Finance Act 1995

(263A) (1) Subject to subsections (2) to (4) below, in any case falling within subsection (1) of section 730A of the Taxes Act (treatment of price differential on sale and repurchase of securities) and in any case which would fall within that subsection if the sale price and the repurchase price were different— (a) the acquisition of the securities in question by the interim holder and the disposal of those securities by him to the repurchaser, and (b) except where the repurchaser is or may be different from the original owner, the disposal of those securities by the original owner and any acquisition of those securities by the original owner as the repurchaser, shall be disregarded for the purposes of capital gains tax. (2) Subsection (1) above does not apply in any case where the repurchase price of the securities in question falls to be calculated for the purposes of section 730A of the Taxes Act by reference to provisions of section 737C of that Act that are not in force in relation to those securities when the repurchase price becomes due. (3) Subsection (1) above does not apply if— (a) the agreement or agreements under which provision is made for the sale and repurchase are not such as would be entered into by persons dealing with each other at arm’s length; or (b) any of the benefits or risks arising from fluctuations, before the repurchase takes place, in the market value of the securities sold accrues to, or falls on, the interim holder. (4) Subsection (1) above does not apply in relation to any disposal or acquisition of qualifying corporate bonds in a case where the securities disposed of by the original owner or those acquired by him, or by any other person, as the repurchaser are not such bonds. (5) Expressions used in this section and in section 730A of the Taxes Act have the same meanings in this section as in that section.

• (5) This section shall have effect where the agreement to sell the securities is entered into on or after the date on which this Act is passed.

Manufactured interest payments: exclusion from bond-washing provisions

81

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Manufactured interest on gilt-edged securities

82

Power to make special provision for special cases

83

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

• (2) In section 182(1) of the Finance Act 1993 and section 229 of the Finance Act 1994 (powers to modify provisions relating to Lloyd’s), the following paragraph shall be inserted, in each case, after paragraph (c)—

(ca) for modifying the application of this Chapter in relation to cases where assets forming part of a premiums trust fund are the subject of— (i) any such arrangement as is mentioned in section 129(1), (2) or (2A) of the Taxes Act 1988 (stock lending etc.); or (ii) any such arrangements or agreements as are mentioned in section 737E(2) and (8) of the Taxes Act 1988 (sale and repurchase of securities etc.);

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Stock lending: power to modify rules

84

Stock lending: interest on cash collateral

85

Interest

Deduction of tax from interest on deposits

86

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Interest payments deemed to be distributions

87

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Debts

Generalisation of ss.63 to 66 of Finance Act 1993

88

• (1) In sections 63 to 66 of the Finance Act 1993 (deemed periodic disposal of certain debts), for “the resident company”, wherever occurring, substitute “ the creditor company ”.

• (2) After section 62 of that Act insert—

(62A) In sections 63 to 66 below as they apply by virtue of section 61 above— (a) “the creditor company” means the company identified in subsection (1) of that section as the person entitled to the debt (referred to there as “the resident company”); and (b) “the commencement date” means 1st April 1993.

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• (3) In section 63 of that Act, omit subsection (12) (meaning of “commencement date”).

• (4) The above amendments shall be deemed always to have had effect.

• (5) Anything done before the passing of this Act under or by reference to the provisions of sections 63 to 66 of the Finance Act 1993 as originally enacted shall have effect as if done under or by reference to those provisions as amended by this section.

Application of ss.63 to 66 to debts held by associates of banks

89

• (1) A debt is a qualifying debt for the purposes of sections 63 to 66 of the Finance Act 1993 (deemed periodic disposal of certain debts) at any time if, at that time, the person entitled to the debt is a company which—

• (a) is resident in the United Kingdom, and

• (b) is an associated company of a company (whether or not itself resident in the United Kingdom) which carries on a banking business in the United Kingdom,

and the debt is not an exempted debt as defined by the following provisions.

• (2) A debt is an exempted debt for those purposes at any time if at that time it is held by the company entitled to it for the purposes of long term insurance business.

• (3) A debt is an exempted debt for those purposes at any time if each of the first, second and third conditions mentioned below—

• (a) is fulfilled at that time,

• (b) has been fulfilled throughout so much of the period of the debt as falls before that time, and

• (c) is likely to be fulfilled throughout so much of that period as falls after that time.

• (4) The first condition is that the terms of the debt provide that any interest carried by it shall be at a rate which falls into one, and one only, of the following categories—

• (a) a fixed rate which is the same throughout the period of the debt,

• (b) a rate which bears to a standard published rate the same fixed relationship throughout that period, and

• (c) a rate which bears to a published index of prices the same fixed relationship throughout that period.

• (5) The second condition is that those terms provide for any such interest to be payable as it accrues at intervals of 12 months or less.

• (6) The third condition is that the terms of the debt are not such—

• (a) in the case of a debt on a security, that the security is a deep discount or deep gain security, or

• (b) in any other case, that if the debt were a debt on a security it would be a deep discount or deep gain security.

In this subsection “deep discount security” has the same meaning as in Schedule 4 to the Taxes Act 1988 and “deep gain security” has the same meaning as in Schedule 11 to the Finance Act 1989, disregarding paragraph 1(4)(c) of that Schedule.

• (7) In this section—

• “associated company” shall be construed in accordance with section 416 of the Taxes Act 1988;

• “long term insurance business” means insurance business of any of the classes specified in Schedule 1 to the Insurance Companies Act 1982; and

• “published index of prices” means the retail prices index or any similar general index of prices which is published by, or by an agent of, the government of any territory outside the United Kingdom.

• (8) In sections 63 to 66 of the Finance Act 1993 as they apply by virtue of this section “the creditor company” means the company identified in subsection (1) above as the person entitled to the debt.

• (9) In sections 63 to 66 of the Finance Act 1993 as they apply by virtue of this section “the commencement date” means—

• (a) in relation to a debt not falling within subsection (10) below, 29th November 1994; and

• (b) in relation to a debt falling within that subsection, 1st April 1996.

• (10) A debt falls within this subsection if the person liable for it is—

• (a) an institution which is a higher education institution for the purposes of section 65 of the Further and Higher Education Act 1992 or Article 30 of the Education and Libraries (Northern Ireland) Order 1993,

• (b) an institution which is an institution within the higher education sector for the purposes of the Further and Higher Education (Scotland) Act 1992, or

• (c) a registered housing association within the meaning of the Housing Associations Act 1985 or Part II of the Housing (Northern Ireland) Order 1992,

and that person was so liable at the end of 28th November 1994.

Reliefs

Relief for post-cessation expenditure

90

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Employee liabilities and indemnity insurance

91

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Post-employment deductions

92

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Incidental overnight expenses etc

93

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Capital allowances: ships

Deferment of balancing charges in respect of ships

94

Reimposition of deferred charge

95

Ships in respect of which charge may be deferred

96

Procedural provisions relating to deferred charges

97

Deferred charges: commencement and transitional provisions

98

Capital allowances: other provisions

Highway concessions

99

Arrangements affecting the value of a relevant interest

100

Import warehouses etc

101

Commencement of certain provisions

102

• (1) Chapter IV of Part IV of the Finance Act 1994 (changes for facilitating self-assessment) shall be deemed to have been enacted with the following modification.

• (2) In section 218 (commencement etc. of Chapter IV, sections 213(4) and (8) and 214(4) and (6) of which relate to capital allowances) the following subsection shall be inserted after subsection (1)—

(1A) In a case where— (a) a trade is set up and commenced by a company, and (b) it is not set up and commenced before 6th April 1994, sections 213(4) and (8) and 214(4) and (6) have effect only if it is set up and commenced on or after 6th April 1995.

Management: self-assessment etc.

Liability of trustees

103

• (1) In subsection (2) of section 7 of the Management Act (notice of liability)—

• (a) for the words “a person who is” there shall be substituted the words “ persons who are ”; and

• (b) for the words “a trustee” there shall be substituted the words “ the relevant trustees ”.

• (2) After subsection (8) of that section there shall be inserted the following subsection—

(9) For the purposes of this Act the relevant trustees of a settlement are— (a) in relation to income, the persons who are trustees when the income arises and any persons who subsequently become trustees; and (b) in relation to chargeable gains, the persons who are trustees in the year of assessment in which the chargeable gains accrue and any persons who subsequently become trustees.

• (3) In subsection (1) of section 8A of that Act (trustee’s return)—

• (a) for the words “a trustee” there shall be substituted the words “ the relevant trustees ”; and

• (b) for the words “the trustee”, in the first place where they occur, there shall be substituted the words “ any relevant trustee ”.

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

(5) The following references, namely— (a) references in section 9 or 28C of this Act to a person to whom a notice has been given under this section being chargeable to tax; and (b) references in section 29 of this Act to such a person being assessed to tax, shall be construed as references to the relevant trustees of the settlement being so chargeable or, as the case may be, being so assessed.

• (5) At the beginning of Part XI of that Act (miscellaneous and supplemental) there shall be inserted the following section—

(107A) (1) Subject to the following provisions of this section, anything which for the purposes of this Act is done at any time by or in relation to any one or more of the relevant trustees of a settlement shall be treated for those purposes as done at that time by or in relation to the other or others of those trustees. (2) Subject to subsection (3) below, where the relevant trustees of a settlement are liable— (a) to a penalty under section 7, 12B, 93, 95 or 97AA of this Act or paragraph 2A of Schedule 1A to this Act, or to interest under section 103A of this Act on such a penalty; (b) to make a payment in accordance with an assessment under section 30 of this Act, or to make a payment under section 59A or 59B of this Act; (c) to a surcharge under section 59C of this Act, or to interest under that section on such a surcharge; or (d) to interest under section 86 of this Act, the penalty, interest, payment or surcharge may be recovered (but only once) from any one or more of those trustees. (3) No amount may be recovered by virtue of subsection (2)(a) or (c) above from a person who did not become a relevant trustee until after the relevant time, that is to say— (a) in relation to so much of a penalty under section 93(3) or 97AA(1)(b) of this Act as is payable in respect of any day, or to interest under section 103A of this Act on so much of such a penalty as is so payable, the beginning of that day; (b) in relation to a penalty under any other provision of this Act mentioned in subsection (2)(a) above, or to interest under section 103A of this Act on such a penalty, the time when the relevant act or omission occurred; and (c) in relation to a surcharge under subsection (2) or (3) of section 59C of this Act, or to interest under that section on such a surcharge, the beginning of the day mentioned in that subsection; and in paragraph (b) above “the relevant act or omission” means the act or omission which caused the penalty to become payable. (4) In a case where— (a) subsection (2)(a) above applies in relation to a penalty under section 93 of this Act, or (b) subsection (2)(c) above applies in relation to a surcharge under section 59C of this Act, subsection (8) of section 93 or, as the case may be, subsection (9) of section 59C of this Act shall have effect as if the reference to the taxpayer were a reference to each of the relevant trustees.

• (6) In section 118 of that Act (interpretation), after the definition of “the principal Act” there shall be inserted the following definition—

“the relevant trustees”, in relation to a settlement, shall be construed in accordance with section 7(9) of this Act.

• (7) Unless the contrary intention appears, this section, sections 104 to 115 below and Schedule 20 to this Act—

• (a) so far as they relate to income tax and capital gains tax, have effect as respects the year 1996-97 and subsequent years of assessment, and

• (b) so far as they relate to corporation tax, have effect as respects accounting periods ending on or after the appointed day for the purposes of Chapter III of Part IV of the Finance Act 1994.

Returns and self-assessments

104

• (1) In each of the following, namely—

• (a) subsection (1A) of section 8 of the Management Act (personal return); and

• (b) subsection (1A) of section 8A of that Act (trustee’s return),

there shall be inserted at the end the words “ and the amounts referred to in that subsection are net amounts, that is to say, amounts which take into account any relief, allowance or repayment of tax for which a claim is made and give credit for any income tax deducted at source and any tax credit to which section 231 of the principal Act applies ”.

• (2) In subsection (1B) of section 8 of that Act, for the word “loss” there shall be substituted the words “ loss, tax, credit ”.

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

(5) In this section and sections 8A, 9 and 12AA of this Act, any reference to income tax deducted at source is a reference to income tax deducted or treated as deducted from any income or treated as paid on any income.

• (4) In subsection (1) of section 9 of that Act (returns to include self-assessment), for the words “on the basis of the information contained in the return” there shall be substituted the following paragraphs—

(a) on the basis of the information contained in the return; and (b) taking into account any relief, allowance or repayment of tax a claim for which is included in the return and giving credit for any income tax deducted at source and any tax credit to which section 231 of the principal Act applies,

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• (5) In subsection (1) of section 11AA of that Act (return of profits to include self-assessment), for the words “on the basis of the information contained in the return” there shall be substituted the following paragraphs—

(a) on the basis of the information contained in the return; and (b) taking into account any relief, allowance or repayment of tax a claim for which is included in the return,

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• (6) For subsection (1) of section 12AA of that Act (partnership return) there shall be substituted the following subsections—

(1) Where a trade, profession or business is carried on by two or more persons in partnership, for the purpose of facilitating the establishment of the following amounts, namely— (a) the amount in which each partner chargeable to income tax for any year of assessment is so chargeable, and (b) the amount in which each partner chargeable to corporation tax for any period is so chargeable, an officer of the Board may act under subsection (2) or (3) below (or both). (1A) The amounts referred to in paragraphs (a) and (b) of subsection (1) above are net amounts, that is to say, amounts which— (a) take into account any relief, allowance or repayment of tax for which a claim is made; and (b) in the case of the amount referred to in paragraph (a) of that subsection, give credit for any income tax deducted at source and any tax credit to which section 231 of the principal Act applies.

• (7) For subsection (1) of section 12AB of that Act (partnership return to include partnership statement) there shall be substituted the following subsection—

(1) Every return under section 12AA of this Act shall include a statement (a partnership statement) of the following amounts, namely— (a) in the case of each period of account ending within the period in respect of which the return is made— (i) the amount of income or loss from each source which, on the basis of the information contained in the return and taking into account any relief or allowance a section 42(7) claim for which is included in the return, has accrued to or has been sustained by the partnership for that period, (ii) each amount of income tax which, on that basis, has been deducted or treated as deducted from any income of the partnership, or treated as paid on any such income, for that period, (iii) the amount of each tax credit which, on that basis, has accrued to the partnership for that period, and (iv) the amount of each charge which, on that basis, was a charge on the income of the partnership for that period; and (b) in the case of each such period and each of the partners, the amount which, on that basis and (where applicable) taking into account any such relief or allowance, is equal to his share of that income, loss, tax, credit or charge.

• (8) In subsection (5) of that section, after the definition of “period of account” there shall be inserted the following definitions—

“section 42(7) claim” means a claim under any of the provisions mentioned in section 42(7) of this Act; “tax credit” means a tax credit to which section 231 of the principal Act applies.

Records for purposes of returns

105

• (1) In subsection (1) of section 12B of the Management Act (records to be kept for purposes of returns), for paragraph (b) there shall be substituted the following paragraph—

(b) preserve those records until the end of the relevant day, that is to say, the day mentioned in subsection (2) below or, where a return is required by a notice given on or before that day, whichever of that day and the following is the latest, namely— (i) where enquiries into the return or any amendment of the return are made by an officer of the Board, the day on which, by virtue of section 28A(5) or 28B(5) of this Act, those enquiries are treated as completed; and (ii) where no enquiries into the return or any amendment of the return are so made, the day on which such an officer no longer has power to make such enquiries.

• (2) In subsection (2) of that section, the words from “or, where a return” to the end shall cease to have effect.

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

(2A) Any person who— (a) is required, by such a notice as is mentioned in subsection (1) above given at any time after the end of the day mentioned in subsection (2) above, to make and deliver a return for a year of assessment or other period; and (b) has in his possession at that time any records which may be requisite for the purpose of enabling him to make and deliver a correct and complete return for the year or period, shall preserve those records until the end of the relevant day, that is to say, the day which, if the notice had been given on or before the day mentioned in subsection (2) above, would have been the relevant day for the purposes of subsection (1) above.

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

• (a) in paragraph (a), after the words “subsection (1)” there shall be inserted the words “ or (2A) ”; and

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

• (5) In subsection (4) of that section, after the words “subsection (1)” there shall be inserted the words “ or (2A) ”.

• (6) In subsection (5) of that section—

• (a) at the beginning there shall be inserted the words “ Subject to subsection (5A) below, ”; and

• (b) after the words “subsection (1)” there shall be inserted the words “ or (2A) ”.

• (7) After that subsection there shall be inserted the following subsection—

(5A) Subsection (5) above does not apply where the records which the person fails to keep or preserve are records which might have been requisite only for the purposes of claims, elections or notices which are not included in the return.

Return of employees' emoluments etc

106

• (1) For section 15 of the Management Act there shall be substituted the following section—

(15) (1) Every employer, when required to do so by notice from an officer of the Board, shall, within the time limited by the notice, prepare and deliver to the officer a return relating to persons who are or have been employees of his, containing the information required under the following provisions of this section. (2) An employer shall not be required to include in his return information relating to any year of assessment if the notice is given more than five years after the 31st January next following that year. (3) A notice under subsection (1) above— (a) shall specify the employees for whom a return is to be made and may, in particular, specify individuals (by name or otherwise) or all employees of an employer or all his employees who are or have been in employment to which Chapter II of Part V of the principal Act applies; and (b) shall specify the years of assessment or other periods with respect to which the information is to be provided. (4) A notice under subsection (1) above may require the return to state the name and place of residence of an employee to whom it relates. (5) A notice under subsection (1) above may require the return to contain, in respect of an employee to whom it relates, the following particulars— (a) in the case of relevant payments made by the employer, particulars of the payments; (b) in the case of relevant payments not falling within paragraph (a) above the making of which by another person has been arranged by the employer— (i) particulars of the payments; and (ii) the name and business address of the other person; and (c) in the case of relevant payments not falling within either of the preceding paragraphs, the name and business address of any person who has, to the employer’s knowledge, made the payments. (6) Any payments made to an employee in respect of his employment are relevant payments for the purposes of this section, including— (a) payments to him in respect of expenses (including sums put at his disposal and paid away by him); (b) payments made on his behalf and not repaid; and (c) payments to him for services rendered in connection with a trade or business, whether the services were rendered in the course of his employment or not. (7) Where, for the purposes of his return, an employer apportions expenses incurred partly in or in connection with a particular matter and partly in or in connection with other matters— (a) the return shall contain a statement that the sum included in the return is the result of such an apportionment; and (b) if required to do so by notice from an officer of the Board, the employer shall prepare and deliver to the officer, within the time limited by the notice, a return containing full particulars as to the amount apportioned and the manner in which, and the grounds on which, the apportionment has been made. (8) A notice under subsection (1) above may require the return— (a) to state in respect of an employee to whom it relates whether any benefits are or have been provided for him (or for any other person) by reason of his employment, such as may give rise to charges to tax under the relevant sections, that is to say, sections 141, 142, 143, 144A, 145, 146 and 154 to 165 of the principal Act (miscellaneous benefits in cash or in kind); and (b) if such benefits are or have been provided, to contain such particulars of those benefits as may be specified in the notice. (9) Where such benefits are provided the notice may, without prejudice to subsection (8)(b) above, require the return to contain the following particulars— (a) in the case of benefits which are or have been provided by the employer, particulars of the amounts which may be chargeable to tax by virtue of the relevant sections; (b) in the case of benefits not falling within paragraph (a) above the provision of which by another person is or has been arranged by the employer— (i) particulars of the amounts which may be so chargeable; and (ii) the name and business address of the other person; and (c) in the case of benefits not falling within either of the preceding paragraphs, the name and business address of any person who has, to the employer’s knowledge, provided the benefits. (10) Where it appears to an officer of the Board that a person has, in any year of assessment, been concerned in making relevant payments to, or providing benefits to or in respect of, employees of another, the officer may at any time up to five years after the 31st January next following that year by notice require that person— (a) to deliver to the officer, within the time limited by the notice, such particulars of those payments or benefits, or of the amounts which may be chargeable to tax in respect of the benefits, as may be specified in the notice (so far as known to him); and (b) to include with those particulars the names and addresses (so far as known to him) of the employees concerned. (11) In determining, in pursuance of a notice under subsection (1) or (10) above, amounts which may be chargeable to tax by virtue of the relevant sections, a person— (a) shall not make— (i) any deduction or other adjustment which he is unable to show, by reference to information in his possession or otherwise available to him, is authorised or required by the relevant sections; or (ii) any deduction authorised by section 141(3), 142(2), 145(3) or 156(8) of the principal Act; but (b) subject to that, shall make all such deductions and other adjustments as may be authorised or required by the relevant sections. (12) Where the employer is a body of persons, the secretary of the body or other officer (by whatever name called) performing the duties of secretary shall be treated as the employer for the purposes of this section. Where the employer is a body corporate, that body corporate, as well as the secretary or other officer, shall be liable to a penalty for failure to comply with this section. (13) In this section— - “arranged” includes guaranteed and in any way facilitated; - “employee” means an office holder or employee whose emoluments fall to be assessed under Schedule E, and related expressions are to be construed accordingly; - “relevant payments” has the meaning given by subsection (6) above; and - “the relevant sections” has the meaning given by subsection (8)(a) above.

• (2) This section has effect as respects payments made or benefits provided on or after 6th April 1996.

Procedure for making claims etc

107

• (1) After subsection (1) of section 42 of the Management Act (procedure for making claims etc.) there shall be inserted the following subsection—

(1A) Subject to subsection (3) below, a claim for a relief, an allowance or a repayment of tax shall be for an amount which is quantified at the time when the claim is made.

• (2) In subsection (2) of that section, for the words “subsection (3)” there shall be substituted the words “ subsections (3) and (3A) ”.

• (3) In subsection (3) of that section, for the words “Subsection (2)” there shall be substituted the words “ Subsections (1A) and (2) ”.

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

(3A) Where a person makes a claim requiring relief for a loss incurred or treated as incurred, or a payment made, in one year of assessment (“the later year”) to be given in an earlier year of assessment (“the earlier year”)— (a) subsection (2) above shall not apply in relation to the claim; (b) the claim shall be made in relation to the later year; (c) the claim shall be for an amount equal to the difference between— (i) the amount in which he has been assessed to tax under section 9 of this Act for the earlier year; and (ii) the amount in which he would have been so assessed if the claim could have been, and had been, included in a return made under section 8 or 8A of this Act for that year; and (d) effect shall be given to the claim in relation to the later year, whether by repayment or set-off, or by an addition to the aggregate amount given by section 59B(1)(b) of this Act, or otherwise. (3B) Where no notice under section 8 or 8A of this Act has been given to the person for the earlier year, subsection (3A)(c) above shall have effect as if— (a) sub-paragraph (i) referred to the amount in which he would have been assessed to tax under section 9 of this Act for that year if such a notice had been so given; and (b) sub-paragraph (ii) referred to the amount in which he would have been so assessed if such a notice had been so given and the claim could have been, and had been, included in a return made under section 8 or 8A of this Act for that year.

• (5) In subsection (4) of that section, there shall be inserted at the beginning the words “ Subject to subsection (4A) below, ”.

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

(4A) Subsection (4) above shall not apply where— (a) the company is wholly exempt from corporation tax or is only not so exempt in respect of trading income; and (b) the tax credit is not one in respect of which a payment on account may be claimed by the company under Schedule 19AB to the principal Act.

• (7) In subsection (5) of that section, for the words “subsections (2) and (4) above” there shall be substituted the words “ this section ”.

• (8) In subsection (7)(a) of that section, for the words “sections 84” there shall be substituted the words “ sections 62A, 84 ”.

• (9) In subsection (10) of that section, after the words “This section” there shall be inserted the words “ (except subsection (1A) above) ”.

• (10) In subsection (11) of that section, paragraph (b) and the word “and” immediately preceding that paragraph shall cease to have effect.

• (11) Schedule 1A to that Act (claims etc. not included in returns) shall have effect subject to the amendments specified in Schedule 20 to this Act.

Payments on account of income tax

108

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Surcharges on unpaid tax

109

• (1) In section 59C of the Management Act (surcharges on unpaid income tax and capital gains tax), in subsection (4) (exceptions to surcharge), for the words “or 95” there shall be substituted the words “ , 95 or 95A ”.

• (2) That section of that Act shall apply in relation to any income tax or capital gains tax which—

• (a) is charged by an assessment made on or after 6th April 1998; and

• (b) is for the year 1995-96 or an earlier year of assessment,

as it applies in relation to any income tax or capital gains tax which becomes payable in accordance with section 55 or 59B of that Act and is for the year 1996-97 or a subsequent year of assessment.

Interest on overdue tax

110

• (1) For section 86 of the Management Act there shall be substituted the following section—

(86) (1) The following, namely— (a) any amount on account of income tax which becomes due and payable in accordance with section 59A(2) of this Act, and (b) any income tax or capital gains tax which becomes due and payable in accordance with section 55 or 59B of this Act, shall carry interest at the rate applicable under section 178 of the Finance Act 1989 from the relevant date until payment. (2) For the purposes of subsection (1)(a) above the relevant date is whichever of the dates mentioned in section 59A(2) of this Act is applicable; and for the purposes of subsection (1)(b) above the relevant date is— (a) in any such case as is mentioned in subsection (3) of section 59B of this Act, the last day of the period of three months mentioned in that subsection; and (b) in any other case, the date mentioned in subsection (4) of that section. (3) Subsection (1) above applies even if the relevant date is a non-business day within the meaning of section 93 of the Bills of Exchange Act 1882. (4) Subsection (5) below applies where as regards a year of assessment— (a) any person makes a claim under subsection (3) or (4) of section 59A of this Act in respect of the amounts (the section 59A amounts) payable by him in accordance with subsection (2) of that section, and (b) an amount (the section 59B amount) becomes payable by him in accordance with section 59B(3), (4) or (5) of this Act. (5) Interest shall be payable under this section as if each of the section 59A amounts had been equal to— (a) the aggregate of that amount and 50 per cent. of the section 59B amount, or (b) the amount which would have been payable in accordance with subsection (2) of section 59A of this Act if the claim under subsection (3) or (4) of that section had not been made, whichever is the less. (6) In determining for the purposes of subsections (4) and (5) above what amount (if any) is payable by any person in accordance with section 59B(3), (4) or (5) of this Act— (a) it shall be assumed that both of the section 59A amounts have been paid, and (b) no account shall be taken of any amount which has been paid on account otherwise than under section 59A(2) of this Act or is payable by way of capital gains tax. (7) Subsection (8) below applies where as regards any person and a year of assessment— (a) amounts (the section 59A amounts) become payable by him in accordance with section 59A(2) of this Act, and (b) an amount (the section 59B amount) becomes repayable to him in accordance with section 59B (3), (4) or (5) of this Act. (8) So much of any interest payable under this section on either of the section 59A amounts as is not attributable to the amount by which that amount exceeds 50 per cent. of the section 59B amount shall be remitted. (9) In determining for the purposes of subsections (7) and (8) above what amount (if any) is repayable to any person in accordance with section 59B(3), (4) or (5) of this Act, no account shall be taken of any amount which has been paid on account otherwise than under section 59A(2) of this Act or is payable by way of capital gains tax.

• (2) That section of that Act shall apply in relation to any income tax or capital gains tax which—

• (a) is charged by an assessment made on or after 6th April 1998; and

• (b) is for the year 1995-96 or an earlier year of assessment,

as it applies in relation to any income tax or capital gains tax which becomes due and payable in accordance with section 55 or 59B of that Act and is for the year 1996-97 or a subsequent year of assessment.

• (3) In that section of that Act as it so applies, “the relevant date” means the 31st January next following the year of assessment.

• (4) So far as it relates to partnerships whose trades, professions or businesses were set up and commenced before 6th April 1994, subsection (1) above has effect as respects the year 1997-98 and subsequent years of assessment.

Assessments in respect of income taken into account under PAYE

111

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Recovery of certain amounts deducted or paid under MIRAS

112

• (1) After section 374 of the Taxes Act 1988 there shall be inserted the following section—

(374A) (1) This section applies where, in the case of any loan, interest on the loan never has been relevant loan interest or the borrower never has been a qualifying borrower. (2) Without prejudice to subsection (3) below, in relation to a payment of interest— (a) as respects which either of the conditions mentioned in paragraphs (a) and (b) of section 374(1) is fulfilled, and (b) from which a deduction was made as mentioned in section 369(1), section 369 shall have effect as if the payment of interest were a payment of relevant loan interest made by a qualifying borrower. (3) Nothing in subsection (2) above shall be taken as regards the borrower as entitling him to make any deduction or to retain any amount deducted and, accordingly, where any amount has been deducted, he shall be liable to make good that amount and an officer of the Board may make such assessments as may in his judgment be required for recovering that amount. (4) The Management Act shall apply to an assessment under subsection (3) above as if it were an assessment to income tax for the year of assessment in which the deduction was made and as if— (a) the assessment were among those specified in section 55(1) of that Act (recovery of tax not postponed); (b) the assessment were made for the purpose of making good to the Crown a loss of tax wholly attributable to such a failure or error as is mentioned in subsection (1) of section 88 of that Act (interest on tax recovered to make good loss due to taxpayer’s fault); and (c) for the purposes of that section the date when the tax ought to have been paid were the 1st December following the year of assessment. (5) If the borrower fraudulently or negligently makes any false statement or representation in connection with the making of any deduction, he shall be liable to a penalty not exceeding the amount deducted.

• (2) In subsection (2) of section 375 of that Act (interest ceasing to be relevant loan interest etc.), after paragraph (a) there shall be inserted the following paragraph—

(aa) as respects which any of the conditions mentioned in section 374(1) is fulfilled, and

.

• (3) For subsection (4) of that section there shall be substituted the following subsections—

(4) The Management Act shall apply to an assessment under subsection (3) above as it applies, by virtue of subsection (4) of section 374A, to an assessment under subsection (3) of that section. (4A) If there is any unreasonable delay in the giving of a notice under subsection (1) above, the borrower shall be liable to a penalty not exceeding so much of the aggregate amount that he is liable to make good under subsection (3) above as is attributable to that delay.

• (4) After subsection (8) of that section there shall be inserted the following subsection—

(8A) In any case where an amount to which a person is not entitled is paid to him by the Board in pursuance of regulations made by virtue of subsection (8) above, regulations may— (a) provide for an officer of the Board to make such assessments as may in his judgment be required for recovering that amount from that person; and (b) make provision corresponding to that made by subsection (4A) above and subsections (4) and (5) of section 374A.

• (5) This section applies in relation to deductions made by borrowers, and payments made by the Board, after the passing of this Act.

Allowable losses: capital gains tax

113

• (1) After subsection (2) of section 16 of the Taxation of Chargeable Gains Act 1992 (computation of losses) there shall be inserted the following subsection—

(2A) A loss accruing to a person in a year of assessment shall not be an allowable loss for the purposes of this Act unless, in relation to that year, he gives a notice to an officer of the Board quantifying the amount of that loss; and sections 42 and 43 of the Management Act shall apply in relation to such a notice as if it were a claim for relief.

• (2) Deductions under that Act in respect of allowable losses shall be given preference as follows—

• (a) a deduction in respect of a loss accruing to a person in the year 1996-97 or a subsequent year of assessment shall be preferred to a deduction in respect of a loss accruing to him in an earlier year of assessment; and

• (b) a deduction in respect of a loss accruing to a company in an accounting period ending on or after the appointed day for the purposes of Chapter III of Part IV of the Finance Act 1994 shall be preferred to a deduction in respect of a loss accruing to the company in an accounting period ending before that day.

Liability of trustees and personal representatives: capital gains tax

114

• (1) For subsection (1) of section 65 of the Taxation of Chargeable Gains Act 1992 (liability for tax of trustees and personal representatives) there shall be substituted the following subsection—

(1) Subject to subsection (3) below, capital gains tax chargeable in respect of chargeable gains accruing to the trustees of a settlement or capital gains tax due from the personal representatives of a deceased person may be assessed and charged on and in the name of any one or more of the relevant trustees or the relevant personal representatives.

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

(3) Where section 80 applies as regards the trustees of a settlement (“the migrating trustees”), nothing in subsection (1) above shall enable any person— (a) who ceased to be a trustee of the settlement before the end of the relevant period, and (b) who shows that, when he ceased to be a trustee of the settlement, there was no proposal that the trustees might become neither resident nor ordinarily resident in the United Kingdom, to be assessed and charged to any capital gains tax which is payable by the migrating trustees by virtue of section 80(2). (4) In this section— - “the relevant period” has the same meaning as in section 82; - “the relevant trustees”, in relation to any chargeable gains, means the trustees in the year of assessment in which the chargeable gains accrue and any subsequent trustees of the settlement, and “the relevant personal representatives” has a corresponding meaning.

Minor amendments and repeals

115

• (1) In subsection (7) of section 7 of the Management Act (notice of liability), for the words “income from which” there shall be substituted the words “ income on which ”.

• (2) In subsection (3) of section 9 of that Act (returns to include self-assessment), the words “the following provisions of” shall cease to have effect.

• (3) Section 11A of that Act (notice of liability to capital gains tax) shall cease to have effect.

• (4) In subsection (2) of section 12AA of that Act (partnership return), for the words “such accounts and statements” there shall be substituted the words “ such accounts, statements and documents, relating to information contained in the return, ”.

• (5) In subsection (1)(c) of section 30B of that Act (amendment of partnership statement where loss of tax discovered), after the word “relief” there shall be inserted the words “ or allowance ”.

• (6) In subsection (6) of section 59B of that Act (payment of income tax and capital gains tax), for the words “under section 29 of this Act shall” there shall be substituted the words “ otherwise than under section 9 of this Act shall, unless otherwise provided, ”.

• (7) In subsection (1) of section 100B of that Act (appeals against penalty determinations), after the words “95A of this Act” there shall be inserted the word “ and ”.

• (8) In section 103A of that Act (interest on penalties), for the words “Part II or VA” there shall be substituted the words “ Part II, IV or VA ”.

• (9) Section 73 of the Taxes Act 1988 (single assessments for purposes of Cases III, IV and V of Schedule D) shall cease to have effect.

• (10) In sections 536 and 537B of that Act (taxation of royalties where owner abroad)—

• (a) in subsection (2) (exemption from requirement to deduct tax from royalties), the words “are shown on a claim to” shall cease to have effect; and

• (b) in subsection (4) (deduction of tax where agent’s commission unknown), the words from “and in that case” to the end shall cease to have effect.

• (11) In Schedule 3 to that Act (machinery for assessment, charge and payment of income tax under Schedule C and, in certain cases, Schedule D), in paragraph 6E, sub-paragraphs (1) and (3) shall cease to have effect.

• (12) Section 7 of the Taxation of Chargeable Gains Act 1992 (time for payment of capital gains tax) shall cease to have effect.

• (13) Subsection (3) above has effect as respects the year 1995-96 and subsequent years of assessment.

Transitional provisions

116

• (1) The provisions of the Management Act specified in Schedule 21 to this Act shall have effect subject to the transitional provisions contained in that Schedule.

• (2) Section 198 of the Finance Act 1994 (which is superseded by this section) shall cease to have effect.

Changes for facilitating self-assessment

Treatment of partnerships

117

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Loss relief: general

118

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Relief for losses on unquoted shares

119

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Relief for pre-trading expenditure

120

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Basis of apportionment for Cases I, II and VI of Schedule D

121

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Amendments of transitional provisions

122

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Prevention of exploitation of transitional provisions

123

Schedule 22 to this Act shall have effect for preventing the exploitation of, and (in certain cases) penalising attempts to exploit, the transitional provisions set out in paragraphs 52 and 53 of Schedule 2 to the Income Tax (Trading and Other Income) Act 2005 (changes for facilitating self-assessment: transitional provisions and savings).

Change of residence and non-residents

Change of residence

124

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Non-resident partners

125

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UK representatives of non-residents

126

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Persons not treated as UK representatives

127

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Limit on income chargeable on non-residents: income tax

128

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Limit on income chargeable on non-residents: corporation tax

129

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Exchange gains and losses and currency contracts

Exchange gains and losses: general

130

Schedule 24 to this Act (which amends the provisions of the Finance Act 1993 relating to exchange gains and losses and other provisions connected with exchange gains and losses) shall have effect.

Exchange gains and losses: transitional provision

131

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Currency contracts: transitional provisions

132

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Provisions with a foreign element

Controlled foreign companies

133

Schedule 25 to this Act (which contains amendments of Chapter IV of Part XVII of the Taxes Act 1988 and connected amendments) shall have effect.

Offshore funds

134

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Miscellaneous

Change in ownership of investment company: deductions

135

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Profit-related pay

136

• (1) In Schedule 8 to the Taxes Act 1988 (profit-related pay schemes) paragraph 19 (ascertainment of profits) shall be amended in accordance with subsections (2) to (4) below.

• (2) In sub-paragraph (6) (cases where scheme may provide for departure from requirements applicable to profit and loss account) paragraphs (g) to (k) (extraordinary items) shall be omitted.

• (3) After paragraph (ff) of sub-paragraph (6) there shall be inserted—

(l) any exceptional items which fall within sub-paragraph (6A) below and should in accordance with any accounting practices regarded as standard be shown separately on the face of the profit and loss account.

• (4) After sub-paragraph (6) there shall be inserted—

(6A) The items are— (a) profits or losses on the sale or termination of an operation; (b) costs of a fundamental reorganisation or restructuring having a material effect on the nature and focus of the employment unit’s operations; (c) profits or losses on the disposal of fixed assets; and (d) the effect on tax of any of the items mentioned in paragraphs (a) to (c) above.

• (5) Subject to subsections (6) to (10) below, subsections (2) to (4) above shall have effect in relation to the preparation, for the purposes of a scheme, of a profit and loss account in respect of a period beginning on or after the day on which this Act is passed.

• (6) Subsections (2) to (4) above shall not have effect in relation to an existing scheme unless, before the end of the period of 6 months beginning with the day on which this Act is passed, the scheme is altered to take account of the amendments made by those subsections.

• (7) Subsections (8) to (10) below apply where, before the end of the period mentioned in subsection (6) above, an existing scheme is altered as mentioned in that subsection.

• (8) The provision made by the scheme in compliance with paragraph 20(1) of Schedule 8 to the Taxes Act 1988 shall not prevent a profit and loss account being prepared in accordance with the alteration.

• (9) Where the distributable pool would but for this subsection be determined by reference—

• (a) to an amount shown in a profit and loss account prepared in accordance with the altered scheme, and

• (b) to an amount shown in a profit and loss account (“an earlier account”) prepared in accordance with the scheme in a form in which it stood before the alteration,

then, for the purposes of the determination of the pool, the amount shown in the earlier account shall be recalculated using the same method as that used to calculate the amount mentioned in paragraph (a) above.

• (10) The alteration of the existing scheme shall be treated as being within subsection (8) of section 177B of the Taxes Act 1988 (alterations which are registrable and which once registered cannot give rise to Board’s power of cancellation).

• (11) In subsections (6) to (10) above “an existing scheme” means a scheme which, immediately before the day on which this Act is passed, is registered under Chapter III of Part V of the Taxes Act 1988.

• (12) After paragraph 19 of Schedule 8 to the Taxes Act 1988 there shall be inserted—

(19A) (1) The Treasury may by order amend paragraph 19 above so as to add to, delete or vary any of the items mentioned in sub-paragraph (6) of that paragraph. (2) In this paragraph references to an order are references to an order under sub-paragraph (1) above. (3) Subject to sub-paragraphs (4) to (8) below, any amendment or amendments made by virtue of an order shall have effect in relation to the preparation, for the purposes of a scheme, of a profit and loss account in respect of a period beginning on or after the day on which the order comes into force. (4) Any amendment or amendments made by virtue of an order shall not have effect in relation to an existing scheme unless, before the end of the period of 6 months beginning with the day on which the order comes into force, the scheme is altered to take account of the amendment or amendments. (5) Sub-paragraphs (6) to (8) below apply where, before the end of the period mentioned in sub-paragraph (4) above, an existing scheme is altered as mentioned in that sub-paragraph. (6) The provision made by the scheme in compliance with paragraph 20(1) below shall not prevent a profit and loss account being prepared in accordance with the alteration. (7) Where the distributable pool would but for this sub-paragraph be determined by reference— (a) to an amount shown in a profit and loss account prepared in accordance with the altered scheme, and (b) to an amount shown in a profit and loss account (“an earlier account”) prepared in accordance with the scheme in a form in which it stood before the alteration, then, for the purposes of the determination of the pool, the amount shown in the earlier account shall be recalculated using the same method as that used to calculate the amount mentioned in paragraph (a) above. (8) The alteration of the existing scheme shall be treated as being within subsection (8) of section 177B. (9) An order may include such supplementary, incidental or consequential provisions as appear to the Treasury to be necessary or expedient. (10) In this paragraph “an existing scheme”, in relation to an order, means a scheme which, immediately before the day on which the order comes into force, is a registered scheme.

Part-time workers: miscellaneous provisions

137

• (1) In Schedule 8 to the Taxes Act 1988 (profit-related pay schemes) paragraph 8(a) (employees working less than 20 hours a week excluded by scheme from receiving profit-related pay) shall be omitted.

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

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

• (4) In Part V of Schedule 9 to the Taxes Act 1988 (profit sharing schemes) in paragraph 36(1)(a) (certain full-time employees and directors must be eligible to participate in scheme on similar terms) for the words “a full-time employee” there shall be substituted “ an employee ”.

• (5) In Schedule 5 to the Finance Act 1989 (employee share ownership trusts) in paragraph 4(2)(c) (trust deed must provide that certain persons are beneficiaries if they work at rate of at least 20 hours a week) for the words “at that given time he worked as an employee or” there shall be substituted “ in the case of a director, at that given time he worked as a ”.

• (6) Subsection (1) above shall apply in relation to any scheme not registered before the day on which this Act is passed.

• (7) Subsection (4) above shall apply in relation to any scheme not approved before the day on which this Act is passed.

• (8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (9) Subsection (5) above shall apply in relation to trusts established on or after the day on which this Act is passed; and for this purpose a trust is established when the deed under which it is established is executed.

Charities, etc.: lotteries

138

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Sub-contractors in the construction industry

139

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Valuation of trading stock on discontinuance of trade

140

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Incapacity benefit

141

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Annuities purchased where certain claims or actions are settled

142

The following sections shall be inserted after section 329 of the Taxes Act 1988—

(329A) (1) In a case where— (a) an agreement is made settling a claim or action for damages for personal injury, (b) under the agreement the damages are to consist wholly or partly of periodical payments, and (c) under the agreement the person entitled to the payments is to receive them as the annuitant under one or more annuities purchased for him by the person against whom the claim or action is brought or, if he is insured against the claim concerned, by his insurer, the agreement is for the purposes of this section a qualifying agreement. (2) In a case where— (a) an agreement is made settling a claim or action for damages for personal injury, (b) under the agreement the damages are to consist wholly or partly of periodical payments, and (c) a later agreement is made under which the person entitled to the payments is from a future date to receive them as the annuitant under one or more annuities purchased for him by the person against whom the claim or action is brought or, if he is insured against the claim concerned, by his insurer, the agreement mentioned in paragraph (c) above is for the purposes of this section a qualifying agreement. (3) Subsection (4) below applies where— (a) a person receives a sum as the annuitant under an annuity purchased for him pursuant to a qualifying agreement, or (b) a person receives a sum on behalf of the annuitant under an annuity purchased for the annuitant pursuant to a qualifying agreement. (4) Where this subsection applies the sum shall not be regarded as the recipient’s or annuitant’s income for any purposes of income tax and accordingly shall be paid without any deduction under section 349(1). (5) Subsections (6) to (10) below apply for the purposes of subsection (1) above. (6) The periodical payments may be for the life of the claimant, for a specified period or of a specified number or minimum number or include payments of more than one of those descriptions. (7) The amounts of the periodical payments (which need not be at a uniform rate or payable at uniform intervals) may be— (a) specified in the agreement, with or without provision for increases of specified amounts or percentages, (b) subject to adjustment in a specified manner so as to preserve their real value, or (c) partly specified as mentioned in paragraph (a) and partly subject to adjustment as mentioned in paragraph (b) above. (8) The annuity or annuities must be such as to provide sums which as to amount and time of payment correspond to the periodical payments described in the agreement. (9) Personal injury includes any disease and any impairment of a person’s physical or mental condition. (10) A claim or action for personal injury includes— (a) such a claim or action brought by virtue of the Law Reform (Miscellaneous Provisions) Act 1934; (b) such a claim or action brought by virtue of the Law Reform (Miscellaneous Provisions) Act (Northern Ireland) 1937; (c) such a claim or action brought by virtue of the Damages (Scotland) Act 1976; (d) a claim or action brought by virtue of the Fatal Accidents Act 1976; (e) a claim or action brought by virtue of the Fatal Accidents (Northern Ireland) Order 1977. (11) For the purposes of subsection (2) above— (a) subsections (6), (9) and (10) above apply; (b) subsection (7) above applies as if the reference to the agreement were to that mentioned in subsection (2)(a) above; (c) subsection (8) above applies as if the reference to periodical payments described in the agreement were to periodical payments described in the agreement mentioned in subsection (2)(a) above and falling to be made after the later agreement takes effect. (12) This section does not apply unless the sum concerned is received after the day on which the Finance Act 1995 is passed, but it is immaterial when— (a) the agreement mentioned in subsection (1) above is made or takes effect, or (b) either of the agreements mentioned in subsection (2) above is made or takes effect. (329B) (1) In a case where— (a) an agreement is made settling a claim or action for damages for personal injury, (b) under the agreement the damages are to consist wholly or partly of periodical payments, (c) the person against whom the claim or action is brought (or, if he is insured against the claim concerned, his insurer) purchases one or more annuities, and (d) a later agreement is made under which the annuity is, or the annuities are, assigned in favour of the person entitled to the payments so as to secure that from a future date he receives the payments as the annuitant under the annuity or annuities, the agreement mentioned in paragraph (d) above is for the purposes of this section a qualifying agreement. (2) Subsection (3) below applies where— (a) a person receives a sum as the annuitant under an annuity assigned in his favour pursuant to a qualifying agreement, or (b) a person receives a sum on behalf of the annuitant under an annuity assigned in the annuitant’s favour pursuant to a qualifying agreement. (3) Where this subsection applies the sum shall not be regarded as the recipient’s or annuitant’s income for any purposes of income tax and accordingly shall be paid without any deduction under section 349(1). (4) For the purposes of subsection (1) above— (a) subsections (6), (9) and (10) of section 329A apply; (b) subsections (7) and (8) of section 329A apply as if references to the agreement were to that mentioned in subsection (1)(a) above. (5) This section does not apply unless the sum concerned is received after the day on which the Finance Act 1995 is passed, but it is immaterial when either of the agreements mentioned in subsection (1) above is made or takes effect.

Lloyd’s underwriters: new-style special reserve funds

143

• (1) In Schedule 20 to the Finance Act 1993 (Lloyd’s underwriters: special reserve funds) paragraph 2 (general requirements about special reserve funds) shall be deemed to have been enacted with the modification in subsection (2) below.

• (2) For sub-paragraphs (2) and (3) there shall be substituted—

(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.

Local government residuary body

144

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Payment of rent &c., under deduction of tax

145

• (1) In section 119(1) of the Taxes Act 1988 (rent, &c., payable in connection with mines, quarries and similar concerns), the words from “and, subject to subsection (2) below, shall be subject to deduction of income tax” to the end shall cease to have effect.

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

• (3) The provisions of this section have effect in relation to payments made after the passing of this Act.

Part IV — Petroleum Revenue Tax

Restriction of unrelievable field losses

146

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

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

• (3) After subsection (4) of that section there shall be inserted—

(5) Subsections (6) to (9) below apply if— (a) a claim is made for the allowance of an unrelievable field loss; and (b) the person to whom the loss accrued made a claim or election for the allowance of any expenditure unrelated to that field; and (c) that claim or election was received by the Board on or after 29th November 1994; and (d) the whole or a part of the expenditure to which the claim or election relates is allowed and, accordingly, falls to be taken into account under section 2(8)(a) of this Act for a chargeable period (whether beginning before or after 29th November 1994). (6) Subject to subsection (7) below, where this subsection applies, from the amount which, apart from this subsection, would be the amount of the unrelievable field loss referred to in paragraph (a) of subsection (5) above there shall be deducted an amount equal to so much of any expenditure unrelated to the field as is allowed on a claim or election as mentioned in paragraph (d) of that subsection. (7) If— (a) claims are made for the allowance of more than one unrelievable field loss derived from the same abandoned field, and (b) the person to whom the loss accrued is the same in respect of each of the unrelievable field losses, subsection (6) above shall have effect as if the deduction referred to in that subsection fell to be made from the aggregate amount of those losses. (8) Where subsection (7) above applies, the deduction shall be set against the unrelievable field losses in the order in which the claims for the allowance of each of those losses were received by the Board. (9) In subsections (5) and (6) above, “expenditure unrelated to the field” means— (a) expenditure allowable under any of sections 5, 5A and 5B of this Act; (b) expenditure allowable under this section (derived from a different abandoned field); or (c) expenditure falling within section 65 of the Finance Act 1987 which is accepted by the Board as allowable in accordance with Schedule 14 to that Act; and, in relation to expenditure falling within section 65 of the Finance Act 1987, “election” means an election under Part I of Schedule 14 to that Act.

Removal of time limits for claims for unrelievable field losses

147

• (1) In Schedule 8 to the Oil Taxation Act 1975 (procedural provisions as to allowance of unrelievable field losses), in paragraph 4 (claims)—

• (a) in sub-paragraph (1) (which requires a participator to make a claim to the Board within a time limit), for the words from “and must be made” to “that is to say” there shall be substituted “ at any time after ” and the words from “and the date” to the end of the sub-paragraph shall be omitted; and

• (b) in sub-paragraph (2) the words “within the time allowed for making the original claim” shall be omitted.

• (2) This section applies to claims made on or after the day on which this Act is passed.

Transfer of interests in fields: restriction of transferred losses

148

• (1) In Schedule 17 to the Finance Act 1980 (transfer of interests in oil fields) paragraph 7 (transfer of unused losses from the old to the new participator) shall be amended as follows.

• (2) At the beginning of sub-paragraph (2) there shall be inserted “ Subject to the following provisions of this paragraph ”.

• (3) After sub-paragraph (2) there shall be inserted the following sub-paragraphs—

(3) If, in the case of a transfer of the whole or part of an interest on or after 29th November 1994,— (a) the old participator made a claim or election for the allowance of any expenditure unrelated to the field, and (b) the claim or election was received by the Board on or after that date, and (c) the expenditure allowed on the claim or election fell to be taken into account in computing the assessable profit or allowable loss of the old participator for the transfer period or any earlier chargeable period, then, from the sum which, apart from this sub-paragraph, would be the aggregate of all the losses transferred to the new participator under this paragraph there shall be deducted (subject to sub-paragraphs (5) and (6) below) so much of the expenditure referred to in paragraph (a) above as is allowed on the claim or election (and, accordingly, the amount so deducted shall not fall to be transferred to the new participator under this paragraph). (4) In this paragraph “expenditure unrelated to the field” means expenditure allowable under any of the following provisions— (a) section 5 (abortive exploration expenditure); (b) section 5A (exploration and appraisal expenditure); (c) section 5B (research expenditure); (d) section 6 (unrelievable loss from abandoned field); and (e) section 65 of the Finance Act 1987 (cross-field allowance of certain expenditure incurred on new fields); and, in relation to any such expenditure, “claim” means a claim under Schedule 7 or Schedule 8 and “election” means an election under Part I of Schedule 14 to the Finance Act 1987 and, in relation to such an election, expenditure shall be regarded as allowed if it is accepted by the Board as allowable in accordance with that Schedule. (5) Where, in accordance with sub-paragraph (1) above, only a part of a loss (corresponding to the part of the interest transferred) falls to be transferred under this paragraph, only a corresponding part of the expenditure referred to in sub-paragraph (3) above shall be deducted under that sub-paragraph. (6) Where the amount of the deduction under sub-paragraph (3) above equals or exceeds the sum from which it is to be deducted, no part of any loss shall be transferred to the new participator under this paragraph.

Part V — Stamp Duty

Transfer: associated bodies

149

• (1) Section 42 of the Finance Act 1930 (relief from transfer stamp duty in case of transfer of property as between associated bodies corporate) shall be amended as mentioned in subsections (2) to (5) below.

• (2) In subsection (2) (as substituted by section 27(2) of the Finance Act 1967) for the words from “that the effect” to the end of the subsection there shall be substituted

that— (a) the effect of the instrument is to convey or transfer a beneficial interest in property from one body corporate to another, and (b) the bodies in question are associated at the time the instrument is executed.

• (3) The following subsections shall be inserted after subsection (2) (as so substituted)—

(2A) For the purposes of this section bodies corporate are associated at a particular time if at that time one is the parent of the other or another body corporate is the parent of each. (2B) For the purposes of this section one body corporate is the parent of another at a particular time if at that time the first body is beneficial owner of not less than 75 per cent. of the ordinary share capital of the second body.

• (4) In subsection (3) (as so substituted) for “(2)” there shall be substituted “ (2B) ”, and the words from “with the substitution” to the end shall be omitted.

• (5) The following subsection shall be inserted after subsection (3) (as so substituted)—

(4) In this section “ordinary share capital”, in relation to a body corporate, means all the issued share capital (by whatever name called) of the body corporate, other than capital the holders of which have a right to a dividend at a fixed rate but have no other right to share in the profits of the body corporate.

• (6) In section 27 of the Finance Act 1967 (which relates to section 42 of the Finance Act 1930) in subsection (3)(c) for the words from “a change” to “third body corporate” there shall be substituted “ the transferor or a third body corporate ceasing to be the transferee’s parent (within the meaning of the said section 42) ”.

• (7) This section shall apply in relation to instruments executed on or after the day on which this Act is passed.

Northern Ireland transfer: associated bodies

150

• (1) Section 11 of the Finance Act (Northern Ireland) 1954 (relief from stamp duty in case of transfer of property between associated bodies corporate) shall be amended as follows.

• (2) In subsection (2)(c)(iii) for the words from “a change” to “third body corporate” there shall be substituted “ the transferor or a third body corporate ceasing to be the transferee’s parent ”.

• (3) The following subsections shall be substituted for subsection (3)—

(3) For the purposes of this section a body corporate is associated with another body corporate at a particular time if at that time one is the parent of the other or another body corporate is the parent of each. (3AA) For the purposes of this section one body corporate is the parent of another at a particular time if at that time the first body is beneficial owner of not less than 75 per cent. of the ordinary share capital of the second body.

• (4) In subsection (3A) for the words “paragraphs (i) and (ii) of subsection (3)” there shall be substituted “ subsection (3AA) ”, and the words from “with the substitution” to the end shall be omitted.

• (5) The following subsection shall be inserted after subsection (3A)—

(3AB) In this section “ordinary share capital”, in relation to a body corporate, means all the issued share capital (by whatever name called) of the body corporate, other than capital the holders of which have a right to a dividend at a fixed rate but have no other right to share in the profits of the body corporate.

• (6) This section shall apply in relation to instruments executed on or after the day on which this Act is passed.

Lease or tack: associated bodies

151

• (1) Stamp duty under Part II of Schedule 13 to the Finance Act 1999 (lease) shall not be chargeable on an instrument which is—

• (a) a lease,

• (b) an agreement for a lease, or

• (c) an agreement with respect to a letting,

as respects which the condition in subsection (2) below is satisfied. This subsection is subject to subsection (4A) below.

• (2) The condition is that it is shown to the satisfaction of the Commissioners of Inland Revenue that—

• (a) the lessor is a body corporate and the lessee is another body corporate,

• (b) those bodies are associated at the time the instrument is executed,

• (c) in the case of an agreement, the agreement is for the lease or letting to be granted to the lessee or to a body corporate which is associated with the lessee at the time the instrument is executed, and

• (d) the instrument is not executed in pursuance of or in connection with an arrangement falling within subsection (3) below.

• (3) An arrangement falls within this subsection if it is one under which—

• (a) the consideration, or any part of the consideration, for the lease or agreement was to be provided or received (directly or indirectly) by a person other than a body corporate which at the relevant time was associated with either the lessor or the lessee, or

• (b) the lessor and the lessee were to cease to be associated by reason of the lessor or a third body corporate ceasing to be the lessee’s parent;

and the relevant time is the time of the execution of the instrument.

• (4) Without prejudice to the generality of paragraph (a) of subsection (3) above, an arrangement shall be treated as within that paragraph if it is one under which the lessor or the lessee or a body corporate associated with either at the relevant time was to be enabled to provide any of the consideration, or was to part with any of it, by or in consequence of the carrying out of a transaction which involved (or transactions any of which involved) a payment or other disposition by a person other than a body corporate associated with the lessor or the lessee at the relevant time.

• (4A) An instrument shall not be exempt from stamp duty by virtue of subsection (1) above if at the time the instrument is executed arrangements are in existence by virtue of which at that or some later time any person has or could obtain, or any persons together have or could obtain, control of the lessee but not of the lessor.

• (5) An instrument mentioned in subsection (1) above shall not be treated as duly stamped unless—

• (a) it is duly stamped in accordance with the law that would apply but for that subsection, or

• (b) it has, in accordance with section 12 of the Stamp Act 1891, been stamped with a particular stamp denoting either that it is not chargeable with any duty or that it is duly stamped.

• (6) In this section—

• (a) references to the lessor are to the person granting the lease or (in the case of an agreement) agreeing to grant the lease or letting;

• (b) references to the lessee are to the person being granted the lease or (in the case of an agreement) agreeing for the lease or letting to be granted to him or another.

• (7) For the purposes of this section bodies corporate are associated at a particular time if at that time one is the parent of the other or another body corporate is the parent of each.

• (8) For the purposes of this section one body corporate is the parent of another at a particular time if at that time the first body.

• (a) is beneficial owner of not less than 75 per cent. of the ordinary share capital of the second body.

• (b) is beneficially entitled to not less than 75 per cent of any profits available for distribution to equity holders of the second body; and

• (c) would be beneficially entitled to not less than 75 per cent of any assets of the second body available for distribution to its equity holders on a winding-up.

• (9) In subsection (8) above “ordinary share capital”, in relation to a body corporate, means all the issued share capital (by whatever name called) of the body corporate, other than capital the holders of which have a right to a dividend at a fixed rate but have no other right to share in the profits of the body corporate.

• (10) The ownership referred to in paragraph (a) of subsection (8) above is ownership either directly or through another body corporate or other bodies corporate, or partly directly and partly through another body corporate or other bodies corporate; and Part I of Schedule 4 to the Finance Act 1938 (determination of amount of capital held through other bodies corporate) shall apply for the purposes of that paragraph.

• (10A) Chapter 6 of Part 5 of the Corporation Tax Act 2010 shall apply for the purposes of paragraphs (b) and (c) of subsection (8) as it applies for the purposes of section 151(4)(a) and (b) of that Act; but this is subject to subsection (10B).

• (10B) In determining for the purposes of this section whether a body corporate is the parent of the lessor, sections 171(1)(b) and (3), 173, 174 and 176 to 178 of the Corporation Tax Act 2010 shall not apply for the purposes of paragraph (b) or (c) of subsection (8) above.

• (10C) In this section, “control” shall be construed in accordance with section 1124 of the Corporation Tax Act 2010.

• (11) This section shall apply in relation to instruments executed on or after the day on which this Act is passed.

Part VI — Miscellaneous and General

Miscellaneous

Open-ended investment companies

152

• (1) The Treasury may, by regulations, make such provision as they consider appropriate for securing that the enactments specified in subsection (2) below have effect in relation to—

• (a) open-ended investment companies of any such description as may be specified in the regulations,

• (b) holdings in, and the assets of, such companies, and

• (c) transactions involving such companies,

in a manner corresponding, subject to such modifications as the Treasury consider appropriate, to the manner in which they have effect in relation to unit trusts, to rights under, and the assets subject to, such trusts and to transactions for purposes connected with such trusts.

• (2) The enactments referred to in subsection (1) above are—

• (a) the Tax Acts and the Taxation of Chargeable Gains Act 1992; and

• (b) the enactments relating to stamp duty and stamp duty reserve tax.

• (3) The power of the Treasury to make regulations under this section in relation to any such enactments shall include power to make provision which does any one or more of the following, that is to say—

• (a) identifies the payments which are or are not to be treated, for the purposes of any prescribed enactment, as the distributions of open-ended investment companies;

• (b) modifies the operation in relation to open-ended investment companies, or in relation to payments falling to be treated as the distributions of such companies, of any of the following provisions of Part 23 of the Corporation Tax Act 2010—

• (i) any provision of Chapter 2, except section 1000(2),

• (ii) sections 1030 to 1048,

• (iii) section 1049(1) and (3),

• (iv) sections 1059 to 1063, and

• (v) Chapter 5.

• (c) applies and adapts any of the provisions of the enactments relating to stamp duty or stamp duty reserve tax for the purpose of making in relation to transactions involving open-ended investment companies any provision corresponding (with or without modifications) to that which applies under those enactments in the case of equivalent transactions involving unit trusts;

• (d) provides for any or all of the provisions of sections 75 to 77 of the Finance Act 1986 to have effect or not to have effect in relation to open-ended investment companies or the undertakings of, or any shares in, such companies;

• (e) so modifies the operation of any prescribed enactment in relation to any such companies as to secure that arrangements for treating the assets of an open-ended investment company as assets comprised in separate pools are given an effect corresponding, in prescribed respects, to that of equivalent arrangements constituting the separate parts of an umbrella scheme;

• (f) requires prescribed enactments to have effect in relation to an open-ended investment company as if it were, or were not, a member of the same group of companies as one or more other companies;

• (g) identifies the holdings in open-ended investment companies which are, or are not, to be treated for the purposes of any prescribed enactment as comprised in the same class of holdings;

• (h) preserves a continuity of tax treatment where, in connection with any scheme of re-organisation, assets of one or more unit trusts become assets of one or more open-ended investment companies, or vice versa;

• (i) treats the separate parts of the undertaking of an open-ended investment company in relation to which provision is made by virtue of paragraph (e) above as distinct companies for the purposes of any regulations under this section;

• (j) amends, adapts or applies the provisions of any subordinate legislation made under or by reference to any enactment modified by the regulations.

• (4) The power to make regulations under this section shall be exercisable by statutory instrument and shall include power—

• (a) to make different provision for different cases; and

• (b) to make such incidental, supplemental, consequential and transitional provision as the Treasury may think fit.

• (5) A statutory instrument containing regulations under this section shall be subject to annulment in pursuance of a resolution of the House of Commons.

• (6) In this section—

• “the enactments relating to stamp duty” means the Stamp Act 1891, and any enactment (including any Northern Ireland legislation) which amends or is required to be construed together with that Act;

• “the enactments relating to stamp duty reserve tax” means Part IV of the Finance Act 1986 and any enactment which amends or is required to be construed as one with that Part;

• “Northern Ireland legislation” shall have the meaning given by section 24(5) of the Interpretation Act 1978;

• “open-ended investment company” shall have the meaning given by section 236 of the Financial Services and Markets Act 2000;

• “prescribed” means prescribed by regulations under this section;

• “subordinate legislation” means any subordinate legislation within the meaning of the Interpretation Act 1978 or any order or regulations made by statutory instrument under Northern Ireland legislation; and

• “umbrella scheme” shall have the meaning given by section 619 of the Corporation Tax Act 2010;

and references in this section to the enactments relating to stamp duty, or to any of them, or to Part IV of the Finance Act 1986 shall have effect as including references to enactments repealed by sections 107 to 110 of the Finance Act 1990.

• (7) Any reference in this section to unit trusts has effect—

• (a) for the purposes of so much of this section as confers power in relation to the enactments specified in paragraph (a) of subsection (2) above, as a reference to authorised unit trusts (within the meaning of sections 616 and 619(3) of the Corporation Tax Act 2010), and

• (b) for the purposes of so much of this section as confers power in relation to the enactments specified in paragraph (b) of that subsection, as a reference to any unit trust scheme (within the meaning given by section 57 of the Finance Act 1946).

• (8) For the purposes of this section the enactments which shall be taken to make provision in relation to companies that are members of the same group of companies shall include any enactments which make provision in relation to a case—

• (a) where one company has, or in relation to another company is, a subsidiary, or a subsidiary of a particular description, or

• (b) where one company controls another or two or more companies are under the same control.

Electronic lodgement of tax returns, etc

153

Short rotation coppice

154

• (1) ... The cultivation of short rotation coppice shall be regarded for the purposes of ... the Taxation of Chargeable Gains Act 1992 as farming (and, where relevant, as husbandry or agriculture) and not as forestry; and land in the United Kingdom on which the activity is carried on shall accordingly be regarded for those purposes as farm land or agricultural land, as the case may be, and not as woodlands.

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

• (2) For the purposes of the Inheritance Tax Act 1984 the cultivation of short rotation coppice shall be regarded as agriculture; and accordingly for those purposes—

• (a) land on which short rotation coppice is cultivated shall be regarded as agricultural land, and

• (b) buildings used in connection with the cultivation of short rotation coppice shall be regarded as farm buildings.

• (3) In subsections (1) and (2) “short rotation coppice” means a perennial crop of tree species planted at high density, the stems of which are harvested above ground level at intervals of less than ten years.

• (4) Subsection (1) and subsection (3) so far as relating to subsection (1) shall be deemed to have come into force on 29th November 1994.

• (5) Subsection (2) and subsection (3) so far as relating to subsection (2) shall have effect in relation to transfers of value or other events occuring on or after 6th April 1995.

Inheritance tax: agricultural property

155

• (1) In section 116 of the Inheritance Tax Act 1984 (relief for transfers of agricultural property) in subsection (2) (rate of relief) the word “either” shall be omitted and at the end of paragraph (b) there shall be inserted

or (c) the interest of the transferor in the property immediately before the transfer does not carry either of the rights mentioned in paragraph (a) above because the property is let on a tenancy beginning on or after 1st September 1995;

.

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

(2A) In the application of this section as respects property in Scotland, the reference in subsection (2)(c) above to a tenancy beginning on or after 1st September 1995 includes a reference to its being acquired on or after that date by right of succession (the date of acquisition being taken to be the date on which the successor gives relevant notice under section 12 of the Agricultural Holdings (Scotland) Act 1991).