Finance Act 1995

SCHEDULE 2A (1) (1) The Secretary of State may make regulations under this Schedule with respect to any case where an authorised person has reason to believe that, on or after such date as may be prescribed, an offence under section 29(1) is being committed as regards a vehicle which is stationary on a public road. (2) The regulations may provide that the authorised person or a person acting under his direction may— (a) fix an immobilisation device to the vehicle while it remains in the place where it is stationary, or (b) move it from that place to another place on the same or another public road and fix an immobilisation device to it in that other place. (3) The regulations may provide that on any occasion when an immobilisation device is fixed to a vehicle in accordance with the regulations the person fixing the device shall also fix to the vehicle a notice— (a) indicating that the device has been fixed to the vehicle and warning that no attempt should be made to drive it or otherwise put it in motion until it has been released from the device; (b) specifying the steps to be taken to secure its release; (c) giving such other information as may be prescribed. (4) The regulations may provide that— (a) a vehicle to which an immobilisation device has been fixed in accordance with the regulations may only be released from the device by or under the direction of an authorised person; (b) subject to that, such a vehicle shall be released from the device if the first and second requirements specified below are met. (5) The first requirement is that such charge in respect of the release as may be prescribed is paid in any manner specified in the immobilisation notice. (6) The second requirement is that— (a) a vehicle licence is produced in accordance with instructions specified in the immobilisation notice, and the licence is one which is in force for the vehicle concerned at the time the licence is produced, or (b) where such a licence is not produced, such sum as may be prescribed is paid in any manner specified in the immobilisation notice. (7) The regulations may provide that they shall not apply in relation to a vehicle if— (a) a current disabled person’s badge is displayed on the vehicle, or (b) such other conditions as may be prescribed are fulfilled; and “disabled person’s badge” here means a badge issued, or having effect as if issued, under any regulations for the time being in force under section 21 of the Chronically Sick and Disabled Persons Act 1970 or any regulations for the time being in force under section 14 of the Chronically Sick and Disabled Persons (Northern Ireland) Act 1978. (8) The regulations may provide that an immobilisation notice shall not be removed or interfered with except by or on the authority of a person falling within a prescribed description. (2) (1) The regulations may provide that a person contravening provision made under paragraph 1(8) is guilty of an offence and liable on summary conviction to a fine not exceeding level 2 on the standard scale. (2) The regulations may provide that a person who, without being authorised to do so in accordance with provision made under paragraph 1, removes or attempts to remove an immobilisation device fixed to a vehicle in accordance with the regulations is guilty of an offence and liable on summary conviction to a fine not exceeding level 3 on the standard scale. (3) The regulations may provide that where they would apply in relation to a vehicle but for provision made under paragraph 1(7)(a) and the vehicle was not, at the time it was stationary, being used— (a) in accordance with regulations under section 21 of the Chronically Sick and Disabled Persons Act 1970 or regulations under section 14 of the Chronically Sick and Disabled Persons (Northern Ireland) Act 1978, and (b) in circumstances falling within section 117(1)(b) of the Road Traffic Regulation Act 1984 or Article 174A(2)(b) of the Road Traffic (Northern Ireland) Order 1981 (use where a disabled person’s concession would be available), the person in charge of the vehicle at that time is guilty of an offence and liable on summary conviction to a fine not exceeding level 3 on the standard scale. (4) The regulations may provide that where— (a) a person makes a declaration with a view to securing the release of a vehicle from an immobilisation device purported to have been fixed in accordance with the regulations, (b) the declaration is that the vehicle is or was an exempt vehicle, and (c) the declaration is to the person’s knowledge either false or in any material respect misleading, he is guilty of an offence. (5) The regulations may provide that a person guilty of an offence by virtue of provision made under sub-paragraph (4) is liable— (a) on summary conviction, to a fine not exceeding the statutory maximum, and (b) on conviction on indictment, to imprisonment for a term not exceeding two years or to a fine or (except in Scotland) to both. (3) (1) The regulations may make provision as regards a case where— (a) an immobilisation device is fixed to a vehicle in accordance with the regulations, and (b) such conditions as may be prescribed are fulfilled. (2) The regulations may provide that an authorised person, or a person acting under the direction of an authorised person, may remove the vehicle and deliver it into the custody of a person— (a) who is identified in accordance with prescribed rules, and (b) who agrees to accept delivery in accordance with arrangements agreed between that person and the Secretary of State; and the arrangements may include provision as to the payment of a sum to the person into whose custody the vehicle is delivered. (3) The regulations may provide that the person into whose custody the vehicle is delivered may dispose of it, and in particular provision may be made as to— (a) the time at which the vehicle may be disposed of; (b) the manner in which it may be disposed of. (4) The regulations may make provision allowing a person to take possession of the vehicle if— (a) he claims it before it is disposed of, and (b) any prescribed conditions are fulfilled. (5) The regulations may provide for a sum of an amount arrived at under prescribed rules to be paid to a person if— (a) he claims after the vehicle’s disposal to be or to have been its owner, (b) the claim is made within a prescribed time of the disposal, and (c) any other prescribed conditions are fulfilled. (6) The regulations may provide that— (a) the Secretary of State, or (b) a person into whose custody the vehicle is delivered under the regulations, may recover from the vehicle’s owner (whether or not a claim is made under provision made under sub-paragraph (4) or (5)) such charges as may be prescribed in respect of all or any of the following, namely, its release, removal, custody and disposal; and “owner” here means the person who was the owner when the immobilisation device was fixed. (7) The conditions prescribed under sub-paragraph (4) may include conditions as to— (a) satisfying the person with custody that the claimant is the vehicle’s owner; (b) the payment of prescribed charges in respect of the vehicle’s release, removal and custody; (c) the production of a vehicle licence; (d) payment of a prescribed sum where a vehicle licence is not produced. (8) Without prejudice to anything in the preceding provisions of this paragraph, the regulations may include provision for purposes corresponding to those of sections 101 and 102 of the Road Traffic Regulation Act 1984 (disposal and charges) subject to such additions, omissions or other modifications as the Secretary of State thinks fit. (4) (1) The regulations may provide that where— (a) a person makes a declaration with a view to securing possession of a vehicle purported to have been delivered into the custody of a person in accordance with provision made under paragraph 3, (b) the declaration is that the vehicle is or was an exempt vehicle, and (c) the declaration is to the person’s knowledge either false or in any material respect misleading, he is guilty of an offence. (2) The regulations may provide that a person guilty of such an offence is liable— (a) on summary conviction, to a fine not exceeding the statutory maximum, and (b) on conviction on indictment, to imprisonment for a term not exceeding two years or to a fine or (except in Scotland) to both. (5) (1) The regulations may make provision as regards a case where a person pays a prescribed sum in pursuance of provision made under— (a) paragraph 1(6)(b), or (b) paragraph 3(7)(d). (2) The regulations may— (a) provide for a voucher to be issued in respect of the sum; (b) provide for setting the sum against the amount of any vehicle excise duty payable in respect of the vehicle concerned; (c) provide for the refund of any sum; (d) provide that where a voucher has been issued section 29(1) and any other prescribed provision of this Act shall not apply, as regards the vehicle concerned, in relation to events occurring in a prescribed period. (3) The regulations may make provision— (a) as to the information to be provided before a voucher is issued; (b) as to the contents of vouchers; (c) specifying conditions subject to which any provision under sub-paragraph (2)(b) to (d) is to have effect. (4) The regulations may make provision as to any case where a voucher is issued on receipt of a cheque which is subsequently dishonoured, and in particular the regulations may— (a) provide for a voucher to be void; (b) provide that, where the sum concerned is set against the amount of any vehicle excise duty, the licence concerned shall be void; (c) make provision under which a person is required to deliver up a void voucher or void licence. (6) (1) The regulations may provide that— (a) a person is guilty of an offence if within such reasonable period as is found in accordance with prescribed rules he fails to deliver up a voucher that is void by virtue of provision made under paragraph 5(4); (b) a person guilty of such an offence shall be liable on summary conviction to a fine not exceeding level 3 on the standard scale. (2) The regulations may provide that a person is guilty of an offence if within such reasonable period as is found in accordance with prescribed rules he fails to deliver up a licence that is void by virtue of provision made under paragraph 5(4), and that a person guilty of such an offence shall be liable on summary conviction to a penalty of whichever is the greater of— (a) level 3 on the standard scale; (b) an amount equal to five times the annual rate of duty that was payable on the grant of the licence or would have been so payable if it had been taken out for a period of twelve months. (3) The regulations may provide that where a person is convicted of an offence under provision made by virtue of sub-paragraph (2) he must pay, in addition to any penalty, an amount found in accordance with prescribed rules. (4) The regulations may provide that if— (a) a voucher is void by virtue of provision made under paragraph 5(4), (b) a person seeks to set the sum concerned against the amount of any vehicle excise duty, and (c) he knows the voucher is void, he is guilty of an offence and liable on summary conviction to a fine not exceeding level 5 on the standard scale. (5) The regulations may provide that a person who in connection with— (a) obtaining a voucher for which provision is made under paragraph 5, or (b) obtaining a refund of any sum in respect of which such a voucher is issued, makes a declaration which to his knowledge is either false or in any material respect misleading is guilty of an offence. (6) The regulations may provide that a person is guilty of an offence if he forges, fraudulently alters, fraudulently uses, fraudulently lends or fraudulently allows to be used by another person a voucher for which provision is made under paragraph 5. (7) The regulations may provide that a person guilty of an offence under provision made under sub-paragraph (5) or (6) is liable— (a) on summary conviction, to a fine not exceeding the statutory maximum, and (b) on conviction on indictment, to imprisonment for a term not exceeding two years or to a fine or (except in Scotland) to both. (7) Without prejudice to anything in paragraphs 5(4) and 6 the regulations may include provision for purposes corresponding to those of sections 19A and 36 subject to such additions, omissions or other modifications as the Secretary of State thinks fit. (8) The regulations may make provision about the proceedings to be followed where a dispute occurs as a result of the regulations, and in particular provision may be made— (a) for an application to be made to a magistrates’ court or (in Northern Ireland) a court of summary jurisdiction; (b) for a court to order a sum to be paid by the Secretary of State. (9) As regards anything falling to be done under the regulations (such as receiving payment of a charge or other sum or issuing a voucher) the regulations may provide that it may be done— (a) by an authorised person, or (b) by an authorised person or a person acting under his direction. (10) (1) The regulations may provide that they shall only apply where the authorised person has reason to believe that the offence mentioned in paragraph 1(1) is being committed before such date as may be prescribed. (2) The regulations may provide that they shall only apply where the vehicle mentioned in paragraph 1(1) is in a prescribed area. (3) Different dates may be prescribed under paragraph 1(1) or sub-paragraph (1) above in relation to different areas prescribed under sub-paragraph (2) above. (11) (1) The regulations may make provision as to the meaning for the purposes of the regulations of “owner” as regards a vehicle. (2) In particular, the regulations may provide that for the purposes of the regulations— (a) the owner of a vehicle at a particular time shall be taken to be the person by whom it is then kept; (b) the person by whom a vehicle is kept at a particular time shall be taken to be the person in whose name it is then registered by virtue of this Act. (12) (1) The regulations may make provision as to the meaning in the regulations of “authorised person”. (2) In particular, the regulations may provide that— (a) references to an authorised person are to a person authorised by the Secretary of State for the purposes of the regulations; (b) an authorised person may be a local authority or an employee of a local authority or a member of a police force or some other person; (c) different persons may be authorised for the purposes of different provisions of the regulations. (13) In this Schedule— (a) references to an immobilisation device are to a device or appliance which is an immobilisation device for the purposes of section 104 of the Road Traffic Regulation Act 1984 (immobilisation of vehicles illegally parked); (b) references to an immobilisation notice are to a notice fixed to a vehicle in accordance with the regulations; (c) “prescribed” means prescribed by regulations made under this Schedule.

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• (1) In section 37(2) of the 1994 Act (penalty where duty at higher rate is not paid) the following shall be omitted—

• (a) the words “(or, in Scotland, on indictment or on summary conviction)”, and

• (b) the words “(or, in Scotland, the statutory maximum)”.

• (2) In section 41(1)(b) of the 1994 Act (order in Scotland in case of offence under section 37) the words “182 or” and “183 or” shall be omitted.

• (3) This paragraph shall apply in relation to proceedings begun after the day on which this Act is passed.

Part VIII — Proceedings

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Part IX — Transitionals

Higher rate not to apply

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• (1) This paragraph applies where a vehicle licence is taken out—

• (a) before 1st July 1995, and

• (b) at the rate applicable (at the time it is taken out) under Schedule 1 to the 1994 Act or any provision re-enacted in that Schedule.

• (2) While the licence is in force duty shall not, by virtue of any provision contained in Part III or IV of this Schedule other than paragraph 16(2) above, become chargeable under section 15 of the 1994 Act (vehicle used in manner attracting higher rate).

Regulations

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• (1) This paragraph applies where regulations to determine the seating capacity of a hackney carriage are made, or have effect as if made, under sub-paragraph (2) of paragraph 3 of Schedule 1 to the 1994 Act (as that paragraph has effect apart from the substitution made by paragraph 8 above).

• (2) The regulations shall have effect as if made under sub-paragraph (5) of paragraph 3 of that Schedule (as substituted by paragraph 8 above) to determine the seating capacity of a vehicle.

• (3) This paragraph shall apply in relation to licences taken out on or after 1st July 1995.

Part X — Special Reliefs

Relief where exemption abolished

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• (1) This paragraph applies where—

• (a) a vehicle licence is taken out for a vehicle on or after 1st July 1995 and before 1st July 1996,

• (b) the licence is the first vehicle licence to be taken out for the vehicle on or after 1st July 1995,

• (c) the vehicle would be an exempt vehicle apart from paragraph 2 above, and

• (d) the amount of vehicle excise duty to be paid on the licence would (apart from this paragraph) exceed £1,000.

• (2) In such a case the amount of vehicle excise duty to be paid on the licence shall be £1,000.

• (3) This paragraph shall be construed in accordance with the 1994 Act.

Relief where vehicle changes category

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• (1) This paragraph applies where paragraph 41 above does not apply and—

• (a) a vehicle licence is taken out for a vehicle on or after 1st July 1995 and before 1st July 1996,

• (b) the licence is the first vehicle licence to be taken out for the vehicle on or after 1st July 1995,

• (c) apart from Part III of this Schedule, the annual rate of vehicle excise duty applicable to the vehicle would be found under any of the provisions falling within sub-paragraph (3) below, and

• (d) the new amount of duty exceeds the old amount of duty by more than £1,000.

• (2) In such a case the amount of vehicle excise duty to be paid on the licence shall be an amount equal to £1,000 plus the old amount of duty.

• (3) The provisions falling within this sub-paragraph are—

• (a) paragraph 8(1) and (2)(b) of Schedule 1 to the 1994 Act;

• (b) paragraph 8(1) and (2)(c) of that Schedule;

• (c) paragraph 8(1) and (2)(d) of that Schedule;

• (d) paragraph 12(2) of that Schedule;

• (e) paragraph 12(3) to (5) of that Schedule.

• (4) For the purposes of this paragraph—

• (a) the new amount of duty is the amount of vehicle excise duty payable on the licence apart from this paragraph;

• (b) the old amount of duty is the amount of vehicle excise duty that would be payable on the licence if Part III of this Schedule had not been enacted.

• (5) This paragraph shall be construed in accordance with the 1994 Act.

SCHEDULE 5

1

Part III of the Finance Act 1994 (insurance premium tax) shall be amended as provided by this Schedule.

2

• (1) Section 53 (registration of insurers) shall be amended as follows.

• (2) In subsection (5) (Commissioners to cancel registration of person who ceases to receive premiums)—

• (a) the word “ and ” shall be inserted after paragraph (a);

• (b) paragraph (c) (person to satisfy Commissioners that no tax is unpaid) and the word “and” immediately preceding it shall be omitted.

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

(5A) In a case where— (a) the Commissioners are satisfied that a person has ceased to receive, as insurer, premiums in the course of any taxable business, but (b) he has not notified them under subsection (3) above, they may cancel his registration with effect from the earliest practicable time after he so ceased.

• (4) Sub-paragraph (2) above shall apply in relation to notifications made under section 53(3) on or after the day on which this Act is passed.

3

Section 53 shall be further amended by inserting the following subsection after subsection (1)—

(1A) The register kept under this section may contain such information as the Commissioners think is required for the purposes of the care and management of the tax.

4

The following section shall be inserted after section 53—

(53A) (1) Regulations may make provision requiring a registrable person to notify the Commissioners of particulars which— (a) are of changes in circumstances relating to the registrable person or any business carried on by him, (b) appear to the Commissioners to be required for the purpose of keeping the register kept under section 53 above up to date, and (c) are of a prescribed description. (2) Regulations may make provision— (a) as to the time within which a notification is to be made; (b) as to the form and manner in which a notification is to be made; (c) requiring a person who has made a notification to notify the Commissioners if any information contained in it is inaccurate.

5

• (1) Section 59 (review of Commissioners’ decisions) shall be amended as follows.

• (2) In subsection (1)(d) (review of decision with respect to assessment) for the words “under section 56 above” there shall be substituted “ falling within subsection (1A) below ”.

• (3) The following subsection shall be inserted after subsection (1)—

(1A) An assessment falls within this subsection if it is an assessment under section 56 above in respect of an accounting period in relation to which a return required to be made by virtue of regulations under section 54 above has been made.

• (4) This paragraph shall apply in relation to assessments made on or after the day on which this Act is passed.

6

In section 73(1) (interpretation) after the entry relating to “conduct” there shall be inserted—

“insurance business” means a business which consists of or includes the provision of insurance;

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8

• (1) In Schedule 7 the following shall be inserted after paragraph 4—

(4A) (1) Where, on an application by an authorised person, a justice of the peace or, in Scotland, a justice (within the meaning of section 462 of the Criminal Procedure (Scotland) Act 1975) is satisfied that there are reasonable grounds for believing— (a) that an offence in connection with tax is being, has been or is about to be committed, and (b) that any recorded information (including any document of any nature whatsoever) which may be required as evidence for the purpose of any proceedings in respect of such an offence is in the possession of any person, he may make an order under this paragraph. (2) An order under this paragraph is an order that the person who appears to the justice to be in possession of the recorded information to which the application relates shall— (a) give an authorised person access to it, and (b) permit an authorised person to remove and take away any of it which he reasonably considers necessary, not later than the end of the period of 7 days beginning on the date of the order or the end of such longer period as the order may specify. (3) The reference in sub-paragraph (2)(a) above to giving an authorised person access to the recorded information to which the application relates includes a reference to permitting the authorised person to take copies of it or to make extracts from it. (4) Where the recorded information consists of information contained in a computer, an order under this paragraph shall have effect as an order to produce the information in a form in which it is visible and legible and, if the authorised person wishes to remove it, in a form in which it can be removed. (5) This paragraph is without prejudice to paragraphs 3 and 4 above.

• (2) In paragraph 5(1) of Schedule 7 (duty to provide record of anything removed in exercise of power) after the words “paragraph 4” there shall be inserted “ or 4A ”.

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SCHEDULE 6

The Taxes Act 1988

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3

Sections 22 and 23 of that Act (assessments to income tax under Schedule A and collection from lessees and agents) shall cease to have effect.

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26

In section 692(1) of that Act (reimbursement of settlor), for the words from “the profits” onwards there shall be substituted “ either the profits of a trade carried on by the settlor or the profits of a Schedule A business so carried on ”.

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The Capital Allowances Act 1990 (c. 1)

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The Taxation of Chargeable Gains Act 1992 (c. 12)

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The Finance (No. 2) Act 1992 (c. 48)

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SCHEDULE 7

1

In subsection (6) of section 338 of the Taxes Act 1988 (charges on income), for paragraph (d) and the words after that paragraph (allowance of interest as a charge on income in a case where it would be eligible for relief in the case of an individual) there shall be substituted the following paragraph—

(d) the interest qualifies under section 338A for treatment in accordance with this paragraph as a charge on income.

2

After section 338 of that Act there shall be inserted the following section—

(338A) (1) Subject to the following provisions of this section, interest shall qualify for treatment in accordance with section 338(6)(d) as a charge on income if— (a) at the time when the interest is paid the company in question owns an estate or interest in land, or the property in a caravan or house-boat, in the United Kingdom or the Republic of Ireland; (b) the interest is paid on a loan to defray money applied— (i) in purchasing that estate, interest or property, or another estate, interest or property absorbed into, or given up to obtain, that estate, interest or property; (ii) in improving or developing the land, or buildings on the land; or (iii) in paying off another loan in a case in which interest on that other loan would have qualified under this section for treatment as a charge on income had the loan not been paid off (and on the assumption, if the loan was free of interest, that it carried interest); (c) the land, caravan or house-boat— (i) is occupied by the company and used as the only or main residence of an individual; (ii) is occupied by the company and used otherwise than as a residence; or (iii) is, in any period of 52 weeks comprising the time at which the interest is payable, let at a commercial rent for more than 26 weeks and, when not so let, either available for letting at such a rent or occupied and used as mentioned in sub-paragraph (i) or (ii) above; and (d) the interest is not interest incurred by overdrawing an account or by debiting the account of any person as the holder of a credit card or under similar arrangements. (2) Subsections (2) and (7) of section 354 shall have effect in relation to subsection (1) above as they have effect in relation to subsection (1) of that section. (3) Interest shall qualify under this section for treatment as a charge on income by reference to any land, caravan or house-boat which is being used as the only or main residence of an individual to the extent only that the amount on which it is payable does not exceed the following limit, that is to say, the qualifying maximum for the year of assessment in which the payment is made reduced by the amount on which interest is payable by the company under any earlier loans so far as they— (a) are loans the interest on which qualifies under this section for treatment as a charge on income; and (b) fall within subsection (1)(b) above in respect of the same land, caravan or house-boat. (4) Accordingly— (a) if the amount on which interest is payable under any loan exceeds the limit specified in subsection (3) above, so much only of the interest that would otherwise qualify under this section shall so qualify as bears to the whole of that interest the same proportion as that part of that amount that does not exceed the limit bears to the whole of that amount; and (b) if the amount on which interest is payable under the earlier loans mentioned in that subsection is equal to or exceeds the qualifying maximum for the year of assessment in which the interest is paid, none of the interest on the later loan shall qualify under this section for treatment as a charge on income. (5) Subsections (1A) and (2) of section 355 shall have effect for the purposes of this section in relation to the condition in paragraph (c) of subsection (1) above as they have effect in relation to the condition referred to in section 355(1A)(a). (6) Interest shall not qualify under this section for treatment as a charge on income by reference to any case in which— (a) the land, caravan or house-boat is used as the only or main residence of an individual, and (b) the interest is paid on a home improvement loan, unless the loan was made before 6th April 1988; and subsections (2B) and (2C) of section 355 shall apply for the purposes of this subsection as they apply for the purposes of subsection (2A) of that section. (7) Interest shall not qualify by virtue of subsection (1)(b)(i) above for treatment as a charge on income— (a) where the purchaser has, since 15th April 1969, disposed of an estate or interest in the land, or the property in the caravan or house-boat, in question and it appears that the main purpose of the disposal and purchase was to obtain relief in respect of interest on the loan or to allow interest on the loan to be treated as a charge on income; or (b) where the purchaser is directly or indirectly purchasing from a person who is connected with him and the price substantially exceeds the value of what is acquired; and interest shall not qualify by virtue of subsection (1)(b)(ii) above for such treatment where the money spent is received directly or indirectly by a person connected with the person spending it and substantially exceeds the value of the work done. (8) For the purposes of subsection (7) above one person is connected with another if he is so connected within the terms of section 839. (9) In this section— - “caravan” and “house-boat” have the same meanings as are given to them for the purposes of sections 354 to 366 by subsection (1) of section 367; and - “the qualifying maximum” has the same meaning as is given to it for the purposes of sections 356A to 357 by subsection (5) of that section; and subsections (2) to (4) of section 367 shall apply with the necessary modifications for the determination of any question whether interest qualifies under this section for treatment as a charge on income as they apply for the determination of any question whether interest is eligible for relief under section 353 by virtue of section 354. (10) References in this section to an estate or interest do not include references— (a) to a rentcharge or, in Scotland, a superiority or the interest of a creditor in a contract of ground annual; or (b) to the interest of a chargee or mortgagee or, in Scotland, the interest of a creditor in a charge or security of any kind over land.

SCHEDULE 8

Part I — General amendments

Classes of life assurance business

1

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

2

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

3

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

4

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

5

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

6

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

7

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

8

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

9

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

10

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

Linked assets

11

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

12

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

13

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

14

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

15

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

Receipts to be brought into account

16

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

Supplementary provisions as to apportionment

17

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

Franked investment income: supplementary provisions

18

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

19

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

Computation of losses

20

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

Treatment of interest and annuities

21

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

Interest on repayment of advance corporation tax

22

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

Capital allowances

23

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

24

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

Treatment of tax-free income

25

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

Taxation of pure reinsurance business

26

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

Life reinsurance business: separate charge on profits

27

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

Provisions applicable to charge under Case I of Schedule D

28

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

29

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

Overseas life assurance business

30

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

31

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

32

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

33

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

Taxation of investment return where risk reinsured

34

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

Part II — Application of provisions to overseas life insurance companies

35

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

36

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

37

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

38

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

39

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

40

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

41

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

42

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

43

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

44

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

45

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

46

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

47

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

48

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

49

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

Part III — Supplementary provisions

Penalties

50

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

Miscellaneous

51

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

Commencement

52

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

53

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

54

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

55

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

56

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

57

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

58

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

SCHEDULE 9

Consequential amendment of references to sanctioned transfers

1

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

Modification of the Taxes Act 1988 in relation to overseas life insurance companies

2

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

Modification of the Capital Allowances Act 1990

3

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

Modification of the Taxation of Chargeable Gains Act 1992

4

In subsection (5) of section 213 of the Taxation of Chargeable Gains Act 1992 (spreading of gains and losses under section 212 where there is a transfer of long term business), at the beginning there shall be inserted “Subject to subsections (5A) to (7) below”; and after that subsection there shall be inserted the following subsection—

(5A) Subsection (5) above shall not apply where the transferee is resident outside the United Kingdom unless the business to which the transfer relates is carried on by the transferee, for a period beginning with the time when the transfer takes effect, through a branch or agency in the United Kingdom.

5

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

6

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

SCHEDULE 10

Tax exempt life or endowment business

1

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

Maximum benefits payable to members

2

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

Qualifying policies

3

In paragraph 3 of Schedule 15 to that Act (friendly society policies that are qualifying policies), sub-paragraph (2)(c) (condition limiting consideration for early surrender) shall cease to have effect.

4

• (1) This paragraph applies to any policy which—

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

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

• (2) Where—

• (a) the amount payable by way of premium under a policy to which this paragraph applies is increased by virtue of a variation made in the period beginning with the day on which this Act is passed and ending with 31st March 1996, and

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

Schedule 15 to that Act, in its application to the policy, shall have effect, in relation to that variation, with the omission of paragraph 4(3)(a) and the insertion at the end of paragraph 18(2) of the words set out in sub-paragraph (3) below.

• (3) Those words are as follows, that is to say, “ and as if for paragraph 3(2)(b) above there were substituted— ”

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

”

SCHEDULE 11

Introductory

1

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

Interpretation

2

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

Conditions of approval: benefits that may be provided

3

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

Income withdrawals

4

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

Lump sum to member

5

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

Annuity after death of member

6

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

Income withdrawals after death of member

7

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

Lump sum on death of member

8

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

Other restrictions on approval

9

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

Maximum amount of deductions

10

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

Treatment of personal pension income

11

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

Tax charge on return of contributions after pension date

12

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

SCHEDULE 12

Introduction

1

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

Curtailment of schemes

2

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

European institutions

3

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

Certification: Treasury specifications

4

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

Treasury authorisation

5

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

Section 326: supplementary

6

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

Payments under certain contracts

7

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

Transitional

8

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

SCHEDULE 13

Introduction

1

The Taxation of Chargeable Gains Act 1992 shall be amended as mentioned in this Schedule.

Amendments of section 150A

2

• (1) Section 150A (enterprise investment scheme) shall be amended as mentioned in sub-paragraphs (2) to (4) below; and the amendments made by sub-paragraphs (2) and (3) below shall apply in relation to shares issued on or after 1st January 1994.

• (2) The following subsection shall be inserted after subsection (2)—

(2A) Notwithstanding anything in section 16(2), subsection (2) above shall not apply to a disposal on which a loss accrues.

• (3) In subsection (3) (reduction of relief) the following paragraph shall be inserted after paragraph (a)—

(aa) the amount of the reduction is not found under section 289A(2)(b) of that Act, and

.

• (4) The following subsections shall be inserted after subsection (8) (which disapplies provisions about exchanges, reconstructions or amalgamations in certain circumstances)—

(8A) Subsection (8) above shall not have effect to disapply section 135 or 136 where— (a) the new holding consists of new ordinary shares carrying no present or future preferential right to dividends or to a company’s assets on its winding up and no present or future preferential right to be redeemed, (b) the new shares are issued on or after 29th November 1994 and after the end of the relevant period, and (c) the condition in subsection (8B) below is satisfied. (8B) The condition is that at some time before the issue of the new shares— (a) the company issuing them issued eligible shares, and (b) a certificate in relation to those eligible shares was issued by the company for the purposes of subsection (2) of section 306 of the Taxes Act and in accordance with that section. (8C) In subsection (8A) above— (a) “new holding” shall be construed in accordance with sections 126, 127, 135 and 136; (b) “relevant period” means the period found by applying section 312(1A)(a) of the Taxes Act by reference to the company issuing the shares referred to in subsection (8) above and by reference to those shares.

Reduction of relief

3

The following section shall be inserted after section 150A—

(150B) (1) This section has effect where section 150A(2) applies on a disposal of eligible shares, and before the disposal but on or after 29th November 1994— (a) value is received in circumstances where relief attributable to the shares is reduced by an amount under section 300(1A)(a) of the Taxes Act, (b) there is a repayment, redemption, repurchase or payment in circumstances where relief attributable to the shares is reduced by an amount under section 303(1A)(a) of that Act, or (c) paragraphs (a) and (b) above apply. (2) If section 150A(2) applies on the disposal but section 150A(3) does not, section 150A(2) shall apply only to so much of the gain as remains after deducting so much of it as is found by multiplying it by the fraction— (a) whose numerator is equal to the amount by which the relief attributable to the shares is reduced as mentioned in subsection (1) above, and (b) whose denominator is equal to the amount of the relief attributable to the shares. (3) If section 150A(2) and (3) apply on the disposal, section 150A(2) shall apply only to so much of the gain as is found by— (a) taking the part of the gain found under section 150A(3), and (b) deducting from that part so much of it as is found by multiplying it by the fraction mentioned in subsection (2) above. (4) Where the relief attributable to the shares is reduced as mentioned in subsection (1) above by more than one amount, the numerator mentioned in subsection (2) above shall be taken to be equal to the aggregate of the amounts. (5) The denominator mentioned in subsection (2) above shall be found without regard to any reduction mentioned in subsection (1) above. (6) Subsections (11) and (12) of section 150A apply for the purposes of this section as they apply for the purposes of that section.

Re-investment

4

• (1) The following section shall be inserted after section 150B—

(150C) Schedule 5B to this Act (which provides relief in respect of re-investment under the enterprise investment scheme) shall have effect.

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

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

SCHEDULE 5B (1) (1) This Schedule applies where— (a) there would (apart from paragraph 2(2)(a) below) be a chargeable gain (“the original gain”) accruing to an individual (“the investor”) at any time (“the accrual time”) on or after 29th November 1994; (b) the gain is one accruing either on the disposal by the investor of any asset or in accordance with paragraphs 4 and 5 below or paragraphs 4 and 5 of Schedule 5C; (c) the investor makes a qualifying investment; and (d) the investor is resident or ordinarily resident in the United Kingdom at the accrual time and the time when he makes the qualifying investment and is not, in relation to the qualifying investment, a person to whom sub-paragraph (4) below applies. (2) The investor makes a qualifying investment for the purposes of this Schedule if— (a) he subscribes for any shares to which any relief given to him under Chapter III of Part VII of the Taxes Act is attributable; (b) those shares are issued at a qualifying time; and (c) where that time is before the accrual time, those shares are still held by the investor at the accrual time; and in this Schedule “relevant shares”, in relation to a case to which this Schedule applies, means any of the shares which are acquired by the investor in making the qualifying investment. (3) In this Schedule “a qualifying time”, in relation to any shares subscribed for by the investor, means— (a) any time in the period beginning one year before and ending three years after the accrual time, or (b) any such time before the beginning of that period or after it ends as the Board may by notice allow. (4) This sub-paragraph applies to the investor in relation to a qualifying investment if— (a) though resident or ordinarily resident in the United Kingdom at the time when he makes the investment, he is regarded for the purposes of any double taxation relief arrangements as resident in a territory outside the United Kingdom, and (b) were section 150A to be disregarded, the arrangements would have the effect that he would not be liable in the United Kingdom to tax on a gain arising on a disposal, immediately after their acquisition, of the shares acquired in making that investment. (2) (1) On the making of a claim by the investor for the purposes of this Schedule, so much of the investor’s unused qualifying expenditure on relevant shares as— (a) is specified in the claim, and (b) does not exceed so much of the original gain as is unmatched, shall be set against a corresponding amount of the original gain. (2) Where an amount of qualifying expenditure on any relevant shares is set under this Schedule against the whole or part of the original gain— (a) so much of that gain as is equal to that amount shall be treated as not having accrued at the accrual time; but (b) paragraphs 4 and 5 below shall apply for determining the gain that is to be treated as accruing on the occurrence of any chargeable event in relation to any of those relevant shares. (3) For the purposes of this Schedule— (a) the investor’s qualifying expenditure on any relevant shares is so much of the amount subscribed by him for the shares as represents the amount in respect of which there is given the relief under section 289A of the Taxes Act which is attributable to those shares; and (b) that expenditure is unused to the extent that it has not already been set under this Schedule against the whole or any part of a chargeable gain. (4) For the purposes of this paragraph the original gain is unmatched, in relation to any qualifying expenditure on relevant shares, to the extent that it has not had any other expenditure set against it under this Schedule or Schedule 5C. (3) (1) Subject to the following provisions of this paragraph, there is for the purposes of this Schedule a chargeable event in relation to any relevant shares if, after the making of the qualifying investment— (a) the investor disposes of those shares otherwise than by way of a disposal within marriage; (b) those shares are disposed of, otherwise than by way of a disposal to the investor, by a person who acquired them on a disposal made by the investor within marriage; (c) the investor becomes a non-resident while holding those shares and within the first relevant period; (d) a person who acquired those shares on a disposal within marriage becomes a non-resident while holding those shares and within the first relevant period; (e) the company that issued those shares ceases to be a qualifying company within the second relevant period; or (f) the relief given under section 289A of the Taxes Act in respect of the amount subscribed for those shares is withdrawn or reduced in circumstances not falling within any of paragraphs (a) to (e) above. (2) For the purposes of sub-paragraph (1) above— (a) the first relevant period in the case of any relevant shares is the period found by applying section 312(1A)(a) of the Taxes Act by reference to the company that issued the shares and by reference to the shares; (b) the second relevant period in the case of any shares is the period found by applying section 312(1A)(b) of that Act by reference to the company that issued the shares and by reference to the shares; and (c) whether a company is a qualifying company at any given time shall be determined in accordance with section 293 of that Act. (3) For the purposes of this Schedule there shall not be a chargeable event by virtue of sub-paragraph (1)(c) or (d) above in relation to any shares if— (a) the reason why the person in question becomes a non-resident is that he works in an employment or office all the duties of which are performed outside the United Kingdom, and (b) he again becomes resident or ordinarily resident in the United Kingdom within the period of three years from the time when he became a non-resident, without having meanwhile disposed of any of those shares; and accordingly no assessment shall be made by virtue of sub-paragraph (1)(c) or (d) above before the end of that period in a case where the condition in paragraph (a) above is satisfied and the condition in paragraph (b) above may be satisfied. (4) For the purposes of sub-paragraph (3) above a person shall be taken to have disposed of any shares if and only if there has been such a disposal as would have been a chargeable event in relation to those shares if the person making the disposal had been resident in the United Kingdom. (5) Where in any case— (a) the investor or a person who has acquired any relevant shares on a disposal within marriage dies, and (b) an event occurs at or after the time of the death which (apart from this sub-paragraph) would be a chargeable event in relation to any relevant shares held by the deceased immediately before his death, that event shall not be a chargeable event in relation to the shares so held. (4) (1) On the occurrence of a chargeable event in relation to any relevant shares in relation to which there has not been a previous chargeable event— (a) a chargeable gain shall be treated as accruing at the time of the event; and (b) the amount of the gain shall be equal to so much of the original gain as is an amount against which there has under this Schedule been set any expenditure on those shares. (2) Any question for the purposes of this Schedule as to whether any relevant shares to which a chargeable event relates are shares the expenditure on which has under this Schedule been set against the whole or any part of any gain shall be determined in accordance with the assumptions for which sub-paragraph (3) below provides. (3) For the purposes of sub-paragraph (2) above it shall be assumed, in relation to any disposal of shares (including a disposal within marriage) that— (a) as between qualifying shares acquired by the same person on different days, those acquired on an earlier day are disposed of by that person before those acquired on a later day; and (b) as between qualifying shares acquired by the same person on the same day, those the expenditure on which has been set under this Schedule against the whole or any part of any gain are disposed of by that person only after he has disposed of any other qualifying shares acquired by him on that day. (4) In sub-paragraph (3) above “qualifying shares” means any shares which— (a) were subscribed for by a person eligible for relief in respect of those shares under Chapter III of Part VII of the Taxes Act (the enterprise investment scheme), and (b) are shares in respect of which relief is given under section 289A of that Act in respect of the whole or any part of the amount subscribed. (5) Where at the time of a chargeable event any relevant shares are treated for the purposes of this Act as represented by assets which consist of or include assets other than those shares— (a) the expenditure on those shares which was set against the gain in question shall be treated, in determining for the purposes of this paragraph the amount of expenditure on each of those assets which is to be treated as having been set against that gain, as apportioned in such manner as may be just and reasonable between those assets; and (b) as between different assets treated as representing the same relevant shares, the assumptions for which sub-paragraph (3) above provides shall apply with the necessary modifications in relation to those assets as they would apply in relation to the shares. (5) (1) The chargeable gain which accrues, in accordance with paragraph 4 above, on the occurrence in relation to any relevant shares of a chargeable event shall be treated as accruing, as the case may be— (a) to the person who makes the disposal, (b) to the person who becomes a non-resident, (c) to the person who holds the shares in question when the company ceases to be a qualifying company, or (d) to the person who holds the shares in question when the circumstances arise in respect of which the relief is withdrawn or reduced. (2) Where— (a) sub-paragraph (1) above provides for the holding of shares at a particular time to be what identifies the person to whom any chargeable gain accrues, and (b) at that time, some of those shares are held by the investor and others are held by a person to whom the investor has transferred them by a disposal within marriage, the amount of the chargeable gain accruing by virtue of paragraph 4 above shall be computed separately in relation to the investor and that person without reference to the shares held by the other. (6) (1) In this Schedule “non-resident” means a person who is neither resident nor ordinarily resident in the United Kingdom. (2) In this Schedule references to a disposal within marriage are references to any disposal to which section 58 applies. (3) Notwithstanding anything in section 288(5), shares shall not for the purposes of this Schedule be treated as issued by reason only of being comprised in a letter of allotment or similar instrument. (4) Chapter III of Part VII of the Taxes Act shall apply for the purposes of this Schedule to determine whether and to what extent any relief under that Chapter is attributable to any shares. (5) References in this Schedule to Chapter III of Part VII of the Taxes Act or any provision of that Chapter are to that Chapter or provision as it applies in relation to shares issued on or after 1st January 1994.

• (4) This paragraph has effect in relation to gains accruing and events occurring on or after 29th November 1994.

SCHEDULE 14

Introductory

1

• (1) This Schedule applies, where any shares in or securities of any company (“the relevant company”) are at any time held by another company (“the trust company”), for determining whether and to what extent those shares or securities (“the relevant holding”) are, for the purposes of section 842AA, to be regarded as at that time comprised in the trust company’s qualifying holdings.

• (2) The relevant holding shall be regarded as comprised in the trust company’s qualifying holdings at any time if—

• (a) all the requirements of the following provisions of this Schedule are satisfied at that time in relation to the relevant company and the relevant holding; and

• (b) the relevant holding consists of shares or securities which were first issued by the relevant company to the trust company and have been held by the trust company ever since.

• (3) Subject to paragraph 6(3) below, where the requirements of paragraph 6 or 7 below would be satisfied as to only part of the money raised by the issue of the relevant holding and that holding is not otherwise capable of being treated as comprising separate holdings, this Schedule shall have effect in relation to that holding as if it were two holdings consisting of—

• (a) a holding from which that part of the money was raised; and

• (b) a holding from which the remainder was raised;

and section 842AA shall have effect as if the value of the holding were to be apportioned accordingly between the two holdings which are deemed to exist in pursuance of this sub-paragraph.

Requirement that company must be unquoted company

2

• (1) The requirement of this paragraph is that the relevant company (whether or not it is resident in the United Kingdom) must be an unquoted company.

• (2) In this paragraph “unquoted company” means a company none of whose shares, stocks, debentures or other securities is marketed to the general public.

• (3) For the purposes of this paragraph shares, stocks, debentures or other securities are marketed to the general public if they are—

• (a) listed on a recognised stock exchange,

• (b) listed on a designated exchange in a country outside the United Kingdom, or

• (c) dealt in on the Unlisted Securities Market or dealt in outside the United Kingdom by such means as may be designated.

• (4) In sub-paragraph (3) above “designated” means designated by an order made by the Board for the purposes of that sub-paragraph; and an order made for the purposes of paragraph (b) of that sub-paragraph may designate an exchange by name, or by reference to any class or description of exchanges, including a class or description framed by reference to any authority or approval given in a country outside the United Kingdom.

• (5) Section 828(1) does not apply to an order made for the purposes of sub-paragraph (3) above.

• (6) Where a company any shares in or securities of which are included in the qualifying holdings of the trust company ceases at any time while the trust company is approved as a venture capital trust to be an unquoted company, the requirements of this paragraph shall be deemed, in relation to shares or securities acquired by the trust company before that time, to continue to be satisfied for a period of five years after that time.

Requirements as to company’s business

3

• (1) The requirements of this paragraph are as follows.

• (2) The relevant company must be one of the following, that is to say—

• (a) a company which exists wholly for the purpose of carrying on one or more qualifying trades or which so exists apart from purposes capable of having no significant effect (other than in relation to incidental matters) on the extent of the company’s activities;

• (b) a company whose business consists entirely in the holding of shares in or securities of, or the making of loans to, one or more qualifying subsidiaries of that company; or

• (c) a company whose business consists entirely in—

• (i) the holding of such shares or securities, or the making of such loans; and

• (ii) the carrying on of one or more qualifying trades.

• (3) Subject to sub-paragraph (4) below, the relevant company or a qualifying subsidiary of that company must, when the relevant holding was issued and at all times since, have been either—

• (a) carrying on a qualifying trade wholly or mainly in the United Kingdom; or

• (b) preparing to carry on a qualifying trade which at the time when the relevant holding was issued it intended to carry on wholly or mainly in the United Kingdom.

• (4) The requirements of sub-paragraph (3) above shall not be capable of being satisfied by virtue of paragraph (b) of that sub-paragraph at any time after the end of the period of two years beginning with the issue of the relevant holding unless—

• (a) the relevant company or the subsidiary in question began to carry on the intended trade before the end of that period, and

• (b) that company or subsidiary has, at all times since the end of that period, been carrying on a qualifying trade wholly or mainly in the United Kingdom.

• (5) The requirements of that sub-paragraph shall also be incapable of being so satisfied at any time after the abandonment, within the period mentioned in sub-paragraph (4) above, of the intention in question.

Meaning of “qualifying trade”

4

• (1) For the purposes of this Schedule—

• (a) a trade is a qualifying trade if it is a trade complying with this paragraph; and

• (b) the carrying on of any activities of research and development from which it is intended that there will be derived a trade that—

• (i) will comply with this paragraph, and

• (ii) will be carried on wholly or mainly in the United Kingdom,

shall be treated as the carrying on of a qualifying trade.

• (2) Subject to sub-paragraphs (3) to (9) below, a trade complies with this paragraph if neither that trade nor a substantial part of it consists in one or more of the following activities, that is to say—

• (a) dealing in land, in commodities or futures or in shares, securities or other financial instruments;

• (b) dealing in goods otherwise than in the course of an ordinary trade of wholesale or retail distribution;

• (c) banking, insurance, money-lending, debt-factoring, hire-purchase financing or other financial activities;

• (d) leasing (including letting ships on charter or other assets on hire) or receiving royalties or licence fees;

• (e) providing legal or accountancy services;

• (f) providing services or facilities for any such trade carried on by another person (not being a company of which the company providing the services or facilities is a subsidiary) as—

• (i) consists, to a substantial extent, in activities within any of paragraphs (a) to (e) above; and

• (ii) is a trade in which a controlling interest is held by a person who also has a controlling interest in the trade carried on by the company providing the services or facilities.

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

• (a) a trade of wholesale distribution is one in which the goods are offered for sale and sold to persons for resale by them, or for processing and resale by them, to members of the general public for their use or consumption;

• (b) a trade of retail distribution is one in which the goods are offered for sale and sold to members of the general public for their use or consumption; and

• (c) a trade is not an ordinary trade of wholesale or retail distribution if—

• (i) it consists, to a substantial extent, in dealing in goods of a kind which are collected or held as an investment, or in that activity and any other activity of a kind falling within sub-paragraph (2)(a) to (f) above, taken together; and

• (ii) a substantial proportion of those goods are held by the company for a period which is significantly longer than the period for which a vendor would reasonably be expected to hold them while endeavouring to dispose of them at their market value.

• (4) In determining for the purposes of this paragraph whether a trade carried on by any person is an ordinary trade of wholesale or retail distribution, regard shall be had to the extent to which it has the following features, that is to say—

• (a) the goods are bought by that person in quantities larger than those in which he sells them;

• (b) the goods are bought and sold by that person in different markets;

• (c) that person employs staff and incurs expenses in the trade in addition to the cost of the goods and, in the case of a trade carried on by a company, to any remuneration paid to any person connected with it;

• (d) there are purchases or sales from or to persons who are connected with that person;

• (e) purchases are matched with forward sales or vice versa;

• (f) the goods are held by that person for longer than is normal for goods of the kind in question;

• (g) the trade is carried on otherwise than at a place or places commonly used for wholesale or retail trade;

• (h) that person does not take physical possession of the goods;

and for the purposes of this sub-paragraph the features specified in paragraphs (a) to (c) above shall be regarded as indications that the trade is such an ordinary trade and those in paragraphs (d) to (h) above shall be regarded as indications of the contrary.

• (5) A trade shall not be treated as failing to comply with this paragraph by reason only of its consisting, to a substantial extent, in the receiving of royalties or licence fees if—

• (a) the company carrying on the trade is engaged in—

• (i) the production of films; or

• (ii) the production of films and the distribution of films produced by it since the issue of the relevant holding;

and

• (b) all royalties and licence fees received by it are in respect of films produced by it since the issue of the relevant holding, in respect of sound recordings in relation to such films or in respect of other products arising from such films.

• (6) A trade shall not be treated as failing to comply with this paragraph by reason only of its consisting, to a substantial extent, in the receiving of royalties or licence fees if—

• (a) the company carrying on the trade is engaged in research and development; and

• (b) all royalties and licence fees received by it are attributable to research and development which it has carried out.

• (7) A trade shall not be treated as failing to comply with this paragraph by reason only of its consisting in letting ships, other than oil rigs or pleasure craft, on charter if—

• (a) every ship let on charter by the company carrying on the trade is beneficially owned by the company;

• (b) every ship beneficially owned by the company is registered in the United Kingdom;

• (c) the company is solely responsible for arranging the marketing of the services of its ships; and

• (d) the conditions mentioned in sub-paragraph (8) below are satisfied in relation to every letting of a ship on charter by the company;

but where any of the requirements mentioned in paragraphs (a) to (d) above are not satisfied in relation to any lettings, the trade shall not thereby be treated as failing to comply with this paragraph if those lettings and any other activity of a kind falling within sub-paragraph (2) above do not, when taken together, amount to a substantial part of the trade.

• (8) The conditions are that—

• (a) the letting is for a period not exceeding 12 months and no provision is made at any time (whether in the charterparty or otherwise) for extending it beyond that period otherwise than at the option of the charterer;

• (b) during the period of the letting there is no provision in force (whether by virtue of being contained in the charterparty or otherwise) for the grant of a new letting to end, otherwise than at the option of the charterer, more than 12 months after that provision is made;

• (c) the letting is by way of a bargain made at arm’s length between the company and a person who is not connected with it;

• (d) under the terms of the charter the company is responsible as principal—

• (i) for taking, throughout the period of the charter, management decisions in relation to the ship, other than those of a kind generally regarded by persons engaged in trade of the kind in question as matters of husbandry; and

• (ii) for defraying all expenses in connection with the ship throughout that period, or substantially all such expenses, other than those directly incidental to a particular voyage or to the employment of the ship during that period;

and

• (e) no arrangements exist by virtue of which a person other than the company may be appointed to be responsible for the matters mentioned in paragraph (d) above on behalf of the company;

but this sub-paragraph shall have effect, in relation to any letting between one company and another where one of those companies is the relevant company and the other is a qualifying subsidiary of that company, or where both companies are qualifying subsidiaries of the relevant company, as if paragraph (c) were omitted.

• (9) A trade shall not comply with this paragraph unless it is conducted on a commercial basis and with a view to the realisation of profits.

Provisions supplemental to paragraph 4

5

• (1) In paragraph 4 above—

• “film” means an original master negative of a film, an original master film disc or an original master film tape;

• “oil rig” means any ship which is an offshore installation for the purposes of the Mineral Workings (Offshore Installations) Act 1971;

• “pleasure craft” means any ship of a kind primarily used for sport or recreation;

• “research and development” means any activity which is intended to result in a patentable invention (within the meaning of the Patents Act 1977) or in a computer program; and

• “sound recording”, in relation to a film, means its sound track, original master audio disc or original master audio tape.

• (2) For the purposes of paragraph 4 above, in the case of a trade carried on by a company, a person has a controlling interest in that trade if—

• (a) he controls the company;

• (b) the company is a close company and he or an associate of his, being a director of the company, either—

• (i) is the beneficial owner of more than 30 per cent. of the ordinary share capital of the company, or

• (ii) is able, directly or through the medium of other companies or by any other indirect means, to control more than 30 per cent. of that share capital;

or

• (c) not less than half of the trade could, in accordance with section 344(2), be regarded as belonging to him for the purposes of section 343;

and, in any other case, a person has a controlling interest in a trade if he is entitled to not less than half of the assets used for, or of the income arising from, the trade.

• (3) For the purposes of sub-paragraph (2) above there shall be attributed to any person any rights or powers of any other person who is an associate of his.

• (4) References in paragraph 4 above or this paragraph to a trade, except the references in paragraph 4(2)(f) to the trade for which services or facilities are provided, shall be construed without reference to so much of the definition of trade in section 832(1) as relates to adventures or concerns in the nature of trade; and those references in paragraph 4(2)(f) above to a trade shall have effect, in relation to cases in which what is carried on is carried on by a person other than a company, as including references to any business, profession or vocation.

• (5) In this paragraph—

• “associate” has the meaning given in subsections (3) and (4) of section 417, except that in those subsections, as applied for the purposes of this paragraph, “relative” shall not include a brother or sister; and

• “director” shall be construed in accordance with subsection (5) of that section.

Requirements as to the money raised by the investment in question

6

• (1) The requirements of this paragraph are that the money raised by the issue of the relevant holding must—

• (a) have been employed wholly for the purposes of the trade by reference to which the requirements of paragraph 3(3) above are satisfied; or

• (b) be money which the relevant company or a qualifying subsidiary of that company is intending to employ wholly for the purposes of that trade.

• (2) The requirements of sub-paragraph (1) above shall not be capable of being satisfied by virtue of paragraph (b) of that sub-paragraph at any time after twelve months have expired from whichever is applicable of the following, that is to say—

• (a) in a case where the requirements of sub-paragraph (3) of paragraph 3 above were satisfied in relation to the time when the relevant holding was issued by virtue of paragraph (a) of that sub-paragraph, that time; and

• (b) in a case where they were satisfied in relation to that time by virtue of paragraph (b) of that sub-paragraph, the time when the relevant company or, as the case may be, the subsidiary in question began to carry on the intended trade.

• (3) For the purposes of this paragraph money shall not be treated as employed otherwise than wholly for the purposes of a trade if the only amount employed for other purposes is an amount which is not a significant amount; and nothing in paragraph 1(3) above shall require any money whose use is disregarded by virtue of this sub-paragraph to be treated as raised by a different holding.

• (4) References in this paragraph to employing money for the purposes of a trade shall include references to employing it for the purpose of preparing for the carrying on of the trade.

Requirement imposing a maximum on qualifying investments in the relevant company

7

• (1) The requirement of this paragraph is that the relevant holding did not, when it was issued, represent an investment in excess of the maximum qualifying investment for the relevant period.

• (2) Subject to sub-paragraph (4) below, the maximum qualifying investment for any period is exceeded to the extent that the aggregate amount of money raised in that period by the issue to the trust company during that period of shares in or securities of the relevant company exceeds £1 million.

• (3) Any question for the purposes of this paragraph as to whether any shares in or securities of the relevant company which are for the time being held by the trust company represent an investment in excess of the maximum qualifying investment for any period shall be determined on the assumption, in relation to disposals by the trust company, that, as between shares or securities of the same description, those representing the whole or any part of the excess are disposed of before those which do not.

• (4) Where—

• (a) at the time of the issue of the relevant holding the relevant company or any of its qualifying subsidiaries was a member of a partnership or a party to a joint venture,

• (b) the trade by virtue of which the requirements of paragraph 3(3) above are satisfied was at that time being carried on, or to be carried on, by those partners in partnership or by the parties to the joint venture as such, and

• (c) the other partners or parties to the joint venture include at least one other company,

this paragraph shall have effect in relation to the relevant company as if the sum of money for the time being specified in sub-paragraph (2) above were to be divided by the number of companies (including the relevant company) which, at the time when the relevant holding was issued, were members of the partnership or, as the case may be, parties to the joint venture.

• (5) For the purposes of this paragraph the relevant period is the period beginning with whichever is the earlier of—

• (a) the time six months before the issue of the relevant holding; and

• (b) the beginning of the year of assessment in which the issue of that holding took place.

Requirement as to the assets of the relevant company

8

• (1) The requirement of this paragraph is that the value of the relevant assets—

• (a) did not exceed £10 million immediately before the issue of the relevant holding; and

• (b) did not exceed £11 million immediately afterwards.

• (2) Subject to sub-paragraph (3) below, the reference in sub-paragraph (1) above to the value of the relevant assets is a reference—

• (a) in relation to a time when the relevant company did not have any qualifying subsidiaries, to the value of the gross assets of that company at that time; and

• (b) in relation to any other time, to the aggregate value at that time of the gross assets of all the companies in the relevant company’s group.

• (3) For the purposes of this paragraph assets of any member of the relevant company’s group that consist in rights against, or in shares in or securities of, another member of the group shall be disregarded.

• (4) In this paragraph references, in relation to any time, to the relevant company’s group are references to the relevant company and its qualifying subsidiaries at that time.

Requirements as to the subsidiaries etc. of the relevant company

9

• (1) The requirements of this paragraph are that, subject to sub-paragraph (2) below, the relevant company must not be—

• (a) a company which controls (whether on its own or together with any person connected with it) any company that is not a qualifying subsidiary of the relevant company; or

• (b) a company which is under the control of another company (or of another company and a person connected with the other company);

and arrangements must not be in existence by virtue of which the relevant company could fall within paragraph (a) or (b) above.

• (2) A company shall not fall within sub-paragraph (1)(b) above where—

• (a) the other company is the trust company or a venture capital trust which is not the trust company; and

• (b) the fact that the relevant company is under the control of the other is attributable primarily to a change in the value of any shares in or securities of the relevant company.

Meaning of “qualifying subsidiary”

10

• (1) Subject to the following provisions of this paragraph, a company is a qualifying subsidiary of the relevant company for the purposes of this Schedule if—

• (a) the company in question (“the subsidiary”), and

• (b) where the relevant company has more than one subsidiary, every other subsidiary of the relevant company,

is a company falling within each of sub-paragraphs (2) and (3) below.

• (2) The subsidiary falls within this sub-paragraph if—

• (a) it is a company in relation to which the requirements of paragraph 3(2)(a) above are satisfied;

• (b) it exists wholly for the purpose of holding and managing property used by the relevant company or any of the relevant company’s other subsidiaries for the purposes of—

• (i) research and development from which it is intended that a qualifying trade to be carried on by the relevant company or any of its qualifying subsidiaries will be derived, or

• (ii) one or more qualifying trades so carried on;

• (c) it would exist wholly for such a purpose apart from purposes capable of having no significant effect (other than in relation to incidental matters) on the extent of the company’s activities; or

• (d) it has no profits for the purposes of corporation tax and no part of its business consists in the making of investments.

• (3) The subsidiary falls within this sub-paragraph if—

• (a) the relevant company, or another of its subsidiaries, possesses not less than 90 per cent. of the issued share capital of, and not less than 90 per cent. of the voting power in, the subsidiary;

• (b) the relevant company, or another of its subsidiaries, would in the event of a winding up of the subsidiary or in any other circumstances be beneficially entitled to receive not less than 90 per cent. of the assets of the subsidiary which would then be available for distribution to the equity holders of the subsidiary;

• (c) the relevant company, or another of its subsidiaries, is beneficially entitled to not less than 90 per cent. of any profits of the subsidiary which are available for distribution to the equity holders of the subsidiary;

• (d) no person other than the relevant company or another of its subsidiaries has control of the subsidiary within the meaning of section 840; and

• (e) no arrangements are in existence by virtue of which the relevant company could cease to fall within this sub-paragraph.

• (4) The subsidiary shall not be regarded, at a time when it is being wound up, as having ceased on that account to be a company falling within sub-paragraphs (2) and (3) above if it is shown—

• (a) that it would fall within those sub-paragraphs apart from the winding up; and

• (b) that the winding up is for bona fide commercial reasons and not part of a scheme or arrangement the main purpose of which, or one of the main purposes of which, is the avoidance of tax.

• (5) The subsidiary shall not be regarded, at any time when arrangements are in existence for the disposal by the relevant company, or (as the case may be) by another subsidiary of that company, of all its interest in the subsidiary in question, as having ceased on that account to be a company falling within sub-paragraphs (2) and (3) above if it is shown that the disposal is to be for bona fide commercial reasons and not part of a scheme or arrangement the main purpose of which, or one of the main purposes of which, is the avoidance of tax.

• (6) For the purposes of this paragraph the persons who are equity holders of the subsidiary and the percentage of the assets of the subsidiary to which an equity holder would be entitled shall be determined in accordance with paragraphs 1 and 3 of Schedule 18, taking references in paragraph 3 to the first company as references to an equity holder, and references to a winding up as including references to any other circumstances in which assets of the subsidiary are available for distribution to its equity holders.

Winding up of the relevant company

11

None of the requirements of this Schedule shall be regarded, at a time when the relevant company is being wound up, as being, on that account, a requirement that is not satisfied in relation to that company if it is shown—

• (a) that the requirements of this Schedule would be satisfied in relation to that company apart from the winding up; and