Finance Act 1996

Chargeable gains

Transfer of company’s assets to investment trust

140

• (1) In section 101 of the Taxation of Chargeable Gains Act 1992 (transfer of company’s assets to investment trust) after subsection (1) there shall be inserted—

(1A) Any chargeable gain or allowable loss which, apart from this subsection, would accrue to the company on the sale referred to in subsection (1) above shall be treated as accruing to the company immediately before the end of the last accounting period to end before the beginning of the accounting period mentioned in that subsection.

• (2) This section shall have effect 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).

Roll-over relief

141

• (1) In subsection (4) of section 152 of the Taxation of Chargeable Gains Act 1992 (roll-over relief)—

• (a) after the word “making” there shall be inserted the words “ or amending ”; and

• (b) after the word “assessments”, in the second place where it occurs, there shall be inserted the words “ or amendments ”.

• (2) After section 153 of that Act there shall be inserted the following section—

(153A) (1) This section applies where a person carrying on a trade who for a consideration disposes of, or of his interest in, any assets (“the old assets”) declares, in his return for the chargeable period in which the disposal takes place— (a) that the whole or any specified part of the consideration will be applied in the acquisition of, or of an interest in, other assets (“the new assets”) which on the acquisition will be taken into use, and used only, for the purposes of the trade; (b) that the acquisition will take place as mentioned in subsection (3) of section 152; and (c) that the new assets will be within the classes listed in section 155. (2) Until the declaration ceases to have effect, section 152 or, as the case may be, section 153 shall apply as if the acquisition had taken place and the person had made a claim under that section. (3) The declaration shall cease to have effect as follows— (a) if and to the extent that it is withdrawn before the relevant day, or is superseded before that day by a valid claim made under section 152 or 153, on the day on which it is so withdrawn or superseded; and (b) if and to the extent that it is not so withdrawn or superseded, on the relevant day. (4) On the declaration ceasing to have effect in whole or in part, all necessary adjustments— (a) shall be made by making or amending assessments or by repayment or discharge of tax; and (b) shall be so made notwithstanding any limitation on the time within which assessments or amendments may be made. (5) In this section “the relevant day” means— (a) in relation to capital gains tax, the third anniversary of the 31st January next following the year of assessment in which the disposal of, or of the interest in, the old assets took place; (b) in relation to corporation tax, the fourth anniversary of the last day of the accounting period in which that disposal took place. (6) Subsections (6), (8), (10) and (11) of section 152 shall apply for the purposes of this section as they apply for the purposes of that section.

• (3) In section 175 of that Act (replacement of business assets by members of a group)—

• (a) in subsections (2A) and (2B), after the words “Section 152” there shall be inserted the words “ or 153 ”; and

• (b) in subsection (2C), for the words “Section 152 shall not” there shall be substituted the words “ Neither section 152 nor section 153 shall ”.

• (4) In section 246 of that Act (time of disposal or acquisition), the words from “or, if earlier” to the end shall cease to have effect.

• (5) In subsection (5)(b) of section 247 of that Act (roll-over relief on compulsory acquisition), for the words “subsection (3)” there shall be substituted the words “ subsections (3) and (4) ”.

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

(247A) (1) This section applies where a person who disposes of land (“the old land”) to an authority exercising or having compulsory powers declares, in his return for the chargeable period in which the disposal takes place— (a) that the whole or any specified part of the consideration for the disposal will be applied in the acquisition of other land (“the new land”); (b) that the acquisition will take place as mentioned in subsection (3) of section 152; and (c) that the new land will not be land excluded from section 247(1)(c) by section 248. (2) Until the declaration ceases to have effect, section 247 shall apply as if the acquisition had taken place and the person had made a claim under that section. (3) For the purposes of this section, subsections (3) to (5) of section 153A shall apply as if the reference to section 152148. or 153 were a reference to section 247 and the reference to the old assets were a reference to the old land. (4) In this section “land” and “authority exercising or having compulsory powers” have the same meaning as in section 247.

Premiums for leases

142

• (1) Paragraph 3 of Schedule 8 to the Taxation of Chargeable Gains Act 1992 (premiums for leases) shall be amended as follows.

• (2) In sub-paragraph (2), for the words “for the period” to the end there shall be substituted the words

, being a premium which— (a) is due when the sum is payable by the tenant; and (b) where the sum is payable in lieu of rent, is in respect of the period in relation to which the sum is payable.

• (3) In sub-paragraph (3), for the words “for the period” to the end there shall be substituted the words

, being a premium which— (a) is due when the sum is payable by the tenant; and (b) is in respect of the period from the time when the variation or waiver takes effect to the time when it ceases to have effect.

• (4) For sub-paragraphs (4) to (6) there shall be substituted the following sub-paragraphs—

(4) Where under sub-paragraph (2) or (3) above a premium is deemed to have been received by the landlord, that shall not be the occasion of any recomputation of the gain accruing on the receipt of any other premium, and the premium shall be regarded— (a) in the case of a premium deemed to have been received for the surrender of a lease, as consideration for a separate transaction which is effected when the premium is deemed to be due and consists of the disposal by the landlord of his interest in the lease; and (b) in any other case, as consideration for a separate transaction which is effected when the premium is deemed to be due and consists of a further part disposal of the freehold or other asset out of which the lease is granted. (5) If under sub-paragraph (2) or (3) above a premium is deemed to have been received by the landlord, otherwise than as consideration for the surrender of the lease, and the landlord is a tenant under a lease the duration of which does not exceed 50 years, this Schedule shall apply— (a) as if an amount equal to the amount of that premium deemed to have been received had been given by way of consideration for the grant of the part of the sublease covered by the period in respect of which the premium is deemed to have been paid; and (b) as if that consideration were expenditure incurred by the sublessee and attributable to that part of the sublease under section 38(1)(b).

• (5) This section has effect as respects sums payable on or after 6th April 1996.

Chapter VI — Miscellaneous provisions

Reliefs

Annual payments under certain insurance policies

143

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

Vocational training

144

• (1) Section 32 of the Finance Act 1991 (vocational training relief) shall be amended in accordance with the following provisions of this section.

• (2) In subsection (1) (application of section) for paragraph (ca) (individual has attained school leaving age etc at time of paying for the course) there shall be substituted—

(ca) at the time the payment is made, the individual— (i) in a case where the qualifying course of vocational training is such a course by virtue only of paragraph (b) of subsection (10) below, has attained the age of thirty, or (ii) in any other case, has attained school-leaving age and, if under the age of nineteen, is not a person who is being provided with full-time education at a school,

.

• (3) For subsection (10) (meaning of “qualifying course of vocational training”) there shall be substituted—

(10) In this section “qualifying course of vocational training” means— (a) any programme of activity capable of counting towards a qualification— (i) accredited as a National Vocational Qualification by the National Council for Vocational Qualifications; or (ii) accredited as a Scottish Vocational Qualification by the Scottish Vocational Education Council; or (b) any course of training which— (i) satisfies the conditions set out in the paragraphs of section 589(1) of the Taxes Act 1988 (qualifying courses of training etc), (ii) requires participation on a full-time or substantially full-time basis, and (iii) extends for a period which consists of or includes four consecutive weeks, but treating any time devoted to study in connection with the course as time devoted to the practical application of skills or knowledge.

• (4) This section applies to payments made on or after 6th May 1996.

Personal reliefs for non-resident EEA nationals

145

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

Exemptions for charities

146

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

Withdrawal of relief for Class 4 contributions

147

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

• (2) In consequence of the provision made by subsection (1) above, in paragraph 3(2) of Schedule 2 to—

• (a) the Social Security Contributions and Benefits Act 1992, and

• (b) the Social Security Contributions and Benefits (Northern Ireland) Act 1992,

the words “ (e) section 617(5) (relief for Class 4 contributions); ” shall be omitted.

• (3) This section shall have effect in relation to the year 1996-97 and subsequent years of assessment.

Mis-sold personal pensions etc

148

• (1) Income tax shall not be chargeable on any payment falling within subsection (3) or (5) below.

• (2) Receipt of a payment falling within subsection (3) below shall not be regarded for the purposes of capital gains tax as the disposal of an asset.

• (3) A payment falls within this subsection if it is a capital sum by way of compensation for loss suffered, or reasonably likely to be suffered, by a person in a case where that person, or some other person, acting in reliance on bad investment advice at least some of which was given during the period beginning with 29th April 1988 and ending with 30th June 1994,—

• (a) has, while eligible, or reasonably likely to become eligible, to be a member of an occupational pension scheme, instead become a member of a personal pension scheme or entered into a retirement annuity contract;

• (b) has ceased to be a member of, or to pay contributions to, an occupational pension scheme and has instead become a member of a personal pension scheme or entered into a retirement annuity contract;

• (c) has transferred to a personal pension scheme accrued rights of his under an occupational pension scheme; or

• (d) has ceased to be a member of an occupational pension scheme and has instead (by virtue of such a provision as is mentioned in section 591(2)(g) of the Taxes Act 1988) entered into arrangements for securing relevant benefits by means of an annuity contract.

• (4) A payment chargeable to income tax apart from subsection (1) above may nevertheless be regarded as a capital sum for the purpose of determining whether it falls within subsection (3) above.

• (5) A payment falls within this subsection if and to the extent that it is a payment of interest, on the whole or any part of a capital sum such as is mentioned in subsection (3) above, for a period ending on or before the earliest date on which a determination (whether or not subsequently varied on an appeal or in any other proceedings) of the amount of the particular capital sum in question is made, whether by agreement or by a decision of—

• (a) a court, tribunal or commissioner,

• (b) an arbitrator or (in Scotland) arbiter, or

• (c) any other person appointed for the purpose.

• (6) In this section—

• “bad investment advice” means investment advice in respect of which an action against the person who gave it has been, or may be, brought—in or for negligence;for breach of contract;by reason of a breach of a fiduciary obligation; orby reason of a contravention which is actionable—under section 62 of the Financial Services Act 1986; orunder section 150 of the Financial Services and Markets Act 2000;

• “investment advice”—in relation to a time before 1st December 2001, means advice such as is mentioned in paragraph 15 of Schedule 1 to the Financial Services Act 1986; andin relation to a time on or after that date, means advice such as is mentioned in Article 53 of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001;

• “occupational pension scheme” means—a scheme approved, or being considered for approval, under Chapter I of Part XIV of the Taxes Act 1988 (retirement benefit schemes);a relevant statutory scheme, as defined in section 611A(1) of that Act; ora fund to which section 608 of that Act applies (superannuation funds approved before 6th April 1980 etc);

• “personal pension scheme” has the meaning given by section 630(1) of the Taxes Act 1988;

• “relevant benefits” has the meaning given by section 612(1) of the Taxes Act 1988;

• “retirement annuity contract” means a contract made before 1st July 1988 and approved by the Board under or by virtue of any provision of Chapter III of Part XIV of the Taxes Act 1988.

• (6A) References in subsections (3)(d) and (6) to provisions of Part 14 of the Taxes Act 1988 are to those provisions as they had effect at the time in question.

• (7) This section shall have effect, and be taken always to have had effect, in relation to any payment falling within subsection (3) or (5) above, whether made before or after the passing of this Act.

Annual payments in residuary cases

149

• (1) Section 347A of the Taxes Act 1988 (annual payments not a charge on the income of a payer) shall apply to any payment made on or after 6th April 1996—

• (a) in pursuance of any obligation which falls within section 36(4)(a) of the Finance Act 1988 (existing obligations under certain court orders), and

• (b) for the benefit, maintenance or education of a person (whether or not the person to whom the payment is made) who attained the age of 21 before 6th April 1994,

as if that obligation were not an existing obligation within the definition contained in section 36(4) of the Finance Act 1988.

• (2) Subsection (1) above does not apply to any payment to which section 38 of the Finance Act 1988 (treatment of certain maintenance payments under existing obligations) applies.

Income tax exemption for periodical payments of damages and compensation for personal injury

150

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

Taxation of benefits

Benefits under pilot schemes

151

• (1) The Treasury may by order make provision for the Income Tax Acts to have effect in relation to any amount of benefit payable by virtue of a Government pilot scheme as if it was, as they think fit, either—

• (a) wholly or partly exempt from income tax and, accordingly, to be disregarded in computing the amount of any receipts brought into account for income tax purposes; or

• (b) to the extent specified in the order, to be brought into account for the purposes of income tax as income of a description so specified or as a receipt of a description so specified.

• (2) The Treasury may by order provide for any amount of benefit payable by virtue of a Government pilot scheme to be left out of account, to the extent specified in the order, in the determination for the purposes of section 532 of the Capital Allowances Act (exclusion of expenditure met by contributions) of how far any expenditure has been or is to be met directly or indirectly by the Crown or by an authority or person other than the person actually incurring it.

• (3) In this section “Government pilot scheme” means any arrangements (whether or not contained in a scheme) which—

• (a) are made, under any enactment or otherwise, by the Secretary of State or any Northern Ireland department;

• (b) make provision for or about the payment of amounts of benefit either—

• (i) for purposes that are similar to those for which any social security or comparable benefit is payable; or

• (ii) for purposes connected with the carrying out of any functions of the Secretary of State or any such department in relation to employment or training for employment;

• (c) are arrangements relating to a temporary experimental period; and

• (d) are made wholly or partly for the purpose of facilitating a decision as to whether, or to what extent, it is desirable for provision to be made on a permanent basis for or in relation to any benefit.

• (4) In subsection (3)(b) above the reference to making provision for or about the payment of amounts of benefit for purposes that are similar to those for which any social security or comparable benefit is payable shall include a reference to making provision by virtue of which there is a modification of the conditions of entitlement to, or the conditions for the payment of, an existing social security or comparable benefit.

• (5) An order under this section may—

• (a) make different provision for different cases, and

• (b) contain such incidental, supplemental, consequential and transitional provision (including provision modifying provision made by or under the Income Tax Acts) as the Treasury may think fit.

• (6) In this section “benefit” includes any allowance, grant or other amount the whole or any part of which is payable directly or indirectly out of public funds.

• (7) The power to make an order under this section—

• (a) shall be exercisable for the year 1996-97 and subsequent years of assessment; and

• (b) so far as exercisable for the year 1996-97, shall be exercisable in relation to benefits, allowances and other amounts paid at times on or after 6th April 1996 but before the making of the order.

• (8) The Treasury shall not make an order under this section containing any such provision as is mentioned in subsection (1)(b) above unless a draft of the order has been laid before, and approved by a resolution of, the House of Commons.

Jobfinder’s grant

152

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Investments

Foreign income dividends

153

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FOTRA securities

154

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

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

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

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

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

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

• (7) Schedule 28 to this Act (which contains amendments consequential on the provisions of this section) shall have effect.

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

• (9) This section and Schedule 28 to this Act shall have effect—

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

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

Directions for payment without deduction of tax

155

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Paying and collecting agents etc

156

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Stock lending fees

157

• (1) After section 129A of the Taxes Act 1988 (interest on cash collateral paid in connection with stock lending arrangements) there shall be inserted the following section—

(129B) (1) The income which, as income deriving from investments of a description specified in any of the relevant provisions, is eligible for relief from tax by virtue of that provision shall be taken to include any relevant stock lending fee. (2) For the purposes of this section the relevant provisions are sections 592(2), 608(2)(a), 613(4), 614(3), 620(6) and 643(2). (3) In this section “relevant stock lending fee”, in relation to investments of any description, means any amount, in the nature of a fee, which is payable in connection with an approved stock lending arrangement relating to investments which, but for any transfer under the arrangement, would be investments of that description. (4) In this section “approved stock lending arrangement” has the same meaning as in Schedule 5A.

• (2) This section has effect in relation to any arrangements entered into on or after 2nd January 1996.

Transfers on death under the accrued income scheme

158

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Manufactured payments, repos, etc

159

• (1) Sections 729, 737A(2)(b) and 786(4) of the Taxes Act 1988 (provisions applying to sale and repurchase agreements) shall cease to have effect except in relation to cases where the initial agreement to sell or transfer the securities or other property was made before the appointed day.

• (2) In section 737 of that Act—

• (a) in subsection (5) (manufactured dividends paid to UK residents by non-residents), for the words from “a person resident in the United Kingdom” to “the United Kingdom recipient shall” there shall be substituted “ a United Kingdom recipient, that recipient shall ”; and

• (b) after that subsection there shall be inserted the following subsection—

(5AAA) For the purposes of subsection (5) above a person who receives a manufactured dividend is a United Kingdom recipient if— (a) he is resident in the United Kingdom; or (b) he is not so resident but receives that dividend for the purposes of a trade carried on through a branch or agency in the United Kingdom.

• (3) In section 737C of that Act (deemed manufactured payments), the following subsection shall be inserted after subsection (11A) in relation to cases where the initial agreement to sell the securities is made on or after the appointed day, that is to say—

(11B) The preceding provisions of this section shall have effect in cases where paragraph 2, 3 or 4 of Schedule 23A would apply by virtue of section 737A(5) but for paragraph 5 of that Schedule as they have effect in a case where the paragraph in question is not disapplied by paragraph 5; and where— (a) the gross amount of the deemed manufactured interest, or (b) the gross amount of the deemed manufactured overseas dividend, falls to be calculated in such a case under subsection (8) or (11) above, it shall be so calculated by reference to the provisions of paragraph 3 or 4 of Schedule 23A that would have applied but for paragraph 5 of that Schedule.

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

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

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

• (7) In sub-paragraph (1) of paragraph 8 of that Schedule (power to modify provisions of Schedule)—

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

• (b) in the words after paragraph (b), for “paragraph 2, 3 or 4 above” there shall be substituted “ paragraphs 2 to 5 above ”.

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

• (9) Subsections (2), (4) and (5) above have effect—

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

• (b) for the purposes of income tax, in relation to the year 1996-97 and subsequent years of assessment.

• (10) In this section “the appointed day” means such day as the Treasury may by order appoint, and different days may be appointed under this subsection for different purposes.

Investments in housing

160

Schedule 30 to this Act (which makes provision conferring relief from corporation tax on companies that invest in housing) shall have effect.

Venture capital trusts: control of companies etc

161

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Insurance policies

Qualifying life insurance policies: certification

162

• (1) Section 55 of the Finance Act 1995 (removal of certification requirements for qualifying policies with respect to any time on or after 5th May 1996 etc) shall have effect—

• (a) with the substitution for “5th May 1996”, wherever occurring, of “the appointed date”; and

• (b) with the addition of the following subsection after subsection (8)—

(9) In this section “the appointed date” means such date as may be specified for the purpose in an order made by the Board.

• (2) In Schedule 15 to the Taxes Act 1988 (qualifying policies) paragraphs 24(2A) and 25(2) shall have effect with the substitution for “5th May 1996” of “ the appointed date for the purposes of section 55 of the Finance Act 1995 (removal of certification requirements) ”.

Insurance companies

Life assurance business losses

163

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Limits on relief for expenses

164

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

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

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

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

• (5) Subject to subsection (6) below, this section has effect in relation to accounting periods beginning on or after 1st January 1996.

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

Annual payments under insurance policies: deductions

165

• (1) In section 337 of the Taxes Act 1988 (deductions in computing income), the following subsections shall be inserted after subsection (2)—

(2A) In computing any profits or losses of a company in accordance with the provisions of this Act applicable to Case I of Schedule D, subsection (2)(b) above shall not prevent the deduction of any annuity or other annual payment which is payable by a company wholly or partly in satisfaction of any claim under an insurance policy in relation to which the company is the insurer. (2B) The reference in subsection (2A) above to an annuity payable wholly or partly in satisfaction of a claim under an insurance policy shall be taken, in relation to an insurance company (within the meaning of Chapter I of Part XII), to include a reference to every annuity payable by that company; and the references in sections 338(2) and 434B(2) to an annuity paid wholly or partly as mentioned in subsection (2A) above shall be construed accordingly.

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

• (3) In section 434B of that Act (treatment of interest and annuities in the case of insurance companies), subsection (1) shall cease to have effect; and in subsection (2), for the words from the beginning to “mentioned in subsection (1) above” there shall be substituted—

(2) Nothing in section 337(2A) or 338(2) shall be construed as preventing any annuity or other annual payment which is paid wholly or partly as mentioned in section 337(2A)

.

• (4) Subject to subsection (5) below, this section has effect in relation to accounting periods beginning on or after 1st January 1996.

• (5) In relation to any accounting period beginning on or after 1st January 1996 but ending before 1st April 1996, this section shall have effect as if any reference in provisions inserted by this section to an annuity payable or paid by an insurance company included a reference to any such interest as was mentioned in section 434B(1) of the Taxes Act 1988 before its repeal by virtue of this section.

Equalisation reserves

166

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

Industrial assurance business

167

• (1) In section 432 of the Taxes Act 1988, subsection (2) (industrial assurance business treated as separate business for the purposes of Chapter I of Part XII) shall cease to have effect.

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

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

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

• (5) In Schedule 14 to the Taxes Act 1988 (ancillary provisions about relief in respect of life assurance premiums), in paragraph 8, at the beginning of sub-paragraph (4) (policy which is varied so as to increase benefits, etc. to be treated as issued after 13th March 1984) there shall be inserted “ Subject to sub-paragraph (8) below, ”.

• (6) After sub-paragraph (7) of that paragraph there shall be inserted the following sub-paragraph—

(8) Sub-paragraph (4) above does not apply in the case of a variation so as to increase the benefits secured, if the variation is made— (a) on or after such day as the Board may by order appoint, and (b) in consideration of a change in the method of payment of premiums from collection by a person collecting premiums from house to house to payment by a different method.

• (7) In Schedule 15 to the Taxes Act 1988 (qualifying policies)—

• (a) in paragraph 1(6) (calculation of amount included in premiums of whole life and term insurances in respect of their payment otherwise than annually), for “and if the policy is issued in the course of an industrial assurance business,” there shall be substituted “ sand if the policy provides for payment otherwise than annually without providing for the amount of the premiums if they are paid annually, ”; and

• (b) in paragraph 2(2) (the equivalent calculation for endowment assurances), for “issued in the course of an industrial assurance business” there shall be substituted “ that provides for the payment of premiums otherwise than annually without providing for the amount of the premiums if they are paid annually, ”.

• (8) After paragraph 8 of that Schedule there shall be inserted the following paragraph—

(8A) (1) Paragraphs 7 and 8 above shall have effect in relation to any policy issued on or after the appointed day as if the references to the issue of a policy in the course of an industrial assurance business were references to the issue of a policy by any company in a case in which— (a) the company, before that day and in the course of such a business, issued any policy which was a qualifying policy by virtue of either of those paragraphs; and (b) the policies which on 28th November 1995 were being offered by the company as available to be issued included policies of the same description as the policy issued on or after the appointed day. (2) In this paragraph “the appointed day” means such day as the Board may by order appoint.

• (9) In paragraph 18(3) of that Schedule (certain variations of a policy not to affect whether policy is a qualifying policy), after paragraph (b) there shall be inserted

or (c) any variation so as to increase the benefits secured or reduce the premiums payable which is effected— (i) on or after such day as the Board may by order appoint, and (ii) in consideration of a change in the method of payment of premiums from collection by a person collecting premiums from house to house to payment by a different method.

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

• (11) Subsection (4) above shall come into force on such day as the Board may by order appoint.

• (12) Subsection (7) above shall have effect in relation to policies issued on or after such day as the Board may by order appoint.

Capital redemption business

168

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

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

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

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

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

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

Provisional repayments in connection with pension business

169

Time for amending and enquiring into returns

170

• (1) After section 11AB of the Taxes Management Act 1970 there shall be inserted the following sections—

(11AC) (1) This section applies in any case where a company carrying on insurance business in any period delivers a return for that period under section 11 of this Act which is based wholly or partly on accounts which the company is required or permitted to draw up using the method described in paragraph 52 of Schedule 9A to the Companies Act 1985 (accounting for general insurance business on a non-annual basis). (2) Where this section applies, section 11AA(2) of this Act shall have effect as if after paragraph (b) there were added “and (c1) where a company has delivered a return which is based wholly or partly on accounts drawn up as mentioned in section 11AC(1) of this Act, then, at any time before the end of the period of twelve months beginning with the date on which any particular technical provision constituted in the case of those accounts as described in paragraph 52 of Schedule 9A to the Companies Act 1985 is replaced as described in sub-paragraph (4) of that paragraph, the company may by notice to an officer of the Board so amend its self-assessment as to give effect to any amendments to the return— (i) which arise from the replacement of that technical provision, and (ii) which the company has notified to such an officer.” (3) Where this section applies, section 11AB of this Act shall have effect— (a) as if in subsection (1)(b) after “subsection (2)(b)” there were inserted “or (c1)”; and (b) as if in subsection (2) for the words from “is” to the end of paragraph (b) there were substituted— (“) in the case of a return (whenever delivered) which is based wholly or partly on accounts drawn up as mentioned in section 11AC(1) of this Act, is whichever of the following periods ends the later, that is to say— (i) the period of two years beginning with the date (or, if there is more than one such date, the latest date) on which any technical provision constituted in the case of those accounts as described in paragraph 52 of Schedule 9A to the Companies Act 1985 is replaced as mentioned in sub-paragraph (4) of that paragraph; or (ii) the period ending with the quarter day next following the first anniversary of the day on which the return was delivered; and (b1) in the case of an amendment of such a return— (i) if the amendment is made on or before the filing date, is the period of twelve months beginning with that date; or (ii) if the amendment is made after that date, is the period ending with the quarter day next following the first anniversary of the day on which the amendment was made;”. (11AD) (1) This section applies in any case where a return under section 11 of this Act is delivered by an insurance company which is permitted by an order under section 68 of the Insurance Companies Act 1982 to cause investigations to be made into its financial condition less frequently than is required by section 18 of that Act. (2) Where this section applies, section 11AA(2) of this Act shall have effect as if, after paragraph (b), there were added “and (c2) where a company falling within section 11AD(1) of this Act has delivered a return for any period, then, at any time before the end of the period of twelve months beginning with the date as at which the relevant investigation is carried out, that is to say— (i) if the return is for a period as at the end of which there is carried out an investigation under section 18 of the Insurance Companies Act 1982 into the financial condition of the company, that investigation, or (ii) if the return is not for such a period, the first such investigation to be made into the financial condition of the company as at the end of a subsequent period, the company may by notice to an officer of the Board so amend its self-assessment as to give effect to any amendments to its return which arise from that investigation and which the company has notified to such an officer.” (3) Where this section applies, section 11AB of this Act shall have effect— (a) as if in subsection (1)(b) after “subsection (2)(b)” there were inserted “or (c2)”; and (b) as if in subsection (2) for the words from “is” to the end of paragraph (b) there were substituted— (“) in the case of a return delivered at any time by a company falling within section 11AD(1) of this Act, is the period of two years beginning with the date as at which the relevant investigation, as defined in section 11AA(2)(c2) of this Act, is carried out; and (b2) in the case of an amendment of such a return— (i) if the amendment is made on or before the filing date, is the period of twelve months beginning with that date; or (ii) if the amendment is made after that date, is the period ending with the quarter day next following the first anniversary of the day on which the amendment was made;”. (11AE) (1) This section applies in any case where a return under section 11 of this Act is delivered by a friendly society which is required by section 47 of the Friendly Societies Act 1992 to cause an investigation to be made into its financial condition at least once in every period of three years. (2) Where this section applies, section 11AA(2) of this Act shall have effect as if, after paragraph (b), there were added “and (c3) where a friendly society falling within section 11AE(1) of this Act has delivered a return for any period, then, at any time before the end of the period of fifteen months beginning with the date as at which the relevant investigation is carried out, that is to say— (i) if the return is for a period as at the end of which there is carried out an investigation under section 47 of the Friendly Societies Act 1992 into the financial condition of the society, that investigation, or (ii) if the return is not for such a period, the first such investigation to be made into the financial condition of the society as at the end of a subsequent period, the society may by notice to an officer of the Board so amend its self-assessment as to give effect to any amendments to its return which arise from that investigation and which the society has notified to such an officer.” (3) Where this section applies, section 11AB of this Act shall have effect— (a) as if in subsection (1)(b) after “subsection (2)(b)” there were inserted “or (c3)”; and (b) as if in subsection (2) for the words from “is” to the end of paragraph (b) there were substituted— (“) in the case of a return delivered at any time by a friendly society falling within section 11AE(1) of this Act, is the period of twenty seven months beginning with the date as at which the relevant investigation, as defined in section 11AA(2)(c3) of this Act, is carried out; and (b3) in the case of an amendment of such a return— (i) if the amendment is made on or before the filing date, is the period of twelve months beginning with that date; or (ii) if the amendment is made after that date, is the period ending with the quarter day next following the first anniversary of the day on which the amendment was made;”.

• (2) The amendment made by subsection (1) above shall have effect 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).

Friendly societies

Life or endowment business

171

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

Personal pension schemes

Return of contributions on or after death of member

172

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

Participators in close companies

Loans to participators etc

173

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

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

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

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

• (5) In section 826(4) of that Act (interest on repayment of tax by virtue of section 419), for paragraph (a) there shall be substituted the following paragraph—

(a) the date when the entitlement to relief in respect of the repayment accrued, that is to say— (i) where the repayment of the loan or advance (or part thereof) occurred on or after the day mentioned in section 419(4A), the date nine months after the end of that accounting period; and (ii) in any other case, the date nine months after the end of the accounting period in which the loan or advance was made; or

.

• (6) This section has effect in relation to any loan or advance made in an accounting period ending on or after 31st March 1996.

Attribution of gains to participators in non-resident companies

174

• (1) Section 13 of the Taxation of Chargeable Gains Act 1992 (attribution of gains to members of non-resident companies) shall be amended in accordance with subsections (2) to (9) below.

• (2) In subsection (2) (persons subject to charge on gain to company), for “holds shares” there shall be substituted “ is a participator ”.

• (3) For subsections (3) and (4) (part of gain attributed to person subject to charge) there shall be substituted the following subsections—

(3) That part shall be equal to the proportion of the gain that corresponds to the extent of the participator’s interest as a participator in the company. (4) Subsection (2) above shall not apply in the case of any participator in the company to which the gain accrues where the aggregate amount falling under that subsection to be apportioned to him and to persons connected with him does not exceed one twentieth of the gain.

• (4) In subsection (5), paragraph (a) (section not to apply where gain distributed within two years) shall be omitted; and after that subsection there shall be inserted the following subsection—

(5A) Where— (a) any amount of capital gains tax is paid by a person in pursuance of subsection (2) above, and (b) an amount in respect of the chargeable gain is distributed (either by way of dividend or distribution of capital or on the dissolution of the company) within 2 years from the time when the chargeable gain accrued to the company, that amount of tax (so far as neither reimbursed by the company nor applied as a deduction under subsection (7) below) shall be applied for reducing or extinguishing any liability of that person to income tax in respect of the distribution or (in the case of a distribution falling to be treated as a disposal on which a chargeable gain accrues to that person) to any capital gains tax in respect of the distribution.

• (5) In subsection (7) (deduction of tax paid in computing gain on shares in the company)—

• (a) for “not reimbursed by the company)” there shall be inserted “ neither reimbursed by the company nor applied under subsection (5A) above for reducing any liability to tax) ”; and

• (b) for “the shares by reference to which the tax was paid” there shall be substituted “ any asset representing his interest as a participator in the company. ”

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

(7A) In ascertaining for the purposes of subsection (5A) or (7) above the amount of capital gains tax or income tax chargeable on any person for any year on or in respect of any chargeable gain or distribution— (a) any such distribution as is mentioned in subsection (5A)(b) above and falls to be treated as income of that person for that year shall be regarded as forming the highest part of the income on which he is chargeable to tax for the year; (b) any gain accruing in that year on the disposal by that person of any asset representing his interest as a participator in the company shall be regarded as forming the highest part of the gains on which he is chargeable to tax for that year; (c) where any such distribution as is mentioned in subsection (5A)(b) above falls to be treated as a disposal on which a gain accrues on which that person is so chargeable, that gain shall be regarded as forming the next highest part of the gains on which he is so chargeable, after any gains falling within paragraph (b) above; and (d) any gain treated as accruing to that person in that year by virtue of subsection (2) above shall be regarded as the next highest part of the gains on which he is so chargeable, after any gains falling within paragraph (c) above.

• (7) In subsection (9) (cases where person charged is a company)—

• (a) for “the person owning any of the shares in the company” there shall be substituted “ a person who is a participator in the company ”; and

• (b) for the words from “to the shares” onwards there shall be substituted “ to the participating company’s interest as a participator in the company to which the gain accrues shall be further apportioned among the participators in the participating company according to the extent of their respective interests as participators, and subsection (2) above shall apply to them accordingly in relation to the amounts further apportioned, and so on through any number of companies. ”

• (8) In subsection (10) (application to trustees), for “owning shares in the company” there shall be substituted “ who are participators in the company, or in any company amongst the participators in which the gain is apportioned under subsection (9) above, ”.

• (9) After subsection (11) there shall be inserted the following subsections—

(12) In this section “participator”, in relation to a company, has the meaning given by section 417(1) of the Taxes Act for the purposes of Part XI of that Act (close companies). (13) In this section— (a) references to a person’s interest as a participator in a company are references to the interest in the company which is represented by all the factors by reference to which he falls to be treated as such a participator; and (b) references to the extent of such an interest are references to the proportion of the interests as participators of all the participators in the company (including any who are not resident or ordinarily resident in the United Kingdom) which on a just and reasonable apportionment is represented by that interest. (14) For the purposes of this section, where— (a) the interest of any person in a company is wholly or partly represented by an interest which he has under any settlement (“his beneficial interest”), and (b) his beneficial interest is the factor, or one of the factors, by reference to which that person would be treated (apart from this subsection) as having an interest as a participator in that company, the interest as a participator in that company which would be that person’s shall be deemed, to the extent that it is represented by his beneficial interest, to be an interest of the trustees of the settlement (and not of that person), and references in this section, in relation to a company, to a participator shall be construed accordingly. (15) Any appeal under section 31 of the Management Act involving any question as to the extent for the purposes of this section of a person’s interest as a participator in a company shall be to the Special Commissioners.

• (10) In paragraph 1(3) of Schedule 5 to the Taxation of Chargeable Gains Act 1992 (application of section 86 to section 13 gains)—

• (a) in paragraph (a), for “hold shares in a company which originate” there shall be substituted “ are participators in a company in respect of property which originates ”;

• (b) in paragraph (b), for “the shares” there shall be substituted “ so much of their interest as participators as arises from that property ”; and

• (c) at the end there shall be added—

Subsections (12) and (13) of section 13 shall apply for the purposes of this sub-paragraph as they apply for the purposes of that section.

• (11) This section applies to gains accruing on or after 28th November 1995.

Cancellation of tax advantages

Transactions in certain securities

175

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

Chargeable gains: reliefs

Retirement relief: age limits

176

• (1) In each of sections 163 and 164 of, and paragraph 5 of Schedule 6 to, the Taxation of Chargeable Gains Act 1992 (retirement relief), for “the age of 55”, wherever occurring, there shall be substituted “ the age of 50 ”.

• (2) The amendments made by this section shall apply in relation to disposals on or after 28th November 1995.

Reinvestment relief on disposal of qualifying corporate bond

177

Section 164A of the Taxation of Chargeable Gains Act 1992 (re-investment relief) shall have effect, and be deemed always to have had effect, as if the following subsections were inserted after subsection (2)—

(2A) Where the chargeable gain referred to in subsection (1)(a) above is one which (apart from this section) would be deemed to accrue by virtue of section 116(10)(b)— (a) any reduction falling to be made by virtue of subsection (2)(a) above shall be treated as one made in the consideration mentioned in section 116(10)(a), instead of in the consideration for the disposal of the asset disposed of; but (b) if the disposal on which that gain is deemed to accrue is a disposal of only part of the new asset, it shall be assumed, for the purpose only of making a reduction affecting the amount of that gain— (i) that the disposal is a disposal of the whole of a new asset, (ii) that the gain accruing on that disposal relates to an old asset consisting in the corresponding part of what was in fact the old asset, and (iii) that the corresponding part of the consideration deemed to be given for what was in fact the old asset is taken to be the consideration by reference to which the amount of that gain is computed; and in this subsection “new asset” and “old asset” have the same meanings as in section 116. (2B) Where a chargeable gain accrues in accordance with subsection (12) of section 116, this Chapter shall have effect— (a) as if that gain were a gain accruing on the disposal of an asset; and (b) in relation to that deemed disposal, as if references in this Chapter to the consideration for the disposal were references to the sum of money falling, apart from this Chapter, to be used in computing the gain accruing under that subsection.

Special cases

Sub-contractors in the construction industry

178

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

Roll-over relief in respect of ships

179

Scientific research expenditure: oil licences

180

Overseas petroleum

181

• (1) In subsection (1) of section 196 of the Taxation of Chargeable Gains Act 1992 (interpretation of sections 194 and 195), for “licence” there shall be substituted “ UK licence ”.

• (2) After subsection (1) of section 196 of that Act there shall be inserted the following subsection—

(1A) For the purposes of section 194 a licence other than a UK licence relates to an undeveloped area at any time if, at that time— (a) no development has actually taken place in any part of the licensed area; and (b) no condition for the carrying out of development anywhere in that area has been satisfied— (i) by the grant of any consent by the authorities of a country or territory exercising jurisdiction in relation to the area; or (ii) by the approval or service on the licensee, by any such authorities, of any programme of development.

;

and in subsection (2) of that section for “subsection (1) above” there shall be substituted “ subsections (1) and (1A) above ”.

• (3) For subsection (5) of section 196 of that Act there shall be substituted the following subsections—

(5) In sections 194 and 195 and this section— - “foreign oil concession” means any right to search for or win overseas petroleum, being a right conferred or exercisable (whether or not by virtue of a licence) in relation to a particular area; - “interest” in relation to a licence, includes, where there is an agreement which— 1. relates to oil from the whole or any part of the licensed area, and 2. was made before the extraction of the oil to which it relates, - “licence” means any UK licence or foreign oil concession; - “licensed area” (subject to subsection (4) above)— 1. in relation to a UK licence, has the same meaning as in Part I of the Oil Taxation Act 1975; and 2. in relation to a foreign oil concession, means the area to which the concession applies; - “licensee”— 1. in relation to a UK licence, has the same meaning as in Part I of the Oil Taxation Act 1975; and 2. in relation to a foreign oil concession, means the person with the concession or any person having an interest in it; - “oil”— 1. except in relation to a UK licence, means any petroleum (within the meaning of the Petroleum (Production) Act 1934); and 2. in relation to such a licence, has the same meaning as in Part I of the Oil Taxation Act 1975; - “overseas petroleum” means any oil that exists in its natural condition at a place to which neither the Petroleum (Production) Act 1934 nor the Petroleum (Production) Act (Northern Ireland) 1964 applies; and - “UK licence” means a licence within the meaning of Part I of the Oil Taxation Act 1975. (5A) References in sections 194 and 195 to a part disposal of a licence shall include references to the disposal of any interest in a licence.

• (4) Subsections (1) to (3) above shall have effect in relation to any disposal on or after 13th September 1995 and subsection (3) shall also have effect, and be deemed always to have had effect, for the construction of section 195 of the Taxation of Chargeable Gains Act 1992 in its application to disposals before that date.

• (5) Where enactments re-enacted in the Taxation of Chargeable Gains Act 1992 apply, instead of that Act, in the case of any disposal before 13th September 1995, this section shall have effect as if it required amendments equivalent to those made by subsection (3) above to have effect, and be deemed always to have had effect, for the construction of any enactment corresponding to section 195 of that Act.

Controlled foreign companies

182

Schedule 36 to this Act (which contains amendments of Chapter IV of Part XVII of the Taxes Act 1988) shall have effect in relation to accounting periods of a controlled foreign company, within the meaning of that Chapter, beginning on or after 28th November 1995.

Part V — Inheritance tax

Rate bands

183

• (1) For the Table in Schedule 1 to the Inheritance Tax Act 1984 there shall be substituted—

Table of Rates of Tax	Table of Rates of Tax	Table of Rates of Tax
Portion of value	Portion of value	Rate of tax
Lower limit	Upper limit	Per cent.
£	£	£
0	200,000	Nil
200,000		40

• (2) Subsection (1) above shall apply to any chargeable transfer made on or after 6th April 1996; and section 8 of that Act (indexation of rate bands) shall not have effect as respects any difference between the retail prices index for the month of September 1994 and that for the month of September 1995.

Business property relief

184

• (1) The Inheritance Tax Act 1984 shall be amended as follows.

• (2) In section 105(1) (relevant business property for the purposes of business property relief)—

• (a) in paragraph (b) (unquoted shares and securities attracting 100 per cent. relief where they gave the transferor control of a company)—

• (i) the words “ shares in or ” shall be omitted; and

• (ii) for the words “shares or securities owned by the transferor” there shall be substituted “ securities owned by the transferor and any unquoted shares so owned ”;

• (b) for paragraph (bb) (unquoted shares attracting 100 per cent. relief in other cases) there shall be substituted the following paragraph—

(bb) any unquoted shares in a company;

• (c) paragraph (c) (unquoted shares attracting 50 per cent. relief) shall be omitted.

• (3) In section 107(4) (replacement of property with unquoted shares), for the words from the beginning to “such shares” there shall be substituted—

(4) Without prejudice to subsection (1) above, where any shares falling within section 105(1)(bb) above which are

.

• (4) In section 113A(3A)(b) (which contains a reference to shares and securities falling within paragraph (b) of section 105(1)), after “(b)” there shall be inserted “ or (bb) ”.

• (5) For the removal of any doubt, the following subsection shall be inserted in section 113A (provisions applying to business property relief where there is a transfer within seven years of death) after subsection (7)—

(7A) The provisions of this Chapter for the reduction of value transferred shall be disregarded in any determination for the purposes of this section of whether there is a potentially exempt or chargeable transfer in any case.

• (6) This section—

• (a) so far as it inserts a new subsection (7A) in section 113A, has effect in relation to any transfer of value on or after 28th November 1995; and

• (b) so far as it makes any other provision, has effect—

• (i) in relation to any transfer of value on or after 6th April 1996, and

• (ii) for the purposes of any charge to tax by reason of an event occurring on or after 6th April 1996, in relation to transfers of value before that date.

Agricultural property relief

185

• (1) Chapter II of Part V of the Inheritance Tax Act 1984 (agricultural property) shall be amended as follows.

• (2) In section 116 (relief for transfers of agricultural property) after subsection (5) there shall be inserted—

(5A) Where, in consequence of the death on or after 1st September 1995 of the tenant or, as the case may be, the last surviving tenant of any property, the tenancy— (a) becomes vested in a person, as a result of his being a person beneficially entitled under the deceased tenant’s will or other testamentary writing or on his intestacy, and (b) is or becomes binding on the landlord and that person as landlord and tenant respectively, subsection (2)(c) above shall have effect as if the tenancy so vested had been a tenancy beginning on the date of the death. (5B) Where in consequence of the death on or after 1st September 1995 of the tenant or, as the case may be, the last surviving tenant of any property, a tenancy of the property or of any property comprising the whole or part of it— (a) is obtained by a person under or by virtue of an enactment, or (b) is granted to a person in circumstances such that he is already entitled under or by virtue of an enactment to obtain such a tenancy, but one which takes effect on a later date, or (c) is granted to a person who is or has become the only or only remaining applicant, or the only or only remaining person eligible to apply, under a particular enactment for such a tenancy in the particular case, subsection (2)(c) above shall have effect as if the tenancy so obtained or granted had been a tenancy beginning on the date of the death. (5C) Subsection (5B) above does not apply in relation to property situate in Scotland. (5D) If, in a case where the transferor dies on or after 1st September 1995,— (a) the tenant of any property has, before the death, given notice of intention to retire in favour of a new tenant, and (b) the tenant’s retirement in favour of the new tenant takes place after the death but not more than thirty months after the giving of the notice, subsection (2)(c) above shall have effect as if the tenancy granted or assigned to the new tenant had been a tenancy beginning immediately before the transfer of value which the transferor is treated by section 4(1) above as making immediately before his death. (5E) In subsection (5D) above and this subsection— - “the new tenant” means— 1. the person or persons identified in a notice of intention to retire in favour of a new tenant as the person or persons who it is desired should become the tenant of the property to which that notice relates; or 2. the survivor or survivors of the persons so identified, whether alone or with any other person or persons; - “notice of intention to retire in favour of a new tenant” means, in the case of any property, a notice or other written intimation given to the landlord by the tenant, or (in the case of a joint tenancy or tenancy in common) all of the tenants, of the property indicating, in whatever terms, his or their wish that one or more persons identified in the notice or intimation should become the tenant of the property; - “the retiring tenant’s tenancy” means the tenancy of the person or persons giving the notice of intention to retire in favour of a new tenant; - “the tenant’s retirement in favour of the new tenant” means— 1. the assignment, or (in Scotland) assignation, of the retiring tenant’s tenancy to the new tenant in circumstances such that the tenancy is or becomes binding on the landlord and the new tenant as landlord and tenant respectively; or 2. the grant of a tenancy of the property which is the subject of the retiring tenant’s tenancy, or of any property comprising the whole or part of that property, to the new tenant and the acceptance of that tenancy by him;

• (3) In consequence of subsection (2) above, subsection (2A) of that section (which made, in relation to Scotland, provision which is superseded by the subsection (5A) inserted by subsection (2) above) shall cease to have effect.

• (4) For the removal of any doubt, the following subsection shall be inserted in section 124A (provisions applying to agricultural property relief where there is a transfer within seven years of death) after subsection (7)—

(7A) The provisions of this Chapter for the reduction of value transferred shall be disregarded in any determination for the purposes of this section of whether there is a potentially exempt or chargeable transfer in any case.

• (5) Subsection (2) above—

• (a) so far as relating to subsections (5A) to (5C) of section 116 of the Inheritance Tax Act 1984, has effect in any case where the death of the tenant or, as the case may be, the sole surviving tenant, occurs on or after 1st September 1995; and

• (b) so far as relating to subsections (5D) and (5E) of that section, has effect in any case where the death of the transferor occurs on or after 1st September 1995.

• (6) Subsection (3) above has effect in any case where the death of the tenant or, as the case may be, the sole surviving tenant, occurs on or after 1st September 1995.

• (7) Subsection (4) above has effect in relation to any transfer of value on or after 28th November 1995.

Part VI — Stamp Duty and Stamp Duty Reserve Tax

Stamp duty

Transfers of securities to members of electronic transfer systems etc

186

• (1) Stamp duty shall not be chargeable on an instrument effecting a transfer of securities if the transferee is a member of an electronic transfer system and the instrument is in a form which will, in accordance with the rules of the system, ensure that the securities are changed from being held in certificated form to being held in uncertificated form so that title to them may become transferable by means of the system.

• (2) In this section—

• “certificated form” has the same meaning as in the relevant regulations;

• “electronic transfer system” means a system and procedures which, in accordance with the relevant regulations, enable title to securities to be evidenced and transferred without a written instrument;

• “member”, in relation to an electronic transfer system, means a person who is permitted by the operator of the system to transfer by means of the system title to securities held by him in uncertificated form;

• “operator” means a person approved by the Treasury under the relevant regulations as operator of an electronic transfer system;

• “the relevant regulations” means regulations under section 785 of the Companies Act 2006 (transfer without written instrument);

• “securities” means stock or marketable securities;

• “uncertificated form” has the same meaning as it has in the relevant regulations.

• (3) This section applies in relation to instruments executed on or after 1st July 1996.

• (4) This section shall be construed as one with the Stamp Act 1891.

Stamp duty reserve tax

Territorial scope of the tax

187

• (1) In section 86 of the Finance Act 1986 (introduction) after subsection (3) there shall be added—

(4) Stamp duty reserve tax shall be chargeable in accordance with the provisions of this Part of this Act— (a) whether the agreement, transfer, issue or appropriation in question is made or effected in the United Kingdom or elsewhere, and (b) whether or not any party is resident or situate in any part of the United Kingdom.

• (2) The amendment made by subsection (1) above shall have effect—

• (a) in relation to an agreement, if—

• (i) the agreement is conditional and the condition is satisfied on or after 1st July 1996; or

• (ii) the agreement is not conditional and is made on or after that date; and

• (b) in relation to a transfer, issue or appropriation made or effected on or after that date.

Removal of the two month period

188

• (1) In section 87 of the Finance Act 1986 (the principal charge) in subsection (2) (tax charged on the expiry of the period of two months beginning with the relevant day unless the first and second conditions are fulfilled before that period expires) the following shall be omitted—

• (a) the words “ the expiry of the period of two months beginning with ”, and

• (b) the words from “ unless ” to the end.

• (2) In section 88 of that Act (special cases) in subsection (1) (which provides for instruments on which stamp duty is not chargeable by virtue of certain enactments to be disregarded for the purposes of section 87(4) and (5)) before paragraph (a) there shall be inserted—

(aa) section 65(1) of the Finance Act 1963 (renounceable letters of allotment etc), (ab) section 14(1) of the Finance Act (Northern Ireland) 1963 (renounceable letters of allotment etc.),

.

• (3) Subsections (2) and (3) of that section (which are superseded by subsection (2) above) shall cease to have effect.

• (4) In section 92(1) of that Act (repayment or cancellation of tax where the conditions in section 87(4) and (5) are shown to have been fulfilled after the expiry of the period of two months beginning with the relevant day but before the expiry of six years so beginning)—

• (a) for “after the expiry of the period of two months (beginning with the relevant day, as defined in section 87(3))” there shall be substituted “ on or after the relevant day (as defined in section 87(3)) ”; and

• (b) for “(so beginning)” there shall be substituted “ (beginning with that day) ”.

• (5) The amendments made by this section shall have effect in relation to an agreement to transfer securities if—

• (a) the agreement is conditional and the condition is satisfied on or after 1st July 1996; or

• (b) the agreement is not conditional and is made on or after that date.

Transfers to members of electronic transfer systems etc

189

• (1) In section 88 of the Finance Act 1986 (special cases) after subsection (1) there shall be inserted—

(1A) An instrument on which stamp duty is not chargeable by virtue of section 186 of the Finance Act 1996 (transfers of securities to members of electronic transfer systems etc) shall be disregarded in construing section 87(4) and (5) above unless— (a) the transfer is made by a stock exchange nominee; and (b) the maximum stamp duty chargeable on the instrument, apart from section 186 of the Finance Act 1996, would be 50p; and in this subsection “stock exchange nominee” means a person designated for the purposes of section 127 of the Finance Act 1976 as a nominee of The Stock Exchange by an order made by the Secretary of State under subsection (5) of that section.

• (2) This section has effect in relation to an agreement to transfer securities if an instrument is executed on or after 1st July 1996 in pursuance of the agreement.

Transfers between associated bodies

190

• (1) In section 88 of the Finance Act 1986 (special cases) after subsection (1A) there shall be inserted—

(1B) An instrument on which stamp duty is not chargeable by virtue of section 42 of the Finance Act 1930 or section 11 of the Finance Act (Northern Ireland) 1954 (transfer between associated bodies corporate) shall be disregarded in construing section 87(4) and (5) above in any case where— (a) the property mentioned in section 42(2)(a) of the Finance Act 1930 or, as the case may be, section 11(2)(a) of the Finance Act (Northern Ireland) 1954 consists of chargeable securities of any particular kind acquired in the period of two years ending with the day on which the instrument was executed; and (b) the body corporate from which the conveyance or transfer there mentioned is effected acquired the chargeable securities— (i) in a transaction which was given effect by an instrument of transfer on which stamp duty was not chargeable by virtue of section 81 above; (ii) in pursuance of an agreement to transfer securities as regards which section 87 above did not apply by virtue of section 89 below; or (iii) in circumstances with regard to which the charge to stamp duty or stamp duty reserve tax was treated as not arising by virtue of regulations under section 116 or 117 of the Finance Act 1991.

• (2) At the end of that section there shall be added—

(4) For the purposes of subsection (1B) above, if the securities mentioned in paragraph (a) of that subsection cannot (apart from this subsection) be identified, securities shall be taken as follows, that is to say, securities of the same kind acquired later in the period of two years there mentioned (and not taken under this subsection for the purposes of any earlier instrument) shall be taken before securities acquired earlier in that period. (5) If, in a case where subsection (4) above applies, some, but not all, of the securities taken in accordance with that subsection were acquired as mentioned in paragraph (b) of subsection (1B) above by the body corporate mentioned in that paragraph, the stamp duty reserve tax chargeable under section 87 above by virtue of subsection (1B) above shall not exceed the tax that would have been so chargeable had the agreement to transfer the securities related only to such of the securities so taken as were so acquired. (6) Where a person enters into an agreement for securities to be transferred to him or his nominee, the securities shall be treated for the purposes of subsections (1B)(a) and (4) above as acquired by that person at the time when he enters into the agreement, unless the agreement is conditional, in which case they shall be taken to be acquired by him when the condition is satisfied.

• (3) This section has effect where the instrument on which stamp duty is not chargeable by virtue of section 42 of the Finance Act 1930 or section 11 of the Finance Act (Northern Ireland) 1954 is executed on or after 4th January 1996 in pursuance of an agreement to transfer securities made on or after that date.

Stock lending and collateral security arrangements

191

• (1) After section 89A of the Finance Act 1986 (exceptions from section 87 for public issues) there shall be inserted—

(89B) (1) Where a person (P) has contracted to sell chargeable securities of a particular kind in the ordinary course of his business as a market maker in chargeable securities of that kind and, to enable him to fulfil the contract, he enters into an arrangement under which— (a) another person (Q) is to transfer chargeable securities to P or his nominee, and (b) in return, chargeable securities of the same kind and amount are to be transferred (whether or not by P or his nominee) to Q or his nominee, section 87 above shall not apply as regards an agreement to transfer chargeable securities which is made for the purpose of performing the obligation to transfer chargeable securities described in paragraph (a) or (b) above. (2) Where the arrangement mentioned in subsection (1) above is also one under which— (a) an amount of chargeable securities of some other kind is to be transferred by P or his nominee to Q or his nominee by way of security for the performance of the obligation described in paragraph (b) of that subsection, and (b) on performance of that obligation, the securities mentioned in paragraph (a) above, or chargeable securities of the same kind and amount as those securities, are to be transferred to P or his nominee, section 87 above shall also not apply as regards an agreement to transfer chargeable securities which is made for the purpose of performing the obligation to transfer chargeable securities described in paragraph (a) or (b) above. (3) Where, to enable Q to make the transfer to P or his nominee which is mentioned in paragraph (a) of subsection (1) above, Q enters into an arrangement under which— (a) another person (R) is to transfer chargeable securities to Q or his nominee, and (b) in return, chargeable securities of the same kind and amount are to be transferred (whether or not by Q or his nominee) to R or his nominee, section 87 above shall not apply as regards an agreement to transfer chargeable securities which is made for the purpose of performing the obligation to transfer chargeable securities described in paragraph (a) or (b) above. (4) Where the arrangement mentioned in subsection (3) above is also one under which— (a) an amount of chargeable securities of some other kind is to be transferred by Q or his nominee to R or his nominee by way of security for the performance of the obligation described in paragraph (b) of that subsection, and (b) on performance of that obligation, the securities mentioned in paragraph (a) above, or chargeable securities of the same kind and amount as those securities, are to be transferred to Q or his nominee, section 87 above shall also not apply as regards an agreement to transfer chargeable securities which is made for the purpose of performing the obligation to transfer chargeable securities described in paragraph (a) or (b) above. (5) For the purposes of this section a person is a market maker in chargeable securities of a particular kind if he— (a) holds himself out at all normal times in compliance with the rules of The Stock Exchange as willing to buy and sell chargeable securities of that kind at a price specified by him, and (b) is recognised as doing so by The Stock Exchange. (6) The Treasury may by regulations provide that for subsection (5) above (as it has effect for the time being) there shall be substituted a subsection containing a different definition of a market maker for the purposes of this section. (7) Regulations under subsection (6) above shall apply in relation to any agreement to transfer chargeable securities in pursuance of an arrangement entered into on or after such day after 1st July 1996 as is specified in the regulations. (8) The power to make regulations under subsection (6) above shall be exercisable by statutory instrument subject to annulment in pursuance of a resolution of the House of Commons.

• (2) This section applies in relation to agreements to transfer chargeable securities in pursuance of an arrangement entered into on or after 1st July 1996.

Repayment or cancellation of tax

192

• (1) In consequence of section 188(1) above, subsections (4), (5) and (8) of section 87 of the Finance Act 1986 (exemption from stamp duty reserve tax where an instrument is executed etc) shall cease to have effect.

• (2) In section 88 of that Act (which provides for instruments on which stamp duty is not chargeable by virtue of certain enactments to be disregarded for the purposes of section 87(4) and (5)) in subsections (1), (1A) and (1B) for “section 87(4) and (5) above” there shall be substituted “ section 92(1A) and (1B) below ”.

• (3) In section 92 of that Act (repayment or cancellation of tax) in subsection (1) (which refers to the conditions in section 87(4) and (5))—

• (a) for “section 87(4) and (5)” there shall be substituted “ subsections (1A) and (1B) below ”; and

• (b) for “the following provisions of this section shall apply” there shall be substituted “ subsections (2) to (4A) of this section shall apply ”.

• (4) After that subsection, there shall be inserted—

(1A) The first condition is that an instrument is (or instruments are) executed in pursuance of the agreement and the instrument transfers (or the instruments between them transfer) to B or, as the case may be, to his nominee all the chargeable securities to which the agreement relates. (1B) The second condition is that the instrument (or each instrument) transferring the chargeable securities to which the agreement relates is duly stamped in accordance with the enactments relating to stamp duty if it is an instrument which, under those enactments, is chargeable with stamp duty or otherwise required to be stamped.

• (5) At the end of that section there shall be added—

(6) In this section “the enactments relating to stamp duty” means the Stamp Act 1891 and any enactment which amends or is required to be construed together with that Act.

• (6) The amendments made by this section shall have effect in relation to an agreement to transfer securities if—

• (a) the agreement is conditional and the condition is satisfied on or after 1st July 1996; or

• (b) the agreement is not conditional and is made on or after that date.

Depositary receipts

193

• (1) Section 93 of the Finance Act 1986 (depositary receipts) shall be amended in accordance with the following provisions of this section.

• (2) In subsection (1) (charge to stamp duty reserve tax where certain things are done in pursuance of an arrangement) in paragraph (b) (transfer or issue to, or appropriation by, a person falling within subsection (3))—

• (a) after “transferred or issued to” there shall be inserted “ the person mentioned in paragraph (a) above or ”; and

• (b) for “such a person” there shall be substituted “ the person mentioned in paragraph (a) above or a person falling within subsection (3) below ”.

• (3) In subsection (6) (payment by instalments) in paragraph (d) (instrument received by person falling within subsection (3)) for “subsection (3)” there shall be substituted “ subsection (2) or (3) ”.

• (4) This section has effect—

• (a) so far as relating to the charge to tax under section 93(1) of the Finance Act 1986, where securities are transferred, issued or appropriated on or after 1st July 1996 (whenever the arrangement was made);

• (b) so far as relating to the charge to tax under section 93(10) of that Act, in relation to instalments payable on or after 1st July 1996.

Rates of charge expressed as percentages

194

• (1) In section 87 of the Finance Act 1986, in subsection (6) (which specifies the rate at which stamp duty reserve tax under that section is charged) for “50p for every £100 or part of £100” there shall be substituted “ 0.5 per cent. ”

• (2) In section 93 of that Act (depositary receipts)—

• (a) in subsection (4) (rate of charge) for “£1.50 for every £100 or part of £100” there shall be substituted “ 1.5 per cent. ”;

• (b) in subsection (5) (which applies subsection (4) with modifications in certain cases where the securities are transferred by a chargeable instrument) for the words from “as if “£1.50” read” onwards there shall be substituted “ as if “1.5 per cent.” read “1 per cent.” ”; and

• (c) in subsection (10) (payment in instalments etc) in paragraph (b), for “£1.50 for every £100 or part of £100” there shall be substituted “ 1.5 per cent. of the amount ”.

• (3) Section 94(8) of that Act (which defines “the day of The Stock Exchange reforms” for the purposes of section 93(5) and which becomes unnecessary in consequence of the amendment made by subsection (2)(b) above) shall be omitted.

• (4) In section 96 of that Act (clearance services)—

• (a) in subsection (2) (rate of charge) for “£1.50 for every £100 or part of £100” there shall be substituted “ 1.5 per cent. ”;

• (b) in subsection (3) (which applies subsection (2) with modifications in certain cases where the securities are transferred by a chargeable instrument) for the words from “as if “£1.50” read” onwards there shall be substituted “ as if “1.5 per cent.” read “1 per cent.” ”; and

• (c) in subsection (8) (payment in instalments etc) in paragraph (b), for “£1.50 for every £100 or part of £100” there shall be substituted “ 1.5 per cent. of the amount ”.

• (5) Section 96(12) of that Act (which defines “the day of The Stock Exchange reforms” for the purposes of subsection (3) and which becomes unnecessary in consequence of the amendment made by subsection (4)(b) above) shall be omitted.

• (6) In section 99 of that Act (interpretation) after subsection (12) there shall be added—

(13) Where the calculation of any tax in accordance with the provisions of this Part results in an amount which is not a multiple of one penny, the amount so calculated shall be rounded to the nearest penny, taking any½p as nearest to the next whole penny above.

• (7) Subsections (1) to (5) above have effect in accordance with the following provisions of this subsection, that is to say—

• (a) in relation to the charge to tax under section 87 of the Finance Act 1986, subsection (1) above applies where—

• (i) the agreement to transfer is conditional and the condition is satisfied on or after 1st July 1996; or

• (ii) the agreement is not conditional and is made on or after 1st July 1996;

• (b) in relation to the charge to tax under section 93(1) of that Act, paragraphs (a) and (b) of subsection (2) above apply where securities are transferred, issued or appropriated on or after 1st July 1996 (whenever the arrangement was made) and subsection (3) above has effect accordingly;

• (c) in relation to the charge to tax under section 93(10) of that Act, paragraph (c) of subsection (2) above applies in relation to instalments payable on or after 1st July 1996;

• (d) in relation to the charge to tax under section 96(1) of that Act, paragraphs (a) and (b) of subsection (4) above apply where securities are transferred or issued on or after 1st July 1996 (whenever the arrangement was made) and subsection (5) above has effect accordingly;

• (e) in relation to the charge to tax under section 96(8) of that Act, paragraph (c) of subsection (4) above applies in relation to instalments payable on or after 1st July 1996.

Regulations concerning administration: sub-delegation to the Board

195

In section 98 of the Finance Act 1986 (Treasury regulations with respect to administration etc) after subsection (1) there shall be inserted—

(1A) The power conferred on the Treasury by subsection (1) above includes power to make provision conferring or imposing on the Board functions which involve the exercise of a discretion.

Clearance services

Election by operator for alternative system of charge

196

• (1) In section 70 of the Finance Act 1986 (clearance services) in subsection (1) (which, subject to subsection (9), makes provision with respect to stamp duty on transfers into clearance services) after “Subject to subsection (9)” there shall be inserted “ and section 97A ”.

• (2) In section 96 of that Act (clearance services) in subsection (1) (which, subject to subsection (5) and section 97, provides for stamp duty reserve tax to be chargeable on transfers into clearance services) for “section 97” there shall be substituted “ sections 97 and 97A ”.

• (3) After section 97 of that Act (exceptions) there shall be inserted—