Finance Act 1989

Part I — Customs and Excise, Value Added Tax and Car Tax

CHAPTER I — Customs and Excise

Hydrocarbon oil duties

Rates.

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

• (2) In section 13A of that Act (rebate on unleaded petrol), for “£0.0202” there shall be substituted “£0.0272”.

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

• (4) This section shall be deemed to have come into force at 6 o’clock in the evening of 14th March 1989.

Reliefs.

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• (1) The following section shall be inserted after section 20A of the Hydrocarbon Oil Duties Act 1979—

(20AA) (1) The Commissioners may make regulations allowing reliefs as regards— (a) any duty of excise which has been charged in respect of hydrocarbon oil, petrol substitute, spirits used for making power methylated spirits, or road fuel gas; (b) any amount which has been paid to the Commissioners under section 12(2)above; (c) any amount which would (apart from the regulations) be payable to the Commissioners under section 12(2) above. (2) The regulations may include such provision as the Commissioners think fit in connection with allowing reliefs, and in particular may— (a) provide for relief to take the form of a repayment or remission; (b) provide for relief to be allowed in cases or classes of case set out in the regulations; (c) provide for relief to be allowed to the extent set out in the regulations; (d) provide for relief to be allowed subject to conditions imposed by the regulations; (e) provide for relief to be allowed subject to such conditions as the Commissioners may impose on the person claiming relief; (f) provide for the taking of samples of hydrocarbon oil in order to as certain whether relief should be allowed or has been properly allowed; (g) make provision as to administration (which may include provision requiring the making of applications for relief); (h) make different provision in relation to different cases or classes of case; (i) include such supplementary, incidental, consequential or transitional provisions as appear to the Commissioners to be necessary or expedient. (3) The conditions which may be imposed as mentioned in subsection (2)(d) or(e) above may include conditions as to the physical security of premises, the provision (by bond or otherwise) of security for payment, or such other matters as the Commissioners think fit. (4) Where a person contravenes or fails to comply with any regulation made under this section or any condition imposed by or under such a regulation— (a) he shall be liable on summary conviction to a penalty of three times the value of any goods in respect of which the contravention or failure occurred or a penalty of an amount represented by level 3 on the standard scale, whichever is the greater, and (b) any goods in respect of which the contravention or failure occurred shall be liable to forfeiture. (5) A reference in this section to a duty of excise includes a reference to any addition to such duty by virtue of section 1 of the Excise Duties (Surcharges or Rebates) Act 1979. (6) Schedule 5 to this Act shall have effect with respect to any sample of hydrocarbon oil taken in pursuance of regulations made under this section.

• (2) In consequence of subsection (1) above, in paragraph 6 of Schedule 5 to the Hydrocarbon Oil Duties Act 1979 after “section” there shall be inserted “20AA or”.

Alcoholic liquor duties

Original gravity of beer.

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Blending made-wines etc.

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• (1) Section 55 of the Alcoholic Liquor Duties Act 1979 (charge of excise duty on made-wine) shall be amended as follows.

• (2) In subsection (5) (which, where certain conditions are satisfied, lifts the requirement to hold a licence for premises where made-wine is produced),after paragraph (d) there shall be added

and (e) he does not blend or otherwise mix— (i) two or more made-wines, or (ii) one or more made-wines and one or more wines, so as to produce made-wine the rate of duty applicable to which is higher than the rate applicable to at least one of the constituent liquors.

• (3) After subsection (5) there shall be inserted—

(5A) For the purposes of subsection (5) above— (a) the rate of duty applicable to any made-wine is that which is or would be chargeable under subsection (1) above on its importation into the United Kingdom; and (b) the rate of duty applicable to any wine is that which is or would be chargeable under subsection (1) of section 54 above on its importation into the United Kingdom.

• (4) This section shall have effect in relation to the blending or other mixing of made-wines, or of made-wines and wines, on or after the day on which this Act is passed.

Description as beer.

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Section 73 of the Alcoholic Liquor Duties Act 1979(which prohibits anyone from describing as beer any substance on which beer duty has not been paid) shall cease to have effect.

Vehicles excise duty

Rates.

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

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

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

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

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

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

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Dishonoured cheques.

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

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

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

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

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

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

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

General

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Time limits for proceedings.

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• (1) After section 146 of the Customs and Excise Management Act 1979 there shall be inserted—

(146A) (1) Except as otherwise provided in the customs and excise Acts, and notwithstanding anything in any other enactment, the following provisions shall apply in relation to proceedings for an offence under those Acts. (2) Proceedings for an indictable offence shall not be commenced after the end of the period of 20 years beginning with the day on which the offence was committed. (3) Proceedings for a summary offence shall not be commenced after the end of the period of 3 years beginning with that day but, subject to that, may be commenced at any time within 6 months from the date on which sufficient evidence to warrant the proceedings came to the knowledge of the prosecuting authority. (4) For the purposes of subsection (3) above, a certificate of the prosecuting authority as to the date on which such evidence as is there mentioned came to that authority’s knowledge shall be conclusive evidence of that fact. (5) In the application of this section to Scotland— (a) in subsection (3), “proceedings for an indictable offence” means proceedings on indictment; (b) in subsection (3), “proceedings for a summary offence” means summary proceedings. (6) In the application of this section to Northern Ireland— (a) “indictable offence” means an offence which, if committed by an adult, is punishable on conviction on indictment (whether only on conviction on indictment, or either on conviction on indictment or on summary conviction); (b) “summary offence” means an offence which, if committed by an adult, is punishable only on summary conviction. (7) In this section, “prosecuting authority” means the Commissioners and includes, in Scotland, the procurator fiscal.

• (2) Section 147(1) of that Act shall cease to have effect.

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

• (4) This section shall have effect in relation to offences committed on or after the day on which this Act is passed.

Disbursements in Port of London.

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In section 17 of the Customs and Excise Management Act1979 (general rule that customs and excise receipts, after deduction of disbursements, are to be paid into the Commissioners’ General Account at the Bank of England) paragraph (a) of subsection (5) (special rule that disbursements in Port of London are to be paid out of that Account) shall cease to have effect.

CHAPTER II — Value Added Tax

Zero-rating etc.

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Other provisions

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Chapter III — Miscellaneous

Relief from car tax where vehicle leased to the handicapped.

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Reliefs from duties and taxes for persons enjoying certain immunities and privileges.

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• (1) After section 13 of the Customs and Excise Duties(General Reliefs) Act 1979 there shall be inserted the following sections—

(13A) (1) The Commissioners may by order make provision for conferring in respect of any persons to whom this section applies reliefs, by way of remission or repayment, from payment by them or others of duties of customs or excise, value added tax or car tax. (2) An order under this section may make any relief for which it provides subject to such conditions binding the person in respect of whom the relief is conferred and, if different, the person liable apart from the relief for payment of the tax or duty (including conditions which are to be compiled with after the time when, apart from the relief, the duty or tax would become payable) as may be imposed by or under the order. (3) An order under this section may include any of the provisions mentioned in subsection (4) below for cases where— (a) relief from payment of any duty of customs or excise, value added tax or car tax chargeable on any goods, or on the supply of any goods or services or the importation of any goods has been conferred (whether by virtue of an order under this section or otherwise) in respect of any person to whom this section applies, and (b) in the case of goods, provision for forfeiture of the goods. (4) The provisions referred to in subsection (3) above are— (a) provision for payment to the Commissioners of the tax or duty by— (i) the person liable, apart from the relief, for its payment, or (ii) any person bound by the condition, or (iii) any person who is or has been in possession of the goods or has received the benefit of the services, or for two or more of those persons to be jointly and severally liable for such payment, and (5) An order under this section— (a) may contain such incidental and supplementary provisions as the Commissioners think necessary or expedient, and (b) may make different provision for different cases. (6) In this section and section 13C of this Act— “duty of customs” includes any agricultural levy within the meaning of section 6 of the European Communities Act 1972 chargeable on goods imported into the United Kingdom, and “duty of excise” means any duty of excise chargeable on goods and includes any addition to excise duty by virtue of section 1 of the Excise Duties (Surcharges or Rebates) Act 1979. (7) For the purposes of this section and section 13C of this Act, where in respect of any person to whom this section applies relief is conferred (whether by virtue of an order under this section or otherwise) in relation to the use of goods by any persons or for any purposes, the relief is to be treated as conferred subject to a condition binding on him that the goods will be used only by those persons or for those purposes. (8) Nothing in any order under this section shall be construed as authorising a person to import any thing in contravention of any prohibition or restriction for the time being in force with respect to it under or by virtue of any enactment. (13B) (1) The persons to whom section 13A of this act applies are— (a) any person who, for the purposes of any provision of the Visiting Forces Act 1952 or the International Headquarters and Defence Organisations Act 1964 is— (i) a member of a visiting force or of a civilian component of such a force or a dependant of such a member, or (ii) a headquarters, a member of a headquarters or a dependant of such a member, (b) any person enjoying any privileges or immunities under or by virtue of— (i) the Diplomatic Privileges Act 1964, (ii) the Commonwealth Secretariat Act 1966, (iii) the Consular Relations Act 1968, (iv) the International Organisations Act 1968, or (v) the Overseas Development and Co-operation Act 1980, (c) any person enjoying, under or by virtue of section 2 of the European Communities Act 1972, any privileges or immunities similiar to those enjoyedunder or by virtue of the enactments referred to in paragraph (b) above. (2) The Secretary of State may by order amend subsection (1) above to include any persons enjoying any privileges or immunities similiar to those enjoyed under or by virtue of the enactments referred to in paragraph (b) of that subsection. (3) No order shall be made under this section unless a draft of the order has been laid before and approved by resolution of each House of Parliament. (13C) (1) Subsection (2) below applies where— (a) any relief from payment of any duty of customs or excise, value added tax or car tax chargeable on, or on the supply or importation of, any goods has been conferred (whether by virtue of an order under section 13A of this Actor otherwise) in respect of any person to whom that section applies subject to any condition as to the persons by whom or the purposes for which the goods may be used, and (b) if the tax or duty has subsequently become payable, it has not been paid. (2) If any person— (a) acquires the goods for his own use, where he is not permitted by the condition to use them, or for use for a purpose that is not permitted by the condition or uses them for such a purpose, or (b) acquires the goods for use, or causes or permits them to be used, by a person not permitted by the condition to use them or by a person for a purpose that is not permitted by the condition or disposes of them to a person not permitted by the condition to use them, with intent to evade payment of any tax or duty that has become payable or that, by reason of the disposal, acquisition or use, becomes or will become payable, he is guilty of an offence. (3) For the purposes of this section— (a) in the case of a condition as to the persons by whom goods may be used, a person is not permitted by the condition to use them unless he is a person referred to in the condition as permitted to use them, and (b) in relation to a condition as to the purposes for which goods may be used, a purpose is not permitted by the condition unless it is a purpose referred to in the condition as a permitted purpose, and in this section “dispose” includes “lend” and “let on hire”, and “acquire” shall be interpreted accordingly. (4) A person guilty of an offence under this section may be detained and shall be liable— (a) on summary conviction, to a penalty of the statutory maximum or of three times the value of the goods (whichever is the greater), or to imprisonment for a term not exceeding six months, or to both, or (b) on conviction on indictment, to a penalty of any amount, or to imprisonment for a term not exceeding seven years, or to both.

• (2) Section 13C of the Customs and Excise Duties (General Reliefs) Act 1979 inserted by subsection (1) above shall have effect where relief is conferred on or after the day on which this Act is passed.

• (3) In section 17 of the Customs and Excise Duties (General Reliefs) Act 1979,in subsection (3), for “or 13” there shall be substituted “13 or13A” and, in subsection (4), for “or 13(1)” there shall be substituted “13(1) or 13A”.

Recovery of overpaid excise duty and car tax.

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• (1) This section applies to proceedings for restitution of an amount paid to the Commissioners of Customs and Excise by way of excise duty or car tax.

• (2) Proceedings to which this section applies shall not be dismissed by reason only of the fact that the amount was paid by reason of a mistake of law.

• (3) In any proceedings to which this section applies it shall be a defence that repayment of an amount would unjustly enrich the claimant.

• (4) This section shall have effect in relation to proceedings commenced on or after the day on which this Act is passed.

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

CHAPTER I — General

Income tax rates and allowances

Charge and rates of income tax for 1989-90.

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Age allowance.

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Operative date for PAYE.

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Married couples.

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• (1) Sections 257 to 257F and 265 of the Taxes Act 1988,as inserted for the year 1990-91 and subsequent years by the Finance Act 1988,shall be amended as follows.

• (2) In section 257(1) for “£2,605” there shall be substituted “£2,785”.

• (3) In section 257(2) for “£3,180” there shall be substituted “£3,400”.

• (4) In section 257(3)—

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

• (b) for “£3,310” there shall be substituted “£3,540”.

• (5) In section 257(5)—

• (a) for “£10,600” there shall be substituted “£11,400”,and

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

• (6) In section 257A(1) for “£1,490” there shall be substituted “£1,590”.

• (7) In section 257A(2) for “£1,855” there shall be substituted “£1,985”.

• (8) In section 257A(3)—

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

• (b) for “£1,895” there shall be substituted “£2,025”.

• (9) In section 257A(5)—

• (a) for “£10,600” there shall be substituted “£11,400”,and

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

• (10) In sections . . . 257D(8) and 265(3) after paragraph (b) there shall be inserted

or (c) on account of any payments to which section 593(2) or 639(3) applies,

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• (11) In section 257E(1)(b) for “80” there shall be substituted “75”.

• (12) In section 257E(2)(a) for “£3,180” there shall be substituted “£3,400”.

• (13) In section 257E(2)(b) for “£3,310” there shall be substituted “£3,540”.

Corporation tax rates etc.

Charge and rate of corporation tax for financial year 1989.

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Corporation tax shall be charged for the financial year 1989 at the rate of 35 per cent.

Corporation tax: small companies.

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Receipts basis etc.

Schedule E: revised Cases.

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Schedule E: assessment on receipts basis.

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Schedule E: unpaid emoluments.

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Schedule E: unremitted emoluments.

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Schedule E: emoluments already paid.

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Schedule E: pensions etc.

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Schedule E: supplementary.

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Schedule D: computation

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Companies with investment business and insurance companies: computation

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PAYE: meaning of payment.

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Interest

Relief for interest.

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For the year 1989-90 the qualifying maximum defined in section 367(5) of the Taxes Act 1988 (limit on relief for interest on certain loans) shall be£30,000.

Close company loans: business expansion scheme.

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Close company loans: material interest.

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Benefits in kind

Car benefits.

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• (1) In Schedule 6 to the Taxes Act 1988 (taxation of directors and others in respect of cars) for Part I (tables of flat rate cash equivalents) there shall be substituted—

Cylinder capacity of car in cubic centimetres	Age of car at end of relevant year of assessment	Age of car at end of relevant year of assessment
	Under 4 years	4 years or more
1400 or less	£1,400	£950
More than 1400 but not more than 2000	£1,850	£1,250
More than 2000	£2,950	£1,950
Original market value of car	Age of car at end of relevant year of assessment	Age of car at end of relevant year of assessment
---	---	---
	Under 4 years	4 years or more
Less than £6,000	£1,400	£950
£6,000 or more but less than £8,500	£1,850	£1,250
£8,500 or more but not more than £19,250	£2,950	£1,950
Original market value of car	Age of car at end of relevant year of assessment	Age of car at end of relevant year of assessment
---	---	---
	Under 4 years	4 years or more
More than £19,250 but not more than £29,000	£3,850	£2,600
More than £29,000	£6,150	£4,100

• (2) This section shall have effect for the year 1989-90 and subsequent years of assessment.

Security assets and services.

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Assets used partly for security.

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Security: supplementary.

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Employees earning £8,500 or more and directors.

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

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

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

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

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

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

• (e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (f) the words “ employment to which Chapter II of Part V applies ”shall be substituted for the words from “director’s” to “section167)” in section 418(3)(a) of that Act;

• (g) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Medical insurance

Relief.

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• (1) This section applies where—

• (a) on or after 6th April 1990 an individual makes a payment in respect of a premium under a contract of private medical insurance (whenever issued),

• (b) the contract meets the requirement in subsection (2) below as to the person or persons insured,

• (c) at the time the payment is made the contract is an eligible contract,

• (d) the individual making the payment does not make it out of resources provided by another person for the purpose of enabling it to be made, and

• (e) the individual making the payment is not entitled to claim any relief or deduction in respect of it under any other provision of the Tax Acts.

• (2) The requirement mentioned in subsection (1)(b) above is that the contract insures—

• (a) an individual who at the time the payment is made is aged 60 or over and resident in the United Kingdom,

• (b) individuals each of whom at that time is aged 60 or over and resident in the United Kingdom, or

• (c) two individuals who are married to each other at that time, at least one of whom is aged 60 or over at that time, and each of whom is resident in the United Kingdom at that time.

• (2A) In a case where—

• (a) a payment is made in respect of a premium under a contract at a time when the contract meets the requirement in subsection (2) above by virtue of paragraph (c) of that subsection, and

• (b) a payment is made under the same contract at a time after one of the individuals has died and when the contract does not (apart from this subsection) meet the requirement in subsection (2) above by virtue only of the fact that the surviving spouse is not aged 60 or over at the time,

for the purposes of subsection (2) above in its application to the contract the surviving spouse shall be deemed to be aged 60 or over at the time mentioned in paragraph (b) above.

• (3) If the payment is made by an individual who at the time it is made is resident in the United Kingdom (whether or not he is the individual or one of the individuals insured by the contract) the individual shall be entitled to relief under this subsection in respect of the payment; and (except where subsections (4) to (6) below apply) relief under this subsection shall be given—

• (a) in accordance with subsections (3A) to (3C) below, and

• (b) only on a claim made for the purpose.

• (3A) Where an individual is entitled to relief under subsection (3) above in respect of one or more payments made in a given year of assessment, the amount of his liability for that year of assessment to income tax on his total income shall be the amount to which he would be liable apart from this section less whichever is the smaller of—

• (a) the amount found under subsection (3B) below, and

• (b) the amount which reduces his liability to nil.

• (3B) The amount referred to in subsection (3A)(a) above is an amount found by—

• (a) taking the amount of the payment referred to in subsection (3A) above or (as the case may be) the aggregate amount of the payments there referred to, and

• (b) finding an amount equal to tax on the amount taken under paragraph (a) above at the basic rate for the year of assessment concerned.

• (3C) In determining for the purposes of subsection (3A) above the amount of incomers on would be liable apart from this section, no account shall be taken of—

• (a) any income tax reduction under Chapter I of Part VII of the Taxes Act 1988 or under section 347B of that Act;

• (b) any income tax reduction under section 353(1A) of the Taxes Act 1988;

• (c) any relief by way of a reduction of liability to tax which is given in accordance with any arrangements having effect by virtue of section 788 of the Taxes Act 1988 or by way of a credit under section 790(1) of that Act;

• (d) any tax at the basic rate on so much of that person’s income as is income the income tax on which he is entitled to charge against any other person or to deduct, retain or satisfy out of any payment.

• (4) In such cases and subject to such conditions as the Board may specify in regulations, relief under subsection (3) above shall be given in accordance with subsections (5) and (6) below.

• (5) An individual who is entitled to such relief in respect of a payment may deduct and retain out of it an amount equal to income tax on it at the basic rate for the year of assessment in which it is made.

• (6) The person to whom the payment is made—

• (a) shall accept the amount paid after deduction in discharge of the individual’s liability to the same extent as if the deduction had not been made, and

• (b) may, on making a claim in accordance with regulations, recover from the Board an amount equal to the amount deducted.

• (7) The Treasury may make regulations providing that in circumstances prescribed in the regulations—

• (a) an individual who has made a payment in respect of a premium under a contract of private medical insurance shall cease to be and be treated as not having been entitled to relief under subsection (3) above; and

• (b) he or the person to whom the payment was made (depending on the terms of the regulations) shall account to the Board for tax from which relief has been given on the basis that the individual was so entitled.

• (8) Regulations under subsection (7) above may include provision adapting or modifying the effect of any enactment relating to income tax in order to secure the performance of any obligation imposed under paragraph (b) of that subsection.

• (9) In this section—

• (a) references to a premium, in relation to a contract of insurance, are to any amount payable under the contract to the insurer, and

• (b) references to an individual who is resident in the United Kingdom at anytime include references to an individual who is at that time performing duties which are treated by virtue of section 132(4)(a) of the Taxes Act 1988 as performed in the United Kingdom.

Eligible contracts.

55

• (1) This section has effect to determine whether a contract is at a particular time (the relevant time) an eligible contract for the purposes of section 54 above.

• (2) A contract is an eligible contract at the relevant time if—

• (a) it was entered into by an insurer who at the time it was entered into was a qualifying insurer and was approved by the Board for the purposes of this section,

• (b) the period of insurance under the contract does not exceed one year(commencing with the date it was entered into),

• (ba) at the relevant time the contract satisfies the conditions set out in subsection (2A) below,

• (bb) the contract is not one in the case of which subsection (2D) below applies,

• (c) the contract is not connected with any other contract at the relevant time and has not been connected with any other contract at any time since it was entered into, and

• (d) no benefit has been provided by virtue of the contract other than an approved benefit, and

• (e) the contract meets one or more of the three conditions set out below.

• (2A) The conditions referred to in subsection (2)(ba) above are that—

• (a) the contract either provides indemnity in respect of all or any of the costs of all or any of the treatments, medical services and other matters for the time being specified in regulations made by the Treasury, or in addition to providing indemnity of that description provides cash benefits falling within rules for the time being so specified,

• (b) the contract does not confer any right other than such a right as is mentioned in paragraph (a) above or is for the time being specified in regulations made by the Treasury,

• (c) the premium under the contract is reasonable, and

• (d) the contract satisfies such other requirements as are for the time being specified in regulations made by the Treasury.

• (2B) In a case where—

• (a) at the relevant time the contract confers a material right, or more than one such right, but

• (b) the total cost to the insurer of providing benefits in pursuance of the material right or (as the case may be) in pursuance of all the material rights would not exceed the prescribed sum,

the contract shall not thereby be regarded as failing to satisfy at the relevant time the condition set out in subsection (2A)(b) above.

• (2C) For the purposes of subsection (2B) above a material right is a right which—

• (a) is not a right such as is mentioned in subsection (2A)(a) above or such as is for the time being specified in regulations made under subsection (2A)(b) above, and

• (b) is not a right to a cash benefit.

• (2D) This subsection applies in the case of a contract (the main contract) if—

• (a) at least one other contract is entered into which is a contract (a collateral contract) under which a benefit is provided in consideration of the insured’s entering into the main contract, and

• (b) the cost to the insurer of fulfilling his obligations under the collateral contract (or, if there is more than one collateral contract, of fulfilling his obligations under all of them) exceeds the prescribed sum.

• (3) The first condition is that the contract is certified by the Board under section 56 below at the relevant time.

• (4) The second condition is that, at the time the contract was entered into, it conformed with a standard form certified by the Board as a standard form of eligible contract.

• (5) The third condition is that, at the time the contract was entered into, it conformed with a form varying from a standard form so certified in no other respect than by making additions—

• (a) which were (at the time the contract was entered into) certified by the Board as compatible with an eligible contract when made to that standard form, and

• (b) which (at that time) satisfied any conditions subject to which the additions were so certified.

• (6) Where a contract is varied, and the relevant time falls after the time the variation takes effect, subsections (1) to (5) above shall have effect as if “entered into” read “varied” in each place where it occurs in subsections (4) and (5) above.

• (7) For the purposes of this section a contract is connected with another contract at any time if—

• (a) they are simultaneously in force at that time,

• (b) either of them was entered into with reference to the other, or with a view to enabling the other to be entered into on particular terms, or with a view to facilitating the other being entered into on particular terms, and

• (c) the terms on which either of them was entered into would have been significantly less favourable to the insured if the other had not been entered into.

• (8) For the purposes of this section each of the following is a qualifying insurer—

• (a) an insurer lawfully carrying on in the United Kingdom business of any of the classes specified in Part I of Schedule 2 to the Insurance Companies Act 1982;

• (b) an insurer not carrying on business in the United Kingdom but carrying on business in another member State and being either a national of a member State or a company or partnership formed under the law of any part of the United Kingdom or another member State and having its registered office, central administration or principal place of business in a member State.

• (9) For the purposes of this section a benefit is an approved benefit if it is provided in pursuance of a right of a description

• (a) mentioned in subsection (2A)(a) above, or

• (b) for the time being specified in regulations made under subsection (2A)(b) above.

• (10) For the purposes of this section a benefit is also an approved benefit if it is not a cash benefit and—

• (a) it is a single benefit provided otherwise than as mentioned in subsection (9) above and the cost to the insurer of providing it does not exceed the prescribed sum, or

• (b) it is one of a number of benefits provided otherwise than as mentioned in subsection (9) above and the total cost to the insurer of providing the benefits does not exceed the prescribed sum.

• (11) In this section the reference to a premium, in relation to a contract of insurance, is to any amount payable under the contract to the insurer.

• (12) For the purposes of this section the prescribed sum is £30.

• (13) The Treasury may by order substitute for the sum for the time being specified in subsection (12) above such sum as may be specified in the order; and any such substitution shall have effect in relation to cases where the relevant time falls on or after such date as is specified in the order.

Certification of contracts.

56

• (1) The Board shall certify a contract under this section if it satisfies the conditions set out in subsection (3) below; and the certification shall be expressed to take effect from the time the conditions are satisfied, and shall take effect accordingly.

• (2) The Board shall revoke a certification of a contract under this section if it comes to their notice that the contract has ceased to satisfy the conditions set out in subsection (3) below; and the revocation shall be expressed to take effect from the time the conditions ceased to be satisfied, and shall take effect accordingly.

• (3) The conditions referred to above are that—

• (a) the contract either provides indemnity in respect of all or any of the costs of all or any of the treatments, medical services and other matters for the time being specified in regulations made by the Treasury, or in addition to providing indemnity of that description provides cash benefits falling within rules for the time being so specified,

• (b) the contract does not confer any right other than such a right as is mentioned in paragraph (a) above or is for the time being specified in regulations made by the Treasury,

• (c) the premium under the contract is in the Board’s opinion reasonable, and

• (d) the contract satisfies such other requirements as are for the time being specified in regulations made by the Treasury.

• (4) The certification of a contract by the Board under this section shall cease to have effect if the contract is varied; but this is without prejudice to the application of the preceding provisions of this section to the contract as varied.

• (5) Where the Board refuse to certify a contract under this section, or they revoke a certification, an appeal may be made to the Special Commissioners by—

• (a) the insurer, or

• (b) any person who (if the policy were certified) would be entitled to relief under section 54 above.

• (6) Where a contract is certified under this section, or a certification is revoked or otherwise ceases to have effect, any adjustments resulting from the certification or from its revocation or ceasing to have effect shall be made.

• (7) Subsection (6) above applies where a certification or revocation takes place on appeal as it applies in the case of any other certification or revocation.

• (8) In this section the reference to a premium, in relation to a contract of insurance, is to any amount payable under the contract to the insurer.

Medical insurance: supplementary.

57

• (1) The Board may by regulations—

• (a) provide that a claim under section 54(3) or (6)(b) above shall be made in such form and manner, shall be made at such time, and shall be accompanied by such documents, as may be prescribed;

• (aa) make provision for and with respect to appeals against a decision of an officer of the Board or the Board with respect to a claim under section 54(6)(b) above;

• (b) make provision, in relation to payments in respect of which a person is entitled to relief under section 54 above, for the giving by insurers in such circumstances as may be prescribed of certificates of payment in such form as may be prescribed to such persons as may be prescribed;

• (c) provide that a person who provides (or has at any time provided) insurance under contracts of private medical insurance shall comply with any notice which is served on him by the Board and which requires him within a prescribed period to make available for the Board’s inspection documents (of a prescribed kind) relating to such contracts;

• (d) provide that persons of such a description as may be prescribed shall, within a prescribed period of being required to do so by the Board, furnish to the Board information (of a prescribed kind) about contracts of private medical insurance;

• (e) make provision with respect to the approval of insurers for the purposes of section 55 above and the withdrawal of approval for the purposes of that section;

• (f) make provision for and with respect to appeals against decisions of the Board with respect to the giving or withdrawal of approval of insurers for the purposes of section 55 above;

• (g) make provision with respect to the certification by the Board of standard forms of eligible contract and variations from standard forms of eligible contract certified by them;

• (h) make provision for and with respect to appeals against decisions of the Board with respect to the certification of standard forms of eligible contractor variations from standard forms of eligible contract certified by them;

• (i) provide that certification, or the revocation of a certification, under section 56 above shall be carried out in such form and manner as may be prescribed;

• (j) make provision with respect to appeals against decisions of the Board with respect to certification or the revocation of certification under section 56 above;

• (k) make provision generally as to administration in connection with sections 54 to 56 above.

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

• (3) The following provisions of the Taxes Management Act 1970, namely—

• (a) section 29(1)(c) (excessive relief) as it has effect apart from section 29(2) to (10) of that Act;

• (b) section 30 (tax repaid in error etc.) apart from subsection (1B),

• (c) section 86 (interest), and

• (d) section 95 (incorrect return or accounts),

shall apply in relation to an amount which is paid to any person by the Board as an amount recoverable by virtue of section 54(6)(b) above but to which that person is not entitled as if it were income tax which ought not to have been repaid and, where that amount was claimed by that person, as if it had been repaid as respects a chargeable period as a relief which was not due.

• (3A) In the application of section 86 of the Taxes Management Act 1970 by virtue of subsection (3) above in relation to sums due and payable by virtue of an assessment made under section 29(1)(c) or 30 of that Act, as applied by that subsection, the relevant date—

• (a) in a case where the person falling within section 54(6) above has made any interim claim, within the meaning of regulations made under subsection (1) and section 54(4) above, as respects some part of the year of assessment for which the assessment is made, is 1st January in that year of assessment; and

• (b) in any other case, is the later of the following dates, that is to say—

• (i) 1st January in the year of assessment for which the assessment is made; or

• (ii) the date of the making of the payment by the Board which gives rise to the assessment.

• (4) In sections . . . 257D(8) and 265(3) of the Taxes Act 1988 after paragraph (c) there shall be inserted

or (d) on account of any payments to which section 54(5) of the Finance Act 1989 applies

.

• (5) In subsection (1) above—

• “eligible contract” has the meaning given by section 55 above, and

• “prescribed” means prescribed by or, in relation to form, under the regulations.

Charities

Payroll deduction scheme.

58

• (1) In section 202(7) of the Taxes Act 1988 (which limits to £240 the deductions attracting relief) for “£240” there shall be substituted “£480”.

• (2) This section shall have effect for the year 1989-90 and subsequent years of assessment.

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

59

British Museum and Natural History Museum.

60

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

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

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

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

Profit-related pay, share schemes etc.

Profit-related pay.

61

Schedule 4 to this Act (which amends the provisions of the Taxes Act 1988 relating to profit-related pay) shall have effect.

Savings-related share option schemes.

62

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

Profit sharing schemes.

63

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

Share option and profit sharing schemes: shares of consortium member.

64

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

Employee share schemes: material interest.

65

In Schedule 9 to the Taxes Act 1988 the following paragraph shall be inserted after paragraph 39—

(40) (1) Where an individual has an interest in shares or obligations of the company as a beneficiary of an employee benefit trust, the trustees shall not be regarded as associates of his by reason only of that interest unless sub-paragraph (3) below applies in relation to him. (2) In this paragraph “employee benefit trust” has the same meaning as in paragraph 7 of Schedule 8. (3) This sub-paragraph applies in relation to an individual if at any time on or after 14th March 1989— (a) the individual, either on his own or with any one or more of his associates, or (b) any associate of his, with or without other such associates, has been the beneficial owner of, or able (directly or through the medium of other companies or by any other indirect means) to control, more than 25per cent., or in the case of a share option scheme which is not a savings-related share option scheme more than 10 per cent., of the ordinary share capital of the company. (4) Sub-paragraphs (9) to (12) of paragraph 7 of Schedule 8 shall apply for the purposes of this paragraph in relation to an individual as they apply for the purposes of that paragraph in relation to an employee.

Priority share allocations for employees etc.

66

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

Employee share ownership trusts

Tax relief.

67

• (1) This section applies where—

• (a) a company expends a sum in making a payment by way of contribution to the trustees of a trust which is a qualifying employee share ownership trust at the time the sum is expended,

• (b) at that time, the company or a company which it then controls has employees who are eligible to benefit under the terms of the trust deed,

• (c) at that time the company is resident in the United Kingdom,

• (d) before the expiry of the expenditure period the sum is expended by the trustees for one or more of the qualifying purposes, and

• (e) before the end of the claim period a claim for relief under this section is made.

• (2) In such a case the sum—

• (a) shall be deducted in computing for the purposes of Schedule D the profits of a trade carried on by the company,

• (b) if the company is an investment company, shall be treated as expenses of management, or

• (c) if the company is a company in relation to which the I - E rules apply and the sum is referable, in accordance with Chapter 4 of Part 2 of the Finance Act 2012, to the company's basic life assurance and general annuity business, shall be treated for the purposes of section 76 of that Act as ordinary BLAGAB management expenses of the company.

• (3) For the purposes of subsection (1)(b) above, the question whether one company is controlled by another shall be construed in accordance with section840 of the Taxes Act 1988.

• (4) For the purposes of subsection (1)(d) above each of the following is a qualifying purpose—

• (a) the acquisition of shares in the company which established the trust;

• (b) the repayment of sums borrowed;

• (c) the payment of interest on sums borrowed;

• (d) the payment of any sum to a person who is a beneficiary under the terms of the trust deed;

• (e) the meeting of expenses.

• (5) For the purposes of subsection (1)(d) above the expenditure period is the period of nine months beginning with the day following the end of the period of account in which the sum is charged as an expense of the company, or such longer period as the Board may allow by notice given to the company.

• (6) For the purposes of subsection (1)(e) above the claim period is the period of two years beginning with the day following the end of the period of account in which the sum is charged as an expense of the company.

• (7) For the purposes of this section the trustees of an employee share ownership trust shall be taken to expend sums paid to them in the order in which the sums are received by them (irrespective of the number of companies making payments).

Principal charges to tax.

68

• (1) This section applies where a chargeable event (within the meaning of section 69 below) occurs in relation to the trustees of an employee share ownership trust.

• (2) In such a case—

• (a) the trustees shall be treated as receiving, when the event occurs, income of an amount that is equal to the chargeable amount (within the meaning of section 70 below),

• (b) that income shall be chargeable to income tax for the year of assessment in which the event occurs,

• (ba) the tax so chargeable shall be charged on the full amount of the income the trustees are treated as receiving in the year of assessment , and

• (bb) the trustees are liable for any tax so chargeable, ...

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

• (3) If the whole or any part of the tax assessed on the trustees is not paid before the expiry of the period of six months beginning with the day on which the assessment becomes final and conclusive, a notice of liability to tax under this subsection may be served on a qualifying company and the tax or the part unpaid (as the case may be) shall be payable by the company on service of the notice.

• (4) Where a notice of liability is served under subsection (3) above—

• (a) any interest which is due on the tax or the part (as the case may be) and has not been paid by the trustees, and

• (b) any interest accruing due on the tax or the part (as the case may be)after the date of service,

shall be payable by the company.

• (5) Where a notice of liability is served under subsection (3) above and any amount payable by the company (whether on account of tax or interest) is not paid by the company before the expiry of the period of three months beginning with the date of service, the amount unpaid may be recovered from the trustees(without prejudice to the right to recover it instead from the company).

• (6) For the purposes of this section each of the following is a qualifying company—

• (a) the company which established the employee share ownership trust;

• (b) any company falling within subsection (7) below.

• (7) A company falls within this subsection if, before it is sought to serve a notice of liability on it under subsection (3) above—

• (a) it has paid a sum to the trustees, and

• (b) the sum has been deducted as mentioned in section 67(2)(a) above or treated as mentioned in section 67(2)(b) above.

Chargeable events.

69

• (1) For the purposes of section 68 above each of the following is a chargeable event in relation to the trustees of an employee share ownership trust—

• (a) the transfer of securities by the trustees, if the transfer is not a qualifying transfer;

• (b) the transfer of securities by the trustees to persons who are at the time of the transfer beneficiaries under the terms of the trust deed, if the terms on which the transfer is made are not qualifying terms;

• (c) the retention of securities by the trustees at the expiry of the qualifying period beginning with the date on which they acquired them;

• (d) the expenditure of a sum by the trustees for a purpose other than a qualifying purpose.

• (e) where—

• (i) the trustees make a qualifying transfer within subsection (3AA) below for a consideration, and

• (ii) they do not, during the period specified in subsection (5A) below, expend a sum of not less than the amount of that consideration for one or more qualifying purposes,

the expiry of that period.

• (2) For the purposes of subsection (1)(a) above a transfer is a qualifying transfer if it is made to a person who at the time of the transfer is a beneficiary under the terms of the trust deed.

• (3) For the purposes of subsection (1)(a) above a transfer is also a qualifying transfer if—

• (a) it is made to the trustees of a scheme which at the time of the transfer is a profit sharing scheme approved under Schedule 9 to the Taxes Act 1988, and

• (b) it is made for a consideration which is not less than the price the securities might reasonably be expected to fetch on a sale in the open market.

• (3AA) For the purposes of subsection (1)(a) above a transfer is also a qualifying transfer if—

• (a) it is a transfer of relevant shares made to the trustees of the plan trust of a share incentive plan,

• (b) the plan is approved under Schedule 2 to the Income Tax (Earnings and Pensions) Act 2003 when the transfer is made, and

• (c) the consideration (if any) for which the transfer is made does not exceed the market value of the shares.

• (3AB) For the purpose of determining whether a transfer by the trustees is a qualifying transfer within subsection (3AA) above, where on or after 21st March 2000—

• (a) the trustees transfer or dispose of part of a holding of shares (whether by way of a qualifying transfer or otherwise), and

• (b) the holding includes any relevant shares,

the relevant shares shall be treated as transferred or disposed of before any other shares included in that holding.

For this purpose “ holding ” means any number of shares of the same class held by the trustees, growing or diminishing as shares of that class are acquired or disposed of.

• (3AC) For the purposes of subsections (3AA) and (3AB) above—

• “ market value ” has the same meaning as it has for the purposes of the SIP code (see paragraph 92 of Schedule 2 to the Income Tax (Earnings and Pensions) Act 2003); and

• “ relevant shares ” means— shares that are held by the trustees of the employee share ownership trust at midnight on 20th March 2000, andshares purchased by those trustees with original funds after that time.

• (3AD) For the purposes of subsection (3AC) above—

• (a) “ original funds ” means any money held by the trustees of the employee share ownership trust in a bank or building society account at midnight on 20th March 2000, and

• (b) any payment made by the trustees after that time (whether to acquire shares or otherwise) shall be treated as made out of original funds (and not out of money received after that time) until those funds are exhausted.

• (3A) For the purposes of subsection (1)(a) above a transfer is also a qualifying transfer if it is made by way of exchange in circumstances mentioned in section 85(1) of the Capital Gains Tax Act 1979 or section 135(1) of the Taxation of Chargeable Gains Act 1992.

• (4) For the purposes of subsection (1)(b) above a transfer of securities is made on qualifying terms if—

• (a) all the securities transferred at the same time other than those transferred on a transfer such as is mentioned in subsection (4ZA) below are transferred on similar terms,

• (b) securities have been offered to all the persons who are beneficiaries under the terms of the trust deed by virtue of a rule which conforms with paragraph 4(2), (3) or (4) of Schedule 5 to this Act when the transfer is made, and

• (c) securities are transferred to all such persons who have accepted.

• (4ZA) For the purposes of subsection (1)(b) above a transfer of securities is also made on qualifying terms if—

• (a) it is made to a person exercising a right to acquire shares, and

• (b) that right was obtained in accordance with the provisions of an SAYE option scheme within the meaning of the SAYE code (see section 516(4) of the Income Tax (Earnings and Pensions) Act 2003)—

• (i) which was established by, or by a company controlled by, the company which established the trust, and

• (ii) which is approved under Schedule 3 to that Act, and

• (c) that right is being exercised in accordance with the provisions of that scheme, and

• (d) the consideration for the transfer is payable to the trustees.

• (4A) For the purposes of subsection (1)(c) above the qualifying period is—

• (a) seven years, in the case of trusts established on or before the day on which the Finance Act 1994 was passed;

• (b) twenty years, in the case of other trusts;

and for this purpose a trust is established when the deed under which it is established is executed.

• (5) For the purposes of subsection (1)(d) or (e) above each of the following is a qualifying purpose—

• (a) the acquisition of shares in the company which established the trust;

• (b) the repayment of sums borrowed;

• (c) the payment of interest on sums borrowed;

• (d) the payment of any sum to a person who is a beneficiary under the terms of the trust deed;

• (e) the meeting of expenses.

• (5A) The period referred to in paragraph (e) of subsection (1) above is the period—

• (a) beginning with the qualifying transfer mentioned in that paragraph, and

• (b) ending nine months after the end of the period of account in which that qualifying transfer took place.

For this purpose the period of account means the period of account of the company that established the employee share ownership trust.

• (6) For the purposes of subsection (4) above, the fact that terms vary according to the levels of remuneration of beneficiaries, the length of their service, or similar factors, shall not be regarded as meaning that the terms are not similar.

• (7) In ascertaining for the purposes of this section whether particular securities are retained, securities acquired earlier by the trustees shall be treated as transferred by them before securities acquired by them later.

• (8) For the purposes of this section trustees—

• (a) acquire securities when they become entitled to them (subject to the exceptions in subsection (9) below);

• (b) transfer securities to another person when that other becomes entitled to them;

• (c) retain securities if they remain entitled to them.

• (9) The exceptions are these—

• (a) if securities are issued to trustees in exchange in circumstances mentioned in section 135(1) of the Taxation of Chargeable Gains Act 1992, they shall be treated as having acquired them when they became entitled to the securities for which they are exchanged;

• (b) if trustees become entitled to securities as a result of a reorganisation, they shall be treated as having acquired them when they became entitled to the original shares which those securities represent (construing “reorganisation” and “original shares” in accordance with section 126 of that Act).

• (10) If trustees agree to take a transfer of securities, for the purposes of this section they shall be treated as becoming entitled to them when the agreement is made and not on a later transfer made pursuant to the agreement.

• (11) If trustees agree to transfer securities to another person, for the purposes of this section the other person shall be treated as becoming entitled to them when the agreement is made and not on a later transfer made pursuant to the agreement.

• (12) For the purposes of this section the following are securities—

• (a) shares;

• (b) debentures.

Chargeable amounts.

70

• (1) This section has effect to determine the chargeable amount for the purposes of section 68 above.

• (2) If the chargeable event falls within section 69(1)(a), (b) or (c) above the following rules shall apply—

• (a) if the event constitutes a disposal of the securities by the trustees for the purposes of the Taxation of Chargeable Gains Act 1992, the chargeable amount is an amount equal to the sums allowable under section 38(1)(a) and (b) of that Act;

• (b) if the event does not constitute such a disposal, the chargeable amount is an amount equal to the sums which would be so allowable had the trustees made a disposal of the securities for the purposes of that Act at the time the chargeable event occurs.

• (3) If the chargeable event falls within section 69(1)(d) above the chargeable amount is an amount equal to the sum concerned.

• (4) If the chargeable event falls within section 69(1)(e) above the chargeable amount is an amount equal to—

• (a) the amount of the consideration received for the qualifying transfer mentioned in section 69(1)(e) above, less

• (b) the amount of any expenditure by the trustees for a qualifying purpose during the period mentioned in section 69(5A) above.

Further charges to tax: borrowing.

71

• (1) This section applies where—

• (a) a chargeable event (within the meaning of section 69 above) occurs in relation to the trustees of an employee share ownership trust,

• (b) at the time the event occurs anything is outstanding in respect of the principal of an amount or amounts borrowed at any time by the trustees, and

• (c) the chargeable event is one as regards which section 72(2)(b) below applies.

• (2) In the following provisions of this section—

• (a) “the initial chargeable event” means the event referred to in subsection (1)(a) above, and

• (b) “the total outstanding amount” means the total amount outstanding, at the time the initial chargeable event occurs, in respect of the principal of an amount or amounts borrowed at any time by the trustees.

• (3) If any of the total outstanding amount is repaid after the initial chargeable event occurs, a further chargeable event shall occur in relatio nto the trustees at the end of the year of assessment in which the repayment is made.

• (4) In such a case—

• (a) the trustees shall be treated as receiving, when the further event occurs, income of an amount that is equal to the chargeable amount,

• (b) that income shall be chargeable to income tax for the year of assessment at the end of which the further event occurs,

• (ba) the tax so chargeable shall be charged on the full amount of the income the trustees are treated as receiving in the year of assessment , and

• (bb) the trustees are liable for any tax so chargeable, ...

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

• (5) Subject to subsection (6) below, for the purposes of subsection (4) above the chargeable amount is an amount equal to the aggregate of the total outstanding amount repaid in the year of assessment.

• (6) In a case where section 72(2)(b) below had effect in the case of the initial chargeable event, for the purposes of subsection (4) above the chargeable amount is an amount equal to the smaller of—

• (a) the aggregate of the total outstanding amount repaid in the year of assessment, and

• (b) an amount found by applying the formula A-B-C.

• (7) For the purposes of subsection (6) above—

• (a) A is the amount which would be the chargeable amount for the initial chargeable event apart from section 72(2) below,

• (b) B is the chargeable amount for the initial chargeable event, and

• (c) C is the amount (if any) found under subsection (8) below.

• (8) If, before the further chargeable event occurs, one or more prior chargeable events have occurred in relation to the trustees by virtue of the prior repayment of any of the total outstanding amount found for the time the initial chargeable event occurs, the amount found under this subsection is an amount equal to the chargeable amount for the prior chargeable event or to the aggregate of the chargeable amounts for the prior chargeable events (as the case may be).

• (9) In a case where—

• (a) a chargeable event (within the meaning of section 69 above) occurs in relation to the trustees in circumstances mentioned in subsection (1) above,

• (b) a sum falls to be included in the total outstanding amount found for the time the event occurs,

• (c) another chargeable event (within the meaning of that section) occurs in relation to the trustees in circumstances mentioned in subsection (1) above, and

• (d) the same sum or a part of it would (apart from this subsection) fall to be included in the total outstanding amount found for the time the event occurs,

the sum or part (as the case may be) shall not be included in the total outstanding amount found for the time the other chargeable event occurs.

• (10) In ascertaining for the purposes of this section whether a repayment is in respect of a particular amount, amounts borrowed earlier shall be taken to be repaid before amounts borrowed later.

• (11) Subsections (3) to (7) of section 68 above shall apply where tax is assessed by virtue of this section as they apply where tax is assessed by virtue of that section.

Limit on chargeable amount.

72

• (1) For the purposes of this section each of the following is a chargeable event in relation to the trustees of an employee share ownership trust—

• (a) an event which is a chargeable event by virtue of section 69 above;

• (b) an event which is a chargeable event by virtue of section 71 above.

• (2) If a chargeable event (the event in question) occurs in relation to the trustees of an employee share ownership trust, the following rules shall apply—

• (a) the amount which would (apart from this subsection) be the chargeable amount for the event in question shall be aggregated, for the purposes of paragraph (b) below, with the chargeable amounts for other chargeable events(if any) occurring in relation to the trustees before the event in question,

• (b) if the amount which would (apart from this subsection) be the chargeable amount for the event in question (or the aggregate found under paragraph (a)above, if there is one) exceeds the deductible amount, the chargeable amount for the event in question shall be the amount it would be apart from this subsection less an amount equal to the excess, and

• (c) section 70(2) and (3) and section 71(5) above shall have effect subject to paragraph (b) above.

• (3) For the purposes of subsection (2) above the deductible amount (as regards the event in question) is an amount equal to the total of the sums falling within subsection (4) below.

• (4) A sum falls within this subsection if it has been received by the trustees before the occurrence of the event in question and—

• (a) it has been deducted as mentioned in section 67(2)(a) above, or treated as mentioned in section 67(2)(b) above, before the occurrence of that event, or

• (b) it would fall to be so deducted or treated if a claim for relief under section 67 above had been made immediately before the occurrence of that event.

Information.

73

• (1) An inspector may by notice in writing require a return to be made by the trustees of an employee share ownership trust if they have at any time received a sum which has been deducted as mentioned in section 67(2)(a) above or treated as mentioned in section 67(2)(b) above.

• (2) Where he requires such a return to be made the inspector shall specify the information to be contained in it.

• (3) The information which may be specified is information the inspector needs for the purposes of sections 68 to 72 above, and may include information about—

• (a) sums received (including sums borrowed) by the trustees;

• (b) expenditure incurred by them;

• (c) assets acquired by them;

• (d) transfers of assets made by them.

• (4) The information which may be required under subsection (3)(a) above may include the persons from whom the sums were received.

• (5) The information which may be required under subsection (3)(b) above may include the purpose of the expenditure and the persons receiving any sums.

• (6) The information which may be specified under subsection (3)(c) above may include the persons from whom the assets were acquired and the consideration furnished by the trustees.

• (7) The information which may be included under subsection (3)(d) above may include the persons to whom assets were transferred and the consideration furnished by them.

• (8) In a case where a sum has been deducted as mentioned in section 67(2)(a)above, or treated as mentioned in section 67(2)(b) above, the inspector shall send to the trustees to whom the payment was made a certificate stating—

• (a) that a sum has been so deducted or so treated, and

• (b) what sum has been so deducted or so treated.

• (9) In the Table in section 98 of the Taxes Management Act1970 (penalties for failure to comply with notices etc.) at the end of the first column there shall be inserted— “ Section 73 of the Finance Act 1989 ”.

Interpretation.

74

Schedule 5 to this Act shall have effect to determine whether, for the purposes of sections 67 to 73 above, a trust is at a particular time—

• (a) an employee share ownership trust;

• (b) a qualifying employee share ownership trust.

Pensions etc.

Retirement benefits schemes.

75

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

Non-approved retirement benefits schemes.

76

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

Personal pension schemes.

77

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

Unit trusts etc.

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

78

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

80

Offshore funds operating equalisation arrangements.

81

• (1) In section 758 of the Taxes Act 1988 (offshore funds operating equalisation arrangements) in subsection (6) (reference to section 78 of the Capital Gains Tax Act 1979 not to include reference to it as applied by section 82) for the words “but not” there shall be substituted the words “and a reference to section 78”.

• (2) This section shall apply where a conversion of securities occurs on or after 14th March 1989; and “conversion of securities” here has the same meaning as in section 82 of the Capital Gains Tax Act 1979.

Life assurance

Calculation of profits: bonuses etc

82

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

Calculation of profits: policy holders' tax

82A

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

Unappropriated surplus on valuation

82B

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

Relevant financial reinsurance contracts

82C

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

Treatment of profits: life assurance — adjustment consequent on change in Insurance Prudential Sourcebook

82D

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

Section 82D: treatment of transferors under insurance business transfer schemes

82E

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

Section 82D: treatment of transferees under insurance business transfer schemes

82F

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

Receipts to be taken into account.

83

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

Structural assets

83XA

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

Changes in value of assets brought into account: non-profit companies

83YA

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

Meaning of “appropriate line 51 amount” for purposes of s.83YA

83YB

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

FAFTS: charge in relevant period of account

83YC

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

FAFTS: deduction in subsequent periods of account

83YD

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

Regulations: apportionment and redefining “financial reinsurance arrangement”

83YE

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

Financial reinsurance arrangements: further provision

83YF

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

Contingent loans

83ZA

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

Meaning of “brought into account”.

83A

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

Changes in recognised accounts: attribution of amounts carried forward under s.432F of Taxes Act 1988

83B

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

Amounts added to long term insurance fund of a company in excess of that company’s loss.

83AA

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

Treatment of surplus where there is a subsequent transfer of business from the company etc.

83AB

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

Interpretation of sections 85 to 89 and further provisions about insurance companies.

84

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

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

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

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

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

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

Charge of certain receipts of basic life assurance business.

85

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

Excess adjusted life assurance trade profits

85A

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

Spreading of relief for acquisition expenses.

86

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

Management expenses.

87

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

Corporation tax: policy holders’ share of profits.

88

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

Lower corporation tax rate on certain insurance company profits.

88A

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

Policy holders’ share of profits.

89

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

Modification of sections 82 to 83A, 88 and 89 in relation to overseas life insurance companies.

89A

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

Life policies etc. held by companies.

90

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

Interpretation

90A

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

Underwriters

Premiums trust funds: stock lending.

91

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

Regulations about underwriters etc.

92

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

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

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

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

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

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

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

Securities

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

93

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

94

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

95

Securities: miscellaneous.

96

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

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

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

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

Groups of companies

Set-off of ACT where companies remain in the same group.

97

• (1) In section 240 of the Taxes Act 1988 (set-off of company’s ACT against subsidiary’s liability to corporation tax) at the end of subsection (5)(set-off not to be made against subsidiary’s liability to corporation tax for any accounting period in which, or in any part of which, it was not a subsidiary of the surrendering company) there shall be added the words “unless throughout that period or part both companies were subsidiaries of a third company”.

• (2) This section shall have effect in relation to accounting periods ending on or after 14th March 1989.

Restriction on set-off of ACT.

98

• (1) After section 245 of the Taxes Act 1988 there shall be inserted—

(245A) (1) This section applies if— (a) there is a change in the ownership of a company (“the relevant company”); (b) by virtue of section 240 the relevant company is treated as having paid an amount of advance corporation tax in respect of a distribution made by it at any time before the change; and (c) within the period of six years beginning three years before the change, there is a major change in the nature or conduct of a trade or business of the company which is for the purposes of section 240 the surrendering company in relation to that amount. (2) No advance corporation tax which the relevant company is treated by virtue of section 240 as having paid in respect of a distribution made by it in anaccounting period beginning before the change of ownership shall be treatedunder section 239(4) as paid by it in respect of distributions made in an accounting period ending after the change of ownership; and this subsection shall apply to an accounting period in which the change of ownership occurs as if the part ending with the change of ownership, and the part after, were two separate accounting periods. (3) Subsections (4) and (5) of section 245 shall apply also for the purposes of this section and as if the reference in subsection (4) of section 245 to the period of three years mentioned in subsection (1)(a) of that section were a reference to the period mentioned in subsection (1)(c) above. (4) Sections 768(8) and (9) and 769 shall apply also for the purposes of this section and as if in subsection (3) of section 769 the reference to the benefit of losses were a reference to the benefit of advance corporation tax. (245B) (1) Subsection (4) below applies if— (a) there is a change in the ownership of a company (“the relevant company”); (b) any advance corporation tax paid by the relevant company in respect of distributions made by it in an accounting period beginning before the change is treated under section 239(4) as paid by it in respect of distributions made by it in an accounting period ending after the change; (c) after the change the relevant company acquires an asset from another company in such circumstances that section 273(1) of the Taxes Act 1970applies to the acquisition; and (d) a chargeable gain accrues to the relevant company on the disposal of the asset within the period of three years beginning with the change of ownership. (2) Subsection (1)(b) above shall apply to an accounting period in which the change of ownership occurs as if the part ending with the change of ownership, and the part after, were two separate accounting periods. (3) For the purposes of subsection (1)(d) above an asset acquired by the relevant company as mentioned in subsection (1)(c) above shall be treated as the same as an asset owned at a later time by that company if the value of the second asset is derived in whole or in part from the first asset, and in particular where the second asset is a freehold, and the first asset was a leasehold and the lessee has acquired the reversion. (4) In relation to the accounting period in which the chargeable gain accrues to the relevant company (“the relevant period”), section 239 shall have effect as if the limit imposed by subsection (2) of that section on the amount of advance corporation tax to be set against the relevant company’s liability to corporation tax were reduced by whichever is the lesser of— (a) the amount of advance corporation tax that would have been payable (apart from section 241) in respect of a distribution made at the end of the relevant period of an amount which, together with the advance corporation tax so payable in respect of it, is equal to the chargeable gain, and (b) the amount of surplus advance corporation tax in relation to the accounting period which by virtue of subsection (2) above is treated for the purposes of subsection (1)(b) above as ending with the change of ownership. (5) Sections 768(8) and (9) and 769 shall apply also for the purposes of this section and as if in subsection (3) of section 769 the reference to the benefit of losses were a reference to the benefit of advance corporation tax.

• (2) This section shall have effect where the change in the ownership of the relevant company occurs on or after 14th March 1989.

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

99

Change in ownership of company.

100

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

Treatment of convertible shares or securities for purposes relating togroup relief etc.

101

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

Surrender of company tax refund etc. within group.

102

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

Close companies

Repeal of apportionment provisions.

103

• (1) Except as provided by subsection (2) below, Chapter III of Part XI of theTaxes Act 1988 (apportionment of undistributed income etc. of close companies)shall not have effect in relation to accounting periods beginning after 31stMarch 1989.

• (2) Section 427(4) of the Taxes Act 1988 (which gives relief to an individualwhere income apportioned to him in an earlier accounting period of a closecompany is included in a distribution received by him in a later accountingperiod), and section 427(5) of, and Part I of Schedule 19 to, that Act so faras they relate to section 427(4), shall continue to have effect in any casewhere the subsequent distribution referred to in section 427(4) is made before1st April 1992.

Meaning of “close company”.

104

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

Small companies’ rate not available to certain close companies.

105

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

Restriction on payment of tax credits.

106

• (1) In section 231 of the Taxes Act 1988 (tax credits for certain recipientsof qualifying distributions) in subsection (3) after the words “made and”there shall be inserted the words “subject to subsections (3A) to (3D)below” and after that subsection there shall be inserted—