Finance Act 1987

• (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

63

• (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—

• (a) the apportionment specified in the apportionment notice shall, as respects the two final periods, have effect as if it were the apportionment resulting from section 8(2) of the principal Act; and

• (b) all such amendments of assessments to tax and determinations shall be made as may be necessary in consequence of paragraph (a) above.

• (6) If the Board are not satisfied that an apportionment notice complies with subsections (2) to (4) above, they shall give notice to the responsible person rejecting the apportionment notice and, where the Board give such a notice, the responsible person may, by notice in writing given to the Board within thirty days after the date of the notice of rejection, appeal ... against the notice.

• (7) Where notice of appeal is given under subsection (6) abvove—

• (a) if, at any time after the giving of the notice and before the determination of the appeal by the tribunal, the Board and the appellant agree that the apportionment notice should be accepted or withdrawn or varied, the same consequences shall ensue as if the tribunal had determined the appeal to that effect;

• (b) if the appeal is notified to the tribunal and it appears to the tribunal that the apportionment notice should be accepted, with or without modifications, the tribunal shall allow the appeal and, where appropriate, make such modifications of the apportionment specified in the notice as the tribunal thinks fit; and

• (c) where the appeal is allowed, subsection (5) above shall apply as if the apportionment notice (subject to any modifications made by the tribunal) had been accepted by the Board.

• (8) Paragraphs 14(2), (8) and (11) and 14A to 14I of Schedule 2 to the principal Act shall apply in relation to an appeal under subsection (6) as they apply in relation to an appeal against an assessment or determination made under that Act subject to the following modifications—

• (a) any reference in those paragraphs to a participator is to be construed as a reference to the responsible person by whom notice of appeal is given;

• (b) any reference to an agreement under paragraph 14(9) shall be construed as a reference to an agreement under subsection (7)(a) above;

• (c) any other modifications that are necessary.

• (9) This section applies where the final allocation period ends on or after 30th June 1987.

Variation of decisions on claims for allowable expenditure

67

In Schedule 7 to the principal Act (claim for allowance of certain exploration expenditure etc.) at the end of the Table set out in paragraph 1(3) (which applies the provisions of Schedule 5 specified in the first column of the Table with the modifications specified in the second column) there shall be added—

9	In sub-paragraph (2) omit paragraphs (b) and (c), in sub-paragraph (8) for the reference to all or any of the participators substitute a reference to the participator by whom the claim is made and in sub-paragraph (11) for “after 15th March 1983” substitute “ on or after 17th March 1987 ”.

Part VI — Miscellaneous and Supplementary

Abolition of enactments relating to exchange control

68

• (1) The Exchange Control Act 1947 shall cease to have effect.

• (2) Nothing in subsection (1) above affects the power of the Treasury to issue a certificate under subsection (2) of section 18 of that Act (including that subsection as applied by section 28(3) or section 29(3) of that Act) with respect to acts done before 13th December 1979.

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

• (4) Subsections (1) and (2) above extend to the Channel Islands and the Isle of Man.

Regulation of financial dealings

69

In section 2 of the Banking and Financial Dealings Act 1971 (power of Treasury to suspend financial dealings)—

• (a) at the end of paragraph (c) of subsection (1) (power to suspend dealings in gold) there shall be added “ or, according as may be specified in the order, gold of such kind as may be so specified ”; and

• (b) in subsection (6) for the definition beginning “foreign currency” there shall be substituted—

“foreign currency” means any currency other than sterling and any units of account defined by reference to more than one currency (whether or not including sterling); and “gold” includes gold coin, gold bullion and gold wafers.

Arrangements specified in Orders in Council relating to double taxation relief etc.

70

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

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

Pre-consolidation amendments

71

Short title, interpretation, construction and repeals

72

• (1) This Act may be cited as the Finance Act 1987.

• (2) In this Act “the Taxes Act” means the Income and Corporation Taxes Act 1970.

• (3) Part II of this Act, so far as it relates to income tax, shall be construed as one with the Income Tax Acts, so far as it relates to corporation tax, shall be construed as one with the Corporation Tax Acts and, so far as it relates to capital gains tax, shall be construed as one with the Capital Gains Tax Act 1979.

• (4) Part III of this Act, except section 56 and Schedule 7, shall be construed as one with the Stamp Act 1891.

• (5) In Part IV of this Act “the 1984 Act” means the Inheritance Tax Act 1984.

• (6) Part V of this Act shall be construed as one with Part I of the Oil Taxation Act 1975 and in that Part “the principal Act” means that Act.

• (7) The enactments specified in Schedule 16 to this Act (which include enactments which are spent or otherwise unnecessary) are hereby repealed to the extent specified in the third column of that Schedule, but subject to any provision at the end of any Part of that Schedule.

SCHEDULE 1

Part I — Tables Substituted in Part II of Schedule 4 to the Acts of 1971 and 1972

Part II — Recovery Vehicles

Interpretation

1

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

2

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

The charge of duty

3

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

Recovery vehicles not chargeable as goods vehicles

4

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

Exclusion of recovery vehicles from trade licences

5

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

6

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

Part III — Miscellaneous Amendments

Introductory

7

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

Additional liability for evasion of duty

8

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

9

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

10

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

11

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

12

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

13

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

Offences relating to trade licences

14

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

15

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

Regulations concerning transfer etc. of vehicles

16

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

17

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

Increase of certain penalties for offences under regulations

18

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

19

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

Dishonoured cheques

20

In subsection (3) of section 102 of the Customs and Excise Management Act 1979 (penalty for failure to deliver up excise licence following dishonour of cheque) after paragraph (a) there shall be inserted the following paragraph—

(aa) where the licence is a licence under the Vehicles (Excise) Act 1971, a penalty of whichever is the greater of— (i) level 3 on the standard scale, or (ii) an amount equal to five times the annual rate of duty that was payable on the grant of the licence or would have been so payable if it had been taken out for a period of twelve months.

21

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

SCHEDULE 2

Supplies received from abroad

1

Section 7 of the principal Act (reverse charge on supplies received from abroad) shall be amended as follows—

• (a) in paragraph (b) of subsection (1), for the words “taxable person” there shall be substitiuted “person (in this section referred to as “the recipient”)”;

• (b) in subsection (1), in the words following paragraph (b) for the words “as if the taxable person” there shall be substituted “as if the recipient”;

• (c) in subsections (3) and (4) for the words “taxable person” there shall be substituted “recipient”; and

• (d) in subsection (3) for the words “the allowance” there shall be substituted “any allowance”.

Repayment of tax on importation to those in business overseas

2

Transfers of going concerns

3

In section 33 of the principal Act (transfers of going concerns), after subsection (1) there shall be inserted—

(1A) Where the transferee is liable to be registered by virtue of paragraph 1(1)(b) of Schedule 1 to this Act at the time the business is transferred, paragraph 4(2) of that Schedule shall not apply but the Commissioners shall register him with effect from that time.

.

Appeals

4

In section 40(1) of the principal Act (appeals) for paragraph (d) there shall be substituted—

(d) the proportion of input tax allowable under section 15 above

.

SCHEDULES 3–6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Part I — The Taxable Maximum

1

• (1) For the purposes of subsections (3) and (4) of the principal section, the taxable maximum in respect of a week shall be determined in accordance with paragraphs 2 to 4 below and the taxable maximum in respect of part of a week shall be equal to one-sixth of the taxable maximum in respect of a week multiplied by the number of days in the part.

• (2) In this Part of this Schedule—

• (a) "married couple" and "unmarried couple" have the same meaning as in Part II of the Social Security Act 1986; and

• (b) "the principal section" means section 29 of this Act.

2

Where the income support is paid to one of a married or unmarried couple in a case not falling within subsection (2)(b) of the principal section, the taxable maximum in respect of a week shall be equal to the aggregate of—

• (a) the weekly rate specified for the week in question in relation to unemployment benefit in paragraph 1 of Part I of Schedule 4 to the Social Security Act 1975; and

• (b) the increase for an adult dependant specified for that week in paragraph 1(a) of Part IV of that Schedule.

3

Where the income support is paid to one of a married or unmarried couple in a case falling within subsection (2)(b) of the principal section, the taxable maximum in respect of a week shall—

• (a) if the applicable amount (within the meaning of Part II of the Social Security Act 1986) consists only of an amount in respect of them, be equal to one half of that amount; and

• (b) if the applicable amount includes other amounts, be equal to one half of the portion of it which is included in respect of them.

4

Where the income support is paid to a person who is not one of a married or unmarried couple, the taxable maximum in respect of a week shall be equal to the weekly rate referred to in paragraph 2(a) above.

Part II — Consequential Amendments

The Income and Corporation Taxes Act 1970

5

In subsection (2) of section 530 of the Taxes Act (meaning of "earned income" in the Income Tax Acts) in paragraph (c) for the words "or section 27 of the Finance Act 1981" there shall be substituted "or section 29 of the Finance Act 1987".

The Finance Act 1981

6

In section 28(1) of the Finance Act 1981 (notification of amount of benefit which is taxable) for the words "under section 27 above" there shall be substituted "in respect of any unemployment benefit or income support".

7

In section 29 of the Finance Act 1981 (pay as you earn repayments) for paragraph (b) there shall be substituted the following—

(b) he has claimed a payment of income support under the Social Security Act 1986 or the Social Security (Northern Ireland) Order 1986 in respect of a period including that time and his right to that income support is subject to the condition specified in section 20(3)(d)(i) of that Act or, in Northern Ireland, Article 21(3)(d)(i) of that Order (availability for employment);

SCHEDULE 4

Part I — Amendments of Schedule 10 to the Finance Act 1980 and Schedule 10 to the Finance Act 1984

1

• (1) In Schedule 10 to the Finance Act 1980 (savings-related share option schemes) after paragraph 10 there shall be inserted the following paragraph—

(10A) (1) The scheme may also provide that if any company (in this paragraph referred to as "the acquiring company")— (a) obtains control of a company whose shares are scheme shares as a result of making a general offer falling within sub-paragraph (i) or sub-paragraph (ii) of paragraph 10(1)(a) above, or (b) obtains control of a company whose shares are scheme shares in pursuance of a compromise or arrangement sanctioned by the court under section 425 of the Companies Act 1985 or Article 418 of the Companies (Northern Ireland) Order 1986, or (c) becomes bound or entitled to acquire shares in a company whose shares are scheme shares under sections 428 to 430 of the said Act of 1985 or Articles 421 to 423 of the said Order of 1986, any participant in the scheme may at any time within the appropriate period, by agreement with the acquiring company, transfer to the acquiring company his rights under the scheme (in this paragraph referred to as "the old rights") in consideration of the grant to him of rights (in this paragraph referred to as "the new rights") which are equivalent to the old rights but relate to shares in a different company (whether the acquiring company itself or some other company falling within paragraph (b) or paragraph (c) of paragraph 15 below). (2) In sub-paragraph (1) above "the appropriate period" means— (a) in a case falling within paragraph (a), the period of six months beginning with/the time when the person making the offer has obtained control of the company and any condition subject to which the offer is made is satisfied, (b) in a case falling within paragraph (b), the period of six months beginning with the time when the court sanctions the compromise or arrangement, and (c) in a case falling within paragraph (c), the period during which the acquiring company remains bound or entitled as mentioned in that paragraph. (3) The new rights shall not be regarded for the purposes of this paragraph as equivalent to the old rights unless— (a) the shares to which they relate satisfy the conditions specified, in relation to scheme shares, in paragraphs 15 to 19 below; and (b) the new rights will be exercisable in the same manner as the old rights and subject to the provisions of the scheme as it had effect immediately before the exchange; and (c) the total market value, immediately before the exchange, of the shares which were subject to the participant's old rights is equal to the total market value, immediately after the exchange, of the shares in respect of which the new rights are granted to the participant; and (d) the total amount payable by the participant for the acquisition of shares in pursuance of the new rights is equal to the total amount that would have been payable for the acquisition of shares in pursuance of the old rights. (4) Where any new rights are granted pursuant to a provision included in a scheme by virtue of this paragraph they shall be regarded— (a) for the purposes of section 47 of this Act and this Schedule, and (b) for the purposes of the subsequent application (by virtue of a condition complying with sub-paragraph (3)(b) above) of the provisions of the scheme, as having been granted at the time when the corresponding old rights were granted.

• (2) In paragraph 11 of the said Schedule 10 (rights not to be capable of being transferred) after the words "paragraph 7" there shall be inserted "or paragraph 10A".

2

• (1) In Schedule 10 of the Finance Act 1984 (approved share option schemes) after paragraph 4 there shall be inserted the following paragraph—

(4A) (1) The scheme may provide that if any company (in this paragraph referred to as "the acquiring company")— (a) obtains control of a company whose shares are scheme shares as a result of making— (i) a general offer to acquire the whole of the issued share capital of the company which is made on a condition such that if it is satisfied the person making the offer will have control of the company, or (ii) a general offer to acquire all the shares in the company which are of the same class as the scheme shares, or (b) obtains control of a company whose shares are scheme shares in pursuance of a compromise or arrangement sanctioned by the court under section 425 of the Companies Act 1985 or Article 418 of the Companies (Northern Ireland) Order 1986, or (c) becomes bound or entitled to acquire shares in a company whose shares are scheme shares under sections 428 to 430 of the said Act of 1985 or Articles 421 to 423 of the said Order of 1986, any participant in the scheme may at any time within the appropriate period, by agreement with the acquiring company, transfer to the acquiring company his rights under the scheme (in this paragraph referred to as "the old rights") in consideration of the grant to him of rights (in this paragraph referred to as "the new rights") which are equivalent to the old rights but relate to shares in a different company (whether the acquiring company itself or some other company falling within paragraph (b) or paragraph (c) of paragraph 7 below). (2) In sub-paragraph (1) above "the appropriate period" means— (a) in a case falling within paragraph (a), the period of six months beginning with the time when the person making the offer has obtained control of the company and any condition subject to which the offer is made is satisfied, (b) in a case falling within paragraph (b), the period of six months beginning with the time when the court sanctions the compromise or arrangement, and (c) in a case falling within paragraph (c), the period during which the acquiring company remains bound or entitled as mentioned in that paragraph. (3) The new rights shall not be regarded for the purposes of this paragraph as equivalent to the old rights unless— (a) the shares to which they relate satisfy the conditions specified, in relation to scheme shares, in paragraphs 7 to 11 below; and (b) the new rights will be exercisable in the same manner as the old rights and subject to the provisions of the scheme as it had effect immediately before the exchange; and (c) the total market value, immediately before the exchange, of the shares which were subject to the participant's old rights is equal to the total market value, immediately after the exchange, of the shares in respect of which the new rights are granted to the participant; and (d) the total amount payable by the participant for the acquisition of shares in pursuance of the new rights is equal to the total amount that would have been payable for the acquisition of shares in pursuance of the old rights. (4) Where any new rights are granted pursuant to a provision included in a scheme by virtue of this paragraph they shall be regarded— (a) for the purposes of section 38 of this Act and this Schedule, and (b) for the purposes of the subsequent application (by virtue of a condition complying with sub-paragraph (3)(b) above) of the provisions of the scheme, as having been granted at the time when the corresponding old rights were granted.

• (2) In paragraph 12 of the said Schedule 10 (transfer of rights) after the words "any of them" there shall be inserted "(except pursuant to a provision included in the scheme by virtue of paragraph 4A above)".

Part II — Transitional Provisions

3

• (1) Where an existing scheme is altered before 1st August 1989 so as to include such a provision as is mentioned in paragraph 10A of Schedule 10 to the Finance Act 1980 or, as the case may be, paragraph 4A of Schedule 10 to the Finance Act 1984 (in this paragraph referred to as "an exchange provision"), the scheme as altered may by virtue of this paragraph apply that provision to rights obtained under the scheme before the date on which the alteration takes effect.

• (2) If an exchange provision is applied as mentioned in sub-paragraph (1) above in a case where, on or after 17th March 1987 but before the date on which the alteration takes effect, an event has occurred by reason of which a person holding rights under the scheme would be able to take advantage of the exchange provision—

• (a) the scheme may permit a person who held rights under the scheme immediately before that event to take advantage of the exchange provision, and

• (b) in a case where rights then held would otherwise, by reason of the event, have ceased to be exercisable, the scheme may provide that the exchange provision shall apply as if the rights were still exercisable.

• (3) The application of an exchange provision as mentioned in sub-paragraph (1) or sub-paragraph (2) above shall not itself be regarded for the purposes of Schedule 10 to the Finance Act 1980 or, as the case may be, Schedule 10 to the Finance Act 1984 as the acquisition of a right.

• (4) In sub-paragraph (1) above "an existing scheme" means a scheme approved under Schedule 10 to the Finance Act 1980 or Schedule 10 to the Finance Act 1984 before 1st August 1987.

• (5) This paragraph has effect subject to paragraph 3(2) of Schedule 10 to the said Act of 1980 or, as the case may be, paragraph 2(2) of Schedule 10 to the said Act of 1984 (which require the approval of the Board for any alteration in a scheme).

Part III — Consequential Provisions Relating to Capital Gains Tax

4

In section 47 of the Finance Act 1980 (savings-related share option schemes) after subsection (2) there shall be inserted the following subsection—

(2A) Where a right to acquire shares in a body corporate which was obtained as mentioned in subsection (1) above is exchanged for a right to acquire shares in another body corporate in accordance with a provision included in a scheme pursuant to paragraph 10A of Schedule 10 to this Act, the exchange shall not be treated for the purposes of the Capital Gains Tax Act 1979 as involving any disposal of the first-mentioned right or any acquisition of the other right, but for those purposes the other right shall be treated as the same asset acquired as the first-mentioned right was acquired.

5

In section 38 of the Finance Act 1984 (approved share option schemes) after subsection (6) there shall be inserted the following subsection—

(6A) Where a right to acquire shares in a body corporate is exchanged for a right to acquire shares in another body corporate in accordance with a provision included in a scheme pursuant to paragraph 4A of Schedule 10 to this Act, the exchange shall not be treated for the purposes of the Capital Gains Tax Act 1979 as involving any disposal of the first-mentioned right or any acquisition of the other right, but for those purposes the other right shall be treated as the same asset acquired as the first-mentioned right was acquired.

.

Part IV — Material Interest Test

Interests under trusts

6

• (1) This paragraph applies in a case where—

• (a) the individual (in this paragraph referred to as "the beneficiary") was one of the objects of a discretionary trust, and

• (b) the property subject to the trust at any time consisted of or included any shares or obligations of the company.

• (2) If neither the beneficiary nor any relevant associate of his had received any benefit under the discretionary trust before 14th November 1986, then, as respects any time before that date, the trustees of the settlement concerned shall not be regarded, by reason only of the matters referred to in sub-paragraph (1) above, as having been associates (as denned in section 303(3) of the Taxes Act) of the beneficiary.

• (3) If, on or after 14th November 1986,—

• (a) the beneficiary ceases to be eligible to benefit under the discretionary trust by reason of—

• (i) an irrevocable disclaimer or release executed by him under seal, or

• (ii) the irrevocable exercise by the trustees of a power to exclude him from the objects of the trust, and

• (b) immediately after he so ceases, no relevant associate of his is interested in the shares or obligations of the company which are subject to the trust, and

• (c) during the period of twelve months ending with the date when the beneficiary so ceases, neither the beneficiary nor any relevant associate of his received any benefit under the trust,

the beneficiary shall not be regarded, by reason only of the matters referred to in sub-paragraph (1) above, as having been interested in the shares or obligations of the company as mentioned in section 303(3)(c) of the Taxes Act at any time during the period of twelve months referred to in paragraph (c) above.

• (4) In sub-paragraphs (2) and (3) above "relevant associate" has the meaning given to "associate" by section (3) of section 303 of the Taxes Act, but with the omission of paragraph (c) of that subsection.

• (5) Sub-paragraph (3)(a)(i) above, in its application to Scotland, shall be construed as if the words "under seal" were omitted.

Options etc.

7

• (1) For the purposes of paragraph (a) of subsection (6) of section 285 of the Taxes Act (cases in which a person has a material interest in a company) a right to acquire any shares (however arising) shall be taken to be a right to control them.

• (2) Any reference in sub-paragraph (3) below to the shares attributed to an individual is a reference to the shares which, in accordance with section 285(6)(a) of the Taxes Act, fall to be brought into account in his case to determine whether their number exceeds a particular percentage of the company's ordinary share capital.

• (3) In any case where—

• (a) the shares attributed to an individual consist of or include shares which he or any other person has a right to acquire, and

• (b) the circumstances are such that, if that right were to be exercised, the shares acquired would be shares which were previously unissued and which the company is contractually bound to issue in the event of the exercise of the right,

then, in determining at any time prior to the exercise of that right whether the number of shares attributed to the individual exceeds a particular percentage of the ordinary share capital of the company, that ordinary share capital shall be taken to be increased by the number of unissued shares referred to in paragraph (b) above.

• (4) This paragraph has effect as respects any time on or after 6th April 1987.

Shares held by trustees of approved profit sharing schemes

8

In applying section 285(6) of the Taxes Act (cases in which a person has a material interest in a company), as respects any time before or after the passing of this Act, there shall be disregarded—

• (a) the interest of the trustees of a profit sharing scheme approved under Part I of Schedule 9 to the Finance Act 1978 in any shares which are held by them in accordance with the scheme and have not yet been appropriated to an individual; and

• (b) any rights exercisable by those trustees by virtue of that interest.

SCHEDULE 5

Interpretation

1

• (1) In this Schedule—

• "the principal section" means section 35 of this Act; and

• "employer" and "employee" have the same meaning as in the principal section.

• (2) Any reference in this Schedule to an employee being employed by an employer is a reference to the employee holding office or employment under the employer.

Qualifying courses of training

2

Subject to paragraph 3 below, a course is a qualifying course of training if—

• (a) it provides a course of training designed to impart or improve skills or knowledge relevant to, and intended to be used in the course of, gainful employment (including self-employment) of any description; and

• (b) the course is entirely devoted to the teaching or practical application of the skills or knowledge (or to both such teaching and practical application); and

• (c) the duration of the course does not exceed one year; and

• (d) all teaching and practical application forming part of the course takes place within the United Kingdom.

3

A course shall not be regarded as a qualifying course of training in relation to a particular employee unless—

• (a) he attends the course on a full-time or substantially full-time basis; and

• (b) he is employed by the employer full-time throughout the period of two years ending at the time when he begins to undertake the course or, if it is earlier, at the time he ceases to' be employed by him; and

• (c) the opportunity to undertake the course, on similar terms as to payment or reimbursement of relevant expenses, is available either generally to holders or past holders of offices or employment under the employer or to a particular class or classes of such holders or past holders.

Courses undertaken with a view to retraining

4

• (1) An employee shall not be regarded as undertaking a course with a view to retraining unless—

• (a) he begins to undertake the course of training while he is employed by the employer or within the period of one year after he ceases to be so employed; and

• (b) he ceases to be employed by the employer not later than the end of the period of two years beginning at the end of the qualifying course of training.

• (2) An employee shall not be regarded as having undertaken a course with a view to retraining if, any time within the period of two years beginning at the time when he ceased to be employed as mentioned in sub-paragraph (1)(b) above, he is again employed by the employer.

Relevant expenses

5

• (1) Where an employee undertakes a qualifying course of training, the relevant expenses consist of—

• (a) fees for attendance at the course;

• (b) fees for any examination which is taken during or at the conclusion of the course;

• (c) the cost of any books which are essential for a person attending the course; and

• (d) travelling expenses falling within sub-paragraph (2) below.

• (2) The travelling expenses referred to in sub-paragraph (1)(d) above are those which would be deductible under section 189 of the Taxes Act (relief for necessary expenses)—

• (a) on the assumption that attendance at the course is one of the duties of the employee's office or employment; and

• (b) if the employee has in fact ceased to be employed by the employer, on the assumption that he continues to be employed by him.

SCHEDULE 6

Part I — Companies

Interpretation

1

• (1) In this Part of this Schedule an "old company" means a company to which section 244 of the Taxes Act applied in respect of the last accounting period ending before 17th March 1987.

• (2) In relation to an old company—

• (a) "the company's section 244 interval" means the interval after the end of an accounting period of the company which, in accordance with section 244 of the Taxes Act, was the period within which corporation tax assessed for that period was required to be paid; and

• (b) "the period of reduction" means the number of whole days which are comprised in a period equal to one-third of the difference between nine months and the company's section 244 interval.

General rules

2

Subject to paragraph 5 below, with respect to the first accounting period of an old company beginning on or after 17th March 1987, section 243(4) of the Taxes Act (time for payment of corporation tax) shall have effect as if for the reference to nine months there were substituted a reference to a period which is equal to the company's section 244 interval less the period of reduction.

3

Subject to paragraph 5 below, with respect to any accounting period of an old company which begins—

• (a) after the accounting period referred to in paragraph 2 above, but

• (b) before the second anniversary of the beginning of that period,

section 243(4) of the Taxes Act shall have effect as if for the reference to nine months there were substituted a reference to a period equal to the previous payment interval less the period of reduction.

4

In relation to any accounting period of an old company falling within paragraph 3 above, "the previous payment interval" means the interval after the end of the immediately preceding accounting period within which corporation tax for that preceding period is required to be paid by virtue of section 243(4) of the Taxes Act, as modified by this Part of this Schedule.

5

If the accounting period referred to in paragraph 2 above or any accounting period falling within paragraph 3 above is less than twelve months, the paragraph in question shall have effect in relation to that accounting period as if for the reference in that paragraph to the period of reduction there were substituted a reference to the number of whole days comprised in a period which bears to the period of reduction the same proportion as that accounting period bears to twelve months.

Consequential provisions

6

With respect to any accounting period of an old company which falls within paragraph 2 or paragraph 3 above, section 86 of the Taxes Management Act 1970 (interest on overdue tax) shall have effect as if, in paragraph 5(a) of the Table in subsection (4) (the reckonable date in relation to corporation tax), the reference into the nine months mentioned in section 243(4) of the Taxes Act were a reference to the period which, under the preceding provisions of this Part of this Schedule, is substituted for those nine months.

7

In section 88 of the Taxes Management Act 1970 (interest on tax recovered to make good loss due to taxpayer's fault) in paragraph (e) of subsection (5) (the date when corporation tax ought to have been pa(d) for the words from "where section 244(1)" to "the interval" there shall be substituted "in the case of an accounting period in respect of which subsection (4) of section 243 of the principal Act applies as modified by paragraph 2 or paragraph 3 of Schedule 6 to the Finance Act 1987, at the end of the period which, under that paragraph, is substituted for the period of nine months".

8

With respect to any accounting period of an old company which falls within paragraph 2 or paragraph 3 above, section 48 of the Finance (No. 2) Act 1975 (repayment supplement in respect of delayed repayments of certain taxes to companies) shall have effect as if, in subsection (9) in paragraph (a) of the definition of "the material date", the reference to the nine months mentioned in section 243(4) of the Taxes Act were a reference to the period which, under the preceding provisions of this Part of this Schedule, is substituted for those nine months.

Part II — Building Societies

9

In this Part of this Schedule a "1989 accounting period" means an accounting period ending in the year 1989-90.

10

Where, by virtue of section 344(2)(a) of the Taxes Act, corporation tax assessed on a building society in respect of a 1989 accounting period would, apart from this paragraph, be payable by a date which is earlier than the end of the period of two months from the end of that accounting period, the tax shall be payable within that period of two months.

11

If, apart from this paragraph, the date on which, under section 344(2)(b) of the Taxes Act, a building society would be required to make a provisional payment of corporation tax for a 1989 accounting period would fall before the end of the period of two months from the end of that accounting period, that date shall be postponed until the end of that period of two months.

12

With respect to a 1989 accounting period of a building society to which paragraph 10 above applies, in the following enactments—

• (a) in section 86(4) of the Taxes Management Act 1970, paragraph 5(c) in the second column of the Table (the reckonable date for interest on overdue tax); and

• (b) in section 48(9) of the Finance (No. 2) Act 1975, paragraph (c) of the definition of "the material date" (for repayment supplement),

the reference to the time limit imposed by subsection (2)(a) of section 344 of the Taxes Act shall be construed as a reference to the limit imposed by paragraph 10 above.

SCHEDULE 7

1

Part IV of the Finance Act 1986 shall be amended in accordance with the following provisions of this Schedule.

Principal charge

2

• (1) In section 87, after subsection (7) there shall be inserted —

(7A) Where there would be no charge to tax under this section in relation to some of the chargeable securities to which the agreement between A and B relates if separate agreements had been made between them for the transfer of those securities and for the transfer of the remainder, this section shall have effect as if such separate agreements had been made. (7B) This section shall have effect in relation to a person to whom the chargeable securities are transferred by way of security for a loan to B as it has effect in relation to a nominee of B.

.

• (2) This paragraph shall be deemed always to have had effect.

Renounceable letters of allotment, etc.

3

• (1) In section 88(3)(a), after the words “subsection (2)” there shall be inserted the words “the words 'the expiry of the period of two months beginning with' and”.

• (2) This paragraph shall have effect in relation to agreements made on or after 1st August 1987.

Market makers in options

4

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

Clearance services

5

• (1) In section 90, for subsection (5) there shall be substituted —

(5) Section 87 above shall not apply as regards an agreement to transfer securities which the Board are satisfied are held, when the agreement is made, by a person within subsection (6) below. (6) A person is within this subsection if his business is exclusively that of holding shares, stock or other marketable securities — (a) as nominee or agent for a person whose business is or includes the provision of clearance services for the purchase and sale of shares, stock or other marketable securities, and (b) for the purpose of such part of the business mentioned in paragraph (a) above as consists of the provision of such clearance services (in a case where the business does not consist exclusively of that); and in this subsection, 'marketable securities' shall be construed in accordance with section 122(1) of the Stamp Act 1891 .

• (2) This paragraph shall be deemed always to have had effect.

Charities etc.

6

• (1) In section 90, at the end there shall be added —

(7) Section 87 above shall not apply as regards an agreement to transfer securities to — (a) a body of persons established for charitable purposes only, or (b) the trustees of a trust so established, or (c) the Trustees of the National Heritage Memorial Fund, or (d) the Historic Buildings and Monuments Commission for England.

• (2) This paragraph shall be deemed always to have had effect.

Interest on tax repayments

7

• (1) In section 92, after subsection (4) there shall be inserted —

(4A) Interest paid under subsection (2) above shall not constitute income for any tax purposes.

• (2) This paragraph shall be deemed always to have had effect.

SCHEDULE 8

1

In section 10 of the 1984 Act (dispositions not intended to confer gratuitous benefit) in subsection (2) for the words from “shares” to “stock exchange” there shall be substituted “ unquoted shares or unquoted debentures ”.

2

In section 98 of the 1984 Act (effect of alterations of capital, etc.) in subsection (1)—

• (a) in paragraph (a) for the words from “shares” onwards there shall be substituted “ quoted shares or quoted securities ”;

• (b) in paragraph (b) for the words from “shares” onwards there shall be substituted “ unquoted shares in or unquoted debentures of a close company ”; and

• (c) for the words “shares or debentures not so quoted” there shall be substituted “ unquoted shares or unquoted debentures ”.

3

In section 100 of the 1984 Act (alterations of capital where participators are trustees) in subsection (1)(c) for the words from “shares” onwards there shall be substituted “ unquoted shares in or unquoted securities of the close company ”.

4

In section 104 of the 1984 Act (relief for business property) in subsection (1)(a) for the words “or (b)” there shall be substituted “ (b) or (bb) ”.

5

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

6

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

7

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

8

• (1) In section 113A of the 1984 Act (application of relief for business property to transfers made within seven years before death of transferor) in subsection (3) at the beginning of paragraph (b) there shall be inserted the words “ except to the extent that the original property consists of shares or securities to which subsection (3A) below applies ”.

• (2) After subsection (3) of that section there shall be inserted the following subsection—

(3A) This subsection applies to shares or securities— (a) which were quoted at the time of the chargeable transfer referred to in subsection (1) or subsection (2) above; or (b) which fell within paragraph (b) of section 105(1) above in relation to that transfer and were unquoted throughout the period referred to in subsection (3)(a) above.

9

In section 124A of the 1984 Act (application of agricultural relief to transfers within seven years before death of transferor) in subsection (6) for the words following paragraph (b) there shall be substituted “ his period of ownership of the original property shall be treated as including his period of ownership of the shares. ”

10

In section 136 of the 1984 Act (transactions of close companies) in subsection (1)(b) for the words “shares quoted on a recognised stock exchange” there shall be substituted “ quoted shares ” and for the words “shares in or debentures of the company which are not so quoted” there shall be substituted “ unquoted shares in or unquoted debentures of the company ”.

11

In section 140(2) of the 1984 Act (market value for purposes of Chapter IV of Part IV) in paragraph (b) for the words from “shares” to “exchange” there shall be substituted “ unquoted shares ”.

12

• (1) In section 168 of the 1984 Act (unquoted shares and securities) in subsection (1) before the word “securities” where it first occurs, there shall be inserted “ unquoted ”.

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

13

• (1) In section 178 of the 1984 Act (sale of shares etc. from deceased’s estate) in subsection (1), in the definition of “qualifying investments”, for the words from “at the date” to “exchange” there shall be substituted “ are quoted at the date of the death in question ”.

• (2) In subsection (2) of that section—

• (a) after the words “quotation on a recognised stock exchange” there shall be inserted “ or dealing in the Unlisted Securities Market ”, and

• (b) the words “on a recognised stock exchange”, in the second place where they occur, shall be omitted.

14

In section 180 of the 1984 Act (effect of purchases) in subsection (3) after the word “exchange” there shall be inserted “ or separately dealt in on the Unlisted Securities Market ”.

15

• (1) In section 227 of the 1984 Act (payment by instalments) for subsection (1A) there shall be substituted the following subsection—

(1A) Subsection (1) above does not apply to— (a) tax payable on the value transferred by a potentially exempt transfer which proves to be a chargeable transfer, or (b) additional tax becoming payable on the value transferred by any chargeable transfer by reason of the transferor’s death within seven years of the transfer,except to the extent that the tax is attributable to the value of property which satisfies one of the conditions specified in subsection (1C) below and, in the case of property consisting of unquoted shares or unquoted securities, the further condition specified in section 228(3A) below.

• (2) In subsection (1B) of that section for the words “subsection (1A) above” there shall be substituted “ this section ”.

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

(1C) The conditions referred to in subsection (1A) above are— (a) that the property was owned by the transferee throughout the period beginning with the date of the chargeable transfer and ending with the death of the transferor (or, if earlier, the death of the transferee), or (b) that for the purposes of determining the tax, or additional tax, due by reason of the death of the transferor, the value of the property is reduced in accordance with the provisions of Chapter I or Chapter II of Part V of this Act by virtue of section 113B or section 124B above.

16

• (1) In section 228 of the 1984 Act (shares etc. within section 227) in subsection (1) for the words “not falling under paragraph (a) above and not quoted on a recognised stock exchange”, in each place where they occur, there shall be substituted “ which do not fall under paragraph (a) above and are unquoted ”.

• (2) After subsection (3) of that section there shall be inserted the following subsection—

(3A) The further condition referred to in section 227(1A) above is that the shares or securities remained unquoted throughout the period beginning with the date of the chargeable transfer and ending with the death of the transferor (or if earlier, the death of the transferee).

17

In section 272 of the 1984 Act (general interpretation) after the definition of “purchaser” there shall be inserted—

“quoted”, in relation to any shares or securities, means quoted on a recognised stock exchange or dealt in on the Unlisted Securities Market and “unquoted”, in relation to any shares or securities, means neither so quoted nor so dealt in

.

18

• (1) In Schedule 20 to the Finance Act 1986 (gifts with reservation) paragraph 8 (agricultural and business property) shall be amended as follows.

• (2) In sub-paragraph (1) for the word “Where” there shall be substituted “ This paragraph applies where ” and the words from “then” onwards shall be omitted.

• (3) After sub-paragraph (1) there shall be inserted the following sub-paragraph—

(1A) Where this paragraph applies— (a) any question whether, on the material transfer of value, any shares or securities fall within paragraph (b) or paragraph (bb) of section 105(1) of the 1984 Act (which specify shares and securities qualifying for 50 per cent. relief) shall be determined, subject to the following provisions of this paragraph, as if the shares or securities were owned by the donor and had been owned by him since the disposal by way of gift; and (b) subject to paragraph (a) above, any question whether, on the material transfer of value, relief is available by virtue of Chapter I or Chapter II of Part V of the 1984 Act and, if relief is available by virtue of Chapter II, what is the appropriate percentage for that relief, shall be determined, subject to the following provisions of this paragraph, as if, so far as it is attributable to the property comprised in the gift, that transfer were a transfer of value by the donee.

• (4) In sub-paragraph (2) for the words “sub-paragraph (1)” there shall be substituted “ sub-paragraph (1A)(b) ”.

• (5) In sub-paragraph (3)—

• (a) for the words “that sub-paragraph shall not apply” there shall be substituted “ relief shall not be available by virtue of Chapter II of Part V of the 1984 Act on the material transfer of value ”; and

• (b) for the words “by virtue of sub-paragraph (1) above” there shall be substituted “ by virtue of sub-paragraph (1A)(b) above ”.

SCHEDULE 9

1

The following section shall be inserted after section 57 of the Inheritance Tax Act 1984—

(57A) (1) Subject to the following provisions, subsection (2) below applies where— (a) a person dies who immediately before his death was beneficially entitled to an interest in possession in property comprised in a settlement, and (b) within two years after his death the property becomes held on trusts (whether of that or another settlement) by virtue of which a direction under paragraph 1 of Schedule 4 to this Act is given in respect of the property. (2) Where this subsection applies, this Act shall have effect as if the property had on the death of the deceased become subject to the trusts referred to in subsection (1)(b) above; and accordingly no disposition or other event occurring between the date of the death and the date on which the property becomes subject to those trusts shall, so far as it relates to the property, be a transfer of value or otherwise constitute an occasion for a charge to tax. (3) Where property becomes held on trusts of the kind specified in paragraph (b) of subsection (1) above as the result of proceedings before a court and could not have become so held without such proceedings, that paragraph shall have effect as if it referred to three years instead of two. (4) Subsection (2) above shall not apply if— (a) the disposition by which the property becomes held on the trusts referred to in subsection (1)(b) above depends on a condition or is defeasible; or (b) the property which becomes held on those trusts is itself an interest in settled property; or (c) the trustees who hold the property on those trusts have, for a consideration in money or money’s worth, acquired an interest under a settlement in which the property was comprised immediately before the death of the person referred to in subsection (1)(a) above or at any time thereafter; or (d) the property which becomes held on those trusts does so for a consideration in money or money’s worth, or is acquired by the trustees for such a consideration, or has at any time since the death of the person referred to in subsection (1)(a) above been acquired by any other person for such a consideration. (5) If the value of the property when it becomes held on the trusts referred to in subsection (1)(b) above is lower than so much of the value transferred on the death of the person referred to in subsection (1)(a) as is attributable to the property, subsection (2) above shall apply to the property only to the extent of the lower value. (6) For the purposes of this section, a person shall be treated as acquiring property for a consideration in money or money’s worth if he becomes entitled to it as a result of transactions which include a disposition for such consideration (whether to him or another) of that or other property.

.

2

At the end of paragraph 3 of Schedule 4 to the 1984 Act there shall be added—

(5A) In the case of property which, if a direction is given under paragraph 1 above, will be property to which paragraph 15A below applies, sub-paragraph (1)(b) above shall have effect as if for the reference to the settlor there were substituted a reference to either the settlor or the person referred to in paragraph 15A(2).

.

3

After paragraph 15 of that Schedule there shall be inserted—