Finance Act 1991

• (1) In section 2 of that Act, in subsection (3A) (regulations enabling the strength, weight or volume of spirits, wine or made-wine to be ascertained by reference to information on the label of the container etc) after the word “spirits,” in both places where it occurs there shall be inserted the word “beer, ”.

• (2) In subsection (5) of that section (saving for other methods of calculating the strength, weight or volume of wine, made-wine or cider) after the words “volume of” there shall be inserted the word “beer, ”.

• (3) Subsection (6) of that section (section not to apply to beer) shall cease to have effect.

4

In section 3 of that Act (meaning of, and method of ascertaining, gravity of liquids)—

• (a) in subsection (3), the words “Subject to subsection (5) below”, and

• (b) subsection (5) (original gravity for purposes of section 38),

shall cease to have effect.

5

• (1) Section 4(1) of that Act (definitions) shall be amended in accordance with the following provisions of this paragraph.

• (2) The definitions of “brewer” and “brewer for sale” and of “limited licence to brew beer” shall be omitted.

• (3) After the definition of “methylated spirits” there shall be inserted—

“package, in relation to beer, means to put beer into tanks, casks, kegs, cans, bottles or any other receptacles of a kind in which beer is distributed to wholesalers or retailers; “packager, in relation to beer, means a person carrying on the business of packaging beer;

.

• (4) After the definition of “rectifier” there shall be inserted—

“registered brewer has the meaning given by section 47(1) below;

.

6

Sections 37, 38 and 39 of that Act (which make provision for the duty on beer brewed in the UK to be charged by reference to worts and gravity and as to the charging and payment of duty on such beer brewed by brewers for sale and by private brewers) shall cease to have effect.

7

Section 40 of that Act (duty on imported beer etc) shall cease to have effect.

8

For section 41 of that Act (exemption from duty of beer brewed for private consumption) there shall be substituted—

(41) The duty on beer produced in the United Kingdom shall not be chargeable on beer produced by a person who produces beer only for his own domestic use.

9

In section 42 of that Act (drawback on exportation, removal to excise warehouse, shipment as stores etc) for subsection (3) (declaration required for beer brewed in the UK) there shall be substituted—

(3) In the case of beer produced in the United Kingdom, the person intending to remove, export or ship the beer shall produce to the proper officer a declaration made by the person who paid the duty on the beer, in such form and manner as the Commissioners may direct, stating the strength of the beer and the date on which the duty became payable.

10

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11

In section 44 of that Act (remission or repayment of duty on beer used for purposes of research or experiment) in subsection (1) for the word “brewing” there shall be substituted the words “the production of beer ”.

12

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

13

For section 46 of that Act (remission or repayment of duty on spoilt beer) there shall be substituted—

(46) (1) Where it is shown to the satisfaction of the Commissioners that any beer which has been removed from any premises of a registered brewer in respect of which he is registered under section 47 below has become spoilt or otherwise unfit for use and, in the case of beer delivered to another person, has been returned to the registered brewer as so spoilt or unfit, the Commissioners shall, subject to compliance with such conditions as they may by regulations impose, remit or repay any duty charged or paid in respect of the beer. (2) If any person contravenes or fails to comply with any regulation made under subsection (1) above, he shall be liable on summary conviction to a penalty not exceeding level 3 on the standard scale.

14

For section 49 of that Act (power to regulate manufacture of beer by brewers for sale) there shall be substituted—

(49) (1) The Commissioners may, with a view to managing, securing and collecting the duty on beer produced in, or imported into, the United Kingdom or to the protection of the revenues derived from the duty of excise on beer, make regulations— (a) regulating the production, packaging, keeping and storage of beer produced in the United Kingdom and the packaging, keeping and storage of beer imported into the United Kingdom; (b) regulating the registration of persons and premises under section 41A or 47 above and the revocation or variation of any such registrations; (c) for determining under or in accordance with the regulations when the production of beer begins and when it is completed; (d) for securing and collecting the duty; (e) for determining the duties chargeable, the rates of those duties, the persons liable to pay them and in that connection prescribing the method of charging the duties, the due dates for payment and the method of payment; (f) for charging the duty, in such circumstances as may be prescribed in the regulations, by reference to a strength which the beer might reasonably be expected to have, or the rate of duty in force, at a time other than that at which the beer becomes chargeable; (g) for relieving beer from the duty in such circumstances and to such extent as may be prescribed in the regulations; (h) regulating and, in such circumstances as may be prescribed in the regulations, prohibiting the addition of substances to, the mixing of, or the carrying out of other operations on or in relation to, beer; (j) regulating the transportation of beer in such circumstances as may be prescribed in the regulations. (2) Regulations under this section may make different provision for persons, premises or beer of different classes or descriptions, for different circumstances and for different cases. (3) Any person contravening or failing to comply with any regulation made under this section shall be liable on summary conviction to a penalty not exceeding level 5 on the standard scale, and any article or substance in respect of which the offence was committed shall be liable to forfeiture.

15

• (1) In section 49A of that Act, in subsection (1) (duty determined in accordance with regulations under section 49(1)(bb) deemed to have been paid for purposes of claims for drawback by brewers for sale)—

• (a) for the words “brewer for sale” there shall be substituted the words “registered brewer or person registered under section 41A above ”; and

• (b) for the words “section 49(1)(bb)” there shall be substituted the words “section 49(1)(e) ”.

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

• (a) for the words “brewer for sale” in both places where they occur there shall be substituted the words “registered brewer or person registered under section 41A above ”;

• (b) for the words “the brewer” there shall be substituted the word “he ”; and

• (c) for the words “under section 38 above” there shall be substituted the words “in respect of the excise duty on beer ”.

16

Section 50 of that Act (regulations as respects sugar kept by brewers for sale) shall cease to have effect.

17

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

18

Section 53 of that Act (limited licences to brew) shall cease to have effect.

19

Section 71A of that Act (restrictions on adding substances to beer) shall cease to have effect.

20

Section 72 of that Act (offences by wholesaler or retailer of beer) shall cease to have effect.

The Bankruptcy (Scotland) Act 1985 (c. 66)

21

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The Insolvency Act 1986 (c. 45)

22

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The Insolvency (Northern Ireland) Order 1989

23

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

The Licensing (Northern Ireland) Order 1990

24

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SCHEDULE 3

Part I — THE VEHICLES (EXCISE) ACT 1971

Introduction

1

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

Excise duty on, and licensing of, mechanically propelled vehicles

2

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

Exemptions from duty

3

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

4

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

5

• (1) In section 7 (miscellaneous exemptions from duty)—

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

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

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

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

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

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

Liability to pay duty and consequences of non-payment

6

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

7

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

8

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

9

• . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10

• . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Registration and registration marks, etc.

11

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

Miscellaneous

12

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

13

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

14

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15

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16

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17

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Supplementary

18

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19

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

Schedules

20

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21

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22

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23

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

Part II — Section 11 of the Finance Act 1976

24

In section 11 of the Finance Act 1976, for subsection (5) there shall be substituted the following subsection—

(5) In its application to Northern Ireland, this section shall have effect as if in subsection (2)— (a) for paragraph (b) there were substituted the following paragraph— (”) the relevant maximum weight or, as the case may be, the relevant maximum train weight of the vehicle;” and (b) in paragraph (c) for the words “plated weights there were substituted “relevant maximum weight or, as the case may be, such relevant maximum train weight.

SCHEDULE 4

After Part VIIIA of the Customs and Excise Management Act 1979 there shall be inserted—

SCHEDULE 5

After Part IX of the Customs and Excise Management Act 1979 there shall be inserted—

SCHEDULE 6

Taxation of beneficial loan arrangements

1

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

2

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

3

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

4

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

5

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

Applicable rates of capital gains tax

6

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

SCHEDULE 7

Management expenses

1

In section 76 of the Taxes Act 1988 (expenses of management of insurance companies) in subsection (1)—

• (a) in paragraphs (ca) ..., for the words “basic life assurance business” there shall be substituted in each place the words “basic life assurance and general annuity business ”;

• (b) in paragraph (d), the words “general annuity business” shall cease to have effect.

Interpretation of Chapter I of Part XII

2

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

Apportionment of income and gains

3

• . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Computation of trading profit

4

• (1) In section 436 of that Act (general annuity business and pension business: separate charge on profits) in subsection (1)—

• (a) the words “general annuity business or” shall cease to have effect, and

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

• (2) In subsection (3) of that section—

• (a) in paragraph (c), the words “or general annuity business”, and

• (b) in paragraph (e), the words “general annuity business or”,

shall cease to have effect.

• (3) In subsection (4) of that section, the words “general annuity business or” shall cease to have effect.

• (4) In section 437 of that Act (general annuity business) subsections (2) to (5) shall cease to have effect.

Deduction for annuities referable to basic life assurance and general annuity business

5

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

Transfer of assets between classes of business

6

• . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

United Kingdom branches of overseas life assurance companies

7

• (1) In section 446 of that Act (computation under section 436 of profits arising to an overseas life assurance company)—

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

• (b) subsections (2) and (3),

shall cease to have effect.

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

• (3) Subsection (3) of that section (proportion of profits arising from general annuity business for purposes of section 446) shall cease to have effect.

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

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

Treatment of tax-free income

8

In section 474 of that Act, in subsection (1)(b) (certain tax-free income to be included in computing profits or loss from pension business and general annuity business) the words “and general annuity business” shall cease to have effect.

Life annuity contracts: taxation of gain on chargeable event

9

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

Computation of offshore income gains

10

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

Interpretation of sections 85 to 89 of Finance Act 1989

11

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

Miscellaneous receipts

12

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

Spreading of relief for acquisition expenses

13

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

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

• (3) In subsection (4) of that section (meaning of “the acquisition of business”) after the word “includes” there shall be inserted “(a) ” and at the end there shall be added the words

and (b) the securing, in an accounting period beginning on or after 1st January 1992, of the payment of increased or additional consideration in respect of an annuity contract already made (whether in an accounting period beginning before, or on or after, that date).

Deemed disposal of unit trusts etc

14

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

Exemptions and exclusions from charges by virtue of section 46

15

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

Transitional relief for old general annuity contracts

16

• (1) In the application of the I - E rules in relation to an accounting period of an insurance company, an amount equal to the lesser of the following amounts is to be treated (if it is not nil) for the purposes of section 76 of the Finance Act 2012 as a deemed BLAGAB management expense for the accounting period that is to say—

• (a) A, and

• (b) A - (R1 - R2 + C -SV - DB),

and if the result of the formula in paragraph (b) above is a negative amount, it shall be taken to be nil.

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

• A is the gross amount of any annuities paid in the accounting period so far as referable to old annuity contracts;

• R1 is the amount of the company’s opening liabilities for the accounting period in respect of old annuity contracts but taking that amount as nil if it would otherwise be below nil;

• R2 is the amount of the company’s closing liabilities for the accounting period in respect of old annuity contracts but taking that amount as nil if it would otherwise be below nil;

• C is the amount of any consideration received in the accounting period in respect of old annuity contracts;

• SV is the amount of any sums paid in the accounting period by reason of the surrender of rights conferred by old annuity contracts;

• DB is the amount of any death benefits paid in the accounting period in respect of old annuity contracts.

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

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

• (5) If, in the case of an annuity under a group annuity contract made by an insurance company in an accounting period beginning before 1st January 1992—

• (a) the company’s liabilities first include an amount in respect of that annuity in an accounting period beginning on or after that date, and

• (b) the company’s liability in respect of that annuity is referable to its basic life assurance and general annuity business,

the group annuity contract, so far as relating to that annuity, shall be treated for the purposes of this paragraph, other than this sub-paragraph, as if it had been made in an accounting period beginning on or after 1st January 1992 (and were, accordingly, not an old annuity contract).

• (6) If, in the case of an annuity which is subject to a reinsurance treaty made by the reinsurer in an accounting period beginning before 1st January 1992—

• (a) the reinsurer’s liabilities first include an amount in respect of that annuity in an accounting period beginning on or after that date, and

• (b) the reinsurer’s liability in respect of that annuity is referable to its basic life assurance and general annuity business,

the reinsurance treaty, as respects the reinsurer and so far as relating to that annuity, shall be treated for the purposes of this paragraph, other than this sub-paragraph, as if it had been made in an accounting period beginning on or after 1st January 1992 (and were, accordingly, not an old annuity contract).

• (7) In this paragraph—

• “general annuity contract means an annuity contract so far as referable to general annuity business;

• “group annuity contract means a contract between an insurance company and some other person under which the company undertakes to become liable to pay annuities to or in respect of such persons as may subsequently be specified or otherwise ascertained under or in accordance with the contract (whether or not annuities under the contract are also payable to or in respect of persons who are specified or ascertained at the time the contract is made);

• “old annuity contract means a general annuity contract made by an insurance company in an accounting period beginning before 1st January 1992 (including one forming part of the business transferred to another insurance company by an insurance business transfer scheme);

• “reinsurance treaty means a contract under which one insurance company is obliged to cede, and another (in this paragraph referred to as a “reinsurer) to accept, the whole or part of a risk of a class or description to which the contract relates;

...

• (8) Where—

• (a) business is transferred to an insurance company by an insurance business transfer scheme during an accounting period of the company, and

• (b) the business transferred consists of or includes old annuity contracts (“the transferred contracts”),

the reference in the definition of R1 in sub-paragraph (2) above to the company's opening liabilities for the accounting period is, in relation to the transferred contracts, a reference to the company's liabilities in respect of the transferred contracts immediately after the transfer.

Transitional provisions for chargeable gains and unrelieved general annuity losses

17

• (1) An insurance company’s unrelieved general annuity losses shall be relieved under this paragraph by setting them against the relevant part of any chargeable gains arising to the company in accounting periods beginning on or after 1st January 1992.

• (2) Any relief under this paragraph shall be given as far as possible for the first accounting period of the company beginning on or after 1st January 1992 and, so far as it cannot be so given, for the next accounting period, and so on.

• (3) For the purposes of this paragraph an insurance company’s “unrelieved general annuity losses are so much of any losses—

• (a) arising from the company’s general annuity business in an accounting period or year of assessment beginning before 1st January 1992, and

• (b) computed as mentioned in paragraph (c) of subsection (3) of section 436 of the Taxes Act 1988 as it applied in relation to such accounting periods,

as, by virtue only of an insufficiency of profits, cannot be relieved under that subsection (or any previous enactment which it re-enacts) by setting them off against the profits of such an accounting period or year of assessment.

• (4) For the purposes of this paragraph the relevant part of the chargeable gains arising to a company in an accounting period is so much of the chargeable gains arising to the company in the accounting period as are referable to its basic life assurance and general annuity business.

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

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

Application of this Schedule

18

Paragraphs 1, 3, 4, 5, 6(1) and (2), 7, 8, 10 to 14, 16 and 17 above have effect with respect only to accounting periods beginning on or after 1st January 1992.

SCHEDULE 8

After Schedule 19AA to the Taxes Act 1988 there shall be inserted—

SCHEDULE 9

Tax exempt life or endowment business

1

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

2

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

Maximum benefits payable to members

3

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

Qualifying policies

4

• (1) In Schedule 15 to that Act (qualifying policies) in paragraph 3, sub-paragraph (1)(c) (contract for policy issued by new society to be made by member over 18) shall be omitted, with the word “and” immediately preceding it.

• (2) This paragraph shall apply in relation to policies issued in pursuance of contracts made on or after the day on which this Act is passed.

5

• (1) This paragraph applies to any policy—

• (a) issued by a friendly society, or branch of a friendly society, in the course of tax exempt life or endowment business (as defined in section 466 of the Taxes Act 1988), and

• (b) effected by a contract made after 31st August 1987 and before the day on which this Act is passed.

• (2) Where—

• (a) the amount payable by way of premium under a policy to which this paragraph applies is increased by virtue of a variation made in the period beginning with the day on which this Act is passed and ending with 31st July 1992, and

• (b) the variation is not such as to cause a person to become in breach of the limits in section 464 of the Taxes Act 1988,

Schedule 15 to that Act, in its application to the policy, shall have effect, in relation to that variation, with the modifications mentioned in sub-paragraph (3) below.

• (3) The modifications are the omission of paragraph 4(3)(a) and the insertion at the end of paragraph 18(2) of

and as if for paragraph 3(2)(b) above there were substituted— (”) subject to sub-paragraph (4) below, the premiums payable under the policy shall be premiums of equal or rateable amounts payable at yearly or shorter intervals over the whole of the term of the policy as from the variation, or, where premiums are not payable for any period after the person liable to pay them or whose life is insured has attained a specified age, being an age attained at a time not less than ten years after the beginning of the term of the policy, over the whole of the remainder of the period for which premiums are payable.”

SCHEDULE 10

Capital gains: exemption

1

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

Accrued income scheme: inclusion

2

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

Incidental costs of issue

3

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

Preferential rights of acquisition

4

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

SCHEDULE 11

Deduction of income tax

1

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

2

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

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

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

Collection

3

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

4

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

Information

5

• (1) In section 18 of the Taxes Management Act 1970 (information about interest payments) after subsection (3C) there shall be inserted—

(3D) For the purposes of this section, the payment by a building society of a dividend in respect of a share in the society shall be treated as the payment of interest.

• (2) This paragraph shall have effect as regards a case where the payment is made on or after the day on which this Act is passed.

SCHEDULE 12

General treatment of extra return

1

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

Accrued income scheme

2

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

Deep discount securities

3

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

Deep gain securities

4

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

General

5

This Schedule applies if the new securities are issued on or after 19th March 1991 (whether the old securities are issued before or on or after that day).

SCHEDULE 13

The new arrangements

1

After Schedule 23 to the Taxes Act 1988 there shall be inserted—

Schedule 23A (1) (1) In this Schedule— - “approved stock lending arrangement means an arrangement such as is mentioned in subsection (1), (2) or (2A) of section 129 and in relation to which that section and section 149B(9) of the 1979 Act apply; - “dividend manufacturer has the meaning given by paragraph 2(1) below; - “dividend manufacturing regulations means regulations made by the Treasury under this Schedule; - “interest manufacturer has the meaning given by paragraph 3(1) below; - “manufactured dividend, “manufactured interest and “manufactured overseas dividend shall be construed respectively in accordance with paragraphs 2, 3 and 4 below, as shall references to the gross amount thereof; - “market maker, in relation to any shares, stock or other securities, means a person who— (a) holds himself out at all normal times in compliance with the rules of the Stock Exchange as willing to buy and sell shares, stock or other securities of the kind concerned at a price specified by him, and (b) is recognised as doing so by the Council of the Stock Exchange, but subject to any regulations under sub-paragraph (2) below; - “overseas dividend means any interest, dividend or other annual payment payable in respect of any overseas securities; - “overseas dividend manufacturer has the meaning given by paragraph 4(1) below; - “overseas securities means— (a) shares, stock or other securities issued by a government or public or local authority of a territory outside the United Kingdom or by any other body of persons not resident in the United Kingdom; and (b) quoted Eurobonds held in a recognised clearing system, within the meaning of section 124; - “overseas tax means tax under the law of a territory outside the United Kingdom; - “overseas tax credit means any such credit under the law of a territory outside the United Kingdom in respect of overseas tax as corresponds to a tax credit; - “prescribed means prescribed in dividend manufacturing regulations; - “recognised clearing house means a recognised clearing house within the meaning of the Financial Services Act 1986; - “recognised investment exchange means a recognised investment exchange within the meaning of that Act; - “securities includes any loan stock or similar security; - “transfer includes any sale or other disposal; - “unapproved manufactured payment, subject to any regulations under sub-paragraph (2) below, means— (a) any manufactured dividend, manufactured interest or manufactured overseas dividend paid in connection with an unapproved stock lending arrangement, and (b) any manufactured dividend or manufactured interest not falling within paragraph (a) above which is paid in respect of United Kingdom securities or United Kingdom equities by a person other than one who is— (i) a market maker in relation to United Kingdom securities or United Kingdom equities of the kind in question, or (ii) in such circumstances as may be prescribed, a member, of a prescribed class or description, of a prescribed recognised investment exchange, or (iii) in such circumstances as may be prescribed, a prescribed recognised clearing house,and which is so paid otherwise than in connection with an approved stock lending arrangement; - “unapproved stock lending arrangement means an arrangement such as is mentioned in subsection (1), (2) or (2A) of section 129, but which, in consequence of regulations under subsection (4) of that section, is not an approved stock lending arrangement; - “United Kingdom equities means shares of any company resident in the United Kingdom; - “United Kingdom securities means securities of the government of the United Kingdom, of any public or local authority in the United Kingdom or of any company or other body resident in the United Kingdom, but does not include quoted Eurobonds held in a recognised clearing system, within the meaning of section 124, or United Kingdom equities. (2) Dividend manufacturing regulations may amend sub-paragraph (1) above— (a) by changing the definition for the time being of “market maker”; or (b) by changing the definition for the time being of “unapproved manufactured payment”. (2) (1) This paragraph applies in any case where, under a contract or other arrangements for the transfer of United Kingdom equities, one of the parties (the “dividend manufacturer) is required to pay to the other ( “the recipient) an amount representative of a dividend on the equities; and in this Schedule the “manufactured dividend means any payment which the dividend manufacturer makes in discharge of that requirement. (2) If, in a case where this paragraph applies, the dividend manufacturer is a company resident in the United Kingdom, then, for all purposes of the Tax Acts, the manufactured dividend shall be treated as if it were a dividend of, and paid by, the dividend manufacturer (and shall accordingly be a distribution of the dividend manufacturer for those purposes). (3) If, in a case where this paragraph applies, the dividend manufacturer is not such a company as is mentioned in sub-paragraph (2) above (so that section 737 applies in relation to the dividend manufacturer) the manufactured dividend shall for all purposes of the Tax Acts be treated in relation to the recipient and all persons claiming title through or under him— (a) as if the manufactured dividend were a dividend on the United Kingdom equities, (b) as if any amount required in consequence of section 737 to be deducted by the dividend manufacturer on account of income tax in respect of the gross amount of the manufactured dividend were required to be accounted for by him as advance corporation tax in respect of the dividend, and (c) as if any certificate of deduction of tax required in consequence of that section to be issued in connection with the manufactured dividend were the tax credit certificate that would have been issued had the manufactured dividend in fact been a dividend on the United Kingdom equities. (4) For the purposes of sub-paragraph (3)(b) above, the gross amount of a manufactured dividend is the aggregate of the amount of the manufactured dividend and the amount of the tax credit that would have been issued in respect thereof had the manufactured dividend in fact been a dividend on the United Kingdom equities. (3) (1) This paragraph applies in any case where, under a contract or other arrangements for the transfer of United Kingdom securities, one of the parties (the “interest manufacturer) is required to pay to the other ( “the recipient) an amount representative of a periodical payment of interest on the securities; and in this Schedule the “manufactured interest means any payment which the interest manufacturer makes in discharge of that requirement. (2) If, in a case where this paragraph applies, the interest manufacturer is a company resident in the United Kingdom, then, for all purposes of the Tax Acts, the gross amount of the manufactured interest shall be treated as if it were the gross amount of a periodical payment of interest on the securities, but made by the interest manufacturer. (3) If, in a case where this paragraph applies, the interest manufacturer is not such a company as is mentioned in sub-paragraph (2) above (so that section 737 applies in relation to the interest manufacturer) the gross amount of the manufactured interest shall for all purposes of the Tax Acts be treated in relation to the recipient, and all persons claiming title through or under him, as if it were the gross amount of a periodical payment of interest on the securities, but made by the interest manufacturer. (4) For the purposes of this paragraph the gross amount of any manufactured interest is an amount equal to the gross amount of that periodical payment of interest of which the manufactured interest is representative, as mentioned in sub-paragraph (1) above. (4) (1) This paragraph applies in any case where, under a contract or other arrangements for the transfer of overseas securities, one of the parties (the “overseas dividend manufacturer) is required to pay to the other ( “the recipient) an amount representative of an overseas dividend on the overseas securities; and in this Schedule the “manufactured overseas dividend means any payment which the overseas dividend manufacturer makes in discharge of that requirement. (2) Subject to sub-paragraph (3) below, where this paragraph applies the gross amount of the manufactured overseas dividend shall be treated for all purposes of the Tax Acts as an annual payment, within section 349, but— (a) the amount which is to be deducted from that gross amount on account of income tax shall be an amount equal to the relevant withholding tax on that gross amount; and (b) in the application of sections 338(4)(a) and 350(4) in relation to manufactured overseas dividends the references to Schedule 16 shall be taken as references to dividend manufacturing regulations; and paragraph (a) above is without prejudice to any further amount required to be deducted under dividend manufacturing regulations by virtue of sub-paragraph (8) below. (3) If, in a case where this paragraph applies, the overseas dividend manufacturer is not resident in the United Kingdom and the manufactured overseas dividend is paid by him otherwise than in the course of a trade which he carries on through a branch or agency in the United Kingdom, sub-paragraph (2) above shall not apply; but if the manufactured overseas dividend is received by a person resident in the United Kingdom (the “United Kingdom recipient), then unless the United Kingdom recipient shows either— (a) that the overseas dividend manufacturer was entitled to payment of the overseas dividend as the registered holder of the overseas securities, or (b) that the overseas dividend manufacturer was entitled to payment of the overseas dividend directly or indirectly from a person from whom he acquired the overseas securities, or to whom he transferred them, and who was so entitled to the payment, the United Kingdom recipient shall account for and pay an amount of tax in respect of the manufactured overseas dividend equal to that which the overseas dividend manufacturer would have been required to account for and pay had he been resident in the United Kingdom; and any reference in this Schedule to an amount deducted under sub-paragraph (2) above includes a reference to an amount of tax accounted for and paid under this sub-paragraph. (4) Where a manufactured overseas dividend is paid after deduction of the amount required by sub-paragraph (2) above, or where the amount of tax required under sub-paragraph (3) above in respect of such a dividend has been accounted for and paid, then for all purposes of the Tax Acts as they apply in relation to persons resident in the United Kingdom or to persons not so resident but carrying on business through a branch or agency in the United Kingdom— (a) the manufactured overseas dividend shall be treated in relation to the recipient, and all persons claiming title through or under him, as if it were an overseas dividend of an amount equal to the gross amount of the manufactured overseas dividend, but paid after the withholding therefrom, on account of overseas tax, of the amount deducted under sub-paragraph (2) above; and (b) the amount so deducted shall accordingly be treated in relation to the recipient, and all persons claiming title through or under him, as an amount so withheld instead of as an amount on account of income tax. (5) For the purposes of this paragraph— (a) “relevant withholding tax, in relation to the gross amount of a manufactured overseas dividend, means an amount of tax representative of— (i) the amount (if any) that would have been deducted by way of overseas tax from an overseas dividend on the overseas securities of the same gross amount as the manufactured overseas dividend; and (ii) the amount of the overseas tax credit (if any) in respect of such an overseas dividend; (b) the gross amount of a manufactured overseas dividend is an amount equal to the gross amount of that overseas dividend of which the manufactured overseas dividend is representative, as mentioned in sub-paragraph (1) above; and (c) the gross amount of an overseas dividend is an amount equal to the aggregate of— (i) so much of the overseas dividend as remains after the deduction of the overseas tax (if any) chargeable on it; (ii) the amount of the overseas tax (if any) so deducted; and (iii) the amount of the overseas tax credit (if any) in respect of the overseas dividend. (6) Dividend manufacturing regulations may make provision with respect to the rates of relevant withholding tax which are to apply in relation to manufactured overseas dividends in relation to different overseas territories, but in prescribing those rates the Treasury shall have regard to— (a) the rates at which overseas tax would have fallen to be deducted, and (b) the rates of overseas tax credits, in overseas territories, or in the particular overseas territory, in respect of payments of overseas dividends on overseas securities. (7) Dividend manufacturing regulations may make provision for a person who, in any chargeable period, is an overseas dividend manufacturer to be entitled in prescribed circumstances to set off against each other, in accordance with the regulations— (a) overseas tax in respect of any overseas dividends, or amounts deducted under sub-paragraph (2) above from any manufactured overseas dividends, received by him in that chargeable period, and (b) the sums due from him on account of the amounts deducted by him under sub-paragraph (2) above from the manufactured overseas dividends paid by him in that chargeable period, and account to the Board for, or as the case may be, claim credit in respect of, the balance. (8) Dividend manufacturing regulations may also make provision for cases where a manufactured overseas dividend is paid or otherwise dealt with in circumstances such that, had it been an overseas dividend in respect of the overseas securities, it would have been— (a) a relevant foreign dividend, within the meaning of section 123, (b) a foreign dividend, within the meaning of that section, (c) interest on a quoted Eurobond held in a recognised clearing system, within the meaning of section 124, or (d) an overseas public revenue dividend, within the meaning of Part III, and, notwithstanding anything in sub-paragraph (2) or (3) above, any such regulations may provide for deductions of an amount determined by reference to the gross amount of the manufactured overseas dividend to be made from the manufactured overseas dividend on account of income tax similar to the deductions that would, in the case of an overseas dividend, be made under subsection (2) or (3) of section 123 or under Part III, as the case may be, and for Parts III and IV of Schedule 3 to apply with prescribed modifications in relation thereto. (5) (1) Sub-paragraph (2) below applies in any case where, under a contract or other arrangements for the transfer of securities, a party ( “the payment manufacturer) who satisfies the following condition, that is to say, that he is entitled either— (a) to a dividend or a periodical payment of interest as the registered holder of the securities, or (b) to payment, whether directly or indirectly, of any such dividend or interest from a person from whom he acquired the securities or to whom he transferred them, is required to pay to the other party ( “the recipient) an amount representative of that dividend or interest; and in this paragraph the “manufactured payment means any payment which the payment manufacturer makes in discharge of that requirement. (2) Where this sub-paragraph applies— (a) paragraphs 2, 3 and 4 above and section 737 shall not apply in relation to the manufactured payment, (b) the dividend or interest shall be treated for all purposes of the Tax Acts as the income of the recipient and not as the income of the payment manufacturer, and (c) the manufactured payment shall not be regarded as the income of the recipient, but this sub-paragraph is subject to sub-paragraphs (3) and (4) below. (3) In any case where— (a) any dividend or interest would, apart from the application or, as the case may be, the subsequent application of this sub-paragraph, be treated by virtue of any provision of this paragraph as the income of a person (the “subsequent manufacturer) who is a party to a further contract or other arrangements for the transfer of securities, and (b) under that contract or those arrangements, the subsequent manufacturer is required to pay to the other party (the “subsequent recipient) an amount representative of the dividend or interest (the “subsequent manufactured payment), sub-paragraph (4) below shall apply instead of sub-paragraph (2) above (and, on any second or subsequent application of this sub-paragraph, instead of sub-paragraph (4) below as it last applied). (4) Where this sub-paragraph applies— (a) paragraphs 2, 3 and 4 above and section 737 shall not apply in relation to the manufactured payment or any subsequent manufactured payment; (b) the dividend or interest shall be treated for all purposes of the Tax Acts as the income of the subsequent recipient (or, on a second or subsequent application of sub-paragraph (3) above, the last of them) and not as the income of any other person; and (c) neither the manufactured payment nor any subsequent manufactured payment shall be regarded as the income of the recipient or of any subsequent recipient; but this sub-paragraph is subject to any subsequent application of sub-paragraph (3) above. (5) Notwithstanding anything in sub-paragraphs (1) to (4) above, in any case where— (a) the dividend or interest is an overseas dividend, (b) the payment manufacturer or a subsequent manufacturer is resident in the United Kingdom but the recipient or a subsequent recipient is not so resident, and (c) the rates of overseas tax or overseas tax credit applicable to the overseas dividend in relation to the payment manufacturer or subsequent manufacturer falling within paragraph (b) above are different from what they would have been in relation to the recipient or subsequent recipient falling within that paragraph, had the overseas dividend been paid directly to him, dividend manufacturing regulations may, in such cases as may be prescribed, make provision for tax to be charged on, or for credit in respect of tax to be given to, such one of the manufacturers falling within paragraph (b) above as may be determined in accordance with the regulations, at such rates as may be so determined. (6) Any reference in this paragraph to securities is a reference to United Kingdom equities, United Kingdom securities or overseas securities. (6) (1) This paragraph applies where a person makes an unapproved manufactured payment. (2) Where the unapproved manufactured payment is a manufactured dividend paid by a company, any advance corporation tax paid by the company in respect of the manufactured dividend— (a) shall not be set against any liability of the company to corporation tax as mentioned in section 239; (b) shall not be surrendered under, or otherwise treated as mentioned in, section 240; and (c) shall not be utilised in any other way for the purposes of the Tax Acts; and no franked investment income of a company shall be used to frank (within the meaning of section 241(5)) the manufactured dividend. (3) Where the unapproved manufactured payment is manufactured interest paid by a company— (a) relief shall not be given to the company under any provision of the Tax Acts in respect of any amount which the company is required to deduct from the payment on account of income tax; and (b) the company shall not be entitled under paragraph 5(1) of Schedule 16 to claim to set income tax borne by deduction from payments received by it against the income tax which it is liable to pay in respect of the payment of manufactured interest. (4) Where the unapproved manufactured payment is a manufactured overseas dividend— (a) relief shall not be given to any person under any provision of the Tax Acts in respect of any amount which he is required to deduct from the payment on account of income tax; and (b) a person shall not be entitled under or by virtue of this Schedule to set— (i) overseas tax in respect of overseas dividends received by him, or (ii) an amount deducted under paragraph 4(2) above in respect of manufactured overseas dividends received by him, against any income tax which he is liable to pay in respect of the payment of the manufactured overseas dividend. (5) If it appears to an inspector that, notwithstanding the foregoing provisions of this paragraph, franked investment income of a company has been used to frank a manufactured dividend which is an unapproved manufactured payment, he may make an assessment on the dividend manufacturer under sub-paragraph (3) of paragraph 3 of Schedule 13 and that sub-paragraph shall accordingly apply in relation to the amount of advance corporation tax in question. (6) If it appears to an inspector that, notwithstanding the foregoing provisions of this paragraph, income tax on income received by an interest manufacturer has been set against an amount deducted by the interest manufacturer on account of income tax on a payment of manufactured interest which is an unapproved manufactured payment, the inspector may make an assessment on the interest manufacturer under paragraph 4 of Schedule 16 and that paragraph shall accordingly apply in relation to the amount of income tax in question. (7) In this paragraph “relief means relief by way of— (a) deduction in computing profits or gains; or (b) deduction or set off against income or total profits. (7) (1) Except where paragraph 5(2) or (4) above applies, in any case where (apart from this paragraph)— (a) an amount paid by way of manufactured dividend would exceed the amount of the dividend of which it is representative, or (b) the aggregate of— (i) an amount paid by way of manufactured interest or manufactured overseas dividend, and (ii) the tax required to be accounted for in connection with the making of that payment, would exceed the gross amount (as determined in accordance with paragraph 3 or 4 above) of the interest or overseas dividend of which it is representative, as the case may be, the payment shall, to the extent of an amount equal to the excess, not be regarded for the purposes of this Schedule as made in discharge of the requirement referred to in paragraph 2(1), 3(1) or 4(1) above, as the case may be, but shall instead to that extent be taken for all purposes of the Tax Acts to constitute a separate fee for entering into the contract or other arrangements under which it was made, notwithstanding anything in paragraphs 2 to 4 above. (2) Dividend manufacturing regulations may make provision in such circumstances and for such purposes of the Tax Acts as may be prescribed for such a fee as is mentioned in sub-paragraph (1) above to be treated as paid in any case that would fall within that sub-paragraph, apart from paragraph 5 above; and, without prejudice to the generality of the foregoing, any such regulations may in particular provide— (a) for the amount of the fee to be determined in accordance with the regulations, and (b) for such of the persons mentioned in that paragraph as may be prescribed to be treated as paying or, as the case may be, as receiving the fee, and it is immaterial for the purposes of paragraph (b) above whether or not the person prescribed would, apart from paragraph 5 above, have been regarded by virtue of sub-paragraph (1) above as paying or receiving a fee, or as paying it to, or receiving it from, any other person prescribed under paragraph (b) above. (3) For the purpose of giving relief under any provision of the Tax Acts in a case falling within paragraph 3(1) or 4(1) above where (apart from this paragraph) the aggregate referred to in sub-paragraph (1)(b) above would be less than the gross amount there mentioned— (a) the gross amount of the manufactured interest or manufactured overseas dividend shall be taken to be an amount equal to the aggregate referred to in sub-paragraph (1)(b) above, except where paragraph 6 above applies, and (b) where paragraph 6 above applies, the gross amount of the manufactured interest or manufactured overseas dividend shall be taken to be only the amount referred to in sub-paragraph (1)(b)(i) above, notwithstanding anything in paragraph 3, 4 or 6 above. (4) In this paragraph “relief means relief by way of— (a) deduction in computing profits or gains; or (b) deduction or set off against income or total profits. (8) (1) Dividend manufacturing regulations may make provision for— (a) such manufactured dividends, manufactured interest or manufactured overseas dividends as may be prescribed, or (b) such dividend manufacturers, interest manufacturers or overseas dividend manufacturers as may be prescribed, to be treated in prescribed circumstances otherwise than as mentioned in paragraph 2, 3 or 4 above for the purposes of such provisions of the Tax Acts as may be prescribed. (2) Dividend manufacturing regulations may make provision with respect to— (a) the accounts and other records which are to be kept, (b) the vouchers which are to be issued or produced, (c) the returns which are to be made, (d) the manner in which amounts required to be deducted or accounted for under or by virtue of this Schedule on account of tax are to be accounted for and paid, by dividend manufacturers, interest manufacturers or overseas dividend manufacturers in connection with the manufacturing of dividends, interest or overseas dividends. (3) Dividend manufacturing regulations may— (a) make provision for prescribed provisions of the Management Act to apply in relation to manufactured dividends, manufactured interest or manufactured overseas dividends with such modifications, specified in the regulations, as the Treasury think fit; (b) make such further provision with respect to the administration, assessment, collection and recovery of amounts required to be deducted or accounted for under or by virtue of this Schedule on account of tax as the Treasury think fit. (4) Dividend manufacturing regulations may make different provision for different cases.

Power to obtain information in connection with dealings in securities

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Manufactured dividends etc: amendments of section 737

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Consequential provisions

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SCHEDULE 14

Part I — INDUSTRIAL BUILDINGS AND STRUCTURES

Buildings and structures in enterprise zones

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In section 1 of the Capital Allowances Act 1990 (enterprise zones) after subsection (1) there shall be inserted—

(1A) Where the person entitled to the relevant interest in relation to any capital expenditure incurred as mentioned in paragraphs (a) and (b) of subsection (1) above incurs an additional VAT liability in respect of any of that capital expenditure at a time when— (a) the building or structure is, or is to be, an industrial building or structure occupied as mentioned in paragraph (a) of that subsection, and (b) the site of the building or structure is in an enterprise zone and not more than 10 years have elapsed since the site was first included in the zone, that liability shall be regarded for the purposes of this Act as capital expenditure incurred on the construction of the building or structure and, subject to the following provisions of this Act, an allowance shall accordingly be made to him under that subsection for the chargeable period related to the incurring of that liability.

Transitional relief for regional projects

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• (1) In section 2 of that Act, in subsection (1) (which applies section 1, with modifications, in relation to certain regional projects) after paragraph (a) there shall be inserted—

(aa) in subsection (1A)— (i) for the words “paragraphs (a) and (b) there shall be substituted the words “paragraph (a); and (ii) paragraph (b) shall be omitted; and

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

(3A) This section also applies to any additional VAT liability incurred in respect of expenditure certified under subsection (2) or (3) above.

Writing-down allowances

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• (1) In section 3 of that Act (writing-down allowances in respect of industrial buildings and structures) after subsection (2) there shall be inserted—

(2A) Where the person entitled to the relevant interest in relation to any capital expenditure incurred on the construction of a building or structure incurs an additional VAT liability in respect of any of that capital expenditure, then— (a) that liability shall be regarded for the purposes of this Act as capital expenditure incurred by him on the construction of the building or structure, and (b) the residue (as defined in section 8(1)) of the expenditure incurred on the construction of the building shall accordingly be deemed for the purposes of this Part to be increased as at the time at which the liability is incurred by an amount equal to the liability. (2B) Where an additional VAT liability is incurred as mentioned in subsection (2A) above, then (subject to any further adjustment under this subsection on any later such event or under subsection (2C) or (3) below) the writing-down allowance for any chargeable period, if that chargeable period or its basis period ends after the time at which the liability is incurred, shall be the residue of the capital expenditure immediately after the incurring of the liability, reduced in the proportion (if it is less than one) which the length of the chargeable period bears to the part unexpired, at the date of the incurring of the liability, of the period of 25 years beginning with the time when the building or structure was first used. (2C) In any case where— (a) an additional VAT rebate in respect of any capital expenditure incurred on the construction of a building or structure is made to the person entitled to the relevant interest in relation to that expenditure, and (b) the residue of that expenditure immediately before the making of the rebate is not less than the amount of the rebate, then (subject to any further adjustment under this subsection on any later such event or under subsection (2B) above or (3) below) the writing-down allowance for any chargeable period, if that chargeable period or its basis period ends after the time at which the rebate is made, shall be the residue of that expenditure immediately after the making of the rebate, reduced in the proportion (if it is less than one) which the length of the chargeable period bears to the part unexpired, at the date of the making of the rebate, of the period of 25 years beginning with the time when the building or structure was first used.

• (2) In subsection (3) of that section (sale of relevant interest: recalculation of future writing-down allowances) after the words “on a later sale there shall be inserted the words “or under subsection (2B) or (2C) above ”.

Balancing allowances and balancing charges

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• (1) In section 4 of that Act, in subsection (1) (events which give rise to balancing allowances and balancing charges), after paragraph (d) there shall be inserted the words

or (e) an additional VAT rebate in respect of any of the capital expenditure is made to the person entitled to the relevant interest,

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• (2) In subsection (2) of that section (no balancing allowance or charge on second or subsequent events when the building or structure is not an industrial building or structure) after the words “and where two or more events there shall be inserted the words “falling within paragraphs (a) to (d) of subsection (1) above ”.

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

(2A) No balancing allowance shall be made by reason of an event falling within paragraph (e) of subsection (1) above; and no balancing charge shall be made by reason of such an event unless— (a) the amount of the additional VAT rebate exceeds the residue of expenditure immediately before the making of that rebate, or (b) there is no such residue, and in any such case a balancing charge shall be made on an amount equal to that by which the rebate exceeds the residue of expenditure immediately before the making of the rebate or, where there is no such residue, to the amount of the rebate.

• (4) In subsection (9) of that section, in the definition of “the capital expenditure there shall be added at the end of paragraph (a) the words “ reduced by an amount equal to that of any balancing charge made in relation to that expenditure on the occurrence of an event falling within subsection (1)(e) above; ”.

• (5) At the end of subsection (10) of that section (balancing charge not to exceed allowances made) there shall be added the words “reduced by the amounts (if any) on which balancing charges in respect of the expenditure have been made on him for any such chargeable periods ”.

Writing off of expenditure and meaning of “residue of expenditure

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• (1) In section 8 of that Act, for subsection (2) (initial allowances to be treated as written off when building or structure first used) there shall be substituted—

(2) Where an initial allowance is made in respect of any of the expenditure, then— (a) if that allowance is made in respect of an additional VAT liability incurred after the building or structure is first used, the amount of that allowance shall be treated as written off as at the time at which the liability is incurred; and (b) in any other case, the amount of the allowance shall be treated as written off as at the time when the building or structure is first used.

• (2) After subsection (12) of that section there shall be inserted—

(12A) Where an additional VAT rebate is made in respect of any of the expenditure, there shall be treated as written off as at the time at which the rebate is made an amount equal to the rebate.

• (3) In subsection (13) (application of subsections (1) to (12) to the Crown) for “(12) there shall be substituted “(12A) ”.

Part II — MACHINERY AND PLANT

Transitional relief for regional projects

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• (1) In section 22 of that Act (first-year allowances: transitional relief for regional projects) after subsection (1) there shall be inserted—

(1A) Subsection (1B) below applies in any case where a person— (a) has at any time incurred, as mentioned in paragraphs (a) and (b) of subsection (1) above, capital expenditure to which this section applies, and (b) subsequently incurs an additional VAT liability in respect of that capital expenditure at a time when the machinery or plant is provided wholly and exclusively for the purposes of the trade. (1B) Where this subsection applies, then, for the purposes of this Act— (a) the additional VAT liability shall be regarded as capital expenditure incurred by the person on the provision of the machinery or plant wholly and exclusively for the purposes of the trade, and (b) that capital expenditure shall be regarded as expenditure in consequence of the incurring of which the machinery or plant belongs, or has belonged, to him at some time during the chargeable period related to the incurring of the capital expenditure, and, subject to the following provisions of this Act, a first-year allowance shall accordingly be made to him under subsection (1) above for the chargeable period related to the incurring of that liability.

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

(3A) This section also applies to any additional VAT liability incurred in respect of expenditure certified under subsection (2) or (3) above.

Writing-down allowances and balancing adjustments

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• (1) In section 24 of that Act, after subsection (1) (expenditure on machinery or plant qualifying for writing-down allowances) there shall be inserted—

(1A) If, in a case where the circumstances are as mentioned in paragraphs (a) and (b) of subsection (1) above, the person there mentioned incurs an additional VAT liability in respect of the capital expenditure at a time when the machinery or plant is provided wholly and exclusively for the purposes of the trade, then, for the purposes of this Act— (a) that liability shall be regarded as capital expenditure incurred by him on the provision of the machinery or plant wholly and exclusively for the purposes of the trade, and (b) that capital expenditure shall be regarded as expenditure in consequence of the incurring of which the machinery or plant belongs, or has belonged, to him, and, subject to the following provisions of this Act, subsection (1) above shall have effect accordingly in relation to the capital expenditure constituted by that liability.

• (2) At the beginning of subsection (6) of that section (disposal value) there shall be inserted the words “Subject to subsection (7) below, ” and after that subsection there shall be inserted—

(7) This subsection applies to all machinery and plant— (a) on the provision of which for the purposes of the trade a person has incurred capital expenditure; (b) which belongs to him at some time in a chargeable period or its basis period; and (c) in respect of which the following event occurs, namely, the making of an additional VAT rebate to him in that chargeable period or its basis period in respect of the capital expenditure incurred by him on the provision of the machinery or plant; and where this subsection applies to any machinery or plant the amount that is to be brought into account by virtue of subsection (6) above by that person for the chargeable period related to the making of the rebate shall be increased by the addition of (or, if there would not otherwise be a disposal value for that chargeable period, shall be) the disposal value of the machinery or plant in respect of which that rebate is made. (8) Except in subsection (7) above, any reference in this Act to subsection (6) above (but not a reference to any specific provision of it) shall be taken to include a reference to subsection (7) above.

The disposal value

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• (1) In section 26 of that Act (which defines the disposal value by reference to the event giving rise to it) in subsection (1), after paragraph (e) there shall be inserted—

(ee) if that event is the making of an additional VAT rebate in respect of capital expenditure incurred on the provision of the machinery or plant, equals the amount of that rebate; and

.

• (2) At the end of subsection (2) of that section (disposal value not to exceed expenditure on the provision of the machinery or plant for the purposes of the trade) there shall be added the words—

reduced by the aggregate amount of any additional VAT rebates made to him in respect of any of that capital expenditure. (2A) If the event by reason of which a disposal value is to be brought into account is the making of an additional VAT rebate to a person, subsection (2) above shall have effect as if the capital expenditure referred to in that subsection were reduced (or further reduced) by the amount of any disposal value brought into account by that person in respect of the machinery or plant by reason of any earlier event (other than the making of an additional VAT rebate).

• (3) At the end of that section there shall be added—

(4) Where an additional VAT rebate has been made to any of the persons mentioned in subsection (3) above in respect of the capital expenditure incurred by him as there mentioned, that capital expenditure shall, in his case, be treated as reduced by the amount of the rebate, but no further reduction shall be made under subsection (2) above.

Short-life assets

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• (1) In section 37 of that Act, after subsection (4) (allowances for the notional trade to be given for the corresponding period of the actual trade) there shall be inserted—

(4A) In any case where— (a) a balancing allowance that would, on the assumptions in subsection (3) above, fall to be made to the trader for a chargeable period in the case of the notional trade has, by virtue of subsection (4) above, been made to him for a chargeable period in the case of the actual trade, (b) after the chargeable period of the notional trade related to its permanent discontinuance for the purposes of sections 24, 25 and 26, he incurs an additional VAT liability in respect of the capital expenditure incurred on the provision of the machinery or plant, and (c) that liability was not brought into account in determining the amount of the balancing allowance, a further balancing allowance, of an amount equal to the liability, shall be made to him for the chargeable period of the actual trade related to the incurring of the liability (and the liability shall not be brought into account for any chargeable period in the case of the notional trade).

• (2) In subsection (5) of that section (no disposal value brought into account before fourth anniversary) after the word “If there shall be inserted the words “disregarding section 24(7) ”.

Fixtures

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Further restrictions on allowances

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• (1) In section 75 of that Act (connected persons etc) in subsection (1) (provision by purchase of machinery or plant)—

• (a) after the words “in respect of the expenditure there shall be inserted the words “or any additional VAT liability incurred in respect of it ”; and

• (b) for the words “so much (if any) of the expenditure there shall be substituted the words “so much (if any) of the aggregate of the expenditure and any such additional VAT liability ”.

• (2) In subsection (2) of that section (contracts under which a person will or may become the owner of machinery or plant)—