Finance Act 1993

• (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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12

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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;

• “losses” has the same meaning as in section 92 above, except that it does not include allowable losses within the meaning of the Taxation of Chargeable Gains Act 1992;

• “profits” has the same meaning as in section 92 above, except that it does not include chargeable gains within the meaning of that Act;

• “the relevant foreign currency” means the currency in which the financial statements and records mentioned in subsection (2) or, as the case may be, (3) above are prepared;

• “return of accounts” has the same meaning as in section 93 above.

94AA

• (1) Where any receipt or expense, or the value of any asset, liability or derivative contract, of a company—

• (a) is to be taken into account in making a computation under subsection (1) of section 92 above for an accounting period, and

• (b) is denominated in a currency other than sterling,

it shall be translated into its sterling equivalent by reference to a rate determined in accordance with subsection (4) below.

• (2) Where the amount of any receipt or expense, or the value of any asset, liability or derivative contract, of a company—

• (a) falls to be brought into account for the purposes of the accounts mentioned in paragraph (a), or the return of accounts mentioned in paragraph (b), of subsection (2) of section 93 above,

• (b) is denominated in a currency other than the relevant foreign currency, within the meaning of that section, and

• (c) accordingly falls to be translated into the relevant foreign currency,

the amount or value shall for the purposes of that section be translated from the currency mentioned in paragraph (b) above into the relevant foreign currency by reference to a rate determined in accordance with subsection (4) below.

• (3) Where, for any purpose of any provision of section 93A(4) or (6) above, any profit or loss denominated in one currency falls to be translated into its equivalent expressed in another currency, the translation shall be made by reference to a rate determined in accordance with subsection (4) below.

• (4) The rate is—

• (a) the rate used in the preparation of the accounts of the company for the accounting period in question, if that rate is an arm’s length exchange rate for the relevant day, or

• (b) in any other case, the London closing exchange rate for the relevant day.

• (5) The reference in subsection (4)(a) above to the exchange rate used in the preparation of the accounts of the company includes a reference to any exchange rate implied by a derivative contract whose underlying subject matter is currency.

• (6) Nothing in this section affects the operation of Chapter 4 of Part 17 of the Taxes Act 1988 (controlled foreign companies).

• (7) Nothing in paragraph 88 of Schedule 18 to the Finance Act 1998 (company tax returns, assessments and related matters) shall be taken to prevent an amount being translated under this section for an accounting period by reference to an exchange rate which was not the exchange rate used to translate that amount for the purposes of the Corporation Tax Acts for another accounting period (whether of the same or a different company).

• (8) In this section—

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

• “arm’s length exchange rate” means such exchange rate as might reasonably be expected to be agreed between persons dealing at arm’s length;

• “derivative contract” shall be construed in accordance with Schedule 26 to the Finance Act 2002;

• “the relevant day”—where the rate used in the preparation of the accounts is an exchange rate for a particular day, means that day; andwhere the rate used in the preparation of the accounts is an average rate for a number of days, means each of those days;

• “underlying subject matter”, in relation to a derivative contract, shall be construed in accordance with Schedule 26 to the Finance Act 2002.

94AB

• (1) Where the amount of any receipt or expense, or the value of any asset, liability or derivative contract, of a company falls to be translated into its sterling equivalent for the purposes of section 93(4) or (5) above, the translation shall be made by reference to a rate which is an arm’s length exchange rate for the appropriate day.

• (2) For the purposes of subsection (1) above, the “appropriate day” is the day the rate for which would have been used if the accounts, or return of accounts, of the company were translated into sterling in accordance with generally accepted accounting practice in relation to foreign currency translation.

• (3) Nothing in this section affects the operation of Chapter 4 of Part 17 of the Taxes Act 1988 (controlled foreign companies).

• (4) Nothing in paragraph 88 of Schedule 18 to the Finance Act 1998 (company tax returns, assessments and related matters) shall be taken to prevent an amount being translated under this section for an accounting period by reference to an exchange rate which was not the exchange rate used to translate that amount for the purposes of the Corporation Tax Acts for another accounting period (whether of the same or a different company).

• (5) In this section—

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

• “arm’s length exchange rate” has the same meaning as in section 94AA;

• “derivative contract” shall be construed in accordance with Schedule 26 to the Finance Act 2002.

94A

• (1) If a trade carried on by a petroleum extraction company is a ring fence trade—

• (a) subsection (1) of section 94 above shall not apply as regards the trade, but

• (b) regulations may make provision under that section as regards a case where in an accounting period the company carries on the trade and the condition mentioned in subsection (2) below is fulfilled.

• (2) The condition is that—

• (a) part of the trade consists of activities which relate to oil and are carried on under the authority of a petroleum licence in the United Kingdom or a designated area, and

• (b) part of the trade consists of activities which relate to gas and are carried on under the authority of a petroleum licence in the United Kingdom or a designated area.

• (3) For the purposes of this section—

• (a) a petroleum licence is a licence granted under Part I of the Petroleum Act 1998or the Petroleum (Production) Act (Northern Ireland) 1964;

• (b) a petroleum extraction company is a company which carries on activities under the authority of such a licence;

• (c) a designated area is an area designated by Order in Council under section 1(7) of the Continental Shelf Act 1964.

• (4) For the purposes of this section “ring fence trade” means activities which—

• (a) fall within any of paragraphs (a) to (c) of subsection (1) of section 492 of the Taxes Act 1988 (oil extraction etc.), and

• (b) constitute a separate trade (whether by virtue of that subsection or otherwise).

• (5) For the purposes of this section—

• (a) “oil” means such substance as falls within the meaning of oil contained in section 502(1) of the Taxes Act 1988 and is not gas;

• (b) “gas” means such substance as falls within the meaning of oil contained in section 502(1) of the Taxes Act 1988 and is gas of which the largest component by volume, measured at a temperature of 15 degrees centigrade and a pressure of one atmosphere, is methane or ethane or a combination of those gases.

Pay and file: miscellaneous amendments.

Expenditure involving crime.

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

Parts of trades: petroleum extraction companies.

Transitional relief for certain exploration and appraisal expenditure.

Residence: available accommodation.

Corporation tax.

Double taxation relief in relation to petroleum revenue tax.

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Taxation of profits and allowance of losses.

Corporation tax.

Residence: available accommodation.

Residence: available accommodation.

Expenditure involving crime.

Accrual on qualifying assets and liabilities.

Modifications where loss carried forward.

135A

136A

Irrecoverable debts that become recoverable.

Interpretation and commencement.

Nominal amount of a debt.

168A

Taxation of profits and allowance of losses.

179A

• (1) This section applies where a member ceases to carry on his underwriting business by reason of death.

• (2) For the purposes of assessing the profits of the member’s underwriting business, the member shall be treated as having died at the end of the year of assessment which corresponds to the underwriting year immediately preceding that in which he actually died.

• (3) For the purposes of the Income Tax Acts—

• (a) the carrying on of the member’s underwriting business by his personal representatives shall not be treated as a change in the persons engaged in the carrying on of that business; and

• (b) subject to the provisions of any regulations made by the Board, the business shall be treated as continuing until the member’s deposit at Lloyd’s is paid over to his personal representatives.

Interpretation and commencement.

Transitional relief for certain exploration and appraisal expenditure.

Time when expenditure is incurred.

Exploration and appraisal expenditure.

Double taxation relief in relation to petroleum revenue tax.

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Tariff receipts etc.

Double taxation relief in relation to petroleum revenue tax.

Residence: available accommodation.

Increase in stamp duty threshold.

Rent to mortgage: England and Wales.

Corporation tax.

Stamp duty.

Residence: available accommodation.

Trading funds.

The following is the Schedule to be inserted after Schedule 7 to the Taxation of Chargeable Gains Act 1992.

The following Schedule shall be inserted after Schedule 8 to the Finance Act 1989—

Currency contracts: matching

4A

• (1) Regulations may provide that where—

• (a) as regards a contract an initial exchange gain or initial exchange loss accrues to a company for an accrual period under section 126(5) of this Act or would so accrue apart from regulations under this Schedule,

• (b) the relevant duty 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

• (c) an election is made in accordance with the regulations to match the duty 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 reference in sub-paragraph (1) above to the relevant duty is to the duty to which, under the contract, the company becomes subject as regards the second currency (within the meaning given by section 126 of this Act).

• (4) Where regulations are made under this paragraph, sub-paragraphs (3) to (12) of paragraph 4 above shall apply as they apply where regulations are made under that paragraph; but in the application of those sub-paragraphs by virtue of this sub-paragraph—

• (a) the references to a liability in sub-paragraphs (3), (4), (9) and (11) shall be construed as references to a duty,

• (b) the references to liabilities in sub-paragraphs (3) and (4) shall be construed as references to duties, and

• (c) the reference in sub-paragraph (11)(a) to sub-paragraph (1) of paragraph 4 shall be construed as a reference to sub-paragraph (1) above.

5A

• (1) This paragraph applies where regulations under both paragraph 2 and paragraph 4A above apply—

• (a) as regards the same contract, 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 either of those paragraphs).

These repeals have effect in accordance with section 4 of this Act

These repeals have effect in relation to any case where the prescribed accounting period begins after 5th April 1993.

These repeals come into force in accordance with section 44(4) of this Act.

The repeal of section 13(4) of the Finance Act 1985 has effect in accordance with paragraph 3(3) of Schedule 2 to this Act and the repeal of section 19(2)(b) of that Act has effect in accordance with paragraph 5(3) of that Schedule.

1

The repeal of section 24 of the Finance Act 1990 has effect for the year 1993-94 and subsequent years of assessment.

These repeals have effect for the year 1994-95 and subsequent years of assessment.

This repeal has effect for the year 1993-94.

This repeal has effect for the year 1993-94 and subsequent years of assessment.

These repeals have effect for the year 1993-94 and subsequent years of assessment.

These repeals come into force in accordance with section 87(2) of this Act.

The repeal of section 212(8) of the Taxation of Chargeable Gains Act 1992 has effect, in accordance with section 91(1) of this Act, in relation to the accounting periods mentioned in section 212(8), and the other repeals have effect in relation to accounting periods beginning on or after 1st January 1993.

These repeals have effect in accordance with section 103 of this Act.

These repeals have effect in accordance with section 107 of this Act.

The repeals in the Income and Corporation Taxes Act 1988 and the repeal of paragraph 9 of Schedule 15 to the Finance Act 1991 have effect in relation to accounting periods ending after the day appointed for the purposes of section 10 of the Income and Corporation Taxes Act 1988.

1

The repeal of section 450(6) of the Income and Corporation Taxes Act 1988 has effect in relation to acquisitions or disposals made, or treated as made, after 31st December 1993.

2

The following repeals, namely—

3

The repeals in section 43 of the Finance Act 1989 have effect in relation to periods of account ending on or after 30th June 1993.

4

The following repeals, namely—

5

The other repeals have effect for the year 1992-93 and subsequent years of assessment.

This repeal has effect in accordance with section 208 of this Act.

The repeals in the Provisional Collection of Taxes Act 1968 have effect in accordance with section 205 of this Act.

Editorial notes