Finance Act 1997

(1) The provision of insurance or reinsurance by a person who provides it in the course of— (a) any insurance business which he is authorised under section 3 or 4 of the Insurance Companies Act 1982 to carry on, or (b) any business in respect of which he is exempted under section 2 of that Act from the requirement to be so authorised. (2) The provision by an insurer or reinsurer who belongs outside the United Kingdom of— (a) insurance against any of the risks or other things described in Schedules 1 and 2 to the Insurance Companies Act 1982, or (b) reinsurance relating to any of those risks or other things. (3) The provision of insurance or reinsurance by the Export Credits Guarantee Department. (4) The provision by an insurance broker or insurance agent of any of the services of an insurance intermediary in a case in which those services— (a) are related (whether or not a contract of insurance or reinsurance is finally concluded) to any such provision of insurance or reinsurance as falls, or would fall, within item 1, 2 or 3; and (b) are provided by that broker or agent in the course of his acting in an intermediary capacity. (1) For the purposes of item 4 services are services of an insurance intermediary if they fall within any of the following paragraphs— (a) the bringing together, with a view to the insurance or reinsurance of risks, of— (i) persons who are or may be seeking insurance or reinsurance, and (ii) persons who provide insurance or reinsurance; (b) the carrying out of work preparatory to the conclusion of contracts of insurance or reinsurance; (c) the provision of assistance in the administration and performance of such contracts, including the handling of claims; (d) the collection of premiums. (2) For the purposes of item 4 an insurance broker or insurance agent is acting “in an intermediary capacity” wherever he is acting as an intermediary, or one of the intermediaries, between— (a) a person who provides any insurance or reinsurance the provision of which falls within item 1, 2 or 3, and (b) a person who is or may be seeking insurance or reinsurance or is an insured person. (3) Where— (a) a person (“the supplier”) makes a supply of goods or services to another (“the customer”), (b) the supply of the goods or services is a taxable supply and is not a zero-rated supply, (c) a transaction under which insurance is to be or may be arranged for the customer is entered into in connection with the supply of the goods or services, (d) a supply of services which are related (whether or not a contract of insurance is finally concluded) to the provision of insurance in pursuance of that transaction is made by— (i) the person by whom the supply of the goods or services is made, or (ii) a person who is connected with that person and, in connection with the provision of that insurance, deals directly with the customer, and (e) the related services do not consist in the handling of claims under the contract for that insurance, those related services do not fall within item 4 unless the relevant requirements are fulfilled. (4) For the purposes of Note (3) the relevant requirements are— (a) that a document containing the statements specified in Note (5) is prepared; (b) that the matters that must be stated in the document have been disclosed to the customer at or before the time when the transaction mentioned in Note (3)(c) is entered into; and (c) that there is compliance with all such requirements (if any) as to— (i) the preparation and form of the document, (ii) the manner of disclosing to the customer the matters that must be stated in the document, and (iii) the delivery of a copy of the document to the customer, as may be set out in a notice that has been published by the Commissioners and has not been withdrawn. (5) The statements referred to in Note (4) are— (a) a statement setting out the amount of the premium under any contract of insurance that is to be or may be entered into in pursuance of the transaction in question; and (b) a statement setting out every amount that the customer is, is to be or has been required to pay, otherwise than by way of such a premium, in connection with that transaction or anything that is to be, may be or has been done in pursuance of that transaction. (6) For the purposes of Note (3) any question whether a person is connected with another shall be determined in accordance with section 839 of the Taxes Act. (7) Item 4 does not include— (a) the supply of any market research, product design, advertising, promotional or similar services; or (b) the collection, collation and provision of information for use in connection with market research, product design, advertising, promotional or similar activities. (8) Item 4 does not include the supply of any valuation or inspection services. (9) Item 4 does not include the supply of any services by loss adjusters, average adjusters, motor assessors, surveyors or other experts except where— (a) the services consist in the handling of a claim under a contract of insurance or reinsurance; (b) the person handling the claim is authorised when doing so to act on behalf of the insurer or reinsurer; and (c) that person’s authority so to act includes written authority to determine whether to accept or reject the claim and, where accepting it in whole or in part, to settle the amount to be paid on the claim. (10) Item 4 does not include the supply of any services which— (a) are supplied in pursuance of a contract of insurance or reinsurance or of any arrangements made in connection with such a contract; and (b) are so supplied either— (i) instead of the payment of the whole or any part of any indemnity for which the contract provides, or (ii) for the purpose, in any other manner, of satisfying any claim under that contract, whether in whole or in part.

• (2) This section has effect in relation to supplies made on or after the day on which this Act is passed.

Bad debt relief

Bad debt relief

39

• (1) In section 36 of the Value Added Tax Act 1994, paragraph (b) of subsection (4) (condition of bad debt relief that property in goods supplied has passed) shall not apply in the case of any claim made under that section in relation to a supply of goods made after the day on which this Act is passed.

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

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

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

• (5) No claim for a refund may be made in accordance with section 22 of the Value Added Tax Act 1983 (old scheme for bad debt relief) at any time after the day on which this Act is passed.

Groups of companies

Groups containing bodies of different descriptions

40

• (1) In section 43 of the Value Added Tax Act 1994 (groups of companies), after subsection (1) there shall be inserted the following subsections—

(1AA) Where— (a) it is material, for the purposes of any provision made by or under this Act (“the relevant provision”), whether the person by or to whom a supply is made, or the person by whom goods are acquired or imported, is a person of a particular description, (b) paragraph (b) or (c) of subsection (1) above applies to any supply, acquisition or importation, and (c) there is a difference that would be material for the purposes of the relevant provision between— (i) the description applicable to the representative member, and (ii) the description applicable to the body which (apart from this section) would be regarded for the purposes of this Act as making the supply, acquisition or importation or, as the case may be, as being the person to whom the supply is made, the relevant provision shall have effect in relation to that supply, acquisition or importation as if the only description applicable to the representative member were the description in fact applicable to that body. (1AB) Subsection (1AA) above does not apply to the extent that what is material for the purposes of the relevant provision is whether a person is a taxable person.

• (2) In subsection (2) of that section (self supplies), at the end there shall be inserted “and may provide for that purpose that the representative member is to be treated as a person of such description as may be determined under the order.”

• (3) Subsection (1) above has effect in relation to any supply made after 26th November 1996 and in relation to any acquisition or importation taking place after that date.

Group supplies using an overseas member

41

• (1) In section 43 of the Value Added Tax Act 1994 (groups of companies), after subsection (2) there shall be inserted the following subsections—

(2A) A supply made by a member of a group (“the supplier”) to another member of the group (“the UK member”) shall not be disregarded under subsection (1)(a) above if— (a) it would (if there were no group) be a supply of services falling within Schedule 5 to a person belonging in the United Kingdom; (b) those services are not within any of the descriptions specified in Schedule 9; (c) the supplier has been supplied (whether or not by a person belonging in the United Kingdom) with services falling within any of paragraphs 1 to 8 of Schedule 5; (d) the supplier belonged outside the United Kingdom when it was supplied with the services mentioned in paragraph (c) above; and (e) the services so mentioned have been used by the supplier for making the supply to the UK member. (2B) Subject to subsection (2C) below, where a supply is excluded by virtue of subsection (2A) above from the supplies that are disregarded in pursuance of subsection (1)(a) above, all the same consequences shall follow under this Act as if that supply— (a) were a taxable supply in the United Kingdom by the representative member to itself, and (b) without prejudice to that, were made by the representative member in the course or furtherance of its business. (2C) A supply which is deemed by virtue of subsection (2B) above to be a supply by the representative member to itself— (a) shall not be taken into account as a supply made by the representative member when determining any allowance of input tax under section 26(1) in the case of the representative member; (b) shall be deemed for the purposes of paragraph 1 of Schedule 6 to be a supply in the case of which the person making the supply and the person supplied are connected within the meaning of section 839 of the Taxes Act (connected persons); and (c) subject to paragraph (b) above, shall be taken to be a supply the value and time of which are determined as if it were a supply of services which is treated by virtue of section 8 as made by the person by whom the services are received. (2D) For the purposes of subsection (2A) above where— (a) there has been a supply of the assets of a business of a person (“the transferor”) to a person to whom the whole or any part of that business was transferred as a going concern (“the transferee”), (b) that supply is either— (i) a supply falling to be treated, in accordance with an order under section 5(3), as being neither a supply of goods nor a supply of services, or (ii) a supply that would have fallen to be so treated if it had taken place in the United Kingdom, and (c) the transferor was supplied with services falling within paragraphs 1 to 8 of Schedule 5 at a time before the transfer when the transferor belonged outside the United Kingdom, those services, so far as they are used by the transferee for making any supply falling within that Schedule, shall be deemed to have been supplied to the transferee at a time when the transferee belonged outside the United Kingdom. (2E) Where, in the case of a supply of assets falling within paragraphs (a) and (b) of subsection (2D) above— (a) the transferor himself acquired any of the assets in question by way of a previous supply of assets falling within those paragraphs, and (b) there are services falling within paragraphs 1 to 8 of Schedule 5 which, if used by the transferor for making supplies falling within that Schedule, would be deemed by virtue of that subsection to have been supplied to the transferor at a time when he belonged outside the United Kingdom, that subsection shall have effect, notwithstanding that the services have not been so used by the transferor, as if the transferor were a person to whom those services were supplied and as if he were a person belonging outside the United Kingdom at the time of their deemed supply to him; and this subsection shall apply accordingly through any number of successive supplies of assets falling within paragraphs (a) and (b) of that subsection.

• (2) Subject to subsection (3) below, subsection (1) above has effect in relation to supplies made on or after 26th November 1996.

• (3) Section 43 of the Value Added Tax Act 1994 shall have effect in relation to supplies made after the day on which this Act is passed with the provisions inserted by subsection (1) above modified in accordance with subsections (4) and (5) below.

• (4) In subsection (2A), in paragraph (c) for the words from “services” to the end of the paragraph there shall be substituted “ any services falling within paragraphs 1 to 8 of Schedule 5 which do not fall within any of the descriptions specified in Schedule 9; ”.

• (5) In subsection (2C), at the beginning there shall be inserted “Except in so far as the Commissioners may by regulations otherwise provide,”.

Incidental and supplemental provisions etc.

Services subject to the reverse charge

42

In section 8 of the Value Added Tax Act 1994 (reverse charge on supplies falling within Schedule 5), after subsection (6) there shall be inserted the following subsections—

(7) The power of the Treasury by order to add to or vary Schedule 5 shall include power to make such incidental, supplemental, consequential and transitional provision in connection with any addition to or variation of that Schedule as they think fit. (8) Without prejudice to the generality of subsection (7) above, the provision that may be made under that subsection includes— (a) provision making such modifications of section 43(2A) to (2E) as the Treasury may think fit in connection with any addition to or variation of that Schedule; and (b) provision modifying the effect of any regulations under subsection (4) above in relation to any services added to the Schedule.

Payments on account: appeals

43

In section 28 of the Value Added Tax Act 1994 (payments on account), after subsection (2) there shall be inserted the following subsection—

(2AA) An order under this section may provide for the matters with respect to which an appeal under section 83 lies to a tribunal to include such decisions of the Commissioners under that or any other order under this section as may be specified in the order.

Part IV — Payments and overpayments in respect of indirect taxes

Value added tax

Liability of Commissioners to interest

44

• (1) Section 78 of the Value Added Tax Act 1994 (interest) shall have effect, and be deemed always to have had effect, with the insertion of the following subsection after subsection (1)—

(1A) In subsection (1) above— (a) references to an amount which the Commissioners are liable in consequence of any matter to pay or repay to any person are references, where a claim for the payment or repayment has to be made, to only so much of that amount as is the subject of a claim that the Commissioners are required to satisfy or have satisfied; and (b) the amounts referred to in paragraph (d) do not include any amount payable under this section.

• (2) That section shall have effect in relation to any claim made on or after 18th July 1996, and shall be deemed always to have had effect in relation to such a claim, with the substitution of the following subsection for subsection (11)—

(11) A claim under this section shall not be made more than three years after the end of the applicable period to which it relates.

• (3) That section shall have effect, and be deemed always to have had effect, with the substitution of the following paragraph for paragraph (a) of subsection (12)—

(a) references to the authorisation by the Commissioners of the payment of any amount include references to the discharge by way of set-off (whether under section 81(3) or otherwise) of the Commissioners’ liability to pay that amount; and

.

• (4) For subsections (8) and (9) of that section (periods in respect of which the Commissioners are not liable to interest) there shall be substituted the following subsections—

(8) In determining in accordance with subsection (4), (6) or (7) above the applicable period for the purposes of subsection (1) above, there shall be left out of account any period by which the Commissioners’ authorisation of the payment of interest is delayed by the conduct of the person who claims the interest. (8A) The reference in subsection (8) above to a period by which the Commissioners’ authorisation of the payment of interest is delayed by the conduct of the person who claims it includes, in particular, any period which is referable to— (a) any unreasonable delay in the making of the claim for interest or in the making of any claim for the payment or repayment of the amount on which interest is claimed; (b) any failure by that person or a person acting on his behalf or under his influence to provide the Commissioners— (i) at or before the time of the making of a claim, or (ii) subsequently in response to a request for information by the Commissioners, with all the information required by them to enable the existence and amount of the claimant’s entitlement to a payment or repayment, and to interest on that payment or repayment, to be determined; and (c) the making, as part of or in association with either— (i) the claim for interest, or (ii) any claim for the payment or repayment of the amount on which interest is claimed, of a claim to anything to which the claimant was not entitled. (9) In determining for the purposes of subsection (8A) above whether any period of delay is referable to a failure by any person to provide information in response to a request by the Commissioners, there shall be taken to be so referable, except so far as may be prescribed, any period which— (a) begins with the date on which the Commissioners require that person to provide information which they reasonably consider relevant to the matter to be determined; and (b) ends with the earliest date on which it would be reasonable for the Commissioners to conclude— (i) that they have received a complete answer to their request for information; (ii) that they have received all that they need in answer to that request; or (iii) that it is unnecessary for them to be provided with any information in answer to that request.

• (5) Subsection (4) above shall have effect for the purposes of determining whether any period beginning on or after the day on which this Act is passed is left out of account.

• (6) Amendments corresponding to those made by subsections (1) and (3) above shall be deemed to have had effect, for the purposes of the cases to which the enactments applied, in relation to the enactments directly or indirectly re-enacted in section 78 of the Value Added Tax Act 1994.

Assessment for overpayments of interest

45

• (1) After section 78 of the Value Added Tax Act 1994 there shall be inserted the following section—

(78A) (1) Where— (a) any amount has been paid to any person by way of interest under section 78, but (b) that person was not entitled to that amount under that section, the Commissioners may, to the best of their judgement, assess the amount so paid to which that person was not entitled and notify it to him. (2) An assessment made under subsection (1) above shall not be made more than two years after the time when evidence of facts sufficient in the opinion of the Commissioners to justify the making of the assessment comes to the knowledge of the Commissioners. (3) Where an amount has been assessed and notified to any person under subsection (1) above, that amount shall be deemed (subject to the provisions of this Act as to appeals) to be an amount of VAT due from him and may be recovered accordingly. (4) Subsection (3) above does not have effect if or to the extent that the assessment in question has been withdrawn or reduced. (5) An assessment under subsection (1) above shall be a recovery assessment for the purposes of section 84(3A). (6) Sections 74 and 77(6) apply in relation to assessments under subsection (1) above as they apply in relation to assessments under section 73 but as if the reference in subsection (1) of section 74 to the reckonable date were a reference to the date on which the assessment is notified. (7) Where by virtue of subsection (6) above any person is liable to interest under section 74— (a) section 76 shall have effect in relation to that liability with the omission of subsections (2) to (6); and (b) section 77, except subsection (6), shall not apply to an assessment of the amount due by way of interest; and (without prejudice to the power to make assessments for interest for later periods) the interest to which any assessment made under section 76 by virtue of paragraph (a) above may relate shall be confined to interest for a period of no more than two years ending with the time when the assessment to interest is made. (8) For the purposes of this section notification to a personal representative, trustee in bankruptcy, interim or permanent trustee, receiver, liquidator or person otherwise acting in a representative capacity in relation to another shall be treated as notification to the person in relation to whom he so acts.

• (2) In section 83 of that Act (matters subject to appeal), after paragraph (s) there shall be inserted the following paragraph—

(sa) an assessment under section 78A(1) or the amount of such an assessment;

.

• (3) In section 84 of that Act (further provisions as to appeals), after subsection (3) there shall be inserted the following subsection—

(3A) An appeal against an assessment which is a recovery assessment for the purposes of this subsection, or against the amount of such an assessment, shall not be entertained unless— (a) the amount notified by the assessment has been paid or deposited with the Commissioners; or (b) on being satisfied that the appellant would otherwise suffer hardship, the Commissioners agree, or the tribunal decides, that the appeal should be entertained notwithstanding that that amount has not been so paid or deposited.

• (4) Subsection (1) above shall be deemed to have come into force on 4th December 1996 in relation to amounts paid by way of interest at any time on or after 18th July 1996.

• (5) Subsections (2) and (3) above shall be deemed to have come into force on 4th December 1996 in relation to assessments made on or after that date.

• (6) Section 76(10) of the Value Added Tax Act 1994 (notification to representative of person who made acquisition) shall have effect, and be deemed always to have had effect, as if for “the person who made the acquisition in question” there were substituted “ another ”.

Repayments of overpayments: unjust enrichment

46

• (1) In section 80 of the Value Added Tax Act 1994, after subsection (3) (defence of unjust enrichment to claim for repayment of an overpayment) there shall be inserted the following subsections—

(3A) Subsection (3B) below applies for the purposes of subsection (3) above where— (a) there is an amount paid by way of VAT which (apart from subsection (3) above) would fall to be repaid under this section to any person (“the taxpayer”), and (b) the whole or a part of the cost of the payment of that amount to the Commissioners has, for practical purposes, been borne by a person other than the taxpayer. (3B) Where, in a case to which this subsection applies, loss or damage has been or may be incurred by the taxpayer as a result of mistaken assumptions made in his case about the operation of any VAT provisions, that loss or damage shall be disregarded, except to the extent of the quantified amount, in the making of any determination— (a) of whether or to what extent the repayment of an amount to the taxpayer would enrich him; or (b) of whether or to what extent any enrichment of the taxpayer would be unjust. (3C) In subsection (3B) above— - “the quantified amount” means the amount (if any) which is shown by the taxpayer to constitute the amount that would appropriately compensate him for loss or damage shown by him to have resulted, for any business carried on by him, from the making of the mistaken assumptions; and - “VAT provisions” means the provisions of— 1. any enactment, subordinate legislation or EU legislation (whether or not still in force) which relates to VAT or to any matter connected with VAT; or 2. any notice published by the Commissioners under or for the purposes of any such enactment or subordinate legislation.

• (2) After section 80 of that Act there shall be inserted the following sections—

(80A) (1) The Commissioners may by regulations make provision for reimbursement arrangements made by any person to be disregarded for the purposes of section 80(3) except where the arrangements— (a) contain such provision as may be required by the regulations; and (b) are supported by such undertakings to comply with the provisions of the arrangements as may be required by the regulations to be given to the Commissioners. (2) In this section “reimbursement arrangements” means any arrangements for the purposes of a claim under section 80 which— (a) are made by any person for the purpose of securing that he is not unjustly enriched by the repayment of any amount in pursuance of the claim; and (b) provide for the reimbursement of persons who have for practical purposes borne the whole or any part of the cost of the original payment of that amount to the Commissioners. (3) Without prejudice to the generality of subsection (1) above, the provision that may be required by regulations under this section to be contained in reimbursement arrangements includes— (a) provision requiring a reimbursement for which the arrangements provide to be made within such period after the repayment to which it relates as may be specified in the regulations; (b) provision for the repayment of amounts to the Commissioners where those amounts are not reimbursed in accordance with the arrangements; (c) provision requiring interest paid by the Commissioners on any amount repaid by them to be treated in the same way as that amount for the purposes of any requirement under the arrangements to make reimbursement or to repay the Commissioners; (d) provision requiring such records relating to the carrying out of the arrangements as may be described in the regulations to be kept and produced to the Commissioners, or to an officer of theirs. (4) Regulations under this section may impose obligations on such persons as may be specified in the regulations— (a) to make the repayments to the Commissioners that they are required to make in pursuance of any provisions contained in any reimbursement arrangements by virtue of subsection (3)(b) or (c) above; (b) to comply with any requirements contained in any such arrangements by virtue of subsection (3)(d) above. (5) Regulations under this section may make provision for the form and manner in which, and the times at which, undertakings are to be given to the Commissioners in accordance with the regulations; and any such provision may allow for those matters to be determined by the Commissioners in accordance with the regulations. (6) Regulations under this section may— (a) contain any such incidental, supplementary, consequential or transitional provision as appears to the Commissioners to be necessary or expedient; and (b) make different provision for different circumstances. (7) Regulations under this section may have effect (irrespective of when the claim for repayment was made) for the purposes of the making of any repayment by the Commissioners after the time when the regulations are made; and, accordingly, such regulations may apply to arrangements made before that time. (80B) (1) Where any person is liable to pay any amount to the Commissioners in pursuance of an obligation imposed by virtue of section 80A(4)(a), the Commissioners may, to the best of their judgement, assess the amount due from that person and notify it to him. (2) Subsections (2) to (8) of section 78A apply in the case of an assessment under subsection (1) above as they apply in the case of an assessment under section 78A(1).

• (3) In section 83 of that Act (matters subject to appeal), after paragraph (t) there shall be inserted the following paragraph—

(ta) an assessment under section 80B(1) or the amount of such an assessment;

.

• (4) Subsection (1) above has effect for the purposes of making any repayment on or after the day on which this Act is passed, even if the claim for that repayment was made before that day.

Repayments and assessments: time limits

47

• (1) For subsections (4) and (5) of section 80 of the Value Added Tax Act 1994 (time limit for making claim for a repayment of an overpayment) there shall be substituted the following subsection—

(4) The Commissioners shall not be liable, on a claim made under this section, to repay any amount paid to them more than three years before the making of the claim.

• (2) Subject to subsections (3) and (4) below, subsection (1) above shall be deemed to have come into force on 18th July 1996 as a provision applying, for the purposes of the making of any repayment on or after that date, to all claims under section 80 of the Value Added Tax Act 1994, including claims made before that date and claims relating to payments made before that date.

• (3) Subsection (4) below applies as respects the making of any repayment on or after 18th July 1996 on a claim under section 80 of the Value Added Tax Act 1994 if—

• (a) legal proceedings for questioning any decision (“the disputed decision”) of the Commissioners, or of an officer of the Commissioners, were brought by any person at any time before that date,

• (b) a determination has been or is made in those proceedings that the disputed decision was wrong or should be set aside,

• (c) the claim is one made by that person at a time after the proceedings were brought (whether before or after the making of the determination), and

• (d) the claim relates to—

• (i) an amount paid by that person to the Commissioners on the basis of the disputed decision, or

• (ii) an amount paid by that person to the Commissioners before the relevant date (including an amount paid before the making of the disputed decision) on grounds which, in all material respects, correspond to those on which that decision was made.

• (4) Where this subsection applies in the case of any claim—

• (a) subsection (4) of section 80 of the Value Added Tax Act 1994 (as inserted by this section) shall not apply, and shall be taken never to have applied, in relation to so much of that claim as relates to an amount falling within subsection (3)(d)(i) or (ii) above, but

• (b) the Commissioners shall not be liable on that claim, and shall be taken never to have been liable on that claim, to repay any amount so falling which was paid to them more than three years before the proceedings mentioned in subsection (3)(a) above were brought.

• (5) In subsection (3)(d) above—

• (a) the reference to the relevant date is a reference to whichever is the earlier of 18th July 1996 and the date of the making of the determination in question; and

• (b) the reference to an amount paid on the basis of a decision, or on any grounds, includes an amount so paid on terms (however expressed) which questioned the correctness of the decision or, as the case may be, of those grounds.

• (6) After the subsection (4) inserted in section 80 of the Value Added Tax Act 1994 by this section there shall be inserted the following subsections—

(4A) Where— (a) any amount has been paid, at any time on or after 18th July 1996, to any person by way of a repayment under this section, and (b) the amount paid exceeded the Commissioners’ repayment liability to that person at that time, the Commissioners may, to the best of their judgement, assess the excess paid to that person and notify it to him. (4B) For the purposes of subsection (4A) above the Commissioners’ repayment liability to a person at any time is— (a) in a case where any provision affecting the amount which they were liable to repay to that person at that time is subsequently deemed to have been in force at that time, the amount which the Commissioners are to be treated, in accordance with that provision, as having been liable at that time to repay to that person; and (b) in any other case, the amount which they were liable at that time to repay to that person. (4C) Subsections (2) to (8) of section 78A apply in the case of an assessment under subsection (4A) above as they apply in the case of an assessment under section 78A(1).

• (7) In section 83 of that Act (matters subject to appeal), in paragraph (t), after “80” there shall be inserted “ , an assessment under subsection (4A) of that section or the amount of such an assessment ”.

• (8) Nothing contained in—

• (a) any regulations under section 25(1) of, or paragraph 2 of Schedule 11 to, that Act relating to the correction of errors or the making of adjustments, or

• (b) any requirement imposed under any such regulations,

shall be taken, in relation to any time on or after 18th July 1996, to have conferred an entitlement on any person to receive, by way of repayment, any amount to which he would not have had any entitlement on a claim under section 80 of that Act.

• (9) Subsections (6) to (8) above shall be deemed to have come into force on 4th December 1996.

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

• (11) In this section—

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

• “legal proceedings” means any proceedings before a court or tribunal.

• (12) Without prejudice to the generality of paragraph 1(2) of Schedule 13 to the Value Added Tax Act 1994 (transitional provisions), the references in this section, and in subsection (4) of section 80 of that Act (as inserted by this section), to a claim under that section include references to a claim first made under section 24 of the Finance Act 1989 (which was re-enacted in section 80).

Set-off of credits and debits

48

• (1) In section 81 of the Value Added Tax Act 1994 (which makes provision for the set-off of credits and debits), after subsection (3) there shall be inserted the following subsection—

(3A) Where— (a) the Commissioners are liable to pay or repay any amount to any person under this Act, (b) that amount falls to be paid or repaid in consequence of a mistake previously made about whether or to what extent amounts were payable under this Act to or by that person, and (c) by reason of that mistake a liability of that person to pay a sum by way of VAT, penalty, interest or surcharge was not assessed, was not enforced or was not satisfied, any limitation on the time within which the Commissioners are entitled to take steps for recovering that sum shall be disregarded in determining whether that sum is required by subsection (3) above to be set against the amount mentioned in paragraph (a) above.

• (2) Subsection (1) above shall be deemed to have come into force on 18th July 1996 as a provision applying for determining the amount of any payment or repayment by the Commissioners on or after that date, including a payment or repayment in respect of a liability arising before that date.

Transitional provision for set-offs etc

49

• (1) Where—

• (a) at any time before 4th December 1996, any person (“the taxpayer”) became liable to pay any sum (“the relevant sum”) to the Commissioners by way of VAT, penalty, interest or surcharge,

• (b) at any time on or after 18th July 1996 and before 4th December 1996 an amount was set against the whole or any part of the relevant sum,

• (c) the amount set against that sum was an amount which is treated under section 47 above as not having been due from the Commissioners at the time when it was set against that sum, and

• (d) as a consequence, the taxpayer’s liability to pay the whole or a part of the relevant sum falls to be treated as not having been discharged in accordance with section 81(3) of the 1994 Act,

the Commissioners may, to the best of their judgement, assess the amount of the continuing liability of the taxpayer and notify it to him.

• (2) In subsection (1) above the reference to the continuing liability of the taxpayer is a reference to so much of the liability to pay the relevant sum as—

• (a) would have been discharged if the amount mentioned in subsection (1)(b) above had been required to be set against the relevant sum in accordance with section 81(3) of the 1994 Act, but

• (b) falls, by virtue of section 47 above, to be treated as not having been discharged in accordance with section 81(3) of that Act.

• (3) The taxpayer’s only liabilities under the 1994 Act in respect of his failure, on or after the time mentioned in subsection (1)(b) above, to pay an amount assessable under this section shall be—

• (a) his liability to be assessed for that amount under this section; and

• (b) liabilities arising under the following provisions of this section.

• (4) Subsections (2) to (8) of section 78A of the 1994 Act apply in the case of an assessment under subsection (1) above as they apply in the case of an assessment under section 78A(1) of that Act.

• (5) The 1994 Act shall have effect as if the matters specified in section 83 of that Act (matters subject to appeal) included an assessment under this section and the amount of such an assessment.

• (6) Nothing contained in—

• (a) any regulations under section 25(1) of, or paragraph 2 of Schedule 11 to, the 1994 Act relating to the correction of errors or the making of adjustments, or

• (b) any requirement imposed under any such regulations,

shall be taken, in relation to any time on or after 18th July 1996, to have conferred on any person any entitlement, otherwise than in accordance with section 81(3) of that Act, to set any amount, as an amount due from the Commissioners, against any sum which that person was liable to pay to the Commissioners by way of VAT, penalty, interest or surcharge.

• (7) In this section—

• “the 1994 Act” means the Value Added Tax Act 1994; and

• “the Commissioners” means the Commissioners of Customs and Excise.

• (8) This section shall be deemed to have come into force on 4th December 1996.

• (9) Where at any time on or after 4th December 1996 and before the day on which this Act is passed any assessment corresponding to an assessment under this section was made under a resolution of the House of Commons having effect in accordance with the provisions of the Provisional Collection of Taxes Act 1968, this section has effect, on and after the day on which this Act is passed, as if that assessment were an assessment under this section and as if any appeal brought under that resolution had been brought under this section.

Excise duties and other indirect taxes

Overpayments, interest, assessments, etc

50

• (1) Schedule 5 to this Act (which makes provision in relation to excise duties, insurance premium tax and landfill tax which corresponds to that made for VAT by sections 44 to 48 above) shall have effect.

• (2) Schedule 6 to this Act (which makes further provision for the assessment of amounts payable under enactments relating to excise duty) shall also have effect.

Enforcement of payment

Enforcement by distress

51

• (1) The Commissioners may by regulations not having effect in England and Wales or Scotland make provision—

• (a) for authorising distress to be levied on the goods and chattels of any person refusing or neglecting to pay—

• (i) any amount of relevant tax due from him, or

• (ii) any amount recoverable as if it were relevant tax due from him;

• (b) for the disposal of any goods or chattels on which distress is levied in pursuance of the regulations; and

• (c) for the imposition and recovery of costs, charges, expenses and fees in connection with anything done under the regulations.

• (2) The provision that may be contained in regulations under this section shall include, in particular—

• (a) provision for the levying of distress, by any person authorised to do so under the regulations, on goods or chattels located at any place whatever (including on a public highway); and

• (b) provision authorising distress to be levied at any such time of the day or night, and on any such day of the week, as may be specified or described in the regulations.

• (3) Regulations under this section may—

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

• (b) contain any such incidental, supplemental, consequential or transitional provision as the Commissioners think fit;

and the transitional provision that may be contained in regulations under this section shall include transitional provision in connection with the coming into force of the repeal by this Act of any other power by regulations to make provision for or in connection with the levying of distress.

• (4) The power to make regulations under this section shall be exercisable by statutory instrument subject to annulment in pursuance of a resolution of the House of Commons.

• (5) The following are relevant taxes for the purposes of this section, that is to say—

• (a) any duty of customs or excise, other than vehicle excise duty;

• (b) value added tax;

• (c) insurance premium tax;

• (d) landfill tax;

• (da) aggregates levy;

• (e) any agricultural levy of the European Union .

• (f) climate change levy.

• (6) In this section “the Commissioners” means the Commissioners of Customs and Excise.

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

Enforcement by diligence

52

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

Amendments consequential on sections 51 and 52

53

• (1) In section 117 of the Customs and Excise Management Act 1979 (execution and distress against revenue traders), after subsection (4) there shall be inserted the following subsection—

(4A) This section does not apply for the purposes of levying distress in accordance with regulations under section 51 of the Finance Act 1997 or for the purposes of any execution under section 52 of that Act by diligence.

• (2) In section 11(1)(a) of the Finance Act 1994 (walking possession agreements in connection with enforcement of excise duty)—

• (a) for the words from “by virtue of” to “1981” there shall be substituted “ in accordance with regulations under section 51 of the Finance Act 1997 (enforcement by distress) ”; and

• (b) after “default’)” there shall be inserted “ who has refused or neglected to pay any amount of relevant duty or any amount recoverable as if it were an amount of relevant duty due from him ”.

• (3) In section 13(6) of the Finance Act 1994 (assessment for penalties), for the words “duty of excise”, in each place where they occur, there shall be substituted “ relevant duty ”.

• (4) In section 18(8) of the Finance Act 1994 (saving relating to section 18(1), (2) and (4)), for “, (2) and (4)” there shall be substituted “ and (2) ”.

• (5) In paragraph 19(1)(a) of Schedule 7 to the Finance Act 1994 (walking possession agreements in connection with enforcement of insurance premium tax), for “paragraph 7(7) above” there shall be substituted “ section 51 of the Finance Act 1997 (enforcement by distress) ”.

• (6) In section 48 of the Value Added Tax Act 1994 (VAT representatives), after subsection (7) there shall be inserted the following subsection—

(7A) A sum required by way of security under subsection (7) above shall be deemed for the purposes of— (a) section 51 of the Finance Act 1997 (enforcement by distress) and any regulations under that section, and (b) section 52 of that Act (enforcement by diligence), to be recoverable as if it were VAT due from the person who is required to provide it.

• (7) In section 68(1)(a) of the Value Added Tax Act 1994 (walking possession agreements), for “paragraph 5(4) of Schedule 11” there shall be substituted “ section 51 of the Finance Act 1997 (enforcement by distress) ”.

• (8) In paragraph 24(1)(a) of Schedule 5 to the Finance Act 1996 (walking possession agreements in connection with the enforcement of landfill tax), for “paragraph 13(1) above” there shall be substituted “ section 51 of the Finance Act 1997 (enforcement by distress) ”.

• (9) This section shall come into force on such day as the Commissioners of Customs and Excise may by order made by statutory instrument appoint, and different days may be appointed under this subsection for different purposes.

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

Income tax charge, rates and reliefs

Charge and rates of income tax for 1997-98

54

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

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

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

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

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

Modification of indexed allowances

55

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

Blind person’s allowance

56

• (1) In subsection (1) of section 265 of the Taxes Act 1988 (blind person’s allowance), for “£1,250” there shall be substituted “ £1,280 ”.

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

• (3) Subsection (1) above shall apply for the year 1997-98 and, subject to subsection (2) above, for subsequent years of assessment.

Limit on relief for interest

57

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

Corporation tax charge and rate

Charge and rate of corporation tax for 1997

58

Small companies

59

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

Payments for wayleaves

Wayleaves for electricity cables, telephone lines, etc

60

• (1) Section 120 of the Taxes Act 1988 (payments for wayleaves for electricity cables, telephone lines, etc.) shall be amended as follows.

• (2) In subsection (1) (payments charged under Schedule D subject to deduction of tax)—

• (a) at the beginning there shall be inserted “ Subject to subsection (1A) below, ”; and

• (b) the words from “and, subject to” onwards (which provide for the deduction of tax) shall be omitted.

• (3) After subsection (1) there shall be inserted the following subsection—

(1A) If— (a) the profits and gains arising to any person for any chargeable period include both rent in respect of any such easement as is mentioned in subsection (1) above and amounts which are charged to tax under Schedule A, and (b) some or all of the land to which the easement relates is included in the land by reference to which the amounts charged under Schedule A arise, then, for that period, that rent shall be charged to tax under Schedule A, instead of being charged under Schedule D.

• (4) Subsections (2) to (4) and, in subsection (5), paragraph (c) and the word “and” immediately preceding it shall cease to have effect.

• (5) This section has effect in relation to payments made on or after 6th April 1997.

Schedule E

Phasing out of relief for profit-related pay

61

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

Travelling expenses etc

62

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

Work-related training

63

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

Relieved expenditure, losses etc.

Postponed company donations to charity

64

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

National Insurance contributions

65

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

Expenditure on production wells etc

66

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

Annuity business of insurance companies

67

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

Consortium claims for group relief

68

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

Distributions etc.

Special treatment for certain distributions

69

Schedule 7 to this Act (which makes provision for the treatment of distributions arising on the purchase etc. by a company of its own shares and for cases where a distribution has a connection with a transaction in securities) shall have effect.

Distributions of exempt funds

70

• (1) In subsection (5) of section 236 of the Taxes Act 1988 (meaning of “relevant profits”)—

• (a) in paragraph (a), after “franked investment income” there shall be inserted “ and foreign income dividends ”; and

• (b) in paragraph (b), for “and franked investment income” there shall be substituted “ , franked investment income and foreign income dividends ”.

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

(8) In this section “foreign income dividends” shall be construed in accordance with Chapter VA of Part VI.

• (3) This section has effect (subject to subsection (4) below) for the purposes of computing the relevant profits (within the meaning of section 236 of the Taxes Act 1988) arising to a company in any period falling wholly or partly after 7th October 1996.

• (4) No foreign income dividend paid before 8th October 1996 shall be included or, as the case may be, excluded by virtue of this section from any such profits as are mentioned in subsection (3) above.

Set-off against franked investment income

71

Section 242 of the Taxes Act 1988 (set-off of losses against surplus franked investment income) shall have effect, and be deemed always to have had effect, as if at the end of paragraph (c) of subsection (6) (power to carry set-off forward) there were inserted

and (d) in relation to relief given in respect of amounts available to be set against profits under section 83 of the Finance Act 1996 or paragraph 4 of Schedule 11 to that Act or under section 131(4) of the Finance Act 1993 (which are provisions relating to deficits on loan relationships, foreign exchange losses and losses on certain financial instruments);

.

FIDs paid to unauthorised unit trusts

72

• (1) In section 246D(5) of the Taxes Act 1988 (section 233(1) and (1A) of that Act not to apply to FIDs paid to individuals, personal representatives or certain trustees), after “representatives” there shall be inserted “ , a foreign income dividend paid to the trustees of a unit trust scheme to which section 469 applies ”.

• (2) This section has effect in relation to distributions made on or after 26th November 1996.

Tax advantages to include tax credits

73

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

Investments etc.

Enterprise investment scheme

74

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

Venture capital trusts

75

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

Stock lending and manufactured payments

76

Schedule 10 to this Act (which makes provision for the treatment for the purposes of income tax, corporation tax and capital gains tax of stock lending arrangements and manufactured payments) shall have effect.

Bond washing and repos

77

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

National Savings Bank interest

78

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

Payments under certain life insurance policies

79

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

Futures and options: transactions with guaranteed returns

80

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

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

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

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

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

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

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

Transfer of assets abroad

Transfer of assets abroad

81

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

Leasing and loan arrangements

Finance leases and loans

82

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

Loan relationships: transitions

83

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

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

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

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

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

• (6) Schedule 13 to this Act (which contains amendments of the transitional provisions in Schedule 15 to the Finance Act 1996) shall have effect.

Capital allowances

Writing-down allowances on long-life assets

84

Schedule A cases etc

85

Schedule 15 to this Act (which makes provision in relation to capital allowances for cases where persons have income chargeable to tax under Schedule A or make lettings of furnished holiday accommodation in the United Kingdom) shall have effect.

Capital allowances on fixtures

86

Chargeable gains

Re-investment relief

87

Schedule 17 to this Act (which amends Chapter IA of Part V of the Taxation of Chargeable Gains Act 1992) shall have effect.

Conversion of securities: QCBs and debentures

88

• (1) The Taxation of Chargeable Gains Act 1992 shall be amended as follows.

• (2) In paragraph (a) of subsection (3) of section 132 (meaning of conversion of securities)—

• (a) after “includes” there shall be inserted “ any of the following, whether effected by a transaction or occurring in consequence of the operation of the terms of any security or of any debenture which is not a security, that is to say ”;

• (b) after sub-paragraph (i) there shall be inserted the following sub-paragraphs—

(ia) a conversion of a security which is not a qualifying corporate bond into a security of the same company which is such a bond, and (ib) a conversion of a qualifying corporate bond into a security which is a security of the same company but is not such a bond, and

.

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

(4) In subsection (3)(a)(ia) above the reference to the conversion of a security of a company into a qualifying corporate bond includes a reference to— (a) any such conversion of a debenture of that company that is deemed to be a security for the purposes of section 251 as produces a security of that company which is a qualifying corporate bond; and (b) any such conversion of a security of that company, or of a debenture that is deemed to be a security for those purposes, as produces a debenture of that company which, when deemed to be a security for those purposes, is such a bond. (5) In subsection (3)(a)(ib) above the reference to the conversion of a qualifying corporate bond into a security of the same company which is not such a bond includes a reference to any conversion of a qualifying corporate bond which produces a debenture which— (a) is not a security; and (b) when deemed to be a security for the purposes of section 251, is not such a bond.

• (4) In section 116(2) (qualifying corporate bonds), after the word “section”, in the first place where it occurs, there shall be inserted “ references to a transaction include references to any conversion of securities (whether or not effected by a transaction) within the meaning of section 132 and ”.

• (5) In section 251(6) (deemed securities), after paragraph (d) there shall be inserted—

and any debenture which results from a conversion of securities within the meaning of section 132, or is issued in pursuance of rights attached to such a debenture, shall be deemed for the purposes of this section to be a security (as defined in that section).

• (6) This section has effect for the purposes of the application of the Taxation of Chargeable Gains Act 1992 in relation to any disposal on or after 26th November 1996 and shall so have effect, where a conversion took place at a time before that date, as if it had come into force before that time.

Earn-out rights

89

• (1) After section 138 of the Taxation of Chargeable Gains Act 1992 there shall be inserted the following section—

(138A) (1) For the purposes of this section an earn-out right is so much of any right conferred on any person (“the seller”) as— (a) constitutes the whole or any part of the consideration for the transfer by him of shares in or debentures of a company (“the old securities”); (b) consists in a right to be issued with shares in or debentures of another company (“the new company”); (c) is such that the value or quantity of the shares or debentures to be issued in pursuance of the right (“the new securities”) is unascertainable at the time when the right is conferred; and (d) is not capable of being discharged in accordance with its terms otherwise than by the issue of the new securities. (2) Where— (a) there is an earn-out right, (b) the exchange of the old securities for the earn-out right is an exchange to which section 135 would apply, in a manner unaffected by section 137, if the earn-out right were an ascertainable amount of shares in or debentures of the new company, and (c) the seller elects under this section for the earn-out right to be treated as a security of the new company, this Act shall have effect, in the case of the seller and every other person who from time to time has the earn-out right, in accordance with the assumptions specified in subsection (3) below. (3) Those assumptions are— (a) that the earn-out right is a security within the definition in section 132; (b) that the security consisting in the earn-out right is a security of the new company and is incapable of being a qualifying corporate bond for the purposes of this Act; (c) that references in this Act (including those in this section) to a debenture include references to a right that is assumed to be a security in accordance with paragraph (a) above; and (d) that the issue of shares or debentures in pursuance of such a right constitutes the conversion of the right, in so far as it is discharged by the issue, into the shares or debentures that are issued. (4) For the purposes of this section where— (a) any right which is assumed, in accordance with this section, to be a security of a company (“the old right”) is extinguished, (b) the whole of the consideration for the extinguishment of the old right consists in another right (“the new right”) to be issued with shares in or debentures of that company, (c) the new right is such that the value or quantity of the shares or debentures to be issued in pursuance of the right (“the replacement securities”) is unascertainable at the time when the old right is extinguished, (d) the new right is not capable of being discharged in accordance with its terms otherwise than by the issue of the replacement securities, and (e) the person on whom the new right is conferred elects under this section for it to be treated as a security of that company, the assumptions specified in subsection (3) above shall have effect in relation to the new right, in the case of that person and every other person who from time to time has the new right, as they had effect in relation to the old right. (5) An election under this section in respect of any right must be made, by a notice given to an officer of the Board— (a) in the case of an election by a company within the charge to corporation tax, within the period of two years from the end of the accounting period in which the right is conferred; and (b) in any other case, on or before the first anniversary of the 31st January next following the year of assessment in which that right is conferred. (6) An election under this section shall be irrevocable. (7) Subject to subsections (8) to (10) below, where any right to be issued with shares in or debentures of a company is conferred on any person, the value or quantity of the shares or debentures to be issued in pursuance of that right shall be taken for the purposes of this section to be unascertainable at a particular time if, and only if— (a) it is made referable to matters relating to any business or assets of one or more relevant companies; and (b) those matters are uncertain at that time on account of future business or future assets being included in the business or assets to which they relate. (8) Where a right to be issued with shares or debentures is conferred wholly or partly in consideration for the transfer of other shares or debentures or the extinguishment of any right, the value and quantity of the shares or debentures to be issued shall not be taken for the purposes of this section to be unascertainable in any case where, if— (a) the transfer or extinguishment were a disposal, and (b) a gain on that disposal fell to be computed in accordance with this Act, the shares or debentures to be issued would, in pursuance of section 48, be themselves regarded as, or as included in, the consideration for the disposal. (9) Where any right to be issued with shares in or debentures of a company comprises an option to choose between shares in that company and debentures of that company, the existence of that option shall not, by itself, be taken for the purposes of this section either— (a) to make unascertainable the value or quantity of the shares or debentures to be issued; or (b) to prevent the requirements of subsection (1)(b) and (d) or (4)(b) and (d) above from being satisfied in relation to that right. (10) For the purposes of this section the value or quantity of shares or debentures shall not be taken to be unascertainable by reason only that it has not been fixed if it will be fixed by reference to the other and the other is ascertainable. (11) In subsection (7) above “relevant company”, in relation to any right to be issued with shares in or debentures of a company, means— (a) that company or any company which is in the same group of companies as that company; or (b) the company for whose shares or debentures that right was or was part of the consideration, or any company in the same group of companies as that company; and in this subsection the reference to a group of companies shall be construed in accordance with section 170(2) to (14).

• (2) Subject to subsections (3) to (8) below—

• (a) the section 138A inserted by subsection (1) above shall be deemed always to have been a section of the Taxation of Chargeable Gains Act 1992; and

• (b) the enactments applying to chargeable periods beginning before 6th April 1992 shall be deemed always to have included a corresponding section.

• (3) Subject to subsections (4) to (6) below, an election under section 138A of the Taxation of Chargeable Gains Act 1992 in respect of a right conferred on any person before 26th November 1996 may be made at any time before the end of the period for the making of such an election in respect of a right conferred on that person on that date.

• (4) An election in respect of a right conferred on any person shall not be made by virtue of subsection (3) above at any time after the final determination of his liability to corporation tax or capital gains tax for the chargeable period in which the right was in fact conferred on him.

• (5) A notice given to an officer of the Board before the day on which this Act is passed shall not have effect as an election under section 138A of the Taxation of Chargeable Gains Act 1992, or the corresponding provision applying to chargeable periods beginning before 6th April 1992, except in accordance with subsection (6) below.

• (6) Where—

• (a) any person has given a notification to an officer of the Board before the day on which this Act is passed, and

• (b) that notification was given either—

• (i) in anticipation of the right to make an election under section 138A of the Taxation of Chargeable Gains Act 1992, or

• (ii) for the purposes of an extra-statutory concession available to be used by that person for purposes similar to those of that section,

that notification shall, unless the Board otherwise direct, be treated as if it were a valid and irrevocable election made by that person for the purposes of that section or, as the case may be, the corresponding provision.

• (7) Where any notification given as mentioned in subsection (6)(b)(ii) above is treated as an election for the purposes of section 138A of the Taxation of Chargeable Gains Act 1992 or any corresponding provision, that section or, as the case may be, the corresponding provision shall be taken to have no effect by virtue of that election in relation to any disposal before 26th November 1996 of any asset which—

• (a) was issued to any person in pursuance of an earn-out right;

• (b) was issued to any person in pursuance of any such right as is mentioned in subsection (4) of that section; or

• (c) falls for the purposes of that Act to be treated as the same as an asset issued at any time to any person in pursuance of such a right as is mentioned in paragraph (a) or (b) above but is not an asset first held by that person before that time.

• (8) Subsection (7) above shall not prevent section 138A of the Taxation of Chargeable Gains Act 1992 from being taken, for the purposes of applying that Act to any disposal on or after 26th November 1996, to have had effect in relation to—

• (a) any disposal before that date on which, by virtue of any of the no gain/no loss provisions (within the meaning of that Act: see section 288(3A) of that Act), neither a gain nor a loss accrued,

• (b) any deemed disposal before that date by reference to which a gain or loss falls to be calculated in accordance with section 116(10)(a) of that Act, or

• (c) any transaction before that date that would have fallen to be treated as a disposal but for section 127 of that Act.

Double taxation relief

Restriction of relief for underlying tax

90

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

Disposals of loan relationships with or without interest

91

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Repayment supplement

Time from which entitlement runs

92

• (1) Section 824 of the Taxes Act 1988 (repayment supplements), where it has effect as amended by paragraph 41 of Schedule 19 to the Finance Act 1994, shall be amended in accordance with subsections (2) to (4) below.

• (2) For paragraphs (a) and (b) of subsection (3) there shall be substituted the following paragraphs—

(a) if the repayment is— (i) the repayment of an amount paid in accordance with the requirements of section 59A of the Management Act on account of income tax for a year of assessment, or (ii) the repayment of income tax for such a year which is not income tax deducted at source, the relevant time is the date of the payment that is being repaid; (b) if the repayment is of income tax deducted at source for a year of assessment, the relevant time is the 31st January next following that year; and

.

• (3) In paragraph (c) of that subsection, for the words from “the relevant time” to the end of that paragraph there shall be substituted “ the relevant time is the date on which the penalty or surcharge was paid ”.

• (4) For subsection (4) there shall be substituted the following subsections—