Legalize / United Kingdom / Public General Act

Finance Act 1996

Type Public General Act

Publication 1996-04-29

Last updated 2026-03-18

State In force

Department Statute Law Database

Source legislation.gov.uk

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Reform history JSON API

(b) payment in respect of credit shall be made subject to such conditions (if any) as the Commissioners think fit to impose, including conditions as to repayment in specified circumstances;

(c) deduction in respect of credit shall be made subject to such conditions (if any) as the Commissioners think fit to impose, including conditions as to the payment to the Commissioners, in specified circumstances, of an amount representing the whole or part of the amount deducted.

(6) Regulations may require a claim by a person to be made in a return required by provision made under section 49 above.

(7) Nothing in section 52 or 53 below shall be taken to derogate from the power to make regulations under this section (whether with regard to bad debts, the environment or any other matter).

Bad debts

52

(1) Regulations may be made under section 51 above with a view to securing that a person is entitled to credit if—

(a) he carries out a taxable activity at a landfill site as a result of which he becomes entitled to a debt which turns out to be bad (in whole or in part), and

(b) such other conditions as may be prescribed are fulfilled.

(2) The regulations may include provision under section 51(5)(b) or (c) above requiring repayment or payment if it turns out that it was not justified to regard a debt as bad (or to regard it as bad to the extent that it was so regarded).

(3) The regulations may include provision for determining whether, and to what extent, a debt is to be taken to be bad.

Bodies concerned with the environment

53

(1) Regulations may be made under section 51 above with a view to securing that a person is entitled to credit if—

(a) he pays a sum to a body whose objects are or include the protection of the environment, and

(b) such other conditions as may be prescribed are fulfilled.

(2) The regulations may in particular prescribe conditions—

(a) requiring bodies to which sums are paid (environmental bodies) to be approved by another body (the regulatory body);

(b) requiring the regulatory body to be approved by the Commissioners;

(c) requiring sums to be paid with the intention that they be expended on such matters connected with the protection of the environment as may be prescribed.

(3) The regulations may include provision under section 51(5)(b) or (c) above requiring repayment or payment if—

(a) a sum is not in fact expended on matters prescribed under subsection (2)(c) above, or

(b) a prescribed condition turns out not to have been fulfilled.

(4) The regulations may include—

(a) provision for determining the amount of credit (including provision for limiting it);

(b) provision that matters connected with the protection of the environment include such matters as overheads (including administration) of environmental bodies and the regulatory body;

(c) provision as to the matters by reference to which an environmental body or the regulatory body can be, and remain, approved (including matters relating to the functions and activities of any such body);

(ca) provision for an environmental body to be and remain approved only if it complies with conditions imposed from time to time by the regulatory body or for the regulatory body to be and remain approved only if it complies with conditions imposed from time to time by the Commissioners (including provision for the variation or revocation of such conditions);

(d) provision allowing the withdrawal of approval of an environmental body by the Commissioners or by the regulatory body, and the withdrawal of approval of the regulatory body by the Commissioners, (whether prospectively or retrospectively);

(e) provision that, if approval of the regulatory body is withdrawn, another body may be approved in its place or its functions may be performed by the Commissioners;

(f) provision allowing the Commissioners to disclose to the regulatory body information which relates to the tax affairs of persons carrying out taxable activities and which is relevant to the credit scheme established by the regulations.

Review and appeal

Review of Commissioners' decisions

54

(1) Subject to section 55, an appeal shall lie to an appeal tribunal from any person who is or will be affected by any of the following decisions—

(a) a decision as to the registration or cancellation of registration of any person under this Part;

(b) a decision as to whether tax is chargeable in respect of a disposal or as to how much tax is chargeable;

(ba) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(bb) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(c) a decision as to whether a person is entitled to credit by virtue of regulations under section 51 above or as to how much credit a person is entitled to or as to the manner in which he is to benefit from credit;

(ca) a decision to withdraw approval of an environmental body under any provision contained in regulations by virtue of section 53(4)(d) above;

(d) a decision as to an assessment falling within subsection (2) below or as to the amount of such an assessment;

(e) a decision to refuse a request under section 58(3) below;

(f) a decision to refuse an application under section 59 below;

(g) a decision as to whether conditions set out in a specification under the authority of provision made under section 68(4)(b) below are met in relation to a disposal;

(h) a decision to give a direction under any provision contained in regulations by virtue of section 68(5) below;

(i) a decision as to a claim for the repayment of an amount under paragraph 14 of Schedule 5 to this Act;

(j) a decision as to liability to a penalty under Part V of that Schedule or as to the amount of such a penalty;

(k) a decision under paragraph 19 of that Schedule (as mentioned in paragraph 19(5));

(l) a decision as to any liability to pay interest under paragraph 26 or 27 of that Schedule or as to the amount of the interest payable;

(m) a decision as to any liability to pay interest under paragraph 29 of that Schedule or as to the amount of the interest payable;

(n) a decision to require any security under paragraph 31 of that Schedule or as to its amount;

(o) a decision as to the amount of any penalty or interest specified in an assessment under paragraph 32 of that Schedule.

(2) An assessment falls within this subsection if it is—

(a) an assessment under section 50 above in respect of an accounting period in relation to which a return required to be made by virtue of regulations under section 49 above has been made , or

(b) an assessment under section 50A.

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

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

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

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

(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

Appeals: general

55

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

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

(3) Subject to subsections (3A) and (3B), where an appeal under section 54 relates to a decision falling within section 54(1)(b) or (d), it shall not be entertained unless the amount which HMRC have determined to be payable as tax has been paid or deposited with them.

(3A) In a case where the amount determined to be payable as tax has not been paid or deposited an appeal may be entertained if—

(a) HMRC are satisfied (on the application of the appellant), or

(b) the appeal tribunal decides (HMRC not being so satisfied and on the application of the appellant),

that the requirement to pay or deposit the amount determined would cause the appellant to suffer hardship.

(3B) Notwithstanding the provisions of sections 11 and 13 of the Tribunals, Courts and Enforcement Act 2007, the decision of the tribunal as to the issue of hardship is final.

(4) On an appeal under this section against an assessment to a penalty under paragraph 18 of Schedule 5 to this Act, the burden of proof as to the matters specified in paragraphs (a) and (b) of sub-paragraph (1) of paragraph 18 shall lie upon the Commissioners.

Appeals: other provisions

56

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

(2) Where on an appeal under section 54 —

(a) it is found that the amount specified in the assessment is less than it ought to have been, and

(b) the tribunal gives a direction specifying the correct amount,

the assessment shall have effect as an assessment of the amount specified in the direction and that amount shall be deemed to have been notified to the appellant.

(3) Where on an appeal under section 55 above it is found that the whole or part of any amount paid or deposited in pursuance of section 55(3) above is not due, so much of that amount as is found not to be due shall be repaid with interest at the rate applicable under section 197 of this Act .

(4) Where on an appeal under section 55 above it is found that the whole or part of any amount due to the appellant by virtue of regulations under section 51(2)(c) or (d) or (f) above has not been paid, so much of that amount as is found not to have been paid shall be paid with interest at the rate applicable under section 197 of this Act .

(5) Where an appeal under section 55 above has been entertained notwithstanding that an amount determined by the Commissioners to be payable as tax has not been paid or deposited and it is found on the appeal that that amount is due it shall be paid with interest at the rate applicable under section 197 of this Act.

(5A) Interest under subsection (5) shall be paid without any deduction of income tax.

(6) Without prejudice to paragraph 25 of Schedule 5 to this Act, nothing in section 55 above shall be taken to confer on a tribunal any power to vary an amount assessed by way of penalty except in so far as it is necessary to reduce it to the amount which is appropriate under paragraphs 18 to 24 of that Schedule.

(7) Without prejudice to paragraph 28 of Schedule 5 to this Act, nothing in section 55 above shall be taken to confer on a tribunal any power to vary an amount assessed by way of interest except in so far as it is necessary to reduce it to the amount which is appropriate under paragraph 26 or 27 of that Schedule.

(8) Sections 85 and 85B of the Value Added Tax Act 1994 (settling of appeals by agreement and payment of tax where there is a further appeal) shall have effect as if—

(a) the references to section 83 of that Act included references to section 54 of this Act, and

(b) the references to value added tax included references to landfill tax.

Review and appeal: commencement

57

Sections 54 to 56 above shall come into force on—

(a) 1st October 1996, or

(b) such earlier day as may be appointed by order.

Miscellaneous

Partnership, bankruptcy, transfer of business, etc

58

(1) As regards any case where a business is carried on in partnership or by another unincorporated body, regulations may make provision for determining by what persons anything required by this Part to be done by a person is to be done.

(2) The registration under this Part of an unincorporated body other than a partnership may be in the name of the body concerned; and in determining whether taxable activities are carried out by such a body no account shall be taken of any change in its members.

(3) The registration under this Part of a body corporate carrying on a business in several divisions may, if the body corporate so requests and the Commissioners see fit, be in the names of those divisions.

(4) As regards any case where a person carries on a business of a person who has died or become bankrupt or incapacitated or whose estate has been sequestrated, or of a person which is in liquidation or receivership or administration , regulations may—

(a) require the first-mentioned person to inform the Commissioners of the fact that he is carrying on the business and of the event that has led to his carrying it on;

(b) make provision allowing the person to be treated for a limited time as if he were the other person;

(5) Regulations may make provision for securing continuity in the application of this Part in cases where a business carried on by a person is transferred to another person as a going concern.

(6) Regulations under subsection (5) above may in particular—

(a) require the transferor to inform the Commissioners of the transfer;

(b) provide for liabilities and duties under this Part of the transferor to become, to such extent as may be provided by the regulations, liabilities and duties of the transferee;

(c) provide for any right of either of them to repayment or credit in respect of tax to be satisfied by making a repayment or allowing a credit to the other;

but the regulations may provide that no such provision as is mentioned in paragraph (b) or (c) of this subsection shall have effect in relation to any transferor and transferee unless an application in that behalf has been made by them under the regulations.

Groups of companies

59

(1) Where under the following provisions of this section any bodies corporate are treated as members of a group, for the purposes of this Part—

(a) any liability of a member of the group to pay tax shall be taken to be a liability of the representative member;

(b) the representative member shall be taken to carry out any taxable activities which a member of the group would carry out (apart from this section) by virtue of section 69 below;

(2) Two or more bodies corporate are eligible to be treated as members of a group if the conditions mentioned in subsection (3) below are fulfilled and—

(a) one of them controls each of the others,

(b) one person (whether a body corporate or an individual) controls all of them, or

(3) The conditions are that—

(a) each of the bodies corporate is a registered person, and

(b) the prospective representative member has an established place of business in the United Kingdom.

(4) Where an application to that effect is made to the Commissioners with respect to two or more bodies corporate eligible to be treated as members of a group, then—

(a) from the beginning of an accounting period they shall be so treated, and

(b) one of them shall be the representative member,

unless the Commissioners refuse the application; and the Commissioners shall not refuse the application unless it appears to them necessary to do so for the protection of the revenue.

(5) Where any bodies corporate are treated as members of a group and an application to that effect is made to the Commissioners, then, from the beginning of an accounting period—

(a) a further body eligible to be so treated shall be included among the bodies so treated,

(b) a body corporate shall be excluded from the bodies so treated,

(d) the bodies corporate shall no longer be treated as members of a group,

unless the application is to the effect mentioned in paragraph (a) or (c) above and the Commissioners refuse the application.

(6) The Commissioners may refuse an application under subsection (5)(a) or (c) above only if it appears to them necessary to do so for the protection of the revenue.

(7) Where a body corporate is treated as a member of a group as being controlled by any person and it appears to the Commissioners that it has ceased to be so controlled, they shall, by notice given to that person, terminate that treatment from such date as may be specified in the notice.

(8) An application under this section with respect to any bodies corporate must be made by one of those bodies or by the person controlling them and must be made not less than 90 days before the date from which it is to take effect, or at such later time as the Commissioners may allow.

(9) For the purposes of this section a body corporate shall be taken to control another body corporate if it is empowered by statute to control that body’s activities or if it is that body’s holding company within the meaning of section 1159 of and Schedule 6 to the Companies Act 1985; and an individual or individuals shall be taken to control a body corporate if he or they, were he or they a company, would be that body’s holding company within the meaning of those provisions.

Information, powers, penalties, etc

60

Schedule 5 to this Act (which contains provisions relating to information, powers, penalties , secondary liability and other matters) shall have effect.

Taxable disposals: special provisions

61

(1) Where—

(a) a taxable disposal is in fact made on a particular day,

(b) within the period of 14 days beginning with that day the person liable to pay tax in respect of the disposal issues a landfill invoice in respect of the disposal, and

for the purposes of this Part the disposal shall be treated as made at the time the invoice is issued.

(2) The reference in subsection (1) above to a landfill invoice is to a document containing such particulars as regulations may prescribe for the purposes of that subsection.

(3) The Commissioners may at the request of a person direct that subsection (1) above shall apply—

(a) in relation to disposals in respect of which he is liable to pay tax, or

(b) in relation to such of them as may be specified in the direction,

as if for the period of 14 days there were substituted such longer period as may be specified in the direction.

Taxable disposals: regulations

62

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Qualifying material: special provisions

63

(1) This section applies for the purposes of section 42 above.

(2) The Commissioners may direct that where material is disposed of it must be treated as qualifying material if it would in fact be such material but for a small quantity of non-qualifying material; and whether a quantity of non-qualifying material is small must be determined in accordance with the terms of the direction.

(3) The Commissioners may at the request of a person direct that where there is a disposal in respect of which he is liable to pay tax the material disposed of must be treated as qualifying material if it would in fact be such material but for a small quantity of non-qualifying material, and—

(a) a direction may apply to all disposals in respect of which a person is liable to pay tax or to such of them as are identified in the direction;

(b) whether a quantity of non-qualifying material is small must be determined in accordance with the terms of the direction.

(4) If a direction under subsection (3) above applies to a disposal any direction under subsection (2) above shall not apply to it.

(4A) Subsections (2) to (4) do not apply where the material disposed of consists of qualifying fines.

(5) An order may provide that material must not be treated as qualifying material unless prescribed conditions are met.

(6) A condition may relate to any matter the Treasury think fit (such as the production of a document which includes a statement of the nature of the material).

Interpretation

Disposal of material as waste

64

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Disposal by way of landfill

65

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Landfill sites

66

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Operators of landfill sites

67

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Weight of material disposed of

68

(1) The weight of the material disposed of on a taxable disposal shall be determined in accordance with regulations.

(2) The regulations may—

(a) prescribe rules for determining the weight;

(b) authorise rules for determining the weight to be specified by the Commissioners in a prescribed manner;

(c) authorise rules for determining the weight to be agreed by the person liable to pay the tax and an authorised person.

(3) The regulations may in particular prescribe, or authorise the specification or agreement of, rules about—

(a) the method by which the weight is to be determined;

(b) the time by reference to which the weight is to be determined;

(4) The regulations may include provision that a specification authorised under subsection (2)(b) above may provide—

(a) that it is to have effect only in relation to disposals of such descriptions as may be set out in the specification;

(b) that it is not to have effect in relation to particular disposals unless the Commissioners are satisfied that such conditions as may be set out in the specification are met in relation to the disposals;

and the conditions may be framed by reference to such factors as the Commissioners think fit (such as the consent of an authorised person to the specification having effect in relation to disposals).

(5) The regulations may include provision that—

(a) where rules are agreed as mentioned in subsection (2)(c) above, and

(b) the Commissioners believe that they should no longer be applied because they do not give an accurate indication of the weight or they are not being fully observed or for some other reason,

the Commissioners may direct that the agreed rules shall no longer have effect.

(6) The regulations shall be so framed that where in relation to a given disposal—

(a) no specification of the Commissioners has effect, and

(b) no agreed rules have effect,

the weight shall be determined in accordance with rules prescribed in the regulations.

Taxable activities

69

(1) A person carries out a taxable activity if the person—

(a) makes a taxable disposal (whether or not at a landfill site),

(b) permits a taxable disposal to be made at a landfill site, or

and the person is liable to pay tax in respect of the disposal.

(2) Where—

(a) a taxable disposal is made at a landfill site, and

(b) it is made without the knowledge of the person who is liable to pay tax in respect of it,

that person shall for the purposes of subsection (1)(b) be taken to permit the disposal.

Interpretation: other provisions

70

(1) Unless the context otherwise requires—

“accounting period” shall be construed in accordance with section 49 above;

“appeal tribunal” means the First-tier Tribunal or, where determined by or under Tribunal Procedure Rules, the Upper Tribunal;

“authorised person” means any person acting under the authority of the Commissioners;

“the Commissioners” means the Commissioners of Customs and Excise;

“conduct” includes any act, omission or statement;

“disposal” and “dispose of” shall be construed in accordance with section 40A;

“the Environment Agency” means the body established by section 1 of the Environment Act 1995;

“fines” means particles produced by a waste treatment process that involves an element of mechanical treatment;

“HMRC” means Her Majesty’s Revenue and Customs;

“landfill site” has the meaning given by section 40(4);

“material” means material of all kinds, including objects, substances and products of all kinds;

“the Natural Resources Body for Wales” means the body established by article 3 of the Natural Resources Body for Wales (Establishment) Order 2012 (S.I. 2012/1903);

“operator”, in relation to a landfill site, means the person who at the relevant time is the holder of the permit (where section 40(4)(a) applies) or the licence (where section 40(4)(b) or (c) applies);

“prescribed” means prescribed by an order or regulations under this Part;

“registered person” and “registrable person” have the meaning given by section 47(10) above;

“tax” means landfill tax;

“taxable disposal” has the meaning given by section 40 above.

“taxable person” means a person who is liable to pay tax on a taxable disposal.

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

(2A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) A reference to this Part includes a reference to any order or regulations made under it and a reference to a provision of this Part includes a reference to any order or regulations made under the provision, unless otherwise required by the context or any order or regulations.

(4) This section and sections 68 and 69 above apply for the purposes of this Part.

Supplementary

Orders and regulations

71

(1) The power to make an order under section 57 above shall be exercisable by the Commissioners, and the power to make an order under any other provision of this Part shall be exercisable by the Treasury.

(2) Any power to make regulations under this Part shall be exercisable by the Commissioners.

(3) Any power to make an order or regulations under this Part shall be exercisable by statutory instrument.

(4) An order to which this subsection applies shall be laid before the House of Commons; and unless it is approved by that House before the expiration of a period of 28 days beginning with the date on which it was made it shall cease to have effect on the expiration of that period, but without prejudice to anything previously done under the order or to the making of a new order.

(5) In reckoning any such period as is mentioned in subsection (4) above no account shall be taken of any time during which Parliament is dissolved or prorogued or during which the House of Commons is adjourned for more than four days.

(6) A statutory instrument containing an order or regulations under this Part (other than an order under section 57 above or an order to which subsection (4) above applies) shall be subject to annulment in pursuance of a resolution of the House of Commons.

(7) Subsection (4) above applies to—

(za) an order under section 40A which has the result that anything which would not otherwise be a taxable disposal is a taxable disposal;

(a) an order under section 42(3) above providing for material which would otherwise be qualifying material not to be qualifying material;

(aa) an order under section 42(3A) providing for fines which would otherwise be qualifying fines not to be qualifying fines;

(b) an order under section 46 above which produces the result that a disposal which would otherwise not be a taxable disposal is a taxable disposal;

(c) an order under section 63(5) above other than one which provides only that an earlier order under section 63(5) is not to apply to material;

(cza) an order under section 63A(2) other than one which provides only that an earlier order under section 63A(2) is not to apply to fines;

(ca) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(cb) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(8) Any power to make an order or regulations under this Part—

(a) may be exercised as regards prescribed cases or descriptions of case;

(b) may be exercised differently in relation to different cases or descriptions of case.

(9) An order or regulations under this Part may include such supplementary, incidental, consequential or transitional provisions as appear to the Treasury or the Commissioners (as the case may be) to be necessary or expedient.

(10) No specific provision of this Part about an order or regulations shall prejudice the generality of subsections (8) and (9) above.

Part IV — Income Tax, Corporation Tax and Capital Gains Tax

Chapter I — Principal provisions

Income tax charge, rates and reliefs

Charge and rates of income tax for 1996-97

72

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

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

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

Application of lower rate to income from savings

73

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

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

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

(4) Schedule 6 to this Act (which makes further amendments in connection with the charge at the lower rate on income from savings etc.) shall have effect.

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

Personal allowances for 1996-97

74

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75

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Limit on relief for interest

76

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Corporation tax charge and rate

Charge and rate of corporation tax for 1996

77

Corporation tax shall be charged for the financial year 1996 at the rate of 33 per cent.

Small companies

78

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Abolition of Schedule C charge etc.

Abolition of Schedule C charge etc

79

(1) The charge to tax under Schedule C is abolished—

(a) for the purposes of income tax, for the year 1996-97 and subsequent years of assessment;

(b) for the purposes of corporation tax, for accounting periods ending after 31st March 1996.

(2) Schedule 7 to this Act (which, together with Chapter II of this Part of this Act, makes provision for imposing a charge under Schedule D on descriptions of income previously charged under Schedule C, and makes connected amendments) shall have effect.

Chapter II — Loan relationships

Introductory provisions

Taxation of loan relationships

80

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Meaning of “loan relationship” etc

81

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Taxation of profits and gains and relief for deficits

Method of bringing amounts into account

82

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Non-trading deficit on loan relationships

83

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Computational provisions etc.

Debits and credits brought into account

84

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Authorised accounting methods

85

(1) Subject to the following provisions of this Chapter, the alternative accounting methods that are authorised for the purposes of this Chapter are—

(a) an accruals basis of accounting; and

(b) a mark to market basis of accounting under which any loan relationship to which that basis is applied is brought into account in each accounting period at a fair value.

(2) An accounting method applied in any case shall be treated as authorised for the purposes of this Chapter only if—

(a) subject to paragraphs (b) to (c) below, it is in conformity with generally accepted accounting practice to use that method in that case;

(b) it contains proper provision for allocating payments under a loan relationship , or arising as a result of a related transaction, to accounting periods; . . .

(bb) it contains proper provision for determining exchange gains and losses from loan relationships for accounting periods; and

(c) where it is an accruals basis of accounting, it does not contain any provision (other than provision in respect of exchange losses or provision comprised in authorised arrangements for bad debt) that gives debits by reference to the valuation at different times of any asset representing a loan relationship.

(3) In the case of an accruals basis of accounting, proper provision for allocating payments under a loan relationship to accounting periods is provision which—

(a) allocates payments to the period to which they relate, without regard to the periods in which they are made or received or in which they become due and payable;

(b) includes provision which, where payments relate to two or more periods, apportions them on a just and reasonable basis between the different periods;

(c) assumes, subject to authorised arrangements for bad debt, that, so far as any company in the position of a creditor is concerned, every amount payable under the relationship will be paid in full as it becomes due;

(d) secures the making of the adjustments required in the case of the relationship by authorised arrangements for bad debt; and

(e) provides, subject to authorised arrangements for bad debt and for writing off government investments, that, where there is a release of any liability under the relationship, the appropriate amount in respect of the release is credited to the debtor in the accounting period in which the release takes place.

(4) In the case of a mark to market basis of accounting, proper provision for allocating payments under a loan relationship to accounting periods is provision which allocates payments to the accounting period in which they become due and payable.

(5) In this section—

(a) the references to authorised arrangements for bad debt are references to accounting arrangements under which debits and credits are brought into account in conformity with the provisions of paragraph 5 of Schedule 9 to this Act; and

(b) the reference to authorised arrangements for writing off government investments is a reference to accounting arrangements that give effect to paragraph 7 of that Schedule.

(6) In this section “fair value”, in relation to any loan relationship of a company, means the amount which, at the time as at which the value falls to be determined, is the amount that the company would obtain from or, as the case may be, would have to pay to an independent person for—

(a) the transfer of all the company’s rights under the relationship in respect of amounts which at that time are not yet due and payable; and

(b) the release of all the company’s liabilities under the relationship in respect of amounts which at that time are not yet due and payable.

Application of accounting methods

86

(1) This section has effect, subject to the following provisions of this Chapter, for the determination of which of the alternative authorised accounting methods that are available by virtue of section 85 above is to be used as respects the loan relationships of a company.

(2) Different methods may be used as respects different relationships or, as respects the same relationship, for different accounting periods or for different parts of the same accounting period.

(3) If a basis of accounting which is or equates with an authorised accounting method is used as respects any loan relationship of a company in a company’s statutory accounts, then the method which is to be used for the purposes of this Chapter as respects that relationship for the accounting period, or part of a period, for which that basis is used in those accounts shall be—

(a) where the basis used in those accounts is an authorised accounting method, that method; and

(b) where it is not, the authorised accounting method with which it equates.

but this subsection is subject to subsections (3A) and (3D) below.

(3A) If, in the case of a company falling within subsection (8)(c) or (d) below, an authorised mark to market basis of accounting—

(a) would be used as respects some or all of the company’s loan relationships, were the company a UK company following generally accepted accounting practice, but

(b) is not the basis of accounting used as respects those loan relationships in the company’s statutory accounts,

the company may elect to use an authorised mark to market basis of accounting as its authorised accounting method for the purposes of this Chapter in relation to every loan relationship as respects which that basis would be used if the company were a UK company following generally accepted accounting practice.

(3B) Any election under subsection (3A) above—

(a) must be made before the expiration of the period of two years following the end of the company’s first accounting period beginning on or after 1st October 2002 in which it is party to a loan relationship in relation to which such an election may be made;

(b) has effect for that accounting period and all subsequent accounting periods of the company; and

(3C) A company which makes an election under sub-paragraph (3A) above as respects its loan relationships shall be taken for the purposes of Schedule 26 to the Finance Act 2002 (derivative contracts) to have at the same time made an election under sub-paragraph (2) of paragraph 19 of that Schedule having effect—

(a) for the accounting periods mentioned in subsection (3B)(b) above, and

(b) as respects any derivative contracts to which the company is or may become party in any of those accounting periods,

and that election shall so have effect notwithstanding anything in paragraph (a) or (b) of sub-paragraph (3) of that paragraph.

(3D) If, in the case of a company falling within subsection (8)(c) or (d) below which has not made an election under subsection (3A) above,—

(a) an authorised mark to market basis of accounting would be used for an accounting period—

(i) as respects some or all of the company’s loan relationships, and

(ii) as respects some or all of the company’s derivative contracts,

were the company a UK company following generally accepted accounting practice, and

(b) that basis of accounting—

(i) is used in the company’s statutory accounts as respects those derivative contracts for that accounting period, but

(ii) is not the basis of accounting used in those accounts as respects those loan relationships for that accounting period,

the company must for that accounting period use an authorised mark to market basis of accounting as its authorised accounting method for the purposes of this Chapter in relation to every loan relationship as respects which that basis would be used if the company were a UK company following generally accepted accounting practice.

(4) For any period or part of a period for which the authorised accounting method to be used as respects a loan relationship of a company is not

(a) a method determined under subsection (3) above,

(b) an authorised mark to market method in accordance with an election under subsection (3A) above, or

an authorised accruals basis of accounting shall be used for the purposes of this Chapter as respects that loan relationship.

(5) For the purposes of this section (but subject to subsection (6) below)—

(a) a basis of accounting equates with an authorised accruals basis of accounting if it purports to allocate payments under a loan relationship to accounting periods according to when they are taken to accrue; and

(b) a basis of accounting equates with an authorised mark to market basis of accounting if (without equating with an authorised accruals basis of accounting) it purports in respect of a loan relationship—

(i) to produce credits or debits computed by reference to the determination, as at different times in an accounting period, of a fair value; and

(ii) to produce credits or debits relating to payments under that relationship according to when they become due and payable.

(6) An accounting method which purports to make any such allocation of payments under a loan relationship as is mentioned in subsection (5)(a) above shall be taken for the purposes of this section to equate with an authorised mark to market basis of accounting (rather than with an authorised accruals basis of accounting) if—

(a) it purports to bring that relationship into account in each accounting period at a value which would be a fair value if the valuation were made on the basis that interest under the relationship were to be disregarded to the extent that it has already accrued; and

(b) the credits and debits produced in the case of that relationship by that method (when it is properly applied) correspond, for all practical purposes, to the credits and debits produced in the case of that relationship, and for the same accounting period, by an authorised mark to market basis of accounting.

(7) In this section

“fair value” has the same meaning as in section 85 above.

“UK company” means a company incorporated or formed under the law of a part of the United Kingdom.

(8) In this Chapter“statutory accounts”, in relation to a company, means—

(a) any accounts relating to that company that are drawn up in accordance with any requirements of the Companies Act 1985 or the Companies (Northern Ireland) Order 1986 that apply in relation to that company;

(b) any accounts relating to that company that are drawn up in accordance with any requirements of regulations under section 70 of the Friendly Societies Act 1992 that apply in relation to that company;

(c) any accounts relating to that company which are accounts to which Part I of Schedule 21C to the Companies Act 1985 or Part I of Schedule 21D to that Act (companies with UK branches) applies;

(d) in the case of a company which—

(i) is not subject to any such requirements as are mentioned in paragraphs (a) or (b) above, and

(ii) is a company in whose case there are no accounts for the period in question that fall within paragraph (c) above,

any accounts relating to the company drawn up in accordance with requirements imposed in relation to that company under the law of its home State; and

(e) in the case of a company which—

(i) is not subject to any such requirements as are mentioned in paragraphs (a), (b) or (d) above, and

(ii) is a company in whose case there are no accounts for the period in question that fall within paragraph (c) above,

the accounts relating to the company that most closely correspond to the accounts which, in the case of a company formed and registered under the Companies Act 1985, are required under that Act.

(9) For the purposes of subsection (8) above the home State of a company is the country or territory under whose law the company is incorporated.

Accounting method where parties have a connection

87

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

Exemption from section 87 in certain cases

88

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

Inconsistent application of accounting methods

89

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

Changes of accounting method

90

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

Payments subject to deduction of tax

91

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

Special cases

Convertible securities etc

92

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

Relationships linked to the value of chargeable assets

93

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

Indexed gilt-edged securities

94

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

Gilt strips

95

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

Special rules for certain other gilts

96

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

Manufactured interest

97

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

Collective investment schemes

98

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

Insurance companies

99

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

Miscellaneous other provisions

Interest on judgments, imputed interest, etc

100

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

Financial instruments

101

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

Discounted securities: income tax provisions

102

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

Supplemental

Interpretation of Chapter

103

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

Minor and consequential amendments

104

Schedule 14 to this Act (which, for the purposes of both corporation tax and income tax, makes certain minor and consequential amendments in connection with the provisions of this Chapter) shall have effect.

Commencement and transitional provisions

105

(1) Subject to Schedule 15 to this Act, this Chapter has effect—

(a) for the purposes of corporation tax, in relation to accounting periods ending after 31st March 1996; and

(b) so far as it makes provision for the purposes of income tax, in relation to the year 1996-97 and subsequent years of assessment.

(2) Schedule 15 to this Act (which contains transitional provisions and savings in connection with the coming into force of this Chapter) shall have effect.

Chapter III — Provisions relating to the Schedule E charge

Living accommodation provided for employees

106

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

Beneficial loans

107

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

Incidental benefits for holders of certain offices etc

108

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

Charitable donations: payroll deduction schemes

109

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

PAYE settlement agreements

110

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

Amount or value of consideration for option

111

(1) Section 149A of the Taxation of Chargeable Gains Act 1992 (consideration for grant of option under approved share option schemes not to be deemed to be equal to market value of option) shall be amended as follows.

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

(3) In subsection (2) (grantor to be treated as if the amount or value of the consideration was its actual amount or value) for “The grantor of the option” there shall be substituted “ Both the grantor of the option and the person to whom the option is granted ”.

(4) Subsection (4) (section not to affect treatment under that Act of person to whom option granted) shall cease to have effect.

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

(6) This section has effect in relation to any right to acquire shares in a body corporate obtained on or after 28th November 1995 by an individual by reason of his office or employment as a director or employee of a body corporate.

Release and replacement

112

(1) After section 237 of the Taxation of Chargeable Gains Act 1992 there shall be inserted—

(237A) (1) This section applies in any case where a right to acquire shares in a body corporate (“the old right”) which was obtained by an individual by reason of his office or employment as a director or employee of that or any other body corporate is released in whole or in part for a consideration which consists of or includes the grant to that individual of another right (“the new right”) to acquire shares in that or any other body corporate. (2) As respects the person to whom the new right is granted— (a) without prejudice to subsection (1) above, the new right shall not be regarded for the purposes of capital gains tax as consideration for the release of the old right; (b) the amount or value of the consideration given by him or on his behalf for the acquisition of the new right shall be taken for the purposes of section 38(1) to be the amount or value of the consideration given by him or on his behalf for the old right; and (c) any consideration paid for the acquisition of the new right shall be taken to be expenditure falling within section 38(1)(b). (3) As respects the grantor of the new right, in determining for the purposes of this Act the amount or value of the consideration received for the new right, the release of the old right shall be disregarded.

(2) Section 238(4) of that Act (which provides that the release of an option under an approved share option scheme in exchange for another option, in connection with a company take-over, is not to involve a disposal, and which is superseded by subsection (1) above) shall cease to have effect.

(3) This section has effect in relation to transactions effected on or after 28th November 1995.

Exercise of rights by employees of non-participating companies

113

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

Requirements to be satisfied by approved schemes

114

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

Transitional provisions

115

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

The release date

116

(1) In section 187(2) of the Taxes Act 1988 (interpretation of sections 185 and 186 of, and Schedules 9 and 10 to, that Act) in the definition of “release date” (the fifth anniversary of the date on which shares were appropriated to a participant in a profit sharing scheme) for “fifth” there shall be substituted “ third ”.

(2) The amendment made by subsection (1) above shall have effect in relation to shares of a participant in a profit sharing scheme if the third anniversary of the appropriation of the shares to the participant occurs on or after the day on which this Act is passed.

(3) If the third anniversary of the appropriation of any shares to a participant in a profit sharing scheme has occurred, but the fifth anniversary of their appropriation to him has not occurred, before the passing of this Act, then, in the application of sections 186 and 187 of, and Schedules 9 and 10 to, the Taxes Act 1988 in relation to those shares, the release date shall be the day on which this Act is passed.

The appropriate percentage

117

(1) In Schedule 10 to the Taxes Act 1988 (further provisions relating to profit sharing schemes) for paragraph 3 (the appropriate percentage) there shall be substituted—

(3) (1) For the purposes of any of the relevant provisions charging an individual to income tax under Schedule E by reason of the occurrence of an event relating to any of his shares, the “appropriate percentage” in relation to those shares is 100 per cent., unless sub-paragraph (2) below applies. (2) Where the individual— (a) ceases to be a director or employee of the grantor or, in the case of a group scheme, a participating company as mentioned in paragraph 2(a) above, or (b) reaches the relevant age, before the event occurs, the “appropriate percentage” is 50 per cent., unless paragraph 6(4) below applies.

(2) In section 187(8) of that Act (determination of certain values and percentages where shares are appropriated to a participant at different times) paragraph (b) (which relates to the appropriate percentage), and the word “and” immediately preceding it, shall cease to have effect.

(3) Subsections (1) and (2) above have effect in relation to the occurrence, on or after the day on which this Act is passed, of events by reason of whose occurrence any provision of section 186 or 187 of, or Schedule 9 or 10 to, the Taxes Act 1988 charges an individual to income tax under Schedule E.

The appropriate allowance

118

(1) In section 186(12) of the Taxes Act 1988 (determination of the appropriate allowance for the purposes of the charge to tax on capital receipts by a participant in an approved profit sharing scheme)—

(a) for “£100” there shall be substituted “ £60 ”; and

(b) for “five years” there shall be substituted “ three years ”.

(2) Subsection (1) above has effect for the year 1997-98 and subsequent years of assessment.

Removal of requirement for at least one year’s service

119

(1) In Schedule 5 to the Finance Act 1989 (employee share ownership trusts) in paragraph 4(5)(a) (for a trust to be a qualifying ESOT, its beneficiaries must have been employees or directors of the company for at least one year) the words “not less than one year and” shall cease to have effect.

(2) This section applies to trusts established on or after the day on which this Act is passed.

120

(1) In Schedule 5 to the Finance Act 1989 (employee share ownership trusts), in paragraph 4 (the trust deed must contain provision as to the beneficiaries) after sub-paragraph (2) there shall be inserted—

(2A) The trust deed may provide that a person is a beneficiary at a given time if at that time he is eligible to participate in a savings-related share option scheme within the meaning of Schedule 9 to the Taxes Act 1988— (a) which was established by a company within the founding company’s group, and (b) which is approved under that Schedule. (2B) Where a trust deed contains a rule conforming with sub-paragraph (2A) above it must provide that the only powers and duties which the trustees may exercise in relation to persons who are beneficiaries by virtue only of that rule are those which may be exercised in accordance with the provisions of a scheme such as is mentioned in that sub-paragraph.

(2) In consequence of the amendment made by subsection (1) above, section 69 of, and Schedule 5 to, the Finance Act 1989 (which respectively make provision about chargeable events in relation to the trustees of qualifying employee share ownership trusts and the requirements to be satisfied by such trusts) shall be amended in accordance with the following provisions of this section.

(3) In subsection (4) of that section (meaning of “qualifying terms” for the purposes of the provision that the transfer of securities to beneficiaries is a chargeable event if it is not on qualifying terms)—

(a) in paragraph (a) (securities which are transferred at the same time must be transferred on similar terms) after “time” there shall be inserted “ other than those transferred on a transfer such as is mentioned in subsection (4ZA) below ”;

(b) in paragraph (b) (securities must have been offered to all the persons who are beneficiaries), after “trust deed” there shall be inserted “ by virtue of a rule which conforms with paragraph 4(2), (3) or (4) of Schedule 5 to this Act ”; and

(c) in paragraph (c) (securities must be transferred to all such beneficiaries who have accepted the offer) for “beneficiaries” there shall be substituted “ persons ”.

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

(4ZA) For the purposes of subsection (1)(b) above a transfer of securities is also made on qualifying terms if— (a) it is made to a person exercising a right to acquire shares, and (b) that right was obtained in accordance with the provisions of a savings-related share option scheme within the meaning of Schedule 9 to the Taxes Act 1988— (i) which was established by, or by a company controlled by, the company which established the trust, and (ii) which is approved under that Schedule, and (c) that right is being exercised in accordance with the provisions of that scheme, and (d) the consideration for the transfer is payable to the trustees.

(5) In sub-paragraph (4) of paragraph 4 of that Schedule (trust deed may provide for charity to be beneficiary if there are no beneficiaries falling within a rule conforming with sub-paragraph (2) or (3)) after “sub-paragraph (2)” there shall be inserted “ , (2A) ”.

(6) In sub-paragraph (7) of that paragraph (trust deed must not provide for a person to be a beneficiary unless he falls within a rule conforming with sub-paragraph (2), (3) or (4)) after “sub-paragraph (2)” there shall be inserted “ , (2A) ”.

(7) In sub-paragraph (8) of that paragraph (trust deed must provide that person with material interest in founding company cannot be a beneficiary) after “at a particular time (the relevant time)” there shall be inserted “ by virtue of a rule which conforms with sub-paragraph (2), (3) or (4) above ”.

(8) In paragraph 5(2) of that Schedule (trust deed must be so expressed that it is apparent that the general functions of the trustees are as mentioned in paragraphs (a) to (e)) after paragraph (c) there shall be inserted—

(cc) to grant rights to acquire shares to persons who are beneficiaries under the terms of the trust deed;

(9) In paragraph 9 of that Schedule (trust deed must provide that transfers of securities to beneficiaries must be on qualifying terms and within the qualifying period) in sub-paragraph (2) (meaning of qualifying terms)—

(a) in paragraph (a) (securities which are transferred at the same time must be transferred on similar terms) after “time” there shall be inserted “ other than those transferred on a transfer such as is mentioned in sub-paragraph (2ZA) below ”;

(b) in paragraph (b) (securities must have been offered to all the persons who are beneficiaries) after “trust deed” there shall be inserted “ by virtue of a rule which conforms with paragraph 4(2), (3) or (4) above ”; and

(c) in paragraph (c) (securities must be transferred to all such beneficiaries who have accepted the offer) for “beneficiaries” there shall be substituted “ persons ”.

(10) After sub-paragraph (2) of that paragraph there shall be inserted—

(2ZA) For the purposes of sub-paragraph (1) above a transfer of securities is also made on qualifying terms if— (a) it is made to a person exercising a right to acquire shares, and (b) that right was obtained in accordance with the provisions of a savings-related share option scheme within the meaning of Schedule 9 to the Taxes Act 1988— (i) which was established by, or by a company controlled by, the founding company, and (ii) which is approved under that Schedule, and (c) that right is being exercised in accordance with the provisions of that scheme, and (d) the consideration for the transfer is payable to the trustees.

(11) In paragraph 10 of that Schedule (trust deed must not contain features not essential or reasonably incidental to purposes mentioned in that paragraph)—

(a) after “acquiring sums and securities,” there shall be inserted “ granting rights to acquire shares to persons who are eligible to participate in savings-related share option schemes approved under Schedule 9 to the Taxes Act 1988, transferring shares to such persons, ”; and

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

(12) This section has effect in relation to trusts established on or after the day on which this Act is passed.

Chapter V — Self Assessment, General Management etc.

General

Returns and self assessment

121

(1) In subsection (1) of section 8 of the Taxes Management Act 1970 (personal return), and in subsection (1) of section 8A of that Act (trustee’s return), after the words “year of assessment,” there shall be inserted the words “ and the amount payable by him by way of income tax for that year, ”.

(2) In subsection (1A) of each of those sections, the words from “and the amounts referred to” to the end shall cease to have effect.

(3) After that subsection of each of those sections there shall be inserted the following subsection—

(1AA) For the purposes of subsection (1) above— (a) the amounts in which a person is chargeable to income tax and capital gains tax are net amounts, that is to say, amounts which take into account any relief or allowance a claim for which is included in the return; and (b) the amount payable by a person by way of income tax is the difference between the amount in which he is chargeable to income tax and the aggregate amount of any income tax deducted at source and any tax credits to which section 231 of the principal Act applies.

(4) For subsection (1) of section 9 of that Act (returns to include self-assessment) there shall be substituted the following subsection—

(1) Subject to subsection (2) below, every return under section 8 or 8A of this Act shall include a self-assessment, that is to say— (a) an assessment of the amounts in which, on the basis of the information contained in the return and taking into account any relief or allowance a claim for which is included in the return, the person making the return is chargeable to income tax and capital gains tax for the year of assessment; and (b) an assessment of the amount payable by him by way of income tax, that is to say, the difference between the amount in which he is assessed to income tax under paragraph (a) above and the aggregate amount of any income tax deducted at source and any tax credits to which section 231 of the principal Act applies.

(5) In subsection (1)(b) of section 11AA of that Act (return of profits to include self-assessment), for the words “, allowance or repayment of tax” there shall be substituted the words “ or allowance ”.

(6) In subsection (1)(a) of section 12AA of that Act (partnership return), after the words “so chargeable” there shall be inserted the words “ and the amount payable by way of income tax by each such partner ”.

(7) For subsection (1A) of that section there shall be substituted the following subsection—

(1A) For the purposes of subsection (1) above— (a) the amount in which a partner is chargeable to income tax or corporation tax is a net amount, that is to say, an amount which takes into account any relief or allowance for which a claim is made; and (b) the amount payable by a partner by way of income tax is the difference between the amount in which he is chargeable to income tax and the aggregate amount of any income tax deducted at source and any tax credits to which section 231 of the principal Act applies.

(8) This section and sections 122, 123, 125 to 127 and 141 below—

(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.

Notional tax deductions and payments

122

(1) At the end of subsection (1) of section 9 of the Taxes Management Act 1970 (as substituted by section 121(4) above) there shall be inserted the words “ but nothing in this subsection shall enable a self-assessment to show as repayable any income tax treated as deducted or paid by virtue of section 233(1), 246D(1), 249(4), 421(1), 547(5) or 599A(5) of the principal Act. ”

(2) At the end of subsection (1) of section 59B of that Act (payment of income tax and capital gains tax) there shall be inserted the words “ but nothing in this subsection shall require the repayment of any income tax treated as deducted or paid by virtue of section 233(1), 246D(1), 249(4), 421(1), 547(5) or 599A(5) of the principal Act. ”

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

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

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

(6) In subsection (1)(b) of section 421 of that Act (taxation of borrower when loan released), for the words “no assessment shall be made on him in respect of” there shall be substituted the words “ he shall not be liable to pay ”.

(7) The following shall cease to have effect, namely—

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

(b) in subsection (6) of section 599A of that Act (charge to tax: payments out of surplus funds), the words from “subject” to “and”; and

Liability of partners

123

(1) In subsection (2) of section 12AA of the Taxes Management Act 1970 (partnership return) after the words “with the notice” there shall be inserted the words “ or a successor of his ”.

(2) In subsection (3) of that section after the words “the partner” there shall be inserted the words “ or a successor of his ”.

(3) In subsection (7)(a) of that section, the words “any part of” shall cease to have effect.

(4) At the end of that section there shall be inserted the following subsections—

(11) In this Act “successor”, in relation to a person who is required to make and deliver, or has made and delivered, a return in pursuance of a notice under subsection (2) or (3) above, but is no longer available, means— (a) where a partner is for the time being nominated for the purposes of this subsection by a majority of the relevant partners, that partner; and (b) where no partner is for the time being so nominated, such partner as— (i) in the case of a notice under subsection (2) above, is identified in accordance with rules given with that notice; or (ii) in the case of a notice under subsection (3) above, is nominated for the purposes of this subsection by an officer of the Board; and “predecessor” and “successor”, in relation to a person so nominated or identified, shall be construed accordingly. (12) For the purposes of subsection (11) above a nomination under paragraph (a) of that subsection, and a revocation of such a nomination, shall not have effect in relation to any time before notice of the nomination or revocation is given to an officer of the Board. (13) In this section “relevant partner” means a person who was a partner at any time during the period for which the return was made or is required, or the personal representatives of such a person.

(5) In subsection (1) of section 12AB of that Act (partnership return to include partnership statement)—

(a) in paragraph (a), for the words “each period of account ending within the period in respect of which the return is made” there shall be substituted the words “ the period in respect of which the return is made and each period of account ending within that period ”;

(b) in sub-paragraph (i) of that paragraph, for the words “that period” there shall be substituted the words “ the period in question ”;

(ia) the amount of the consideration which, on that basis, has accrued to the partnership in respect of each disposal of partnership property during that period,

;

(d) in paragraph (b), after the words “such period” there shall be inserted the words “ as is mentioned in paragraph (a) above ” and after the word “loss,” there shall be inserted the word “ consideration, ”.

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

(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(8) In subsection (1)(b) of section 93A of that Act (failure to make partnership return), after the word “he” there shall be inserted the words “ or a successor of his ”.

(9) In subsections (3) and (4) of that section, after the words “the representative partner” there shall be inserted the words “ or a successor of his ”.

(10) In subsection (6) of that section—

(a) after the words “the representative partner” there shall be inserted the words “ or a successor of his ”; and

(b) after the words “that partner”, in both places where they occur, there shall be inserted the words “ or successor ”.

(11) In subsection (7) of that section, for the words “the representative partner had a reasonable excuse for not delivering the return” there shall be substituted the words “ the person for the time being required to deliver the return (whether the representative partner or a successor of his) had a reasonable excuse for not delivering it ”.

(12) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(14) In subsection (1) of section 118 of that Act (interpretation), for the definition of “successor” there shall be substituted the following definition—

“successor”, in relation to a person who is required to make and deliver, or has made and delivered, a return under section 12AA of this Act, and “predecessor” and “successor”, in relation to the successor of such a person, shall be construed in accordance with section 12AA(11) of this Act;

Retention of original records

124

(1) The Taxes Management Act 1970, as it has effect—

(a) for the purposes of income tax and capital gains tax, as respects the year 1996-97 and subsequent years of assessment, and

(b) for the purposes of corporation tax, as respects accounting periods ending on or after the day appointed under section 199 of the Finance Act 1994 for the purposes of Chapter III of Part IV of that Act (self-assessment management provisions),

shall be amended in accordance with the following provisions of this section.

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

(3) After that subsection there shall be inserted—

(4A) The records which fall within this subsection are— (a) any statement in writing such as is mentioned in— (i) subsection (1) of section 234 of the principal Act (amount of qualifying distribution and tax credit), or (ii) subsection (1) of section 352 of that Act (gross amount, tax deducted, and actual amount paid, in certain cases where payments are made under deduction of tax), which is furnished by the company or person there mentioned, whether after the making of a request or otherwise; (b) any certificate or other record (however described) which is required by regulations under section 566(1) of the principal Act to be given to a sub-contractor (within the meaning of Chapter IV of Part XIII of that Act) on the making of a payment to which section 559 of that Act (deductions on account of tax) applies; (c) any such record as may be requisite for making a correct and complete claim in respect of, or otherwise requisite for making a correct and complete return so far as relating to, an amount of tax— (i) which has been paid under the laws of a territory outside the United Kingdom, or (ii) which would have been payable under the law of such a territory but for a relief to which section 788(5) of the principal Act (relief for promoting development and relief contemplated by double taxation arrangements) applies.

(4) In subsection (5) of that section (penalty for failure to comply with section 12B(1) or (2A)) for “Subject to subsection (5A)” there shall be substituted “ Subject to subsections (5A) and (5B) ”.

(5) After subsection (5A) of that section there shall be inserted—

(5B) Subsection (5) above also does not apply where— (a) the records which the person fails to keep or preserve are records falling within paragraph (a) of subsection (4A) above; and (b) an officer of the Board is satisfied that any facts which he reasonably requires to be proved, and which would have been proved by the records, are proved by other documentary evidence furnished to him.

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

(7) In sub-paragraph (4) of that paragraph (penalty for failure to comply with paragraph 2A(1)) at the beginning there shall be inserted “ Subject to sub-paragraph (5) below, ”.

(8) After that sub-paragraph there shall be inserted—

(5) Sub-paragraph (4) above does not apply where— (a) the records which the person fails to keep or preserve are records falling within paragraph (a) of section 12B(4A) of this Act; and (b) an officer of the Board is satisfied that any facts which he reasonably requires to be proved, and which would have been proved by the records, are proved by other documentary evidence furnished to him.

(9) The amendments made by this section shall not have effect in relation to—

(a) any time before this Act is passed, or

(b) any records which a person fails to preserve before this Act is passed.

Determination of tax where no return delivered

125

(1) For subsection (1) of section 28C of the Taxes Management Act 1970 (determination of tax where no return delivered) there shall be substituted the following subsections—

(1) This section applies where— (a) a notice has been given to any person under section 8 or 8A of this Act (the relevant section), and (b) the required return is not delivered on or before the filing date. (1A) An officer of the Board may make a determination of the following amounts, to the best of his information and belief, namely— (a) the amounts in which the person who should have made the return is chargeable to income tax and capital gains tax for the year of assessment; and (b) the amount which is payable by him by way of income tax for that year; and subsection (1AA) of section 8 or, as the case may be, section 8A of this Act applies for the purposes of this subsection as it applies for the purposes of subsection (1) of that section.

(2) In subsection (3) of that section the words “or 11AA” shall cease to have effect.

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

(4) After subsection (5) of section 59B of that Act (payment of income tax and capital gains tax) there shall be inserted the following subsection—

(5A) Where a determination under section 28C of this Act which has effect as a person’s self-assessment is superseded by his self-assessment under section 9 of this Act, any amount of tax which is payable or repayable by virtue of the supersession shall be payable or (as the case may be) repayable on or before the day given by subsection (3) or (4) above.

PAYE regulations

126

(1) After subsection (9) of section 59A of the Taxes Management Act 1970 (payments on account of income tax) there shall be inserted the following subsection—

(10) Regulations under section 203 of the principal Act (PAYE) may provide that, for the purpose of determining the amount of any such excess as is mentioned in subsection (1) above, any necessary adjustments in respect of matters prescribed by the regulations shall be made to the amount of tax deducted at source under that section.

(2) After subsection (7) of section 59B of that Act (payment of income tax and capital gains tax) there shall be inserted the following subsection—

(8) Regulations under section 203 of the principal Act (PAYE) may provide that, for the purpose of determining the amount of the difference mentioned in subsection (1) above, any necessary adjustments in respect of matters prescribed by the regulations shall be made to the amount of tax deducted at source under that section.

Repayment postponed pending completion of enquiries

127

After subsection (4) of section 59B of the Taxes Management Act 1970 (payment of income tax and capital gains tax) there shall be inserted the following subsection—

(4A) Where in the case of a repayment the return on the basis of which the person’s self-assessment was made under section 9 of this Act is enquired into by an officer of the Board— (a) nothing in subsection (3) or (4) above shall require the repayment to be made before the day on which, by virtue of section 28A(5) of this Act, the officer’s enquiries are treated as completed; but (b) the officer may at any time before that day make the repayment, on a provisional basis, to such extent as he thinks fit.

Claims for reliefs involving two or more years

128

(1) In section 42 of the Taxes Management Act 1970 (procedure for making claims etc.)—

(a) subsections (3A) and (3B) (which are superseded by subsection (2) below) shall cease to have effect;

(b) in subsection (7)(a), the words “534, 535, 537A, 538” shall cease to have effect; and

(11A) Schedule 1B to this Act shall have effect as respects certain claims for relief involving two or more years of assessment.

(2) After Schedule 1A to that Act there shall be inserted, as Schedule 1B, the provisions set out in Schedule 17 to this Act (claims for reliefs involving two or more years).

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

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

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

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

(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

(9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(11) This section (except subsections (1)(b) and (6) above) and Schedule 17 to this Act have effect as respects claims made (or deemed to be made) in relation to the year 1996-97 or later years of assessment.

(12) Subsection (1)(b) above has effect as respects claims made in relation to the year 1997-98 or later years of assessment.

Claims for medical insurance and vocational training relief

129

(1) Nothing in section 42 of the Taxes Management Act 1970 (procedure for making claims etc.), or Schedule 1A to that Act (claims etc. not included in returns), shall apply in relation to—

(a) any claim under subsection (6)(b) of section 54 (medical insurance relief) of the Finance Act 1989 (“the 1989 Act”); or

(b) any claim under subsection (5)(b) of section 32 (vocational training relief) of the Finance Act 1991 (“the 1991 Act”).

(2) In section 54(6)(b) of the 1989 Act andsection 32(5)(b) of the 1991 Act, after the words “on making a claim” there shall be inserted the words “ in accordance with regulations ”.

(3) In section 57(1) of the 1989 Act (medical insurance relief: supplementary), after paragraph (a) there shall be inserted the following paragraph—

(aa) make provision for and with respect to appeals against a decision of an officer of the Board or the Board with respect to a claim under section 54(6)(b) above;

(4) In section 33(1) of the 1991 Act (vocational training relief: supplementary), after paragraph (a) there shall be inserted the following paragraph—

(aa) make provision for and with respect to appeals against a decision of an officer of the Board or the Board with respect to a claim under section 32(5)(b) above;

(5) Subsection (1)(a) above shall not apply in relation to claims made before the coming into force of regulations made by virtue of section 57(1)(aa) of the 1989 Act.

(6) Subsection (1)(b) above shall not apply in relation to claims made before the coming into force of regulations made by virtue of section 33(1)(aa) of the 1991 Act.

Procedure for giving notices

130

(1) Section 42 of, and Schedule 1A to, the Taxes Management Act 1970, as they have effect—

(a) for the purposes of income tax and capital gains tax, as respects the year 1996-97 and subsequent years of assessment, and

(b) for the purposes of corporation tax, as respects accounting periods ending on or after the day appointed under section 199 of the Finance Act 1994 for the purposes of Chapter III of Part IV of that Act (self-assessment management provisions),

shall be amended in accordance with the following provisions of this section.

(2) In subsection (7) of section 42 (which contains a list of provisions, claims under which must be made in accordance with subsection (6)) the following words shall cease to have effect, that is to say—

(a) in paragraph (a), “62A,” and “401,”; and

(b) in paragraph (c), “30,”, “33,”, “48, 49,” and “124A,”.

(3) In subsection (10) of that section (section 42 to apply in relation to elections and notices as it applies in relation to claims) the words “and notices” shall cease to have effect.

(4) In subsection (11) of that section (Schedule 1A to apply as respects any claim, election or notice made otherwise than in a return under section 8 etc) for the words “, election or notice” there shall be substituted “ or election ”.

(5) In paragraph 1 of Schedule 1A (claims etc. not included in returns), in the definition of “claim”, for the words “means a claim, election or notice” there shall be substituted “ means a claim or election ”.

Interest on overdue tax

131

(1) Section 110 of the Finance Act 1995 (interest on overdue tax) shall be deemed to have been enacted with the insertion after subsection (3) of the following subsection—

(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.

(2) In subsection (3) of section 86 of the Taxes Management Act 1970 (which was substituted by the said section 110), for the words “section 93” there shall be substituted the words “ section 92 ”.

(3) In Schedule 19 to the Finance Act 1994, paragraph 23 (which is superseded by the said section 110) shall cease to have effect.

Overdue tax and excessive payments by the Board

132

Schedule 18 to this Act (which amends enactments relating to overdue tax or excessive payments by the Board) shall have effect.

Claims and enquiries

133

Schedule 19 to this Act (which, for purposes connected with self-assessment, further amends provisions relating to claims and enquiries) shall have effect.

Discretions exercisable by the Board etc

134

(1) Schedule 20 to this Act (which in connection with self-assessment modifies enactments by virtue of which a decision or other action affecting an assessment may be or is required to be taken by the Board, or one of their officers, before the making of the assessment) shall have effect.

(2) Subject to subsection (3) below, the amendments made by that Schedule shall have effect—

(a) for the purposes of income tax and capital gains tax, as respects the year 1996-97 and subsequent years of assessment; and

(b) for the purposes of corporation tax, as respects accounting periods ending on or after the day appointed under section 199 of the Finance Act 1994 for the purposes of Chapter III of Part IV of that Act (self-assessment management provisions).

(3) Paragraphs 22 and 23 of that Schedule shall have effect in relation to shares issued on or after 6th April 1996.

Time limits for claims etc

135

(1) Schedule 21 to this Act (which in connection with self-assessment modifies enactments which impose time limits on the making of claims, elections, adjustments and assessments and the giving of notices, and enactments which provide for the giving of notice to the inspector) shall have effect.

(2) Subject to subsections (3) to (5) below, the amendments made by that Schedule shall have effect—

(a) for the purposes of income tax and capital gains tax, as respects the year 1996-97 and subsequent years of assessment; and

(b) for the purposes of corporation tax, as respects accounting periods ending on or after the day appointed under section 199 of the Finance Act 1994 for the purposes of Chapter III of Part IV of that Act (self-assessment management provisions).

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

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

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

Appeals

136

Schedule 22 to this Act (which makes provision, in connection with self-assessment, about appeals) shall have effect.

Companies

Schedules 13 and 16 to the Taxes Act 1988

137

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

Accounting periods

138

Schedule 24 to this Act (which makes provision, in connection with self-assessment, in relation to accounting periods) shall have effect.

Surrenders of advance corporation tax

139

Schedule 25 to this Act (which makes provision, in connection with self-assessment, about surrenders of advance corporation tax) shall have effect.

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Finance Act 1996

Bad debts

52

Bodies concerned with the environment

53

Review and appeal

Review of Commissioners' decisions

54

Appeals: general

55

Appeals: other provisions

56

Review and appeal: commencement

57

Miscellaneous

Partnership, bankruptcy, transfer of business, etc

58

Groups of companies

59

Information, powers, penalties, etc

60

Taxable disposals: special provisions

61

Taxable disposals: regulations

62

Qualifying material: special provisions

63

Interpretation

Disposal of material as waste

64

Disposal by way of landfill

65

Landfill sites

66

Operators of landfill sites

67

Weight of material disposed of

68

Taxable activities

69

Interpretation: other provisions

70

Supplementary

Orders and regulations

71

Part IV — Income Tax, Corporation Tax and Capital Gains Tax

Chapter I — Principal provisions

Income tax charge, rates and reliefs

Charge and rates of income tax for 1996-97

72

Application of lower rate to income from savings

73

Personal allowances for 1996-97

74

Blind person’s allowance

75

Limit on relief for interest

76

Corporation tax charge and rate

Charge and rate of corporation tax for 1996

77

Small companies

78

Abolition of Schedule C charge etc.

Abolition of Schedule C charge etc

79

Chapter II — Loan relationships

Introductory provisions

Taxation of loan relationships

80

Meaning of “loan relationship” etc

81

Taxation of profits and gains and relief for deficits

Method of bringing amounts into account

82

Non-trading deficit on loan relationships

83

Computational provisions etc.

Debits and credits brought into account

84