Finance Act 1993

(124A) (1) Subject to the following provisions of this Part, if a person having a major interest in any agricultural land incurs any expenditure to which this section applies, there shall be made to him, for the chargeable period which is that related to the incurring of the expenditure, an allowance (“an initial allowance”) equal to 20 per cent. of the amount of that expenditure. (2) This section applies to any expenditure falling within section 123 which is incurred under a contract which— (a) is entered into either— (i) in the period beginning with 1st November 1992 and ending with 31st October 1993; or (ii) for the purpose of securing that obligations under a contract entered into in that period are complied with; but (b) is not entered into for the purpose of securing that obligations under a contract entered into before the beginning of that period are complied with. (3) No expenditure on the construction of any building, fence or other works shall be taken into account for the purposes of any initial allowance under this Part unless it is incurred for the purposes of husbandry on the agricultural land in question; and no initial allowance shall be made under this Part in respect of expenditure on the construction of any building, fence or other works unless the building, fence or other works is or is to be first used for the purposes of husbandry on or before 31st December 1994. (4) Where expenditure is incurred on a farmhouse or any asset (other than a farmhouse) which is to serve partly the purposes of husbandry and partly other purposes, the same apportionment of that expenditure shall be made for the purposes of any initial allowance under this Part as is required by section 124(1)(a) or (b) to be made for the purposes of writing-down allowances. (5) In a case where— (a) any expenditure to which this section applies is incurred on the construction of any building, fence or other works; and (b) either— (i) when the building, fence or other works comes to be used it is not used for the purposes of husbandry; or (ii) it has not come to be so used by the end of 31st December 1994, the expenditure shall be left out of account for the purposes of initial allowances under this Part and, accordingly, any initial allowance made in respect of the expenditure under this section shall be withdrawn and all such assessments and adjustments of assessments shall be made as may be necessary to give effect to that withdrawal. (6) Subject to subsection (7) below, a person making a claim by virtue of this section as it applies for income tax purposes may require the initial allowance to be reduced to a specified amount; and a company may by notice given to the inspector not later than two years after the end of the chargeable period for which the allowance falls to be made disclaim the initial allowance or require it to be reduced to a specified amount. (7) Subsection (6) above shall have effect as respects allowances falling to be made for accounting periods ending after the day appointed for the purposes of section 10 of the principal Act (pay and file) with the omission of the words “as it applies for income tax purposes” and the words from “and a company” onwards. (124B) Where an initial allowance under this Part is made for any chargeable period in respect of any expenditure on the construction of a building, fence or other works, a writing-down allowance in respect of that expenditure shall be made under this Part for the same chargeable period only if the building, fence or other works has come to be used for the purposes of husbandry before the end of that period.

4

• (1) In subsection (1) of section 126 (transfers of relevant interest), for “a writing-down allowance” there shall be substituted “ an allowance under this Part ”.

• (2) For subsection (2) of that section there shall be substituted the following subsection—

(2) If, in a case falling within subsection (1) above, the date of the acquisition occurs during a chargeable period of the former owner or its basis period, the former owner shall be entitled— (a) to the whole of any initial allowance for the chargeable period related to the acquisition; but (b) only to an appropriate proportion of any writing-down allowance for the chargeable period so related; and, similarly, if the date of the acquisition occurs during a chargeable period of the new owner or its basis period, the new owner shall be entitled only to an appropriate proportion of any writing-down allowance for the chargeable period (of his) related to the acquisition.

• (3) In subsection (6) of that section (balancing increase of last writing-down allowance in respect of allowance lost on transfers), after “total allowances” there shall be inserted “ (including any initial allowance) ”.

5

• (1) After subsection (3) of section 127 (buildings etc. bought unused) there shall be inserted the following subsections—

(3A) The expenditure referred to in subsection (1) above includes neither— (a) expenditure which falls to be disregarded for the purposes of writing-down allowances by virtue of section 124(1); nor (b) expenditure some or all of which is expenditure to which section 124A applies. (3B) Accordingly, any expenditure which is treated as incurred under subsection (2)(c) above shall be treated (without prejudice to section 124(2)) as incurred for the purposes mentioned in section 124(1).

• (2) In subsection (4) of that section, for “and (3)” there shall be substituted “ (3) and (3B) ”.

6

After section 127 there shall be inserted the following section—

(127A) (1) This section shall apply (subject to subsection (2) below) where— (a) there is expenditure on the construction of any building, fence or other works (“the actual expenditure”) which— (i) is expenditure falling within section 123; and (ii) is not expenditure which would fall to be disregarded for the purposes of writing-down allowances by virtue of section 124(1); (b) some or all of the actual expenditure is expenditure to which section 124A applies or would be such expenditure if it were capital expenditure; and (c) before the building, fence or other works comes to be used, the relevant interest is sold. (2) In relation to any case in which the relevant interest is sold in pursuance of a contract entered into in the period beginning with 1st November 1992 and ending with 31st October 1993 by a person who— (a) carries on a trade which consists, in whole or in part, in the construction of buildings or structures with a view to their sale; and (b) has been entitled to that interest since before 1st November 1992, section 124A(2) above shall have effect for the purposes of subsection (1)(b) above and subsection (6) below as if for the words from “contract which” onwards there were substituted “contract entered into either before 1st November 1993 or for the purpose of securing that obligations under a contract entered into before that date are complied with.” (3) Where this section applies— (a) the actual expenditure shall be left out of account for the purposes of this Part and, accordingly— (i) any initial allowance or writing-down allowance made in respect of the actual expenditure shall be withdrawn; and (ii) all such assessments and adjustments of assessments shall be made as may be necessary to give effect to that withdrawal; (b) section 126 shall not apply; (c) the person who buys the relevant interest shall be treated for the purposes of this Part as having incurred, on the date when the purchase price becomes payable, expenditure falling within section 123 on the construction of the building, fence or other works (“the deemed expenditure”); and (d) the deemed expenditure shall be treated (without prejudice to section 124(2) and 124A(5)) as incurred for the purposes of husbandry on the agricultural land in question. (4) The deemed expenditure— (a) shall be whichever is the lesser of the net price paid by the person concerned for the purchase of the relevant interest and the actual expenditure; and (b) shall be regarded as comprising a section 124A element and a residual element. (5) The section 124A element of the deemed expenditure shall be calculated in accordance with the formula— $AxBC$ (6) In subsection (5) above— - A is the deemed expenditure; - B is so much of the actual expenditure as is expenditure to which section 124A applies or expenditure that would be such expenditure if it were capital expenditure; and - C is the actual expenditure. (7) The residual element of the deemed expenditure shall be so much (if any) of the deemed expenditure as does not comprise the section 124A element. (8) Notwithstanding the provisions of subsection (3)(c) above— (a) the section 124A element of the deemed expenditure shall be treated for the purpose only of determining entitlement to allowances as expenditure to which that section applies; and (b) the residual element of the deemed expenditure shall be treated for that purpose as expenditure which is not expenditure to which that section applies. (9) Where the relevant interest is sold more than once before the building, fence or other works is used, subsections (2) and (3)(c) and (d) above shall have effect only in relation to the last of those sales.

7

• (1) In subsection (1) of section 128 (balancing allowances and charges), for “a writing-down allowance” there shall be substituted “ an allowance under this Part ”.

• (2) In subsection (2) of that section, for “this Part less the aggregate of any writing-down allowances” there shall be substituted “ any allowances under this Part less the aggregate of any such allowances ”.

• (3) In subsection (3) of that section, after “purposes of” there shall be inserted “ allowances under ”.

• (4) In subsection (6) of that section, for “writing-down allowances” there shall be substituted “ allowances under this Part ”.

8

In section 129(1) (balancing events), for “a writing-down allowance” there shall be substituted “ an allowance under this Part ”.

9

In section 131(2) (application of Chapter I of Part V to forestry buildings etc.), in the words after paragraph (b), before “subject” there shall be inserted “ with the omission of sections 124A, 127(3A)(b) and 127A and ”.

10

In section 146(3) (allowances under Parts V and VI not to exceed expenditure), after “made under” there shall be inserted “ Part V or ”.

SCHEDULE 13

1

The Capital Allowances Act 1990 shall be amended as follows.

2

In section 23(6) (interpretation of information provisions relating to first-year allowances), at the end there shall be inserted “ and references in this section to a first-year allowance shall not include references to a first-year allowance in respect of expenditure to which section 22 applies by virtue only of subsection (3B) of that section. ”

3

In section 30(2)(c) (special provision for ships), for “section” there shall be substituted “ sections 46(8)(e) and ”.

4

In section 38(m) (assets attracting first-year allowances not to be treated as short-life assets), after “section 22” there shall be inserted “ (2), (3) or (3A) ”.

5

• (1) In subsection (2)(a) of section 39 (definition of a qualifying purpose), for “subsections (2) and (3)” there shall be substituted “ subsections (2) to (3B) ”.

• (2) In subsection (8)(b) of that section (anti-avoidance provision in respect of chartering), after “new expenditure,” there shall be inserted “ a first-year allowance by virtue of section 22(3B) or ”.

6

After subsection (8) of section 42 (modifications in relation to “old expenditure” of provisions relating to overseas leasing) there shall be inserted the following subsection—

(9) For the purposes of the application of this section to any expenditure to which section 22 applies by virtue only of subsection (3B) of that section, this section shall have effect— (a) as if subsection (4) above included a reference to a first-year allowance made in respect of that expenditure; and (b) for the purposes of paragraph (a) above, as if the reference in that subsection to an event occurring such that there is no right to that allowance included a reference to an event occurring such that, if subsection (3) included a reference to first-year allowances, there would be no such right.

7

• (1) In subsection (1) of section 43 (cases where section applies), for “This section” there shall be substituted “ Subsections (2) and (3) below ”.

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

(4) Section 22(6A)(a) shall not prevent a first-year allowance being made in respect of expenditure incurred by any person on the provision of machinery or plant for leasing where it appears that— (a) the machinery or plant will be leased as mentioned in subsection (1) above; and (b) the circumstances are such that subsection (2) above will require the whole or any part of the expenditure to be treated as not falling within section 42(1); and any first-year allowance made by virtue of this subsection in respect of that expenditure shall be made on the same assumptions and subject to the same apportionments (if any) as it appears would, by virtue of subsection (3) above, be applicable in the case of a writing-down allowance.

8

In section 44 (further provisions in relation to joint lessees in cases involving new expenditure), after subsection (4) there shall be inserted the following subsection—

(5) For the purposes of the application of this section to any expenditure to which section 22 applies by virtue of subsection (3B) of that section, this section shall have effect as if— (a) references to section 43(2) included references to section 43(4); (b) references to a normal writing-down allowance included references to a first-year allowance; and (c) the reference in subsection (2) above to the separate item of machinery or plant referred to in section 43(3)(a) were, in relation to a first-year allowance, a reference to the machinery or plant in respect of which, in accordance with section 43(4), that allowance is or is treated as made.

9

In section 46 (recovery of allowances made in respect of plant and machinery subsequently let to a foreign resident), after subsection (7) there shall be inserted the following subsection—

(8) For the purposes of the application of this section to any expenditure to which section 22 applies by virtue of subsection (3B) of that section, this section shall have effect as if— (a) in subsection (1) above, after “qualified for a” there were inserted “first-year allowance or any”; (b) in subsection (2) above— (i) in paragraph (a), at the beginning there were inserted “the aggregate of any first-year allowance and”; and (ii) in paragraph (b), after the word “no” there were inserted “first-year allowance or”; (c) in subsection (5) above— (i) after “and a” there were inserted “first-year allowance or”; and (ii) in paragraph (a), for the words from “it referred” to the end of the paragraph there were substituted “that allowance were such a first-year allowance or, as the case may be, normal writing-down allowance as is referred to in paragraph (a) of that subsection and the references to the expenditure in respect of which an allowance is made were construed accordingly;” (d) in subsection (6) above— (i) in paragraph (a), after “for a” there were inserted “first-year allowance or”; and (ii) in the words after paragraph (b), for “a normal writing-down allowance has been made” there were substituted “the allowance that has been made is a first-year allowance or normal writing-down allowance”; and (e) in subsection (7) above— (i) in paragraph (a), after “section” there were inserted “30(2)(c) or”; and (ii) for “section 31” there were substituted “section 30 or 31”.

10

In section 48 (information provisions in relation to joint lessees in cases involving new expenditure), after subsection (6) there shall be inserted the following subsection—

(7) For the purposes of the application of this section to any expenditure to which section 22 applies by virtue of subsection (3B) of that section, this section shall have effect as if the references in subsections (1) and (2) above to a normal writing-down allowance included references to a first-year allowance; but nothing in this subsection shall prevent subsection (1) above from continuing to apply where the use for permitted leasing is after the expenditure has qualified for one allowance and before it qualifies for another.

11

• (1) In subsection (3) of section 50, in paragraph (i) of the definition of “old expenditure” (old expenditure to include expenditure falling within section 22) after “22” there shall be inserted “ other than expenditure to which that section applies by virtue only of subsection (3B) of that section ”.

• (2) After subsection (4) of that section there shall be inserted the following subsection—

(4A) In the case of expenditure to which section 22 applies by virtue only of subsection (3B) of that section, any reference in this Chapter to the expenditure having qualified for a first-year allowance is a reference to such an allowance having fallen to be made in respect of the whole or any part of that expenditure.

12

• (1) In section 81 (assets used for purposes not attracting capital allowances and assets received by way of gift), after subsection (1) there shall be inserted the following subsection—

(1A) Subject to section 63, in a case falling within subsection (1)(a) or (b) above, the assumptions applied by that subsection in relation to sections 24 to 26— (a) shall apply in relation to section 22 as they apply in relation to those sections but only for the purposes of first-year allowances by virtue of section 22(3B); and (b) where those assumptions require any person to be treated as having incurred expenditure in a chargeable period related to any event, shall apply for those purposes as if they required that person to be treated as having incurred that expenditure on the date of that event.

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

(2A) Where a person is treated as having incurred capital expenditure on the provision of machinery or plant by virtue of subsection (1)(a) above, he shall be treated for the purposes of section 75(1), as it has effect in relation to first-year allowances by virtue of section 22(3B), as having done so by way of purchase from a person connected with him.

• (3) Sub-paragraph (2) above shall have effect in cases where machinery or plant is brought into use on or after 14th April 1993.

13

• (1) In subsection (1)(a) of section 147 (exclusion of double allowances), after “those Parts” there shall be inserted “ or section 22 ”.

• (2) In subsection (2) of that section, after “any person” there shall be inserted “ an allowance is made under section 22 in respect of any capital expenditure or ”.

SCHEDULE 14

Failure to give notice of liability for corporation tax

1

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

Further claims etc. where assessment made

2

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

Interest on overdue corporation tax: transitional cases

3

• (1) Section 86 of that Act of 1970 (interest on overdue tax) shall be amended as follows.

• (2) In subsection (3)(b), for “subject to subsection (3A)” there shall be substituted “ subject to subsections (3A) and (4A) ”.

• (3) In subsection (3A), at the beginning there shall be inserted “ Subject to subsection (4A) below, ”.

• (4) After subsection (4) there shall be inserted the following subsections—

(4A) For the purposes of this section where— (a) a notice served under section 11 above at any time after the appointed day for the purposes of section 82 of the Finance (No. 2) Act 1987 (amendment of section 11 for the purposes of pay and file) is to be taken as requiring a company to make a return for any accounting period ending on or before the day appointed for the purposes of section 10 of the principal Act; and (b) the tax charged by any assessment to corporation tax for that accounting period does not become due and payable until after the date nine months from the end of that accounting period, the reckonable date, in relation to tax charged for that accounting period by that assessment, is the date mentioned in paragraph (b) above (instead of the date which would otherwise be determined under subsection (3) or (3A) above). (4B) The Board may at their discretion mitigate (whether before or after judgment) any interest due under this section in a case where the reckonable date is determined under subsection (4A) above and may stay or compound any proceedings for the recovery thereof.

Interest on overdue corporation tax: pay and file cases

4

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

• (2) For subsection (6) of that section there shall be substituted the following subsections—

(6) In any case where— (a) on a claim under section 393A(1) of the principal Act, the whole or any part of a loss incurred in an accounting period (“the later period”) has been set off for the purposes of corporation tax against profits of a preceding accounting period (“the earlier period”); (b) the earlier period does not fall wholly within the period of twelve months immediately preceding the later period; and (c) if the claim had not been made, there would be an amount or, as the case may be, an additional amount of corporation tax for the earlier period which would carry interest in accordance with this section, then, for the purposes of the determination at any time of whether any interest is payable under this section or of the amount of interest so payable, the amount mentioned in paragraph (c) above shall be taken to be an amount of unpaid corporation tax for the earlier period except so far as concerns interest for any time after the date on which any corporation tax for the later period became (or, as the case may be, would have become) due and payable as mentioned in subsection (1) above. (7) Where, in a case falling within subsection (6)(a) and (b) above— (a) there is in the earlier period, as a result of the claim under section 393A(1) of the principal Act, an amount of surplus advance corporation tax, as defined in subsection (3) of section 239 of that Act; and (b) pursuant to a claim under the said subsection (3), the whole or any part of that amount is to be treated for the purposes of the said section 239 as discharging liability for an amount of corporation tax for an accounting period before the earlier period, the claim under the said subsection (3) shall be disregarded for the purposes of subsection (6) above but subsection (4) above shall have effect in relation to that claim as if the reference in the words after paragraph (c) to the later period within the meaning of subsection (4) above were a reference to the period which, in relation to the claim under the said section 393A(1), would be the later period for the purposes of subsection (6) above.

Effect on interest of reliefs

5

In section 91(1B) of that Act of 1970 (subsection (1A) subject to section 87A(4)), after “section 87A(4)” there shall be inserted “ (6) and (7) ”.

Failure to make return for corporation tax

6

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

Things to be done by companies

7

In section 108(1) of that Act of 1970 (which includes provision requiring companies to act for the purposes of the Taxes Acts through their proper officers), after “proper officer of the company” there shall be inserted “ or, except where a liquidator has been appointed for the company, through such other person as may for the time being have the express, implied or apparent authority of the company to act on its behalf for the purpose ”.

Relief under section 393 of the Taxes Act 1988

8

• (1) In relation to any case in which by virtue of section 99 of the Finance Act 1990 losses may be set off under subsection (1) of section 393 or of section 396 of the Taxes Act 1988 without the making of a claim, the Taxes Act 1988 shall have effect with the following amendments.

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

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

• (4) In section 398 (transactions in deposits), for the words from “he may” onwards there shall be substituted “ the amount of his loss may be set off in pursuance of a claim under section 392 or, as the case may be, against which the amount of his loss may be set off under section 396 ”.

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

9

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

Interest on tax overpaid

10

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

• (2) In subsection (7A) of that section, for “any increase in the amount of that repayment” there shall be substituted “ so much of the amount of that repayment as falls to be made ”.

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

• (4) In subsection (7B) of that section, for “any increase in the amount of that payment” there shall be substituted “ so much of the amount of that payment as falls to be made ”.

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

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

Surrender of refunds

11

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

SCHEDULE 15

Introduction

1

• (1) This paragraph applies where regulations under this Schedule provide that the amount of an initial exchange gain or initial exchange loss accruing to a company as regards an asset, liability or contract for an accrual period shall be found in accordance with the alternative method of calculation.

• (2) In such a case the amount shall not be found in accordance with section 125(2) or (4) of this Act or section 126(3) or (5) or section 127(3) or (4) (as the case may be) but shall be found by—

• (a) taking the accrued amount for each day in the accrual period, and

• (b) adding the amounts found under paragraph (a) above.

• (3) Subject to regulations under this Schedule, the accrued amount for a day in the accrual period shall be found by—

• (a) taking the amount of the initial exchange gain or initial exchange loss found in accordance with section 125(2) or (4) of this Act or section 126(3) or (5) or section 127(3) or (4) (as the case may be), and

• (b) dividing it by the number of days in the period.

• (4) Where an accrual period does not begin at the beginning of a day, the part of the day that falls within the accrual period shall be treated for the purposes of this Schedule as a complete day.

• (5) Where an accrual period does not end at the end of a day, the part of the day that falls within the accrual period shall be treated for the purposes of this Schedule as a complete day.

Exempt circumstances

2

• (1) Regulations may provide that where—

• (a) as regards an asset, liability or contract an initial exchange gain or initial exchange loss accrues to a company for an accrual period under section 125, 126 or 127 of this Act or would so accrue apart from regulations under this Schedule,

• (b) at any time on a day in the period the asset or contract was held, or the liability was owed, by the company in exempt circumstances, and

• (c) such other conditions as may be prescribed are fulfilled,

the amount of the gain or loss shall be found in accordance with the alternative method of calculation.

• (2) Regulations may also provide that as regards any such day as is mentioned in sub-paragraph (1) above the accrued amount shall be ascertained in accordance with prescribed rules.

• (3) Regulations may be so framed that the accrued amount as regards a day depends on the extent to which an asset or contract is held, or a liability is owed, in exempt circumstances.

• (4) For the purposes of this paragraph an asset or contract is held, or a liability is owed, in exempt circumstances at a given time if it is then held or owed—

• (a) for the purposes of long-term insurance business;

• (b) for the purposes of mutual insurance business;

• (c) for the purposes of the occupation of commercial woodlands;

• (d) by a housing association approved at that time for the purposes of section 488 of the Taxes Act 1988;

• (e) by a self-build society approved at that time for the purposes of section 489 of that Act.

• (5) In this paragraph—

Unremittable income

3

• (1) Regulations may provide that where—

• (a) as regards an asset falling within section 153(1)(a) or (b) of this Act an initial exchange gain or initial exchange loss accrues to a company for an accrual period under section 125 or 127 of this Act or would so accrue apart from regulations under this Schedule,

• (b) at any time on a day in the period income represented by the asset was unremittable, and

• (c) such other conditions as may be prescribed are fulfilled,

the amount of the gain or loss shall be found in accordance with the alternative method of calculation.

• (2) Regulations may also provide that as regards any such day as is mentioned in sub-paragraph (1) above the accrued amount shall be ascertained in accordance with prescribed rules.

• (3) Regulations may be so framed that the accrued amount as regards a day depends on the extent to which the income represented by an asset is unremittable.

• (4) For the purposes of this paragraph income is unremittable if—

• (a) a claim under subsection (2) of section 584 of the Taxes Act 1988 (relief for unremittable income) has been made in relation to the income,

• (b) paragraphs (a) and (b) of that subsection apply to it, and

• (c) those paragraphs have not ceased to apply to it.

Matched liabilities

4

• (1) Regulations may provide that where—

• (a) as regards a liability an initial exchange gain or initial exchange loss accrues to a company for an accrual period under section 125 or 127 of this Act or would so accrue apart from regulations under this Schedule,

• (b) the liability falls within section 153(2)(a) of this Act,

• (c) the liability is eligible to be matched on any day in the accrual period with an asset held by the company, and such other conditions as may be prescribed are fulfilled, and

• (d) an election is made in accordance with the regulations to match the liability with the asset on any such day and the election has effect by virtue of the regulations,

the amount of the gain or loss shall be found in accordance with the alternative method of calculation.

• (2) Regulations may also provide that as regards any day in respect of which an election has effect the accrued amount shall be ascertained in accordance with prescribed rules.

• (3) The question whether a liability is eligible to be matched with an asset shall be determined in accordance with prescribed rules, and in particular regulations may include provision that—

• (a) only liabilities of a prescribed description are eligible to be matched with assets;

• (b) only assets of a prescribed description are eligible to be matched with liabilities;

• (c) liabilities of a prescribed description are eligible to be matched only with assets of a prescribed description.

• (4) Regulations may include provision that on any day—

• (a) a liability may be partially matched;

• (b) an asset may be partially matched;

• (c) one asset may be matched with two or more liabilities (wholly or partially);

• (d) one liability may be matched with two or more assets (wholly or partially).

• (5) Regulations may include provision that an election relating to an asset or assets shall be treated as made in relation to another asset or other assets (as where assets are replaced by others).

• (6) Regulations may include provision—

• (a) that an election may in prescribed circumstances have effect from a time before it is made;

• (b) that an election may be varied;

• (c) that an election may not be revoked;

• (d) that an election must be made by the company (subject to any provision under sub-paragraph (7) below).

• (7) Regulations may provide that where the company is a relevant controlled foreign company an election may be made by a United Kingdom resident company which has (or may be made jointly by United Kingdom resident companies which together have) a majority interest in the company; and—

• (a) a company is a relevant controlled foreign company if Chapter IV of Part XVII of the Taxes Act 1988 applies in relation to the accounting period of the company which constitutes the accrual period or in which the accrual period falls;

• (b) paragraph 4(3) of Schedule 24 to that Act (majority interest) applies for the purposes of this sub-paragraph.

• (8) Regulations may include provision—

• (a) that prescribed conditions shall be treated as fulfilled in prescribed circumstances (subject to any provision under paragraph (b) below);

• (b) that prescribed conditions shall be treated as not having been fulfilled if the inspector gives notification that he is not satisfied that they are fulfilled;

• (c) for an appeal from the inspector’s notification;

• (d) for a notification to be given to the company or companies making the election.

• (9) Regulations may be so framed that the accrued amount as regards a day depends on the extent to which a liability is matched.

• (10) Regulations may also provide as mentioned in one or more of the following paragraphs—

• (a) that a chargeable gain (or chargeable gains) shall be treated as accruing to a relevant person for the purposes of the Taxation of Chargeable Gains Act 1992;

• (b) that an allowable loss (or allowable losses) shall be treated as accruing to a relevant person for the purposes of that Act;

• (c) that the operation of that Act as regards a relevant person shall be otherwise adjusted in accordance with prescribed rules (whether the adjustment results in the incidence of tax on the person being greater or smaller).

• (11) For the purposes of sub-paragraph (10) above each of the following is a relevant person—

• (a) the company mentioned in sub-paragraph (1) above;

• (b) any person who has at any time acquired a matched asset (or part of a matched asset) since the company acquired it;

and a matched asset is an asset which has at any time been to any extent matched with a liability in pursuance of an election.

• (12) Regulations may make provision—

• (a) as to the occasion on which a chargeable gain or allowable loss mentioned in sub-paragraph (10) above is to be treated as accruing, as to the amount to be treated as the amount of the gain or loss, and as to other matters relating to the gain or loss;

• (b) as to the timing and extent of any adjustment mentioned in sub-paragraph (10)(c) above and as to other matters relating to the adjustment.

Combination of circumstances

5

• (1) This paragraph applies where regulations under more than one of paragraphs 2 to 4 above apply—

• (a) as regards the same asset or liability, and

• (b) for the same accrual period.

• (2) Regulations may provide that, as regards any day falling within the period and identified in accordance with prescribed rules, the accrued amount shall be ascertained in accordance with rules prescribed under this paragraph (rather than provisions made under any of those paragraphs).

Arm’s length test

6

Where regulations make provision under any of the relevant paragraphs, they may provide that for the purposes of section 136(11) of this Act amounts X and Y shall be found without regard to matters which are prescribed and would otherwise have had to be taken into account under the regulations ; and the relevant paragraphs are paragraphs 2, 3, 4 and 5 above..

Local currency

7

Where regulations make provision under any of paragraphs 2 to 5A above, section 149 of this Act shall have effect as if the references to sections 125 to 127 included references to this Schedule and the provisions of the regulations.

General

8

Regulations may be so framed that the accrued amount as regards a day is nil (so that, depending on the circumstances, an initial exchange gain or initial exchange loss may be extinguished).

9

Regulations may make different provision about exchange gains (on the one hand) and exchange losses (on the other).

SCHEDULE 16

Introduction

1

For the purposes of this Schedule an existing asset, liability or contract is an asset, liability or contract to which this Chapter applies by virtue of section 165(2) or (3) of this Act or by virtue of regulations under section 165(4) of this Act.

General provision

2

• (1) Regulations may make such provision as the Treasury think fit with regard to the application of this Chapter to an existing asset, liability or contract (such as provision for finding the basic valuation of an asset or liability).

• (2) Nothing in the following provisions of this Schedule shall prejudice the generality of sub-paragraph (1) above.

Attributed gain or loss

3

• (1) Regulations may provide that—

• (a) an amount found in accordance with prescribed rules shall be attributed to an existing asset or liability, and

• (b) the amount shall be characterised as a gain or loss in accordance with prescribed rules.

• (2) The regulations may provide that an attributed gain or loss shall be set off against exchange losses or exchange gains accruing as regards the asset or liability; and for this purpose—

• (a) an exchange gain is an exchange gain of a trade or an exchange gain of part of a trade or a non-trading exchange gain;

• (b) an exchange loss is an exchange loss of a trade or an exchange loss of part of a trade or a non-trading exchange loss.

• (3) The regulations may provide that if an event of a prescribed description occurs as regards the asset or liability at a time falling on or after the commencement day of the company concerned and at a time when all or part of an attributed gain or loss is outstanding—

• (a) an initial exchange gain or initial exchange loss of an amount found in accordance with prescribed rules shall be treated as accruing to the company as regards the asset or liability, or

• (b) a chargeable gain or allowable loss of an amount found in accordance with prescribed rules shall be treated as accruing to the company as regards the asset or liability for the purposes of the Taxation of Chargeable Gains Act 1992.

• (4) The regulations may provide that where—

• (a) apart from provision under this sub-paragraph, an allowable loss would be treated as accruing by virtue of provision made under sub-paragraph (3)(b) above, and

• (b) the company concerned makes an election in accordance with prescribed rules,

the loss shall not be treated as accruing and relief of an amount equal to it shall be given to the company in such form and manner as may be prescribed.

• (5) The regulations may provide that where provision under this paragraph has effect the outstanding attributed gain or loss shall be treated as reduced or extinguished.

• (6) The regulations may make provision—

• (a) as to the time when an initial exchange gain or initial exchange loss is to be treated as accruing and as to the extent to which it is to be treated as an exchange gain or loss of a trade or of part of a trade or as a non-trading exchange gain or loss;

• (b) as to the occasion on which a chargeable gain or allowable loss is to be treated as accruing;

• (c) as to other matters relating to setting off against, or the accrual of, gains or losses as mentioned in this paragraph.

Adjustment of exchange gain or loss

4

• (1) Regulations may provide that where an exchange gain or exchange loss accrues to a company as regards an existing asset or liability (or would so accrue apart from the regulations)—

• (a) the amount of the gain or loss shall be deemed to be increased in accordance with prescribed rules,

• (b) the amount of the gain or loss shall be deemed to be reduced in accordance with prescribed rules, or

• (c) the gain or loss shall be deemed not to accrue.

• (2) For the purposes of this paragraph—

• (a) an exchange gain is an exchange gain of a trade or an exchange gain of part of a trade or a non-trading exchange gain;

• (b) an exchange loss is an exchange loss of a trade or an exchange loss of part of a trade or a non-trading exchange loss.

• (3) The regulations may be framed by reference to—

• (a) exchange differences arising as regards the asset or liability at any time while the company actually holds or owes it (whether any such time falls before, on or after the company’s commencement day);

• (b) such other factors as the Treasury think fit;

and for this purpose exchange differences are gains and losses attributable to fluctuations in currency exchange rates.

• (4) The regulations may include provision designed to prevent provision under them being avoided by the replacement (or partial replacement) of assets or liabilities by other assets or liabilities.

Allowable losses

5

• (1) Regulations may provide that where—

• (a) an allowable loss of a prescribed description has accrued to a qualifying company for the purposes of the Taxation of Chargeable Gains Act 1992,

• (b) the loss has accrued before the company’s commencement day,

• (c) all or part of the loss has not been allowed as a deduction under that Act, and

• (d) prescribed conditions (whether relating to the making of a claim or otherwise) are fulfilled,

the loss shall be set off against exchange gains accruing to the company.

• (2) For the purposes of this paragraph an exchange gain is an exchange gain of a trade or an exchange gain of part of a trade or a non-trading exchange gain.

• (3) The regulations may provide that the loss may only be set off—

• (a) to the extent that it has not been allowed as a deduction under the Taxation of Chargeable Gains Act 1992;

• (b) against exchange gains accruing as regards assets or liabilities of a prescribed description.

• (4) The regulations may include rules for ascertaining whether an allowable loss of a prescribed description has or has not been allowed as a deduction under the Taxation of Chargeable Gains Act 1992.

Miscellaneous

6

• (1) Regulations may provide—

• (a) that provision under paragraph 3 above or provision under paragraph 4 above or provision under neither of them shall apply in the case of an asset or liability according to the circumstances of the case;

• (b) that provision under paragraph 3(3)(a) above or provision under paragraph 3(3)(b) above shall apply in the case of an asset or liability according to the circumstances of the case.

• (2) The circumstances may be framed by reference to—

• (a) whether, and how, exchange differences arising as regards the asset or liability would be taken into account for tax purposes apart from this Chapter;

• (b) such other factors as the Treasury think fit;

and for this purpose exchange differences are gains and losses attributable to fluctuations in currency exchange rates.

SCHEDULE 17

Introduction

1

In this Schedule “the 1992 Act” means the Taxation of Chargeable Gains Act 1992.

Currency

2

• (1) In a case where—

• (a) there is for the purposes of the 1992 Act a disposal of currency other than sterling by a qualifying company, and

• (b) immediately before the disposal the company did not hold the currency in exempt circumstances (within the meaning given by paragraph 3 below),

for the purposes of that Act no chargeable gain or allowable loss shall accrue on the disposal.

• (2) This paragraph applies to disposals on or after the company’s commencement day.

3

• (1) For the purposes of paragraph 2 above a company holds currency in exempt circumstances at a given time if—

• (a) the purposes for which it then holds the currency are or include any of the purposes mentioned in sub-paragraph (2) below,

• (b) it is a housing association approved at that time for the purposes of section 488 of the Taxes Act 1988, or

• (c) it is a self-build society approved at that time for the purposes of section 489 of that Act.

• (2) The purposes referred to in sub-paragraph (1)(a) above are—

• (a) the purposes of long-term insurance business;

• (b) the purposes of mutual insurance business;

• (c) the purposes of the occupation of commercial woodlands.

• (3) In this paragraph—

• “long-term insurance business” means business which consists of the effecting or carrying out of contracts which fall within Part II of Schedule 1 to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001;

• “commercial woodlands” means woodlands in the United Kingdom which are managed on a commercial basis and with a view to the realisation of profits.

Debts other than securities

4

Debts on securities: disposals

5

Debts on securities: relief

6

Reconstructions, groups etc.

7

• (1) This paragraph applies where there is for the purposes of the 1992 Act a disposal or acquisition of an asset which is—

• (a) currency,

• (b) a debt which is not a debt on a security and the right to settlement under which is a qualifying asset,

• (c) a security (as defined in section 132 of the 1992 Act) where the right to settlement under the debt on the security is a qualifying asset, or

• (d) an obligation which by virtue of section 143 of the 1992 Act (futures and options) is regarded as an asset to the disposal of which that Act applies and which is a duty under a currency contract.

• (2) In a case where—

• (a) the condition mentioned in sub-paragraph (3) below is fulfilled, and

• (b) section 139 or 171 of the 1992 Act (reconstructions, groups etc.) would, apart from this paragraph, apply as regards the disposal or acquisition,

the section concerned shall not apply as regards the disposal and the corresponding acquisition or (as the case may be) shall not apply as regards the acquisition and the corresponding disposal.

• (3) The condition is that stated in paragraph (a) or (b) below (as the case may be)—

• (a) the disposal is by a qualifying company and immediately before the disposal the asset is held wholly for qualifying purposes;

• (b) the acquisition is by a qualifying company and immediately after the acquisition the asset is held wholly for qualifying purposes.

• (4) For the purposes of this paragraph qualifying purposes are purposes which constitute one or both of the following—

• (a) purposes of long-term insurance business;

• (b) purposes of mutual insurance business;

and “long-term insurance business” means business which consists of the effecting or carrying out of contracts which fall within Part II of Schedule 1 to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001.

• (5) This paragraph applies where the disposal or acquisition (as the case may be) is made on or after the commencement day of the company mentioned in sub-paragraph (3)(a) or (b) above (as the case may be).

Indexation allowance

8

SCHEDULE 18

Taxes Management Act 1970 (c. 9)

1

In section 87A of the Taxes Management Act 1970 (interest on overdue tax for accounting periods ending after appointed day) the following subsection shall be inserted after subsection (4)—

(4A) In a case where— (a) there is for an accounting period of a company (“the later period”) a relievable amount within the meaning of section 131 of the Finance Act 1993 (non-trading exchange gains and losses), (b) as a result of a claim under subsection (5) or (6) of that section the whole or part of the relievable amount for the later period is set off against the exchange profits (as defined in subsection (10) of that section) of an earlier accounting period (“the earlier period”), and (c) disregarding the effect of subsection (5) or (6) (as the case may be) of that section, an amount of corporation tax for the earlier period would carry interest in accordance with this section, then, in determining the amount of interest payable under this section on corporation tax unpaid for the earlier period, no account shall be taken of any reduction in the amount of that tax resulting from the claim under subsection (5) or (6) of that section except so far as concerns interest for any time after the date on which any corporation tax for the later period became due and payable, as mentioned in subsection (1) above.

Income and Corporation Taxes Act 1988 (c. 1)

2

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

3

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

4

In section 407 of the Taxes Act 1988 (relationship between group relief and other relief) in subsection (2) at the end of paragraph (b) there shall be inserted “ and ”, and after that paragraph there shall be inserted—

(c) relief under section 131(7) of the Finance Act 1993 in respect of the whole or part of a relievable amount for an accounting period after the accounting period the profits of which are being computed; and the reference in paragraph (c) above to a relievable amount shall be construed in accordance with section 131 of the Finance Act 1993.

5

In section 826 of the Taxes Act 1988 (interest on tax overpaid) the following subsection shall be inserted after subsection (7B)—

(7C) In a case where— (a) there is for an accounting period of a company (“the later period”) a relievable amount within the meaning of section 131 of the Finance Act 1993 (non-trading exchange gains and losses), (b) as a result of a claim under subsection (5) or (6) of that section the whole or part of the relievable amount for the later period is set off against the exchange profits (as defined in subsection (10) of that section) of an earlier accounting period (“the earlier period”), and (c) a repayment falls to be made of corporation tax for the earlier period, then, in determining the amount of interest (if any) payable under this section on the repayment of corporation tax for the earlier period, no account shall be taken of any increase in the amount of the repayment resulting from the claim under subsection (5) or (6) (as the case may be) of that section except so far as concerns interest for any time after the date on which any corporation tax for the later period became (or, as the case may be, would have become) due and payable, as mentioned in subsection (2) above.

6

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

Finance Act 1989 (c. 26)

7

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

SCHEDULE 19

Part I — Determination of a syndicate’s profit or loss

Preliminary

1

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

Returns by managing agent

2

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

Determinations by inspector

3

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

Appeals

4

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

Modification of determinations pending appeal

5

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

Apportionments of syndicate’s profit or loss

6

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

Individual members: effect of determinations

7

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

Assessment of individual members: time limits

8

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

Part II — Payments on account of tax

Preliminary

9

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

Returns by members’ agent

10

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

Payments on account of tax

11

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

Assessment on members’ agent

12

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

Part III — Repayment of tax deducted etc. from investment income

13

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

SCHEDULE 20

Part I — Requirements for and tax consequences of new-style funds

Preliminary

1

• (1) In this Part of this Schedule—

• “the arrangements” means the arrangements mentioned in section 175(1) of this Act;

• “cash call” means a request for funds which, in pursuance of a contract made in accordance with the rules and practices of Lloyd’s, is made to a member by the agent of a syndicate of which he is a member;

• “overall premium limit”, in relation to a member and an underwriting year, means the maximum amount which, under the rules of Lloyd’s, the member may accept by way of premiums in that year;

• “payment”, unless the contrary intention appears, means a payment in money;

• “stop-loss payment” means a payment of insurance money under a stop-loss insurance or a payment out of the High Level Stop Loss Fund;

• “syndicate profit”, in relation to a member and an underwriting year, means the amount by which the aggregate of his profits exceeds the aggregate of his losses for the year, and “syndicate loss” shall be construed accordingly.

• (2) For the purposes of the definitions of “syndicate profit” and “syndicate loss” in sub-paragraph (1) above—

• (a) any reference to profits or losses of a member is a reference to profits or losses which, in the accounts of the syndicates of which he is a member, are shown as arising to him, . . .

• (b) any payments under paragraph 3(1), 4(1), (2), (3) or (6), 5(1), (4) or (7) or 6(2) below shall be disregarded.

• (c) where the accounts of a syndicate remain open beyond the end of the underwriting year which is the closing year for that syndicate, profits or losses shown in the accounts of the syndicate as arising to a member in any subsequent underwriting year shall be profits or losses of the member for the last underwriting year but one preceding that subsequent underwriting year.

General requirements

2

• (1) The arrangements must provide—

• (a) for the setting up, in relation to any member, of a special reserve fund vested in one or more trustees who have control over it, and

• (b) for the appointment of an authorised fund manager (who may be the trustees or one of the trustees) to invest the capital of the fund and to vary the investments;

and in this sub-paragraph “authorised” means authorised under the rules of Lloyd’s.

• (2) The arrangements must be such as to secure that—

• (a) any income arising to the trustee or trustees of the special reserve fund shall be added to the capital of the fund and held on the same trusts as the fund; and

• (b) except as required or permitted by this Schedule, no payments shall be made into or out of the special reserve fund.

Payments into fund out of syndicate profits

3

• (1) The arrangements must be such as to secure that, if the member has made a syndicate profit for an underwriting year, he has the right to make, into his special reserve fund, payments the amount of which is not in the aggregate greater than whichever of the following is the less, namely—

• (a) 50 per cent. of that profit; and

• (b) the amount (if any) by which 50 per cent. of the member’s overall premium limit for the closing year exceeds the value of the fund as at the end of that year.

• (2) Any payments which a member is entitled to make by virtue of sub-paragraph (1) above must be made before the end of such period as may be prescribed.

• (3) Where the member did not accept premiums in the closing year, the reference in sub-paragraph (1)(b) above to the member’s overall premium limit for that year shall be construed as a reference to that limit for the latest underwriting year in which he did so.

Payments out of fund to cover cash calls

4

• (1) The arrangements must be such as to secure that, if a cash call is made on the member in respect of an underwriting year, there shall be made into a premium trust fund of his, out of his special reserve fund, payments the amount of which is equal in the aggregate to the amount of the call, or the amount of his special reserve fund, whichever is the less.

• (1A) References in sub–paragraph (1) above to a cash call include references to a cash call made in respect of an underwriting year determined by paragraph 1(2)(c) above (“the relevant cash call”) if and to the extent that the aggregate amount of the relevant cash call and any previous cash calls made on the member in respect of the syndicate concerned exceeds the net amount of losses arising to the member from that syndicate which have been declared before the date of the relevant cash call after deducting the amount of profits arising to him from that syndicate which have been so declared.

• (2) Where the aggregate amount of any payments made under sub-paragraph (1) above in respect of any year is found to exceed the amount of the member’s syndicate loss for the year, there shall be made into his special reserve fund, out of a premium trust fund or ancillary trust fund of his, payments the amount of which is equal in the aggregate to the amount of the excess.

• (3) Where a stop-loss payment is made to the member in respect of his syndicate loss for any year, so much of the stop-loss payment as does not exceed the requisite amount shall be paid into his special reserve fund.

• (4) In sub-paragraph (3) above “the requisite amount” means so much of the amount (if any) given by sub-paragraph (5) below as does not exceed the aggregate amount mentioned in paragraph (b) of that sub-paragraph.

• (5) The amount given by this sub-paragraph is the amount by which—

• (a) the amount of the stop-loss payment, and

• (b) the aggregate amount of the payments under sub-paragraph (1) above as reduced by the aggregate amount of any payments under sub-paragraph (2) above,

exceeds in the aggregate the amount of the member’s syndicate loss.

• (6) Where the whole or any part of a stop-loss payment made to a member is repaid, there shall be made to the member or his personal representatives or assigns, out of his special reserve fund, payments the amount of which is equal in the aggregate to the amount (if any) to which sub-paragraph (7) below applies or the amount of his special reserve fund, whichever is the less.

• (7) This sub-paragraph applies to any amount which—

• (a) has been paid into the member’s special reserve fund under sub-paragraph (2) or (3) above, but

• (b) would not have been so paid but for the stop-loss payment or (as the case may be) the part repaid.

• (8) Any payments required by sub-paragraph (1), (2), (3) or (6) above shall be made before the end of such period as may be prescribed.

Payments out of fund to cover syndicate losses

5

• (1) The arrangements must be such as to secure that, if the member has sustained a syndicate loss for an underwriting year, there shall be made into a premium trust fund of his, out of his special reserve fund, payments the amount of which is equal in the aggregate to the net amount of the loss or the amount of his special reserve fund, whichever is the less.

• (2) Sub-paragraphs (3) and (4) below apply where a stop-loss payment is made to the member in respect of his syndicate loss for any year.

• (3) If any payments are subsequently made for the year under sub-paragraph (1) above, the aggregate amount of those payments shall be determined as if the net amount of the syndicate loss were reduced by the amount of the stop-loss payment.

• (4) If any payments have previously been made for the year under sub-paragraph (1) above, so much of the stop-loss payment as does not exceed the requisite amount shall be paid into his special reserve fund.

• (5) In sub-paragraph (4) above “the requisite amount” means so much of the amount (if any) given by sub-paragraph (6) below as does not exceed the amount mentioned in paragraph (b) of that sub-paragraph.

• (6) The amount given by this sub-paragraph is the amount by which—

• (a) the amount of the stop-loss payment, and

• (b) the aggregate amount of the payments made under sub-paragraph (1) above,

exceeds in the aggregate the net amount of the member’s syndicate loss.

• (7) Where the whole or any part of a stop-loss payment made to a member is repaid, there shall be made to the member or his personal representatives or assigns, out of his special reserve fund, payments the amount of which is equal in the aggregate to the aggregate of the amounts (if any) to which sub-paragraphs (8) and (9) below apply or the amount of his special reserve fund, whichever is the less.

• (8) This sub-paragraph applies to any amount which—

• (a) has not been paid out of the member’s special reserve fund under sub-paragraph (1) above, but

• (b) would have been so paid but for the stop-loss payment or (as the case may be) the part repaid.

• (9) This sub-paragraph applies to any amount which—

• (a) has been paid into the member’s special reserve fund under sub-paragraph (4) above, but

• (b) would not have been so paid but for the stop-loss payment or (as the case may be) the part repaid.

• (10) Any payments required by sub-paragraph (1), (4) or (7) above shall be made before the end of such period as may be prescribed.

• (11) In this paragraph “net amount”, in relation to a member’s syndicate loss for any year, means the amount of the loss as reduced by the amount of any payments made under paragraph 4(1) above for the year.

Valuation and payments out of fund of excess amounts

6

• (1) The arrangements must be such as to secure that the fund manager of a member’s special reserve fund—

• (a) shall determine in the prescribed manner the value of the fund as at the end of the year 1994 and each subsequent underwriting year; and

• (b) shall report the value so determined to the member;

and the report shall also state such other matters as may be prescribed.

• (2) If the value (determined under sub-paragraph (1) above) of the fund as at the end of any underwriting year exceeds 50 per cent. of—

• (a) the higher of—

• (i) the member’s overall premium limit for that year, and

• (ii) his overall premium limit for the immediately preceding year; or

• (b) where he did not accept premiums in either of those years, his overall premium limit for the last underwriting year in which he did so,

there shall be made to the member or his personal representatives or assigns, out of his special reserve fund, payments the amount of which is equal in the aggregate to the excess.

• (3) The payments required by sub-paragraph (2) above shall be made before the end of such period as may be prescribed.

Payments out of fund on cessation

7

• (1) The arrangements must provide that, on the member ceasing to carry on his underwriting business, whether by reason of death or otherwise, the amount of his special reserve fund, so far as not required for giving effect to the requirements of paragraph 4 or 5 above, shall be paid over to the member or his personal representatives or assigns.

• (2) For the purposes of sub-paragraph (1) above, a payment of an amount shall be in money or in assets forming part of the fund or both, as the member or his personal representatives or assigns may direct.

Entitlement of member for tax purposes

8

• (1) Subject to sub-paragraph (2) and paragraph 11(2)-(4)below, a member shall be treated for the purposes of the Income Tax Acts and the Gains Tax Acts as absolutely entitled as against the trustees to the assets forming part of his special reserve fund.

• (2) Where an asset is disposed of by a member to the trustees of his special reserve fund, nothing in sub-paragraph (1) above shall affect the operation of the Gains Tax Acts in relation to that disposal.

Tax exemption for profits arising from assets of fund

9

• (1) Profits or losses arising from assets forming part of a special reserve fund shall be excluded for the purposes of income tax under the Income Tax Acts, and for the purposes of capital gains tax under the Gains Tax Acts.

• (2) Where for any underwriting year income tax has been deducted from any profits arising from assets forming part of a special reserve fund, the fund manager may, at any time after the end of that year, claim repayment of that tax.

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

Tax consequences of payments into and out of fund

10

• (1) In computing for the purposes of income tax the profits of a member’s underwriting business for any year of assessment, the aggregate amount of any payments which, in respect of the relevant underwriting year, are made into his special reserve fund under paragraph 3(1) above shall be deducted as an expense.

• (2) In computing for the purposes of income tax the profits of a member’s underwriting business for any year of assessment—

• (a) the aggregate amount of any payments which, in respect of the relevant underwriting year, are made out of his special reserve fund under paragraph 4(1) or 5(1) above shall be treated as a trading receipt; and

• (b) the aggregate amount of any payments which, in respect of that year, are made into that fund under paragraph 4(2) or (3) or 5(4) above shall be deducted as an expense.

• (3) In computing for the purposes of income tax the profits of a member’s underwriting business for any year of assessment, the aggregate amount of any payments which, as a result of the repayment of stop-loss payments in the relevant underwriting year, are made out of his special reserve fund under paragraph 4(6) or 5(7) above shall be treated as a trading receipt.

• (4) In computing for the purposes of income tax the profits of a member’s underwriting business for any year of assessment, the aggregate amount of any payments which, in respect of the relevant underwriting year’s closing year, are made out of his special reserve fund under paragraph 6(2) above (including where they are also made under paragraph 7(1) above)shall be treated as a trading receipt.

• (5) In this paragraph “the relevant underwriting year”, in relation to a year of assessment, means the underwriting year next but two before its corresponding underwriting year.

Tax consequences of cessation

11

• (1) This paragraph applies where a member ceases to carry on his underwriting business,whether by reason of death or otherwise.

• (2) In computing for the purposes of income tax the profits of the member’s underwriting business for the relevant year of assessment, any payment under paragraph 7(1) above (except where they are also made under paragraph 6(2) above)which is made to him or his personal representatives or assigns out of his special reserve fund shall be treated—

• (a) subject to sub-paragraph (2A) below, as made immediately after the end of the relevant underwriting year; and

• (b) as being a single trading receipt of an amount equal to that mentioned in sub-paragraph (3) below.

• (2A) Where the member ceases to carry on his underwriting business by reason of his death, any payment falling within sub-paragraph (2) above shall be treated, for the purposes of sections 59C and 86 of the Management Act , as if made immediately after the commencement of his final year of assessment.

• (3) The amount referred to in sub-paragraph (2) above is the value of the fund, as determined under paragraph 6(1) above for the penultimate underwriting year and—

• (a) as reduced by the aggregate amount of any payments under paragraph 4(1) or (6) or 5(1) or (7) above made after the end of that year;

• (b) as increased by the aggregate amount of any payments under paragraph 3(1),4(2) or (3) or 5(4) above so made; . . .

• (c) as increased by the amount of any tax repayment . . . under paragraph 9(2) . . . above after the end of that year.

• (d) as increased by an amount equal to any profits, and reduced by an amount equal to any losses, arising to the trustees from assets after the end of that year (excluding any gains or losses on assets whose transfer is treated as an acquisition by sub-paragraph (4)(a) or (b) below); and

• (e) as increased by the aggregate amount of any payments made—

• (i) by the trustees to the member or his personal representatives or assigns,

• (ii) out of his special reserve fund under paragraph 7(1) above (except where they are also made under paragraph 6(2) above), or otherwise than out of his special reserve fund, and

• (iii) before the end of that year,

and for this purpose the amount of any payment which is made by way of the transfer of an asset shall be taken to be the market value of the asset at the date of the transfer and “market value” shall be construed in accordance with section 272 of the Taxation of Chargeable Gains Act 1992 .

• (4) Where an asset is transferred to the member or his personal representatives or assigns under paragraph 7(1) above or otherwise than out of his special reserve fund, the transfer shall be treated, for the purposes of the Gains Tax Acts —

• (5) In this paragraph, subject to the provisions of any regulations made by the Board—

• “the relevant year of assessment” means—where a member dies before the occurrence of any of the events specified in sub-paragraph (6) below, the year of assessment at the end of which he is treated, by virtue of section 179A(2) of this Act , as having died;in any other case, his final year of assessment.

• (6) For the purposes of the definitions of “the relevant underwriting year” and “the relevant year of assessment” in sub–paragraph (5) above the events specified before the occurrence of which a member dies are the following—

• (a) the member’s deposit at Lloyd’s is paid over to him or his assigns, or to a person other than the member or his assigns;

• (b) the member or another person is released from any arrangement entered into by the member or that person in order to satisfy the requirement on the part of the member to provide a deposit at Lloyd’s;

• (c) the last open year of account of any syndicate of which he was a member is closed.

• (7) For the purposes of sub–paragraph (6)(c) above, the last open year of account of any syndicate of which a person was a member shall be regarded as having closed either—

• (a) when the member is treated under the rules or practice of Lloyd’s as having been discharged of all his liabilities in relation to that syndicate, whether by the syndicate closing its accounts or by the member or his personal representatives or assigns entering into a quota share contract, or

• (b) in a case where the member entered, or his personal representatives or assigns have entered, into a quota share contract before the end of the closing year of the syndicate, at the end of the underwriting year in which the contract was made.

Part II — Winding up of old-style funds

Preliminary

12

• (1) In this Part of this Schedule—

• “new-style fund” means a special reserve fund set up under the arrangements mentioned in section 175(1) of this Act;

• “old-style fund” means a special reserve fund set up under the arrangements mentioned in section 452(1) of the Taxes Act 1988;

• “the relevant period”, in relation to an old-style fund, means the period of three months beginning with the closing date.

• (2) For the purposes of sub-paragraph (1) above, the closing date for an old-style fund shall be the earliest date on which each of the following has occurred as respects the year 1991-92 and earlier years of assessments, namely—

• (a) the time for making any payments into the fund under section 452(5) of the Taxes Act 1988 has expired, or the member has given notice to the inspector that he will not be making any (or any further) such payments; and

• (b) any payments required by section 453(1) of that Act to be made out of the fund have been so made.

Winding up of old-style funds

13

• (1) A member may, at any time before the end of the relevant period, direct that so much of the capital of any old-style fund of his as represents sums paid into it under section 452(5) of the Taxes Act 1988 shall be transferred, at the end of that period, into his new-style fund; . . .

• (2) Where an amount of capital is transferred into a member’s new-style fund under sub-paragraph (1) above, there shall be paid into that fund by the Board an amount equal to the amount of tax which, if the amount transferred were a net amount corresponding to a gross amount from which income tax had been duly deducted at the basic rate for the year 1992-93, would have been so deducted.

• (3) If a member does not give a direction under sub-paragraph (1) above in relation to any old-style fund of his, so much of the capital of that fund as represents sums paid into it under section 452(5) of the Taxes Act 1988 shall be paid over, at the end of the relevant period, to the member or his personal representatives or assigns.

• (4) In either event, the remaining capital of any old-style fund of a member shall be paid over, at the end of the relevant period, to the member or his personal representatives or assigns.

• (5) For the purposes of sub-paragraphs (1) and (3) above, any payments made out of an old-style fund under section 453(1) of the Taxes Act 1988 shall be treated as having been met, so far as possible, out of payments made into the fund under section 452(5) of that Act.

• (6) A transfer or payment under this paragraph of an amount of capital shall be in money or in assets forming part of the fund or both, as the member may direct.

Tax consequences of winding up

14

• (1) Where an asset is transferred into a member’s new-style fund under paragraph 13(1) above, the transfer shall be treated, for the purposes of the Gains Tax Acts, to be a disposal of the asset by the member for a consideration equal to its market value.

• (2) Sub-paragraph (3) below applies where an amount is paid over to the member or his personal representatives or assigns under paragraph 13(3) above.

• (3) In computing for the purposes of income tax the profits of the member’s underwriting business for the year 1992-93, it shall be assumed—

• (a) that the amount paid were a net amount corresponding to a gross amount from which income tax had been duly deducted at the basic rate for that year; and

• (b) that the corresponding gross amount were a trading receipt for that year.

SCHEDULE 21

Part I — Restrictions on powers under section 187

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Part II — Meaning of “documents”

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SCHEDULE 22

Introduction

1

The Government Trading Funds Act 1973 shall be amended as follows.

Reserves

2

• (1) The following section shall be inserted after section 2—

(2AA) (1) An order providing for any assets and liabilities to be appropriated as assets and liabilities of a trading fund may make— (a) provision for any part of the amount by which the values of the assets exceed the amounts of the liabilities to be treated as reserves in the accounts of the trading fund, and (b) provision about the maintenance of such reserves. (2) For the purposes of subsection (1) above “reserves” means reserves whether general, capital or otherwise; and an order may provide for different kinds of reserves. (3) Nothing in subsection (1) above shall prejudice the operation of section 4(2) of this Act in relation to a trading fund; and nothing in section 4(2) of this Act shall prejudice the operation of subsection (1) above in relation to a trading fund. (4) This section applies in relation to an order made after the day on which the Finance Act 1993 was passed.

• (2) In section 2(3) (originating debt where fund established) in paragraph (b) after “capital” there shall be inserted “ or any amount treated by virtue of the order as reserves or (where the order provides for both public dividend capital and reserves) the aggregate of those amounts ”.

• (3) In section 2(4) (addition to originating debt where additional assets and liabilities appropriated to fund) in paragraph (b) after “capital” there shall be inserted “ for any amount treated by virtue of the order as reserves or (where the order provides for both public dividend capital and reserves) the aggregate of those amounts ”.

Public dividend capital etc.

3

In section 2A (public dividend capital) the following subsection shall be inserted after subsection (2) (limited power of Minister to issue public dividend capital to fund)—

(2A) If the responsible Minister considers it appropriate to do so, he may with Treasury concurrence issue out of money provided by Parliament an amount to the fund as public dividend capital; and this subsection shall have effect instead of subsection (2) above after the day on which the Finance Act 1993 was passed.

Maximum borrowing etc.

4

• (1) The following section shall be inserted after section 2B—

(2C) (1) Where an order made after the day on which the Finance Act 1993 was passed establishes a trading fund, the order shall provide that the aggregate of the following shall not exceed the maximum specified in the order— (a) the total outstanding at any given time in respect of amounts issued to the fund under section 2B of this Act (other than as originating debt), and (b) the total at that time constituting public dividend capital issued to the fund under section 2A(2A) of this Act; and that maximum (or that maximum as varied by a subsequent order) shall be observed accordingly. (2) Where an order made on or before the day on which the Finance Act 1993 was passed establishes a trading fund, and the order specifies the maximum amount that may be issued to the fund under section 2B of this Act, the order shall be taken to provide that the aggregate of the following shall not exceed that maximum— (a) the total outstanding at any given time in respect of amounts issued to the fund under section 2B of this Act (other than as originating debt), and (b) the total at that time constituting public dividend capital issued to the fund under section 2A(2A) of this Act; and that maximum (or that maximum as varied by a subsequent order) shall be observed accordingly. (3) The sum of the maxima in force in respect of all trading funds at any time shall not exceed £2,000 million. (4) The Treasury may by order made by statutory instrument increase or further increase the limit in subsection (3) above by any amount, not exceeding £1,000 million, specified in the order but not so as to make the limit exceed £4,000 million. (5) No order under subsection (4) above shall be made unless a draft of a statutory instrument containing it has been laid before the House of Commons and approved by a resolution of that House.

• (2) In section 2B (borrowing by funds) subsections (6) to (9) (which are superseded by the new section 2C) shall be omitted.

SCHEDULE 23

Part I — Excise duties

Part II — Value added tax

Part III — Income tax, corporation tax and capital gains tax

Part IV — Oil taxation

Part V — Inheritance tax

Part VI — Statutory effect of resolutions etc.

Part VII — Trading funds

Rates of duty.

Beer duty: rate for new regime.

Low strength beer.

Beer duty: abolition of certain reliefs, etc.

Blending of alcoholic liquors.

Sparkling wine or made-wine.

Extension of Hydrocarbon Oil Duties Act 1979 to energy products.

Measurement of volume.

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Rates of duty: general.

Offences by bodies corporate.

Re-organisations etc. involving debentures.

Restriction on set-off of pre-entry losses.

Provisions supplemental to sections 77 and 78.

Earnings cap etc: no indexation in 1993-94.

62A

Modifications where loss carried forward.

Taxation of profits and allowance of losses.

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Pre-trading expenditure.

Abolition of PRT for oil fields with development consents on or after 16th March 1993.

Reduction of rates of PRT and interest repayments for taxable oil fields.

Expenditure involving crime.

Expenditure involving crime.

Employers’ pension contributions.

93A

• (1) This section applies where in an accounting period a company carries on a business and either the first condition or the second condition is fulfilled.

• (2) The first condition is that—

• (a) the accounts of the company as a whole are prepared in sterling but, so far as relating to part of the business, they are prepared, using the closing rate/net investment method, from financial statements and records prepared in a currency other than sterling; or

• (b) in the case of a company which is not resident in the United Kingdom, the company makes a return of accounts for its permanent establishment in the United Kingdom prepared in sterling but, so far as relating to part of the business, it is prepared, using that method, from financial statements and records prepared in a currency other than sterling.

• (3) The second condition is that—

• (a) the accounts of the company as a whole are prepared in a currency other than sterling ( “the first currency”) in accordance with generally accepted accounting practice but, so far as relating to part of the business, they are prepared, using the closing rate/net investment method, from financial statements and records prepared in a currency ( “the second currency”) which is neither sterling nor the first currency; or

• (b) in the case of a company which is not resident in the United Kingdom, the company makes a return of accounts for its permanent establishment in the United Kingdom prepared in a currency other than sterling ( “the first currency”) in accordance with generally accepted accounting practice, but, so far as relating to part of the business, it is prepared, using the closing rate/ net investment method, from financial statements and records prepared in a currency ( “the second currency”) which is neither sterling nor the first currency.

• (4) The profits or losses of the part of the business for an accounting period shall for the purposes of corporation tax be found by—

• (a) taking the amount of all the profits and losses of the part of the business for the period computed and expressed in the relevant foreign currency; and

• (b) taking—

• (i) in a case where the first condition is fulfilled, the sterling equivalent, or

• (ii) in a case where the second condition is fulfilled, the equivalent in the first currency,

of the amount found by applying paragraph (a) above.

• (5) In a case where the second condition is fulfilled, effect shall be given to subsection (4) above before effectis given to section 93(4) above.

• (6) In the application for the purposes of subsection (4)(a) above of—

• (a) section 578A(2) or (3) of the Taxes Act 1988, or

• (b) section 43(3), 74(2), 75(1), 76(2), (3) or (4), 99(1), (2) or (3) or 208(1) of the Capital Allowances Act,

it shall be assumed that any sterling amount mentioned in any of those sections is its equivalent expressed in the relevant foreign currency.

• (7) Where for any accounting period—

• (a) the accounts of the company, so far as relating to a part of its business, are prepared, using the closing rate/net investment method, from financial statements and records prepared in a currency which is not sterling and, where the second condition is fulfilled, is not the first currency, or

• (b) in the case of a company which is not resident in the United Kingdom, its return of accounts for its permanent establishment in the United Kingdom, so far as relating to a part of the company’s business, is prepared, using that method, from such financial statements and records,

then, if different such financial statements and records are prepared in different currencies, the company shall be treated for the purposes of this section as having a separate part of a separate business for each such different currency (and this section shall accordingly apply separately in relation to each such part).

• (8) In this section, “part of a business” includes any collection of assets and liabilities.

• (9) In this section, unless the context otherwise requires—

• “accounts” has the same meaning as in section 93 above;

• “the closing rate/net investment method” means the method so called as described under the title “Foreign currency translation” in the Statement of Standard Accounting Practice issued in April 1983 by the Institute of Chartered Accountants in England and Wales;