph (3) would have applied (apart from this sub-paragraph) had those rights not been disposed of but an allotment of shares or debentures made to him. (5) Where relief is reduced by virtue of sub-paragraph (3) above— (a) the sums allowable as deductions from the consideration in the computation, for the purposes of capital gains tax, of the gain or loss accruing to an individual on the disposal of any of the allotted shares or debentures shall be taken to include the amount of the reduction, apportioned between the allotted shares or (as the case may be) debentures in such a way as appears to the inspector, or on appeal to the Commissioners concerned, to be just and reasonable; and (b) the sums so allowable on the disposal (in circumstances in which paragraph 16 above does not apply) of any of the shares referred to in sub-paragraph (3)(a) above shall be taken to be reduced by the amount mentioned in paragraph (a) above, similarly apportioned between those shares.

.

• (2) Sub-paragraphs (1) to (3) of the inserted paragraph 16A have effect in relation to reorganisations occurring at any time after 18th March 1986 and sub-paragraph (5) of that paragraph has effect in relation to disposals made at any time after that date.

Application to subsidiaries

18

For sub-paragraph (1) of paragraph 17 there shall be substituted the following sub-paragraphs—