Finance Act 1987

Part I — Customs and Excise and Value Added Tax

Chapter I — Customs and Excise

Duties of excise

Warrants to purchase Government stock, etc.

1

• (1) After section 13 of the Hydrocarbon Oil Duties Act 1979 there shall be inserted the following section—

(13A) (1) On unleaded petrol charged with the excise duty on hydrocarbon oil and delivered for home use there shall be allowed at the time of delivery a rebate of duty at the rate of £0.0096 a litre. (2) For the purposes of this section petrol is “unleaded” if it contains not more than 0.013 grams of lead per litre of petrol or, if the petrol is delivered for home use before 1st April 1990, not more than 0.020 grams of lead per litre of petrol. (3) Rebate shall not be allowed under this section in any case where it is allowed under section 14 below.

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

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

• (4) This section shall be deemed to have come into force at 6 o’clock in the evening of 17th March 1987.

Vehicles excise duty

2

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

• (2) In Schedule 4 to each of the Acts of 1971 and 1972 (annual rates of duty on goods vehicles)—

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

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

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

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

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

• (6) . . . section 102 of the Customs and Excise Management Act of 1979, as it applies in relation to licences under the Act of 1971, shall have effect subject to the further amendments in Part III of Schedule 1 to this Act.

• (7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Abolition of general betting duty on on-course bets

3

• (1) General betting duty shall not be chargeable on any bet made on or after 29th March 1987 which is an on-course bet within the meaning of Part I of the Betting and Gaming Duties Act 1981 (in this section referred to as “the 1981 Act”) and, accordingly, with respect to bets made on or after that date, section 1 of the 1981 Act (charge to, and rates of, duty) shall be amended as follows—

• (a) in subsection (1) after the words “on any bet” there shall be inserted “ which is not an on-course bet and ”; and

• (b) in subsection (2) the words from the beginning of paragraph (a) to “bet” in paragraph (b) shall be omitted.

• (2) With respect to bets made on or after 29th March 1987 but before the betting commencement date within the meaning of section 6 of the Finance Act 1986, Part III of the Miscellaneous Transferred Excise Duties Act (Northern Ireland) 1972 (in this section referred to as “the 1972 Act”) (which made separate provision for Northern Ireland corresponding to that made by the 1981 Act and which ceased to have effect on the betting commencement date except in relation to bets made before that date) shall be deemed to have been amended as follows—

• (a) in section 16(1) (charge of duty) after the words “on any bet” there shall be inserted “ which is not an on-course bet and ”; and

• (b) in section 17 (rates of duty) in subsection (1) paragraph (a) and, in paragraph (b), the words from the beginning to “bet” shall be omitted.

• (3) In Schedule 1 to the 1981 Act (supplementary provisions)—

• (a) in paragraph 1 (definitions) at the end of the definition of “general betting business” there shall be added the words “ or would or might involve such sums becoming so payable if on-course bets were not excluded from that duty ”; and

• (b) in paragraph 2 (power to make regulations for administration of general betting duty) in sub-paragraph (4)(a) after the words “liable for duty” there shall be inserted “ or would be or might be or become liable for duty if on-course bets were not excluded from duty ”.

• (4) The amendments made by subsection (3) above shall be deemed to have come into force on 29th March 1987.

• (5) During the period beginning with 29th March 1987 and ending with the betting commencement date within the meaning of section 6 of the Finance Act 1986, in Schedule 2 to the 1972 Act (supplementary provisions) the references to a business which involves, or may involve, general betting duty becoming payable by any person and the references to any activity by reason of which a person is or may be or become liable for that duty shall be deemed to have included respectively references to a business which would or might involve that duty becoming payable, and to an activity by reason of which a person would be or might be or become liable for that duty, if on-course bets were not excluded from that duty.

Gaming machine licence duty: rates

4

Gaming machine licence duty: other amendments

5

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

• (2) In subsection (3) of section 26 of the 1981 Act (which provides that if one or more gaming machines are made available on any premises in such a way that they can be played, any gaming machine anywhere on the premises shall be treated as provided for gaming) after the word “and” there shall be inserted “ subject to subsection (3A) below ”.

• (3) After subsection (3) of the said section 26 there shall be inserted the following subsection—

(3A) The Commissioners may by regulations make provision for the purpose of enabling spare gaming machines to be kept on premises for use in the case of the breakdown of other gaming machines on those premises; and such regulations may provide that, in such circumstances and subject to such conditions as may be specified in the regulations, a gaming machine on any premises which is not made available as mentioned in subsection (3) above, or is not in a state in which it can be played, shall not be treated by virtue of that subsection as provided for gaming on those premises.

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

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

Amendments of the Management Act

Access to approved wharves and transit sheds

6

Powers of search and access etc. in respect of vehicles

7

• (1) In section 27 of the Customs and Excise Management Act 1979 (officers’ power of boarding) in subsection (1) for the words from “a vehicle” to “any officer” there shall be substituted

a vehicle is— (a) entering, leaving or about to leave the United Kingdom, (b) within the prescribed area, (c) within the limits of or entering or leaving a port or any land adjacent to a port and occupied wholly or mainly for the purpose of activities carried on at the port, (d) at, entering or leaving an aerodrome, (e) at, entering or leaving an approved wharf, transit shed, customs warehouse or free zone, or (f) at, entering or leaving any such premises as are mentioned in subsection (1) of section 112 below, any officer

.

• (2) In section 28 of that Act (officers’ powers of access, etc.) in subsection (1) after the words “any vehicle” there shall be inserted “ which falls within paragraphs (a) to (f) of subsection (1) of section 27 above or is ”.

Local export control

8

• (1) In section 58A of the Customs and Excise Management Act 1979 (local export control) at the end of subsection (1) there shall be inserted “ and, subject to and to such modifications as may be specified in the directions, this section and section 58D below shall apply in relation to goods which, for the purposes of any Community regulation relating to export refunds or monetary compensatory amounts, are treated as exports as if the supply of the goods were their exportation or, as the case may require, their shipping for exportation ”.

• (2) In subsection (3)(b) of that section (conditions for the application of local export control) after the word “shipped” there shall be inserted “ for exportation or exported by land ”.

• (3) After subsection (7) of that section (power of Commissioners to relax requirements) there shall be inserted—

(7A) Without prejudice to the powers of the Commissioners under subsection (7) above, they may direct that, in relation to goods of a description specified in the directions which are shipped for exportation or exported by land by an exporter of a description so specified, paragraph (a) of subsection (3) above shall have effect as if— (a) in sub-paragraph (i) the words “time and” were omitted; and (b) for sub-paragraph (ii) there were substituted— (ii) at the time that notice is delivered or immediately thereafter, the exporter enters such paarticulars of the goods and of such other matters as may be required by the directions in a record maintained by him at such place as the proper officer may require; and (iii) the proper officer informs the exporter that he consents to the removal of the goods; and

• (4) In section 58D of that Act (operative date for Community purposes) in subsection (2) (b) for the words following “above” there shall be substituted “ as set out in section 58A(7A)(b) above, the day entry is made ”.

Records relating to importation and exportation

9

After section 75 of the Customs and Excise Management Act 1979 there shall be inserted the following—

(75A) (1) Every person who is concerned (in whatever capacity) in the importation or exportation of goods of which an entry or specification is required for that purpose by or under this Act shall keep such records as the Commissioners may require. (2) The Commissioners may require any records kept in pursuance of this section to be preserved for such period not exceeding four years as they may require. (3) The duty under this section to preserve records may be discharged by the preservation of the information contained therein by such means as the Commissioners may approve; and where that information is so preserved a copy of any document forming part of the records shall, subject to the following provisions of this section, be admissible in evidence in any proceedings, whether civil or criminal, to the same extent as the records themselves. (4) The Commissioners may, as a condition of an approval under subsection (3) above of any means of preserving information, impose such reasonable requirements as appear to them necessary for securing that the information will be as readily available to them as if the records themselves had been preserved. (5) The Commissioners may at any time for reasonable cause revoke or vary the conditions of any approval given under subsection (3) above. (6) A statement contained in a document produced by a computer shall not by virtue of subsection (3) above be admissible in evidence— (a) in civil proceedings in England and Wales, except in accordance with sections 5 and 6 of the Civil Evidence Act 1968; (b) in criminal proceedings in England and Wales, except in accordance with sections 68 to 70 of the Police and Criminal Evidence Act 1984; (c) in civil proceedings in Northern Ireland, except in accordance with sections 2 and 3 of the Civil Evidence Act (Northern Ireland) 1971; and (d) in criminal proceedings in Northern Ireland, except in accordance with the said sections 2 and 3, which shall, for the purposes of this section, apply with the necessary modifications to such proceedings.

Information powers

10

In section 77 of the Customs and Excise Management Act 1979 (information in relation to goods imported, exported or shipped for carriage coastwise) in subsection (1)(a) the words “importation, exportation or” shall be omitted, and after that section there shall be inserted the following section—

(77A) (1) Every person who is concerned (in whatever capacity) in the importation or exportation of goods for which an entry or specification is required for that purpose by or under this Act shall— (a) furnish to the Commissioners, within such time and in such form as they may reasonably require, such information relating to the goods or to the importation or exportation as the Commissioners may reasonably specify; and (b) if so required by an officer, produce or cause to be produced for inspection by the officer— (i) at the principal place of business of the person upon whom the demand is made or at such other place as the officer may reasonably require, and (ii) at such time as the officer may reasonably require, any documents relating to the goods or to the importation or exportation. (2) Where, by virtue of subsection (1) above, an officer has power to require the production of any documents from any such person as is referred to in that subsection, he shall have the like power to require production of the documents concerned from any other person who appears to the officer to be in possession of them; but where any such other person claims a lien on any document produced by him, the production shall be without prejudice to the lien. (3) An officer may take copies of, or make extracts from, any document produced under subsection (1) or subsection (2) above. (4) If it appears to him to be necessary to do so, an officer may, at a reasonable time and for a reasonable period, remove any document produced under subsection (1) or subsection (2) above and shall, on request, provide a receipt for any document so removed; and where a lien is claimed on a document produced under subsection (2) above, the removal of the document under this subsection shall not be regarded as breaking lien. (5) Where a document removed by an officer under subsection (4) above is reasonably required for the proper conduct of a business, the officer shall, as soon as practicable, provide a copy of the document, free of charge, to the person by whom it was produced or caused to be produced. (6) Where any documents removed under the powers conferred by this section are lost or damaged, the Commissioners shall be liable to compensate their owner for any expenses reasonably incurred by him in replacing or repairing the documents. (7) If any person fails to comply with a requirement under this section, he shall be liable on summary conviction to a penalty of level 3 on the standard scale.

Chapter II — Value Added Tax

Accounting for and payment of tax

11

Credit for input tax

12

Supplies abroad etc.

13

Registration

14

Supplies to groups

15

Tour operators

16

Valuation of supplies at less than market value

17

Issue of securities

18

Interpretation and miscellaneous further amendments

19

Part II — Income Tax, Corporation Tax and Capital Gains Tax

Chapter I — General

Tax rates

Charge of income tax for 1987-88

20–39

Charge of corporation tax for financial year 1987

21

Corporation tax shall be charged for the financial year 1987 at the rate of 35 per cent.

Corporation tax: small companies

22

• (1) For the financial year 1987 the small companies rate shall be 27 per cent.

• (2) For the financial year 1987, the fraction mentioned in section 95(2) of the Finance Act 1972 (marginal relief for small companies) shall be one fiftieth.

Deduction rate for sub-contractors in construction industry

23

Section 69(4) of the Finance (No. 2) Act 1975 (which requires deductions to be made from payments to certain sub-contractors in the construction industry) shall have effect in relation to payments made on or after 2nd November 1987 with the substitution for the words "29 per cent." of the words "27 per cent.".

Personal reliefs etc.

Personal reliefs: operative date for PAYE

24

For the year 1987-88, in subsection (7) of section 24 of the Finance Act 1980 (which specifies the date from which indexed changes in income tax thresholds and allowances are to be brought into account for the purposes of PA YE) for "5th May" there shall be substituted "18th May".

Relief for interest

25

For the year 1987-88 the qualifying maximum referred to in paragraphs 5(1) and 24(3) of Schedule 1 to the Finance Act 1974 (limit on relief for interest on certain loans for the purchase or improvement of land) shall be £30,000.

Increased personal relief for those aged eighty and over

26

• (1) Subject to the provisions of this section, subsection (1) of section 8 of the Taxes Act (personal reliefs) shall have effect—

• (a) in relation to a claim by a person who proves that he or his wife was at any time within the year of assessment of the age of eighty or upwards, as if the sum specified in paragraph (a) (married) were £4,845; and

• (b) in relation to a claim by a person who proves that he was at any time within the year of assessment of the age of eighty or upwards, as if the sum specified in paragraph (b) (single) were £3,070.

• (2) For the purposes of subsection (1) above, a person who would have been of the age of eighty or upwards within the year of assessment if he had not died in the course of it shall be treated as having been of that age within that year.

• (3) For any year of assessment for which a person is entitled to increased personal relief by virtue of this section, he shall not be entitled to increased relief under subsection (1A) of section 8 of the Taxes Act (increased relief for persons of sixty-five and upwards).

• (4) For the purpose of any enactment which refers to Part I of the Taxes Act or to Chapter II of that Part, subsections (1) and (2) above shall be taken to be included' in that Chapter.

• (5) In the following enactments—

• (a) subsection (1B) of section 8 of the Taxes Act (tapering of relief under subsection (1A)),

• (b) subsection (2) of section 14 of that Act (which, as applied by section 15A of that Act, determines the amount of widow's bereavement allowance), and

• (c) paragraph 3(3) of Schedule 4 to the Finance Act 1971 (exclusion of certain reliefs where there is separate taxation of wife's earnings),

any reference to subsection (1A) of section 8 of the Taxes Act includes a reference to subsection (1) above.

• (6) In subsection (8) of section 36 of the Finance Act 1976 (application of provisions relating to transfer of balance of certain reliefs between spouses) the reference in paragraph (b) to section 8(lA)(b) of the Taxes Act includes a reference to subsection (1)(b) above.

• (7) In section 24 of the Finance Act 1980 (indexation of income tax thresholds and allowances), any reference to section 8 of the Taxes Act includes a reference to subsection (1) above.

• (8) This section has effect for the year 1987-88 and subsequent years of assessment.

Invalid care allowance and unemployment benefit

27

• (1) In section 8 of the Taxes Act (personal reliefs) in paragraph (b) of subsection (2) (wife's earned income relief) after sub-paragraph (iii) there shall be inserted the words

and (iv) invalid care allowance

.

• (2) In Schedule 4 to the Finance Act 1971 (separate taxation of wife's earnings) in paragraph 1 (meaning of wife's earnings) at the end of paragraph (b) there shall be inserted the words "unemployment benefit or invalid care allowance".

• (3) This section—

• (a) so far as it relates to invalid care allowance, has effect for the year 1984-85 and subsequent years of assessment, and

• (b) so far as it relates to unemployment benefit, has effect for the year 1987-88 and subsequent years of assessment;

and all such adjustments (whether by repayment of tax or otherwise) shall be made as are appropriate to give effect to this section.

Increased relief for blind persons

28

For the year 1987-88 and subsequent years of assessment, in section 18 of the Taxes Act—

• (a) in subsection (1) (single blind persons and married couples of whom one is blind) for "£360" there shall be substituted "£540"; and

• (b) in subsection (2) (married couples, both of whom are blind) for "£720" there shall be substituted "£1,080".

Income support etc.

29

• (1) For subsection (2) of section 219 of the Taxes Act (which specifies certain social security benefits which are not to be treated as income for the purposes of the Income Tax Acts) there shall be substituted the following subsection—

(2) The following payments shall not be treated as income for any purpose of the Income Tax Acts— (a) payments of income support, family credit or housing benefit under the Social Security Act 1986 or the Social Security (Northern Ireland) Order 1986 other than payments of income support which are taxable by virtue of section 29 of the Finance Act 1987; (b) payments of child benefit; and (c) payments excepted by subsection (1) above from the charge to tax imposed by that subsection.

;

and, accordingly, paragraph 101(b) of Schedule 10 to the Social Security Act 1986 shall cease to have effect.

• (2) Subject to the following provisions of this section, payments to any person of income support under the Social Security Act 1986 in respect of any period shall be charged to income tax under Schedule E if during that period—

• (a) his right to income support is subject to the condition specified in section 20(3)(d)(i) of that Act (availability for employment); or

• (b) he is one of a married or unmarried couple and section 23 of that Act (trade disputes) applies to him but not to the other person;

and in paragraph (b) above "married couple" and "unmarried couple" have the same meaning as in Part II of the Social Security Act 1986.

• (3) Where the amount of income support paid to any person in respect of any week or part of a week exceeds the taxable maximum for that period as defined in Part I of Schedule 3 to this Act, the excess shall not be taxable.

• (4) Where payments of unemployment benefit and payments of income support are made to any person in respect of the same week or part of a week, the amount taxable in respect of that period in respect of those payments shall not exceed the taxable maximum for that period within the meaning of subsection (3) above.

• (5) In their application to Northern Ireland subsections (2) to (4) above and Part I of Schedule 3 to this Act shall have effect as if—

• (a) for the references to the Social Security Act 1986, to Part II of that Act and to sections 20(3)(d)(i) and 23 of that Act there were substituted respectively references to the Social Security (Northern Ireland) Order 1986, Part III of that Order and Articles 21(3)(d)(i) and 24 of that Order; and

• (b) for the references to paragraph 1 of Part I of Schedule 4 to the Social Security Act 1975 and paragraph 1(a) of Part IV of that Schedule there were substituted respectively references to paragraph 1 of Part I of Schedule 4 to the Social Security (Northern Ireland) Act 1975 and paragraph 1(a) of Part IV of that Schedule.

• (6) The consequential amendments in Part II of Schedule 3 to this Act shall have effect.

• (7) Except as provided by subsection (8) below, this section and Schedule 3 to this Act shall have effect in relation to payments in respect of periods beginning on or after the income support date.

• (8) Subsection (1) above, so far as it relates to family credit or housing benefit, shall have effect in relation to payments in respect of periods beginning on or after the family credit date and the housing benefit date respectively; and nothing in that subsection shall affect payments of family income supplement in respect of periods before the family credit date.

• (9) In subsections (7) and (8) above, the "income support date", the "family credit date" and the "housing benefit date" mean the days on which regulations containing the first schemes under section 20 of the Social Security Act 1986 and Article 21 of the Social Security (Northern Ireland) Order 1986 providing respectively for income support, for family credit and for housing benefit come into force.

Friendly societies, trade unions and charities

Registered friendly societies

30

• (1) In so far as the profits of a registered friendly society from life or endowment business relate to contracts made on or after 1st September 1987, section 332 of the Taxes Act (registered friendly societies: tax exempt limits etc.) shall be amended in accordance with subsections (2) and (3) below.

• (2) In paragraph (a) of subsection (2) for the words from "the assurance" onwards there shall be substituted—

(i) the assurance of gross sums under contracts under which the total premiums payable in any period of twelve months exceed £100; or (ii) the granting of annuities of annual amounts exceeding £156; and

.

• (3) For subsection (3) there shall be substituted the following subsection—

(3) In determining for the purposes of subsection (2)(a)(i) above the total premiums payable in any period of twelve months— (a) where those premiums are payable more frequently than annually, there shall be disregarded an amount equal to 10 per cent. of those premiums; and (b) so much of any premium as is charged on the ground that an exceptional risk of death is involved shall be disregarded; and in applying the limit of £156 in subsection (2)(a)(ii) above, any bonus or addition declared upon an annuity shall be disregarded.

• (4) In section 64 of the Friendly Societies Act 1974 (which relates to the maximum contractual benefits a person may have with friendly societies and is in the following provisions of this section referred to as "section 64"), paragraph (a) of subsection (1) shall not apply as respects sums assured under contracts made on or after 1st September 1987; and after that subsection there shall be inserted the following subsections—

(1A) With respect to contracts for the assurance of gross sums under tax exempt life or endowment business, a member of a registered friendly society or branch shall not be entitled to have outstanding with any one or more such societies or branches (taking together all such societies or branches throughout the United Kingdom) contracts under which the total premiums payable in any period of twelve months exceed £100 unless all those contracts were entered into before 1st September 1987. (1B) In applying the limit in subsection (1A) above, the premiums under any contract for an annuity which was made before 1st June 1984 by a new society, shall be brought into account as if the contract were for the assurance of a gross sum.

• (5) At the end of subsection (2) of section 64 (provisions disregarded in applying limits) there shall be added the following

and (d) so far as concerns the total premiums payable in any period of twelve months,— (i) 10 per cent. of the premiums payable under any contract under which the premiums are payable more frequently than annually; and (ii) £10 of the premiums payable under any contract made before 1st September 1987 by a society which is not a new society; and (iii) so much of any premium as is charged on the ground that an exceptional risk of death is involved.

• (6) In subsection (2B) of section 64 (contracts not to be qualifying policies where limits are exceeded)—

• (a) in paragraph (a) after the words "sums assured" there shall be inserted "or premiums payable"; and

• (b) in paragraph (b) after the words "sums assured by" there shall be inserted "or, as the case may be, the premiums payable under".

• (7) At the end of subsection (6) of section 64 (declaration that limits are not exceeded) there shall be added the words "and that the total premiums under those contracts do not exceed those limits".

• (8) At the end of section 41(9) of the Finance Act 1985 (gains on non-qualifying policies issued by friendly societies in the course of tax exempt business to be chargeable under section 399 of the Taxes Act at basic rate as well as at higher rates) there shall be added the words "but any relief under section 400 of that Act shall be computed as if this subsection had not been enacted".

Relief in respect of certain income of trade unions

31

• (1) In section 338 of the Taxes Act (which, as amended by section 36 of the Finance Act 1982, provides for exemption for certain income and gains of a trade union precluded by Act or rules from assuring to any person a sum exceeding £2,400 by way of gross sum or £500 a year by way of annuity) for "£2,400" and "£500" there shall be substituted respectively "£3,000" and "£625".

• (2) This section has effect in relation to income or gains which are applicable and applied as mentioned in the said section 338 on or after 17th March 1987.

Charities: payroll deduction scheme

32

• (1) In section 27(7) of the Finance Act 1986 (which limits to £100 the deductions attracting relief) for "£100" there shall be substituted "£120".

• (2) This section has effect for the year 1987-88 and subsequent years of assessment.

Employees etc.

Employee share schemes, etc.

33

• (1) Schedule 10 to the Finance Act 1980 (savings-related share option schemes) and Schedule 10 to the Finance Act 1984 (approved share option schemes) shall have effect subject to the amendments in Part I of Schedule 4 to this Act (which enable schemes to allow rights acquired under them to be exchanged for other rights in certain circumstances); and the transitional provisions in Part II of that Schedule and the consequential provisions relating to capital gains tax in Part III thereof shall have effect.

• (2) Subject to subsection (3) below, the provisions of Part IV of Schedule 4 to this Act shall have effect for the purpose only of determining whether an individual has a material interest in a company for the purposes of the employee share scheme legislation.

• (3) Paragraph 8 of Schedule 4 to this Act shall also have effect for the purpose of determining whether interest on a loan made on or after 6th April 1987 is eligible for relief under section 75 of the Finance Act 1972 by virtue of paragraph 9 of Schedule 1 to the Finance Act 1974.

• (4) In this section "the employee share scheme legislation" means—

• (a) Schedule 9 to the Finance Act 1978,

• (b) Schedule 10 to the Finance Act 1980, and

• (c) Schedule 10 to the Finance Act 1984.

Employees seconded to educational bodies

34

• (1) With respect to expenditure attributable to the employment of a person on or after 26th November 1986 and before 1st April 1997, section 28 of the Finance Act 1983 (employees seconded to charities) shall have effect as if the references in subsections (1) and (2A) of that section to a charity included references to any of the bodies specified in subsection (2) below.

• (2) The bodies referred to in subsection (1) above are—

• (a) in England and Wales, any local education authority and any educational institution maintained by such an authority;

• (b) in Scotland, any education authority, any educational establishment maintained by such an authority, and any college of education or central institution within the meaning of the Education (Scotland) Act 1980;

• (c) in Northern Ireland, any education and library board, college of education or controlled school within the meaning of the Education and Libraries (Northern Ireland) Order 1986 and any institution of further education which is under the management of an education and library board by virtue of Article 28 of that Order; and

• (d) any other educational body which is for the time being approved for the purposes of this section by the Secretary of State or, in Northern Ireland, the Department of Education for Northern Ireland.

• (3) Any approval granted by the Secretary of State or the Department of Education for Northern Ireland under subsection (2)(d) above before 1st September 1987 may be expressed to have effect for any period before that date.

Relief for costs of training etc.

35

• (1) Where, on or after 6th April 1987, a person (in this section referred to as the "employer") incurs expenditure in paying or reimbursing relevant expenses incurred in connection with a qualifying course of training which—

• (a) is undertaken by a person (in this section referred to as the "employee") who is the holder or past holder of any office or employment under the employer, and

• (b) is undertaken with a view to retraining the employee,

the employee shall not-thereby be regarded as receiving any emolument which forms part of his income for any purpose of Schedule E.

• (2) Schedule 5 to this Act shall have effect to determine for the purposes of this section—

• (a) what is a qualifying course of training;

• (b) whether such a course is undertaken by an employee with a view to retraining; and

• (c) what are relevant expenses in relation to such a course.

• (3) Subject to subsection (4) below, where—

• (a) an employer incurs expenditure in paying or reimbursing relevant expenses as mentioned in subsection (1) above, and

• (b) that subsection has effect in relation to the income of the employee for the purposes of Schedule E,

then, if and so far as that expenditure would not, apart from this subsection, be so deductible, it shall be deductible in computing for the purposes of Schedule D the profits or gains of the trade, profession or vocation of the employer for the purposes of which the employee is or was employed.

• (4) If the employer carries on a business, the expenses of management of which are eligible for relief under section 304 of the Taxes Act, subsection (3) above shall have effect as if for the words from "in computing" onwards there were substituted "as expenses of management for the purposes of section 304 of the Taxes Act".

• (5) In any case where—

• (a) an employee's liability to tax for any year of assessment is determined (by assessment or otherwise) on the assumption that subsection (1) above applies in his case and, subsequently, there is a failure to comply with any provision of paragraph 4 of Schedule 5 to this Act, or

• (b) an employer's liability to tax for any year is determined (by assessment or otherwise) on the assumption that, by virtue only of subsection (3) above (or subsections (3) and (4) above), he is entitled to a deduction on account of any expenditure and, subsequently, there is such a failure as is referred to in paragraph (a) above,

an assessment under section 29(3) of the Taxes Management Act 1970 of an amount due in consequence of the failure referred to above may be made at any time not later than six years after the end of the chargeable period in which the failure occurred.

• (6) Where an event occurs by reason of which there is a failure to comply with any provision of paragraph 4 of Schedule 5 to this Act, the employer of the employee concerned shall within sixty days of coming to know of the event give a notice in writing to the inspector containing particulars of the event.

• (7) If the inspector has reason to believe that an employer has not given a notice which he is required to give under subsection (6) above in respect of any event, the inspector may by notice in writing require the employer 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 event as the inspector may reasonably require for the purposes of this section.

• (8) The Table in section 98 of the Taxes Management Act 1970 (penalties) shall be amended as follows—

• (a) at the end of the first column there shall be inserted—

Section 35(7) of the Finance Act 1987

; and

• (b) at the end of the second column there shall be inserted—

Section 35(6) of the Finance Act 1987

.

Companies

Time for payment of corporation tax by certain long-established companies and building societies

36

• (1) Section 244 of the Taxes Act (which, in the case of certain companies trading before the financial year 1965, provides that the interval within which corporation tax is to be paid in respect of any accounting period shall be longer than the period of nine months provided for, in relation to companies generally, by section 243(4) of that Act) shall not apply with respect to any accounting period of a company beginning on or after 17th March 1987.

• (2) Section 344 of the Taxes Act (which, in the case of certain building societies carrying on business in the year 1965-66, makes special provision as to the time for payment of corporation tax) shall not apply with respect to any accounting period of a building society ending on or after 6th April 1990.

• (3) In Schedule 6 to this Act—

• (a) Part I has effect with respect to and in connection with the payment of corporation tax for certain accounting periods by a company to which, by virtue of section 244 of the Taxes Act, section 243(4) of that Act did not apply as respects the last accounting period ending before 17th March 1987; and

• (b) Part II has effect with respect to and in connection with the payment by a building society to which section 344 of the Taxes Act applies of corporation tax for accounting periods ending in the year 1989-90.

Close companies: meaning of "associate"

37

• (1) In subsection (3) of section 303 of the Taxes Act (close companies: meaning of "associate")—

• (a) in paragraph (c) for the words "any other person interested therein" there shall be substituted—

(i) the trustee or trustees of the settlement concerned or, as the case may be, the personal representatives of the deceased, and (ii) if the participator is a company, any other company interested in those shares or obligations

; and

• (b) the proviso shall be omitted.

• (2) In determining whether, by virtue of paragraph 9 of Schedule 1 to the Finance Act 1974, interest on a loan is eligible for relief under section 75 of the Finance Act 1972, the amendments made by subsection (1) above shall have effect with respect to loans made after 13th November 1986.

• (3) Subject to subsection (2) above, the amendments made by subsection (1) above shall be deemed to have come into force on 6th April 1986.

Unit trusts and investment companies

Authorised unit trusts

38

• (1) For section 354 of the Taxes Act there shall be substituted—

(354) (1) In respect of income arising to the trustees of an authorised unit trust, and for the purposes of the provisions relating to relief for capital expenditure, the Tax Acts shall have effect as if— (a) the trustees were a company resident in the United Kingdom, and (b) the rights of the unit holders were shares in the company. (2) The Tax Acts shall also have effect as if the aggregate amount shown in the accounts of the trust as income available for payment to unit holders or for investment were dividends on the shares referred to in subsection (1) above paid to them in proportion to their rights, the date of payment, in the case of income not paid to unit holders, being taken to be— (a) the date or latest date provided by the terms of the authorised unit trust for any distribution in respect of the distribution period in question; (b) if no date is so provided, the last day of the distribution period. (3) References in the Corporation Tax Acts to a body corporate shall be construed in accordance with the preceding provisions of this section, and section 242 of this Act shall apply with any necessary modifications. (4) Section 304 of this Act shall apply in relation to an authorised unit trust whether or not it falls within the definition of 'investment company' in subsection (5) of that section; and sums periodically appropriated for managers' remuneration shall be treated for the purposes of that section as sums disbursed as expenses of management. (5) In this section 'distribution period' means a period over which income from the investments subject to the trusts is aggregated for the purposes of ascertaining the amount available for distribution to unit holders.

.

• (2) This section shall have effect in relation to distribution periods (within the meaning of section 354 of the Taxes Act) beginning on or after 1st April 1987.

Other unit trusts

39

• (1) After section 354 of the Taxes Act there shall be inserted—

(354A) (1) This section applies to— (a) any unit trust scheme that is not an authorised unit trust, and (b) any authorised unit trust to which, by virtue of section 60 of the Finance Act 1980, section 354 of this Act does not apply, except where the trustees of the scheme are not resident in the United Kingdom. (2) Income arising to the trustees of the scheme shall be regarded for the purposes of the Tax Acts as income of the trustees (and not as income of the unit holders); and the trustees (and not the unit holders) shall be regarded as the persons to or on whom allowances or charges are to be made under the provisions of those Acts relating to relief for capital expenditure. (3) For the purposes of the Tax Acts the unit holders shall be treated as receiving annual payments (made by the trustees under deduction of tax) in proportion to their rights. (4) The total amount of those annual payments in respect of any distribution period shall be the amount which, after deducting income tax at the basic rate in force for the year of assessment in which the payments are treated as made, is equal to the aggregate amount shown in the accounts of the scheme as income available for payment to unit holders or for investment. (5) The date on which the annual payments are treated as made shall be the date or latest date provided by the terms of the scheme for any distribution in respect of the distribution period in question, except that, if— (a) the date so provided is more than twelve months after the end of the period, or (b) no date is so provided, the date on which the payments are treated as made shall be the last day of the period. (6) In this section 'distribution period' has the same meaning as in section 354 of this Act, but— (a) if the scheme does not make provision for distribution periods, then for the purposes of this section its distribution periods shall be taken to be successive periods of twelve months the first of which began with the day on which the scheme took effect, and (b) if the scheme makes provision for distribution periods of more than twelve months, then for the purposes of this section each of those periods shall be taken to be divided into two (or more) distribution periods, the second succeeding the first after twelve months (and so on for any further periods). (7) In this section 'unit trust scheme' has the same meaning as in the Financial Services Act 1986, except that the Treasury may by regulations provide that any scheme of a description specified in the regulations shall be treated as not being a unit trust scheme for the purposes of this section. (8) Regulations under this section— (a) may contain such supplementary and transitional provisions as appear to the Treasury to be necessary or expedient, and (b) shall be made by statutory instrument, which shall be subject to annulment in pursuance of a resolution of the House of Commons. (9) Sections 16 and 17 of the Finance Act 1973 (which make provision for charging tax at the additional rate on certain trust income) shall not apply to a scheme to which this section applies. (10) Paragraph 8(1) of Schedule 23 to the Finance Act 1985 (which charges tax at the additional rate on certain sums treated as received by trustees in respect of accrued interest) shall not apply in relation to profits or gains treated as received by the trustees of a scheme to which this section applies if or to the extent that those profits or gains represent accruals of interest (within the meaning of Chapter IV of Part II of that Act) which are treated as income in the accounts of the scheme.

.

• (2) This section shall have effect in relation to distribution periods (within the meaning of section 354A of the Taxes Act) beginning on or after 6th April 1987.

Unit trusts: miscellaneous amendments

40

Investment companies, etc.

41–46

Business expansion scheme

Carry-back of relief

42

• (1) In paragraph 2 of Schedule 5 to the Finance Act 1983, at the beginning of sub-paragraph (3) (which provides that relief is to be given as a deduction from income for the year in which the relevant shares are issued) there shall be inserted the words "Subject to sub-paragraph (4A) below"; and after sub-paragraph (4) there shall be inserted—

(4A) If— (a) the shares are issued before 6th October in a year of assessment, and (b) the claimant so requests in his claim for relief, the relief shall be given partly by way of deduction from the claimant's total income for the year of assessment in which the shares are issued and partly by way of deduction from his total income for the preceding year of assessment. (4B) A deduction from the claimant's total income for the year of assessment preceding that in which the shares are issued shall be of such amount as may be specified in the claim, but— (a) that amount shall not exceed one half of the total relief in respect of the shares, and (b) the aggregate of that amount and the amounts of any other deductions made by virtue of sub-paragraph (4A) above from the claimant's total income for the year of assessment preceding that in which the shares are issued shall not exceed £5,000.

.

• (2) For sub-paragraph (9) of paragraph 2 of that Schedule there shall be substituted—

(9) Section 52(7) of Chapter II shall apply, but with the deletion of the reference to section 204(3) of the Taxes Act (pay as you earn). (10) Where effect is given to a claim for relief by repayment of tax, section 47 of the Finance (No. 2) Act 1975 (repayment supplement) shall have effect in relation to the repayment as if the time from which the twelve months mentioned in subsections (1)(a) and (4)(a) of that section are to be calculated were the end of the year of assessment in which the shares are issued or, if the period mentioned in sub-paragraph (4)(a) above ends in a later year, the end of that later year.

.

• (3) For sub-paragraph (2) of paragraph 3 of that Schedule there shall be substituted—

(2) No more than £40,000 may be deducted by way of relief under paragraph 2 above from the total income of an individual for a year of assessment.

.

• (4) In paragraph 12 of that Schedule, after sub-paragraph (2) there shall be added—

(3) Section 60(4) and (5) of Chapter II shall apply in relation to the limit of £5,000 imposed by paragraph 2(4B) above as it applies in relation to the limit of £40,000 imposed by paragraph 3(2) above; and for this purpose the reference in section 60(5) to a division in proportion to the amounts subscribed by the husband and the wife shall be construed as a reference to a division in proportion to the aggregate amounts of the relevant deductions sought by each of them in their claims under paragraph 2(4A) above.

.

• (5) In paragraph 14 of that Schedule, after sub-paragraph (1) there shall be inserted—

(1A) Where by virtue of paragraph 2(4A) above relief has been given for each of two consecutive years of assessment, any withdrawal of relief shall be made for the first of those years before being made for the second.

.

• (6) This section shall have effect in relation to shares issued on or after 6th April 1987.

Films

43

• (1) In paragraph 6 of Schedule 5 to the Finance Act 1983 (qualifying trades), for paragraphs (a) and (b) of sub-paragraph (2A) there shall be substituted—

(a) the company carrying on the trade is engaged throughout the relevant period in— (i) the production of films, or (ii) the production of films and the distribution of films produced by it in the relevant period; and (b) all royalties and licence fees received by it in that period are in respect of films produced by it in that period or sound recordings in relation to such films or other products arising from such films.

.

• (2) This section shall have effect in relation to shares issued on or after 17th March 1987.

Oil industry: advance corporation tax

Limited right to carry back surrendered ACT

44

• (1) In any case where,—

• (a) on a date not earlier than 17th March 1987, a company which is the surrendering company for the purposes of section 92 of the Finance Act 1972 (setting of company's advance corporation tax against subsidiary's liability) paid a dividend, and

• (b) at no time in the accounting period of the surrendering company in which that dividend was paid was the surrendering company under the control of a company resident in the United Kingdom (construing "control" in accordance with section 302 of the Taxes Act), and

• (c) under subsection (1) of the said section 92 the benefit of the advance corporation tax (in this section referred to as "ACT") paid in respect of that dividend was surrendered to a subsidiary of the surrendering company, and

• (d) that ACT is not such that the restriction in paragraph (a) or paragraph (b) of subsection (2) of section 16 of the Oil Taxation Act 1975 (ACT on distributions to associated companies etc.) applies with respect to it, and

• (e) in one or more of the accounting periods of the subsidiary beginning in the six years preceding the accounting period in which falls the date referred to in paragraph (a) above, the subsidiary has a liability to corporation tax in respect of income which consists of or includes income arising from oil extraction activities or oil rights, within the meaning of Part II of the Oil Taxation Act 1975 (in this section referred to as "ring fence income"),

sections 85 and 92 of the Finance Act 1972 shall have effect-subject to subsections (3) to (7) below.

• (2) Where the conditions in subsection (1) above are fulfilled, the subsidiary to which the benefit of the ACT is surrendered is in the following provisions of this section referred to as a "qualifying subsidiary"; and in those provisions—

• (a) "section 85" means section 85 of the Finance Act 1972 (payments of ACT to be set against company's liability to corporation tax on its profits) and "section 92" means section 92 of that Act;

• (b) "the surrendering company" has the same meaning as in section 92;

• (c) "surrendered ACT" means ACT which, by virtue of subsection (2) of section 92, a qualifying subsidiary is treated as having paid in respect of a distribution made on a particular date; and

• (d) "the principal accounting period" means the accounting period of the qualifying subsidiary in which that date falls.

• (3) So much of subsection (3A) of section 92 as would prevent surrendered ACT being set against a qualifying subsidiary's liability to corporation tax under subsection (3) of section 85 (carry back to earlier periods) shall not apply; but the said subsection (3) shall have effect subject to the following provisions of this section.

• (4) Surrendered ACT may not under subsection (3) of section 85 be set against a qualifying subsidiary's liability to corporation tax for an accounting period earlier than the principal accounting period unless throughout—

• (a) that period,

• (b) the principal accounting period, and

• (c) any intervening accounting period,

the qualifying subsidiary was carrying on activities which, under and for the purposes specified in section 13 of the Oil Taxation Act 1975, constitute a separate trade (oil extraction activities etc.).

• (5) Subject to subsection (6) below, for each accounting period of the surrendering company in which is paid a dividend, the ACT on which gives rise, under section 92, to surrendered ACT, the total amount of that surrendered ACT in respect of which claims may be made under subsection (3) of section 85 (whether by one qualifying subsidiary of the surrendering company or by two or more taken together) shall not exceed whichever of the following limits is appropriate to the accounting period of the surrendering company—

• (a) for periods ending on or after 17th March 1987 and before 1st April 1989, £10 million;

• (b) for periods ending on or after 1st April 1989 and before 1st April 1991, £15 million;

• (c) for later periods, £20 million.

• (6) In any case where an accounting period of the surrendering company is less than twelve months, the amount which is appropriate to it under paragraphs (a) to (c) of subsection (5) above shall be proportionately reduced.

• (7) The amount of surrendered ACT of the principal accounting period which, on a claim under subsection (3) of section 85, may be treated as if it were ACT paid in respect of distributions made by the qualifying subsidiary concerned in any earlier accounting period shall not exceed the amount of ACT that would have been payable in respect of a distribution made at the end of that earlier period of an amount which, together with the ACT so payable in respect of it, would equal the qualifying subsidiary's ring fence income of that period.

• (8) In determining the amount (if any) of ACT which may be repayable—

• (a) under section 17(3) of the Oil Taxation Act 1975, or

• (b) under section 127(5) of the Finance Act 1981,

any ACT in respect of a distribution actually made on or after 17th March 1987 shall be left out of account.

Surrender of ACT where oil extraction company owned by a consortium

45

• (1) In any case where—

• (a) a company (in this section referred to as "the consortium company") is owned by a consortium consisting of two members only, each of which owns 50 per cent. of the issued share capital of the company, and

• (b) the consortium company carries on a trade consisting of or including activities falling within paragraphs (a) to (c) of subsection (1) of section 13 of the Oil Taxation Act 1975 (oil extraction etc.), and

• (c) all of the issued share capital of the consortium company is of the same class and carries the same rights as to voting, dividends and distribution of assets on a winding up,

section 92 of the Finance Act 1972 (setting of company's advance corporation tax against subsidiary's liability) shall have effect, subject to the following provisions of this section, as if the company were a subsidiary of each member of the consortium.

• (2) This section has effect with respect to advance corporation tax paid by either member of the consortium in respect of a dividend paid by it on or after 17th March 1987; and, in relation to a surrender under the said section 92 of the benefit of the advance corporation tax paid in respect of such a dividend,—

• (a) "surrendered ACT" means advance corporation tax which, by virtue of subsection (2) of that section, the consortium company is treated as having paid; and

• (b) "the notional distribution date" means the date of the distribution in respect of which the surrendered ACT is treated as paid.

• (3) No surrender under subsection (1) of section 92 of the Finance Act 1972 of the benefit of advance corporation tax may be made by virtue of this section—

• (a) unless the conditions in paragraphs (a) to (c) of subsection (1) above are fulfilled throughout that accounting period of the consortium company in which falls the notional distribution date; or

• (b) if arrangements are in existence by virtue of which any person could cause one or more of those conditions to cease to be fulfilled at some time during that or any later accounting period.

• (4) In the application of section 85 of the Finance Act 1972 (payments of ACT to be set against company's liability to corporation tax on its income) in relation to surrendered ACT resulting from a surrender by either one of the consortium members under section 92 of that Act, the reference in subsection (2) of section 85 (the limit on the amount to be set against corporation tax) to the consortium company's income charged to corporation tax shall be construed as a reference to one half of so much of that income as consists of income arising from oil extraction activities or oil rights, within the meaning of Part II of the Oil Taxation Act 1975.

• (5) So much of any surplus advance corporation tax as consists of or includes surrendered ACT shall not be treated under section 85(4) of the Finance Act 1972 as if it were advance corporation tax paid in respect of distributions made by the consortium company in a later accounting period unless the conditions in paragraphs (a) to (c) of subsection (1) above are fulfilled throughout that later period.

• (6) In any case where—

• (a) as a result of a surrender by one of the consortium members, the consortium company is treated as paying an amount of surrendered ACT which exceeds the limit applicable under subsection (2) of section 85 of the Finance Act 1972 (as modified by subsection (4) above), and

• (b) that excess falls to be treated under subsection (4) of that section as advance corporation tax paid by the consortium company in respect of distributions made in a later accounting period,

then, for the purposes of the application of subsection (2) of that section (as modified by subsection (4) above) in relation to that later accounting period, the excess of the surrendered ACT shall be treated as resulting from a surrender by that one of the consortium members referred to in paragraph (a) above.

• (7) Where section 92 of the Finance Act 1972 has effect as mentioned in subsection (2) above, subsection (9) of that section shall have effect with the omission of paragraph (b) (and the word "and" immediately preceding it).

• (8) Notwithstanding the provisions of subsection (1) above the consortium company shall not be regarded as a subsidiary for the purposes of section 44 above.

ACT on redeemable preference shares

46

• (1) In section 16 of the Oil Taxation Act 1975 (oil extraction activities etc.: restriction on setting advance corporation tax against profits therefrom) in subsection (2), after the words "United Kingdom" there shall be inserted "or, where subsection (2A) below applies, in respect of any distribution consisting of a dividend on a redeemable preference share".

• (2) At the end of subsection (2) of the said section 16 there shall be inserted the following subsections—

(2A) Subject to subsection (2B) below, this subsection applies in relation to the payment of a dividend on redeemable preference shares if the dividend is paid on or after 17th March 1987 and— (a) at the time the shares are issued, or (b) at the time the dividend is paid, the company paying the dividend is under the control of a company resident in the United Kingdom, and in this subsection "control" shall be construed in accordance with section 302 of the Taxes Act. (2B) Subsection (2A) above does not apply if or to the extent that it is shown that the proceeds of the issue of the redeemable preference shares— (a) were used to meet expenditure incurred by the company issuing them in carrying on oil extraction activities or in acquiring oil rights otherwise than from a connected person; or (b) were appropriated to meeting expenditure to be so incurred by that company; and section 533 of the Taxes Act (connected persons) applies for the purposes of this subsection.

• (3) At the end of the said section 16 there shall be added the following subsections—

(4) For the purposes of subsections (2) to (2B) above, shares in a company are redeemable preference shares either if they are so described in the terms of their issue or if, however they are described, they fulfil the condition in paragraph (a) below and either or both of the conditions in paragraphs (b) and (c) below— (a) that, as against other shares in the company, they carry a preferential entitlement to a dividend or to any assets in a winding up or both; (b) that, by virtue of the terms of their issue, the exercise of a right by any person or the existence of any arrangements, they are liable to be redeemed, cancelled or repaid, in whole or in part; (c) that, by virtue of any material arrangements, the holder has a right to require another person to acquire the shares or is obliged in any circumstances to dispose of them or another person has a right or is in any circumstances obliged to acquire them. (5) For the purposes of paragraph (a) of subsection (4) above, shares are to be treated as carrying a preferential entitlement to a dividend as against other shares if, by virtue of any arrangements, there are circumstances in which a minimum dividend will be payable on those shares but not on others; and for the purposes of paragraph (c) of that subsection arrangements relating to shares are material arrangements if the company which issued the shares or a company associated with that company is a party to the arrangements.

Chapter II

Retirement relief

47

Part III — Stamp Duty and Stamp Duty Reserve Tax

Stamp duty

Unit trusts

48

—In section of the Finance Act 1946 and in section 28 of the Finance (No. 2) Act (Northern Ireland) 1946—

• (a) for the definition in subsection (1) of “unit trust scheme” there shall be substituted—

“unit trust scheme” has the same meaning as in the Financial Services Act 1986 (but subject to subsection (1A) of this section)

;

• (b) in the definition in subsection (1) of “trust instrument”, for the words from “by virtue” to “aforesaid” there shall be substituted the words “ on which the property in question is held ”;

• (c) after subsection (1) there shall be inserted—

(1A) The Treasury may by regulations provide that any scheme of a description specified in the regulations shall be treated as not being a unit trust scheme for the purposes of this Part of this Act. (1B) Regulations under this section— (a) may contain such supplementary and transitional provisions as appear to the Treasury to be necessary or expedient, and (b) shall be made by statutory instrument, which shall be subject to annulment in pursuance of a resolution of the House of Commons.

.

Contract notes

49

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

Warrants to purchase Government stock, etc.

50

• (1) Where an interest in, a right to an allotment of or to subscribe for, or an option to acquire or to dispose of, exempt securities is transferred to or vested in any person by any instrument, no stamp duty shall be chargeable on the instrument by virtue of Part I ..., of Schedule 13 to the Finance Act 1999 (conveyance or transfer on sale or otherwise)

• (2) No stamp duty under Schedule 15 to the Finance Act 1999 (bearer instruments) shall be chargeable —

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

• (b) on the transfer of the interest, right or option constituted by, or transferable by means of, an instrument which relates to an interest, right or option within subsection (1).

• (3) For the purposes of this section, “exempt securities” means —

• (a) securities the transfer of which is exempt from all stamp duties,

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

• (c) securities the transfer of which is exempt by virtue of section 30 of the Finance Act 1967 or section 7 of the Finance Act (Northern Ireland) 1967 or section 79(2) of the Finance Act 1986 from stamp duty under Schedule 15 to the Finance Act 1999 (stamp duty: bearer instruments);

and “securities” means stock or marketable securities and includes loan capital as defined in section 78(7) of the Finance Act 1986 .

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

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

Bearer instruments relating to stock in foreign currencies

51

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

Clearance services

52

• (1) In section 70(6) of the Finance Act 1986 (transfer of securities to clearance system), for the word “relevant” (in each place where it occurs) there shall be substituted the words “shares, stock or other marketable”.

• (2) The amendments made by this section have effect in relation to instruments executed on or after 1st August 1987.

Borrowing of stock by market makers

53

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

Shared ownership transactions

54

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

Crown exemption

55

• (1) Where any conveyance, transfer or lease is made or agreed to be made

• (a) to a Minister of the Crown or

• (b) to the solicitor for the affairs of Her Majesty’s Treasury, or

• (c) to the Welsh Ministers, the First Minister for Wales, the Counsel General to the Welsh Assembly Government or the National Assembly for Wales Commission,or

• (d) to the Northern Ireland Assembly Commission

no stamp duty shall be chargeable under Part I or II, paragraph 16, of Schedule 13 to the Finance Act 1999 on the instrument by which the conveyance, transfer or lease, or the agreement for it is effected.

• (2) In this section “Minister of the Crown” has the same meaning as in the Ministers of the Crown Act 1975.

• (3) Article 3(6) of the Secretary of State for the Environment Order 1970 and Article 4(5) of the Secretary of State for Transport Order 1976 (which excempt transfers by, to or with those Ministers) shall cease to have effect.

• (4) This section applies to instruments executed on or after 1st August 1987.

Stamp duty reserve tax

Stamp duty reserve tax

56

Schedule 7 to this Act (which contains miscellaneous amendments of Part IV of the Finance Act 1986 ) shall have effect.

Part IV — Inheritance Tax

Reduced rates of tax

57

• (1) In the Inheritance Tax Act 1984 (in this Part of this Act referred to as “the 1984 Act”) section 8(1) (indexation of rate bands) shall not apply to chargeable transfers made in the year beginning 6th April 1987.

• (2) For the Table in Schedule 1 to that Act there shall be substituted the Table set out below:

Portion of value	Portion of value	Rate of tax
Lower limit	Upper limit	Per cent
£	£
Lower Limit £	Upper Limit £	Per cent.
0	90,000	Nil
90,000	140,000	30
140,000	220,000	40
220,000	330,000	50
330,000		60

• (3) Subsection (2) above applies to any chargeable transfer (within the meaning of the 1984 Act) made on or after 17th March 1987.

Securities, other business property and agricultural property

58

• (1) The 1984 Act and Schedule 20 to the Finance Act 1986 (gifts with reservation) shall have effect subject to the amendments in Schedule 8 to this Act, being amendments—

• (a) making provisions with respect to the treatment for the purposes of the 1984 Act of shares and securities dealt in on the Unlisted Securities Market;

• (b) making other amendments of Chapter I of Part V of the 1984 Act (business property);

• (c) making provision with respect to the application to certain transfers of relief under that Chapter and under Chapter II of that Part (agricultural property); and

• (d) making provision with respect to the payment of tax by instalments.

• (2) Subject to subsection (3) below, Schedule 8 to this Act shall have effect in relation to transfers of value made, and other events occurring, on or after 17th March 1987.

• (3) The amendments of the 1984 Act made by Schedule 8 to this Act shall be disregarded in determining under section 113A(3) or section 113B(3) of the 1984 Act whether any property acquired by the transferee before 17th March 1987 would be relevant business property in relation to a notional transfer of value made on or after that date.

Maintenance funds for historic buildings etc.

59

Schedule 9 to this Act shall have effect.

Acceptance in lieu: waiver of interest

60

• (1) In section 233 of the 1984 Act (interest on unpaid tax) in subsection (1), at the beginning of the words following paragraph (c) there shall be inserted the words “ then, subject to subsection (1A) below ”.

• (2) After subsection (1) of that section there shall be inserted the following subsection—

(1A) If, under section 230 above, the Board agree to accept property in satisfaction of any tax on terms that the value to be attributed to the property for the purposes of that acceptance is determined as at a date earlier than that on which the property is actually accepted, the terms may provide that the amount of tax which is satisfied by the acceptance of the property shall not carry interest under this section from that date.

• (3) This section applies in any case where the acceptance referred to in section 230 of the 1984 Act occurs on or after 17th March 1987.

Part V — Oil Taxation

Nomination of disposals and appropriations

61

• (1) The provisions of Schedule 10 to this Act shall have effect, being provisions for and in connection with the establishment of a scheme of nominations by participators in oil fields of certain proposed sales ... of oil.

• (2) Nothing in this section or Schedule 10 to this Act applies—

• (a) to oil which is gaseous at a temperature of 15 degrees centigrade and pressure of one atmosphere; or

• (b) to oil of a kind which is normally disposed of crude by deliveries in quantities of 25,000 metric tonnes or less; or

• (c) to oil which is excluded from this section by regulations under subsection (8) below;

and references to oil in this section and Schedule 10 to this Act shall be construed accordingly.

• (3) If the market value of a relevant delivery ascertained in accordance with Schedule 3 to the principal Act exceeds a participator's delivery proceeds of a relevant delivery (within the meaning given by Schedule 10), the excess shall be brought into account by him in accordance with section 2(5)(e) of the principal Act.

• (4) If a relevant delivery is a delivery of blended oil within the meaning of section 63, regulations under section 2(5B) of the principal Act shall apply for the purposes of determining the proportion of the excess attributable to a field.

• (4A) For each month in which a participator makes a relevant delivery, his monthly excess is the sum of his excesses (if any) calculated in accordance with subsection (3).

• (4B) For each chargeable period of an oil field “ the excess of nominated proceeds for the period ” means, in relation to a participator in the oil field, that proportion of the sum of his monthly excesses for the chargeable period (if any) which is attributable to the field.

• (5) In subsection (5) of section 2 of the principal Act (amounts to be taken into account in determining whether a gross profit or loss accures to a participator in any chargeable period) at the end of paragraph (d) there shall be added

and” (e) the excess of the nominated proceeds for that period, as defined in section 61 of the Finance Act 1987.

• (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (8) The Board may by regulations made by statutory instrument make provision, including provision having effect with respect to things done on or after 1st July 2006,—

• (a) as to oil which is excluded from this section, as mentioned in subsection (2) above; and

• (b) for any purpose for which regulations, other than those described as “Treasury regulations”, may be made under Schedule 10 to this Act;

and regulations made by virtue of paragraph (a) above may amend paragraphs (a) and (b) of subsection (2) above.

• (9) A statutory instrument made in the exercise of the power conferred by ... subsection (8) above shall (unless otherwise expressly provided) be subject to annulment in pursuance of a resolution of the Commons House of Parliament.

Market value of oil to be determined on a monthly basis

62

• (1) In the following provisions of the principal Act (which refer to the market value of oil at the material time in a particular calendar month) the words “at the material time” shall be omitted—

• (a) in section 2 (assessable profits and allowable losses), in subsection (9), paragraphs (a)(i) and (a)(ii);

• (b) in section 5A (allowance of exploration and appraisal expenditure), subsection (5B);

• (c) in section 14 (valuation of oil disposed of or appropriated in certain circumstances), subsections (4) and (4A)(b); and

• (d) in paragraph 2 of Schedule 2 (returns by participators), sub-paragraphs (2)(a)(iii) and (2)(b)(ii).

• (2) In the following provisions of the principal Act (which refer to the market value of stocks of oil at the end of a chargeable period) for the words “at the end” there shall be substituted “ in the last calendar month” ”

• (a) section 2(4)(b);

• (b) section 2(5)(d); and

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

and in the provisions specified in paragraphs (a) and (b) above for the word “then” there shall be substituted “ at the end of that period ”.

• (3) In Schedule 3 to the principal Act (miscellaneous provisions relating to petroleum revenue tax) paragraphs 2, 2A and 3 (market value of oil) shall be amended in accordance with Part I of Schedule 11 to this Act; and the consequential amendments of the principal Act in Part II of that Schedule shall have effect.

• (3A) Subsection (4) applies to a participator in an oil field in any case where—

• (a) paragraph 2 of Schedule 2 to the principal Act requires the participator to make a return for any chargeable period (including cases where the latest time for the delivery of that return is deferred), and

• (b) there are any relevant sales of Category 2 oil (as defined in subsection (6) below).

• (4) In such a case, that participator shall also be required, not later than the end of the second month after the end of that chargeable period, to deliver to the Board a return of all relevant sales of Category 2 oil stating—

• (a) the date of the contract of sale;

• (b) the name of the seller;

• (c) the name of the buyer;

• (d) the quantity of Category 2 oil actually sold and, if it is different, the quantity of Category 2 oil contracted to be sold;

• (e) the price receivable for that Category 2 oil;

• (f) the date which, under the contract, was the date or, as the case may be, the latest date for delivery of the Category 2 oil and the date on which the Category 2 oil was actually delivered; and

• (g) such other particulars as the Board may prescribe.

• (5) Where two or more companies which are participators in the same oil field are members of the same group of companies, within the meaning of section 413 of the Taxes Act, a return made for the purposes of subsection (4) above by one of them and expressed also to be made on behalf of the other or others shall be treated for the purposes of this section as a return made by each of them.

• (6) For the purposes of the return required by subsection (4) above from a participator in an oil field, a relevant sale of Category 2 oil is a contract for the sale of Category 2 oil at arm’s length to which the participator or any company which is resident in the United Kingdom and associated with the participator for the purposes of section 115(2) of the Finance Act 1984 is a party (as seller, buyer or otherwise), being a sale of Category 2 oil—

• (a) for delivery at any time during the chargeable period referred to in subsection (3A) above; and

• (b) details of which are not included in a return for the period under paragraph 2 of Schedule 2 to the principal Act which is delivered to the Board at the same time as the return required by subsection (4) above or which was delivered to them previously; and

• (c) which is for the delivery of at least 500 metric tonnes of Category 2 oil; ...

• (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (7) A return under subsection (4) above shall be in such form as the Board may prescribe and shall include a declaration that the return is correct and complete; and if a participator fails to deliver a return under that subsection he shall be liable—

• (a) to a penalty not exceeding £500; and

• (b) if the failure continues after it has been declared by the court or the tribunal before which proceedings for the penalty have been commenced, to a further penalty not exceeding £100 for each day on which the failure so continues;

except that a participator shall not be liable to a penalty under this subsection if the failure is remedied before proceedings for the recovery of the penalty are commenced.

• (8) Where a participator fraudulently or negligently delivers an incorrect return under subsection (4) above, he shall be liable to a penalty not exceeding £2,500 or, in the case of fraud, £5,000.

• (8A) For provision about the meaning of “Category 2 oil”, see paragraph 2 of Schedule 3 to the principal Act (which applies by virtue of section 72(6) below).

• (9) This section has effect with respect to chargeable periods ending after 31st December 1986.

Blends of oil from two or more fields

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• (1) This section applies if, at any time before its disposal or relevant appropriation, oil won from an oil field (“the relevant field”) in a chargeable period (“the relevant period”) is mixed with oil won from one or more other oil fields.

• (2) A relevant participator's share of oil won from the relevant field in the relevant period is to be taken to be the amount of the blended oil that it is just and reasonable (for the purposes of the oil taxation legislation) to allocate to the participator in respect of the relevant period.

• (3) In making the allocation regard must be had (in particular) to the quantity and quality of the oil derived from each of the originating fields.

• (4) If the participators in the originating fields select a method for making the allocation, that method is to be used to determine that allocation.

• (5) But that is subject to Schedule 12.

• (6) If the participators in the originating fields fail to select a method for making the allocation, HMRC may select a method.

• (7) In a case where only some oil won from the relevant field in the relevant period is, before its disposal or relevant appropriation, mixed with oil won from one or more other fields, subsection (2) has effect for the purpose of determining the amount of the blended oil that is to be taken to be included in a relevant participator's share of oil won from the relevant field.

• (8) Schedule 12 contains provision supplementing this section.

• (9) In this section and Schedule 12—

• “blended oil” means oil that consists of oil from two or more oil fields that has been mixed;

• “foreign field” means an area which is a foreign field for the purposes of section 12 of the Oil Taxation Act 1983;

• “oil” includes any substance which would be oil if the enactments mentioned in section 1(1) of the principal Act extended to a foreign field;

• “oil field” includes a foreign field;

• “oil taxation legislation” means Part 1 of the principal Act and any enactment construed as one with that Part;

• “originating fields”, in relation to any blended oil, means the oil fields from which oil which has been mixed as mentioned in subsection (1);

• “relevant participator” means a person who is a participator in the relevant field at any time in the relevant period.

Relief for research expenditure

64

• (1) The section set out in Part I of Schedule 13 to this Act shall be inserted in the principal Act after section 5A for the purpose of setting up a new allowance by virtue of which a participator in an oil field may obtain relief for certain research expenditure which is incurred otherwise than in connection with that field.

• (2) For the purpose of giving effect to, and in consequence of, the new allowance, the enactments specified in Part II of Schedule 13 to this Act shall have effect subject to the amendments there specified.

• (3) Part III of Schedule 13 to this Act shall have effect with respect to sums falling to be set off against expenditure which would otherwise be allowable under the new section set out in Part I of that Schedule.

Cross-field allowance of certain expenditure incurred on new fields

65

• (1) Where an election is made by a participator in an oil field (in this section referred to as “the receiving field”), up to 10 per cent. of certain expenditure incurred on or after 17th March 1987 in connection with another field, being a field which is for the purposes of this section a relevant new field, shall be allowable in accordance with this section in respect of the receiving field; and in the following provisions of this section the relevant new field in connection with which the expenditure was incurred is referred to as “the field of origin”.

• (2) An election under this section may be made only in respect of expenditure which—

• (a) was incurred by the participator making the election or, if that participator is a body corporate, by an associated company; and

• (b) as regards the field of origin, is allowable under section 3 or section 4 of the principal Act or section 3 of the Oil Taxation Act 1983; and

• (c) as regards the field of origin, has been allowed as qualifying for supplement under section 2(9)(b)(ii) or (c)(ii) of the principal Act (in the following provisions of this section referred to as “supplement”); and

• (d) is not expenditure falling within subsection (1) of section 5A of the principal Act (allowance of exploration and appraisal expenditure);

and Part I of Schedule 14 to this Act shall have effect with respect to elections under this section.

• (3) A participator may not make an election under this section in respect of expenditure which was incurred before the date which is his qualifying date, within the meaning of section 113 of the Finance Act 1984 (restriction of PRT reliefs), in relation to the receiving field unless that date falls before the end of the first chargeable period in relation to that field.

• (4) Where, by virtue of an election by a participator under this section, an amount of expenditure is allowable in respect of the receiving field, it shall be allowable as follows—

• (a) it shall be taken into account in that assessment to tax or determination relating to a chargeable period of the receiving field which is specified in Part II of Schedule 14 to this Act; and

• (b) it shall be so taken into account under subsection (8) of section 2 of the principal Act (allowable expenditure etc.) as if, for the chargeable period in question, it were an addition to the sum mentioned in paragraph (a) of that subsection; and

• (c) it shall be excluded in determining for the purposes of section 111(2) of the Finance Act 1981 (restriction of expenditure supplement) whether any, and if so what, assessable profit or allowable loss accrues to the participator in any chargeable period of the receiving field.

• (5) Where, by virtue of an election by a participator under this section, an amount of expenditure is allowable in respect of the receiving field, that amount shall be disregarded in determining, as regards the field of origin, the amounts referred to (in relation to the participator or the associated company, as the case may be) in paragraph (b) or paragraph (c) of subsection (9) of section 2 of the principal Act (allowable expenditure and supplement thereon.

• (6) In Schedule 14 to this Act—

• (a) Part III has effect to determine for the purposes of this section what is a relevant new field and who is an associated company of a participator making an election;

• (b) Part IV contains provisions supplemental to and consequential upon the allowance of expenditure by virtue of an election under this section, including provisions applicable where a notice of variation is served in respect of expenditure which is already the subject of such an election;

• (c) “the receiving field” and “the field of origin” have the meaning assigned by subsection (1) above;

• (d) “the principal section” means this section;

• (e) “election” means an election under this section; and

• (f) “supplement” has the meaning assigned by subsection (2)(c) above.

Oil allowance: adjustment for final periods

66

• (1) For the purposes of this section—

• (a) “the final allocation period”, in relation to an oil field, means the chargeable period of that field in which section 8(6)(b) of the principal Act applies (the earliest chargeable period in which oil allowance is subject to “the necessary restriction” in order to confine it within the overall maximum); and

• (b) “the penultimate period”, in relation to an oil field, means the chargeable period of that field which immediately precedes the final allocation period;

and any reference in this section to the two final periods is a reference to the final allocation period and the penultimate period.

• (2) The following provisions of this section apply if the responsible person gives notice to the Board (in this section referred to as an “apportionment notice”) specifying the manner in which the oil allowance for the field is to be apportioned between the participators in each of the two final periods, being a manner designed—

• (a) to produce, so far as practicable, the result specified in subsection (4) below, being a result which, in the circumstances of the case, could not be achieved under section 8(6)(b) of the principal Act; and

• (b) to secure that adjustments in a participator’s share of the oil allowance are made in the final allocation period in preference to the penultimate period.

• (3) An apportionment notice shall be of no effect unless—

• (a) it is given not later than six months after the expiry of the final allocation period; and

• (b) not later than the date of the notice the responsible person notifies the Board in accordance with paragraph (b) of subsection (6) of section 8 of the principal Act of the manner in which the necessary restriction, as defined in that subsection, is to be apportioned between the participators; and

• (c) it specifies a period for each of paragraphs (a) and (b) of subsection (4) below; and

• (d) it contains such information as the Board may prescribe for the purpose of showing how, or to what extent, the apportionment of the oil allowance achieves the result specified in subsection (4) below.

• (4) The result referred to in subsection (2) above is that the respective shares of the oil allowance utilised by each of two or more participators specified in the apportionment notice bear to each other the same proportion as their respective shares in oil won and saved from the field and, for this purpose—

• (a) a participator’s share of the oil allowance means the total amount of the allowance utilised by him over the period specified for the purpose of this paragraph in the apportionment notice; and

• (b) a participator’s share in oil won and saved from the field means the total of the oil included in his share of oil won and saved from the field (as specified in returns under Schedule 2 to the principal Act) over the period specified for the purposes of this paragraph in the apportionment notice, being a period which includes that specified for the purposes of paragraph (a) above.

• (5) If the Board are satisfied that an apportionment notice complies with subsections (2) to (4) above, they shall give notice to the responsible person accepting the apportionment notice and, on the giving of that notice—