Finance Act 1996

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13

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SCHEDULE 24

Part I — Amendments of the Taxes Management Act 1970

Introductory

1

The Taxes Management Act 1970 shall be amended in accordance with this Part of this Schedule.

2

In section 11 (return of profits), after subsection (9) there shall be inserted the following subsection—

(10) In the following provisions of this Act “section 11 notice” means a notice under this section.

Power to enquire into return for wrong period, etc.

3

In section 11AA (return of profits to include self-assessment), after subsection (4) there shall be inserted the following subsections—

(5) This section, except subsection (4) above, applies in relation to a return for a period— (a) which ends in or at the end of the period specified in the section 11 notice; (b) which in the return is treated as an accounting period; but (c) which is not, or may not be, an accounting period. (6) In relation to such a return, “the filing date” means, in this section and section 11AB of this Act, the day which would be the day mentioned in section 11(4) of this Act if the period for which the return is made were an accounting period.

4

• (1) In section 11AB(1) (power to enquire into return of profits), after paragraph (c) (which is inserted by paragraph 2 of Schedule 19 to this Act), there shall be inserted

or (d) if it appears to the officer that a return delivered in response to a section 11 notice— (i) is or may be a return for the wrong period, or (ii) has become a return for the wrong period as a result of a direction under section 12(5A) of the principal Act, the period for which the return should have been made;

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

(4) For the purposes of subsection (1)(d) above a return is a return for the wrong period in each of the cases set out below. (5) The first case is where— (a) the return is made for a period which ends in or at the end of the period specified in the section 11 notice and which in the return is treated as an accounting period; but (b) the period for which the return is made is not an accounting period of the company. (6) The second case is where— (a) the return is made for a part of the period specified in the section 11 notice which in the return is treated as not falling within an accounting period of the company; but (b) there is an accounting period ending in or at the end of the period specified in the section 11 notice.

5

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Amendment of return for wrong period

6

After section 28A there shall be inserted the following sections—

(28AA) (1) Where an officer of the Board gives notice under section 11AB(1) of this Act to a company of his intention to enquire into the period for which a return should have been made, the officer’s enquiries shall be treated as completed at such time as he by notice— (a) informs the company that he has completed his enquiries; and (b) states his conclusions on the subject of his enquiries. (2) Subsections (3) and (4) below apply where the officer in the conclusions stated under subsection (1) above designates a period, in accordance with subsections (6) to (8) below, as the accounting period for which the return should have been made. (3) At any time in the period of 30 days beginning with the day on which the officer’s enquiries are completed, the company may amend the return for the purpose of making it a return appropriate to the designated period. (4) At any time in the period of 30 days beginning immediately after the period mentioned in subsection (3) above, the officer may by notice to the company amend the return for the purpose of making it a return appropriate to the designated period. (5) The power under subsections (3) and (4) above to amend a return includes the power to amend a self-assessment so as to make clear that it is a self-assessment for the designated period. (6) If there is only one accounting period ending in or at the end of the period specified in the section 11 notice, the only period which the officer may designate is that period. (7) If there is more than one accounting period ending in or at the end of the period specified in the section 11 notice, the only period which the officer may designate is the earliest of those accounting periods for which no return has been delivered. (8) In designating a period, the officer must specify the dates on which the period begins and ends. (28AB) (1) On an application made by the company, the Commissioners shall direct the officer to give a notice under section 28AA(1) of this Act within a period specified in the direction, unless they are satisfied that the officer has reasonable grounds for not giving such a notice. (2) Proceedings under subsection (1) above shall be heard and determined in the same way as an appeal. (3) An appeal may be brought against an amendment made under section 28AA(4) of this Act within the period of 30 days beginning with the date on which the notice of the amendment was issued. (4) The provisions of this Act relating to appeals shall have effect in relation to an appeal under subsection (3) above as they have effect in relation to an appeal against an assessment to tax. (5) Subsection (6) below applies where— (a) a return is delivered in response to a section 11 notice; (b) following a statement of conclusions under section 28AA of this Act, a period is finally determined to be the accounting period for which the return should have been made; (c) the effect of the determination is that there is a period (“a further period”) which— (i) before the determination was not an accounting period ending in or at the end of the period specified in the section 11 notice, and (ii) as a result of the determination, becomes a period so ending; and (d) there is no return which can be amended under section 28AA of this Act so as to become a return for that further period. (6) Where this subsection applies, the section 11 notice shall be taken to require a return for the further period before the postponed final day. (7) The postponed final day is whichever is the later of— (a) the final day determined under section 11(4) of this Act; and (b) the last day of the period of 30 days beginning with the day on which the accounting period for the return mentioned in subsection (5)(a) above is finally determined. (8) In relation to any return for the further period the provisions of this Act shall have effect as if any reference to the filing date in relation to that return were a reference to the postponed final day.

Failure to deliver return: determinations

7

After section 28C there shall be inserted the following sections—

(28D) (1) Where— (a) a section 11 notice has been served on a company, and (b) no return is delivered to an officer of the Board in response to the notice before the relevant day, the officer may make a determination of the amounts in which, to the best of his information and belief, the company is chargeable to corporation tax for the relevant period. (2) In subsection (1) above “the relevant period” means— (a) if there is only one accounting period ending in or at the end of the period specified in the section 11 notice, that accounting period; (b) if there is more than one accounting period ending in or at the end of the period so specified, each of those accounting periods; (c) if the officer has insufficient information to identify the accounting periods of the company, such period or periods ending in or at the end of the period so specified as he may determine. (3) Subject to subsections (4) and (5) below, a determination under subsection (1) above shall have effect for the purposes of Parts VA, VI, IX and XI of this Act as if— (a) it were a self-assessment made under section 11AA of this Act; and (b) (where subsection (2)(c) above applies) the period for which the determination is made were an accounting period of the company. (4) If— (a) the company delivers a return for a period ending in or at the end of the period specified in the section 11 notice, (b) the period is, or is treated in the return as, an accounting period, and (c) the return includes a self-assessment under section 11AA of this Act, the self-assessment shall supersede the determination under subsection (1) above or, if there is more than one determination under that subsection, the determination for the period which is, or most closely approximates to, the period for which the return is made. (5) If the company shows— (a) that there is no period ending in or at the end of the period specified in the section 11 notice which is an accounting period of the company, or (b) that it has delivered a return containing a self-assessment for the accounting period, or each accounting period, ending in or at the end of the period specified in the section 11 notice, any determination under subsection (1) above shall be of no effect. (28E) (1) Where— (a) a company delivers a return for an accounting period ending in or at the end of the period specified in a section 11 notice served on the company, but (b) there is another period so ending (an “outstanding period”) which it appears to an officer of the Board is or may be an accounting period but for which no return has been delivered before the relevant day, the officer may make a determination of the amounts in which, to the best of his information and belief, the company is chargeable to corporation tax for the outstanding period. (2) Subject to subsections (3) and (4) below, a determination under subsection (1) above shall have effect for the purposes of Parts VA, VI, IX and XI of this Act as if— (a) it were a self-assessment made under section 11AA of this Act; and (b) where the officer has insufficient information to determine whether the outstanding period is an accounting period, the period for which the determination is made were an accounting period of the company. (3) If, after the determination is made— (a) the company delivers a further return for a period ending in or at the end of the period specified in the section 11 notice, (b) the period is, or is treated in the return as, an accounting period, and (c) the return includes a self-assessment under section 11AA of this Act, the self-assessment shall supersede the determination under subsection (1) above. (4) If the company shows that it has delivered a return containing a self-assessment for the accounting period, or each accounting period, ending in or at the end of the period specified in the section 11 notice, the determination under subsection (1) above shall be of no effect. (28F) (1) Notice of any determination under section 28D or 28E of this Act shall be served on the person in respect of whom it is made and shall state the date on which it is issued. (2) No determination may be made under section 28D or 28E of this Act after the end of the period of five years beginning with the relevant day. (3) A self-assessment shall not supersede a determination under section 28D or 28E of this Act if it is made after whichever is the later of— (a) the end of the period of five years beginning with the relevant day; and (b) the end of the period of twelve months beginning with the date of the determination. (4) Where— (a) an officer of the Board has commenced any proceedings for the recovery of any tax charged by a determination under section 28D or 28E of this Act, and (b) before those proceedings are concluded, the determination is superseded by a self-assessment, those proceedings may be continued as if they were proceedings for the recovery of so much of the tax charged by the self-assessment as is due and payable and has not been paid. (5) In sections 28D and 28E of this Act and this section “the relevant day” means, in relation to a section 11 notice— (a) if the final day for the delivery of any return required by the notice can be ascertained in accordance with section 11(4) of this Act, that day; (b) in any other case, the day determined in accordance with subsection (6) below. (6) The day is whichever is the later of— (a) the last day of the period of 30 months from the end of the period specified in the section 11 notice; and (b) the last day of the period of three months from the day on which the section 11 notice was served.

Commencement

8

• (1) Paragraphs 3 to 6 above have effect in relation to returns made for 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).

• (2) Paragraph 7 above has effect in relation to notices under section 11 of the Taxes Management Act 1970 specifying a period ending on or after the day so appointed.

Part II — Other amendments

General

9

In this Part of this Schedule “the appointed day” means the day appointed as mentioned in paragraph 8(1) above.

Repeal of section 8A of the Taxes Act 1988

10

Section 8A of the Taxes Act 1988 (resolutions to reduce corporation tax) shall cease to have effect.

Determination of accounting date

11

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Companies in liquidation

12

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Construction of references to assessments

13

In section 197(1) of the Finance Act 1994 (construction of certain references), in paragraph (b) after “28C” there shall be inserted “ , 28D or 28E ”.

SCHEDULE 25

Amendments of section 240 of the Taxes Act 1988

1

• (1) Section 240 of the Taxes Act 1988 (set-off of company’s advance corporation tax against subsidiary’s liability to corporation tax) shall be amended as follows.

• (2) For subsection (1) there shall be substituted the following subsections—

(1) Where a company (“the surrendering company”) has paid an amount of advance corporation tax in respect of a dividend or dividends paid by it in an accounting period, it may under this section surrender the benefit of so much of that amount as is available for surrender, or any part of that amount that is available for surrender, to any company which was a subsidiary of it throughout that accounting period. (1A) The surrender shall take effect on the surrendering company making a claim in accordance with Schedule 13A. (1B) A claim to surrender an amount exceeding the amount the benefit of which, at the time the claim is made, is available for surrender shall be of no effect.

• (3) For subsections (6) and (7) there shall be substituted the following subsections—

(5A) A claim under subsection (1A) above may be withdrawn by the surrendering company with the consent of the subsidiary to whom the surrender was made. (5B) The withdrawal of a claim under subsection (1A) above to make a surrender for an accounting period of the surrendering company shall not prevent the making of a further claim under that subsection for that accounting period (whether to the same or a different subsidiary). (5C) Where the surrendering company withdraws a claim by virtue of which an amount of advance corporation tax was treated under subsection (2) above as paid by its subsidiary in respect of a distribution made on a date determined under that subsection— (a) the subsidiary shall be treated as if it had not paid that amount in respect of a distribution made by it on the date so determined; and (b) subject to the effect of any further claim, the surrendering company shall be treated as having paid a corresponding amount of advance corporation tax in respect of a distribution made by it on the date so determined. (5D) The amount of advance corporation tax the benefit of which is at any time available for surrender is the amount referred to in subsection (1) above less any amount which at that time falls within subsection (5E) below. (5E) The amounts are— (a) any amount which has been repaid to the surrendering company; (b) any amount which has been dealt with under section 239(3); (c) any amount surrendered under a claim for that period which has not been withdrawn. (5F) Subject to subsection (5C)(b) above, no amount of advance corporation tax the benefit of which has been surrendered under this section shall be treated for the purposes of section 239 as advance corporation tax paid by the surrendering company.

• (4) After subsection (13) there shall be inserted the following subsection—

(14) Schedule 13A (which makes supplementary provision with respect to surrenders of advance corporation tax) shall have effect.

The new Schedule 13A to the Taxes Act 1988

2

After Schedule 13 to the Taxes Act 1988 there shall be inserted the following Schedule—

SCHEDULE 13A (1) (1) In this Schedule any reference to a claim is to a claim under section 240(1A). (2) In this Schedule “the relevant accounting period of the surrendering company” means, in relation to a claim by the surrendering company, the accounting period referred to in section 240(1). (2) (1) Surrenders to different subsidiaries or to the same subsidiary at different times shall be treated as made by separate claims (however the claims are presented). (2) Where a surrendering company makes more than one claim at the same time, the claims shall be treated as made in such sequence as the surrendering company at that time elects or as, in default of such an election, an officer of the Board determines. (3) (1) A claim must specify— (a) the amount the benefit of which is surrendered; and (b) the subsidiary to whom the surrender is made. (2) The amount specified in compliance with sub-paragraph (1)(a) above must be an amount which is quantified at the time when the claim is made. (4) A claim by the surrendering company must be made within the period of six years from the end of the relevant accounting period of the surrendering company. (5) (1) Where a claim could be made by being included in a return under section 11 of the Management Act, or an amendment of such a return, it must be so made. (2) Section 42 of and Schedule 1A to the Management Act (procedure for making claims) shall not apply to the making of claims. (6) (1) A claim not included in a return or an amendment of a return must be made to an officer of the Board and must be supported by such documents as the officer may require. (2) The claim shall be made in such form as the Board may determine. (3) The form of claim shall provide for a declaration to the effect that all the particulars given in the form are correctly stated to the best of the information and belief of the person making the claim. (7) (1) A claim shall not be withdrawn except by a notice given to an officer of the Board in such form as the Board may determine. (2) A notice withdrawing a claim must specify— (a) the surrendering company which made the claim; (b) the amount the benefit of which was surrendered under the claim; (c) the subsidiary to whom the surrender was made; and (d) the relevant accounting period of the surrendering company in relation to the claim. (3) A notice withdrawing a claim must be accompanied by a notice signifying the consent required by section 240(5A). (4) Where a claim included in a return is withdrawn and the withdrawal could be made by an amendment of the return, it must be so made. (8) Where— (a) a claim (“claim A”) is withdrawn, and (b) at the time when claim A is withdrawn, another claim (“claim B”) is made, claim A shall be treated as being withdrawn before claim B is treated as made. (9) (1) Subject to sub-paragraph (3) below, a claim shall not be withdrawn after the earlier of— (a) the end of the period of six years from the end of the relevant accounting period of the surrendering company; and (b) the date on which an assessment for any relevant accounting period of the subsidiary in whose favour the claim was made becomes final. (2) In this paragraph “relevant accounting period of the subsidiary” means, in relation to a claim, any period in which a distribution is treated under section 240(2) as made by virtue of the claim. (3) In the circumstances given by sub-paragraph (4) below, a claim may be withdrawn at any time before the end of the period of six years from the end of the relevant accounting period of the surrendering company. (4) The circumstances are that— (a) the claim was made— (i) after the date on which an assessment for a relevant accounting period of the subsidiary in whose favour the claim is made becomes final; and (ii) after a further assessment has been made on the subsidiary for that period by an officer of the Board or the Board; and (b) immediately before the claim is withdrawn, none of the advance corporation tax which, by virtue of the claim, is treated as paid by the subsidiary has been finally dealt with to the subsidiary’s advantage. (5) For the purposes of sub-paragraph (4) above, advance corporation tax is finally dealt with to the subsidiary’s advantage if— (a) it is set against any liability of the subsidiary under any assessment to corporation tax which has become final; or (b) any of it is repaid to the subsidiary. (10) Nothing in the Management Act shall be read as allowing a claim to be amended. (11) (1) Where— (a) a claim is made after an assessment to corporation tax for the relevant accounting period of the surrendering company has become final, (b) under section 239(1), advance corporation tax has been set against the company’s liability to corporation tax for that period, and (c) the claim is a claim to surrender the benefit of an amount which is or includes the whole or a part of the amount set-off, the claim must be accompanied by an assessment (a self-assessment) of the corporation tax due as a result of the claim. (2) The tax shall be treated as due and payable, in accordance with section 59D of the Management Act, on the day following the expiry of nine months from the end of the relevant accounting period. (3) The standard provisions about enquiries into self-assessments (given by paragraph 14 below) apply to self-assessments provided under this paragraph. (12) (1) Where— (a) by virtue of section 239(4), advance corporation tax paid in the relevant accounting period of the surrendering company has been set against the company’s liability to corporation tax for a later accounting period, (b) the claim is made after assessments to corporation tax for both periods have become final, and (c) the claim is a claim to surrender the benefit of an amount which is or includes the whole or a part of the amount set-off, the claim must be accompanied by an assessment (a self-assessment) of the corporation tax due as a result of the claim. (2) The tax shall be treated as due and payable, in accordance with section 59D of the Management Act, on the day following the expiry of nine months from the end of the later accounting period. (3) The standard provisions about enquiries into self-assessments (given by paragraph 14 below) apply to self-assessments provided under this paragraph. (4) For the purposes of sub-paragraph (1)(a) above, advance corporation tax which was in fact paid in the relevant accounting period of the surrendering company shall be treated as set against the liability of the company to corporation tax for the later accounting period after any other advance corporation tax available to be so treated. (13) (1) Sub-paragraph (3) below applies where— (a) under section 239(1), advance corporation tax has been set against the subsidiary’s liability to corporation tax for an accounting period (“the relevant accounting period”), (b) the advance corporation tax is, includes or is part of advance corporation tax which is treated as paid by the subsidiary in respect of that period on the assumption that section 240(2) required that treatment, and (c) after an assessment to corporation tax for that period has become final, the subsidiary becomes aware of facts (“the true facts”) which, by virtue of section 240(1B), make that treatment incorrect. (2) Sub-paragraph (3) below also applies where— (a) by virtue of section 239(4), advance corporation tax has been set against the subsidiary’s liability to corporation tax for an accounting period (“the relevant accounting period”), (b) the advance corporation tax is, includes or is part of advance corporation tax which is treated as paid by the subsidiary in respect of a previous accounting period on the assumption that section 240(2) required that treatment, and (c) after an assessment to corporation tax for that period has become final, the subsidiary becomes aware of facts (“the true facts”) which, by virtue of section 240(1B), make that treatment incorrect. (3) The subsidiary must, before the end of the period of three months beginning with the day on which it becomes aware of the true facts, provide an officer of the Board with an assessment (a self-assessment) of the amount of corporation tax which was due for the relevant accounting period on the basis of the true facts. (4) The tax shall be treated as due and payable, in accordance with section 59D of the Management Act, on the day following the expiry of nine months from the end of the relevant accounting period of the subsidiary. (5) The standard provisions about enquiries into self-assessments (given by paragraph 14 below) apply to self-assessments provided under this paragraph. (6) For the purposes of this paragraph it shall be assumed that advance corporation tax actually paid (or correctly treated as paid) by the subsidiary has been set against the subsidiary’s liability to corporation tax before any advance corporation tax incorrectly treated as paid by the subsidiary. (14) (1) The standard provisions about enquiries into self-assessments (which correspond, in general terms, to certain provisions of section 28A of the Management Act) are as follows. (2) An officer of the Board may, at any time before the end of the period of one year beginning with the day on which the self-assessment is received, give notice of his intention to enquire into the self-assessment. (3) The officer’s enquiries shall end on such day as he by notice— (a) informs the company that he has completed his enquiries, and (b) states his conclusions as to the amount of tax which should be contained in the company’s self-assessment. (4) At any time in the period of 30 days beginning with the day on which the enquiries end, the company may amend its self-assessment so as to make good any deficiency or eliminate any excess in the amount of tax contained in the self-assessment. (5) At any time in the period of 30 days beginning immediately after the period mentioned in sub-paragraph (4) above, the officer may by notice to the company amend the company’s self-assessment so as to make good any deficiency or eliminate any excess in the amount of tax contained in the self-assessment. (6) The provisions of the Management Act apply to an amendment of a self-assessment under sub-paragraph (5) above as they apply to an amendment of a self-assessment under section 28A(4) of that Act. (7) At any time before a notice is given under sub-paragraph (3) above, the company may apply for a direction that the officer shall give such a notice within such period as may be specified in the direction. (8) Subject to sub-paragraph (9) below, an application under sub-paragraph (7) above shall be heard and determined in the same way as an appeal against an amendment of a self-assessment under section 28A(2) or (4) of the Management Act. (9) The Commissioners hearing an application under sub-paragraph (7) above shall give the direction applied for unless they are satisfied that the officer has reasonable grounds for not giving the notice. (15) (1) Where— (a) a claim is withdrawn after an assessment for the relevant accounting period of the surrendering company has become final, and (b) an amount of corporation tax paid by the surrendering company in respect of that period would not have been payable if the claim had not been made, the surrendering company shall be entitled by notice to claim repayment of that amount. (2) Where— (a) a claim is made after the date on which an assessment for any relevant accounting period of the subsidiary in whose favour the claim is made becomes final, and (b) an amount of corporation tax paid by the subsidiary in respect of that period would not have been payable if the claim had not been made, the subsidiary shall be entitled by notice to claim repayment of that amount. (3) In this paragraph “relevant accounting period of the subsidiary” has the same meaning as in paragraph 9.

3

Paragraphs 1 and 2 above have effect where the accounting period of the surrendering company ends 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).

Other amendments

4

Section 239(5) of the Taxes Act 1988 (manner in which claims under section 239(1) and (4) to be given effect) shall cease to have effect in relation to accounting periods ending on or after the day appointed as mentioned in paragraph 3 above.

5

In the Table in section 98 of the Taxes Management Act 1970 (penalties in respect of certain information provisions), after the entry in the second column relating to Schedule 13 to the Taxes Act 1988, there shall be inserted the following entry—

Schedule 13A, paragraphs 11, 12 and 13;

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SCHEDULE 26

The sections inserted after section 329 of the Taxes Act 1988 by section 150 of this Act are as follows—

SCHEDULE 27

Companies that pay FIDs

1

• (1) In section 246A(1) of the Taxes Act 1988 (foreign income dividends) after “a company” there shall be inserted “ resident in the United Kingdom ”.

• (2) This paragraph has effect in relation to dividends paid on or after 28th November 1995.

Recipients of FIDs

2

Section 246D(5) of that Act (exclusion of section 233(1) and (1A) in the case of foreign income dividends) shall have effect, and be deemed always to have had effect, as if at the end there were inserted “ to which an individual is beneficially entitled, a foreign income dividend paid to personal representatives or a foreign income dividend paid to trustees in a case in which the dividend is income to which section 686 applies. ”

Calculation of the distributable foreign profit and the notional foreign source ACT

3

• (1) In section 246I(6) of that Act, for the words from “an amount equal” onwards there shall be substituted “ the amount of corporation tax payable, before double taxation relief is afforded, in respect of the foreign source profit. ”

• (2) In section 246P(2) of that Act (assumptions to apply for the purposes of calculating the notional foreign source ACT), the following paragraph shall be inserted before the “and” at the end of paragraph (e)—

(ea) where any of the matched foreign source profits represent an amount (“a gross profit”) reduced by one or more such deductions as are mentioned in section 246I(2), the amount of double taxation relief which is to be taken, in finding the amount of corporation tax falling finally to be borne, to have been available (after the reduction) to be allowed by reference to the amount representing the gross profit was equal to the amount that would have been available to be so allowed had no reduction been made;

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• (3) In section 246P of that Act, after subsection (12) there shall be inserted the following subsection—

(12A) In this section “double taxation relief” has the same meaning as in section 246I.

• (4) Subject to sub-paragraph (5) below, this paragraph has effect in relation to accounting periods ending after 28th November 1995.

• (5) This paragraph, so far as applicable as respects authorised unit trusts, has effect in relation to any distribution period ending after 28th November 1995.

International headquarters company

4

• (1) Section 246S of that Act (conditions for treatment as international headquarters company) shall be amended as follows.

• (2) In subsection (3) (wholly-owned subsidiary of foreign quoted parent company), in paragraph (a), for “wholly owned by” there shall be substituted “ a 100 per cent. subsidiary of ”.

• (3) Subsection (8) (extension of subsection (3)) shall cease to have effect.

• (4) After subsection (10) there shall be inserted the following subsection—

(10A) For the purposes of this section a company is a 100 per cent. subsidiary of another if and so long as it is a body corporate all of whose share capital would fall to be treated for the purposes of section 838 as owned directly or indirectly by the other and that other is a body corporate; but for this purpose references in that section to owning share capital shall be construed in accordance with subsection (12) below.

• (5) Subject to sub-paragraph (6) below, this paragraph has effect in relation to any accounting period ending after 28th November 1995.

• (6) Where—

• (a) this paragraph has effect under sub-paragraph (5) above in relation to an accounting period in which a dividend is paid, and

• (b) the immediately preceding period ended on or before 28th November 1995,

subsection (9) (requirement to be international headquarters company in the period before that in which a dividend is paid) shall have effect in the case of that dividend as if this paragraph also had effect in relation to that immediately preceding period.

Life assurance business charged under Case I of Schedule D

5

• (1) In section 440B of that Act (modifications for life assurance business charged under Case I of Schedule D), after subsection (1) there shall be inserted the following subsection—

(1A) Nothing in section 208 shall prevent foreign income dividends from being taken into account in any computation of the profits of the company’s life assurance business charged in accordance with Case I of Schedule D.

• (2) This paragraph has effect in relation to accounting periods beginning on or after 1st January 1996.

Foreign income distributions to corporate unit holders

6

• (1) In section 468R of that Act (foreign income distributions to corporate unit holders), after subsection (3) there shall be inserted the following subsection—

(4) No repayment shall be made of any tax which is deemed to have been deducted by virtue of the application of paragraph (b) of section 468Q(2) in relation to a foreign income distribution.

• (2) This paragraph applies in relation to any distribution period ending on or after 28th November 1995.

SCHEDULE 28

The Taxes Act 1988

1

Section 47 of the Taxes Act 1988 (FOTRA securities) shall cease to have effect.

2

Section 474(2) of that Act (which prevents the deduction of expenses in respect of securities the income on which is exempt from tax) shall cease to have effect.

3

• (1) In section 475 of that Act (tax-free securities: exclusion of interest on borrowed money), ...

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

• (3) Subsections (6) and (7) of that section shall cease to have effect.

4

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

5

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

6

In paragraph 1(3) of Schedule 24 to that Act ... (amount taken into account in computing tax of company on the assumption that it is resident in the United Kingdom), for “by virtue of section 47 or 48” there shall be substituted, in each case, “ and have been so received by virtue of section 154(2) of the Finance Act 1996 ”.

The Inheritance Tax Act 1984 (c. 51)

7

In section 6(2) of the Inheritance Tax Act 1984 (FOTRA securities to be excluded property in specified circumstances), for the words from “neither” to “United Kingdom” there shall be substituted “ of a description specified in the condition ”.

8

In each of paragraphs (a) and (b) of section 48(4) of that Act (excluded property in the case of settlements), for the words from “neither” to “United Kingdom” there shall be substituted “ of a description specified in the condition in question ”.

SCHEDULE 29

Part I — The New Chapter

1

In Part IV of the Taxes Act 1988 (provisions relating to the Schedule D charge) the following Chapter shall be inserted after Chapter VII—

(118A) In this Chapter— (a) except in the terms “agent concerned”, “collecting agent” and “paying agent”, references to an “agent” include a person acting as nominee or sub-agent for an agent; (b) “bank” has the meaning given by section 840A; (c) the “chargeable date”— (i) in the case of a relevant payment, has the meaning given by section 118B(5); and (ii) in the case of a relevant receipt, has the meaning given by section 118C(4); (d) “collecting agent” has the meaning given by section 118C(1), and in relation to any relevant receipt or chargeable receipt, a reference to the collecting agent is a reference to the collecting agent by virtue of whose performance of a relevant function that receipt was received or arose; (e) in relation to any dividends, references to “coupons” include warrants for and bills of exchange purporting to be drawn or made in payment of those dividends; (f) references to a depositary include references to a person acting as agent or nominee for a depositary; (g) except in paragraph (h) below, references to “dividends” are references to foreign dividends, United Kingdom public revenue dividends or relevant dividends as the context requires; (h) “foreign dividends” means any annual payments, interest or dividends payable out of or in respect of foreign holdings; (i) “foreign holdings” means the stocks, funds, shares or securities of any body of persons not resident in the United Kingdom or of a government or public or local authority in a country outside the United Kingdom; (j) “gilt-edged securities” means any securities which— (i) are gilt-edged securities for the purposes of the 1992 Act; or (ii) will be such securities on the making of any order under paragraph 1 of Schedule 9 to that Act the making of which is anticipated in the prospectus under which they were issued; (k) “international organisation” has the meaning given by section 51A(8); (l) references to a “nominee” include a person acting as agent or nominee for a nominee; (m) “paying agent” has the meaning given by section 118B(1); (n) “prescribed” means prescribed in regulations made by the Board under this Chapter or prescribed by the Board in accordance with such regulations; (o) “quoted Eurobond” means a quoted Eurobond within the meaning of section 124 the interest on which is chargeable to tax under Case III of Schedule D, and “quoted Eurobond interest” means interest on such a quoted Eurobond; (p) “relevant dividends” means foreign dividends and quoted Eurobond interest; (q) “relevant holdings” means foreign holdings and quoted Eurobonds; (r) “relevant payment” has the meaning given by section 118B(5); (s) “relevant receipt” has the meaning given by section 118C(2); (t) “securities” includes any loan stocks or similar securities, whether secured or unsecured; and (u) “United Kingdom public revenue dividends” means income from securities which is payable out of the public revenue of the United Kingdom or Northern Ireland. (118B) (1) A person specified in column 1 of Table A below shall be a paying agent for the purposes of this Chapter in relation to such dividends as are— (a) of a description set out in column 2 of that Table opposite his specification; and (b) entrusted to him for payment or distribution.

(2) The Bank of England and the Bank of Ireland shall be treated as paying agents for the purposes of this Chapter in relation to United Kingdom public revenue dividends which are payable to them. (3) The National Debt Commissioners shall be treated as paying agents for the purposes of this Chapter in relation to United Kingdom public revenue dividends payable by them. (4) Foreign dividends fall within this subsection if they are payable out of, or in respect of, the stocks, funds, shares or securities of an organisation which is for the time being designated for the purposes of this subsection pursuant to section 582A(1). (5) Any payment in relation to which a person is a paying agent shall be a relevant payment for the purposes of this Chapter; and the chargeable date is— (a) in relation to such a payment as is mentioned in subsection (2) above, the date on which the payment is received; and (b) in relation to any other relevant payment, the date on which the payment is made. (118C) (1) Subject to subsection (3) below, a person described in column 1 of Table B below shall be a collecting agent for the purposes of this Chapter in relation to such functions performed by him as are set out in that description, which shall be relevant functions for the purposes of this Chapter. (2) Such dividends or proceeds of sale or other realisation as— (a) are set out in column 2 of Table B below opposite the description of a collecting agent in column 1; and (b) are received or arise by virtue of that collecting agent’s performance of a relevant function comprised in that description shall be relevant receipts for the purposes of this Chapter.