Legalize / United Kingdom / Finance (No. 2) Act 1997 / History

Reform history

Finance (No. 2) Act 1997

20 versions · 1997-07-31

2016-09-15

Finance (No. 2) Act 1997

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2013-01-31

Finance (No. 2) Act 1997

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2011-12-30

Finance (No. 2) Act 1997

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2011-07-19

Finance (No. 2) Act 1997

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2010-04-01

Finance (No. 2) Act 1997

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2009-07-21

Finance (No. 2) Act 1997

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2009-04-01

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2008-07-21

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2007-07-19

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2007-04-06

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2007-03-29

Finance (No. 2) Act 1997

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2006-12-31

Finance (No. 2) Act 1997

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2006-07-19

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2005-04-07

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2005-04-06

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2004-12-02

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2004-07-22

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2003-07-10

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2002-07-24

Finance (No. 2) Act 1997

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Changes on 2002-07-24

@@ -6,13 +6,13 @@

##### 1

- (1) Every company which, on 2nd July 1997, was benefitting from a windfall from the flotation of an undertaking whose privatisation involved the imposition of economic regulation shall be charged with a tax (to be known as the “windfall tax”) on the amount of that windfall.

- (2) Windfall tax shall be charged at the rate of 23 per cent.

- (3) Schedule 1 to this Act (which sets out how to quantify the windfall from which a company was benefitting on 2nd July 1997) shall have effect.

#### The companies benefitting from windfalls

#### Lloyd’s underwriters.

##### 2

@@ -36,9 +36,9 @@

- (3) In this Part references, in relation to a company privatised by means of a flotation, to the time of the company’s flotation are references to the time when shares in the floated company were first admitted to listing on the Official List of the Stock Exchange.

- (4) For the purposes of this Part a company in existence on 2nd July 1997 (“the relevant company”) was on that date a demerged successor of a company privatised by means of a flotation if—

- (a) after the flotation of the floated company but before 2nd July 1997, there had been a statutory transfer of property, rights and liabilities from the floated company to a company (“the transferee company”) which was a subsidiary undertaking of the floated company at the time of the transfer;

- (4) For the purposes of this Part a company in existence on 2nd July 1997 (“*the relevant company*”) was on that date a demerged successor of a company privatised by means of a flotation if—

- (a) after the flotation of the floated company but before 2nd July 1997, there had been a statutory transfer of property, rights and liabilities from the floated company to a company (“*the transferee company*”) which was a subsidiary undertaking of the floated company at the time of the transfer;

- (b) the transferee company was not a subsidiary undertaking of the floated company on 2nd July 1997 but was, on that date, a subsidiary undertaking of the relevant company; and

@@ -58,7 +58,7 @@

- (f) a company authorised by a licence under section 8 of the Railways Act 1993 to be the operator of a railway asset.

- (6) In subsection (5) above “airport operator” has the same meaning as in the Airports Act 1986.

- (6) In subsection (5) above “*airport operator*” has the same meaning as in the Airports Act 1986.

#### Administration of the windfall tax etc

@@ -76,7 +76,7 @@

- (1) In paragraph 19 of Schedule 8 to the Taxes Act 1988 (ascertainment of profits for the purposes of profit-related pay schemes)—

- (a) in sub-paragraph (5)(b), after “1985” there shall be inserted “or section 3(3) of the Finance (No. 2) Act 1997”; and

- (a) in sub-paragraph (5)(b), after “1985” there shall be inserted “ or section 3(3) of the Finance (No. 2) Act 1997 ”; and

- (b) after paragraph (ff) of sub-paragraph (6) there shall be inserted the following paragraph—

@@ -92,7 +92,7 @@

- (5) An alteration of an existing scheme to take account of subsection (1) above shall be treated as being within section 177B of the Taxes Act 1988 (alterations which are registrable and which, when registered, cannot give rise to the Board’s power of cancellation).

- (6) In this section “existing scheme” means a scheme which at any time in the period beginning with 2nd July 1997 and ending immediately before the day on which this Act is passed was a registered scheme under Chapter III of Part V of the Taxes Act 1988.

- (6) In this section “*existing scheme*” means a scheme which at any time in the period beginning with 2nd July 1997 and ending immediately before the day on which this Act is passed was a registered scheme under Chapter III of Part V of the Taxes Act 1988.

- (7) The preceding provisions of this section shall cease to have effect, in accordance with the notes to Part VI(3) of Schedule 18 to the Finance Act 1997, as if they were included in the repeal of Schedule 8 to the Taxes Act 1988.

@@ -102,31 +102,31 @@

- (1) In this Part—

- “company” means a company within the meaning of the Companies Act 1985 or the Companies (Northern Ireland) Order 1986;

- “fixed price”, in relation to any offer of publicly-owned shares in a company, means— a price set out in the offer; or a price subsequently fixed by a Minister of the Crown in a case in which the amount of a first instalment of the price was fixed by the offer;

- “the floated company”, in relation to the privatisation of a company by means of a flotation, means the company so privatised;

- “public corporation”, in relation to a statutory transfer, means any body corporate in existence at the time of the transfer which— had been established by or in accordance with the provisions of any enactment; and had a membership consisting of, or including, persons appointed as members by a Minister of the Crown;

- “publicly-owned”, in relation to any shares, means held by— a Minister of the Crown or the Treasury; or a nominee for a Minister of the Crown or for the Treasury;

- “share” includes any right to require the issue of a share;

- “statutory transfer” means a transfer under a transferring enactment or by or in accordance with a statutory scheme;

- “subsidiary undertaking”— except in relation to a company formed and registered in Northern Ireland, means a subsidiary undertaking within the meaning of Part VII of the Companies Act 1985; and in relation to a company so formed and registered, means a subsidiary undertaking within the meaning of Part VIII of the Companies (Northern Ireland) Order 1986.

- “*company*” means a company within the meaning of the Companies Act 1985 or the Companies (Northern Ireland) Order 1986;

- “*fixed price*”, in relation to any offer of publicly-owned shares in a company, means—a price set out in the offer; ora price subsequently fixed by a Minister of the Crown in a case in which the amount of a first instalment of the price was fixed by the offer;

- “*the floated company*”, in relation to the privatisation of a company by means of a flotation, means the company so privatised;

- “*public corporation*”, in relation to a statutory transfer, means any body corporate in existence at the time of the transfer which—had been established by or in accordance with the provisions of any enactment; andhad a membership consisting of, or including, persons appointed as members by a Minister of the Crown;

- “*publicly-owned*”, in relation to any shares, means held by—a Minister of the Crown or the Treasury; ora nominee for a Minister of the Crown or for the Treasury;

- “*share*” includes any right to require the issue of a share;

- “*statutory transfer*” means a transfer under a transferring enactment or by or in accordance with a statutory scheme;

- “*subsidiary undertaking*”—except in relation to a company formed and registered in Northern Ireland, means a subsidiary undertaking within the meaning of Part VII of the Companies Act 1985; andin relation to a company so formed and registered, means a subsidiary undertaking within the meaning of Part VIII of the Companies (Northern Ireland) Order 1986.

- (2) In this section—

- “enactment” means an enactment contained in a public general Act or any provision of Northern Ireland legislation;

- “Minister of the Crown” includes a Northern Ireland department or the head of such a department;

- “statutory scheme” means any scheme which— has been made in exercise of any power or duty conferred or imposed by any enactment; contains provision for the division of property, rights and liabilities between different persons, or for the transfer of property, rights and liabilities to a company; and would not have taken effect or come into force but for having been approved by a Minister of the Crown;

- “transferring enactment” means an enactment under which property, rights and liabilities of a person specified in the enactment became, by virtue of that enactment, the property, rights or liabilities of a company nominated under that enactment.

- “*enactment*” means an enactment contained in a public general Act or any provision of Northern Ireland legislation;

- “*Minister of the Crown*” includes a Northern Ireland department or the head of such a department;

- “*statutory scheme*” means any scheme which—has been made in exercise of any power or duty conferred or imposed by any enactment;contains provision for the division of property, rights and liabilities between different persons, or for the transfer of property, rights and liabilities to a company; andwould not have taken effect or come into force but for having been approved by a Minister of the Crown;

- “*transferring enactment*” means an enactment under which property, rights and liabilities of a person specified in the enactment became, by virtue of that enactment, the property, rights or liabilities of a company nominated under that enactment.

- (3) In subsection (2) above the reference, in relation to a scheme, to its having been approved by a Minister of the Crown includes a reference to its having been made by a Minister of the Crown.

@@ -140,17 +140,13 @@

##### 6

- (1) In section 2(1A) of the Value Added Tax Act 1994 (rate of VAT on fuel and power for domestic use etc.), for “8 per cent.” there shall be substituted “5 per cent.”.

- (2) This section applies in relation to any supply made on or after 1st September 1997 and any acquisition or importation taking place on or after that date.

### Alcoholic liquor duties

#### Rate of duty on spirits

##### 7

- (1) In section 5 of the Alcoholic Liquor Duties Act 1979 (spirits), for “£18.99” there shall be substituted “£19.56”.

- (1) In section 5 of the Alcoholic Liquor Duties Act 1979 (spirits), for “£18.99” there shall be substituted “ £19.56 ”.

- (2) This section shall come into force on 1st January 1998.

@@ -158,7 +154,7 @@

##### 8

- (1) In section 36(1) of the Alocoholic Liquor Duties Act 1979 (beer), for “£10.82” there shall be substituted “£11.14”.

- (1) In section 36(1) of the Alocoholic Liquor Duties Act 1979 (beer), for “£10.82” there shall be substituted “ £11.14 ”.

- (2) This section shall come into force on 1st January 1998.

@@ -168,7 +164,7 @@

- (1) For the Table of rates of duty in Schedule 1 to the Alocoholic Liquor Duties Act 1979 (wine and made-wine) there shall be substituted—

| Description of wine or made-wine | Rates of duty per hectolitre |

| *Description of wine or made-wine* | *Rates of duty per hectolitre* |

| --- | --- |

| | £ |

| Wine or made-wine of a strength not exceeding 4 per cent. | 44.58 |

@@ -178,7 +174,7 @@

| Sparkling wine or sparkling made-wine of a strength exceeding 8.5 per cent. or of a strength exceeding 8.5 per cent. but not exceeding 15 per cent. | 206.66 |

| Wine or made-wine of a strength exceeding 15 per cent. but not exceeding 22 per cent. | 192.86 |

| Description of wine or made-wine | Rates of duty per litre of alcohol in the wine or made-wine |

| *Description of wine or made-wine* | *Rates of duty per litre of alcohol in the wine or made-wine* |

| --- | --- |

| | £ |

| Wine or made-wine of a strength exceeding 22 per cent. | 19.56 |

@@ -204,25 +200,25 @@

##### 11

- (1) In relation to times before the coming into force of section 7(2) and (3) of the Finance Act 1997 (which makes amendments specifying separate rates of duty for light oil, for ultra low sulphur diesel and for heavy oil which is not ultra low sulphur diesel), section 6(1) of the Hydrocarbon Oil Duties Act 1979 (“the 1979 Act”) shall have effect as follows—

- (a) for “£0.4168” (rate of duty on light oil) there shall be substituted “£0.4510”; and

- (b) for “£0.3686” (rate of duty on heavy oil) there shall be substituted “£0.4028”.

- (a) for “£0.4168” (rate of duty on light oil) there shall be substituted “ £0.4510 ”; and

- (b) for “£0.3686” (rate of duty on heavy oil) there shall be substituted “ £0.4028 ”.

- (2) In relation to times after the coming into force of section 7(2) and (3) of the Finance Act 1997, section 6(1A) of the 1979 Act (which is inserted by section 7(3) of the Finance Act 1997) shall have effect as follows—

- (a) in paragraph (a) (rate of duty on light oil), for “£0.4168” there shall be substituted “£0.4510”;

- (b) in paragraph (b) (rate of duty on ultra low sulphur diesel), for “£0.3586” there shall be substituted “£0.3928”; and

- (c) in paragraph (c) (rate of duty on heavy oil that is not ultra low sulphur diesel), for “£0.3686” there shall be substituted “£0.4028”.

- (3) In section 11(1) of the 1979 Act (rebate on heavy oil), for “£0.0194” (fuel oil) and “£0.0250” (gas oil) there shall be substituted “£0.0200” and “£0.0258”, respectively.

- (4) In section 14(1) of the 1979 Act (rebate on light oil for use as furnace fuel), for “£0.0194” there shall be substituted “£0.0200”.

- (5) This section shall be deemed to have come into force at 6 o'clock in the evening of 2nd July 1997.

- (a) in paragraph (a) (rate of duty on light oil), for “£0.4168” there shall be substituted “ £0.4510 ”;

- (b) in paragraph (b) (rate of duty on ultra low sulphur diesel), for “£0.3586” there shall be substituted “ £0.3928 ”; and

- (c) in paragraph (c) (rate of duty on heavy oil that is not ultra low sulphur diesel), for “£0.3686” there shall be substituted “ £0.4028 ”.

- (3) In section 11(1) of the 1979 Act (rebate on heavy oil), for “£0.0194” (fuel oil) and “£0.0250” (gas oil) there shall be substituted “ £0.0200 ” and “ £0.0258 ”, respectively.

- (4) In section 14(1) of the 1979 Act (rebate on light oil for use as furnace fuel), for “£0.0194” there shall be substituted “ £0.0200 ”.

- (5) This section shall be deemed to have come into force at 6 o’clock in the evening of 2nd July 1997.

### Tobacco products duty

@@ -232,11 +228,11 @@

- (1) For the Table of rates of duty in Schedule 1 to the Tobacco Products Duty Act 1979 there shall be substituted—

| 1. Cigarettes … | An amount equal to 21 per cent. of the retail price plus £72.06 per thousand cigarettes. |

| 1. Cigarettes... | An amount equal to 21 per cent. of the retail price plus £72.06 per thousand cigarettes. |

| --- | --- |

| 2. Cigars … | £105.86 per kilogram. |

| 3. Hand-rolling tobacco … | £87.74 per kilogram. |

| 4. Other smoking tobacco and chewing tobacco … | £46.55 per kilogram. |

| 2. Cigars... | £105.86 per kilogram. |

| 3. Hand-rolling tobacco... | £87.74 per kilogram. |

| 4. Other smoking tobacco and chewing tobacco... | £46.55 per kilogram. |

- (2) This section shall come into force on 1st December 1997.

@@ -246,15 +242,13 @@

##### 13

- (1) In Schedule 1 to the Vehicle Excise and Registration Act 1994 (annual rates of duty) in paragraph 1(2) (the general rate), for “£145” there shall be substituted “£150”.

- (1) In Schedule 1 to the Vehicle Excise and Registration Act 1994 (annual rates of duty) in paragraph 1(2) (the general rate), for “£145” there shall be substituted “ £150 ”.

- (2) For the table in paragraph 9(1) of that Schedule (rates of duty for rigid goods vehicles) there shall be substituted the following table—

| --- | --- | --- | --- | --- |

| kgs | kgs | £ | £ | £ |

| 3,500 | 7,500 | 160 | 160 | 160 |

| 7,500 | 12,000 | 300 | 300 | 300 |

@@ -273,13 +267,9 @@

- (3) For the table in paragraph 11(1) of that Schedule (rates of duty for tractive units) there shall be substituted the following table—

| --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | Rate for tractive unit with three or more axles | Rate for tractive unit with three or more axles | Rate for tractive unit with three or more axles |

| kgs | kgs | £ | £ | £ | £ | £ | £ |

| 3,500 | 7,500 | 160 | 160 | 160 | 160 | 160 | 160 |

| 7,500 | 12,000 | 300 | 300 | 300 | 300 | 300 | 300 |

@@ -301,7 +291,7 @@

##### 14

- (1) In section 7 of the Vehicle Excise and Registration Act 1994 (issue of vehicle licences), in subsection (3B) (conditions that may be imposed in place of requirement to make a declaration), after “include” there shall be inserted “(a)” and at the end there shall be inserted

> ; and

> (b) a condition requiring such payments as may be specified by the Secretary of State to be made to him in respect of—

@@ -399,7 +389,7 @@

- (1) The rate at which corporation tax is charged for the financial year 1997 shall be, and shall be deemed always to have been, 31 per cent. (and not 33 per cent. as provided by section 58 of the Finance Act 1997).

- (2) The small companies' rate for that year shall be, and shall be deemed always to have been, 21 per cent. (and not 23 per cent. as provided by section 59(a) of that Act).

- (2) The small companies’ rate for that year shall be, and shall be deemed always to have been, 21 per cent. (and not 23 per cent. as provided by section 59(a) of that Act).

- (3) All such adjustments shall be made, whether by way of discharge or repayment of tax or otherwise, as may be required in consequence of the provisions of this section.

@@ -411,9 +401,9 @@

- (1) In section 231 of the Taxes Act 1988 (tax credits for certain recipients of qualifying distributions)—

- (a) in subsection (2) (payment of tax credits to companies resident in the United Kingdom) for “Subject to section 241(5)” there shall be substituted “Subject to sections 231A and 241(5)”; and

- (b) at the beginning of subsection (3) (claims by other persons to set tax credits against income tax liability and to receive payment of any excess of tax credit over that liability) there shall be inserted “Subject to section 231A,”.

- (2) After section 231 of the Taxes Act 1988 there shall be inserted—

@@ -422,10 +412,10 @@

> (2) In the case of any pension fund, for any year of assessment the aggregate amount of the tax credits in respect of which claims are made under section 231(3) must not exceed the aggregate amount of the tax credits in respect of the qualifying distributions comprised in the income of the pension fund and brought into charge to tax.

> (3) Accordingly, no payment shall be made under section 231(3) in respect of so much of the excess there mentioned as is referable to a tax credit in respect of a qualifying distribution if or to the extent that the qualifying distribution is income of a pension fund.

> (4) In this section—

> - “income”, in relation to a pension fund, means income derived from investments or deposits held for the purposes of the pension fund;

> - “pension fund” means any scheme, fund or other arrangements established and maintained (whether in the United Kingdom or elsewhere) for the purpose of providing pensions, retirement annuities, allowances, lump sums, gratuities or other superannuation benefits (with or without subsidiary benefits);

> - “scheme” includes any deed, agreement or series of agreements.

> (5) For convenience of identification only, the schemes, funds or other arrangements which are “pension funds” for the purposes of this section by virtue of the definition of that expression in subsection (4) above include, in particular, those whose income is, in whole or in part, exempt, or eligible for exemption, from tax under or by virtue of any of the following provisions—

> - “*income*”, in relation to a pension fund, means income derived from investments or deposits held for the purposes of the pension fund;

> - “*pension fund*” means any scheme, fund or other arrangements established and maintained (whether in the United Kingdom or elsewhere) for the purpose of providing pensions, retirement annuities, allowances, lump sums, gratuities or other superannuation benefits (with or without subsidiary benefits);

> - “*scheme*” includes any deed, agreement or series of agreements.

> (5) For convenience of identification only, the schemes, funds or other arrangements which are “*pension funds*” for the purposes of this section by virtue of the definition of that expression in subsection (4) above include, in particular, those whose income is, in whole or in part, exempt, or eligible for exemption, from tax under or by virtue of any of the following provisions—

> (a) section 512(2);

> (b) section 592(2);

> (c) section 608(2)(a);

@@ -459,7 +449,7 @@

- (5) Sections 242 to 244 of the Taxes Act 1988 cease to have effect in consequence of, and in accordance with, the foregoing provisions of this section.

- (6) In section 237(4) of the Taxes Act 1988 (bonus issue and related tax credit not to be franked investment income for the purposes of sections 241 and 244) for “sections 241 and 244” there shall be substituted “section 241”.

- (7) Subsection (6) above has effect in accordance with subsection (5) above.

@@ -493,11 +483,11 @@

> (2B) Section 231(1) of the Taxes Act 1988 (entitlement to tax credit) shall not apply where the distribution there mentioned is a distribution in respect of any asset of a member’s premiums trust fund.

- (2) In section 219 of the Finance Act 1994 (taxation of profits of corporate members) at the beginning of subsection (3) there shall be inserted “Subject to subsection (4A) below,”.

- (2) In section 219 of the Finance Act 1994 (taxation of profits of corporate members) at the beginning of subsection (3) there shall be inserted “ Subject to subsection (4A) below, ”.

- (3) In subsection (4) of that section (subsection (2) applies in relation to distributions and associated tax credits notwithstanding section 11(2)(a) or 208 of the Taxes Act 1988)—

- (a) for “dividends or other distributions of a company resident in the United Kingdom” there shall be substituted “UK distributions”; and

- (a) for “dividends or other distributions of a company resident in the United Kingdom” there shall be substituted “ UK distributions ”; and

- (b) the words “(and any associated tax credits)” shall cease to have effect.

@@ -507,11 +497,11 @@

> (a) shall be taken into account in computing profits of the corporate member for tax purposes; and

> (b) shall be so taken into account under Case I of Schedule D (and not under any other Schedule or any other Case of Schedule D).

> (4B) Section 231(1) of the Taxes Act 1988 (entitlement to tax credit) shall not apply where the distribution there mentioned is a distribution in respect of any asset of a corporate member’s premiums trust fund.

> (4C) In this section “UK distributions” means dividends or other distributions of a company resident in the United Kingdom.

- (5) In section 20(1) of the Taxes Act 1988, as amended by section 24(10) below, in paragraph 2 of Schedule F (distribution in respect of which a person is entitled to a tax credit treated for the purposes of the Tax Acts, other than section 95(1), as representing income equal to the aggregate of the distribution and the tax credit) after “95(1)” there shall be inserted “of this Act and section 219(4A) of the Finance Act 1994”.

- (6) In section 231(1) of the Taxes Act 1988 (recipient of distribution made by UK resident company entitled to tax credit subject to sections 247 and 441A) after “441A,” there shall be inserted “section 171(2B) of the Finance Act 1993 and section 219(4B) of the Finance Act 1994,”.

> (4C) In this section “*UK distributions*” means dividends or other distributions of a company resident in the United Kingdom.

- (5) In section 20(1) of the Taxes Act 1988, as amended by section 24(10) below, in paragraph 2 of Schedule F (distribution in respect of which a person is entitled to a tax credit treated for the purposes of the Tax Acts, other than section 95(1), as representing income equal to the aggregate of the distribution and the tax credit) after “95(1)” there shall be inserted “ of this Act and section 219(4A) of the Finance Act 1994 ”.

- (6) In section 231(1) of the Taxes Act 1988 (recipient of distribution made by UK resident company entitled to tax credit subject to sections 247 and 441A) after “441A,” there shall be inserted “ section 171(2B) of the Finance Act 1993 and section 219(4B) of the Finance Act 1994, ”.

- (7) This section has effect in relation to distributions made on or after 2nd July 1997.

@@ -533,18 +523,18 @@

> (1) Where a dealer—

> (a) receives a relevant distribution, that is to say—

> (i) any distribution which is made by a company resident in the United Kingdom (“a UK distribution”), or

> (i) any distribution which is made by a company resident in the United Kingdom (“*a UK distribution*”), or

> (ii) any payment which is representative of a UK distribution, or

> (b) makes any payment which is representative of a UK distribution,

> the distribution or, as the case may be, the payment shall be taken into account in computing the profits of the dealer which are chargeable to tax in accordance with the provisions of this Act applicable to Case I or II of Schedule D.

- (3) In subsection (1A) (provisions consequential on subsection (1) where dealer receives qualifying distribution to which Schedule 7 to the Finance Act 1997 applies)—

- (a) in the words preceding paragraph (a), for “qualifying distribution to which Schedule 7 to the Finance Act 1997 applies” there shall be substituted “relevant distribution”;

- (a) in the words preceding paragraph (a), for “qualifying distribution to which Schedule 7 to the Finance Act 1997 applies” there shall be substituted “ relevant distribution ”;

- (b) paragraph (b) (distribution not to be treated for the purposes of sections 246D and 246F as a FID received by the dealer) shall cease to have effect;

- (c) in paragraph (c), for “sections 208 and 234(1)” there shall be substituted “section 208”;

- (c) in paragraph (c), for “sections 208 and 234(1)” there shall be substituted “ section 208 ”;

- (d) paragraph (d) (which disapplies paragraph 2A(2) of Schedule 23A to the Taxes Act 1988 which is repealed by this section) shall be omitted; and

@@ -554,11 +544,11 @@

- (4) Subsection (1B) (which relates to the application of section 732 and which becomes unnecessary in consequence of the amendments made to that section by section 26 below) shall cease to have effect.

- (5) In subsection (2) (meaning of “dealer”)—

- (5) In subsection (2) (meaning of “*dealer*”)—

- (a) the word “qualifying” shall be omitted in both places where it occurs; and

- (b) in paragraph (a), after “shares” there shall be inserted “or stock”.

- (b) in paragraph (a), after “shares” there shall be inserted “ or stock ”.

- (6) After subsection (2) there shall be inserted—

@@ -568,13 +558,13 @@

- (8) Subsection (5) (definitions) shall be omitted.

- (9) For the sidenote there shall be substituted “Taxation of dealers in respect of distributions etc.”

- (10) In section 20(1) of the Taxes Act 1988, in paragraph 2 of Schedule F (distribution in respect of which a person is entitled to a tax credit treated for the purposes of the Tax Acts as representing income equal to the aggregate of the distribution and the tax credit) after “purposes of the Tax Acts” there shall be inserted “(other than section 95(1))”.

- (11) In section 234 of the Taxes Act 1988 (information relating to distributions) in subsection (1), the words “but subject to section 95(1A)(c)” shall be omitted.

- (12) In section 246D(1) of the Taxes Act 1988 (individuals entitled to FIDs treated as receiving grossed-up amount) after “that individual shall be treated” there shall be inserted “(except for the purposes of section 95(1))”.

- (9) For the sidenote there shall be substituted “ Taxation of dealers in respect of distributions etc. ”

- (11) In section 234 of the Taxes Act 1988 (information relating to distributions) in subsection (1), the words“but subject to section 95(1A)(c)” shall be omitted.

- (13) In Schedule 23A to the Taxes Act 1988 (manufactured dividends and interest) paragraph 2A(2) (which provides that if the dividend manufacturer is a company not resident in the UK no amount shall be deductible in the case of that company in respect of the manufactured dividend) shall be omitted (and accordingly paragraph 2(3)(c) of that Schedule has effect instead).

@@ -582,7 +572,7 @@

- (a) paragraph (a) (subjection to section 95(1A)(b)) shall be omitted; and

- (b) in paragraph (b) (subjection to section 247(5B) to (5D)) for “of that Act” there shall be substituted “of the Taxes Act 1988”.

- (b) in paragraph (b) (subjection to section 247(5B) to (5D)) for “of that Act” there shall be substituted “ of the Taxes Act 1988 ”.

- (15) This section has effect in relation to—

@@ -594,29 +584,29 @@

##### 25

- (1) In section 246A(9) of the Taxes Act 1988 (which provides that “fixed-rate preference shares” shall be construed in accordance with section 95(5)) for “section 95(5)” there shall be substituted “paragraph 13(6) of Schedule 28B”.

- (1) In section 246A(9) of the Taxes Act 1988 (which provides that “*fixed-rate preference shares*” shall be construed in accordance with section 95(5)) for “section 95(5)” there shall be substituted “ paragraph 13(6) of Schedule 28B ”.

- (2) In Schedule 28B to the Taxes Act 1988 (venture capital trusts) paragraph 13 (general interpretation) shall be amended in accordance with subsections (3) and (4) below.

- (3) In sub-paragraph (5), paragraph (b) (which provides that “fixed-rate preference shares” has the same meaning as in section 95), and the word “and” immediately preceding that paragraph, shall be omitted.

- (3) In sub-paragraph (5), paragraph (b) (which provides that “*fixed-rate preference shares*” has the same meaning as in section 95), and the word “and” immediately preceding that paragraph, shall be omitted.

- (4) After sub-paragraph (5) there shall be inserted—

> (6) In this paragraph “fixed-rate preference shares” means shares which—

> (6) In this paragraph “*fixed-rate preference shares*” means shares which—

> (a) were issued wholly for new consideration;

> (b) do not carry any right either to conversion into shares or securities of any other description or to the acquisition of any additional shares or securities; and

> (c) do not carry any right to dividends other than dividends which—

> (i) are of a fixed amount or at a fixed rate per cent. of the nominal value of the shares, and

> (ii) together with any sum paid on redemption, represent no more than a reasonable commercial return on the consideration for which the shares were issued;

> and in paragraph (a) above “new consideration” has the meaning given by section 254.

> and in paragraph (a) above “*new consideration*” has the meaning given by section 254.

- (5) In Schedule 7 to the Finance Act 1997 (special treatment for certain distributions) paragraph 5 (fixed-rate preference shares) shall be amended in accordance with subsections (6) and (7) below.

- (6) In sub-paragraph (2) (which defines “fixed-rate preference shares” by reference to section 95 of the Taxes Act 1988)—

- (a) in paragraph (a) for “section 95 of” there shall be substituted “paragraph 13 of Schedule 28B to”; and

- (b) in paragraph (b) for “section 95(5)(c)(i) of that Act” there shall be substituted “paragraph 13(6)(c)(i) of that Schedule”.

- (a) in paragraph (a) for “section 95 of” there shall be substituted “ paragraph 13 of Schedule 28B to ”; and

- (b) in paragraph (b) for “section 95(5)(c)(i) of that Act” there shall be substituted “ paragraph 13(6)(c)(i) of that Schedule ”.

- (7) After sub-paragraph (2) there shall be inserted—

@@ -628,7 +618,7 @@

##### 26

- (1) Section 732 of the Taxes Act 1988 (dealers in securities) shall Purchase and sale be amended as follows. of securities.

- (1) Section 732 of the Taxes Act 1988 (dealers in securities) shall be amended as follows.

- (2) After subsection (1) (dealers in securities: reduction for tax purposes of price paid by the appropriate amount in respect of interest) there shall be inserted—

@@ -708,10 +698,10 @@

> (10) In determining for the purposes of subsections (2)(b) and (8)(b) b above whether a company could have used the income consisting of the distribution in question to frank a distribution of the company, the company shall be taken to use its actual franked investment income to frank distributions before using the income consisting of the distribution in question.

> (11) References in this section to using franked investment income to frank a distribution of a company have the same meaning as in Chapter V of Part VI.

> (12) In this section—

> - “arrangements” means arrangements of any kind, whether in writing or not (and includes a series of arrangements, whether or not between the same parties);

> - “business or other commercial purposes” includes the efficient management of investments;

> - “franked investment income” has the same meaning as in Chapter V of Part VI and references to income consisting of a distribution shall be construed accordingly;

> - “tax advantage” has the same meaning as in Chapter I of Part XVII.

> - “*arrangements*” means arrangements of any kind, whether in writing or not (and includes a series of arrangements, whether or not between the same parties);

> - “*business or other commercial purposes*” includes the efficient management of investments;

> - “*franked investment income*” has the same meaning as in Chapter V of Part VI and references to income consisting of a distribution shall be construed accordingly;

> - “*tax advantage*” has the same meaning as in Chapter I of Part XVII.

- (2) This section has effect in relation to distributions made on or after 2nd July 1997.

@@ -737,9 +727,15 @@

- (3) In this section—

- “foreign income dividend” shall be construed in accordance with Chapter VA of Part VI of the Taxes Act 1988;

- “section 505 body” means— a charity, as defined in section 506(1) of the Taxes Act 1988; a body mentioned in section 507 of that Act (heritage bodies); or an Association of a description specified in section 508 of that Act (scientific research organisations).

- “*foreign income dividend*” shall be construed in accordance with Chapter VA of Part VI of the Taxes Act 1988;

- “*section 505 body*” means—

- (a) a charity, as defined in section 506(1) of the Taxes Act 1988;

- (b) a body mentioned in section 507 of that Act (heritage bodies); or

- (c) an Association of a description specified in section 508 of that Act (scientific research organisations).

### Distributions, tax credits etc in and after 1999-00

@@ -751,9 +747,9 @@

- (2) In subsection (1) (recipient of certain distributions to be entitled to tax credit equal to proportion of distribution corresponding to rate of ACT in force)—

- (a) after “where” there shall be inserted “, in any year of assessment for which income tax is charged,”; and

- (b) for “the rate of advance corporation tax in force for the financial year in which” there shall be substituted “the tax credit fraction in force when”.

- (a) after “where” there shall be inserted “ , in any year of assessment for which income tax is charged, ”; and

- (b) for “the rate of advance corporation tax in force for the financial year in which” there shall be substituted “ the tax credit fraction in force when ”.

- (3) After subsection (1) there shall be inserted—

@@ -763,7 +759,7 @@

- (5) In subsection (3) (which includes provision for payment of excess of tax credit over income tax liability to person not being a company resident in the UK)—

- (a) for “Subject to section 231A,” there shall be substituted “Subject to subsection (3AA) below,”; and

- (a) for “Subject to section 231A,” there shall be substituted “ Subject to subsection (3AA) below, ”; and

- (b) the words “and subject to subsections (3A) and (3D) below where the credit exceeds that income tax, to have the excess paid to him” shall cease to have effect.

@@ -801,7 +797,7 @@

- (1) Section 1A of the Taxes Act 1988 (application of lower rate to income from savings and distributions) shall be amended in accordance with subsections (2) to (4) below.

- (2) In subsection (1) (certain savings and distribution income to be charged at the lower rate to the exclusion of basic rate) for “lower rate” there shall be substituted “rate applicable in accordance with subsection (1A) below”.

- (2) In subsection (1) (certain savings and distribution income to be charged at the lower rate to the exclusion of basic rate) for “lower rate” there shall be substituted “ rate applicable in accordance with subsection (1A) below ”.

- (3) After subsection (1) there shall be inserted—

@@ -841,9 +837,9 @@

- (2) In subsection (1) (income to which the section applies to be chargeable at the rate applicable to trusts instead of at the basic rate or, in accordance with section 1A, the lower rate)—

- (a) for “at the rate applicable to trusts” there shall be substituted “at the rate applicable in accordance with subsection (1AA) below”; and

- (b) after “at the lower rate” there shall be inserted “or the Schedule F ordinary rate”.

- (a) for “at the rate applicable to trusts” there shall be substituted “ at the rate applicable in accordance with subsection (1AA) below ”; and

- (b) after “at the lower rate” there shall be inserted “ or the Schedule F ordinary rate ”.

- (3) After subsection (1) there shall be inserted—

@@ -861,14 +857,13 @@

- (5) In subsection (1A), so as to make the words following “as Parliament may determine” into a separate paragraph, for the words “and, for the purposes of assessments” there shall be substituted—

> For the purposes of assessments

- (6) In subsection (2AA) (income treated by s.689B as applied in defraying trustees' expenses to be taxed at the rate that would apply apart from s.686, instead of the rate applicable to trusts) after “instead of the rate applicable to trusts” there shall be inserted “or the Schedule F trust rate (as the case may be)”.

> .

- (6) In subsection (2AA) (income treated by s.689B as applied in defraying trustees’ expenses to be taxed at the rate that would apply apart from s.686, instead of the rate applicable to trusts) after “instead of the rate applicable to trusts” there shall be inserted “ or the Schedule F trust rate (as the case may be) ”.

- (7) Before subsection (6) there shall be inserted—

> (5A) In this section “Schedule F type income”, in relation to trustees, means—

> (5A) In this section “*Schedule F type income*”, in relation to trustees, means—

> (a) income chargeable under Schedule F;

> (b) income to which section 1A applies by virtue of its being equivalent foreign income falling within subsection (3)(b) of that section and chargeable under Case V of Schedule D;

> (c) a qualifying distribution whose amount or value is determined in accordance with section 233(1A);

@@ -877,7 +872,7 @@

> (f) income treated as received by the trustees by virtue of section 421(1)(a);

> (g) any amount which, by virtue of section 686A, is treated for the purposes of the Tax Acts as if it were income to which this section applies.

- (8) For the sidenote there shall be substituted “Accumulation and discretionary trusts: special rates of tax.”

- (8) For the sidenote there shall be substituted “ Accumulation and discretionary trusts: special rates of tax. ”

- (9) After section 686 of the Taxes Act 1988 there shall be inserted—

@@ -923,21 +918,21 @@

- (4) In subsection (2) (determination whether any amount is a relevant amount) in paragraph (b) (application of the assumption in section 701(3A)(b)) for “assumption” there shall be substituted “assumptions”.

- (5) In subsection (4) (rate at which sums are assumed to bear tax) in paragraphs (a) and (c) for “lower rate” there shall be substituted “Schedule F ordinary rate”.

- (6) In subsection (6) (income represented by a relevant amount to be treated as not brought into charge to tax for the purposes of ss.348 and 349(1)) at the end there shall be added “except to the extent that the relevant amount is or would be paid out of sums in respect of a distribution chargeable under Schedule F”.

- (5) In subsection (4) (rate at which sums are assumed to bear tax) in paragraphs (a) and (c) for “lower rate” there shall be substituted “ Schedule F ordinary rate ”.

- (6) In subsection (6) (income represented by a relevant amount to be treated as not brought into charge to tax for the purposes of ss.348 and 349(1)) at the end there shall be added “ except to the extent that the relevant amount is or would be paid out of sums in respect of a distribution chargeable under Schedule F ”.

- (7) In section 701 of the Taxes Act 1988 (interpretation of Part XVI) subsection (3A) (which defines the “applicable rate” as basic rate or lower rate, according to the rate at which the income of the residue out of which the payment to the beneficiary is made bears tax) shall be amended in accordance with subsections (8) and (9) below.

- (8) For the words “or the lower rate”, in both places where they occur, there shall be substituted “, the lower rate or the Schedule F ordinary rate”.

- (8) For the words “or the lower rate”, in both places where they occur, there shall be substituted “ , the lower rate or the Schedule F ordinary rate ”.

- (9) In paragraph (b) (assumption that payments are made out of income bearing tax at the basic rate before income bearing tax at the lower rate)—

- (a) after “it shall be assumed” there shall be inserted “(i)”;

- (b) after “lower rate” there shall be inserted “or the Schedule F ordinary rate”; and

- (a) after “it shall be assumed” there shall be inserted “ (i) ”;

- (b) after “lower rate” there shall be inserted “ or the Schedule F ordinary rate ”; and

- (c) at the end of the paragraph there shall be added

@@ -1014,7 +1009,7 @@

- (4) Schedule 6 to this Act (which makes provision for and in connection with the repeal of provisions relating to foreign income dividends) shall have effect.

- (5) In subsection (2) above, “distribution accounts”, “distribution date” and “distribution period” shall be construed in accordance with section 468H of the Taxes Act 1988 (interpretation of sections 468I to 468R of that Act).

- (5) In subsection (2) above, “*distribution accounts*”, “*distribution date*” and “*distribution period*” shall be construed in accordance with section 468H of the Taxes Act 1988 (interpretation of sections 468I to 468R of that Act).

### Gilt-edged securities

@@ -1030,17 +1025,17 @@

- (3) In that section—

- (a) in subsection (1), after “following securities” there shall be inserted “in so far as they are not gilt-edged securities”;

- (b) in subsection (2), after “by virtue of” there shall be inserted “subsection (A1) above or of”;

- (c) in subsection (3), for “to which subsection (1) above applied” there shall be substituted “the interest on which is to be paid without deduction of income tax”; and

- (d) in subsections (4) and (5), for the words “two months”, in each place where they occur, there shall be substituted “one month”.

- (a) in subsection (1), after “following securities” there shall be inserted “ in so far as they are not gilt-edged securities ”;

- (b) in subsection (2), after “by virtue of” there shall be inserted “ subsection (A1) above or of ”;

- (c) in subsection (3), for “to which subsection (1) above applied” there shall be substituted “ the interest on which is to be paid without deduction of income tax ”; and

- (d) in subsections (4) and (5), for the words “two months”, in each place where they occur, there shall be substituted “ one month ”.

- (4) In subsection (7) of that section, after “requires” there shall be inserted the following definition—

> “gilt-edged securities” means any securities which—

> “*gilt-edged securities*” means any securities which—

> (a) are gilt-edged securities for the purposes of the 1992 Act; or

> (b) will be such securities on the making of any order under paragraph 1 of Schedule 9 to that Act the making of which is anticipated in the prospectus under which they were issued,

@@ -1048,15 +1043,9 @@

- (5) Section 51A (interest on gilt-edged securities held under authorised arrangements to be paid without deduction of tax) shall cease to have effect.

- (6) In section 51B (periodic accounting for tax on interest on gilt-edged securities), for subsection (5) there shall be substituted the following subsections—

> (5) In this section “relevant gilt-edged securities” means securities of one of the following descriptions—

> (a) gilt-edged securities issued before 6th April 1998 other than those in relation to which a direction under section 50(1) was given before that date;

> (b) gilt-edged securities issued on or after that date in relation to which the Treasury have given a direction that they may be subjected to periodic accounting;

> and in this subsection “gilt-edged securities” has the same meaning as in section 50.

> (5A) Regulations under this section shall not apply to a payment of interest on any relevant gilt-edged securities if that payment is made at any time after the Treasury have given a direction that those securities are to be exempted from periodic accounting.

- (7) In sections 722A(5) and 730C(9), and in paragraph 3A(2)(a) of Schedule 23A, (which all define “gilt-edged securities” by reference to section 51A of the Taxes Act 1988), for “51A” there shall be substituted, in each case, “50”.

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

- (8) Subject to subsections (9) to (13) below, this section has effect in relation to payments of interest falling due on or after 6th April 1998.

@@ -1070,7 +1059,7 @@

that application (unless withdrawn) shall have effect in relation to any interest on those securities to which section 50(A1) of that Act applies as it previously had effect in relation to any interest on those securities to which that direction applied.

- (11) Sections 50, 51B and 118D(4) of the Taxes Act 1988 shall have effect in relation to any gilt-edged securities issued before 6th April 1998 which—

- (11) Section 50 of the Taxes Act 1988 shall have effect in relation to any gilt-edged securities issued before 6th April 1998 which—

- (a) are securities the interest on which, if paid immediately before that date, would have fallen to be paid after deduction of income tax, and

@@ -1078,7 +1067,7 @@

as if the appropriate person had so made an application under section 50(2) of that Act as to enable that application to take effect in relation to payments of interest made on or after that date.

- (12) In subsection (11) above “the appropriate person” means—

- (12) In subsection (11) above “*the appropriate person*” means—

- (a) in the case of securities transferred before 6th April 1998 but after the time when the balance was struck for a dividend on them falling due on or after that date, the person who held the securities at the time when the balance was so struck;

@@ -1092,13 +1081,13 @@

- (1) Chapter VIIA of Part IV of the Taxes Act 1988 (paying and collecting agents) shall be amended as follows.

- (2) Section 118A (interpretation of Chapter) shall become subsection (1) of that section and, in paragraph (k) of that subsection (meaning of “international organisation”), for “has the meaning given by section 51A(8)” there shall be substituted “means an organisation of which two or more sovereign powers, or the governments of two or more sovereign powers, are members”.

- (2) Section 118A (interpretation of Chapter) shall become subsection (1) of that section and, in paragraph (k) of that subsection (meaning of “*international organisation*”), for “has the meaning given by section 51A(8)” there shall be substituted “ means an organisation of which two or more sovereign powers, or the governments of two or more sovereign powers, are members ”.

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

> (2) If, in any proceedings, any question arises whether a person is an international organisation for the purposes of this Chapter, a certificate issued by or under the authority of the Secretary of State stating any fact relevant to that question shall be conclusive evidence of that fact.

- (4) In section 118D(4) (payments of interest payable without deduction of tax not to be chargeable payments), after “by virtue of” there shall be inserted “section 50(A1) or of”.

- (4) In section 118D(4) (payments of interest payable without deduction of tax not to be chargeable payments), after “by virtue of” there shall be inserted “ section 50(A1) or of ”.

- (5) In subsection (3) of section 118G (United Kingdom public revenue dividends excluded from being chargeable payments)—

@@ -1110,7 +1099,7 @@

> (i) is not registered (within the meaning of section 50 of this Act); and

> (ii) is, for the time being, beneficially owned by a person who is not ordinarily resident in the United Kingdom.

- (6) In section 118G(7), for paragraphs (a) and (b) there shall be substituted “foreign dividends on foreign holdings held by a nominee approved for the purposes of this subsection”.

- (6) In section 118G(7), for paragraphs (a) and (b) there shall be substituted “ foreign dividends on foreign holdings held by a nominee approved for the purposes of this subsection ”.

- (7) Section 118G(8) and (10) shall cease to have effect.

@@ -1124,7 +1113,7 @@

- (1) Section 393A of the Taxes Act 1988 (set-off of trading losses against profits of previous three years) shall be amended in accordance with subsections (2) to (6) below.

- (2) In subsection (2) (three year carry-back period), for “is the period of three years” there shall be substituted “is (subject to subsection (2A) below) the period of twelve months”.

- (2) In subsection (2) (three year carry-back period), for “is the period of three years” there shall be substituted “ is (subject to subsection (2A) below) the period of twelve months ”.

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

@@ -1139,9 +1128,9 @@

- (4) In subsection (7) (application of section 393(9))—

- (a) at the beginning there shall be inserted “Subject to subsection (7A) below,”; and

- (b) for “the accounting period in which the cessation occurs” there shall be substituted “an accounting period ending with the cessation, or ending at any time in the twelve months immediately preceding the cessation,”.

- (a) at the beginning there shall be inserted “ Subject to subsection (7A) below, ”; and

- (b) for “the accounting period in which the cessation occurs” there shall be substituted “ an accounting period ending with the cessation, or ending at any time in the twelve months immediately preceding the cessation, ”.

- (5) After that subsection there shall be inserted the following subsection—

@@ -1152,7 +1141,7 @@

- (6) After subsection (11) there shall be inserted the following subsection—

> (12) In this section “ring fence trade” has the same meaning as in section 62A of the 1990 Act.

> (12) In this section “*ring fence trade*” has the same meaning as in section 62A of the 1990 Act.

- (7) In section 343 of that Act (company reconstructions without a change of ownership), the following subsection shall be inserted after subsection (4)—

@@ -1162,7 +1151,7 @@

- (9) Where a loss in any trade is incurred by a company in an accounting period ending on or after 2nd July 1997 but beginning before that date, section 393A of the Taxes Act 1988 shall have effect as if subsection (2A) of that section applied to the pre-commencement part of any amount of that loss to which that subsection would not apply apart from this subsection.

- (10) In subsection (9) above “the pre-commencement part”, in relation to the amount of the whole or any part of a loss in an accounting period, means the part of that amount which, on an apportionment in accordance with subsection (11) or, as the case may be, (12) below, is attributable to the part of that accounting period falling before 2nd July 1997.

- (10) In subsection (9) above “*the pre-commencement part*”, in relation to the amount of the whole or any part of a loss in an accounting period, means the part of that amount which, on an apportionment in accordance with subsection (11) or, as the case may be, (12) below, is attributable to the part of that accounting period falling before 2nd July 1997.

- (11) Except in a case where subsection (12) below applies, an apportionment for the purposes of subsection (10) above shall be made on a time basis according to the respective lengths of the part of the accounting period falling before 2nd July 1997 and the remainder of that accounting period.

@@ -1174,7 +1163,7 @@

- (1) Chapter II of Part IV of the Finance Act 1996 (loan relationships) shall be amended as follows.

- (2) In paragraph 3(7) of Schedule 8 (permitted period of three years for carry-back of deficits), for “three years” and “three year” there shall be substituted, in each case, “twelve months”.

- (3) In sub-paragraph (3) of paragraph 4 of Schedule 11 (carry-back of deficit by insurance companies)—

@@ -1184,13 +1173,13 @@

; and

- (b) in paragraph (b), for “those periods” there shall be substituted “up to three such periods”.

- (4) In sub-paragraph (5) of that paragraph (mechanism for carry-back in the case of insurance companies), for “the three accounting periods preceding the deficit period” there shall be substituted “accounting periods falling wholly or partly within the period of twelve months mentioned in sub-paragraph (3)(a) above”.

- (5) In sub-paragraph (8) of that paragraph (which defines the set-off periods), in each of paragraphs (b) and (c), for “immediately preceding” there shall be substituted “(if any) which falls wholly or partly within the period of twelve months mentioned in sub-paragraph (3)(a) above and immediately precedes”.

- (6) In sub-paragraph (9) of that paragraph (adjusted amount of a company’s eligible profit), after “is” there shall be inserted “(subject to sub-paragraph (9A) below)”; and after that sub-paragraph there shall be inserted the following sub-paragraph—

- (b) in paragraph (b), for “those periods” there shall be substituted “ up to three such periods ”.

- (4) In sub-paragraph (5) of that paragraph (mechanism for carry-back in the case of insurance companies), for “the three accounting periods preceding the deficit period” there shall be substituted “ accounting periods falling wholly or partly within the period of twelve months mentioned in sub-paragraph (3)(a) above ”.

- (5) In sub-paragraph (8) of that paragraph (which defines the set-off periods), in each of paragraphs (b) and (c), for “immediately preceding” there shall be substituted “ (if any) which falls wholly or partly within the period of twelve months mentioned in sub-paragraph (3)(a) above and immediately precedes ”.

- (6) In sub-paragraph (9) of that paragraph (adjusted amount of a company’s eligible profit), after “is” there shall be inserted “ (subject to sub-paragraph (9A) below) ”; and after that sub-paragraph there shall be inserted the following sub-paragraph—

> (9A) Where a set-off period falls only partly within the period of twelve months mentioned in sub-paragraph (3)(a) above, the adjusted amount of a company’s eligible profit for that period shall be taken to be confined to the part of the amount computed under sub-paragraph (9) above which is proportionate to the part of the set-off period that falls within that period of twelve months.

@@ -1198,9 +1187,9 @@

- (8) Paragraph 3 of Schedule 8 to the Finance Act 1996 shall have effect in relation to any deficit for a deficit period beginning before but ending on or after 2nd July 1997 as if the permitted period in relation to the pre-commencement part of the deficit were the period beginning with 1st April 1996 and ending immediately before the beginning of the deficit period.

- (9) Where for the purposes of paragraph 23 of Schedule 15 to the Finance Act 1996 (transitional provision in connection with the carrying back of exchange losses) there is a relievable amount for an accounting period ending on or after 2nd July 1997, that paragraph shall have effect, except in relation to any pre-commencement part of that amount, as if, in section 131(10)(b) of the Finance Act 1993 (the permitted period) as applied by that paragraph, the words “twelve months” were substituted for the words “three years”.

- (10) In this section “pre-commencement part”, in relation to the deficit for any deficit period or the relievable amount for any accounting period, means the part (if any) of that deficit or relievable amount which, on an apportionment in accordance with subsection (11) or, as the case may be, (12) below, is attributable to such part (if any) of that period as falls before 2nd July 1997.

- (10) In this section “*pre-commencement part*”, in relation to the deficit for any deficit period or the relievable amount for any accounting period, means the part (if any) of that deficit or relievable amount which, on an apportionment in accordance with subsection (11) or, as the case may be, (12) below, is attributable to such part (if any) of that period as falls before 2nd July 1997.

- (11) Except in a case where subsection (12) below applies, an apportionment for the purposes of subsection (10) above shall be made on a time basis according to the respective lengths of the part of the deficit period or, as the case may be, accounting period falling before 2nd July 1997 and the remainder of that period.

@@ -1218,228 +1207,27 @@

##### 42

- (1) In subsection (1) of section 22 of the Capital Allowances Act 1990 (first-year allowances), after “40 per cent. of that expenditure” there shall be inserted “, in the case of expenditure to which this section applies by virtue only of subsection (3C) below, shall be of an amount equal to the percentage of that expenditure that is given by subsection (1AA) below”.

- (2) After that subsection there shall be inserted the following subsection—

> (1AA) In the case of expenditure to which this section applies by virtue only of subsection (3C) below, the percentage mentioned in subsection (1) above is—

> (a) in the case of expenditure to which Chapter IVA applies, 12 per cent; and

> (b) in the case of any other expenditure, 50 per cent.

- (3) After subsection (3B) of that section there shall be inserted the following subsection—

> (3C) This section applies to—

> (a) any expenditure which, disregarding any effect of section 83(2) on the time at which it is to be treated as incurred, is incurred by a small company or a small business in the period beginning with 2nd July 1997 and ending with 1st July 1998; and

> (b) any additional VAT liability incurred in respect of expenditure to which this section applies by virtue of paragraph (a) above.

- (4) In subsection (4) of that section, after “any expenditure” there shall be inserted “to which this section applies otherwise than by virtue only of subsection (3C) above”.

- (5) After subsection (6A) of that section there shall be inserted the following subsections—

> (6B) No first-year allowance shall be made in respect of any expenditure to which this section applies by virtue only of subsection (3C) above—

> (a) if the chargeable period related to the incurring of the expenditure is also the chargeable period related to the permanent discontinuance of the trade;

> (b) if the expenditure (whether or not it is expenditure to which Chapter IVA would apply but for the provisions of section 38B) is expenditure of the kind described in any of subsections (2) to (4) of section 38B;

> (c) if the expenditure is expenditure to which Chapter IVA would apply but for the provisions of section 38H; or

> (d) if the expenditure is expenditure on the provision of machinery or plant for leasing, whether in the course of a trade or otherwise;

> and section 50(2) shall apply for the interpretation of paragraph (d) above as it applies for the interpretation of Chapter V of this Part.

> (6C) No first-year allowance shall be made in respect of any expenditure incurred on the provision of machinery or plant to which this section applies by virtue only of subsection (3C) above if—

> (a) the provision of the machinery or plant is connected with a change in the nature or conduct of a trade or business carried on by a person other than the person incurring the expenditure; and

> (b) the obtaining of a first-year allowance is the main benefit, or one of the main benefits, which could reasonably be expected to arise from the making of the change.

- (6) In sections 23(6), 42(9), 44(5), 46(8), 48(7) and 50(3) and (4A) of that Act (which contain provisions referring to the temporary first-year allowances under section 22(3B) of that Act), after the words “subsection (3B)”, in each place where they occur, there shall be inserted the words “or (3C)”.

- (7) In section 39(2)(a) of that Act (definition of a qualifying purpose), for “subsections (2) to (3B)” there shall be substituted “subsections (2) to (3C)”.

- (8) In section 43 of that Act (provisions relating to joint lessees in cases involving new expenditure), after subsection (4) there shall be added the following subsection—

> (5) Any first-year allowance made in respect of expenditure to which section 22 applies by virtue only of subsection (3C) of that section shall be made on the same assumptions and subject to the same apportionments (if any) as it appears would, by virtue of subsection (3) above, be applicable in the case of a writing-down allowance.

- (9) This section shall have effect in relation to every chargeable period ending on or after 2nd July 1997.

#### Expenditure of a small company or small business

##### 43

- (1) After section 22 of the Capital Allowances Act 1990 there shall be inserted the following section—

> (22A)

> (1) For the purposes of section 22 capital expenditure incurred by a company is capital expenditure incurred by a small company if the company—

> (a) qualifies as small or medium-sized in relation to the financial year of the company in which the expenditure is incurred; and

> (b) is not a member of a large group at the time when the expenditure is incurred.

> (2) For the purposes of section 22, capital expenditure is capital expenditure incurred by a small business if—

> (a) it is incurred by a business for the purposes of a trade (the “first trade”) carried on by that business; and

> (b) were the first trade carried on by a company (the “hypothetical company”) in the circumstances set out in subsection (3) below, that company would qualify as small or medium-sized in relation to the financial year of that company in which the expenditure would be treated as incurred.

> (3) Those circumstances are—

> (a) that every trade, profession or vocation carried on by the business concerned is carried on by the business as a part of the first trade;

> (b) that the financial years of the hypothetical company coincide with the chargeable periods of the business concerned; and

> (c) that accounts of the hypothetical company for any relevant chargeable period were prepared in accordance with the requirements of the Companies Act 1985 as if that period were a financial year of the company.

> (4) Subject to subsection (5) below, a company is a member of a large group at the time when any expenditure is incurred if —

> (a) it is at that time the parent company of a group which does not qualify as small or medium-sized in relation to the financial year of the parent company in which that time falls; or

> (b) it is at that time a subsidiary undertaking in relation to the parent company of such a group.

> (5) If, at the time when any expenditure is incurred by any company any arrangements exist which are such that, had effect been given to them immediately before that time, the company or a successor of the company would, at that time, have been a member of a large group, this section shall have effect as if the company concerned was a member of a large group at that time.

> (6) In this section—

> - “arrangements” means arrangements of any kind, whether in writing or not, including arrangements that are not legally enforceable;

> - “business” means— an individual; a partnership of which all the members are individuals; a registered friendly society within the meaning of Chapter II of Part XII of the principal Act; or a body corporate which is not a company but is within the charge to corporation tax;

> - “company” means— a company, or an oversea company, within the meaning of the Companies Act 1985; or a company, or a Part XXIII company, within the meaning of the Companies (Northern Ireland) Order 1986;

> - “financial year”, “group”, “parent company” and “subsidiary undertaking”— except in relation to a company formed and registered in Northern Ireland, have the same meanings as in Part VII of the Companies Act 1985; and in relation to a company so formed and registered, have the same meanings as in Part VIII of the Companies (Northern Ireland) Order 1986.

> (7) References in this section, in relation to a company, to its qualifying as small or medium-sized—

> (a) except in the case of a company formed and registered in Northern Ireland, are references to its so qualifying, or being treated as so qualifying, for the purposes of section 247 of the Companies Act 1985; and

> (b) in the case of a company so formed and registered, are references to its so qualifying, or being treated as so qualifying, for the purposes of Article 255 of the Companies (Northern Ireland) Order 1986.

> (8) In relation to a company with respect to which the question arises whether it is or would be a member of a large group, references to a group’s qualifying as small or medium-sized—

> (b) in the case of a company so formed and registered, are references to its so qualifying, or being treated as so qualifying, for the purposes of Article 257 of the Companies (Northern Ireland) Order 1986.

> (9) For the purposes of this section a company is the successor of another if—

> (a) it carries on a trade which, in whole or in part, the other company has ceased to carry on; and

> (b) the circumstances are such that section 343 of the principal Act applies in relation to the two companies as the predecessor and the successor within the meaning of that section.

- (2) This section shall have effect in relation to every chargeable period ending on or after 2nd July 1997.

### Capital allowances and finance leases

#### Writing-down allowances for finance lessors

##### 44

- (1) Section 25 of the Capital Allowances Act 1990 (qualifying expenditure for writing-down allowances) shall be amended as follows.

- (2) After subsection (5) there shall be inserted the following subsections—

> (5A) Subject to subsection (5B) below, capital expenditure incurred by any person in any chargeable period on the provision of machinery or plant for leasing under a finance lease shall not be brought into account so as to form part of that person’s qualifying expenditure for that period except to the extent of the part of the expenditure which is proportionate to the part of the chargeable period falling after the time when the expenditure was incurred.

> (5B) Subsection (5A) above does not apply where, in the chargeable period related to the incurring of the expenditure, the disposal value of the machinery or plant falls to be brought into account in accordance with section 24(6).

> (5C) Where under subsection (5A) above only part of any capital expenditure on the provision of any machinery or plant may be included in a person’s qualifying expenditure for any chargeable period, subsection (1)(a)(i) above shall not prevent the whole or any part of the remainder of that expenditure from being included in his qualifying expenditure for the next following chargeable period.

- (3) In subsection (6) (disposal values brought into account on an assignment)—

- (a) for the words “subsection (5) above”, in the first place where they occur, there shall be substituted “subsection (5) or (5B) above”; and

- (b) for “, as modified by subsection (5) above,” there shall be substituted “(as modified, where subsection (5) above applies, by that subsection)”.

- (4) In subsection (8) (adjustments), after “subsections (5)” there shall be inserted “, (5B)”.

- (5) This section has effect for chargeable periods ending on or after 2nd July 1997 except in relation to—

- (a) expenditure incurred before that date; and

- (b) expenditure incurred in the twelve months beginning with that date in pursuance of a contract entered into before that date.

#### Hire-purchase by finance lessors

##### 45

- (1) In section 60 of the Capital Allowances Act 1990 (machinery and plant on hire-purchase), after subsection (2) there shall be inserted the following subsection—

> (2A) Subsections (1)(b) and (2)(b) above do not apply where the capital expenditure incurred by the person to whom the machinery or plant is treated as belonging under subsection (1)(a) was incurred on the provision of the machinery or plant for leasing under a finance lease.

- (2) This section has effect for chargeable periods ending on or after 2nd July 1997 except in relation to—

- (a) expenditure incurred before that date; and

- (b) expenditure incurred in the twelve months beginning with that date in pursuance of a contract entered into before that date.

#### Sale and leaseback etc. using finance leases

##### 46

- (1) In the Capital Allowances Act 1990—

- (a) in section 75(1), (2) and (3) (further restrictions on allowances), for the words “sections 76 and 77”, in each place where they occur, there shall be substituted “sections 76, 76A and 77”; and

- (b) in section 76, after subsection (6) there shall be inserted the following subsection—

> (7) This section has effect subject to the modifications made by section 76A in cases where there is a finance lease.

- (2) After section 76 of that Act there shall be inserted the following section—

> (76A)

> (1) Where—

> (a) any machinery or plant is used for the purposes of any non-trading activities carried on by any person, and

> (b) it is directly or indirectly as a consequence of the machinery or plant having been leased under a finance lease that it is available for that use,

> subsections (1), (2) and (3) of section 75 and subsection (1) of section 76 (except the words after “without”) shall have effect as if the use for the purposes of those activities were a use for the purposes of a trade carried on by that person.

> (2) Where—

> (a) subsection (1), (2) or (3) of section 75 applies by virtue of paragraph (b) of that subsection, or is treated (under one or both of section 76(1) and subsection (1) above) as so applying,

> (b) it is directly or indirectly as a consequence of the machinery or plant having been leased under a finance lease that it is available after—

> (i) the date of the sale,

> (ii) the date of the making of the contract, or

> (iii) the date of the assignment,

> for the use which is mentioned in that paragraph, or which is treated as if it were a use so mentioned, and

> (c) apart from this subsection the disposal value to be brought into account under sections 24, 25 and 26 by reason of the sale, contract or assignment would be more than the amount (“the section 76(2) amount”) which (if no disposal value fell to be brought into account) would be applicable instead in accordance with section 76(2) and subsection (5) below,

> sections 24, 25 and 26 (and, accordingly, subsections (1) to (3) of section 75) shall have effect as if the disposal value to be so brought into account were equal to the section 76(2) amount.

> (3) Where—

> (a) a disposal value has fallen, in a case within sub-paragraphs (a) and (b) of subsection (2) above, to be brought into account under sections 24, 25 and 26 by reason of the sale, contract or assignment,

> (b) the machinery or plant in question falls to be treated as belonging, at a time after the event by reason of which that disposal value fell to be brought into account, to any person in consequence of his incurring any capital expenditure,

> (c) the allowances under this Part in respect of that capital expenditure are not restricted by subsection (1), (2) or (3) of section 75, and

> (d) the amount of that expenditure (“the actual amount”) exceeds the maximum allowable amount,

> this Part shall have effect in relation to that expenditure as if it were expenditure of an amount equal to the maximum allowable amount.

> (4) In subsection (3) above “the maximum allowable amount” means the sum of the following amounts—

> (a) the disposal value falling to be brought into account as mentioned in subsection (3)(a) above, and

> (b) so much of the actual amount of the expenditure as is equal to the amount included in that expenditure by virtue of section 66 (installation costs).

> (5) In a case which—

> (a) falls within paragraphs (a) and (b) of subsection (2) above, but

> (b) is a case in which no disposal value falls to be brought into account as mentioned in the applicable subsection of section 75,

> subsections (2) to (4) of section 76 shall have effect as if the amounts referred to in each of paragraphs (b) and (c) of section 76(2) were equal to the notional written-down value of the capital expenditure incurred by the person mentioned in that paragraph on the provision of the machinery or plant.

> (6) Subsection (7) below applies where, in a case falling within paragraphs (a) and (b) of subsection (2) above—

> (a) the finance lease, or

> (b) any transaction or series of transactions of which it forms a part,

> makes provision (otherwise than by means of guarantees from persons connected with the lessee) the effect of which (if the lessor and the persons connected with him are treated as the same person) is to remove the whole, or the greater part, of any non-compliance risk which (apart from that provision) would fall directly or indirectly on the lessor.

> (7) Where this subsection applies—

> (a) subsections (1), (2) and (3) of section 75 shall have effect as if (as well as excluding the making of a first-year allowance), they also required—

> (i) the whole amount of the expenditure, and

> (ii) any additional VAT liability incurred in respect of it,

> to be left out of account in determining the amount for any period of a person’s qualifying expenditure under section 25; and

> (b) subsections (2), (3) and (5) above shall not apply.

> (8) Where subsection (7) above applies in a case where the buyer, person entering into the contract or assignee is different from the lessor—

> (a) any capital expenditure incurred on the provision of the machinery or plant by the lessor, and

> (b) any additional VAT liability incurred in respect of it,

> shall also be disregarded both for the purposes of determining the amount for any period of the lessor’s qualifying expenditure under section 25 and for the purposes of any claim by the lessor to a first-year allowance.

> (9) In this section “the notional written-down value”, in relation to any expenditure incurred by a person on the provision of any machinery or plant, means the amount which, if—

> (a) the sale, contract or assignment were an event by reason of which a disposal value of that machinery or plant fell to be brought into account in that person’s case, and

> (b) the further assumptions set out in subsection (10) below were made in relation to that expenditure,

> would give rise to neither a balancing allowance nor a balancing charge for the chargeable period for which that disposal value would be brought into account in that person’s case.

> (10) Those assumptions are—

> (a) that the person in question incurred the expenditure on the provision of the machinery or plant wholly and exclusively for the purposes of a trade carried on by him (until its deemed discontinuance) separately from any other trade or other activities carried on or assumed to be carried on by him;

> (b) that that person was within the charge to tax in respect of that separate trade;

> (c) that the expenditure was the only capital expenditure ever taken into account in respect of that trade in determining qualifying expenditure for the purposes of section 24;

> (d) that the expenditure is to be treated in relation to that person as expenditure to which Chapter IVA of this Part applies if, but only if, it is expenditure falling in fact to be so treated apart from the preceding assumptions; and

> (e) that there had been made to that person the full amount of every allowance to which, on the assumptions specified in paragraphs (a) to (c) above, that person was entitled in respect of that expenditure.

> (11) This section and sections 75 and 76 shall have effect in relation to machinery or plant where—

> (a) it is directly or indirectly as a consequence of the machinery or plant having been leased under a finance lease that it is available for any use to which it is put, and

> (b) the machinery or plant has at any time been acquired by one public authority from another otherwise than by purchase,

> as if the public authority from whom it was acquired were connected with the public authority that acquired it and with every person connected with the acquiring authority.

> (12) In this section—

> - “deemed discontinuance”, in relation to the trade assumed under subsection (10) above in a case in which section 75(1), (2) or (3) applies or is treated as applying, means a permanent discontinuance of that trade at the time of the sale, of the performance of the contract or, as the case may be, of the assignment;

> - “non-compliance risk”, in relation to a finance lease, means a risk that a loss will be sustained by any person if payments under the lease are not made in accordance with its terms;

> - “non-trading activities” means any activities that do not constitute a trade; and

> - “public authority” includes the Crown or any government or local authority;

> and (subject to subsection (11) above) references in this section to persons connected with each other shall be construed in accordance with section 839 of the principal Act.

- (3) This section has effect for chargeable periods ending on or after 2nd July 1997 except in relation to expenditure incurred before 2nd July 1998 in a case in which—

- (a) the sale referred to in subsection (1) of section 75 of that Act is a sale under a contract entered into before 2nd July 1997;

- (b) the contract referred to in subsection (2) of that section is itself a contract entered into before 2nd July 1997; or

- (c) the assignment referred to in subsection (3) of that section is an assignment made before 2nd July 1997 or in pursuance of a contract entered into before that date.

#### Meaning of “finance lease”

##### 47

- (1) After section 82 of the Capital Allowances Act 1990 there shall be inserted the following section—

> (82A)

> (1) In this Part “finance lease” means any arrangements which—

> (a) provide for machinery or plant to be leased or otherwise made available by a person (“the lessor”) to another (“the lessee”); and

> (b) are such that, in cases where the lessor and persons connected with the lessor are all UK companies—

> (i) the arrangements, or

> (ii) arrangements in which they are comprised,

> fall, in accordance with normal accountancy practice, to be treated in the accounts of one or more of those companies as a finance lease or as a loan.

> (2) In this section—

> - “accounts”, in relation to a company, includes any consolidated group accounts relating to two or more companies of which that company is one;

> - “consolidated group accounts” means accounts prepared in accordance with— section 227 of the Companies Act 1985, or Article 235 of the Companies (Northern Ireland) Order 1986; and

> - “UK company” means a company incorporated in a part of the United Kingdom;

> and references in this section to persons connected with each other shall be construed in accordance with section 839 of the principal Act.

- (2) This section has effect in relation to any case in relation to which the Capital Allowances Act 1990 has effect as amended by any of sections 44 to 46 above.

### Films

@@ -1452,11 +1240,11 @@

> (4) The amount deducted for a relevant period under subsection (1) above shall not exceed so much of the total expenditure incurred by the claimant on—

> (a) the production of the film concerned, or

> (b) the acquisition of the master negative or any master tape or master disc of it,

> as has not already been deducted by virtue of section 68(3) to (6) of the 1990 Act, section 41 above or this section.

> as has not already been deducted by virtue of section 40B or 41 above or this section.

- (2) Subject to subsection (3) below, this section applies to so much of any expenditure falling within paragraphs (a) and (b) of section 42(1) of the Finance (No. 2) Act 1992 as is expenditure in relation to which each of the following conditions is satisfied, that is to say—

- (a) the expenditure is expenditure incurred on or after 2nd July 1997 and before 2nd July 2000;

- (a) the expenditure is expenditure incurred on or after 2nd July 1997 and before 2nd July 2005;

- (b) the film concerned is a film with a total production expenditure of £15 million or less; and

@@ -1476,21 +1264,27 @@

- (b) the maximum amount mentioned in subsection (4)(a) above had already been deducted by virtue of that section.

- (6) In this section “total production expenditure”, in relation to any claim for relief under section 42 of the Finance (No. 2) Act 1992 in the case of any film, means (subject to subsection (7) below) the total of all expenditure on the production of the film, whenever incurred and whether or not incurred by the claimant.

- (6) In this section “*total production expenditure*”, in relation to any claim for relief under section 42 of the Finance (No. 2) Act 1992 in the case of any film, means (subject to subsections (6A) and (7) below) the total of all expenditure on the production of the film, whenever incurred and whether or not incurred by the claimant.

- (6A) For the purposes of this section the production expenditure on a film shall be taken not to include any amount that at the time the film is completed—

- (a) has not been paid, and

- (b) is not the subject of an unconditional obligation to pay within four months after the date of completion.

- (7) For the purposes of this section where—

- (a) any part of the expenditure incurred by any person on the production of a film is incurred under or by virtue of any transaction directly or indirectly between that person and a person connected with him, and

- (b) that part of that expenditure might have been expected to have been of a greater amount (“the arm’s length amount”) if the transaction had been between independent persons dealing at arm’s length,

- (b) that part of that expenditure might have been expected to have been of a greater amount (“*the arm’s length amount*”) if the transaction had been between independent persons dealing at arm’s length,

that part of that expenditure shall be deemed, for the purpose of determining the amount of the total production expenditure on the film, to have been expenditure of an amount equal to the arm’s length amount.

- (8) Subsection (3) of section 43 of the Finance (No. 2) Act 1992 (time of completion of a film) shall apply for the purposes of this section as it applies for the purposes of sections 41 and 42 of that Act, but with the omission of paragraph (b) (completion on incurring acquisition expenditure) and the word “or” immediately preceding it.

- (9) Subsections (3) to (6) of section 159 of the Capital Allowances Act 1990 (time when expenditure incurred) shall apply for determining when for the purposes of this section any expenditure is incurred as they apply for determining when for the purposes of that Act any capital expenditure is incurred, but as if, in subsection (6) of that section, the words “at a time” were substituted for the words “in a chargeable period”.

- (10) Section 839 of the Taxes Act 1988 (meaning of “connected person”) applies for the purposes of this section.

- (9) Subsections (1) to (5) of section 5 of the Capital Allowances Act 2001 (when capital expenditure is incurred) apply for determining when for the purposes of this section any expenditure is incurred as they apply for determining when for the purposes of that Act any capital expenditure is incurred, but as if, in subsection (6) of that section, “at an earlier time” were substituted for “in an earlier chargeable period”.

- (10) Section 839 of the Taxes Act 1988 (meaning of “*connected person*”) applies for the purposes of this section.

- (11) This section applies for the making of a deduction for any relevant period ending on or after 2nd July 1997.

@@ -1522,18 +1316,18 @@

- (3) In subsection (1A) (disregard of paragraph (a) to paragraph (c) of subsection (1) in relation to conveyances or transfers of stock or marketable securities) for “paragraph (c)” there shall be substituted “paragraph (e)”.

- (4) In subsection (2) (disregard of paragraph (a) for the purposes of leases where consideration includes rent which exceeds £600 a year)—

- (a) after the words “shall have effect as if” there shall be inserted “(a)”, and

- (a) after the words “shall have effect as if” there shall be inserted “ (a) ”, and

- (b) after the word “omitted” there shall be inserted—

> and

> (b) in paragraph (d) for the words “paragraphs (a) to (c)” there were substituted the words “paragraphs (b) and (c)”.

- (5) In section 4 of the Finance Act Northern Ireland) 1963, for the words “section 34(4) of the Finance Act 1958”, wherever they occur, there shall be substituted the words “section 7(4) of the Finance Act Northern Ireland) 1958”.

- (5) In section 4 of the Finance Act Northern Ireland) 1963, for the words “section 34(4) of the Finance Act 1958”, wherever they occur, there shall be substituted the words “ section 7(4) of the Finance Act Northern Ireland) 1958 ”.

- (6) This section shall apply to instruments executed on or after 8th July 1997, except where the instrument in question is executed in pursuance of a contract made on or before 2nd July 1997.

@@ -1551,7 +1345,7 @@

- (2) In section 246(2)(b) of the Taxes Act 1988 (charge to ACT at previous year’s rate until 5th May in any year), for “May” there shall be substituted “August”.

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

- (3) Subsection (1) above applies in relation to resolutions passed after the day on which this Act is passed.

@@ -1561,7 +1355,7 @@

##### 51

In this Act “the Taxes Act 1988” means the Income and Corporation Taxes Act 1988.

In this Act “*the Taxes Act 1988*” means the Income and Corporation Taxes Act 1988.

#### Repeals

@@ -1599,7 +1393,7 @@

- (2) For the purposes of this paragraph the average annual profit for a company’s initial period is the amount produced by the following formula—

$$A=365×PD$ Where— A is the average annual profit for the company’s initial period; P is the amount, ascertained in accordance with paragraph 5 below, of the total profits for the company’s initial period; and D is the number of days in the company’s initial period.$

$$A=365×PD$Where—A is the average annual profit for the company’s initial period;P is the amount, ascertained in accordance with paragraph 5 below, of the total profits for the company’s initial period; andD is the number of days in the company’s initial period.$

- (3) For the purposes of this paragraph the applicable price-to-earnings ratio is 9.

@@ -1609,7 +1403,7 @@

- (1) Subject to paragraph 4 below, the value which for privatisation purposes was put on the disposal made on the occasion of a company’s flotation is the amount produced by multiplying the institutional price by the number of shares comprised in the ordinary share capital of the company at the time of its flotation.

- (2) In this paragraph “the institutional price”, in relation to a company, means the highest fixed price per share at which publicly-owned shares in the company were offered for disposal on the occasion of the company’s flotation.

- (2) In this paragraph “*the institutional price*”, in relation to a company, means the highest fixed price per share at which publicly-owned shares in the company were offered for disposal on the occasion of the company’s flotation.

- (3) Subject to sub-paragraph (4) below, where publicly-owned shares in a company were offered for disposal in accordance with any arrangements for the payment of the price in two or more instalments, the price per share at which those shares were offered shall be ascertained by aggregating the instalments.

@@ -1627,7 +1421,7 @@

shall each be taken to be the disposal percentage of the amount which, under paragraph 2 or 3 above, would be the amount of that value but for this paragraph.

- (2) For the purposes of this paragraph “the disposal percentage”, in relation to any company, means the percentage which expresses (in terms of nominal value) how much of the ordinary share capital of the company at the time of its flotation was represented by the publicly-owned shares in the company offered for disposal on the occasion of the company’s flotation.

- (2) For the purposes of this paragraph “*the disposal percentage*”, in relation to any company, means the percentage which expresses (in terms of nominal value) how much of the ordinary share capital of the company at the time of its flotation was represented by the publicly-owned shares in the company offered for disposal on the occasion of the company’s flotation.

### Total profits for the initial period

@@ -1685,15 +1479,15 @@

- (10) In this paragraph—

- “the registrar” means— except in relation to a company formed and registered in Northern Ireland, the registrar within the meaning of the Companies Act 1985; and in relation to a company so formed and registered, the registrar within the meaning of the Companies (Northern Ireland) Order 1986; and

- “statutory format”, in relation to a profit and loss account, means a format set out in the provisions (as they had effect in relation to that account) of Schedule 4 to the Companies Act 1985 or Schedule 4 to the Companies (Northern Ireland) Order 1986.

- “*the registrar*” means—except in relation to a company formed and registered in Northern Ireland, the registrar within the meaning of the Companies Act 1985; andin relation to a company so formed and registered, the registrar within the meaning of the Companies (Northern Ireland) Order 1986;and

- “*statutory format*”, in relation to a profit and loss account, means a format set out in the provisions (as they had effect in relation to that account) of Schedule 4 to the Companies Act 1985 or Schedule 4 to the Companies (Northern Ireland) Order 1986.

### Meaning of the initial period etc

##### 6

- (1) In this Schedule “initial period”, in relation to a company privatised by means of a flotation, means (subject to sub-paragraph (2) below) the period which—

- (1) In this Schedule “*initial period*”, in relation to a company privatised by means of a flotation, means (subject to sub-paragraph (2) below) the period which—

- (a) begins with the first day of the first financial year of the company to begin after the time of its flotation; and

@@ -1735,19 +1529,19 @@

- (1) This paragraph applies where—

- (a) a company (“the predecessor company”) was benefitting on 2nd July 1997 from a windfall from the flotation of an undertaking whose privatisation involved the imposition of economic regulation; and

- (a) a company (“*the predecessor company*”) was benefitting on 2nd July 1997 from a windfall from the flotation of an undertaking whose privatisation involved the imposition of economic regulation; and

- (b) another company which on that date was a demerged successor of the predecessor company is also taken for the purposes of this Part to have been benefitting from such a windfall on that date.

- (2) Where this paragraph applies—

- (a) the amount of the windfall from which the predecessor company was benefitting on 2nd July 1997 shall be equal to only the appropriate fraction of the amount (“the total windfall”) which (but for this paragraph) would have been the amount of that windfall under paragraphs 1 to 6 above; and

- (a) the amount of the windfall from which the predecessor company was benefitting on 2nd July 1997 shall be equal to only the appropriate fraction of the amount (“*the total windfall*”) which (but for this paragraph) would have been the amount of that windfall under paragraphs 1 to 6 above; and

- (b) the amount of the windfall from which the demerged successor shall be taken to have been benefitting on that date shall be equal to the remainder of the total windfall.

- (3) In this paragraph “the appropriate fraction” means the following fraction—

$$PP+S$ Where— P is the amount produced by multiplying the number of shares comprised at the end of the relevant day in the ordinary share capital of the predecessor company by the market price on that day of an ordinary share in that company; and S is the amount produced by multiplying the number of shares comprised at the end of the relevant day in the ordinary share capital of the demerged successor by the market price on that day of an ordinary share in the demerged successor.$

- (3) In this paragraph “*the appropriate fraction*” means the following fraction—

$$PP+S$Where—P is the amount produced by multiplying the number of shares comprised at the end of the relevant day in the ordinary share capital of the predecessor company by the market price on that day of an ordinary share in that company; andS is the amount produced by multiplying the number of shares comprised at the end of the relevant day in the ordinary share capital of the demerged successor by the market price on that day of an ordinary share in the demerged successor.$

- (4) For the purposes of this paragraph references to the market price of shares on any day are references to the sum of—

@@ -1755,13 +1549,13 @@

- (b) one half of the difference between those two prices.

- (5) In this paragraph “the relevant day” means the day on which shares in the demerged successor were first listed on the Official List of the Stock Exchange.

- (5) In this paragraph “*the relevant day*” means the day on which shares in the demerged successor were first listed on the Official List of the Stock Exchange.

### General interpretation of the Schedule

##### 8

- (1) In this Schedule “financial year”, in relation to a company, means (subject to sub-paragraph (2) below)—

- (1) In this Schedule “*financial year*”, in relation to a company, means (subject to sub-paragraph (2) below)—

- (a) a financial year of that company within the meaning of Part VII of the Companies Act 1985; or

@@ -1877,7 +1671,7 @@

- (c) in a case where the required return has not been delivered by the end of six months from the relevant time, a penalty (in addition to the penalties under paragraphs (a) and (b) above) of an amount not exceeding 20 per cent. of the amount of windfall tax with which that company is charged.

- (4) In sub-paragraph (3) above “the relevant time”, in relation to the delivery of a return, means the time by which that return should under paragraph 1(2) above have been delivered.

- (4) In sub-paragraph (3) above “*the relevant time*”, in relation to the delivery of a return, means the time by which that return should under paragraph 1(2) above have been delivered.

### Payment of windfall tax

@@ -2161,7 +1955,7 @@

- (1) Where a chargeable company fraudulently or negligently delivers an incorrect return in response to a requirement under paragraph 1 above, that company shall be liable to a penalty of an amount not exceeding the understated amount.

- (2) In sub-paragraph (1) above “the understated amount”, in relation to a return delivered by a chargeable company, means the amount (if any) by which the amount of windfall tax with which that company is charged exceeds the amount set out in the return as the amount with which it is charged.

- (2) In sub-paragraph (1) above “*the understated amount*”, in relation to a return delivered by a chargeable company, means the amount (if any) by which the amount of windfall tax with which that company is charged exceeds the amount set out in the return as the amount with which it is charged.

- (3) For the purposes of this Part—

@@ -2213,7 +2007,7 @@

##### 16

- (1) Subject to sub-paragraph (3) below, where any amount of windfall tax with which a company is charged is not paid before the end of the period of six months beginning with the time by which it was required to be paid under paragraph 3 above (“the six month period”), any company falling within sub-paragraph (2) below may be assessed (in the name of the chargeable company) to all or any part of the unpaid windfall tax with which the chargeable company is charged.

- (1) Subject to sub-paragraph (3) below, where any amount of windfall tax with which a company is charged is not paid before the end of the period of six months beginning with the time by which it was required to be paid under paragraph 3 above (“*the six month period*”), any company falling within sub-paragraph (2) below may be assessed (in the name of the chargeable company) to all or any part of the unpaid windfall tax with which the chargeable company is charged.

- (2) A company falls within this sub-paragraph if it is one or other or both of the following, that is to say—

@@ -2225,7 +2019,7 @@

- (4) This Schedule shall have effect for the purposes of, and in relation to, an assessment under sub-paragraph (1) above as if the amount to which a company is assessable under this paragraph were an amount of windfall tax with which that company is charged.

- (5) Where, by virtue of this paragraph, any company (“the group member”) pays any amount of windfall tax with which another company (“the charged company”) is charged—

- (5) Where, by virtue of this paragraph, any company (“*the group member*”) pays any amount of windfall tax with which another company (“*the charged company*”) is charged—

- (a) that payment shall discharge the liability of the charged company to pay that amount of windfall tax; but

@@ -2237,7 +2031,7 @@

- (1) Where a company which has become liable to a tax-geared penalty subsequently becomes liable to another such penalty, the amount or, as the case may be, maximum amount of the subsequent penalty shall be treated as reduced so that the aggregate of the tax-geared penalties to which the company has become liable does not exceed the greater or greatest of them.

- (2) In sub-paragraph (1) above “tax-geared penalty” means (subject to sub-paragraph (3) below)—

- (2) In sub-paragraph (1) above “*tax-geared penalty*” means (subject to sub-paragraph (3) below)—

- (a) a penalty under paragraph 2(1) or 14(1) above, or

@@ -2325,17 +2119,17 @@

- (1) In this Schedule—

- “the Board” means the Commissioners of Inland Revenue;

- “chargeable company” means a company which, on 2nd July 1997, was benefitting from a windfall from the flotation of an undertaking whose privatisation involved the imposition of economic regulation;

- “group” means a parent undertaking (within the meaning of the Companies Act 1985 or the Companies (Northern Ireland) Order 1986), together with all of its subsidiary undertakings;

- “the Management Act” means the Taxes Management Act 1970;

- “notice” means notice in writing;

- “Special Commissioners” has the same meaning as in the Tax Acts.

- “*the Board*” means the Commissioners of Inland Revenue;

- “*chargeable company*” means a company which, on 2nd July 1997, was benefitting from a windfall from the flotation of an undertaking whose privatisation involved the imposition of economic regulation;

- “*group*” means a parent undertaking (within the meaning of the Companies Act 1985 or the Companies (Northern Ireland) Order 1986), together with all of its subsidiary undertakings;

- “*the Management Act*” means the Taxes Management Act 1970;

- “*notice*” means notice in writing;

- “*Special Commissioners*” has the same meaning as in the Tax Acts.

- (2) In this Schedule references to the repayment of an amount of windfall tax include references to making an allowance by way of set-off of an amount of windfall tax against any liability.

@@ -2353,7 +2147,7 @@

> (b) the franked investment income of, and foreign income dividends arising to, the company which are referable to its basic life assurance and general annuity business.

- (3) In subsection (8) (interpretation) the definition of “relevant franked investment income” shall cease to have effect.

- (3) In subsection (8) (interpretation) the definition of “*relevant franked investment income*” shall cease to have effect.

- (4) This paragraph has effect in relation to distributions made on or after 2nd July 1997.

@@ -2381,17 +2175,17 @@

> (a) in respect of its life assurance business; or

> (b) in respect of any category of life assurance business which it carries on.

- (3) In subsection (3) (certain franked investment income not to be used to frank distributions but may be the subject of claim under section 242) the words from “but it may be the subject of a claim” onwards shall cease to have effect.

- (4) In subsection (8) (which provides amongst other things for the payment of tax credit) the words from “or by payment of tax credit” onwards shall cease to have effect.

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

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

- (5) Sub-paragraph (2) above has effect in relation to distributions made on or after 2nd July 1997.

- (6) Sub-paragraph (3) above has effect for accounting periods beginning on or after 2nd July 1997.

- (7) Sub-paragraph (4) above has effect for accounting periods beginning on or after 1st January 1998.

- (8) In determining, for the purposes of any claim under section 242 of the Taxes Act 1988 made by virtue of section 434(3) of that Act for an accounting period beginning before 2nd July 1997 and ending on or after that date, the policy holders' share of the franked investment income from investments held in connection with an insurance company’s life assurance business, there shall be left out of account any distributions which are made on or after 2nd July 1997.

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

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

- (8) In determining, for the purposes of any claim under section 242 of the Taxes Act 1988 made by virtue of section 434(3) of that Act for an accounting period beginning before 2nd July 1997 and ending on or after that date, the policy holders’ share of the franked investment income from investments held in connection with an insurance company’s life assurance business, there shall be left out of account any distributions which are made on or after 2nd July 1997.

- (9) Any amount which, by virtue of sub-paragraph (8) above, is treated as a surplus of franked investment income for the purposes of any such claim as is mentioned in that sub-paragraph shall be disregarded for the purposes of section 20(4) of this Act.

@@ -2461,85 +2255,21 @@

##### 9

- (1) Section 441A of the Taxes Act 1988 (section 441: distributions) shall be amended as follows.

- (2) Subsection (1) (which falls as a result of new section 434(1) to (1B)) shall cease to have effect.

- (3) In subsection (2), for “such a distribution” there shall be substituted “a distribution in respect of any asset of its overseas life assurance fund”.

- (4) This paragraph has effect in relation to distributions made on or after 2nd July 1997.

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

### Schedule 19AB to the Taxes Act 1988

##### 10

- (1) Schedule 19AB to the Taxes Act 1988 (payments on account of tax credits and deducted tax) shall be amended as follows.

- (2) In paragraph 1 (entitlement to certain payments on account) in sub-paragraph (1)—

- (a) the words “the aggregate of” shall cease to have effect; and

- (b) paragraph (b) (which confers entitlement to payments in respect of tax credits) shall cease to have effect.

- (3) In sub-paragraph (7) of that paragraph, as that sub-paragraph has effect apart from the provisions of paragraph 1(6) of Schedule 34 to the Finance Act 1996—

- (a) the words “paid or” shall cease to have effect;

- (b) paragraph (b) shall cease to have effect; and

- (c) in the words following paragraph (b), the words “or in section 42(5A) of the Management Act” shall cease to have effect.

- (4) Sub-paragraph (8) (which falls with the repeal of section 438(6)) shall cease to have effect.

- (5) In sub-paragraph (10) (which defines “pension business repayments”)—

- (a) the words “and payments of tax credits”, and

- (b) the words “or in section 42(5A) of the Management Act”,

shall cease to have effect.

- (6) Sub-paragraph (2) above has effect in relation to distributions made on or after 2nd July 1997.

- (7) Sub-paragraphs (3) to (5) above have effect for accounting periods beginning on or after 2nd July 1997.

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

##### 11

- (1) Schedule 19AB to the Taxes Act 1988, as it has effect in relation to provisional repayment periods falling in accounting periods ending on or after the day appointed under section 199 of the Finance Act 1994 for the purposes of Chapter III of Part IV of that Act, shall be amended as follows.

- (2) In paragraph 1, in sub-paragraph (7)—

- (a) the words “paid or” shall cease to have effect;

- (b) paragraph (b) shall cease to have effect; and

- (c) in the words following paragraph (b), the words “or section 42(4) of the Management Act” shall cease to have effect.

- (3) In paragraph 3 (repayment with interest of excessive provisional repayments) in sub-paragraph (1A)—

- (a) the words “paid or” shall cease to have effect;

- (b) the words “or section 42(4) of the Management Act” shall cease to have effect; and

- (c) paragraph (b) shall cease to have effect.

- (4) In sub-paragraph (1B) of that paragraph—

- (a) the words “payments or” shall cease to have effect; and

- (b) paragraph (b) shall cease to have effect.

- (5) In sub-paragraph (8) of that paragraph—

- (a) the words “paid or” shall cease to have effect; and

- (b) paragraph (b) shall cease to have effect.

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

##### 12

- (1) For the purposes of section 121 of the Finance Act 1993 (repayments and payments to friendly societies), Schedule 19AB to the Taxes Act 1988 shall be deemed to have effect without the amendments made by this Schedule.

- (2) In relation to distributions made on or after 6th April 1999, sub-paragraph (1) above shall not prevent Schedule 19AB to the Taxes Act 1988 having effect for the purposes of section 121 of the Finance Act 1993 with the amendments made by this Schedule.

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

### Schedule 19AC to the Taxes Act 1988

@@ -2560,13 +2290,13 @@

- (6) For sub-paragraph (1) of paragraph 9 (which makes provision similar to section 434(1)) there shall be substituted—

> (1) In section 434, the following subsections shall be treated as inserted after subsection (1B)—

> (1C) The exclusion from section 11(2)(a), (aa) or (ab) of distributions received from companies resident in the United Kingdom shall not apply in relation to—

> (a) the charge to corporation tax on the life assurance profits of an overseas life insurance company computed in accordance with the provisions of this Act applicable to Case I of Schedule D; or

> (b) any computation of such profits in accordance with those provisions.

> (1D) Paragraph 2 of Schedule F shall not have effect for the purposes of subsection (1C)(a) or (b) above, but this subsection shall not apply in relation to distributions in respect of which an overseas life insurance company is entitled to a tax credit under section 441A.

> (1E) The reference in subsection (1C) above to the life assurance profits of an overseas life insurance company is a reference to the profits of the company—

> (a) in respect of its life assurance business; or

> (b) in respect of any category of life assurance business which it carries on.

> (“) The exclusion from section 11(2)(a), (aa) or (ab) of distributions received from companies resident in the United Kingdom shall not apply in relation to—

> (a) the charge to corporation tax on the life assurance profits of an overseas life insurance company computed in accordance with the provisions of this Act applicable to Case I of Schedule D; or

> (b) any computation of such profits in accordance with those provisions.

> (1E) The reference in subsection (1C) above to the life assurance profits of an overseas life insurance company is a reference to the profits of the company—

> (a) in respect of its life assurance business; or

> (b) in respect of any category of life assurance business which it carries on.”

- (7) Paragraph 9A (which falls with the repeal of section 434A(1)) shall cease to have effect.

@@ -2580,7 +2310,7 @@

- (12) Paragraph 12(1) (which falls with the repeal of paragraph 5B(1) to (3)) shall cease to have effect.

- (13) In paragraph 15, sub-paragraph (1) (which falls with the repeal of paragraph 1(8) of Schedule 19AB) shall cease to have effect.

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

- (14) Sub-paragraphs (2), (3), (5), (7), (9), (12) and (13) above have effect for accounting periods beginning on or after 2nd July 1997.

@@ -2594,21 +2324,21 @@

##### 14

- (1) Section 89 of the Finance Act 1989 (policy holders' share of profits) shall be amended as follows.

- (1) Section 89 of the Finance Act 1989 (policy holders’ share of profits) shall be amended as follows.

- (2) In subsection (2)—

- (a) paragraph (a) (which provides for Case I profits to be reduced by unrelieved franked investment income in respect of which an election under section 438(6) has been made) shall cease to have effect;

- (b) in paragraph (b) (which provides for Case I profits to be reduced by the shareholders' share of any other unrelieved franked investment income from investments held in connection with life assurance business)—

- (b) in paragraph (b) (which provides for Case I profits to be reduced by the shareholders’ share of any other unrelieved franked investment income from investments held in connection with life assurance business)—

- (i) the words “other unrelieved” shall cease to have effect; and

- (ii) for “from investments held in connection with the company’s life assurance business” there shall be substituted “which is referable to the company’s basic life assurance and general annuity business”; and

- (c) in paragraph (c) (which provides for Case I profits to be reduced by the shareholders' share of foreign income dividends in respect of such investments) for “in respect of investments held in connection with the company’s life assurance business” there shall be substituted “which are referable to the company’s basic life assurance and general annuity business”.

- (3) Subsection (8) (meaning of “unrelieved” franked investment income) shall cease to have effect.

- (ii) for “from investments held in connection with the company’s life assurance business” there shall be substituted “ which is referable to the company’s basic life assurance and general annuity business ”; and

- (c) in paragraph (c) (which provides for Case I profits to be reduced by the shareholders’ share of foreign income dividends in respect of such investments) for “in respect of investments held in connection with the company’s life assurance business” there shall be substituted “ which are referable to the company’s basic life assurance and general annuity business ”.

- (3) Subsection (8) (meaning of “*unrelieved*” franked investment income) shall cease to have effect.

- (4) This paragraph has effect in relation to distributions made on or after 2nd July 1997.

@@ -2633,7 +2363,7 @@

##### 1

- (1) In section 7 of the Taxes Management Act 1970 (notice of liability to income tax and capital gains tax) in subsection (6) (sources of income which fall within that subsection) after the words “other than the basic rate” there shall be inserted “, the Schedule F ordinary rate”.

- (2) This paragraph has effect for the year 1999-00 and subsequent years of assessment.

@@ -2669,7 +2399,7 @@

##### 4

- (1) In section 231 of the Taxes Act 1988 (tax credits for certain recipients of qualifying distributions) in subsection (1) (whose provisions are expressed to be subject to sections 247 and 441A) for “441A” there shall be substituted “469(2A)”.

- (2) This paragraph has effect in relation to distributions made on or after 6th April 1999.

@@ -2691,11 +2421,11 @@

- (1) Section 233 of the Taxes Act 1988 (taxation of certain recipients of distributions and in respect of non-qualifying distributions) shall be amended as follows.

- (2) In subsections (1) to (1B), for the words “lower rate”, wherever occurring, there shall be substituted “Schedule F ordinary rate”.

- (3) In subsection (1B), for the words “rate applicable to trusts”, in both places where they occur, there shall be substituted “Schedule F trust rate”.

- (4) In subsection (2), in the definition of “excess liability”, for “were charged at the lower rate to the exclusion of the higher rate or, as the case may be, the rate applicable to trusts” there shall be substituted

- (2) In subsections (1) to (1B), for the words “lower rate”, wherever occurring, there shall be substituted “ Schedule F ordinary rate ”.

- (3) In subsection (1B), for the words “rate applicable to trusts”, in both places where they occur, there shall be substituted “ Schedule F trust rate ”.

- (4) In subsection (2), in the definition of “*excess liability*”, for “were charged at the lower rate to the exclusion of the higher rate or, as the case may be, the rate applicable to trusts” there shall be substituted

> were charged—

> (a) in the case of income chargeable under Schedule F, at the Schedule F ordinary rate, and

@@ -2718,25 +2448,13 @@

##### 8

- (1) In section 238(1) of the Taxes Act 1988 (interpretation etc) in the definition of “franked payment” for “rate of advance corporation tax” there shall be substituted “tax credit fraction”.

- (2) This paragraph has effect in relation to distributions made on or after 6th April 1999.

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

### Section 241

##### 9

- (1) In section 241 of the Taxes Act 1988, for subsection (2) (amount on which ACT is payable where there is in an accounting period an excess of franked payments over franked investment income) there shall be substituted—

> (2) If in an accounting period there is such an excess, advance corporation tax shall be payable on the excess at nine-tenths of the rate of advance corporation tax.

- (2) Sub-paragraph (1) above has effect in relation to accounting periods beginning on or after 6th April 1999.

- (3) In the case of an accounting period beginning before, and ending on or after, 6th April 1999, the advance corporation tax payable shall be computed—

- (a) in accordance with section 241, as amended by sub-paragraph (1) above, in the case of that part of the excess, if any, which, had there been such a period, would have accrued in an accounting period beginning with 6th April 1999 and ending with the true accounting period; and

- (b) in accordance with that section as it has effect apart from subsection (1) above in the case of that part of the excess, if any, which, had there been such a period, would have accrued in an accounting period beginning with the true accounting period and ending with 6th April 1999.

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

### Section 249

@@ -2746,13 +2464,13 @@

- (2) In subsection (4) (taxation of individuals)—

- (a) in the words preceding paragraph (a), for “lower rate” there shall be substituted “Schedule F ordinary rate”;

- (b) in paragraph (a), for “lower rate” there shall be substituted “Schedule F ordinary rate”; and

- (c) in paragraph (c), after “as if it were income to which section 1A applies” there shall be inserted “as it applies to income chargeable under Schedule F”.

- (3) In subsection (6) (taxation of trustees) in paragraph (b) for “lower rate” there shall be substituted “Schedule F ordinary rate”.

- (a) in the words preceding paragraph (a), for “lower rate” there shall be substituted “ Schedule F ordinary rate ”;

- (b) in paragraph (a), for “lower rate” there shall be substituted “ Schedule F ordinary rate ”; and

- (c) in paragraph (c), after “as if it were income to which section 1A applies” there shall be inserted “ as it applies to income chargeable under Schedule F ”.

- (3) In subsection (6) (taxation of trustees) in paragraph (b) for “lower rate” there shall be substituted “ Schedule F ordinary rate ”.

- (4) This paragraph has effect in relation to share capital, within the meaning of section 249 of the Taxes Act 1988, issued on or after 6th April 1999.

@@ -2762,9 +2480,9 @@

- (1) In section 421 of the Taxes Act 1988 (taxation of borrower when loan under s.419 released etc) in subsection (1)—

- (a) in paragraphs (a) and (b), for the words “lower rate”, in both places where they occur, there shall be substituted “Schedule F ordinary rate”; and

- (b) in paragraph (c), after the words “as if it were income to which section 1A applies” there shall be inserted “by virtue of subsection (2)(b) of that section”.

- (a) in paragraphs (a) and (b), for the words “lower rate”, in both places where they occur, there shall be substituted “ Schedule F ordinary rate ”; and

- (b) in paragraph (c), after the words “as if it were income to which section 1A applies” there shall be inserted “ by virtue of subsection (2)(b) of that section ”.

- (2) This paragraph has effect in relation to the release or writing off of the whole or part of a debt on or after 6th April 1999.

@@ -2774,14 +2492,14 @@

- (1) Section 469 of the Taxes Act 1988 (unit trusts other than authorised unit trusts) shall be amended as follows.

- (2) In subsection (2) (income of the trustees to which section 1A applies to be chargeable at the basic rate instead of the lower rate) for “lower rate” there shall be substituted “rate applicable in accordance with subsection (1A) of that section”.

- (2) In subsection (2) (income of the trustees to which section 1A applies to be chargeable at the basic rate instead of the lower rate) for “lower rate” there shall be substituted “ rate applicable in accordance with subsection (1A) of that section ”.

- (3) After subsection (2) there shall be inserted—

> (2A) Section 231(1) shall not apply where the recipient of the distribution there mentioned is the trustees of the scheme.

> (2B) Section 233(1) shall not apply where the person there mentioned is the trustees of the scheme.

- (4) In subsection (9) (sections 686 and 687 not to apply) after “686” there shall be inserted “, 686A”.

- (4) In subsection (9) (sections 686 and 687 not to apply) after “686” there shall be inserted “ , 686A ”.

- (5) This paragraph has effect in relation to distributions made on or after 6th April 1999.

@@ -2789,11 +2507,11 @@

##### 13

- (1) In section 549 of the Taxes Act 1988 (policies of life insurance etc: corresponding deficiency relief) in subsection (2) (which contains a definition of “excess liability”)—

- (a) after “(so far as applicable in accordance with section 1A) the lower rate” there shall be inserted “or the Schedule F ordinary rate”; and

- (b) for “any higher rate” there shall be substituted “the higher rate and the Schedule F upper rate”.

- (1) In section 549 of the Taxes Act 1988 (policies of life insurance etc: corresponding deficiency relief) in subsection (2) (which contains a definition of “*excess liability*”)—

- (a) after “(so far as applicable in accordance with section 1A) the lower rate” there shall be inserted “ or the Schedule F ordinary rate ”; and

- (b) for “any higher rate” there shall be substituted “ the higher rate and the Schedule F upper rate ”.

- (2) This paragraph has effect for the year 1999-00 and subsequent years of assessment.

@@ -2861,9 +2579,9 @@

- (2) In subsection (1)—

- (a) in paragraph (a) (set against income within subsection (2) or (3) before other income) after “subsection (2)” there shall be inserted “, (2A)”;

- (b) in paragraph (b) (set against income within subsection (2) before subsection (3)) after “subsection (2)” there shall be inserted “or (2A)”; and

- (a) in paragraph (a) (set against income within subsection (2) or (3) before other income) after “subsection (2)” there shall be inserted “ , (2A) ”;

- (b) in paragraph (b) (set against income within subsection (2) before subsection (3)) after “subsection (2)” there shall be inserted “ or (2A) ”; and

- (c) at the end of paragraph (b) there shall be added

@@ -2890,7 +2608,7 @@

> (2A) Income falls within this subsection if it is income to which section 1A applies by virtue of its being equivalent foreign income falling within subsection (3)(b) of that section and chargeable under Case V of Schedule D.

- (5) In subsection (3) (income to which section 1A applies but which does not fall within subsection (2) of s.689B) after “subsection (2)” there shall be inserted “or (2A)”.

- (5) In subsection (3) (income to which section 1A applies but which does not fall within subsection (2) of s.689B) after “subsection (2)” there shall be inserted “ or (2A) ”.

- (6) This paragraph has effect for the year 1999-00 and subsequent years of assessment.

@@ -2898,11 +2616,11 @@

##### 17

- (1) In section 699 of the Taxes Act 1988 (relief from higher rate tax for inheritance tax on accrued income) in subsection (2) (definition of “excess liability”)—

- (a) after “(so far as applicable in accordance with section 1A) the lower rate” there shall be inserted “or the Schedule F ordinary rate”; and

- (b) for “any higher rate” there shall be substituted “the higher rate and the Schedule F upper rate”.

- (1) In section 699 of the Taxes Act 1988 (relief from higher rate tax for inheritance tax on accrued income) in subsection (2) (definition of “*excess liability*”)—

- (a) after “(so far as applicable in accordance with section 1A) the lower rate” there shall be inserted “ or the Schedule F ordinary rate ”; and

- (b) for “any higher rate” there shall be substituted “ the higher rate and the Schedule F upper rate ”.

- (2) This paragraph has effect for the year 1999-00 and subsequent years of assessment.

@@ -2910,18 +2628,16 @@

##### 18

- (1) In section 703 of the Taxes Act 1988 (cancellation of tax advantage) in subsection (5)(b) (which requires a notice under that section to specify the amount equal to tax at the lower rate on the amount there mentioned) for “lower rate” there shall be substituted “Schedule F ordinary rate”.

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

### Section 709

##### 19

- (1) In section 709 of the Taxes Act 1988 (meaning of tax advantage etc) in subsection (2A) (references to a relief and to repayment of tax to include references to a tax credit and payment of any amount in respect of a tax credit) the words “and to a repayment of tax”, “respectively” and “and to a payment of any amount in respect of a tax credit” shall be omitted.

- (2) This paragraph has effect for the year 1999-00 and subsequent years of assessment.

### Section 709

##### 19

- (2) This paragraph has effect for the year 1999-00 and subsequent years of assessment.

### Section 743

##### 20

@@ -2930,7 +2646,7 @@

- (2) In subsection (1) (subject to an exception for income which has borne tax by deduction at the basic rate or the lower rate, income chargeable under s.739 to be charged under Case VI of Schedule D)—

- (a) for “or the lower rate” there shall be substituted “, the lower rate or the Schedule F ordinary rate”; and

- (a) for “or the lower rate” there shall be substituted “ , the lower rate or the Schedule F ordinary rate ”; and

- (b) for “under Case VI of Schedule D” there shall be substituted—

@@ -2958,9 +2674,9 @@

- (1) In section 819 of the Taxes Act 1988 (old references to standard rate tax) in subsection (2)—

- (a) after “(so far as applicable in accordance with section 1A) the lower rate” there shall be inserted “or the Schedule F ordinary rate”; and

- (b) for “any higher rate” there shall be substituted “the higher rate and the Schedule F upper rate”.

- (a) after “(so far as applicable in accordance with section 1A) the lower rate” there shall be inserted “ or the Schedule F ordinary rate ”; and

- (b) for “any higher rate” there shall be substituted “ the higher rate and the Schedule F upper rate ”.

- (2) This paragraph has effect for the year 1999-00 and subsequent years of assessment.

@@ -2970,15 +2686,15 @@

- (1) In section 832 of the Taxes Act 1988 (interpretation of the Tax Acts) the following definitions shall be inserted in subsection (1) at the appropriate places—

> (a) “the Schedule F ordinary rate” shall be construed in accordance with section 1B(2);

> 1. “*the Schedule F ordinary rate*” shall be construed in accordance with section 1B(2);

;

> (b) “the Schedule F trust rate” shall be construed in accordance with section 686(1A);

> (b) “*the Schedule F trust rate*” shall be construed in accordance with section 686(1A);

;

> (c) “the Schedule F upper rate” shall be construed in accordance with section 1B(2);

> (c) “*the Schedule F upper rate*” shall be construed in accordance with section 1B(2);

@@ -2988,36 +2704,7 @@

##### 23

- (1) Schedule 13 to the Taxes Act 1988 (collection of ACT) shall be amended as follows.

- (2) In paragraph 2, in sub-paragraph (4) (calculation of amount to be paid where the franked payments for the return period exceed the franked investment income or where there is no franked investment income) for the words following “shall be calculated” there shall be substituted “in accordance with sub-paragraph (4A) below”.

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

> (4A) The tax mentioned in sub-paragraph (4) above shall be calculated at a rate equal to nine-tenths of the rate of advance corporation tax in force for the financial year in which the return period ends—

> (a) in a case falling within paragraph (a) of that sub-paragraph, on the excess mentioned in that paragraph; or

> (b) in a case falling within paragraph (b) of that sub-paragraph, on the amount shown under sub-paragraph (1)(a) above.

- (4) In paragraph 4 (receipt of franked investment income after payment of ACT) for sub-paragraph (3) (which imposes a limit on repayment) there shall be substituted—

> (3) The amount of the repayment—

> (a) if no franked payments were made by the company in the return period for which a return is made by virtue of sub-paragraph (2) above, shall not exceed an amount equal to the advance corporation tax that would be payable in respect of a distribution equal to the difference between—

> (i) the franked investment income received, and

> (ii) the tax credit comprised in that franked investment income; and

> (b) in any other case, shall not exceed an amount equal to the advance corporation tax that would be payable in respect of a distribution equal to the amount by which—

> (i) the franked investment income received, exceeds

> (ii) the franked payments made in the return period,

> at the rate provided in paragraph 2(4A) above.

- (5) The preceding provisions of this paragraph have effect in relation to return periods, within the meaning of Schedule 13 to the Taxes Act 1988, ending on or after 6th April 1999.

- (6) If, in the period beginning with 1st April 1999 and ending with 5th April 1999—

- (a) any franked investment income is received by a company, or

- (b) any franked payments are made by a company,

that period shall, in the case of the company, be treated for the purposes of Schedule 13 to the Taxes Act 1988 as if it were a separate return period.

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

### The Taxation of Chargeable Gains Act 1992

@@ -3027,17 +2714,13 @@

- (1) Section 4 of the Taxation of Chargeable Gains Act 1992 (rates of capital gains tax) shall be amended as follows.

- (2) In subsection (2) (case where income tax is chargeable at the higher rate on part of income of an individual) after “the higher rate”, where first occurring, there shall be inserted “or the Schedule F upper rate”.

- (3) In subsection (3) (case where income tax is not chargeable at the higher rate on income of an individual but his gains exceed the unused basic rate band) after “the higher rate”, where first occurring, there shall be inserted “or the Schedule F upper rate”.

- (4) In subsection (3A) (disregard of income chargeable at the lower rate in accordance with section 1A of the Taxes Act 1988 etc)—

- (a) after “the lower rate” there shall be inserted “or the Schedule F ordinary rate”; and

- (b) after “the higher rate” there shall be inserted “or the Schedule F upper rate”.

- (5) In subsection (3B), in paragraph (a) (determination in certain cases of the amount of income comprised in an individual’s total income which is chargeable at the higher rate) after “the higher rate” there shall be inserted “or the Schedule F upper rate”.

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

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

- (6) This paragraph has effect for the year 1999-00 and subsequent years of assessment.

@@ -3045,7 +2728,7 @@

##### 25

- (1) In section 6 of the Taxation of Chargeable Gains Act 1992 (other special cases) in subsection (3) (cases where income includes gains on policies of life insurance etc) in paragraph (b) after “as if no income were chargeable at the higher rate” there shall be inserted “or the Schedule F upper rate”.

- (2) This paragraph has effect for the year 1999-00 and subsequent years of assessment.

@@ -3109,7 +2792,7 @@

##### 1

This Part of this Schedule applies where a person (“the claimant”)—

This Part of this Schedule applies where a person (“*the claimant*”)—

- (a) would, apart from paragraph 2 below, be entitled to a payment under section 35(1) of this Act in respect of a distribution, and

@@ -3141,7 +2824,7 @@

##### 6

A person (“the claimant”) who receives an amount treated as a distribution by virtue of section 209(3), 210 or 211(1) of the Taxes Act 1988 (“a bonus issue”) shall not be entitled to a payment under section 35(1) of this Act in respect of that distribution, except to the extent that paragraph 7 below otherwise provides.

A person (“*the claimant*”) who receives an amount treated as a distribution by virtue of section 209(3), 210 or 211(1) of the Taxes Act 1988 (“*a bonus issue*”) shall not be entitled to a payment under section 35(1) of this Act in respect of that distribution, except to the extent that paragraph 7 below otherwise provides.

##### 7

@@ -3165,11 +2848,11 @@

##### 1

- (1) Section 13 of the Taxes Act 1988 (small companies' relief) shall be amended as follows.

- (1) Section 13 of the Taxes Act 1988 (small companies’ relief) shall be amended as follows.

- (2) In subsection (7) (profits of a company for an accounting period to include foreign income dividends) the words “and with the addition of foreign income dividends arising to the company” shall cease to have effect.

- (3) Subsection (8A) (definition of “foreign income dividends”) shall cease to have effect.

- (3) Subsection (8A) (definition of “*foreign income dividends*”) shall cease to have effect.

- (4) This paragraph has effect for accounting periods beginning on or after 6th April 1999.

@@ -3181,7 +2864,7 @@

- (2) In subsection (2) (deductions from amount treated as expenses of management) the words “foreign income dividends” shall cease to have effect.

- (3) Subsection (6) (definition of “foreign income dividends”) shall cease to have effect.

- (3) Subsection (6) (definition of “*foreign income dividends*”) shall cease to have effect.

- (4) This paragraph has effect in relation to distributions made on or after 6th April 1999.

@@ -3209,7 +2892,7 @@

##### 5

- (1) In section 431(2) of the Taxes Act 1988 (interpretation of Chapter I of Part XII) the definition of “foreign income dividends” shall cease to have effect.

- (1) In section 431(2) of the Taxes Act 1988 (interpretation of Chapter I of Part XII) the definition of “*foreign income dividends*” shall cease to have effect.

- (2) This paragraph has effect for accounting periods beginning on or after 6th April 1999.

@@ -3241,7 +2924,7 @@

- (a) subsection (5) (construction of references to foreign income dividends) shall cease to have effect; and

- (b) in subsection (6), for “to 468R” there shall be substituted “to 468Q”.

- (b) in subsection (6), for “to 468R” there shall be substituted “ to 468Q ”.

- (2) In section 468I of the Taxes Act 1988 (distribution accounts)—

@@ -3259,7 +2942,7 @@

- (4) Section 468K of the Taxes Act 1988 (foreign income distributions) shall cease to have effect.

- (5) In section 468M of the Taxes Act 1988 (deduction of tax: simple case) in subsection (5) (definition of “eligible income”) paragraph (c) shall cease to have effect.

- (5) In section 468M of the Taxes Act 1988 (deduction of tax: simple case) in subsection (5) (definition of “*eligible income*”) paragraph (c) shall cease to have effect.

- (6) In section 468Q of the Taxes Act 1988 (dividend distribution to corporate unit holder)—

@@ -3269,9 +2952,9 @@

- (i) for the formula there shall be substituted the following formula—

$U=A+CD$

- (ii) the definition of “B” shall cease to have effect; and

$U=A×CD$

- (ii) the definition of “*B*” shall cease to have effect; and

- (c) subsection (4) shall cease to have effect.

@@ -3291,7 +2974,7 @@

- (3) In subsection (4) (which contains a reference to foreign income dividends) the words “or foreign income dividends” shall cease to have effect.

- (4) Subsection (5) (definition of “foreign income dividends”) shall cease to have effect.

- (4) Subsection (5) (definition of “*foreign income dividends*”) shall cease to have effect.

- (5) This paragraph has effect in relation to distributions made on or after 6th April 1999.

@@ -3353,7 +3036,7 @@

- (2) In subsection (2) (which contains a reference to foreign income dividends) the words “foreign income dividends” shall cease to have effect.

- (3) Subsection (4) (definition of “foreign income dividends”) shall cease to have effect.

- (3) Subsection (4) (definition of “*foreign income dividends*”) shall cease to have effect.

- (4) This paragraph has effect in relation to distributions made on or after 6th April 1999.

@@ -3383,7 +3066,7 @@

- (a) in sub-paragraph (1)—

- (i) for “paragraphs 7(2), 3A(2) and 9A(2)” there shall be substituted “paragraph 7(2)”; and

- (i) for “paragraphs 7(2), 3A(2) and 9A(2)” there shall be substituted “ paragraph 7(2) ”; and

- (ii) paragraphs (d) to (f) (which require the return to include information in relation to foreign income dividends) shall cease to have effect; and

@@ -3421,7 +3104,7 @@

- (1) Schedule 23A to the Taxes Act 1988 (manufactured dividends and interest) shall be amended as follows.

- (2) In paragraph 1(1) (interpretation) the definition of “foreign income dividend” shall cease to have effect.

- (2) In paragraph 1(1) (interpretation) the definition of “*foreign income dividend*” shall cease to have effect.

- (3) In paragraph 2 (manufactured dividends on UK equities: general) in sub-paragraph (6) the words “Subject to paragraph 2B(2)(b) below” shall cease to have effect.

@@ -3445,9 +3128,9 @@

##### 19

- (1) Section 89 of the Finance Act 1989 (policy holders' share of profits) shall be amended as follows.

- (2) In subsection (2), paragraph (c) (which provides for Case I profits to be reduced by the shareholders' share of any foreign income dividends from investments held in connection with life assurance business) shall cease to have effect.

- (1) Section 89 of the Finance Act 1989 (policy holders’ share of profits) shall be amended as follows.

- (2) In subsection (2), paragraph (c) (which provides for Case I profits to be reduced by the shareholders’ share of any foreign income dividends from investments held in connection with life assurance business) shall cease to have effect.

- (3) Subsection (2A) (which explains certain expressions used in subsection (2)(c)) shall cease to have effect.

@@ -3479,7 +3162,7 @@

##### 22

- (1) Where, in the case of an accounting period of a company beginning before 6th April 1999 and ending on or after 5th April 1999 (“a transitional period”), there would (apart from this sub-paragraph) be such an excess as is mentioned in section 246F(3) of the Taxes Act 1988, no such excess shall be deemed to have arisen.

- (1) Where, in the case of an accounting period of a company beginning before 6th April 1999 and ending on or after 5th April 1999 (“*a transitional period*”), there would (apart from this sub-paragraph) be such an excess as is mentioned in section 246F(3) of the Taxes Act 1988, no such excess shall be deemed to have arisen.

- (2) In their application in relation to foreign income dividends paid in an accounting period of a company beginning before 6th April 1999, sections 246J(5) and 246K(10) of the Taxes Act 1988 shall have effect as if the reference to any subsequent accounting period—

@@ -3512,7 +3195,7 @@

The following sections shall be inserted after section 403—

> (403A)

> (1) The amount which, on a claim for group relief, may be set off against the total profits of the claimant company for an accounting period (“the claim period”), and accordingly the amount to which any consent required in respect of that claim may relate, shall not exceed whichever is the smaller of the following amounts—

> (1) The amount which, on a claim for group relief, may be set off against the total profits of the claimant company for an accounting period (“*the claim period*”), and accordingly the amount to which any consent required in respect of that claim may relate, shall not exceed whichever is the smaller of the following amounts—

> (a) the unused part of the surrenderable amount for the overlapping period; and

> (b) the unrelieved part of the claimant company’s total profits for the overlapping period.

> (2) For the purposes of any claim for group relief—

@@ -3522,7 +3205,7 @@

> (a) the surrenderable amount for the overlapping period is so much of the surrenderable amount for the accounting period of the surrendering company to which the claim relates as is attributable, on an apportionment in accordance with section 403B, to the overlapping period;

> (b) the surrenderable amount for an accounting period of the surrendering company is the total amount for that accounting period of the losses and other amounts which (disregarding this section and section 403C) are available in that company’s case for set off by way of group relief; and

> (c) the amount of the claimant company’s total profits for the overlapping period is so much of its total profits for the claim period as is attributable, on an apportionment in accordance with section 403B, to the overlapping period.

> (4) In relation to any claim for group relief (“the relevant claim”) the amount of the prior surrenders attributable to the period which is the overlapping period in the case of the relevant claim is equal to the aggregate amount (if any) produced by—

> (4) In relation to any claim for group relief (“*the relevant claim*”) the amount of the prior surrenders attributable to the period which is the overlapping period in the case of the relevant claim is equal to the aggregate amount (if any) produced by—

> (a) taking the amount of every claim for group relief (whether a group claim or a consortium claim) which—

> (i) has been made before the relevant claim,

> (ii) was made in respect of the whole or any part of the amount which, in relation to the relevant claim, is the surrenderable amount for the accounting period of the surrendering company to which the claim relates, and

@@ -3533,7 +3216,7 @@

> (ii) the period which is the overlapping period in the case of the relevant claim;

> and

> (d) aggregating all the amounts determined under paragraph (c) above in respect of the previously made claims.

> (5) In relation to any claim for group relief (“the relevant claim”), the amount of previously claimed group relief attributable to the period which is the overlapping period in the case of that claim is the aggregate amount produced by—

> (5) In relation to any claim for group relief (“*the relevant claim*”), the amount of previously claimed group relief attributable to the period which is the overlapping period in the case of that claim is the aggregate amount produced by—

> (a) taking the amount of every claim for group relief (whether a group claim or a consortium claim) which—

> (i) has been made before the relevant claim,

> (ii) was a claim to set off an amount by way of group relief against the claimant company’s total profits for the period which, in relation to the relevant claim, is the claim period, and

@@ -3544,13 +3227,13 @@

> (ii) the period which is the overlapping period in the case of the relevant claim;

> and

> (d) aggregating all the amounts determined under paragraph (c) above in respect of the previously made claims.

> (6) For the purposes of this section the amount of group relief allowable on any claim (“the finalised claim”) shall fall to be determined as at the time when that claim ceases to be capable of being withdrawn as if—

> (6) For the purposes of this section the amount of group relief allowable on any claim (“*the finalised claim*”) shall fall to be determined as at the time when that claim ceases to be capable of being withdrawn as if—

> (a) every claim that became incapable of being withdrawn before that time were a claim made before the finalised claim; and

> (b) every claim that remains capable of being withdrawn at that time were a claim made after the finalised claim.

> (7) Subject to subsection (6) above and without prejudice to any power to withdraw and resubmit claims, where (but for this subsection) more than one claim for group relief would be taken for the purposes of subsections (4) and (5) above to have been made at the same time, those claims shall be deemed, instead, to have been made—

> (a) in such order as the company or companies making them may, by notice to any officer of the Board, elect or, as the case may be, jointly elect; and

> (b) if there is no such election, in such order as an officer of the Board may direct.

> (8) In this section “the overlapping period”, in relation to a claim for group relief, means (subject to subsection (9) below and section 406(3) and (7)) the period which is common to both—

> (8) In this section “*the overlapping period*”, in relation to a claim for group relief, means (subject to subsection (9) below and section 406(3) and (7)) the period which is common to both—

> (a) the claim period; and

> (b) the accounting period of the surrendering company to which the claim relates.

> (9) For the purposes of this section any time in the period which, in relation to any claim for group relief, is common to both the accounting periods mentioned in subsection (8) above but which is a time when the qualifying conditions were not satisfied—

@@ -3560,7 +3243,7 @@

> (a) if the claim is a group claim, whenever the claimant company and the surrendering company are both members of the same group; and

> (b) if the claim is a consortium claim, whenever the conditions specified in section 402(3) for the making of that claim are satisfied in the case of the claimant company and the surrendering company.

> (403B)

> (1) Subject to subsection (2) below, where an apportionment falls to be made under section 403A for the purpose of determining how much of an amount for any period (“the first period”) is attributable to any other period (“the second period”) which comprises the whole or a part of the first period—

> (1) Subject to subsection (2) below, where an apportionment falls to be made under section 403A for the purpose of determining how much of an amount for any period (“*the first period*”) is attributable to any other period (“*the second period*”) which comprises the whole or a part of the first period—

> (a) the whole of that amount shall be attributed to the second period if the first and second periods begin and end at the same times; and

> (b) in any other case, the apportionment shall be made on a time basis according to how much of the first period coincides with the second period.

> (2) Where the circumstances of a particular case are such that the making on the time basis mentioned in subsection (1)(b) above of some or all of the apportionments to be made in that case would work in a manner that would be unjust or unreasonable in relation to any person, those apportionments shall be made instead (to the extent only that is necessary in order to avoid injustice and unreasonableness) in such other manner as may be just and reasonable.

@@ -3582,19 +3265,19 @@

##### 3

Subsection (9) of section 403 (fraction limiting relief in the case of consortium claims) shall cease to have effect.

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

##### 4

In section 405(4) (claims relating to losses of members of both groups and consortia), for the words from “a fraction” to “403(9)(b))” there shall be substituted “which an amount may by virtue of that claim be set off by way of group relief”.

In section 405(4) (claims relating to losses of members of both groups and consortia), for the words from “a fraction” to “403(9)(b))” there shall be substituted “ which an amount may by virtue of that claim be set off by way of group relief ”.

##### 5

- (1) In section 406 (consortium claims by or in relation to group members and consortium companies), in each of subsections (2) and (6) (which refer to the fraction in section 403(9))—

- (a) for “appropriate under section 403(9)” there shall be substituted “the relevant fraction for the purposes of section 403C”; and

- (b) for “that which would be appropriate” there shall be substituted “it would be”.

- (a) for “appropriate under section 403(9)” there shall be substituted “ the relevant fraction for the purposes of section 403C ”; and

- (b) for “that which would be appropriate” there shall be substituted “ it would be ”.

- (2) For subsection (3) of that section there shall be substituted the following subsection—

@@ -3608,7 +3291,7 @@

> (a) were not comprised in the period which is the overlapping period in the case of that claim; and

> (b) were to be treated instead as if it constituted a part of the claim period that did not coincide with any part of the accounting period of the surrendering company to which the claim relates.

- (4) In subsection (8) of that section, for the words from “that fraction” to “409(3)(b)” there shall be substituted “the maximum amount of relief available to the claimant company”.

- (4) In subsection (8) of that section, for the words from “that fraction” to “409(3)(b)” there shall be substituted “ the maximum amount of relief available to the claimant company ”.

##### 6

@@ -4025,207 +3708,3 @@

[^c13262491]: [Sch. 8](https://www.legislation.gov.uk/ukpga/1997/58/schedule/8) restricted (31.7.1998 with effect as mentioned in [s. 76(1)](https://www.legislation.gov.uk/ukpga/1998/36/section/76/1) of the amending Act) by [1998 c. 36](https://www.legislation.gov.uk/ukpga/1998/36), [s. 76(5)](https://www.legislation.gov.uk/ukpga/1998/36/section/76/5) [Sch. 8](https://www.legislation.gov.uk/ukpga/1997/58/schedule/8) restricted (31.7.1998) by [1998 c. 36](https://www.legislation.gov.uk/ukpga/1998/36), [s. 90(4)](https://www.legislation.gov.uk/ukpga/1998/36/section/90/4)

[^key-96e1df48eadb29d19db370cfd0a93ff0]: [Sch. 3 para. 9](https://www.legislation.gov.uk/ukpga/1997/58/schedule/3/paragraph/9) repealed (31.1.2013) by [Statute Law (Repeals) Act 2013 (c. 2)](https://www.legislation.gov.uk/ukpga/2013/2), [s. 3(2)](https://www.legislation.gov.uk/ukpga/2013/2/section/3/2), [Sch. 1 Pt. 10](https://www.legislation.gov.uk/ukpga/2013/2/schedule/1/part/10) Group 1

These repeals have effect in accordance with section 15 of this Act.

These repeals have effect for the year 1997-98 and subsequent years of assessment except in relation to the cases in which the relief that has been or may be given under section 54 of the Finance Act 1989 in respect of any payment is unaffected by the provisions of section 17(1) of this Act.

#### Insurance companies and friendly societies.

#### Repeal of s.95(5) of the Taxes Act 1988: consequential amendments.

#### Purchase and sale of securities.

#### Rates of tax applicable to Schedule F income etc.

#### Trusts.

#### Estates of deceased persons in administration.

#### Tax credits and taxation of distributions: miscellaneous provisions.

#### Foreign income dividends.

#### Paying and collecting agents.

#### Carry-back of trading losses.

#### Carry-back of loan relationship deficits.

#### Restrictions on group relief.

#### Stamp duty on conveyance or transfer on sale.

#### Statutory effect of resolutions etc.

These repeals have effect in accordance with section 15 of this Act.

These repeals have effect in accordance with section 20 of this Act (and, accordingly, the repeal of subsection (7B) of section 826 of the Income and Corporation Taxes Act 1988 has effect only where the earlier period mentioned in that subsection begins on or after 2nd July 1997).

These repeals have effect in accordance with section 36 of, and Schedule 6 to, this Act.

#### Stamp duty on conveyance or transfer on sale.

These repeals have effect in accordance with section 15 of this Act.

These repeals have effect in accordance with section 36 of, and Schedule 6 to, this Act.

#### Charge to windfall tax.

#### Rates of tobacco products duty.

#### Payments where vehicle information transmitted electronically.

#### Limit on relief for interest for 1998-99.

#### Losses etc not to be set against surplus franked investment income.

#### Estates in administration: distributions to which s.233(1) applies.

#### Lloyd’s underwriters.

#### Insurance companies and friendly societies.

#### Repeal of s.95(5) of the Taxes Act 1988: consequential amendments.

#### Purchase and sale of securities.

#### Rates of tax applicable to Schedule F income etc.

#### Trusts.

#### Estates of deceased persons in administration.

#### Tax credits and taxation of distributions: miscellaneous provisions.

#### Foreign income dividends.

#### Paying and collecting agents.

#### Carry-back of loan relationship deficits.

These repeals have effect in accordance with section 15 of this Act.

These repeals have effect in accordance with section 36 of, and Schedule 6 to, this Act.

#### Estates in administration: distributions to which s.233(1) applies.

#### Lloyd’s underwriters.

#### Insurance companies and friendly societies.

#### Repeal of s.95(5) of the Taxes Act 1988: consequential amendments.

#### Rates of tax applicable to Schedule F income etc.

#### Tax credits and taxation of distributions: miscellaneous provisions.

#### Foreign income dividends.

#### Carry-back of trading losses.

#### Restrictions on group relief.

These repeals have effect in accordance with section 15 of this Act.

These repeals have effect in accordance with section 36 of, and Schedule 6 to, this Act.

These repeals have effect in accordance with section 15 of this Act.

These repeals have effect in accordance with section 36 of, and Schedule 6 to, this Act.

These repeals have effect in accordance with section 15 of this Act.

#### Insurance companies and friendly societies.

#### Repeal of s.95(5) of the Taxes Act 1988: consequential amendments.

#### Rates of tax applicable to Schedule F income etc.

#### Foreign income dividends.

#### Carry-back of trading losses.

#### Carry-back of loan relationship deficits.

#### Stamp duty on conveyance or transfer on sale.

These repeals have effect in accordance with section 15 of this Act.

These repeals have effect in accordance with section 36 of, and Schedule 6 to, this Act.

#### Purchase and sale of securities.

#### Rates of tax applicable to Schedule F income etc.

#### Foreign income dividends.

#### Carry-back of trading losses.

#### Stamp duty on conveyance or transfer on sale.

#### Statutory effect of resolutions etc.

These repeals have effect in accordance with section 15 of this Act.

These repeals have effect in accordance with section 36 of, and Schedule 6 to, this Act.

#### Rates of tax applicable to Schedule F income etc.

#### Foreign income dividends.

These repeals have effect in accordance with section 15 of this Act.

These repeals have effect in accordance with section 36 of, and Schedule 6 to, this Act.

#### Carry-back of trading losses.

#### Stamp duty on conveyance or transfer on sale.

These repeals have effect in accordance with section 15 of this Act.

#### Statutory effect of resolutions etc.

These repeals have effect in accordance with section 15 of this Act.

These repeals have effect in accordance with section 36 of, and Schedule 6 to, this Act.

1997-07-31

Finance (No. 2) Act 1997

original version Text at this date