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Finance Act 1998

Type Public General Act

Publication 1998-07-31

Last updated 2026-04-22

State In force

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Taper relief and indexation allowance

Taper relief for CGT.

121

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

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

(3) Schedule 21 to this Act (which makes incidental and consequential provision in connection with the introduction of taper relief) shall have effect.

(4) This section and those two Schedules have effect for the year 1998-99 and subsequent years of assessment.

Freezing of indexation allowance for CGT.

122

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

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

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

(4) In section 13 of that Act (attribution of gains to non-resident companies), the following subsection shall be inserted after subsection (11)—

(11A) For the purposes of this section the amount of the gain or loss accruing at any time to a company that is not resident in the United Kingdom shall be computed (where it is not the case) as if that company were within the charge to corporation tax on capital gains.

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

(6) Subject to subsection (7) below, the preceding provisions of this section have effect in relation to disposals on or after 6th April 1998.

(7) This section does not affect the computation of the amount of so much of any gain as—

(a) is treated for the purposes of the taxation of chargeable gains as having accrued on a disposal on or after 6th April 1998; but

(b) is taken for those purposes to be equal to the whole or any part of a gain that—

(i) would (but for any enactment relating to the taxation of chargeable gains) have accrued on an actual disposal made before that date, or

(ii) would have accrued on a disposal assumed under any such enactment to have been made before that date.

Pooling and identification of shares etc.

Abolition of pooling for CGT.

123

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

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

(3) In subsection (3) of that section (interpretation), for “ “a new holding” is" there shall be substituted “ “a section 104 holding” is ”.

(4) For subsection (4) of that section there shall be substituted the following subsection—

(4) For the purposes of this Chapter securities of a company which are held— (a) by a person who acquired them as an employee of the company or of any other person, and (b) on terms which for the time being restrict his right to dispose of them, shall (notwithstanding that they would otherwise fall to be treated as of the same class) be treated as of a different class from any securities acquired by him otherwise than as an employee of the company or of any other person and also from any shares that are not held subject to restrictions, or the same restrictions, on disposal or in the case of which the restrictions are no longer in force.

(5) In the following enactments for the words “new holding", wherever they occur, there shall be substituted “ section 104 holding ”, namely—

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

(b) in sections 104(6), 107 and 110 of the Taxation of Chargeable Gains Act 1992.

(6) The preceding provisions of this section have effect in relation to any disposal on or after 6th April 1998 of any securities (whenever acquired).

(7) The powers of the Treasury to make provision by regulations under one or more of—

(a) section 333 of the Taxes Act 1988 (investment plan regulations),

(a) section 151 of the Taxation of Chargeable Gains Act 1992 (capital gains tax and investment plans), and

shall include power to provide, to such extent as appears to them to be appropriate for purposes connected with the enactment of this section and section 124 below, for any provision contained in any such regulations to have effect retrospectively in relation to such times falling on or after 17th March 1998 as may be specified in the regulations.

New identification rules for CGT.

124

(1) After section 106 of the Taxation of Chargeable Gains Act 1992 there shall be inserted the following section—

(106A) (1) This section has effect for the purposes of capital gains tax (but not corporation tax) where any securities are disposed of by any person. (2) The securities disposed of shall be identified in accordance with the following provisions of this section with securities of the same class that have been acquired by the person making the disposal. (3) The provisions of this section have effect in the case of any disposal notwithstanding that some or all of the securities disposed of are otherwise identified— (a) by the disposal, or (b) by a transfer or delivery giving effect to it; but where a person disposes of securities in one capacity, they shall not be identified under those provisions with any securities which he holds, or can dispose of, only in some other capacity. (4) Securities disposed of on an earlier date shall be identified before securities disposed of on a later date; and, accordingly, securities disposed of by a later disposal shall not be identified with securities already identified as disposed of by an earlier disposal. (5) Subject to subsection (4) above, if within the period of thirty days after the disposal the person making it acquires securities of the same class, the securities disposed of shall be identified— (a) with securities acquired by him within that period, rather than with other securities; and (b) with securities acquired at an earlier time within that period, rather than with securities acquired at a later time within that period. (6) Subject to subsections (4) and (5) above, securities disposed of shall be identified with securities acquired at a later time, rather than with securities acquired at an earlier time. (7) Subsection (6) above shall not require securities to be identified with particular securities comprised in a section 104 holding or a 1982 holding. (8) Accordingly, that subsection shall have effect for determining whether, and to what extent, any securities should be identified with the whole or any part of a section 104 holding or a 1982 holding— (a) as if the time of the acquisition of a section 104 holding were the time when it first came into being; and (b) as if 31st March 1982 were the time of the acquisition of a 1982 holding. (9) The identification rules set out in the preceding provisions of this section have effect subject to subsection (1) of section 105, and securities disposed of shall not be identified with securities acquired after the disposal except in accordance with that section or subsection (5) above. (10) In this section— - “1982 holding” has the same meaning as in section 109; - “securities” means any securities within the meaning of section 104 or any relevant securities within the meaning of section 108. (11) For the purposes of this section securities of a company shall not be treated as being of the same class unless they are so treated by the practice of a recognised stock exchange, or would be so treated if dealt with on that recognised stock exchange.

(2) In subsection (1) of section 105 of that Act (disposal and acquisition on the same day), for “The following provisions" there shall be substituted “ Paragraphs (a) and (b) below ”; and for subsection (2) of that section there shall be substituted the following subsection—

(2) Where the quantity of securities disposed of by any person exceeds the aggregate quantity of— (a) the securities (if any) which are required by subsection (1) above to be identified with securities acquired on the day of the disposal, (b) the securities (if any) which are required by any of the provisions of section 106 or 106A(5) to be identified with securities acquired after the day of the disposal, and (c) the securities (if any) which are required by any of the provisions of sections 104, 106, 106A or 107, or of Schedule 2, to be identified with securities acquired before the day of the disposal, the disposal shall be treated as diminishing a quantity of securities subsequently acquired, and as so diminishing any quantity so acquired at an earlier date, rather than one so acquired at a later date.

(3) In section 107 of that Act (general identification rules) for subsections (1) and (2) there shall be substituted the following subsections—

(1) This section has effect for the purposes of corporation tax where any securities are disposed of by a company. (1A) The securities disposed of shall be identified in accordance with the following provisions of this section with securities of the same class that have been acquired by the company making the disposal and could be comprised in that disposal. (2) The provisions of this section have effect in the case of any disposal notwithstanding that some or all of the securities disposed of are otherwise identified— (a) by the disposal, or (b) by a transfer or delivery giving effect to it; but where a company disposes of securities in one capacity, they shall not be identified with securities which it holds, or can dispose of, only in some other capacity.

(4) In section 108 of that Act (relevant securities), at the beginning there shall be inserted the following subsection—

(A1) This section has effect for the purposes of corporation tax where any relevant securities are disposed of by a company.

(5) In that section—

(a) in subsections (2) and (7), for “person", in each place where it occurs, there shall be substituted “ company ”; and

(b) in subsection (2), for “him" and “he" there shall be substituted, respectively, “ the company ” and “ it ”.

(6) In each of section 151B(1) and (7) of that Act and paragraph 4(2) of Schedule 5C to that Act (disapplication of share pooling and identification rules in relation to shares in a VCT), for “107" there shall be substituted “ 106A ”.

(7) Subject to subsection (8) below, the preceding provisions of this section have effect in relation to any disposal on or after 6th April 1998.

(8) For the purposes of capital gains tax for the year 1997-98 (but not for the purposes of corporation tax), the following provisions have effect in relation to any disposal of securities made on or after 17th March 1998 and before 6th April 1998, that is to say—

(a) the identification rule in subsection (5) of the section 106A of the Taxation of Chargeable Gains Act 1992 set out in subsection (1) above shall apply in accordance with subsections (3) and (4) of that section;

(b) that rule shall have priority over any other rule, except the one in section 105(1) of that Act; and

(c) section 104(1) of that Act shall not apply to any securities identified by virtue of this subsection with the securities disposed of.

(9) In subsection (8) above “securities” means any securities within the meaning of section 104 of the Taxation of Chargeable Gains Act 1992 or any relevant securities within the meaning of section 108 of that Act.

125

(1) In subsection (1) of section 110 of the Taxation of Chargeable Gains Act 1992 (indexation allowance for section 104 holdings), for “This" there shall be substituted “ For the purposes of corporation tax this ”.

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

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

(4) Subject to subsection (5) below, the preceding provisions of this section have effect in relation to disposals on or after 6th April 1998.

(5) This section does not affect the computation of the amount of so much of any gain as—

(a) is treated for the purposes of the taxation of chargeable gains as having accrued on a disposal on or after 6th April 1998; but

(b) is taken for those purposes to be equal to the whole or any part of a gain that—

(i) would (but for any enactment relating to the taxation of chargeable gains) have accrued on an actual disposal made before that date, or

(ii) would have accrued on a disposal assumed under any such enactment to have been made before that date.

Stock dividends

Capital gains on stock dividends.

126

(1) For sections 141 and 142 of the Taxation of Chargeable Gains Act 1992 (stock dividends) there shall be substituted the following section—

(142) (1) This section applies where any share capital to which section 249 of the Taxes Act applies is issued as mentioned in subsection (4), (5) or (6) of that section in respect of shares in the company held by any person. (2) The case shall not constitute a reorganisation of the company’s share capital for the purposes of sections 126 to 128. (3) The person who acquires the share capital by means of its issue shall (notwithstanding section 17(1)) be treated for the purposes of section 38(1)(a) as having acquired that asset for a consideration equal to the appropriate amount in cash (within the meaning of section 251(2) to (4) of the Taxes Act).

(2) This section applies to any share capital issued on or after 6th April 1998.

Non-residents etc.

Charge to CGT on temporary non-residents.

127

(1) After section 10 of the Taxation of Chargeable Gains Act 1992 there shall be inserted the following section—

(10A) (1) This section applies in the case of any individual (“the taxpayer") if— (a) he satisfies the residence requirements for any year of assessment (“the year of return"); (b) he did not satisfy those requirements for one or more years of assessment immediately preceding the year of return but there are years of assessment before that year for which he did satisfy those requirements; (c) there are fewer than five years of assessment falling between the year of departure and the year of return; and (d) four out of the seven years of assessment immediately preceding the year of departure are also years of assessment for each of which he satisfied those requirements. (2) Subject to the following provisions of this section and section 86A, the taxpayer shall be chargeable to capital gains tax as if— (a) all the chargeable gains and losses which (apart from this subsection) would have accrued to him in an intervening year, (b) all the chargeable gains which under section 13 or 86 would be treated as having accrued to him in an intervening year if he had been resident in the United Kingdom throughout that intervening year, and (c) any losses which by virtue of section 13(8) would have been allowable in his case in any intervening year if he had been resident in the United Kingdom throughout that intervening year, were gains or, as the case may be, losses accruing to the taxpayer in the year of return. (3) Subject to subsection (4) below, the gains and losses which by virtue of subsection (2) above are to be treated as accruing to the taxpayer in the year of return shall not include any gain or loss accruing on the disposal by the taxpayer of any asset if— (a) that asset was acquired by the taxpayer at a time in the year of departure or any intervening year when he was neither resident nor ordinarily resident in the United Kingdom; (b) that asset was so acquired otherwise than by means of a relevant disposal which by virtue of section 58, 73 or 258(4) is treated as having been a disposal on which neither a gain nor a loss accrued; (c) that asset is not an interest created by or arising under a settlement; and (d) the amount or value of the consideration for the acquisition of that asset by the taxpayer does not fall, by reference to any relevant disposal, to be treated as reduced under section 23(4)(b) or (5)(b), 152(1)(b), 162(3)(b) or 247(2)(b) or (3)(b). (4) Where— (a) any chargeable gain that has accrued or would have accrued on the disposal of any asset (“the first asset”) is a gain falling (apart from this section) to be treated by virtue of section 116(10) or (11), 134 or 154(2) or (4) as accruing on the disposal of the whole or any part of another asset, and (b) the other asset is an asset falling within paragraphs (a) to (d) of subsection (3) above but the first asset is not, subsection (3) above shall not exclude that gain from the gains which by virtue of subsection (2) above are to be treated as accruing to the taxpayer in the year of return. (5) The gains and losses which by virtue of subsection (2) above are to be treated as accruing to the taxpayer in the year of return shall not include any chargeable gain or allowable loss accruing to the taxpayer in an intervening year which, in the taxpayer’s case, has fallen to be brought into account for that year by virtue of section 10 or 16(3). (6) The reference in subsection (2)(c) above to losses allowable in an individual’s case in an intervening year is a reference to only so much of the aggregate of the losses that would have been available in accordance with subsection (8) of section 13 for reducing gains accruing by virtue of that section to that individual in that year as does not exceed the amount of the gains that would have accrued to him in that year if it had been a year throughout which he was resident in the United Kingdom. (7) Where this section applies in the case of any individual, nothing in any enactment imposing any limit on the time within which an assessment to capital gains tax may be made shall prevent any such assessment for the year of departure from being made in the taxpayer’s case at any time before the end of two years after the 31st January next following the year of return. (8) In this section— - “intervening year” means any year of assessment which, in a case where the conditions in paragraphs (a) to (d) of subsection (1) above are satisfied, falls between the year of departure and the year of return; - “relevant disposal”, means a disposal of an asset acquired by the person making the disposal at a time when that person was resident or ordinarily resident in the United Kingdom; and - “the year of departure” means the last year of assessment before the year of return for which the taxpayer satisfied the residence requirements. (9) For the purposes of this section an individual satisfies the residence requirements for a year of assessment if that year of assessment is one during any part of which he is resident in the United Kingdom or during which he is ordinarily resident in the United Kingdom. (10) This section is without prejudice to any right to claim relief in accordance with any double taxation relief arrangements.

(2) In section 9(3) of that Act (exclusion from charge of persons temporarily resident), for “section 10(1)" there shall be substituted “ sections 10(1) and 10A ”.

(3) In section 96 of that Act (payments by and to companies), after subsection (9) there shall be inserted the following subsections—

(9A) For the purposes of this section an individual shall be deemed to have been resident in the United Kingdom at any time in any year of assessment which in his case is an intervening year for the purposes of section 10A. (9B) If— (a) it appears after the end of any year of assessment that any individual is to be treated by virtue of subsection (9A) above as having been resident in the United Kingdom at any time in that year, and (b) as a consequence, any adjustments fall to be made to the amounts of tax taken to have been chargeable by virtue of this section on any person, nothing in any enactment limiting the time for the making of any claim or assessment shall prevent the making of those adjustments (whether by means of an assessment, an amendment of an assessment, a repayment of tax or otherwise).

(4) This section has effect—

(a) in any case in which the year of departure is the year 1998-99 or a subsequent year of assessment; and

(b) in any case in which the year of departure is the year 1997-98 and the taxpayer was resident or ordinarily resident in the United Kingdom at a time in that year on or after 17th March 1998.

Disposal of interests in a settlement.

128

(1) In section 76 of the Taxation of Chargeable Gains Act 1992 (disposal of interests in settled property)—

(a) in subsection (1), at the beginning there shall be inserted “Subject to subsection (1A) below";

(b) after that subsection there shall be inserted the subsections set out in subsection (2) below; and

(2) The subsections inserted after subsection (1) are as follows—

(1A) Subject to subsection (3) below, subsection (1) above does not apply if— (a) the settlement falls within subsection (1B) below; or (b) the property comprised in the settlement is or includes property deriving directly or indirectly from a settlement falling within that subsection. (1B) A settlement falls within this subsection if there has been a time when the trustees of that settlement— (a) were not resident or ordinarily resident in the United Kingdom; or (b) fell to be regarded for the purposes of any double taxation relief arrangements as resident in a territory outside the United Kingdom.

(3) The subsection inserted after subsection (2) is as follows—

(3) Subsection (1A) above shall not prevent subsection (1) above from applying where the disposal in question is a disposal in consideration of obtaining settled property that is treated as made under subsection (2) above.

(4) This section has effect in relation to any disposal on or after 6th March 1998.

Attribution of gains to settlor in section 10A cases.

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(1) After section 86 of the Taxation of Chargeable Gains Act 1992 there shall be inserted the following section—

(86A) (1) Subsection (2) below applies in the case of a person who is a settlor in relation to any settlement (“the relevant settlement") where— (a) by virtue of section 10A, amounts falling within section 86(1)(e) for any intervening year or years would (apart from this section) be treated as accruing to the settlor in the year of return; and (b) there is an excess of the relevant chargeable amounts for the non-residence period over the amount of the section 87 pool at the end of the year of departure. (2) Only so much (if any) of— (a) the amount falling within section 86(1)(e) for the intervening year, or (b) if there is more than one intervening year, the aggregate of the amounts falling within section 86(1)(e) for those years, as exceeds the amount of the excess mentioned in subsection (1)(b) above shall fall in accordance with section 10A to be attributed to the settlor for the year of return. (3) In subsection (1) above, the reference to the relevant chargeable amounts for the non-residence period is (subject to subsection (5) below) a reference to the aggregate of the amounts on which beneficiaries of the relevant settlement are charged to tax under section 87 or 89(2) for the intervening year or years in respect of any capital payments received by them. (4) In subsection (1) above, the reference to the section 87 pool at the end of the year of departure is (subject to subsection (5) below) a reference to the amount (if any) which, in accordance with subsection (2) of that section, fell in relation to the relevant settlement to be carried forward from the year of departure to be included in the amount of the trust gains for the year of assessment immediately following the year of departure. (5) Where the property comprised in the relevant settlement has at any time included property not originating from the settlor, only so much (if any) of any capital payment or amount carried forward in accordance with section 87(2) as, on a just and reasonable apportionment, is properly referable to property originating from the settlor shall be taken into account for the purposes of subsections (3) and (4) above. (6) Where any reduction falls to be made by virtue of subsection (2) above in any amount to be attributed in accordance with section 10A to any settlor for any year of assessment, the reduction to be treated as made for that year in accordance with section 87(3) in the case of the settlement in question shall not be made until— (a) the reduction (if any) falling to be made by virtue of that subsection has been made in the case of every settlor to whom any amount is so attributed; and (b) effect has been given to any reduction required to be made under subsection (7) below. (7) Where in the case of any settlement there is (after the making of any reduction or reductions in accordance with subsection (2) above) any amount or amounts falling in accordance with section 10A to be attributed for any year of assessment to settlors of the settlement, the amount or (as the case may be) aggregate amount falling in accordance with that section to be so attributed shall be applied in reducing the amount carried forward to that year in accordance with section 87(2). (8) Where an amount or aggregate amount has been applied, in accordance with subsection (7) above, in reducing the amount which in the case of any settlement is carried forward to any year in accordance with section 87(2), that amount (or, as the case may be, so much of it as does not exceed the amount which it is applied in reducing) shall be deducted from the amount used for that year for making the reduction under section 87(3) in the case of that settlement. (9) Expressions used in this section and section 10A have the same meanings in this section as in that section; and paragraph 8 of Schedule 5 shall apply for the construction of the references in subsection (5) above to property originating from the settlor as it applies for the purposes of that Schedule.

(2) In section 97(1) to (5), (7) and (8) of that Act (interpretation of sections 87 to 96), for the words “sections 87", wherever occurring, there shall be substituted “ sections 86A ”.

(3) This section has effect where the year of departure is the year 1997-98 or any subsequent year of assessment.

Charge on beneficiaries of settlements with non-resident settlors.

130

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

(2) In subsection (1) of section 88 of that Act (charge on beneficiaries of a settlement treated as resident outside the United Kingdom if the settlor is or has been domiciled and resident in the United Kingdom)—

(a) the word “and” shall be inserted at the end of paragraph (a); and

(b) paragraph (c) and the word “and" immediately preceding it shall be omitted.

(3) Subject to subsection (4) below, the preceding provisions of this section apply for the year 1998-99 and subsequent years of assessment and shall be deemed to have applied for the year 1997-98.

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

Charge on settlors of settlements for grandchildren.

131

(1) In paragraph 2 of Schedule 5 to the Taxation of Chargeable Gains Act 1992 (test whether settlor has interest)—

(a) after sub-paragraph (3)(d) there shall be inserted the following paragraphs—

(da) any grandchild of the settlor or of the settlor’s spouse; (db) the spouse of any such grandchild;

(b) in sub-paragraph (3)(e), for “(d)" there shall be substituted “ (db) ”.

(2) For sub-paragraph (7) of that paragraph, there shall be substituted the following sub-paragraph—

(7) In this paragraph— - “child” includes a stepchild; and - “grandchild” means a child of a child.

(3) Schedule 22 to this Act (which makes transitional provision and consequential amendments in connection with the provisions of this section) shall have effect.

(4) The preceding provisions of this section and Schedule 22 to this Act apply for the year 1998-99 and subsequent years of assessment and shall be deemed to have applied for the year 1997-98.

Charge on settlors of pre-19th March 1991 settlements.

132

(1) In paragraph 9 of Schedule 5 to the Taxation of Chargeable Gains Act 1992 (which sets out when a settlement is a qualifying settlement for the purposes of the attribution of gains to the settlor), after sub-paragraph (1) there shall be inserted the following sub-paragraphs—

(1A) Subject to sub-paragraph (1B) below, a settlement created before 19th March 1991 is a qualifying settlement for the purposes of section 86 and this Schedule in— (a) the year 1999-00, and (b) subsequent years of assessment. (1B) Where a settlement created before 19th March 1991 is a protected settlement immediately after the beginning of 6th April 1999, that settlement shall be treated as a qualifying settlement for the purposes of section 86 and this Schedule in a year of assessment mentioned in sub-paragraph (1A)(a) or (b) above only if— (a) any of the five conditions set out in subsections (3) to (6A) below becomes fulfilled as regards the settlement in that year; or (b) any of those five conditions became so fulfilled in any previous year of assessment ending after 19th March 1991.

(2) Sub-paragraph (2) of that paragraph shall not have effect for the purpose of determining whether any settlement is a qualifying settlement in the year 1999-00 or any subsequent year of assessment.

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

(6A) The fifth condition is that the settlement ceases to be a protected settlement at any time on or after 6th April 1999.

(4) After sub-paragraph (10) of that paragraph there shall be inserted the following sub-paragraphs—

(10A) Subject to sub-paragraph (10B) below, a settlement is a protected settlement at any time in a year of assessment if at that time the beneficiaries of that settlement are confined to persons falling within some or all of the following descriptions, that is to say— (a) children of a settlor or of a spouse of a settlor who are under the age of eighteen at that time or who were under that age at the end of the immediately preceding year of assessment; (b) unborn children of a settlor, of a spouse of a settlor, or of a future spouse of a settlor; (c) future spouses of any children or future children of a settlor, a spouse of a settlor or any future spouse of a settlor; (d) a future spouse of a settlor; (e) persons outside the defined categories. (10B) For the purposes of sub-paragraph (10A) above a person is outside the defined categories at any time if, and only if, there is no settlor by reference to whom he is at that time a defined person in relation to the settlement for the purposes of paragraph 2(1) above. (10C) For the purposes of sub-paragraph (10A) above a person is a beneficiary of a settlement if— (a) there are any circumstances whatever in which relevant property which is or may become comprised in the settlement is or will or may become applicable for his benefit or payable to him; (b) there are any circumstances whatever in which relevant income which arises or may arise under the settlement is or will or may become applicable for his benefit or payable to him; (c) he enjoys a benefit directly or indirectly from any relevant property comprised in the settlement or any relevant income arising under the settlement. (10D) In sub-paragraph (10C) above— - “relevant property” means property originating from a settlor; and - “relevant income” means income originating from a settlor.

(5) In construing section 86(1)(e) of the Taxation of Chargeable Gains Act 1992 (which specifies the amount by reference to which a charge arises under that section) as regards a particular year of assessment and in relation to a settlement created before 19th March 1991 which—

(a) is a qualifying settlement in the year 1999-00, but

(b) was not a qualifying settlement in any earlier year of assessment,

no account shall be taken of disposals made before 6th April 1999 (whether for the purpose of arriving at gains or for the purpose of arriving at losses).

(6) Schedule 23 (which makes transitional provision in connection with the coming into force of this section) shall have effect.

Groups of companies etc.

Transfer within group to investment trust.

133

(1) After section 101 of the Taxation of Chargeable Gains Act 1992, there shall be inserted the following section—

(101A) (1) This section applies where— (a) an asset has been disposed of to a company (the “acquiring company") and the disposal has been treated by virtue of section 171(1) as giving rise to neither a gain nor a loss, (b) at the time of the disposal the acquiring company was not an investment trust, and (c) the conditions set out in subsection (2) below are satisfied by the acquiring company. (2) Those conditions are satisfied by the acquiring company if— (a) it becomes an investment trust for an accounting period beginning not more than 6 years after the time of the disposal, (b) at the beginning of that accounting period, it owns, otherwise than as trading stock— (i) the asset, or (ii) property to which a chargeable gain has been carried forward from the asset on a replacement of business assets, (c) it has not been an investment trust for any earlier accounting period beginning after the time of the disposal, and (d) at the time at which it becomes an investment trust, there has not been an event by virtue of which it falls by virtue of section 179(3) or 101C(3) to be treated as having sold, and immediately reacquired, the asset at the time specified in subsection (3) below. (3) The acquiring company shall be treated for all the purposes of this Act as if immediately after the disposal it had sold, and immediately reacquired, the asset at its market value at that time. (4) Any chargeable gain or allowable loss which, apart from this subsection, would accrue to the acquiring company on the sale referred to in subsection (3) above shall be treated as accruing to it immediately before the end of the last accounting period to end before the beginning of the accounting period for which the acquiring company becomes an investment trust. (5) For the purposes of this section a chargeable gain is carried forward from an asset to other property on a replacement of business assets if— (a) by one or more claims under sections 152 to 158, the chargeable gain accruing on a disposal of the asset is reduced, and (b) as a result an amount falls to be deducted from the expenditure allowable in computing a gain accruing on the disposal of the other property. (6) For the purposes of this section an asset acquired by the acquiring company shall be treated as the same as an asset owned by it at a later time if the value of the second asset is derived in whole or in part from the first asset; and, in particular, assets shall be so treated where— (a) the second asset is a freehold and the first asset was a leasehold; and (b) the lessee has acquired the reversion. (7) Where under this section a company is to be treated as having disposed of and reacquired an asset— (a) all such recomputations of liability in respect of other disposals, and (b) all such adjustments of tax, whether by way of assessment or by way of discharge or repayment of tax, as may be required in consequence of the provisions of this section shall be carried out. (8) Notwithstanding any limitation on the time for making assessments, any assessment to corporation tax chargeable in consequence of this section may be made at any time within 6 years after the end of the accounting period referred to in subsection (2)(a) above.

(2) In section 179 of that Act (company ceasing to be a member of a group), after subsection (2B) there shall be inserted the following subsection—

(2C) This section shall not have effect as respects any asset if, before the time when the chargeable company ceases to be a member of the group or, as the case may be, the second group, an event has already occurred by virtue of which the company falls by virtue of section 101A(3) to be treated as having sold and immediately reacquired the asset at the time specified in subsection (3) below.

(3) Subsections (1) and (2) above apply to any company which becomes an investment trust for an accounting period beginning on or after 17th March 1998.

Transfer of company’s assets to venture capital trust.

134

(1) In subsection (4) of section 139 of the Taxation of Chargeable Gains Act 1992 (reconstruction or amalgamation involving transfer of a business), after “investment trust" there shall be inserted “ or a venture capital trust. ”

(2) After the section 101A of that Act inserted by section 133 above there shall be inserted the following section—

(101B) (1) Where section 139 has applied on the transfer of a company’s business (in whole or in part) to a company which at the time of the transfer was not a venture capital trust, then if— (a) at any time after the transfer the company becomes a venture capital trust by virtue of an approval for the purposes of section 842AA of the Taxes Act; and (b) at the time as from which the approval has effect the company still owns any of the assets of the business transferred, the company shall be treated for all the purposes of this Act as if immediately after the transfer it had sold, and immediately reacquired, the assets referred to in paragraph (b) above at their market value at that time. (2) Any chargeable gain or allowable loss which, apart from this subsection, would accrue to the company on the sale referred to in subsection (1) above shall be treated as accruing to the company immediately before the time mentioned in subsection (1)(b) above. (3) This section does not apply if at the time mentioned in subsection (1)(b) above there has been an event by virtue of which the company falls by virtue of section 101(1) to be treated as having sold, and immediately reacquired, the assets immediately after the transfer referred to in subsection (1) above. (4) Notwithstanding any limitation on the time for making assessments, any assessment to corporation tax chargeable in consequence of this section may, in a case in which the approval mentioned in subsection (1)(a) above has effect as from the beginning of an accounting period, be made at any time within 6 years after the end of that accounting period. (5) Where under this section a company is to be treated as having disposed of, and reacquired, an asset of a business, all such recomputations of liability in respect of other disposals and all such adjustments of tax, whether by way of assessment or by way of discharge or repayment of tax, as may be required in consequence of the provisions of this section shall be carried out.

(3) After subsection (1A) of section 101 of that Act there shall be inserted the following subsection—

(1B) This section does not apply if at the time at which the company becomes an investment trust there has been an event by virtue of which it falls by virtue of section 101B(1) to be treated as having sold, and immediately reacquired, the assets immediately after the transfer referred to in subsection (1) above.

(4) Subsection (1) above applies to transfers made on or after 17th March 1998.

(5) Subsections (2) and (3) above apply to a company in respect of which an approval for the purposes of Part 6 of the Income Tax Act 2007 (venture capital trusts) has effect as from a time falling on or after 17th March 1998.

Transfer within group to venture capital trust.

135

(1) In section 171 of the Taxation of Chargeable Gains Act 1992 (transfers within a group), after the word “or" at the end of paragraph (c) of subsection (2) there shall be inserted the following paragraph—

(cc) a disposal by or to a venture capital trust; or

(2) After the section 101B of that Act inserted by section 134 above there shall be inserted the following section—

(101C) (1) This section applies where— (a) an asset has been disposed of to a company (the “acquiring company") and the disposal has been treated by virtue of section 171(1) as giving rise to neither a gain nor a loss, (b) at the time of the disposal the acquiring company was not a venture capital trust, and (c) the conditions set out in subsection (2) below are satisfied by the acquiring company. (2) Those conditions are satisfied by the acquiring company if— (a) it becomes a venture capital trust by virtue of an approval having effect as from a time (the “time of approval") not more than 6 years after the time of the disposal, (b) at the time of approval the company owns, otherwise than as trading stock— (i) the asset, or (ii) property to which a chargeable gain has been carried forward from the asset on a replacement of business assets, (c) it has not been a venture capital trust at any earlier time since the time of the disposal, and (d) at the time of approval, there has not been an event by virtue of which it falls by virtue of section 179(3) or 101A(3) to be treated as having sold, and immediately reacquired, the asset at the time specified in subsection (3) below. (3) The acquiring company shall be treated for all the purposes of this Act as if immediately after the disposal it had sold, and immediately reacquired, the asset at its market value at that time. (4) Any chargeable gain or allowable loss which, apart from this subsection, would accrue to the acquiring company on the sale referred to in subsection (3) above shall be treated as accruing to it immediately before the time of approval. (5) Subsections (5) to (7) of section 101A apply for the purposes of this section as they apply for the purposes of that section. (6) Notwithstanding any limitation on the time for making assessments, any assessment to corporation tax chargeable in consequence of this section may, in a case in which the time of approval is the time at which an accounting period of the company begins, be made at any time within 6 years after the end of that accounting period. (7) Any reference in this section to an approval is a reference to an approval for the purposes of section 842AA of the Taxes Act.

(3) In section 179 of that Act (company ceasing to be a member of a group), after the subsection (2C) inserted by section 133 above there shall be inserted the following subsection—

(2D) This section shall not have effect as respects any asset if, before the time when the chargeable company ceases to be a member of the group or, as the case may be, the second group, an event has already occurred by virtue of which the company falls by virtue of section 101C(3) to be treated as having sold and immediately reacquired the asset at the time specified in subsection (3) below.

(4) Subsection (1) above applies to disposals made on or after 17th March 1998.

(5) Subsections (2) and (3) above apply to a company in respect of which an approval for the purposes of Part 6 of the Income Tax Act 2007 (venture capital trusts) has effect as from a time falling on or after 17th March 1998.

Incorporated friendly societies.

136

(1) In section 170(9) of the Taxation of Chargeable Gains Act 1992 (meaning of “company” in sections 170 to 181), after the word “and" at the end of paragraph (c) there shall be inserted the following paragraph—

(cc) an incorporated friendly society within the meaning of the Friendly Societies Act 1992; and

(2) In subsection (2) of section 171 of that Act (transfers within a group), after the word “or" at the end of the paragraph (cc) inserted by section 135 above there shall be inserted the following paragraph—

(cd) a disposal by or to a qualifying friendly society; or

(3) After subsection (4) of that section there shall be inserted the following subsection—

(5) In subsection (2)(cd) above “qualifying friendly society” means a company which is a qualifying society for the purposes of section 461B of the Taxes Act (incorporated friendly societies entitled to exemption from income tax and corporation tax on certain profits).

(4) Subsection (1) above applies for the purpose of determining, in relation to times on and after 17th March 1998, whether a friendly society is a company within the meaning of the provisions of sections 170 to 181 of the Taxation of Chargeable Gains Act 1992.

(5) Subsections (2) and (3) above apply in relation to disposals made on or after 17th March 1998.

Pre-entry gains.

137

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

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

(3) In subsection (3) of section 213 of that Act (carry back of losses in respect of deemed annual disposal by insurance companies)—

(a) at the beginning there shall be inserted “Subject to subsection (3A) below,"; and

(b) for the “and" at the end of paragraph (c) there shall be substituted—

(ca) none of the intervening accounting periods is an accounting period in which the company joined a group of companies, and

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

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

(6) Subsection (3) above has effect in relation to any intervening period ending on or after 17th March 1998.

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

Pre-entry losses.

138

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

De-grouping charges.

139

(1) In section 179(2B) of the Taxation of Chargeable Gains Act 1992 (cases where there is a connection between groups successively left by a company)—

(a) in paragraph (b), for the words from “company which" to “its" there shall be substituted “ person or persons who control the company mentioned in paragraph (a) above or who have had it under their ”;

(b) in paragraph (c), for the words from “company which has" to “its" there shall be substituted “ person or persons who have, at any time in that period, had under their ”; and

(2) Subsection (1) above has effect in relation to a company in any case in which the time of the company’s ceasing to be a member of the second group is on or after 17th March 1998.

Abolition of reliefs

Phasing out of retirement relief.

140

(1) In Schedule 6 to the Taxation of Chargeable Gains Act 1992 (retirement relief etc.), paragraph 13(1) (amount available for relief: basic rule) shall have effect, in relation to qualifying disposals in a year of assessment specified in the first column of the following Table, as if—

(a) for the references to £250,000 there were substituted references to the amount specified in the second column of that Table; and

(b) for the reference to £1 million there were substituted a reference to the amount specified in the third column of that Table.

Year	£250,000	£1 million

1999-00	£200,000	£800,000
2000-01	£150,000	£600,000
2001-02	£100,000	£400,000
2002-03	£50,000	£200,000

(2) The following provisions, namely—

(a) section 163 of that Act (relief for disposals by individuals on retirement from family business),

(b) section 164 of that Act (other retirement relief), and

shall cease to have effect in relation to disposals in the year 2003-04 and subsequent years of assessment.

(3) In section 157 of that Act (trade carried on by family company), for the words “within the meaning of Schedule 6" there shall be substituted the words “ that is to say, a company the voting rights in which are exercisable, as to not less than 5 per cent., by him ”.

(4) In subsection (8) of section 165 of that Act (relief for gifts of business assets), for paragraph (a) there shall be substituted the following paragraphs—

(a) “personal company”, in relation to an individual, means a company the voting rights in which are exercisable, as to not less than 5 per cent., by that individual; (aa) “holding company”, “trading company” and “trading group” have the meanings given by paragraph 22 of Schedule A1; and

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

(6) Subsections (3) to (5) above have effect in relation to the year 2003-04 and subsequent years of assessment.

Abolition of certain other CGT reliefs.

141

(1) The following provisions of the Taxation of Chargeable Gains Act 1992 shall cease to have effect, namely—

(a) Chapter IA of Part V (roll-over relief on re-investment); and

(b) sections 254 and 255 (relief for debts on qualifying corporate bonds).

(2) In subsection (1) above—

(a) paragraph (a) has effect in relation to acquisitions made on or after 6th April 1998; and

(b) paragraph (b) has effect in relation to loans made on or after 17th March 1998.

Part IV — Inheritance Tax etc.

Property of historic interest etc.

142

Schedule 25 to this Act (which makes provision about the designation of property of historic interest, etc. and about undertakings in relation to such property) shall have effect.

Removal of exemption for gifts for public benefit.

143

(1) Section 26 of the Inheritance Tax Act 1984 (gifts for public benefit) shall not apply to any transfer of value made on or after 17th March 1998.

(2) Accordingly, in that Act, in relation to any transfer of value made on or after 17th March 1998—

(a) in sections 23(5) and 29A(6) (gifts to charities and abatement of exemptions), for the words “25 or 26", in each place where they occur, there shall be substituted “ or 25 ”; and

(b) in section 29(5) (exemptions in loan cases), for “to 26", “25 or 26" and “25(2) and 26(7)" there shall be substituted, respectively, “ to 25 ”, “ or 25 ” and “ and 25(2) ”.

(3) In relation to any property becoming the property of any person on or after 17th March 1998, in section 56(4) and (7) of that Act (exclusion of exemptions in relation to the acquisition of reversionary interests), for the words “to 26", in each place where they occur, there shall be substituted “ to 25 ”.

(4) In section 76 of that Act (tax not charged on property becoming property held for charitable purposes etc.)—

(a) paragraph (d) of subsection (1) and subsection (2) shall cease to have effect, and the word “or” shall be inserted at the end of paragraph (b) of subsection (1);

(b) in subsection (3), for “to (d)" there shall be substituted “ to (c) ”; and

(c) in subsections (6) and (8), for the words “(c) or (d)", in each place where they occur, there shall be substituted “ or (c) ”.

(5) Subsection (4) above has effect in relation to property which ceases to be relevant property, or to be property to which any of sections 70 to 74 of the Inheritance Tax Act 1984 or paragraph 8 of Schedule 4 to that Act applies, on or after 17th March 1998.

(6) In relation to any property becoming the property of a body on a transfer of value made on or after 17th March 1998, in section 161(2)(b) of that Act (related property), for “25 or 26" there shall be substituted “ or 25 ”.

(7) In relation to any disposal on or after 17th March 1998, in section 258(2) of the Taxation of Chargeable Gains Act 1992 (gains on disposal of works of art etc.), in paragraph (a), for “1984 Act" there shall be substituted “ Inheritance Tax Act 1984 (“the 1984 Act") ”.

Maintenance funds for historic buildings, etc.

144

(1) In section 27 of the Inheritance Tax Act 1984 (exemption for transfers into maintenance funds for historic buildings etc.), at the beginning of subsection (1) there shall be inserted “ Subject to subsection (1A) below, ” and after that subsection there shall be inserted the following subsection—

(1A) Subsection (1) above does not apply in the case of a direction given after the time of the transfer unless the claim for the direction (if it is not made before that time) is made no more than two years after the date of that transfer, or within such longer period as the Board may allow.

(2) This section has effect in relation to transfers of value made on or after 17th March 1998.

Accounting for property accepted in satisfaction of tax.

145

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

Part V — Other Taxes

Insurance premium tax

Travel insurance: higher rate tax.

146

(1) Schedule 6A to the Finance Act 1994 (premiums liable to tax at the higher rate) shall be amended as follows.

(2) For paragraph 4 (travel insurance) there shall be substituted—

(4) (1) A premium under a taxable insurance contract falls within this paragraph if it is in respect of the provision of cover against travel risks for a person travelling. (2) Where— (a) a contract of insurance provides cover against both travel risks and risks other than travel risks, (b) the premium attributable to the cover against travel risks does not exceed 10 per cent. of the total premium payable under the contract, and (c) the contract does not provide cover for a person travelling against travel risks falling within two or more of the paragraphs of sub-paragraph (3) below, the premium, so far as attributable to the cover against travel risks, does not fall within this paragraph by virtue of sub-paragraph (1) above. (3) The travel risks mentioned in sub-paragraph (2)(c) above are— (a) liability in respect of cancellation of travel or of accommodation arranged in connection with travel; (b) delayed or missed departure; (c) curtailment of travel or of the use of accommodation arranged in connection with travel; (d) loss or delayed arrival of baggage; (e) personal injury or illness or expenses of repatriation. (4) A premium does not fall within this paragraph by virtue of sub-paragraph (1) above if it is payable under a taxable insurance contract relating to a motor vehicle and is attributable to cover of the kind generally known as— (a) fully comprehensive, (b) third party, fire and theft, (c) third party, or (d) roadside assistance, or if it is payable under a taxable insurance contract relating to a caravan, boat or aircraft and is attributable to cover of a description broadly corresponding to any of those set out in paragraphs (a) to (d) above (so far as applicable) provided in respect of the caravan, boat or aircraft for a period of at least one month for the person travelling. (5) In this paragraph— - “person travelling” includes a person intending to travel; - “travel risks” means risks associated with, or related to, travel or intended travel— 1. outside the United Kingdom, 2. by air within the United Kingdom, 3. within the United Kingdom in connection with travel falling within paragraph (a) or (b) above, or 4. which involves absence from home for at least one night,

(3) Except as provided by subsection (4) below, subsections (1) and (2) above have effect in relation to a premium which falls to be regarded for the purposes of Part III of the Finance Act 1994 as received under a taxable insurance contract by an insurer on or after 1st August 1998.

(4) Subsections (1) and (2) above do not have effect in relation to a premium if the premium—

(a) is in respect of a contract made before 1st August 1998; and

(b) falls, by virtue of regulations under section 68 of the Finance Act 1994 (special accounting scheme), to be regarded for the purposes of Part III of that Act as received under the contract by the insurer on a date before 1st February 1999.

(5) In the application of sections 67A to 67C of the Finance Act 1994 in relation to the increase in insurance premium tax effected by this section and the exception from that increase—

(a) the announcement relating to that increase, as described in section 67A(1), and to that exception, as described in section 67B(1), shall be taken to have been made on 17th March 1998;

(b) “the date of the change” is 1st August 1998; and

Taxable intermediaries.

147

(1) Section 52A of the Finance Act 1994 (certain fees to be treated as premiums under higher rate contracts) shall be amended as follows.

(2) In subsection (5) (which defines a “taxable intermediary" as a person falling within subsection (6) of that section etc) after “subsection (6)" there shall be inserted “ or (6A) ”.

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

(6) A person falls within this subsection if the higher rate contract mentioned in subsection (1) above falls within paragraph 2 or 3 of Schedule 6A to this Act (motor cars or motor cycles, or relevant goods) and the person is— (a) within the meaning of the paragraph in question, a supplier of motor cars or motor cycles or, as the case may be, of relevant goods; or (b) a person connected with a person falling within paragraph (a) above; or (c) a person who in the course of his business pays— (i) the whole or any part of the premium received under that contract, or (ii) a fee connected with the arranging of that contract, to a person falling within paragraph (a) or (b) above. (6A) A person falls within this subsection if the higher rate contract mentioned in subsection (1) above falls within paragraph 4 of Schedule 6A to this Act (travel insurance) and the person is— (a) the insurer under that contract; or (b) a person through whom that contract is arranged in the course of his business; or (c) a person connected with the insurer under that contract; or (d) a person connected with a person falling within paragraph (b) above; or (e) a person who in the course of his business pays— (i) the whole or any part of the premium received under that contract, or (ii) a fee connected with the arranging of that contract, to a person falling within any of paragraphs (a) to (d) above.

(4) In subsection (9) (definitions) the definition of “tour operator" and “travel agent" shall be omitted.

(5) The amendments made by this section have effect in relation to payments in respect of fees charged on or after 1st August 1998.

Landfill tax

Provisional collection of landfill tax.

148

(1) In section 1(1) of the Provisional Collection of Taxes Act 1968 (taxes in relation to which resolutions may have temporary statutory effect), after “insurance premium tax," there shall be inserted “ landfill tax, ”.

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

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

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

Stamp duty

Stamp duty on conveyance or transfer on sale.

149

(1) Section 55 of the Finance Act 1963 and section 4 of the Finance Act Northern Ireland) 1963 (both of which provide for rates of stamp duty on conveyance or transfer on sale) shall each be amended as follows.

(2) In subsection (1)(d) (rate of £1.50p for every £100 etc where consideration does not exceed £500,000 and the instrument is certified at that amount) for “£1.50p" there shall be substituted “ £2 ”.

(3) In subsection (1)(e) (rate of £2 for every £100 etc) for “£2" there shall be substituted “ £3 ”.

(4) This section shall apply to instruments executed on or after 24th March 1998, except where the instrument in question is executed in pursuance of a contract made on or before 17th March 1998.

(5) This section shall be deemed to have come into force on 24th March 1998.

Relief from double stamp duties etc.

150

(1) Where an instrument which is chargeable with stamp duty in Great Britain and in Northern Ireland has been stamped in either of those parts of the United Kingdom—

(a) the instrument shall, to the extent of the duty it bears, be deemed to be stamped in the other part of the United Kingdom, but

(b) if the stamp duty chargeable on the instrument in that other part of the United Kingdom exceeds the stamp duty chargeable on the instrument in the part of the United Kingdom in which it has been stamped, the instrument shall not be deemed to have been duly stamped in that other part of the United Kingdom unless and until stamped in accordance with the law which has effect in that part of the United Kingdom with a stamp denoting an amount equal to the excess.

(2) An instrument which, by virtue of paragraph (b) of subsection (1) above, is not deemed to have been duly stamped in a part of the United Kingdom unless and until stamped with a stamp denoting an amount equal to the excess mentioned in that paragraph may, notwithstanding anything in section 15 of the Stamp Act 1891, be stamped with such a stamp without payment of any penalty at any time within 30 days after it has first been received in that part of the United Kingdom.

(3) In section 22 of the Stamp Duties Management Act 1891 (discontinuance of dies) for the words from “London" to “Gazettes" there shall be substituted “ London, Edinburgh and Belfast Gazettes ”.

(4) Section 29 of the Government of Ireland Act 1920 (the provisions of which are either spent or re-enacted with modifications in subsection (1) above) shall cease to have effect.

(5) The saving in Part I of Schedule 6 to the Northern Ireland Constitution Act 1973 (repeals) for orders made under section 69 of the Government of Ireland Act 1920 shall cease to have effect in relation to Part IV of the Government of Ireland (Adaptation of the Taxing Acts) Order 1922 (the provisions of which are either spent or re-enacted with modifications in subsections (2) and (3) above).

Stamp duty reserve tax

Depositary receipts and clearance services: exchanges of shares.

151

(1) In section 95 of the Finance Act 1986 (depositary receipts; exceptions) in subsection (3) (exchanges) after paragraph (b) there shall be added— “ and the shares in company Y are held under a depositary receipt scheme. ”

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

(5) For the purposes of subsection (3) above, the cases where shares are held under a depositary receipt scheme are those cases where, in pursuance of an arrangement,— (a) a depositary receipt for chargeable securities has been, or is to be, issued by a person falling within section 93(2) above in respect of the shares in question or shares of the same kind and amount; and (b) the shares in question are held by that person, or by a person whose business is or includes holding chargeable securities as nominee or agent for that person, towards the eventual satisfaction of the entitlement of the receipt’s holder to receive chargeable securities. (6) Where an arrangement is entered into under which— (a) shares in a company (company X) are issued to persons in respect of their holdings of shares in another company (company Y), and (b) the shares in company Y are cancelled, the issue shall be treated for the purposes of subsection (3) above as an issue by company X in exchange for the shares in company Y. (7) In this section “depositary receipt for chargeable securities” has the same meaning as in section 93 above (see section 94 above).

(3) In section 97 of the Finance Act 1986 (clearance services: exceptions) in subsection (4) (exchanges) after paragraph (b) there shall be added— “ and the shares in company Y are held under a clearance services scheme. ”

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

(6) For the purposes of subsection (4) above, the cases where shares are held under a clearance services scheme are those cases where— (a) an arrangement falling within paragraph (a) of subsection (1) of section 96 above has been entered into; and (b) in pursuance of that arrangement, the shares are held by the person referred to in that paragraph as A or by a person whose business is or includes holding chargeable securities as nominee for that person. (7) Where an arrangement is entered into under which— (a) shares in a company (company X) are issued to persons in respect of their holdings of shares in another company (company Y), and (b) the shares in company Y are cancelled, the issue shall be treated for the purposes of subsection (4) above as an issue by company X in exchange for the shares in company Y.

(5) In section 99(10) of the Finance Act 1986 (which makes provision in relation to the interpretation of “chargeable securities” in sections 93, 94, 96 and 97A)—

(a) after “94," there shall be inserted “ 95, ”; and

(b) after “96" there shall be inserted “ , 97 ”.

(6) This section applies where the issue by company X referred to in section 95(3) or (6) or 97(4) or (7) of the Finance Act 1986 is an issue on or after 1st May 1998.

Petroleum revenue tax etc.

Gas valuation.

152

(1) Paragraph 3A of Schedule 3 to the Oil Taxation Act 1975 (market value of light gases) shall have effect, and be deemed always to have had effect, with the insertion of the following sub-paragraph after sub-paragraph (3)—

(3A) The circumstances referred to in sub-paragraph (1) above include— (a) the timing of the making, and of any subsequent variations, of the actual contract or other arrangements under which the disposal or appropriation was made; (b) the terms of that contract or, as the case may be, of those arrangements, and the terms of any such variations; and (c) the extent to which the circumstances to which regard is to be had by virtue of paragraphs (a) and (b) above are circumstances that might reasonably have been expected to exist in the case of a contract satisfying the conditions specified in sub-paragraph (2) above.

(2) Paragraph 12 of Schedule 2 to the Oil Taxation Act 1983 (purchase of oil at place of extraction) shall have effect and, in relation to light gases disposed of or appropriated at any time on or after 3rd May 1994, be deemed to have had effect—

(a) with the substitution, for the words “paragraphs (a) to (c)” in sub-paragraph (2), of the words “paragraphs (a) to (cb)"; and

(b) with the substitution for the words from “2(5)(b)" to “length),” in sub-paragraph (5) of the words “2(5)(b) or (ca) of the principal Act (oil disposed of otherwise than in sales at arm’s length),".

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

Gas levy

Reduction and abolition of gas levy.

153

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

Dumping duties

Repeal of Customs Duties (Dumping and Subsidies) Act 1969.

154

The Customs Duties (Dumping and Subsidies) Act 1969 (which confers powers on the Secretary of State, exercisable in accordance with section 6(5) of the Finance Act 1978, to charge duties in respect of dumping and to offset subsidies) shall cease to have effect.

Part VI — Miscellaneous and Supplemental

Fiscal stability

Code for fiscal stability.

155

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

Annual Budget documents.

156

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

Supplementary powers of the Comptroller and Auditor General.

157

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

Government borrowing

Treasury’s position regarding their own securities.

158

(1) This section applies to securities issued by or on behalf of the Treasury, here referred to as Treasury securities.

(2) Any powers which relate to Treasury securities and which are conferred on the Treasury in a capacity other than issuer may be exercised by them, and no rule of law preventing a person contracting with himself shall prevent them exercising the powers.

(3) The powers referred to in subsection (2) above include powers to acquire, hold and transfer securities and to make agreements with regard to them.

(4) If Treasury securities are acquired under powers conferred on the Treasury, until they are transferred or redeemed they shall be treated as held by the persons for the time being constituting the Treasury.

Treasury bills.

159

(1) In section 8 of the Treasury Bills Act 1877 (mode of issue of Treasury bills) the following shall be substituted for paragraph (1)—

(1) Treasury bills shall be issued by the Treasury (either directly or through such agent as the Treasury think fit).

(2) This section shall apply in relation to issues made on or after such day as the Treasury may appoint by order made by statutory instrument.

National loans.

160

Schedule 26 to this Act (national loans) shall have effect.

Non-FOTRA securities.

161

(1) Subject to the following provisions of this section, any gilt-edged security issued before 6th April 1998 without FOTRA conditions shall be treated in relation to times on or after that date as if—

(a) it were a security issued with the post-1996 Act conditions; and

(b) those conditions had been authorised in relation to the issue of that security by virtue of section 22 of the Finance (No. 2) Act 1931.

(2) Where a gilt-edged security falls to be treated as mentioned in subsection (1) above that treatment shall have effect—

(a) for the purposes of Chapter 2 of Part 12 of the Income Tax Act 2007 (accrued income profits) in relation only to accrued income profits which a person is treated as making under section 628(5) or 630(2) of that Act on or after 6th April 1998;

(b) for the other purposes of the Tax Acts, in relation only to payments of interest falling due on or after that date; and

(c) for the purposes of the Inheritance Tax Act 1984, in relation only to a determination of whether property is excluded property at a time falling on or after that date.

(3) No charge to tax shall be treated as arising under section 65 of the Inheritance Tax Act 1984 (property becoming excluded property) by reason only of the coming into force of this section.

(4) In this section “FOTRA conditions” means any such conditions about exemption from taxation as are authorised in relation to the issue of a gilt-edged security by virtue of section 22 of the Finance (No. 2) Act 1931.

(5) In this section “the post-1996 Act conditions” means the FOTRA conditions with which 7.25% Treasury Stock 2007 was first issued by virtue of section 22 of the Finance (No. 2) Act 1931.

(6) In this section “gilt-edged securities” means any securities which are gilt-edged securities for the purposes of the Taxation of Chargeable Gains Act 1992.

(7) This section does not apply to any 3½% War Loan 1952 Or After which was issued with a condition authorised by virtue of section 47 of the Finance (No. 2) Act 1915.

Accounting statements relating to National Savings.

162

(1) Subject to subsection (2) below, in each of the following provisions (which provide for annual statements of account as respects years ending with 31st December to be prepared in relation to deposits with the National Savings Bank), that is to say—

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

(b) section 120(4) of the Finance Act 1980 (investment deposits),

for “31st December" there shall be substituted “ 31st March ”.

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

(3) In section 19(2) of the National Savings Bank Act 1971 (delivery of statement under section 19(1) to the Comptroller and Auditor General), for the words from “before the end of May" to “that year" there shall be substituted “ before the end of August next following the end of any period for which a statement falls to be prepared under subsection (1) above, transmit the statement for that period ”.

(4) In section 20 of that Act (adjustment of balances)—

(a) for “year ending with 31st December" there shall be substituted “ period as respects which a statement falls to be prepared under section 19(1) of this Act ”;

(b) for the words “the year", in each place where they occur, there shall be substituted “ that period ”; and

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

The European single currency

Adoption of single currency by other member States.

163

(1) The Treasury may, to such extent as appears to them appropriate in connection with any of the matters falling within subsection (2) below, by regulations modify the application and effect as respects—

(a) transactions in a currency other than sterling,

(b) instruments denominated in such a currency, and

of any enactment or subordinate legislation relating to any matter for which the Commissioners for Her Majesty’s Revenue and Customs are responsible and to which section 7 of the Commissioners for Revenue and Customs Act 2005 (former Inland Revenue matters) applies.

(2) The matters falling within this subsection are—

(a) the adoption or proposed adoption by other member States of the single currency; and

(b) any transitional measures or other arrangements applying or likely to apply in relation to the adoption of the single currency by other member States.

(3) Without prejudice to the generality of subsection (1) above, the power conferred by that subsection includes power by regulations to provide—

(a) for liabilities to pay amounts to the Commissioners of Inland Revenue under any enactment or subordinate legislation relating to taxation to be capable of being discharged, in accordance with the regulations, by payments in the single currency;

(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) The power to make regulations under this section includes—

(a) power to impose charges to taxation;

(b) power to amend or repeal any enactment; and

(c) power to make such incidental, supplemental, consequential and transitional provision as appears to the Treasury to be appropriate.

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

(6) In this section—

“enactment” includes any enactment contained in this Act (other than this section) and any enactment passed after this Act;

“other member State” means a member State other than the United Kingdom;

“subordinate legislation” has the same meaning as in the Interpretation Act 1978.

(7) References in this section to the adoption of the single currency are references to the adoption of the single currency in accordance with the Treaty establishing the European Community, and the reference in subsection (3)(a) above to that currency shall be construed accordingly.

Supplemental

Interpretation.

164

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

Repeals.

165

(1) The enactments mentioned in Schedule 27 to this Act (which include spent provisions) are hereby repealed to the extent specified in the third column of that Schedule.

(2) The repeals specified in that Schedule have effect subject to the commencement provisions and savings contained or referred to in the notes set out in that Schedule.

Short title.

166

This Act may be cited as the Finance Act 1998.

SCHEDULE 1

Meaning of “the 1994 Act"

1

In this Schedule “the 1994 Act” means the Vehicle Excise and Registration Act 1994.

Certificates as to reduced pollution

2

The following section shall be inserted after section 61A of the 1994 Act—

(61B) (1) The Secretary of State may by regulations make provision— (a) for the making of an application to the Secretary of State for the issue in respect of an eligible vehicle of a reduced pollution certificate; (b) for the manner in which any determination of whether to issue such a certificate on such an application is to be made; (c) for the examination of an eligible vehicle, for the purposes of the determination mentioned in paragraph (b), by such persons, and in such manner, as may be prescribed; (d) for a fee to be paid for such an examination; (e) for a reduced pollution certificate to be issued in respect of an eligible vehicle if, and only if, it is found, on a prescribed examination, that the reduced pollution requirements are satisfied with respect to it; (f) for the form and content of such a certificate; (g) for such a certificate to be valid for such period as the Secretary of State may determine; (h) for the revocation, cancellation or surrender of such a certificate before the end of any such period; (i) for the Secretary of State to be entitled to require the return to him of such a certificate that has been revoked; (j) for the fact that such a certificate is, or is not, in force in respect of a vehicle to be treated as having conclusive effect for the purposes of this Act as to such matters as may be prescribed; (k) for the Secretary of State to be entitled, in prescribed cases, to require the production of such a certificate before making a determination for the purposes of section 7(5); and (l) for appeals against any determination not to issue such a certificate. (2) For the purposes of this Act, the reduced pollution requirements are satisfied with respect to a vehicle at any time if, as a result of adaptations of the prescribed description having been made to the vehicle after the prescribed date, the prescribed requirements are satisfied at that time with respect to the rate and content of the vehicle’s emissions. (3) Without prejudice to the generality of subsection (1), for the purpose of enabling the Secretary of State to determine whether the reduced pollution requirements are satisfied at any time with respect to a vehicle in respect of which a reduced pollution certificate is in force, regulations under this section— (a) may authorise such person as may be prescribed to require the vehicle to be re-examined in accordance with the regulations; (b) may provide for a fee to be paid for such a re-examination; (c) may provide for the refund of such a fee if it is found, on the prescribed re-examination, that the reduced pollution requirements are satisfied with respect to the vehicle. (4) In this section “eligible vehicle” means— (a) a bus, as defined in paragraph 3(2) of Schedule 1; (b) a vehicle to which paragraph 6 of Schedule 1 applies; (c) a haulage vehicle, as defined in paragraph 7(2) of Schedule 1, other than a showman’s vehicle; or (d) a goods vehicle, other than one falling within paragraph 9(2) or 11(2) of Schedule 1. (5) In this section “prescribed” means prescribed by regulations made by the Secretary of State.

Buses

3

(1) In sub-paragraph (1) of paragraph 3 of Schedule 1 to the 1994 Act (annual rates of vehicle excise duty for buses), after “bus" there shall be inserted “ with respect to which the reduced pollution requirements are not satisfied ”.

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

(1A) The annual rate of vehicle excise duty applicable to a bus with respect to which the reduced pollution requirements are satisfied is the general rate specified in paragraph 1(2).

(3) In sub-paragraph (6) of that paragraph, for “which falls" there shall be substituted

which— (a) is not a vehicle with respect to which the reduced pollution requirements are satisfied; and (b) falls

Special vehicles

4

In paragraph 4(7) of that Schedule (annual rates of vehicle excise duty for special vehicles), for “which falls" there shall be substituted

which— (a) is not a vehicle with respect to which the reduced pollution requirements are satisfied; and (b) falls

Recovery vehicles

5

In paragraph 5(6) of that Schedule (annual rates of vehicle excise duty for recovery vehicles), for “which falls" there shall be substituted

which— (a) is not a vehicle with respect to which the reduced pollution requirements are satisfied; and (b) falls

Vehicles used for exceptional loads

6

(1) In paragraph 6 of that Schedule (annual rates of vehicle excise duty for vehicles used for exceptional loads), in sub-paragraph (2), for “the heavy tractive unit rate" there shall be substituted “ the rate specified in sub-paragraph (2A). ”

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

(2A) The rate referred to in sub-paragraph (2) is— (a) in the case of a vehicle with respect to which the reduced pollution requirements are not satisfied, £5,170; and (b) in the case of a vehicle with respect to which those requirements are satisfied, £4,670.

(3) Sub-paragraph (3A) of that paragraph shall cease to have effect.

Haulage vehicles

7

(1) In paragraph 7 of that Schedule (annual rates of vehicle excise duty for haulage vehicles), in sub-paragraph (1)(b), for “the general haulage vehicle rate" there shall be substituted “ the rate specified in sub-paragraph (3A) ”.

(2) In sub-paragraph (3) of that paragraph, for “which falls" there shall be substituted

which— (a) is not a vehicle with respect to which the reduced pollution requirements are satisfied; and (b) falls

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

(3A) The rate referred to in sub-paragraph (1)(b) is— (a) in the case of a vehicle with respect to which the reduced pollution requirements are not satisfied, £350; and (b) in the case of a vehicle with respect to which those requirements are satisfied, the general rate specified in paragraph 1(2).

(4) Sub-paragraphs (4), (5) and (6) of that paragraph shall cease to have effect.

Rigid goods vehicles

8

(1) In sub-paragraph (1) of paragraph 9 of that Schedule (annual rates of vehicle excise duty for rigid goods vehicles), after “which" there shall be inserted “ is not a vehicle with respect to which the reduced pollution requirements are satisfied and which ”.

(2) In sub-paragraph (3) of that paragraph, for the words from “which has" to the end of the sub-paragraph there shall be substituted

which— (a) is not a vehicle with respect to which the reduced pollution requirements are satisfied, (b) has a revenue weight exceeding 44,000 kilograms, and (c) is not an island goods vehicle, shall be £5,170.

(3) In sub-paragraph (4) of that paragraph, for “which falls" there shall be substituted

which— (a) is not a vehicle with respect to which the reduced pollution requirements are satisfied; and (b) falls

(4) Sub-paragraph (5) of that paragraph shall cease to have effect.

9

After that paragraph there shall be inserted the following paragraphs—

(9A) (1) This paragraph applies to a rigid goods vehicle which— (a) is a vehicle with respect to which the reduced pollution requirements are satisfied; (b) is not a vehicle for which the annual rate of vehicle excise duty is determined under paragraph 9(2); and (c) has a revenue weight exceeding 3,500 kilograms. (2) Subject to sub-paragraph (3), the annual rate of vehicle excise duty applicable to a rigid goods vehicle to which this paragraph applies shall be determined in accordance with the table set out in paragraph 9B by reference to— (a) the revenue weight of the vehicle, and (b) the number of axles on the vehicle. (3) The annual rate of vehicle excise duty applicable to a rigid goods vehicle to which this paragraph applies which has a revenue weight exceeding 44,000 kilograms shall be £4,670. (9B) That table is as follows—

Revenue weight of vehicle	Revenue weight of vehicle	Rate	Rate	Rate
(1)	(2)	(3)	(4)	(5)
Exceeding	Not Exceeding	Two axle vehicle	Three axle vehicle	Four or more axle vehicle
kgs	kgs	£	£	£
3,500	7,500	150	150	150
7,500	12,000	150	150	150
12,000	13,000	150	150	150
13,000	14,000	150	150	150
14,000	15,000	340	150	150
15,000	17,000	820	150	150
17,000	19,000	820	350	150
19,000	21,000	820	520	150
21,000	23,000	820	970	150
23,000	25,000	820	1,730	330
25,000	27,000	820	1,840	970
27,000	29,000	820	1,840	1,820
29,000	31,000	820	1,840	2,860
31,000	44,000	820	1,840	3,900

10

In paragraph 10 of that Schedule (the trailer supplement), in sub-paragraph (1), for “paragraph 9" there shall be substituted “ paragraphs 9 and 9A ”.

Tractive units

11

(1) In sub-paragraph (1) of paragraph 11 of that Schedule (annual rates of vehicle excise duty for tractive units), after “which" there shall be inserted “ is not a vehicle with respect to which the reduced pollution requirements are satisfied and which ”.

(2) In sub-paragraph (3) of that paragraph, for the words from “which has" to the end of the sub-paragraph there shall be substituted

which— (a) is not a vehicle with respect to which the reduced pollution requirements are satisfied, (b) has a revenue weight exceeding 44,000 kilograms, and (c) is not an island goods vehicle, shall be £5,170.

(3) In sub-paragraph (4) of that paragraph, for “which falls" there shall be substituted

which— (a) is not a vehicle with respect to which the reduced pollution requirements are satisfied; and (b) falls

(4) Sub-paragraph (5) of that paragraph shall cease to have effect.

12

After that paragraph there shall be inserted the following paragraphs—

(11A) (1) This paragraph applies to a tractive unit which— (a) is a vehicle with respect to which the reduced pollution requirements are satisfied; (b) is not a vehicle for which the annual rate of vehicle excise duty is determined under paragraph 11(2); and (c) has a revenue weight exceeding 3,500 kilograms. (2) Subject to sub-paragraph (3), the annual rate of vehicle excise duty applicable to a tractive unit to which this paragraph applies shall be determined, in accordance with the table set out in paragraph 11B, by reference to— (a) the revenue weight of the tractive unit, (b) the number of axles on the tractive unit, and (c) the types of semi-trailers, distinguished according to the number of their axles, which are to be drawn by it. (3) The annual rate of vehicle excise duty applicable to a tractive unit to which this paragraph applies which has a revenue weight exceeding 44,000 kilograms shall be £4,670.

(11B) That table is as follows—

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Finance Act 1998

Taper relief and indexation allowance

Taper relief for CGT.

121

Freezing of indexation allowance for CGT.

122

Pooling and identification of shares etc.

Abolition of pooling for CGT.

123

New identification rules for CGT.

124

Indexation and share pooling etc.

125

Stock dividends

Capital gains on stock dividends.

126

Non-residents etc.

Charge to CGT on temporary non-residents.

127

Disposal of interests in a settlement.

128

Attribution of gains to settlor in section 10A cases.

129

Charge on beneficiaries of settlements with non-resident settlors.

130

Charge on settlors of settlements for grandchildren.

131

Charge on settlors of pre-19th March 1991 settlements.

132

Groups of companies etc.

Transfer within group to investment trust.

133

Transfer of company’s assets to venture capital trust.

134

Transfer within group to venture capital trust.

135

Incorporated friendly societies.

136

Pre-entry gains.

137

Pre-entry losses.

138

De-grouping charges.

139

Abolition of reliefs

Phasing out of retirement relief.

140

Abolition of certain other CGT reliefs.

141

Part IV — Inheritance Tax etc.

Property of historic interest etc.

142

Removal of exemption for gifts for public benefit.

143

Maintenance funds for historic buildings, etc.

144

Accounting for property accepted in satisfaction of tax.

145

Part V — Other Taxes

Insurance premium tax

Travel insurance: higher rate tax.

146

Taxable intermediaries.

147

Landfill tax

Provisional collection of landfill tax.

148

Stamp duty

Stamp duty on conveyance or transfer on sale.

149

Relief from double stamp duties etc.

150

Stamp duty reserve tax

Depositary receipts and clearance services: exchanges of shares.

151

Petroleum revenue tax etc.

Gas valuation.

152

Gas levy

Reduction and abolition of gas levy.