Finance Act 1997

(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 (4) Subsection (3) above does not have effect if or to the extent that the assessment in question has been withdrawn or reduced.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

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

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—

(4) For the purposes of subsection (3) above, where a repayment in respect of income tax for a year of assessment is made to any person, that repayment— (a) shall be attributed first to so much of any payment made by him under section 59B of the Management Act as is a payment in respect of income tax for that year; (b) in so far as it exceeds the amount (if any) to which it is attributable under paragraph (a) above, shall be attributed in two equal parts to each of the payments made by him under section 59A of the Management Act on account of income tax for that year; (c) in so far as it exceeds the amounts (if any) to which it is attributable under paragraphs (a) and (b) above, shall be attributed to income tax deducted at source for that year; and (d) in so far as it is attributable to a payment made in instalments shall be attributed to a later instalment before being attributed to an earlier one. (4A) In this section any reference to income tax deducted at source for a year of assessment is a reference to— (a) income tax deducted or treated as deducted from any income, or treated as paid on any income, in respect of that year, and (b) amounts which, in respect of that year, are tax credits to which section 231 applies, but does not include a reference to amounts which, in that year, are deducted at source under section 203 in respect of previous years.

• (5) In subsection (2) of section 283 of the Taxation of Chargeable Gains Act 1992 (repayment supplements), for the words from “the relevant time” to the end of that subsection there shall be substituted “ the relevant time is the date on which the tax was paid ”.

• (6) This section has effect as respects the year 1997-98 and subsequent years of assessment and shall be deemed to have had effect as respects the year 1996-97.

Part VI — Inheritance Tax

Rate bands

93

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

Portion of value	Portion of value
Lower limit (£)	Upper limit (£)	Upper limit (£)
		Rate of tax
		Per cent.
0	215,000	Nil
215,000		40

• (2) Subsection (1) above shall apply to any chargeable transfer made on or after 6th April 1997; and section 8 of that Act (indexation of rate bands) shall not have effect as respects any difference between the retail prices index for the month of September 1995 and that for the month of September 1996.

Agricultural property relief

94

After section 124B of the Inheritance Tax Act 1984 there shall be inserted the following section—

(124C) (1) For the purposes of this Chapter, where any land is in a habitat scheme— (a) the land shall be regarded as agricultural land; (b) the management of the land in accordance with the requirements of the scheme shall be regarded as agriculture; and (c) buildings used in connection with such management shall be regarded as farm buildings. (2) For the purposes of this section land is in a habitat scheme at any time if— (a) an application for aid under one of the enactments listed in subsection (3) below has been accepted in respect of the land; and (b) the undertakings to which the acceptance relates have neither been terminated by the expiry of the period to which they relate nor been treated as terminated. (3) Those enactments are— (a) regulation 3(1) of the Habitat (Water Fringe) Regulations 1994; (b) the Habitat (Former Set-Aside Land) Regulations 1994; (c) the Habitat (Salt-Marsh) Regulations 1994; (d) the Habitats (Scotland) Regulations 1994, if undertakings in respect of the land have been given under regulation 3(2)(a) of those Regulations; (e) the Habitat Improvement Regulations (Northern Ireland) 1995, if an undertaking in respect of the land has been given under regulation 3(1)(a) of those Regulations. (4) The Treasury may by order made by statutory instrument amend the list of enactments in subsection (3) above. (5) The power to make an order under subsection (4) above shall be exercisable by statutory instrument subject to annulment in pursuance of a resolution of the House of Commons. (6) This section has effect— (a) in relation to any transfer of value made on or after 26th November 1996; and (b) in relation to transfers of value made before that date, for the purposes of any charge to tax, or to extra tax, which arises by reason of an event occurring on or after 26th November 1996.

Part VII — Stamp Duty and Stamp Duty Reserve Tax

Stamp duty

Mergers of authorised unit trusts

95

• (1) Stamp duty shall not be chargeable on an instrument transferring any property which is subject to the trusts of an authorised unit trust (“the target trust”) to the trustees of another authorised unit trust (“the acquiring trust”) if the conditions set out in subsection (2) below are fulfilled.

• (2) Those conditions are that—

• (a) the transfer forms part of an arrangement under which the whole of the available property of the target trust is transferred to the trustees of the acquiring trust;

• (b) under the arrangement all the units in the target trust are extinguished;

• (c) the consideration under the arrangement consists of or includes the issue of units (“the consideration units”) in the acquiring trust to the persons who held the extinguished units;

• (d) the consideration units are issued to those persons in proportion to their holdings of the extinguished units; and

• (e) the consideration under the arrangement does not include anything else, other than the assumption or discharge by the trustees of the acquiring trust of liabilities of the trustees of the target trust.

• (3) An instrument on which stamp duty is not chargeable by virtue only of this section shall not be taken to be duly stamped unless it is stamped with the duty to which it would be liable but for this section or it has, in accordance with section 12 of the Stamp Act 1891, been stamped with a particular stamp denoting that it is not chargeable with any duty.

• (4) In this section—

• “authorised unit trust” means a unit trust scheme in the case of which an order under section 243 of the Financial Services and Markets Act 2000 is in force;

• “the whole of the available property of the target trust” means the whole of the property subject to the trusts of the target trust, other than any property which is retained for the purpose of discharging liabilities of the trustees of the target trust;

• “unit” and “unit trust scheme” have the same meanings as in Part VII of the Finance Act 1946.

• (5) Each of the parts of an umbrella scheme (and not the scheme as a whole) shall be regarded for the purposes of this section as an authorised unit trust; and in this section “umbrella scheme” has the same meaning as in section 468 of the Taxes Act 1988 and references to parts of an umbrella scheme shall be construed in accordance with that section.

• (6) This section applies to any instrument which is executed—

• (a) on or after the day on which this Act is passed; but

• (b) before 1st July 1999.

Demutualisation of insurance companies

96

• (1) This section applies where there is a relevant transfer, under a scheme, of the whole or any part of the business carried on by a mutual insurance company (“the mutual”) to a company which has share capital (“the acquiring company”).

• (2) Stamp duty shall not be chargeable on an instrument executed for the purposes of or in connection with the transfer if the requirements of subsections (3) and (4) below are satisfied in relation to the shares of a company (“the issuing company”) which is either—

• (a) the acquiring company; or

• (b) a company of which the acquiring company is a wholly-owned subsidiary.

• (3) Shares in the issuing company must be offered, under the scheme, to at least 90 per cent. of the persons who immediately before the transfer are members of the mutual.

• (4) Under the scheme, all the shares in the issuing company which will be in issue immediately after the transfer has been made, other than shares which are to be or have been issued pursuant to an offer to the public, must be offered to the persons who (at the time of the offer) are—

• (a) members of the mutual;

• (b) persons who are entitled to become members of the mutual; or

• (c) employees, former employees or pensioners of the mutual or of a company which is a wholly-owned subsidiary of the mutual.

• (5) An instrument on which stamp duty is not chargeable by virtue only of subsection (2) above shall not be taken to be duly stamped unless it is stamped with the duty to which it would be liable but for that subsection or it has, in accordance with section 12 of the Stamp Act 1891, been stamped with a particular stamp denoting that it is not chargeable with any duty.

• (6) For the purposes of this section, a company is a wholly-owned subsidiary of another person (“the parent”) if it has no members except the parent and the parent’s wholly-owned subsidiaries or persons acting on behalf of the parent or its wholly-owned subsidiaries.

• (7) In this section “relevant transfer” means—

• (a) a transfer from a company to another person of business consisting of the effecting or carrying out of contracts of insurance which is effected under an insurance business transfer scheme; or

• (b) a transfer of the whole or any part of the business of a general insurance company carried on through a branch or agency in the United Kingdom which takes place in accordance with any authorisation granted outside the United Kingdom for the purposes of Article 39 of the Solvency 2 Directive.

• (8) In this section—

• . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• “contract of insurance” has the meaning given by Article 3(1) of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001;

• “employee”, in relation to a mutual insurance company or its wholly-owned subsidiary, includes any officer or director of the company or subsidiary and any other person taking part in the management of the affairs of the company or subsidiary;

• “general insurance company” means a company which has permission under Part 4A of the Financial Services and Markets Act 2000 ... to effect or carry out contracts of insurance;

• “insurance business transfer scheme” has the same meaning as in Part 7 of the Financial Services and Markets Act 2000;

• “insurance company” means a company which carries on the business of effecting or carrying out contracts of insurance;

• “mutual insurance company” means an insurance company carrying on business without having any share capital;

• . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• “pensioner”, in relation to a mutual insurance company or its wholly-owned subsidiary, means a person entitled (whether presently or prospectively) to a pension, lump sum, gratuity or other like benefit referable to the service of any person as an employee of the company or subsidiary.

• “the Solvency 2 Directive” means Directive 2009/138/EC of the European Parliament and of the Council of 25 November 2009 on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II);

• (9) The Treasury may by regulations amend subsection (3) above by substituting a lower percentage for the percentage there mentioned.

• (10) The Treasury may by regulations provide that any or all of the references in subsections (3) and (4) above to members shall be construed as references to members of a class specified in the regulations; and different provision may be made for different cases.

• (11) 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.

• (12) This section applies in relation to instruments executed on or after the day on which this Act is passed.

Relief for intermediaries

97

• (1) Before section 81 of the Finance Act 1986 there shall be inserted the following sections—

(80A) (1) Stamp duty shall not be chargeable on an instrument transferring stock of a particular kind on sale to a person or his nominee if— (a) the person is a member of an EEA exchange, or a recognised foreign exchange, on which stock of that kind is regularly traded; (b) the person is an intermediary and is recognised as an intermediary by the exchange in accordance with arrangements approved by the Commissioners; and (c) the sale is effected on the exchange. (2) Stamp duty shall not be chargeable on an instrument transferring stock of a particular kind on sale to a person or his nominee if— (a) the person is a member of an EEA exchange or a recognised foreign options exchange; (b) options to buy or sell stock of that kind are regularly traded on that exchange and are listed by or quoted on that exchange; (c) the person is an options intermediary and is recognised as an options intermediary by that exchange in accordance with arrangements approved by the Commissioners; and (d) the sale is effected on an EEA exchange, or a recognised foreign exchange, on which stock of that kind is regularly traded or subsection (3) below applies. (3) This subsection applies if— (a) the sale is effected on an EEA exchange, or a recognised foreign options exchange, pursuant to the exercise of a relevant option; and (b) options to buy or sell stock of the kind concerned are regularly traded on that exchange and are listed by or quoted on that exchange. (4) For the purposes of this section— (a) an intermediary is a person who carries on a bona fide business of dealing in stock and does not carry on an excluded business; and (b) an options intermediary is a person who carries on a bona fide business of dealing in quoted or listed options to buy or sell stock and does not carry on an excluded business. (5) The excluded businesses are the following— (a) any business which consists wholly or mainly in the making or managing of investments; (b) any business which consists wholly or mainly in, or is carried on wholly or mainly for the purpose of, providing services to persons who are connected with the person carrying on the business; (c) any business which consists in insurance business; (d) any business which consists in managing or acting as trustee in relation to a pension scheme or which is carried on by the manager or trustee of such a scheme in connection with or for the purposes of the scheme; (e) any business which consists in operating or acting as trustee in relation to a collective investment scheme or is carried on by the operator or trustee of such a scheme in connection with or for the purposes of the scheme. (6) A sale is effected on an exchange for the purposes of subsection (1) or (2) above if (and only if)— (a) it is subject to the rules of the exchange; and (b) it is reported to the exchange in accordance with the rules of the exchange. (7) An instrument on which stamp duty is not chargeable by virtue only of this section shall not be deemed to be duly stamped unless it has been stamped with a stamp denoting that it is not chargeable with any duty; and notwithstanding anything in section 122(1) of the Stamp Act 1891, the stamp may be a stamp of such kind as the Commissioners may prescribe. (80B) (1) For the purposes of section 80A above the question whether a person is connected with another shall be determined in accordance with the provisions of section 839 of the Income and Corporation Taxes Act 1988. (2) In section 80A above and this section— - “collective investment scheme” has the meaning given in section 75 of the Financial Services Act 1986; - “EEA exchange” means a market which appears on the list drawn up by an EEA State pursuant to Article 16 of European Communities Council Directive No. 93/22/EEC on investment services in the securities field; - “EEA State” means a State which is a contracting party to the agreement on the European Economic Area signed at Oporto on the 2nd May 1992 as adjusted by the Protocol signed at Brussels on the 17th March 1993; - “insurance business” means long term business or general business as defined in section 1 of the Insurance Companies Act 1982; - “quoted or listed options” means options which are quoted on or listed by an EEA exchange or a recognised foreign options exchange; - “stock” includes any marketable security; - “trustee” and “the operator” shall, in relation to a collective investment scheme, be construed in accordance with section 75(8) of the Financial Services Act 1986. (3) In section 80A above “recognised foreign exchange” means a market which— (a) is not in an EEA State; and (b) is specified in regulations made by the Treasury under this subsection. (4) In section 80A above and this section “recognised foreign options exchange” means a market which— (a) is not in an EEA State; and (b) is specified in regulations made by the Treasury under this subsection. (5) In section 80A above “the exercise of a relevant option” means— (a) the exercise by the options intermediary concerned of an option to buy stock; or (b) the exercise of an option binding the options intermediary concerned to buy stock. (6) The Treasury may by regulations provide that section 80A above shall not have effect in relation to instruments executed in pursuance of kinds of agreement specified in the regulations. (7) The Treasury may by regulations provide that if— (a) an instrument falls within subsection (1) or (2) of section 80A above, and (b) stamp duty would be chargeable on the instrument apart from that section, stamp duty shall be chargeable on the instrument at a rate, specified in the regulations, which shall not exceed 10p for every £100 or part of £100 of the consideration for the sale. (8) The Treasury may by regulations change the meaning of “intermediary” or “options intermediary” for the purposes of section 80A above by amending subsection (4) or (5) of that section (as it has effect for the time being). (9) The power to make regulations under subsections (3) to (8) above shall be exercisable by statutory instrument subject to annulment in pursuance of a resolution of the House of Commons.

• (2) Section 81 of that Act (sales to market makers) shall be omitted.

• (3) In section 88(1B)(b)(i) of that Act (which prevents repayment or cancellation of stamp duty reserve tax on certain agreements to transfer chargeable securities which were acquired by means of a transfer on which stamp duty was not chargeable by virtue of section 81) for “81” there shall be substituted “ 80A ”.

• (4) Subsections (1) and (2) above apply to instruments executed on or after the commencement day.

• (5) Subsection (3) above applies in relation to an agreement to transfer chargeable securities if the securities were acquired in a transaction which was given effect to by an instrument of transfer executed on or after the commencement day.

• (6) For the purposes of this section the commencement day is such day as the Treasury may by order made by statutory instrument appoint.

Repurchases and stock lending

98

• (1) After section 80B of the Finance Act 1986 there shall be inserted the following section—

(80C) (1) This section applies where a person (A) has entered into an arrangement with another person (B) under which— (a) B is to transfer stock of a particular kind to A or his nominee, and (b) stock of the same kind and amount is to be transferred by A or his nominee to B or his nominee, and the conditions set out in subsection (3) below are fulfilled. (2) Stamp duty shall not be chargeable on an instrument transferring stock to B or his nominee or A or his nominee in accordance with the arrangement. (3) The conditions are— (a) that the arrangement is effected on an EEA exchange or a recognised foreign exchange; and (b) that stock of the kind concerned is regularly traded on that exchange. (4) An arrangement does not fall within subsection (1) above if— (a) the arrangement is not such as would be entered into by persons dealing with each other at arm’s length; or (b) under the arrangement any of the benefits or risks arising from fluctuations, before the transfer to B or his nominee takes place, in the market value of the stock accrues to, or falls on, A. (5) An instrument on which stamp duty is not chargeable by virtue only of subsection (2) above shall not be deemed to be duly stamped unless it has been stamped with a stamp denoting that it is not chargeable with any duty; and notwithstanding anything in section 122(1) of the Stamp Act 1891, the stamp may be a stamp of such kind as the Commissioners may prescribe. (6) An arrangement is effected on an exchange for the purposes of subsection (3) above if (and only if)— (a) it is subject to the rules of the exchange; and (b) it is reported to the exchange in accordance with the rules of the exchange. (7) In this section— - “EEA exchange” has the meaning given in section 80B(2) above; and - “recognised foreign exchange” has the meaning given in section 80B(3) above. (8) The Treasury may by regulations provide that if stamp duty would be chargeable on an instrument but for subsection (2) above, stamp duty shall be chargeable on the instrument at a rate, specified in the regulations, which shall not exceed 10p for every £100 or part of £100 of the consideration for the transfer. (9) The Treasury may by regulations amend this section (as it has effect for the time being) in order— (a) to change the conditions for exemption from duty under this section; or (b) to provide that this section does not apply in relation to kinds of arrangement specified in the regulations. (10) The power to make regulations under subsection (8) or (9) above shall be exercisable by statutory instrument subject to annulment in pursuance of a resolution of the House of Commons.

• (2) Section 82 of that Act (borrowing of stock by market makers) shall be omitted.

• (3) This section applies to instruments executed on or after the commencement day.

• (4) For the purposes of this section the commencement day is such day as the Treasury may by order made by statutory instrument appoint.

Depositary receipts and clearance services

99

• (1) Subsection (4) of section 67 of the Finance Act 1986 (depositary receipts: reduced rate of stamp duty for qualified dealers other than market makers) shall be omitted.

• (2) Accordingly—

• (a) in subsection (3) of that section for “subsections (4) and” there shall be substituted “ subsection ”; and

• (b) subsections (6) to (8) of section 69 of that Act (definition of “qualified dealer” and “market maker” for the purposes of section 67(4) and power to amend definition) shall be omitted.

• (3) Subsection (4) of section 70 of that Act (clearance services: reduced rate of stamp duty for qualified dealers other than market makers) shall be omitted.

• (4) Accordingly—

• (a) in subsection (3) of that section for “subsections (4) and” there shall be substituted “ subsection ”; and

• (b) section 72(4) of that Act (definition of “qualified dealer” and “market maker” for the purposes of section 70(4)) shall be omitted.

• (5) This section applies to any instrument executed on or after the day which is the commencement day for the purposes of section 97 above, except an instrument which transfers relevant securities which were acquired by the transferor before that date.

Stamp duty reserve tax

Mergers of authorised unit trusts

100

• (1) Section 87 of the Finance Act 1986 shall not apply as regards an agreement to transfer securities which constitute property which is subject to the trusts of an authorised unit trust (“the target trust”) to the trustees of another authorised unit trust (“the acquiring trust”) if the conditions set out in subsection (2) below are fulfilled.

• (2) Those conditions are that—

• (a) the agreement forms part of an arrangement under which the whole of the available property of the target trust is transferred to the trustees of the acquiring trust;

• (b) under the arrangement all the units in the target trust are extinguished;

• (c) the consideration under the arrangement consists of or includes the issue of units (“the consideration units”) in the acquiring trust to the persons who held the extinguished units;

• (d) the consideration units are issued to those persons in proportion to their holdings of the extinguished units; and

• (e) the consideration under the arrangement does not include anything else, other than the assumption or discharge by the trustees of the acquiring trust of liabilities of the trustees of the target trust.

• (3) Where—

• (a) stamp duty is not chargeable on an instrument by virtue of section 95(1) above, or

• (b) section 87 of the Finance Act 1986 does not apply as regards an agreement by virtue of subsection (1) above,

section 87 of the Finance Act 1986 shall not apply as regards an agreement, or a deemed agreement, to transfer a unit to the managers of the target trust which is made in order that the unit may be extinguished under the arrangement mentioned in section 95(2)(a) or, as the case may be, subsection (2)(a) above.

• (4) In this section—

• “authorised unit trust” means a unit trust scheme in the case of which an order under section 243 of the Financial Services and Markets Act 2000 is in force;

• “the whole of the available property of the target trust” means the whole of the property subject to the trusts of the target trust, other than any property which is retained for the purpose of discharging liabilities of the trustees of the target trust;

• “unit” and “unit trust scheme” have the same meanings as in Part VII of the Finance Act 1946.

• (5) Each of the parts of an umbrella scheme (and not the scheme as a whole) shall be regarded for the purposes of this section as an authorised unit trust; and in this section “umbrella scheme” has the same meaning as in section 468 of the Taxes Act 1988 and references to parts of an umbrella scheme shall be construed in accordance with that section.

• (6) This section applies—

• (a) to an agreement which is not conditional, if the agreement is made on or after the day on which this Act is passed but before 1st July 1999; and

• (b) to a conditional agreement, if the condition is satisfied on or after the day on which this Act is passed but before 1st July 1999.

Direction to hold trust property on other trusts

101

• (1) Where an agreement to transfer securities constituting property subject to the trusts of an authorised unit trust (“the absorbed trust”) is made by means of a direction by the holders of units in the absorbed trust (“the sellers”) to the trustees of another trust (“the continuing trust”) to hold the whole of the available property of the absorbed trust on the trusts of the continuing trust, section 87 of the Finance Act 1986 shall not apply as regards the agreement if the conditions set out in subsection (2) below are fulfilled.

• (2) Those conditions are that—

• (a) the trustees of the absorbed trust are the same persons as the trustees of the continuing trust;

• (b) the agreement forms part of an arrangement under which all the units in the absorbed trust are extinguished;

• (c) the consideration for the direction by the sellers consists of or includes the issue of units (“the consideration units”) in the continuing trust to the sellers;

• (d) the consideration units are issued to the sellers in proportion to their holdings of the extinguished units; and

• (e) the consideration for the direction by the sellers does not include anything else, other than the assumption or discharge by the trustees of the continuing trust of liabilities of the trustees of the absorbed trust.

• (3) Where section 87 of the Finance Act 1986 does not apply as regards an agreement by virtue of subsection (1) above, that section shall not apply as regards an agreement, or a deemed agreement, to transfer a unit to the managers of the absorbed trust which is made in order that the unit may be extinguished under the arrangement mentioned in subsection (2)(b) above.

• (4) In this section—

• “authorised unit trust” and “unit” have the same meanings as in section 100 above (and section 100(5) applies for the purposes of this section as it applies for the purposes of section 100);

• “the whole of the available property of the absorbed trust” means the whole of the property subject to the trusts of the absorbed trust, other than any property which is retained for the purpose of discharging liabilities of the trustees of the absorbed trust.

• (5) This section applies—

• (a) to an agreement which is not conditional, if the agreement is made on or after the day on which this Act is passed but before 1st July 1999; and

• (b) to a conditional agreement, if the condition is satisfied on or after the day on which this Act is passed but before 1st July 1999.

Relief for intermediaries

102

• (1) After section 88 of the Finance Act 1986 there shall be inserted the following sections—

(88A) (1) Section 87 above shall not apply as regards an agreement to transfer securities of a particular kind to B or his nominee if— (a) B is a member of an EEA exchange, or a recognised foreign exchange, on which securities of that kind are regularly traded; (b) B is an intermediary and is recognised as an intermediary by the exchange in accordance with arrangements approved by the Board; and (c) the agreement is effected on the exchange. (2) Section 87 above shall not apply as regards an agreement to transfer securities of a particular kind to B or his nominee if— (a) B is a member of an EEA exchange or a recognised foreign options exchange; (b) options to buy or sell securities of that kind are regularly traded on that exchange and are listed by or quoted on that exchange; (c) B is an options intermediary and is recognised as an options intermediary by that exchange in accordance with arrangements approved by the Board; and (d) the agreement is effected on an EEA exchange, or a recognised foreign exchange, on which securities of that kind are regularly traded or subsection (3) below applies. (3) This subsection applies if— (a) the agreement is effected on an EEA exchange, or a recognised foreign options exchange, pursuant to the exercise of a relevant option; and (b) options to buy or sell securities of the kind concerned are regularly traded on that exchange and are listed by or quoted on that exchange. (4) For the purposes of this section— (a) an intermediary is a person who carries on a bona fide business of dealing in chargeable securities and does not carry on an excluded business; and (b) an options intermediary is a person who carries on a bona fide business of dealing in quoted or listed options to buy or sell chargeable securities and does not carry on an excluded business. (5) The excluded businesses are the following— (a) any business which consists wholly or mainly in the making or managing of investments; (b) any business which consists wholly or mainly in, or is carried on wholly or mainly for the purpose of, providing services to persons who are connected with the person carrying on the business; (c) any business which consists in insurance business; (d) any business which consists in managing or acting as trustee in relation to a pension scheme or which is carried on by the manager or trustee of such a scheme in connection with or for the purposes of the scheme; (e) any business which consists in operating or acting as trustee in relation to a collective investment scheme or is carried on by the operator or trustee of such a scheme in connection with or for the purposes of the scheme. (6) An agreement is effected on an exchange for the purposes of subsection (1) or (2) above if (and only if)— (a) it is subject to the rules of the exchange; and (b) it is reported to the exchange in accordance with the rules of the exchange. (88B) (1) For the purposes of section 88A above the question whether a person is connected with another shall be determined in accordance with the provisions of section 839 of the Income and Corporation Taxes Act 1988. (2) In section 88A above and this section— - “collective investment scheme” has the meaning given in section 75 of the Financial Services Act 1986; - “EEA exchange” means a market which appears on the list drawn up by an EEA State pursuant to Article 16 of European Communities Council Directive No. 93/22/EEC on investment services in the securities field; - “EEA State” means a State which is a contracting party to the agreement on the European Economic Area signed at Oporto on the 2nd May 1992 as adjusted by the Protocol signed at Brussels on the 17th March 1993; - “insurance business” means long term business or general business as defined in section 1 of the Insurance Companies Act 1982; - “quoted or listed options” means options which are quoted on or listed by an EEA exchange or a recognised foreign options exchange; - “recognised foreign exchange” and “recognised foreign options exchange” have the meanings given, respectively, by subsections (3) and (4) of section 80B above; - “trustee” and “the operator” shall, in relation to a collective investment scheme, be construed in accordance with section 75(8) of the Financial Services Act 1986. (3) In section 88A above “the exercise of a relevant option” means— (a) the exercise by B of an option to buy securities; or (b) the exercise of an option binding B to buy securities. (4) The Treasury may by regulations provide that section 88A above shall not have effect in relation to kinds of agreement specified in the regulations. (5) The Treasury may by regulations provide that if— (a) an agreement falls within subsection (1) or (2) of section 88A above, and (b) section 87 above would, apart from section 88A, apply to the agreement, section 87 shall apply to the agreement but with the substitution of a rate of tax not exceeding 0.1 per cent. for the rate specified in subsection (6) of that section. (6) The Treasury may by regulations change the meaning of “intermediary” or “options intermediary” for the purposes of section 88A above by amending subsection (4) or (5) of that section (as it has effect for the time being). (7) The power to make regulations under subsections (4) to (6) above shall be exercisable by statutory instrument subject to annulment in pursuance of a resolution of the House of Commons.

• (2) Section 89 of that Act (exceptions for market makers etc.) shall be omitted.

• (3) In section 88(1B)(b)(ii) of that Act (which prevents repayment or cancellation of stamp duty reserve tax on certain agreements to transfer property consisting of chargeable securities which were acquired in pursuance of an agreement on which tax was not chargeable by virtue of section 89) for “89” there shall be substituted “ 88A ”.

• (4) Subsections (1) and (2) above apply to an agreement to transfer securities—

• (a) in the case of an agreement which is not conditional, if the agreement is made on or after the commencement day; and

• (b) in the case of a conditional agreement, if the condition is satisfied on or after the commencement day.

• (5) Subsection (3) above applies in relation to property consisting of chargeable securities if the securities were acquired in pursuance of an agreement to which subsections (1) and (2) above apply (by virtue of subsection (4) above).

• (6) For the purposes of this section the commencement day is such day as the Treasury may by order made by statutory instrument appoint.

Repurchases and stock lending

103

• (1) After section 89A of the Finance Act 1986 there shall be inserted the following section—

(89AA) (1) This section applies where a person (P) has entered into an arrangement with another person (Q) under which— (a) Q is to transfer chargeable securities of a particular kind to P or his nominee, and (b) chargeable securities of the same kind and amount are to be transferred by P or his nominee to Q or his nominee, and the conditions set out in subsection (3) below are fulfilled. (2) Section 87 above shall not apply as regards an agreement to transfer chargeable securities to P or his nominee or Q or his nominee in accordance with the arrangement. (3) The conditions are— (a) that the agreement is effected on an EEA exchange or a recognised foreign exchange; (b) that securities of the kind concerned are regularly traded on that exchange; and (c) that chargeable securities are transferred to P or his nominee and Q or his nominee in pursuance of the arrangement. (4) An arrangement does not fall within subsection (1) above if— (a) the arrangement is not such as would be entered into by persons dealing with each other at arm’s length; or (b) under the arrangement any of the benefits or risks arising from fluctuations, before the transfer to Q or his nominee takes place, in the market value of the chargeable securities accrues to, or falls on, P. (5) An agreement is effected on an exchange for the purposes of subsection (3) above if (and only if)— (a) it is subject to the rules of the exchange; and (b) it is reported to the exchange in accordance with the rules of the exchange. (6) In this section— - “EEA exchange” has the meaning given in section 88B(2) above; - “recognised foreign exchange” has the meaning given in section 80B(3) above. (7) The Treasury may by regulations provide that if section 87 would apply as regards an agreement but for subsection (2) above, section 87 shall apply as regards the agreement but with the substitution of a rate of tax not exceeding 0.1 per cent. for the rate specified in subsection (6) of that section. (8) The Treasury may by regulations amend this section (as it has effect for the time being) in order— (a) to change the conditions for exemption from tax under this section; or (b) to provide that this section does not apply in relation to kinds of arrangement specified in the regulations. (9) The power to make regulations under subsection (7) or (8) above shall be exercisable by statutory instrument subject to annulment in pursuance of a resolution of the House of Commons.

• (2) Section 89B of that Act (exceptions for stock lending and collateral security arrangements) shall be omitted.

• (3) In consequence of subsections (1) and (2) above, for section 88(1B)(b)(iia) of that Act (which is inserted by section 106(5)(c) below and which prevents repayment or cancellation of stamp duty reserve tax on certain agreements to transfer property consisting of chargeable securities which were acquired in pursuance of an agreement on which tax was not chargeable by virtue of section 89B(1)(a)) there shall be substituted—

(iia) in pursuance of an agreement to transfer securities which was made for the purpose of performing the obligation to transfer chargeable securities described in section 89AA(1)(a) below and as regards which section 87 above did not apply by virtue of section 89AA(2) below; or

.