Legalize / United Kingdom / Public General Act

Finance Act 1989

Type Public General Act

Publication 1989-07-27

Last updated 2026-03-18

State In force

Department Statute Law Database

Source legislation.gov.uk

articles Not indexed

Reform history JSON API

(1) The trust deed must provide that—

(a) where the trustees transfer securities to a beneficiary, they must do soon qualifying terms;

(b) the trustees must transfer securities before the expiry of the qualifying period beginning with the date on which they acquired them.

(2) For the purposes of sub-paragraph (1) above a transfer of securities ismade 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 sub-paragraph (2ZA) below are transferred on similarterms,

(b) securities have been offered to all the persons who are beneficiariesunder the terms of the trust deed by virtue of a rule which conforms with paragraph 4(2), (3) or (4) above when the transfer is made, and

(2ZA) For the purposes of sub-paragraph (1) 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—

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

(ii) which is approved under Schedule 3 to the Income Tax (Earnings and Pensions) Act 2003, and

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

(2A) For the purposes of sub-paragraph (1) 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.

(3) For the purposes of sub-paragraph (2) above, the fact that terms varyaccording to the levels of remuneration of beneficiaries, the length of theirservice, or similar factors, shall not be regarded as meaning that the termsare not similar.

(4) The trust deed must provide that, in ascertaining for the purposes of arelevant rule whether particular securities are transferred, securitiesacquired earlier by the trustees shall be treated as transferred by thembefore securities acquired by them later; and a relevant rule is one which isincluded in the trust deed and conforms with sub-paragraph (1) above.

Other features

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The trust deed must not contain features which are not essential orreasonably incidental to the purpose of acquiring sums and securities, granting rights to acquire shares to persons who are eligible to participate in SAYE option schemes approved under Schedule 3 to the Income Tax (Earnings and Pensions) Act 2003, transferring shares to such persons, transferring sums and securities to employees and directors, and transferringsecurities to the trustees of profit sharing schemes approved under Schedule 9 to the Taxes Act 1988.

Rules about acquisition etc.

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(1) The trust deed must provide that, for the purposes of the deed, thetrustees—

(a) acquire securities when they become entitled to them;

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

(2) But if the deed provides as mentioned in paragraph 8 above, it mustprovide for the following exceptions to any rule which is included in it andconforms with sub-paragraph (1)(a) above, namely, that—

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

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

(3) The trust deed must provide that—

(a) if the trustees agree to take a transfer of securities, for the purposesof the deed they become entitled to them when the agreement is made and noton a later transfer made pursuant to the agreement;

(b) if the trustees agree to transfer securities to another person, for thepurposes of the deed the other person becomes entitled to them when theagreement is made and not on a later transfer made pursuant to the agreement.

Position after trust’s establishment

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A trust which was at the time it was established a qualifying employeeshare ownership trust shall continue to be one, except that it shall not besuch a trust at any time when the requirements mentioned in paragraph 3(3)(a)to (f) above are not satisfied. This paragraph applies in relation to trusts established on or before the day on which the Finance Act 1994 was passed.

12A

(1) Subject to sub-paragraphs (2) and (3) below, a trust which was at the time it was established a qualifying employee share ownership trust shall continue to be one.

(2) If the trust deed makes provision under paragraph 3A(a) above, the trust shall not be a qualifying employee share ownership trust at any time when the requirements mentioned in paragraph 3(3)(a) to (f) above are not satisfied.

(3) If the trust deed makes provision under paragraph 3A(b) above, the trust shall not be a qualifying employee share ownership trust at any time when the conditions mentioned in paragraph 3B(4)(a) to (e) above are not satisfied.

(4) If the trust deed makes provision under paragraph 3A(c) above, the trust shall not be a qualifying employee share ownership trust at any time when—

(a) there is not a single trustee,

(b) the trustee is not a company which is resident in the United Kingdom and controlled by the founding company, or

(c) the conditions mentioned in paragraph 3C(4)(a) to (e) above are not satisfied as regards the directors of the trustee.

(5) This paragraph applies in relation to trusts established after the day on which the Finance Act 1994 was passed.

13

A trust is an employee share ownership trust at a particular time (therelevant time) if it was a qualifying employee share ownership trust at thetime it was established; and it is immaterial whether or not it is aqualifying employee share ownership trust at the relevant time.

Interpretation

14

For the purposes of this Schedule the following are securities—

(a) shares;

(b) debentures.

15

For the purposes of this Schedule, the question whether one company is controlled by another shall be construed in accordance with section 995 of the Income Tax Act 2007.

16

(1) For the purposes of this Schedule a person shall be treated as having a material interest in a company if he, either on his own or with one or more of his associates, or if any associate of his with or without other such associates,—

(a) is the beneficial owner of, or able (directly or through the medium of other companies or by any other indirect means) to control, more than 5 percent. of the ordinary share capital of the company, or

(b) possesses, or is entitled to acquire, such rights as would, in the event of the winding-up of the company or in any other circumstances, give an entitlement to receive more than 5 per cent. of the assets which would then be available for distribution among the participators.

(2) In this paragraph—

(a) “associate” has the meaning given by section 448 of the Corporation Tax Act 2010, but subject to sub-paragraph (3) below,

(b) “control” has the meaning given by section 995 of the Income Tax Act 2007, and

(3) Where a person has an interest in shares or obligations of the company asa 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 (5)below applies in relation to him.

(4) In sub-paragraph (3) above “employee benefit trust” has the same meaning as in paragraph 7 of Schedule 8 to the Taxes Act 1988, except that in its application for this purpose paragraph 7(5)(b) of that Schedule shall have effect as if it referred to the day on which this Act was passed instead of to 14th March 1989.

(5) This sub-paragraph applies in relation to a person if at any time on or after the day on which this Act was passed—

(a) he, 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 5 percent. of the ordinary share capital of the company.

(6) Sub-paragraphs (9) to (12) of paragraph 7 of Schedule 8 to the Taxes Act1988 shall apply for the purposes of sub-paragraph (5) above as they apply for the purposes of that paragraph.

17

For the purposes of this Schedule a trust is established when the deed under which it is established is executed.

18

For the purposes of this Schedule “SAYE option scheme” has the same meaning as in the SAYE code (see section 516 of the Income Tax (Earnings and Pensions) Act 2003 (approved SAYE option schemes)).

SCHEDULE 6

Part I — Amendments of Taxes Act

Preliminary

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Amendments

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Effect of amendments

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Part II — Approved Schemes: General

Preliminary

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Remuneration

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Accelerated accrual

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Associated employments

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Connected schemes

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Augmentation

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Centralised schemes

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Election

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Supplementary

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Part III — Approved Schemes: Additional Voluntary Contributions

Preliminary

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Abatement of benefits

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Return of surplus funds

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Supplementary

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SCHEDULE 7

Part I — Amendments of Taxes Act

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Part II — Schemes Approved Before Passing of This Act

Interpretation

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Lump sum to member

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SCHEDULE 8

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SCHEDULE 8A

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1ZB

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1A

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1C

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SCHEDULE 9

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SCHEDULE 10

1

Schedule 4 to the Taxes Act 1988 (deep discount securities) shall beamended as mentioned in the following provisions of this Schedule.

2

(1) Paragraph 1 shall be amended as follows.

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

(dd) “a deep discount security” also means any redeemable security whichhas been issued by a public body (at whatever time) at a deep discount, otherthan— (i) a security such as is mentioned in paragraph (d)(ii) above; (ii) a security falling within sub-paragraph (5), (6) or (7) below;

(3) In sub-paragraph (1)(g) after the words “the company” there shall beinserted the words “or the public body”.

(4) The following shall be inserted at the end of sub-paragraph (2)— “ This sub-paragraph applies only in the case of securities issued by acompany. ”

(5) The following sub-paragraphs shall be inserted after sub-paragraph(3)—

(4) For the purposes of this Schedule a public body is any of the followingwhich is not a company— (a) a government, whether of the United Kingdom or elsewhere; (b) a public or local authority, whether in the United Kingdom or elsewhere. (5) A security falls within this sub-paragraph if it is a gilt-edged securityand— (a) it was issued before 14th March 1989, or (b) it was issued on or after that date but was issued under the sameprospectus as any gilt-edged security issued before that date. (6) A security falls within this sub-paragraph if it is a gilt-edged securityand— (a) it was issued under a prospectus under which no securities were issuedbefore 14th March 1989, (b) it was issued otherwise than on the occasion of the original issue underthe prospectus, and (c) all the securities issued on the occasion of the original issue under theprospectus are gilt-edged securities which are not deep discount securities. (7) A security falls within this sub-paragraph if it is not a gilt-edgedsecurity and was issued (at whatever time) under the same prospectus as anyother security which was issued before the security in question and which isnot a deep discount security. (8) For the purposes of this Schedule “gilt-edged security”has the same meaning as it has for the purposes of the 1979 Act.

3

The following sub-paragraph shall be inserted after paragraph 4(7)—

(8) In the case of a deep discount security issued by a public body, thisparagraph applies where a disposal is made on or after 14th March 1989(whatever the date of acquisition).

4

In paragraph 11(1) after the words “deep discount security” thereshall be inserted the words “issued by a company”.

5

The following paragraph shall be inserted after paragraph 11—

(11A) Where any deep discount security issued by a public body is redeemedbefore the redemption date by the body which issued it, paragraph 4 aboveshall have effect subject to paragraph 11(2) above (ignoring the wordsfollowing paragraph (b)).

6

The following sub-paragraph shall be inserted after paragraph 13(2)—

(3) Every public body which issues deep discount securities on or after 1stAugust 1989 shall cause to be shown on the certificate of each such securitythe income element for each income period between the date of issue of thesecurity and the redemption date.

7

The following shall be inserted after paragraph 14—

(15) (1) In a case where— (a) paragraph 4 above would apply (apart from this paragraph) to a disposalof a security, and (b) immediately before the disposal was made the security was held for thepurposes of an exempt approved scheme (within the meaning of Chapter I of PartXIV), that paragraph shall not apply to the disposal. (2) Sub-paragraph (1) above shall not apply unless the disposal is made on orafter 14th March 1989. (16) (1) In a case where— (a) a security is the subject of a transfer which falls within section 129(3),and (b) the transfer constitutes a disposal to which (apart from this paragraph)paragraph 4 above would apply, that paragraph shall not apply to the disposal. (2) Sub-paragraph (1) above shall not apply unless the disposal is made on orafter 14th March 1989. (17) (1) Where on the disposal by trustees of a deep discount security an amountis treated as income chargeable to tax by virtue of paragraph 4(1) above, therate at which it is chargeable shall be a rate equal to the sum of the basicrate and the additional rate for the year of assessment in which the disposalis made. (2) Where the trustees are trustees of a scheme to which section 469 applies,sub-paragraph (1) above shall not apply if or to the extent that the amountis treated as income in the accounts of the scheme. (3) Sub-paragraph (1) above shall not apply unless the disposal is made on orafter 14th March 1989. (18) (1) An underwriting member of Lloyd’s shall be treated for the purposes ofthis Schedule as absolutely entitled as against the trustees to the securitiesforming part of his premiums trust fund, his special reserve fund (if any) andany other trust fund required or authorised by the rules of Lloyd’s, orrequired by the underwriting agent through whom his business or any part ofit is carried on, to be kept in connection with the business. (2) Sub-paragraph (1) above applies where a disposal is made on or after 14thMarch 1989 (whatever the date of acquisition). (3) Where a security forms part of a premiums trust fund at the end of 31stDecember of any relevant year, for the purposes of this Schedule the trusteesof the fund shall be deemed to dispose of the security at that time; and forthis purpose relevant years are 1989 and subsequent years. (4) Where a security forms part of a premiums trust fund at the beginning of1st January of any relevant year, for the purposes of this Schedule thetrustees of the fund shall be deemed to acquire the security at that time; andfor this purpose relevant years are 1990 and subsequent years. (5) Sub-paragraph (6) below applies where the following state of affairsexists at the beginning of 1st January of any year or the end of 31st Decemberof any year— (a) securities have been transferred by the trustees of a premiums trust fundin pursuance of an arrangement mentioned in section 129(1) or (2), (b) the transfer was made to enable another person to fulfil a contract or tomake a transfer, (c) securities have not been transferred in return, and (d) section 129(3) applies to the transfer made by the trustees. (6) The securities transferred by the trustees shall be treated for thepurposes of sub-paragraphs (3) and (4) above as if they formed part of thepremiums trust fund at the beginning of 1st January concerned or the end of31st December concerned (as the case may be). (7) Paragraph 7 above shall have effect subject to sub-paragraph (3) above. (8) Paragraph 7(2) above shall not apply where— (a) the deceased was an underwriting member of Lloyd’s who died on or after14th March 1989, and (b) immediately before his death the security concerned formed part of apremiums trust fund, a special reserve fund or any other trust fund requiredor authorised by the rules of Lloyd’s, or required by the underwriting agentthrough whom the deceased’s business or any part of it was carried on, to bekept in connection with the business. (9) In a case where an amount treated as income chargeable to tax by virtueof paragraph 4(1) above constitutes profits or gains mentioned in section450(1)— (a) section 450(1)(b) shall apply; and (b) paragraph 4(1)(b) above shall not apply. (10) For the purpose of computing income tax for the year 1987–88sub-paragraph (9) above shall have effect as if— (a) the reference to section 450(1) were to paragraph 2 of Schedule 16 to theFinance Act 1973, and (b) the reference to section 450(1)(b) were to paragraph 2(b) of thatSchedule. (11) In this paragraph “business” and “premiums trustfund” have the meanings given by section 457. (19) (1) In a case where— (a) securities have been issued by a public body under a prospectus underwhich no securities were issued before 14th March 1989, (b) some of the securities issued under the prospectus are gilt-edgedsecurities which are would-be deep discount securities, (c) some of the securities issued under the prospectus are gilt-edgedsecurities which are not would-be deep discount securities, and (d) there is a time when the aggregate nominal value of the securities fallingwithin paragraph (b) above (at that time) exceeds the aggregate nominal valueof the securities falling within paragraph (c) above (at that time), sub-paragraph (2) below shall apply in relation to any gilt-edgedsecurity which has been or is issued under the prospectus at any time (whetherbefore, at or after the time mentioned in paragraph (d) above). (2) As regards any event occurring in relation to the security after the timementioned in sub-paragraph (1)(d) above, paragraphs 4, 7, 8, 11A, 12 and 14to 18 above shall have effect as if— (a) the security were a deep discount security, (b) it had been issued as such (whatever the time it was issued), and (c) it had been acquired as such (whatever the time it was acquired). (3) For the purposes of sub-paragraph (1) above a would-be deep discountsecurity is a security which would be a deep discount security apart fromparagraph 1(6) above. (4) For the purposes of sub-paragraph (2) above events, in relation to asecurity, include anything constituting a disposal for the purposes of the1979 Act, the death of a person competent to dispose of the security, adisposal mentioned in paragraph 18(3) above, and an acquisition mentioned inparagraph 18(4) above. (20) (1) In a case where— (a) all the securities issued by a public body on the occasion of the originalissue under a particular prospectus (whatever the time of the issue) areneither gilt-edged securities nor deep discount securities, (b) some of the securities issued under the prospectus are not gilt-edgedsecurities but are new would-be deep discount securities, and (c) there is a time when the aggregate nominal value of the securities fallingwithin paragraph (b) above (at that time) exceeds the aggregate nominal valueof the securities which (looking at the state of affairs at that time) havebeen issued under the prospectus and are neither gilt-edged securities nor newwould-be deep discount securities, sub-paragraph (2) below shall apply in relation to any security which isnot a gilt-edged security but which has been or is issued under the prospectusat any time (whether before, at or after the time mentioned in paragraph (c)above). (2) As regards any event occurring in relation to the security after the timementioned in sub-paragraph (1)(c) above, paragraphs 4, 7, 8, 11A, 12 and 14to 18 above shall have effect as if— (a) the security were a deep discount security, (b) it had been issued as such (whatever the time it was issued), and (c) it had been acquired as such (whatever the time it was acquired). (3) For the purposes of sub-paragraph (1) above a new would-be deep discountsecurity is a security which— (a) would be a deep discount security apart from paragraph 1(7) above, and (b) was issued on or after 14th March 1989. (4) For the purposes of sub-paragraph (2) above events, in relation to asecurity, include anything constituting a disposal for the purposes of the1979 Act, the death of a person competent to dispose of the security, adisposal mentioned in paragraph 18(3) above, and an acquisition mentioned inparagraph 18(4) above.

SCHEDULE 11

Deep gain securities

1

(1) For the purposes of this Schedule a deep gain security is a redeemable security (whenever issued) which fulfils the first and second conditions.

(2) The first condition is that, taking the security at the time it is issuedand assuming redemption, the amount payable on redemption might constitute adeep gain; and if the security is capable of redemption on one of a number ofoccasions, this condition is fulfilled if it is fulfilled as regards any oneof them.

(3) For the purposes of sub-paragraph (2) above “redemption” does not include any redemption which may be made before maturity only at the option of the person who issued the security(and no other person).

(3A) In the case of a security issued before 13th November 1991, for the purposes of sub-paragraph (2) above “redemption” does not include any redemption which may be made before maturity otherwise than in pursuance of the exercise by the person who holds the security for the time being of an option exercisable only on the effluxion of time or the happening of an event which (judged at the time of the security’s issue) is certain or likely to occur.

(3B) In the case of a security issued on or after 13th November 1991, for the purposes of sub-paragraph (2) above “redemption” does not include any redemption which may be made before maturity otherwise than at the option of the person who holds the security for the time being and as regards which the following conditions are fulfilled (judged at the time of the security’s issue)—

(a) the event occasioning redemption is such that, if it occurred and there was no provision for redemption, the interests of the person holding the security at the time of the occurrence might be adversely affected,

(b) the event occasioning redemption is neither certain nor likely to occur,

(c) the event occasioning redemption is not one of a number of events occasioning or allowing redemption before maturity at least one of which is certain or likely to occur, and

(d) the obtaining of a tax advantage by any person is not the main benefit, or one of the main benefits, that might be expected to accrue from the provision for redemption.

(3C) The condition set out in sub-paragraph (3B)(a) above is fulfilled if it is fulfilled by reference to any one potential holder, whether or not it is fulfilled by reference to other potential holders.

(3D) In a case where—

(a) the security is one which under the terms of issue can be converted into or exchanged for a security of a different kind, and

(b) it falls to be decided whether the condition set out in paragraph (b) or (c) of sub-paragraph (3B) above is fulfilled,

the condition concerned shall not be treated as fulfilled unless it is fulfilled having regard only to circumstances in which (judged at the time of the security’s issue) the right to convert or exchange cannot be or is unlikely to be exercised.

(3E) In the case of a security issued on or after 13th November 1991, for the purposes of sub-paragraph (2) above “redemption” does not include any redemption which may be made before maturity at the option of the person who holds the security for the time being and as regards which the following conditions are fulfilled (judged at the time of the security’s issue)—

(a) the event allowing the option to be exercised is such that, if it occurred and there was no provision for redemption, the interests of the person holding the security at the time of the occurrence might be adversely affected,

(b) the event allowing the option to be exercised is neither certain nor likely to occur,

(c) the event allowing the option to be exercised is not one of a number of events occasioning or allowing redemption before maturity at least one of which is certain or likely to occur, and

(d) the obtaining of a tax advantage by any person is not the main benefit, or one of the main benefits, that might be expected to accrue from the provision for redemption.

(3F) The condition set out in sub-paragraph (3E)(a) above is fulfilled if it is fulfilled by reference to any one potential holder, whether or not it is fulfilled by reference to other potential holders.

(3G) In a case where—

(a) the security is one which under the terms of issue can be converted into or exchanged for a security of a different kind, and

(b) it falls to be decided whether the condition set out in paragraph (b) or (c) of sub-paragraph (3E) above is fulfilled,

(4) The second condition is that the security—

(a) is not a deep discount security (either because the amount payable onredemption is not known at issue or for some other reason),

(b) is not a share in a company,

(d) is not a convertible security, and

(e) does not fall within sub-paragraph (5), (6) or (7) below.

(5) A security falls within this sub-paragraph if it is a gilt-edged securityand—

(a) it was issued before 14th March 1989, or

(b) it was issued on or after that date but was issued under the sameprospectus as any gilt-edged security issued before that date.

(6) A security falls within this sub-paragraph if it is a gilt-edged securityand—

(a) it was issued under a prospectus under which no securities were issuedbefore 14th March 1989,

(b) it was issued otherwise than on the occasion of the original issue underthe prospectus, and

(c) all the securities issued on the occasion of the original issue under theprospectus are gilt-edged securities which are not deep gain securities.

(7) A security falls within this sub-paragraph if it is not a gilt-edgedsecurity and was issued (at whatever time) under the same prospectus as anyother security which was issued before the security in question and which isnot a deep gain security.

(8) For the purposes of this paragraph—

(a) a deep discount security is a security which is a deep discount securityfor the purposes of Schedule 4 to the Taxes Act 1988,

(b) “qualifying indexed security” has the meaning given byparagraph 2 below, and

(c) a gilt-edged security is a security which is a gilt-edged security for thepurposes of the Taxation of Chargeable Gains Act 1992 .

(9) For the purposes of this paragraph the amount payable on redemption of asecurity constitutes a deep gain if the issue price is less than the amountso payable, and the amount by which it is less represents more than—

(a) 15 per cent. of the amount so payable, or

(b) half Y per cent. of the amount so payable, where Y is the number ofcomplete years between the date of issue and the redemption date.

(10) For the purposes of this paragraph the amount payable on redemption doesnot include any amount payable by way of interest.

Qualifying indexed securities

2

(1) For the purposes of paragraph 1 above a qualifying indexed security is asecurity which fulfils each of the conditions set out below.

(2) The first condition is that—

(a) the security is denominated in sterling and under the terms of issue theamount payable on redemption is determined by reference to the movement of theretail prices index,

(b) the security is denominated in a currency other than sterling and underthe terms of issue the amount payable on redemption is determined by referenceto any similar general index of prices which is published by the government,or by an agent of the government, of the territory in whose currency thesecurity is denominated, or

(c) the security was quoted in the official list of arecognised stock exchange at the time it was issued, and under the terms of issue the amount payable on redemption isdetermined by reference to the movement of a published index of prices ofshares quoted in the official list of a recognised stock exchange.

(3) The second condition is that the terms of issue make no provision forconversion into, or redemption in, a currency other than that in which thesecurity is denominated on issue.

(4) The third condition is that under the terms of issue—

(a) interest is payable on the security,

(b) not more than one year can elapse between the day of issue and the firstday on which interest becomes payable, or between any day on which interestbecomes payable and the next day on which it becomes payable,

(c) the interest payable is determined by reference to a rate which is notless than a reasonable commercial rate (judged by reference to the date ofissue and by reference to securities of a similar nature to the one inquestion), and

(d) the interest payable is also determined by reference to the movement ofthe index by reference to which the amount payable on redemption isdetermined.

(5) The fourth condition is that where that index is applied to determine theamount payable on redemption or to determine interest it must, under the termsof issue, be applied precisely and without restriction.

(6) The fifth condition is that—

(a) the security is expressed to be issued for a definite period stated on theface of the security, and

(b) the period so stated commences with the day of issue and is five years ormore.

(7) The sixth condition is that the terms of issue contain no provisionenabling the person who holds the security for the time being to require anyof the following before the expiry of a period which commences with the dayof issue and which is five years or more—

(a) the security to be repurchased by the person who issued it;

(b) the security to be purchased by a person other than the person who issuedit;

(d) the security to be redeemed in circumstances other than any of thequalifying circumstances (set out in sub-paragraph (13) below).

(8) The seventh condition is that, where the issue is handled by an agent forthe person making the issue or by an underwriter, the terms on which the agentor underwriter offers the security—

(a) contain no provision for the security to be repurchased by the person whoissued it, converted into another kind of security, or redeemed, before theexpiry of a period which commences with the day of issue and which is fiveyears or more, and

(b) contain no provision enabling the person who holds the security for thetime being to require the security to be purchased, by a person other than theperson who issued it, before the expiry of a period which commences with theday of issue and which is five years or more.

(8A) If a security was issued before 9th June 1989, was not quoted in theofficial list of a recognised stock exchange at the time it was issued, butwas quoted in such a list on 8th June 1989, for the purposes of subparagraph(2)(c) above it shall be deemed to have been quoted in that list at the timeit was issued.

(8B) If a security was issued on or after 9th June 1989, and was quoted in theofficial list of a recognised stock exchange at a time aftet it was issued butbefore the end of the qualifying period, for the purposes of sub-paragraph(2)(c) above it shall be deemed to have been quoted in that list at the timeit was issued; and the qualifying period is the period of one month beginningwith the day on which the security was issued

(9) For the purposes of sub-paragraph (5) above “redemption” does not include any redemption which may bemade before maturity only at the option of the person who issued the security(and no other person).

(10) In a case where the amount payable on redemption, or the amount ofinterest, is under the terms of issue determined by reference to the movementof the index for a period (a notional period) in place of a later actualperiod (a process commonly known as lagging) the fourth condition shall betreated as fulfilled if the following rules are fulfilled—

(a) under the terms of issue the notional period must start not more thaneight months before the actual period starts and must end not more than eightmonths before the actual period ends, and

(b) where the index is applied for the notional period it must, under theterms of issue, be applied precisely and without restriction.

(11) In a case where the terms of issue contain provision for the amountpayable on redemption to be not less than an amount stated in the terms, theprovision shall not prevent the fourth condition being fulfilled if—

(a) the security was issued before 9th June 1989, and

(b) the amount stated does not constitute a deep gain (within the meaninggiven by paragraph 1(9) above).

(11A) In a case where the terms of issue contain provision for the amountpayable on redemption to be not less than a specified percentage of the issueprice, the provision shall not prevent the fourth condition being fulfilledif the specified percentage is not greater than 10.

(12) In a case where—

(a) the terms of issue contain provision for the amount payable on redemptionin any of the qualifying circumstances (set out in sub-paragraph (13) below)to be not less than an amount stated in the terms, and

(b) the security was issued before 9th June 1989,

the provision shall not prevent the fourth condition being fulfilled.

(12A) In a case where—

(a) the terms of issue contain provision for the amount payable on redemptionin any of the qualifying circumstances (set out in sub-paragraph (13) below)to be not more than the issue price, and

(b) the security was issued on or after 9th June 1989,

the provision shall not prevent the fourth condition being fulfilled.

(13) For the purposes of sub-paragraphs (7) , (12) and (12A) above the following are qualifying circumstances—

(a) there is a fundamental change in the rules governing the index and thechange would be detrimental to the interests of the person who holds thesecurity for the time being;

(b) the index ceases to be published without being replaced by a comparableindex;

(c) in the case of a security issued before 13th November 1991, any circumstances except circumstances in which the person who holds the security for the time being exercises an option exercisable only on the effluxion of time or the happening of an event which (judged at the time of the security’s issue) is certain or likely to occur;

(d) in the case of a security issued on or after 13th November 1991, any circumstances for redemption which may be made before maturity otherwise than at the option of the person who holds the security for the time being and as regards which the conditions set out in paragraph 1(3B) above are fulfilled (judged at the time of the security’s issue and read subject to paragraph 1(3C) and (3D) above);

(e) in the case of a security issued on or after 13th November 1991, any circumstances for redemption which may be made before maturity at the option of the person who holds the security for the time being and as regards which the conditions set out in paragraph 1(3E) above are fulfilled (judged at the time of the security’s issue and read subject to paragraph 1(3F) and (3G) above).

(14) In a case where an issue is handled by an agent for the person making theissue, or by an underwriter, for the purposes of sub-paragraphs (2) to (5) and(10) above the terms of issue shall be taken to include any terms on which theagent or underwriter offers the security.

(15) For the purposes of this paragraph the amount payable on redemption doesnot include any amount payable by way of interest.

(16) For the purposes of this paragraph “control” (in relation to acompany) shall be construed in accordance with section 840 of the Taxes Act1988.

Convertible securities

3

(1) For the purposes of paragraph 1 above a security is a convertible securityif—

(a) it was issued by a company before 9th June 1989,

(b) under the terms of issue it can be converted into or exchanged for sharecapital in a company (whether or not the company is the one which issued thesecurity), and

(2) The condition is that—

(a) at some time in the qualifying period the security was quoted in theofficial list of a recognised stock exchange,

(b) at some time in that period relevant share capital was so quoted, or

(3) For the purposes of sub-paragraph (2) above the qualifying period is theperiod of one month beginning with the day on which the security was issued.

(4) For the purposes of sub-paragraph (2) above relevant share capital isshare capital in the company into whose share capital the security can beconverted or for whose share capital the security can be exchanged; andrelevant share capital need not be share capital into or for which thesecurity can be converted or exchanged.

(5) References in this paragraph to share capital are to share capital bywhatever name called.

Issue price

3A

(1) This paragraph applies where—

(a) securities (old securities) of a particular kind are issued by way of the original issue of securities of that kind,

(b) on a later occasion securities (new securities) of the same kind are issued,

(c) a sum (the extra return) is payable in respect of each new security, by the person issuing it, to reflect the fact that interest is accruing on the old securities,

(d) the issue price of each new security includes an element (whether or not separately identified) representing payment for the extra return, and

(e) the extra return is equal to the amount of interest payable for the relevant period on each old security.

(2) In such a case, the issue price of each new security shall be deemed for the purposes of paragraph 1(9) above to be its actual issue price less an amount equal to the extra return payable in respect of the security.

(3) For the purposes of this paragraph securities are of the same kind if they are treated as being of the same kind by the practice of a recognised stock exchange or would be so treated if dealt with on such a stock exchange.

(4) For the purposes of this paragraph the relevant period is the period beginning with the day following the relevant day and ending with the day on which the new securities are issued.

(5) For the purposes of this paragraph the relevant day is—

(a) the last (or only) interest payment day to fall in respect of the old securities before the day on which the new securities are issued, or

(b) the day on which the old securities were issued, in a case where no interest payment day fell in respect of them before the day on which the new securities are issued;

and an interest payment day, in relation to the old securities, is a day on which interest is payable under them.

Meaning of transfer etc.

4

(1) This paragraph has effect for the purposes of this Schedule.

(2) “Transfer”, in relation to a security, means transfer by wayof sale, exchange, gift or otherwise.

(2A) But (notwithstanding sub-paragraph (2) above) “transfer”does not include a transfer made ona conversion of a security into sharecapital in a company.

(3) Where an agreement for the transfer of a security is made, it istransferred, and the person to whom it is agreed to be transferred becomesentitled to it, when the agreement is made and not on a later transfer madepursuant to the agreement; and “entitled”, “transfer” and cognateexpressions shall be construed accordingly.

(4) A person holds a security at a particular time if he is entitled to it atthe time.

(5) A person acquires a security when he becomes entitled to it; and “acquisition” shall be construed accordingly.

(6) If an agreement is conditional (whether on the exercise of an option orotherwise) for the purposes of sub-paragraph (3) above it is made when thecondition is exercised.

Charge to tax on transfer

5

(1) This paragraph applies if—

(a) there is a transfer of a deep gain security on or after 14th March 1989(irrespective of when the person making the transfer acquired it), and

(b) the amount obtained on transfer exceeds the amount paid on acquisition.

(2) In such a case—

(a) an amount equal to the difference between those two amounts, less theamount of any costs, shall be treated as income of the person making thetransfer,

(b) the income shall be chargeable to tax under Case III or Case IV (as thecase may be) of Schedule D,

(d) notwithstanding anything in sections 64 to 67 of the Taxes Act 1988, thetax shall be computed on the income arising in the year of assessment forwhich the computation is made.

(3) For the purposes of this paragraph—

(a) the amount obtained on transfer is the amount obtained, in respect of thetransfer, by the person making it,

(b) the amount paid on acquisition is the amount paid by that person inrespect of his acquisition of the security (or his last acquisition of itbefore the transfer), and

(c) costs are the costs incurred by that person in connection with thetransfer and with his acquisition of the security (or his last acquisition ofit before the transfer).

(4) For the purposes of sub-paragraph (3)(a) above the person making thetransfer shall be treated as obtaining in respect of it—

(a) any amount he actually obtains in respect of it, and

(b) any amount he is entitled to obtain, but does not obtain, in respect ofit.

(5) Sub-paragraph (4) above shall not apply where paragraph 7, 8 or 9 belowapplies.

Exchange gains and losses

5A

(1) This paragraph applies where—

(a) there is a transfer or redemption of a deep gain security, and

(b) the person making the transfer or (as the case may be) the person who was entitled to the security immediately before redemption is a qualifying company.

(2) For the purposes of paragraph 5 above the amount treated as income—

(a) shall be increased by the amount of any non-trading exchange loss, or the aggregate of the amounts of any non-trading exchange losses, accruing to the company as regards the underlying right for any accrual period or periods constituting or falling within the holding period;

(b) shall (after taking account of paragraph (a) above) be reduced by the amount of any non-trading exchange gain, or the aggregate of the amounts of any non-trading exchange gains, accruing to the company as regards the underlying right for any accrual period or periods constituting or falling within the holding period.

(3) For the purposes of this paragraph—

(a) the underlying right is the right to settlement under the debt on the security;

(b) “accrual period” and “qualifying company” have the same meanings as in Chapter II of Part II of the Finance Act 1993;

(c) the question whether a non-trading exchange gain or loss accrues to the company as regards the underlying right for an accrual period shall be decided in accordance with that Chapter.

(4) For the purposes of this paragraph the holding period is the period which—

(a) begins when the company acquired (or last acquired) the security before the transfer or redemption, and

(b) ends when the transfer or redemption is made.

Redemption

6

(1) Paragraph 5 above applies where there is a redemption of a deep gainsecurity as well as where there is a transfer.

(2) In its application by virtue of sub-paragraph (1) above, paragraph 5 aboveshall have effect as if—

(a) references to the person making the transfer were to the person who wasentitled to the security immediately before redemption, and

(b) other references to transfer were to redemption.

Death

7

(1) Where an individual who is entitled to a security dies, for the purposesof this Schedule—

(a) he shall be treated as transferring it to his personal representativesimmediately before his death, and

(b) he shall be treated as obtaining in respect of the transfer an amountequal to the market value of the security at the time of the transfer.

(2) Where a security is transferred by personal representatives to a legatee,for the purposes of paragraph 5 above they shall be treated as obtaining inrespect of the transfer an amount equal to the market value of the securityat the time of the transfer.

(3) In sub-paragraph (2) above “legatee” includes any person taking (whether beneficiallyor as trustee) under a testamentary disposition or on an intestacy or partialintestacy, including any person taking by virtue of an appropriation by thepersonal representatives in or towards satisfaction of a legacy or otherinterest or share in the deceased’s property.

Connected persons

8

(1) This paragraph applies where a security is transferred from one person toanother (whether or not on or after 14th March 1989) and they are connectedwith each other.

(2) For the purposes of paragraph 5 above—

(a) the person making the transfer shall be treated as obtaining in respectof it an amount equal to the market value of the security at the time of thetransfer, and

(b) the person to whom the transfer is made shall be treated as paying inrespect of his acquisition of the security an amount equal to that marketvalue.

(3) Section 839 of the Taxes Act 1988 (connected persons) shall apply for thepurposes of this paragraph.

Market value

9

(1) This paragraph applies where a security is transferred from one person toanother (whether or not on or after 14th March 1989) and—

(a) the transfer is made for a consideration which consists of or includesconsideration not in money or money’s worth, or

(b) the transfer is made otherwise than by way of a bargain made at arm’slength.

(2) For the purposes of paragraph 5 above—

(a) the person making the transfer shall be treated as obtaining in respectof it an amount equal to the market value of the security at the time of thetransfer, and

(b) the person to whom the transfer is made shall be treated as paying inrespect of his acquisition of the security an amount equal to that marketvalue.

Underwriters

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

10

Trustees

11

(1) Where on a transfer or redemption of a security by trustees an amount istreated as income chargeable to tax by virtue of paragraph 5 above, the rateat which it is chargeable shall be the rate applicable to trusts for the year of assessment in which the transfer ismade.

(2) Where the trustees are trustees of a scheme to which section 469 of theTaxes Act 1988 applies, sub-paragraph (1) above shall not apply if or to theextent that the amount is treated as income in the accounts of the scheme.

Foreign currency

12

(1) Where, for the purposes of paragraph 5 above and apart from thisparagraph, the amount obtained on transfer would be an amount expressed in acurrency other than sterling, it shall be treated for those purposes as thesterling equivalent on the day of the transfer of the amount so expressed.

(2) Where, for the purposes of paragraph 5 above and apart from thisparagraph, the amount paid on acquisition would be an amount expressed in acurrency other than sterling, it shall be treated for those purposes as thesterling equivalent on the day of the acquisition of the amount so expressed.

(3) Where, for the purposes of paragraph 5 above and apart from thisparagraph, the amount of the costs incurred by a person in connection with atransfer would be an amount expressed in a currency other than sterling, itshall be treated for those purposes as the sterling equivalent on the day ofthe transfer of the amount so expressed.

(4) Where, for the purposes of paragraph 5 above and apart from thisparagraph, the amount of the costs incurred by a person in connection with anacquisition would be an amount expressed in a currency other than sterling,it shall be treated for those purposes as the sterling equivalent on the dayof the acquisition of the amount so expressed.

(5) In sub-paragraphs (1) and (3) above “transfer” includes “redemption”.

(6) For the purposes of this paragraph the sterling equivalent of an amounton a particular day is the sterling equivalent calculated by reference to theLondon closing rate of exchange for that day.

Receipts in United Kingdom

13

(1) Sub-paragraph (2) below applies where—

(a) by virtue of paragraph 5(2) above an amount is treated as income of aperson and as chargeable to tax under Case IV of Schedule D, and

(b) the person satisfies the Board, on a claim in that behalf, that he is notdomiciled in the United Kingdom, or that (being a Commonwealth citizen or acitizen of the Republic of Ireland) he is not ordinarily resident in theUnited Kingdom.

(2) In such a case—

(a) any amounts received in the United Kingdom in respect of the amounttreated as income shall be treated as income arising in the year of assessmentin which they are so received, and

(b) paragraph 5(2) above shall have effect with the substitution of paragraph(a) above for paragraph 5(2)(c).

(3) For the purposes of sub-paragraph (2) above—

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

(b) subsections (6) to (9) of section 65 of the Taxes Act 1988 shall apply asthey apply for the purposes of subsection (5) of that section.

Retirement benefit schemes

14

In a case where—

(a) paragraph 5 above would apply (apart from this paragraph) to a transferor redemption of a security, and

(b) immediately before the transfer or redemption was made the security washeld for the purposes of an exempt approved scheme (within the meaning ofChapter I of Part XIV of the Taxes Act 1988),

that paragraph shall not apply to the transfer or redemption.

Charities

15

(1) In a case where—

(a) paragraph 5 above would apply (apart from this paragraph) to a transferor redemption of a security,

(b) immediately before the transfer or redemption was made the security washeld by a charity, and

(c) the amount which would (apart from this paragraph) be treated as incomeby virtue of paragraph 5 above is applicable and applied for charitablepurposes,

that paragraph shall not apply to the transfer or redemption.

(2) In this paragraph “charity” has the same meaning as in section 506 of the TaxesAct 1988.

Stock lending

16

In a case where—

(a) a security is the subject of a transfer which falls within section 129(3)of the Taxes Act 1988, and

(b) paragraph 5 above would apply to the transfer (apart from this paragraph),

that paragraph shall not apply to the transfer.

Accrued income scheme

17

In a case where—

(a) a security is the subject of a transfer to which paragraph 5 aboveapplies, and

(b) apart from this paragraph, the transfer would be a transfer for thepurposes of sections 710 to 728 of the Taxes Act 1988,

the transfer shall not be a transfer for those purposes.

Other provisions excluded

18

In a case where paragraph 5 above applies to the redemption of a security,sections 123 and 348 to 350 of the Taxes Act 1988 shall not apply to anyproceeds of the redemption.

Identification of securities

19

Section 108 of the Taxation of Chargeable Gains Act 1992 shall apply to theidentification, for the purposes of this Schedule, of deep gain securitiestransferred or redeemed as it applies to the identification, for the purposesof capital gains tax, of deep discount securities disposed of.

Early redemption: special rules

19A

(1) Sub-paragraph (2) below applies where—

(a) a security is issued on or after 13th November 1991,

(b) it would be a deep gain security apart from paragraph 1(3B) or (3E) above,

(d) immediately before redemption it was held by a person connected with the person who issued it.

(2) As regards the redemption, paragraphs 5 to 19 above shall have effect as if—

(a) the security were a deep gain security, and

(b) it had been acquired as such (whatever the time it was acquired).

(3) Sub-paragraph (4) below applies where—

(a) the conditions set out in sub-paragraph (1)(a) to (c) above are fulfilled,

(b) the security was transferred in the period ending with redemption and beginning with the day falling one year before the day of redemption, and

(4) As regards the transfer, paragraphs 5 to 19 above shall have effect as if—

(a) the security were a deep gain security, and

(b) it had been acquired as such (whatever the time it was acquired).

(5) Section 839 of the Taxes Act 1988 (connected persons) shall apply for the purposes of this paragraph.

Gilts: special rules

20

(1) In a case where—

(a) securities have been issued under a prospectus under which no securitieswere issued before 14th March 1989,

(b) some of the securities issued under the prospectus are gilt-edgedsecurities which are would-be deep gain securities,

(c) some of the securities issued under the prospectus are gilt-edgedsecurities which are not would-be deep gain securities, and

(d) there is a time when the aggregate nominal value of the securities fallingwithin paragraph (b) above (at that time) exceeds the aggregate nominal valueof the securities falling within paragraph (c) above (at that time),

sub-paragraph (2) below shall apply in relation to any gilt-edgedsecurity which has been or is issued under the prospectus at any time (whetherbefore, at or after the time mentioned in paragraph (d) above).

(2) As regards any event occurring in relation to the security after the timementioned in sub-paragraph (1)(d) above, paragraphs 5 to 19 above shall haveeffect as if—

(a) the security were a deep gain security, and

(b) it had been acquired as such (whatever the time it was acquired).

(3) For the purposes of sub-paragraph (1) above a would-be deep gain securityis a security which would be a deep gain security apart from paragraph 1(6)above.

(4) In sub-paragraph (1) above “gilt-edged security” has the same meaning as in paragraph1 above.

(5) For the purposes of sub-paragraph (2) above events, in relation to asecurity, include anything constituting a transfer or acquisition for thepurposes of this Schedule.

Non-gilts: special rules

21

(1) In a case where—

(a) all the securities issued on the occasion of the original issue under aparticular prospectus (whatever the time of the issue) are neither gilt-edgedsecurities nor deep gain securities,

(b) some of the securities issued under the prospectus are not gilt-edgedsecurities but are new would-be deep gain securities, and

(c) there is a time when the aggregate nominal value of the securities fallingwithin paragraph (b) above (at that time) exceeds the aggregate nominal valueof the securities which (looking at the state of affairs at that time) havebeen issued under the prospectus and are neither gilt-edged securities nor newwould-be deep gain securities,

sub-paragraph (2) below shall apply in relation to any security which isnot a gilt-edged security but which has been or is issued under the prospectusat any time (whether before, at or after the time mentioned in paragraph (c)above).

(2) As regards any event occurring in relation to the security after the timementioned in sub-paragraph (1)(c) above, paragraphs 5 to 19 above shall haveeffect as if—

(a) the security were a deep gain security, and

(b) it had been acquired as such (whatever the time it was acquired).

(3) For the purposes of sub-paragraph (1) above , and subject to paragraph 21A below, a new would-be deep gain security is a security which—

(a) would be a deep gain security apart from paragraph 1(7) above, and

(b) was issued on or after 14th March 1989.

(4) In sub-paragraph (1) above “gilt-edged security” has the same meaning as in paragraph1 above.

(5) For the purposes of sub-paragraph (2) above events, in relation to asecurity, include anything constituting a transfer or acquisition for thepurposes of this Schedule.

21A

(1) A security which (apart from this paragraph) would be a new would-be deep gain security for the purposes of paragraph 21(1) above is not such a security if the following three conditions are fulfilled.

(2) The first condition is that all the securities issued on the occasion of the original issue were issued before 13th November 1991.

(3) The second condition is that the security is issued on or after 13th November 1991.

(4) The third condition is that, even if paragraph 1(7) above did not prevent the security being a deep gain security, it would nevertheless not be a deep gain security if for the purposes of paragraph 1(2) above “redemption” did not include any redemption which may be made before maturity otherwise than in pursuance of the exercise by the person who holds the security for the time being of an option exercisable only on the effluxion of time or the happening of an event which (judged at the time of the security’s issue) is certain or likely to occur.

Indexed securities: special rules

22

(1) Sub-paragraph (2) below applies where—

(a) a qualifying indexed security has been issued,

(b) the person by whom it was issued and the person for the time being holdingit make an agreement, on or after 14th March 1989, varying the terms underwhich it is held, and

(2) As regards any event occurring in relation to the security after theagreement is made, paragraphs 5 to 19 above shall have effect as if—

(a) the security were a deep gain security, and

(b) it had been acquired as such (whatever the time it was acquired).

(3) For the purposes of sub-paragraph (2) above events, in relation to asecurity, include anything constituting a transfer or acquisition for thepurposes of this Schedule.

(4) In this paragraph “qualifying indexed security” has the meaning given byparagraph 2 above.

Convertible securities: special rules (1)

22A

(1) Sub-paragraph (2) below applies where—

(a) a security is a qualifying convertible security, for the purposes ofSchedule 10 to the Finance Act 1990, at the time of its issue,

(b) apart from paragraph 21 of Schedule 4 to the Taxes Act 1988, it would bea deep discount security at that time, and

(c) at a later time it ceases to be a qualifying convertible security for thepurposes of Schedule 10 to the Finance Act 1990.

(2) As regards any event occurring in relation to the security after the timementioned in sub-paragraph (1)(c) above, paragraphs 5 to 19 above shall haveeffect as if—

(a) the security were a deep gain security, and

(b) it had been acquired as such (whatever the time it was acquired).

(3) For the purposes of sub-paragraph (2) above events, in relation to asecurity, include anything constituting a transfer or acquisition for thepurposes of this Schedule.

Convertible securities: special rules (2)

22B

(1) In a case where—

(a) a security is a qualifying convertible security, for the purposes ofSchedule 10 to the Finance Act 1990, at the time of its issue, and

(b) apart from this sub-paragraph it would be a deep gain security at thattime,

then (subject to sub-paragraph(3) below) the security shall be treated,at the time of its issue and at all subsequent times, as not being a deep gainsecurity.

(2) Sub-paragraph (3) below applies where—

(a) sub-paragraph (1) above applies in the case of a security, and

(b) at a time after its issue it ceases to be a qualifying convertiblesecurity for the purposes of Schedule 10 to the Finance Act 1990.

(3) As regards any event occurring in relation to the security after the timementioned in sub-paragraph (2)(b) above, paragraphs 5 to 19 above shall haveeffect as if—

(a) the security were a deep gain security, and

(b) it had been acquired as such (whatever the time it was acquired).

(4) For the purposes of sub-paragraph (3)above events, in relation to asecurity, include anything constituting a transfer or acquisition for thepurposes of this Schedule.

No particular redemption date: special rule

22C

(1) This paragraph applies to a security whose terms contain no particular date by which it is to be redeemed.

(2) In the case of such a security the following expressions, wherever they appear in this Schedule, shall be construed as if the words “before maturity” were omitted—

(a) the expression “redemption which may be made before maturity”;

(b) the expression “redemption before maturity”;

Power to modify

23

(1) The Treasury may make regulations amending paragraph 2 above so as to doone or more of the following—

(a) vary any condition for the time being set out in that paragraph;

(b) omit any condition for the time being so set out;

(d) substitute a condition or conditions for any condition or conditions forthe time being so set out.

(2) Regulations under sub-paragraph (1) above—

(a) shall be made by statutory instrument subject to annulment in pursuanceof a resolution of the House of Commons,

(b) shall apply where there is a transfer within the meaning of this Schedule,or a redemption, on or after such day as may be specified in the regulations,and

(c) may include such supplementary, incidental, consequential or transitionalprovisions as appear to the Treasury to be necessary or expedient.

SCHEDULE 12

Part I — Administrative Provisions

Interpretation

1

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

Provision of information by company

2

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

Provision of information by shareholders

3

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

Information about bearer securities

4

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

Part II — Amendments Connected with Repeal of Chapter III of Part XI of Taxes Act1988

The Taxes Management Act 1970 (c.9)

5

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

The Capital Gains Tax Act 1979 (c.14)

6

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

The Income and Corporation Taxes Act 1988 (c.1)

7

In section 13 of the Taxes Act 1988 (small companies’ rate) in subsection(9) for the words “paragraph 17 of Schedule 19” there shall besubstituted the words “paragraphs 2 to 4 of Schedule 12 to the Finance Act1989”.

8

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

9

(1) In section 187(3) of the Taxes Act 1988 (cases in which a person has amaterial interest in a company for the purposes of sections 185 to 187 of, andSchedules 9 and 10 to, that Act) for the words from “in a company” to theend of paragraph (b) there shall be substituted—

in a company if he, either on his own or with one or more associates,or if any associate of his with or without such other associates,— (a) is the beneficial owner of, or able, directly or through the medium ofother companies, or by any other indirect means to control, more than 25 percent., or in the case of a share option scheme which is not a savings-relatedshare option scheme more than 10 per cent., of the ordinary share capital ofthe company, or (b) where the company is a close company, possesses, or is entitled toacquire, such rights as would, in the event of the winding-up of the companyor in any other circumstances, give an entitlement to receive more than 25 percent., or in the case of a share option scheme which is not a savings-relatedshare option scheme more than 10 per cent., of the assets which would then beavailable for distribution among the participators.

and at the end there shall be added the words “ and “participator” has the meaning given by section 417(1) ”.

(2) This paragraph shall have effect in relation to accounting periods beginning after 31st March 1989.

10

(1) In section 214 of the Taxes Act 1988 (chargeable payments connected with exempt distributions) in subsection (1)(c) for the words from “338(2)(a)”to “Schedule 19” there shall be substituted the words “and338(2)(a)”.

(2) This paragraph shall have effect in relation to accounting periods beginning after 31st March 1989, except in any case where section 427(4) ofthe Taxes Act 1988 has effect by virtue of section 103(2) of this Act.

11

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

12

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

13

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

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

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

(4) This paragraph shall have effect in relation to accounting periods beginning after 31st March 1989.

14

(1) In section 576 of the Taxes Act 1988 (which relates to relief for losses on certain unquoted shares) in subsection (5), for paragraph (a) of the definition of “trading company” there shall be substituted—

(a) a company whose business consists wholly or mainly of the carrying on ofa trade or trades

(2) This paragraph shall have effect in relation to disposals made after 31stMarch 1989.

15

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

16

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

17

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

18

(1) Paragraph 7 of Schedule 8 to the Taxes Act 1988 (cases in which a person has a material interest in a company for the purposes of a profit-related pay scheme) shall be amended in accordance with this paragraph.

(2) In sub-paragraph (2) for the words from “in a company” onwards there shall be substituted—

in a company if he, either on his own or with one or more associates, or if any associate of his with or without such other associates,— (a) is the beneficial owner of, or able, directly or through the medium of other companies, or by any other indirect means to control, more than 25 percent. of the ordinary share capital of the company, or (b) in the case of a close company, possesses, or is entitled to acquire, such rights as would, in the event of the winding-up of the company or in any other circumstances, give an entitlement to receive more than 25 per cent. of the assets which would then be available for distribution among the participators

(3) In sub-paragraph (3) the second “and” shall be omitted and after the definition of “control” there shall be inserted

and “participator” has the meaning given by section 417(1)

(4) This paragraph shall have effect in relation to accounting periods beginning after 31st March 1989.

SCHEDULE 13

1–26

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

Patent rights

27

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

28–30

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

SCHEDULE 14

Gifts of business assets

1

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

2

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

3

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

Gifts on which inheritance tax is chargeable etc.

4

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

Payment of tax by instalments

5

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

Minor and consequential amendments

6

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

SCHEDULE 15

Postponed charges etc.: pre-1st April 1982 events

1

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

2

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

Reduction of 1982 value in certain cases

3

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

No gain/no loss disposals

4

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

Elections

5

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

SCHEDULE 16

Part I — Amendments of the Principal Sections

1

(1) Section 32 of the Broadcasting Act 1981 (rentalpayments by programme contractors) shall be amended as follows.

(2) In subsection (1)(b), after the word “amounts” there shall beinserted the words “in respect of profits and in respect of advertisingrevenue”.

(3) In subsection (2)(b), after the word “amounts” there shall beinserted the words “in respect of profits”.

(4) In subsection (4), for the word “Table”, where it first occurs, thereshall be substituted the word “Tables” and the following Tables shall besubstituted for the Table in that subsection—

	Rate for determining amount of additional payments
For so much of the advertising revenue for the accounting period as does not exceed the free slice for advertising revenue.	Nil
For so much of the advertising revenue for the accounting period as exceedsthe free slice for advertising revenue.	The relevant revenue rate except where the rate is nil

For the purposes of this Table— (a) a nil rate, instead of the relevant revenue rate, is applicable in thecase of persons who are DBS programme contractors or DBS teletext contractors; (b) the relevant revenue rate is 10 per cent; and (c) the free slice for advertising revenue is £15 million or, in thecase of a TV programme contractor, that amount with the addition of thepayments payable by him in pursuance of section 13(2).

For so much of the profits for the accounting period after deducting anyamount payable under Table A as does not exceed the free slice for profits.	Nil
For so much of the profits for the accounting period after deducting anyamount payable under Table A as exceeds the free slice for profits.	The relevant profits rate except where the rate is nil.

For the purposes of this Table— (a) a nil rate, instead of the relevant profits rate, is applicable in thecase of— (i) programme contractors who provide local sound broadcasts, and (ii) DBS programme contractors or DBS teletext contractors; (b) the relevant profits rate is 25 per cent; and (c) the free slice for profits is £2 million.

(5) Subsection (4A) shall be omitted.

(6) In subsection (5), for the words “relevant sum mentioned in subsection(4A)” there shall be substituted the words “relevant sum mentioned in theTables above”.

(7) In subsection (7), after the words “additional payments” there shallbe inserted the words “in respect of profits”.

(8) In subsection (8), for the words “any of the provisions of subsections(4), (4A)” there shall be substituted the words “any of the provisionsof subsections (4)”.

(9) For subsection (9) there shall be substituted the followingsubsections—

(9) The power of the Secretary of State under subsection (8) shall includepower to amend the provisions in question as there mentioned— (a) only in their application in relation to the additional payments mentionedin subsection (1)(b); or (b) only in their application in relation to the additional payments mentionedin subsection (2)(b); or (c) differently in their application as mentioned in paragraphs (a) and (b)respectively; or (d) only in their application in relation to additional payments in respectof advertising revenue; or (e) only in their application in relation to additional payments in respectof profits; or (f) differently in their application as mentioned in paragraphs (d) and (e)respectively. (9A) In the application of the provisions mentioned in subsection (8) inrelation to the additional payments mentioned in subsection (1)(b), the powerof the Secretary of State under subsection (8) shall also include power toamend those provisions as mentioned in subsection (8)— (a) only in relation to persons who are TV programme contractors (includingpersons who are both TV programme contractors and teletext contractors); or (b) only in relation to persons who are DBS programme contractors (includingpersons who are both DBS programme contractors and teletext contractors); or (c) only in relation to persons who are teletext contractors (other than DBSteletext contractors) but are not TV or DBS programme contractors; or (d) only in relation to persons who are DBS teletext contractors but are notTV or DBS programme contractors; or (e) differently in relation to persons within paragraphs (a), (b), (c) and (d)respectively.

2

(1) Section 33 of the Broadcasting Act 1981 (supplementalprovisions) shall be amended as follows.

(2) In subsection (1), for the words “advertising receipts” there shallbe substituted the words “advertising revenue”.

(3) In subsection (2), for the words “advertising receipts” there shallbe substituted the words “advertising revenue” and for the words “thosereceipts derive” there shall be substituted the words “the revenuederives”.

(4) In subsection (3)(c), for the words “advertising receipts” thereshall be substituted the words “advertising revenue” and for the word “derive” there shall be substituted the word “derives”.

3

(1) Section 34 of the Broadcasting Act 1981 (instalments payable on accountby programme contractors for their accounting periods) shall be amended asfollows.

(2) In subsection (3)(c), for the words “receipts are” there shall besubstituted the words “revenue is”.

4

(1) Section 35 of the Broadcasting Act 1981 (provision forsupplementing additional payments) shall be amended as follows.

(2) In subsection (1)—

(a) in paragraph (a), after the words “additional payments” there shallbe inserted the words “in respect of profits”;

(b) in paragraph (b)(ii), the words “in the case of second categoryprofits,” shall be omitted; and

Part II — Provisions Inserted as Schedule 4 to the Broadcasting Act 1981

Part III — Transitional Provisions

1

(1) In this paragraph—

“new statutory provisions” means the provisions of the Broadcasting Act 1981 as amended by this Act; and

“existing statutory provisions” means the provisions of thatAct as they had effect immediately before the coming into force of section181.

(2) Any contract between the Authority and a programme contractor which is inforce immediately before the day on which section 181 of this Act comes intoforce shall, until it is varied or superseded by a further contract betweenthem or expires or is otherwise terminated (whichever first occurs), be deemedto be modified by virtue of this Schedule so as—

(a) to substitute provisions in conformity with the new statutory provisionsfor so much of the contract as is in accordance with the existing statutoryprovisions and is not in conformity with the new statutory provisions, and

(b) to incorporate in the contract such additional provisions as a contractbetween the Authority and a programme contractor is required to include inaccordance with the new statutory provisions;

and (subject to paragraph 5 of Schedule 4 to the 1981 Act) any provisionsof the contract which provide for arbitration as to any matters contained inthe contract in accordance with the existing statutory provisions shall beconstrued as making the like provision for arbitration in relation to mattersdeemed to be included in the contract by virtue of this sub-paragraph.

(3) Where it appears to the Authority that the new statutory provisions callfor the inclusion of additional terms in any such contract, but do not affordsufficient particulars of what those terms should be, the Authority may, afterconsulting the programme contractor, decide what those terms are to be.

(4) This paragraph shall not be taken to have effect in relation to anycontract entered into by a programme contractor and any person other than theAuthority before the day on which section 181 of this Act comes into force.

2

Where any accounting period of a programme contractor begins before 1stJanuary 1990 and ends after 31st December 1989, the additional paymentspayable by the programme contractor in relation to that accounting periodunder section 32 of the Broadcasting Act 1981 shall be theaggregate of—

(a) the amounts payable by him on the assumption that section 181 of this Actwas not in force at any time during the accounting period, multipliedby—

$XX+Y,$

and

(b) the amounts payable by him on the assumption that that section was inforce throughout the accounting period, multiplied by—

$$YX+Y;$where (taking any odd four days or more as a week)—X is the number of weeks in the accounting period falling before 1stJanuary 1990, andY is the number of weeks in the accounting period falling after 31stDecember 1989.$

3

Where, under the existing statutory provisions, any excess of firstcategory expenditure over first category income of a programme contractorwould have been carried forward and treated as relevant first categoryexpenditure of his for an accounting period ending after 31st December 1989if those provisions had applied in relation to that period then the excessshall be carried forward and treated, under the new statutory provisions, asrelevant expenditure of the contractor for any accounting period which endsafter that date.

4

In this Part of this Schedule, references to programme contractors shallbe read as including references to teletext contractors.

SCHEDULE 17

Part I — Customs and Excise

The repeals of section 147(1) of the Customs and Excise Management Act1979 and section 11(2) of the Finance Act 1988 have effect in relation tooffences committed on or after the day on which this Act is passed.

Part II

Part III — Value Added Tax

1

The repeal of Group 6 of Schedule 5 to the Value Added Tax Act 1983 haseffect in relation to supplies made on or after 1st April 1989.

2

The remaining repeals have effect in accordance with Schedule 3 to thisAct.

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