Finance Act 1998

Revenue weight of tractive unit	Revenue weight of tractive unit	Rate for tractive unit with two axles	Rate for tractive unit with two axles	Rate for tractive unit with two axles	Rate of tractive unit with three or more axles	Rate of tractive unit with three or more axles	Rate of tractive unit with three or more axles
(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)
Exceeding	Not exceeding	Any no. of semi-trailer axles	2 or more semi-trailer axles	3 or more semi-trailer axles	Any no. of semi-trailer axles	2 or more semi-trailer axles	3 or more semi-trailer axles
kgs	kgs	£	£	£	£	£	£
3,500	7,500	150	150	150	150	150	150
7,500	12,000	150	150	150	150	150	150
12,000	16,000	150	150	150	150	150	150
16,000	20,000	150	150	150	150	150	150
20,000	23,000	310	150	150	150	150	150
23,000	26,000	690	150	150	150	150	150
26,000	28,000	690	630	150	630	150	150
28,000	31,000	1,240	1,240	590	1,240	160	150
31,000	33,000	2,030	2,030	1,240	2,030	500	150
33,000	34,000	4,670	4,670	1,240	2,030	970	150
34,000	36,000	4,670	4,670	2,340	2,030	1,600	360
36,000	38,000	4,670	4,670	2,710	2,320	2,320	780
38,000	44,000	4,670	4,670	2,710	2,320	2,320	780

Other amendments

13

In section 15 of the 1994 Act (vehicles becoming chargeable to duty at higher rate), after subsection (2) there shall be inserted the following subsection—

(2A) For the purposes of subsection (1) a vehicle is also used so as to subject it to a higher rate if— (a) the rate of vehicle excise duty paid on a vehicle licence taken out for the vehicle was the rate applicable to a vehicle of the same description with respect to which the reduced pollution requirements are satisfied, and (b) while the licence is in force, the vehicle is used at a time when those requirements are not satisfied with respect to it.

14

In section 16 of the 1994 Act (exceptions from charge at higher rate in case of tractive units), at the beginning of subsection (1) there shall be inserted “Subject to subsection (9)" and after subsection (7) there shall be inserted the following subsections—

(8) This subsection applies to a tractive unit (“the relevant tractive unit”) in relation to which subsection (2), (4) or (6) applies if— (a) the rate of duty paid on taking out the licence for the relevant tractive unit is the rate applicable to a tractive unit of the appropriate description with respect to which the reduced pollution requirements are satisfied; and (b) while the licence is in force, the relevant tractive unit is used at a time when the reduced pollution requirements are not satisfied with respect to it. (9) Where subsection (8) applies, subsection (1) does not prevent duty becoming payable under section 15 at the rate applicable to a tractive unit of the appropriate description with respect to which the reduced pollution requirements are not satisfied. (10) In this section “the appropriate description” means the description mentioned in paragraph (b) of whichever of subsections (2), (4) and (6) applies in relation to the relevant tractive unit.

15

In section 45 of the 1994 Act (offences relating to false or misleading declarations and information), in subsections (3A) and (3B), after “section 61A" there shall be inserted “ or 61B ”.

16

• (1) Paragraph 22 of Schedule 2 to that Act (exemption in relation to vehicle testing) shall be amended as follows.

• (2) In sub-paragraph (1)—

• (a) in paragraph (a), for “or a vehicle weight test" there shall be substituted “ , a vehicle weight test or a reduced pollution test ”; and

• (b) in paragraph (b), for “a compulsory test or a vehicle weight test" there shall be substituted “ any such test ”.

• (3) In sub-paragraph (2), after “vehicle weight test" there shall be inserted “ , a reduced pollution test ”.

• (4) In sub-paragraph (2A), after “compulsory test", in each place it occurs, there shall be inserted “ or a reduced pollution test ”.

• (5) In sub-paragraph (3), after “compulsory test" there shall be inserted “ , or a reduced pollution test, ”.

• (6) After sub-paragraph (6A) there shall be inserted the following sub-paragraph—

(6AA) In this paragraph “a reduced pollution test” means any examination of a vehicle for which provision is made by regulations under section 61B of this Act.

• (7) In sub-paragraph (6B), for “or vehicle weight test" there shall be substituted “ , a vehicle weight test or a reduced pollution test ”.

• (8) In sub-paragraphs (8) and (9), the word “or” shall be inserted at the end of paragraphs (a) and (c) and after paragraph (c) there shall be inserted the following paragraph—

(d) a certificate issued by virtue of section 61B of this Act.

Commencement

17

• (1) Subject to sub-paragraph (2) below, the preceding provisions of this Schedule shall come into force in relation to licences issued on or after such day as the Secretary of State may by order made by statutory instrument appoint; and different days may be appointed under this sub-paragraph for different purposes.

• (2) Paragraphs 1, 2, 15 and 16 above come into force with the passing of this Act.

SCHEDULE 2

Alcoholic Liquor Duties Act 1979 (c.4)

1

In section 8 of the Alcoholic Liquor Duties Act 1979 (remission of duty in respect of spirits used for medical or scientific purposes) the following subsections shall be inserted after subsection (2)—

(3) Subsection (4) below applies if— (a) spirits are received and delivered in accordance with subsection (1) above, (b) they are not used as proposed, and (c) it is not shown to the satisfaction of the Commissioners that they can be accounted for by natural waste or other legitimate cause. (4) In such a case the Commissioners— (a) may assess as being excise duty due from the person concerned an amount equal to the duty that would have been chargeable on the spirits if, at the time of delivery from warehouse, they had been delivered for home use and otherwise than in accordance with subsection (1) above, and (b) may notify him or his representative accordingly.

2

In section 10 of the Alcoholic Liquor Duties Act 1979 (remission of duty on spirits for use in art or manufacture) the following subsections shall be inserted after subsection (2)—

(3) Subsection (4) below applies if— (a) spirits are received and delivered in accordance with subsection (1) above, (b) they are not used as proposed, and (c) it is not shown to the satisfaction of the Commissioners that they can be accounted for by natural waste or other legitimate cause. (4) In such a case the Commissioners— (a) may assess as being excise duty due from the person concerned an amount equal to the duty that would have been chargeable on the spirits if, at the time of delivery from warehouse, they had been delivered for home use and otherwise than in accordance with subsection (1) above, and (b) may notify him or his representative accordingly.

3

• (1) Section 11 of the Alcoholic Liquor Duties Act 1979 (relief from duty on imported goods not for human consumption containing spirits) shall be amended as follows.

• (2) At the beginning there shall be inserted “ (1) ”.

• (3) At the end there shall be inserted—

(2) Subsection (3) below applies if— (a) the Commissioners make a direction under subsection (1) above, but (b) it turns out that the goods were for human consumption. (3) In such a case the Commissioners— (a) may assess as being excise duty due from the relevant person an amount equal to the duty that would have been chargeable on the goods if the direction had not been made, and (b) may notify him or his representative accordingly. (4) The reference in subsection (3) above to the relevant person is to the importer or (if different) the person who sought the direction.

Hydrocarbon Oil Duties Act 1979 (c.5)

4

• (1) Section 13AB of the Hydrocarbon Oil Duties Act 1979 (misuse of kerosene) shall be amended as follows.

• (2) For subsection (1)(a) there shall be substituted—

(a) in respect of the quantity of kerosene used the Commissioners may assess as being excise duty due from him an amount equal to duty on the same quantity of gas oil at the rate for rebated gas oil which is in force at the time of the contravention, and they may notify him or his representative accordingly;

.

• (3) For subsection (2)(a) there shall be substituted—

(a) in respect of the quantity of kerosene taken into the fuel supply the Commissioners may assess as being excise duty due from him an amount equal to duty on the same quantity of gas oil at the rate for rebated gas oil which is in force at the time of the contravention, and they may notify him or his representative accordingly;

.

Tobacco Products Duty Act 1979 (c.7)

5

In section 8 of the Tobacco Products Duty Act 1979 (charge in cases of default) in subsection (2)—

• (a) for “require him to pay duty" there shall be substituted “ assess an amount as duty due from him ”;

• (b) at the end there shall be inserted , and they may notify him or his representative accordingly.

Finance (No. 2) Act 1992 (c.48)

6

• (1) Section 2 of the Finance (No. 2) Act 1992 (power to provide for drawback of excise duty) shall be amended as follows.

• (2) In subsection (3) (cancellation of drawback) paragraph (b) and the word “and" immediately preceding it shall be omitted.

• (3) After subsection (3) there shall be inserted—

(3A) If entitlement to drawback is cancelled under any provision contained in regulations by virtue of subsection (3) above the Commissioners— (a) may assess as being excise duty due from the prescribed person an amount equal to sums paid or credited to any person in respect of the drawback, and (b) may notify the prescribed person or his representative accordingly. (3B) The reference in subsection (3A) above to the prescribed person is to such person as may be prescribed for the purposes of the subsection by regulations under this section.

Finance Act 1994 (c.9)

7

In section 12 of the Finance Act 1994 (assessment to excise duty) after subsection (1) there shall be inserted—

(1A) Subject to subsection (4) below, where it appears to the Commissioners— (a) that any person is a person from whom any amount has become due in respect of any duty of excise; and (b) that the amount due can be ascertained by the Commissioners, the Commissioners may assess the amount of duty due from that person and notify that amount to that person or his representative.

8

• (1) In section 12A of the Finance Act 1994 (other assessments relating to excise duty matters) subsection (3) (amount assessed deemed to be duty due) shall be amended as follows.

• (2) At the end of paragraph (b) the word “or" shall be omitted and after that paragraph there shall be inserted—

(bb) section 8, 10 or 11 of the Alcoholic Liquor Duties Act 1979,

.

• (3) In paragraph (c) after “13," there shall be inserted “ 13AB, ” and after that paragraph there shall be inserted—

(d) section 8 of the Tobacco Products Duty Act 1979, or (e) section 2 of the Finance (No. 2) Act 1992,

.

9

• (1) In section 12B of the Finance Act 1994, subsection (2) (meaning of relevant time) shall be amended as follows.

• (2) After paragraph (e) there shall be inserted—

(ea) in the case of an assessment under section 8 or 10 of the Alcoholic Liquor Duties Act 1979, the time of delivery from warehouse; (eb) in the case of an assessment under section 11 of that Act, the time when the direction was made;

.

• (3) In paragraph (f) after “13," there shall be inserted “ 13AB, ”.

• (4) After paragraph (g) there shall be inserted—

(ga) in the case of an assessment under section 8 of the Tobacco Products Duty Act 1979, the time when the Commissioners are satisfied of a failure to prove as mentioned in subsection (2)(a) or (b) of that section; (gb) in the case of an assessment under section 2 of the Finance (No. 2) Act 1992, the time when the sums were paid or credited in respect of the drawback;

.

10

In section 14 of the Finance Act 1994 (requirement for review of a decision) in subsection (1)(ba)—

• (a) for “or" (occurring after “Management Act") there shall be substituted “ , section 8, 10 or 11 of the Alcoholic Liquor Duties Act 1979, ”;

• (b) after “13," there shall be inserted “ 13AB, ”;

• (c) after “Hydrocarbon Oil Duties Act 1979," there shall be inserted “ section 8 of the Tobacco Products Duty Act 1979, section 2 of the Finance (No. 2) Act 1992, ”.

11

In section 16 of the Finance Act 1994 (appeals to a tribunal) there shall be inserted after subsection (3)—

(3A) Subsection (3) above shall not apply if the appeal arises out of an assessment under section 8, 10 or 11 of the Alcoholic Liquor Duties Act 1979.

Commencement

12

This Schedule shall come into force on such day as the Commissioners of Customs and Excise may by order made by statutory instrument appoint; and different days may be appointed under this paragraph for different purposes.

SCHEDULE 3

Section 1 of the Provisional Collection of Taxes Act 1968

1

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Section 10 of the Taxes Management Act 1970

2

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Section 87 of the Taxes Management Act 1970

3

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Section 87A of the Taxes Management Act 1970

4

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Section 94 of the Taxes Management Act 1970

5

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Section 109 of the Taxes Management Act 1970

6

• (1) Section 109 of the Taxes Management Act 1970 (corporation tax on close company in connection with loans to participators etc) shall be amended as follows.

• (2) In subsection (3A) (interest under section 87A on so much of tax under section 419 of Taxes Act 1988 as is referable to amount of loan or advance repaid shall not be payable in respect of any period after repayment made)—

• (a) after “If" there shall be inserted “ (a) ”;

• (b) after “principal Act," there shall be inserted

or (b) there is such a release or writing off of the whole or any part of the debt in respect of a loan or advance as is referred to in that subsection,

;

• (c) after “amount repaid" there shall be inserted “ , released or written off ”; and

• (d) after “the repayment was made" there shall be inserted “ or the release or writing off occurred ”.

• (3) 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.

Section 13 of the Taxes Act 1988

7

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Section 14 of the Taxes Act 1988

8

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Section 75 of the Taxes Act 1988

9

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Section 116 of the Taxes Act 1988

10

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Section 238 of the Taxes Act 1988

11

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Section 239 of the Taxes Act 1988

12

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Section 240 of the Taxes Act 1988

13

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Section 241 of the Taxes Act 1988

14

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Section 245 of the Taxes Act 1988

15

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Section 245A of the Taxes Act 1988

16

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Section 245B of the Taxes Act 1988

17

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Section 246 of the Taxes Act 1988

18

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Section 247 of the Taxes Act 1988

19

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Section 248 of the Taxes Act 1988

20

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Section 252 of the Taxes Act 1988

21

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Section 253 of the Taxes Act 1988

22

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Section 255 of the Taxes Act 1988

23

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Section 419 of the Taxes Act 1988

24

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Section 434 of the Taxes Act 1988

25

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Section 434C of the Taxes Act 1988

26

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Section 468Q of the Taxes Act 1988

27

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Section 490 of the Taxes Act 1988

28

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Section 497 of the Taxes Act 1988

29

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Section 498 of the Taxes Act 1988

30

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Section 499 of the Taxes Act 1988

31

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Section 703 of the Taxes Act 1988

32

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Section 704 of the Taxes Act 1988

33

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Section 705 of the Taxes Act 1988

34

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Section 797 of the Taxes Act 1988

35

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Section 802 of the Taxes Act 1988

36

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Section 813 of the Taxes Act 1988

37

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Section 826 of the Taxes Act 1988

38

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Section 832 of the Taxes Act 1988

39

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Section 835 of the Taxes Act 1988

40

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Schedule 13 to the Taxes Act 1988

41

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Schedule 13A to the Taxes Act 1988

42

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Schedule 24 to the Taxes Act 1988

43

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Schedule 26 to the Taxes Act 1988

44

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Paragraph 8 of Schedule 4 to the Finance (No. 2) Act 1997

45

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Paragraph 9 of Schedule 4 to the Finance (No. 2) Act 1997

46

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Paragraph 18 of Schedule 4 to the Finance (No. 2) Act 1997

47

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Paragraph 23 of Schedule 4 to the Finance (No. 2) Act 1997

48

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SCHEDULE 4

Interest on overpaid or early paid corporation tax

1

• (1) In section 826(2) of the Taxes Act 1988 (which defines “the material date” for the purposes of interest on overpaid corporation tax) at the beginning there shall be inserted “ Subject to section 826A(2), ”.

• (2) After section 826 of the Taxes Act 1988 there shall be inserted—

(826A) (1) The Treasury may by regulations make provision applying section 826, with such modifications as may be prescribed, for the purpose of conferring on companies of such descriptions as may be prescribed a right to interest— (a) on such payments made by them in respect of corporation tax as may be prescribed, (b) at the rate applicable under section 178 of the Finance Act 1989, and (c) for such period as may be prescribed, and for treating any such interest for the purposes, or prescribed purposes, of the Tax Acts as interest under section 826(1)(a) on a repayment of corporation tax. (2) The Treasury may by regulations make provision modifying section 826(2) in relation to companies of such description as may be prescribed. (3) Subsections (1) and (2) above do not apply in relation to companies in relation to which section 826(2) is modified or otherwise affected by regulations under section 59E of the Management Act (alteration of date on which corporation tax becomes due and payable) in relation to the accounting period to which the corporation tax in question relates. (4) Where the Treasury make regulations under subsection (2) above in relation to companies of any description, they may also make regulations modifying section 59DA(2) of the Management Act in relation to those companies, or any description of such companies, by varying the date before which the claim there mentioned may not be made. (5) Regulations under this section— (a) may make different provision in relation to different cases or circumstances or in relation to companies or accounting periods of different descriptions; (b) may make such supplementary, incidental, consequential or transitional provision as appears to the Treasury to be necessary or expedient. (6) Regulations under this section may not make provision in relation to accounting periods ending before the day appointed under section 199 of the Finance Act 1994 for the purposes of Chapter III of Part IV of that Act (corporation tax self-assessment). (7) In this section “prescribed” means prescribed by regulations made under this section.

• (3) In section 178 of the Finance Act 1989 (setting of rates of interest) in subsection (2)(m) (which lists the provisions of the Taxes Act 1988 to which the section applies) for “and 826" there shall be substituted “ 826 and 826A(1)(b) ”.

The “material date" for interest on a repayment of income tax

2

• (1) In section 826 of the Taxes Act 1988 (interest on tax overpaid) in subsection (3) (date from which interest runs on a repayment of income tax, or a payment of tax credit, to a company) for the words from “the material date is" to “for the accounting period" there shall be substituted “ the material date is the day after the end of the accounting period ”.

• (2) This paragraph has effect in relation to 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 (corporation tax self-assessment).

Recovery of interest overpaid under section 826(1)(a)

3

• (1) In section 826 of the Taxes Act 1988 (interest on tax overpaid) after subsection (8) there shall be inserted—

(8A) Where— (a) interest has been paid to a company under subsection (1)(a) above, (b) there is a change in the company’s assessed liability to corporation tax, other than a change which in whole or in part corrects an error made by the Board or an officer of the Board, and (c) as a result only of that change (and, in particular, not as a result of any error in the calculation of the interest), it appears to an officer of the Board that the interest ought not to have been paid, either at all or to any extent, the interest that ought not to have been paid may be recovered from the company as if it were interest charged under Part IX of the Management Act (interest on overdue tax). (8B) For the purposes of subsection (8A) above, the cases where there is a change in a company’s assessed liability to corporation tax are those cases where— (a) an assessment, or an amendment of an assessment, of the amount of corporation tax payable by the company for the accounting period in question is made, or (b) a determination of that amount is made under paragraph 36 or 37 of Schedule 18 to the Finance Act 1998 (which until superseded by a self-assessment under that Schedule has effect as if it were one), whether or not any previous assessment or determination has been made. (8C) In subsection (8A)(b) above “error” includes— (a) any computational error; and (b) the allowance of a claim or election which ought not to have been allowed.

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

• (3) The amendments made by this paragraph have effect in relation to interest on repayments of corporation tax paid for 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 (corporation tax self-assessment).

Interest on underpaid tax where reliefs are carried back

4

• (1) Section 87A of the Taxes Management Act 1970 (interest on overdue corporation tax etc) shall be amended as follows.

• (2) In each of subsections (4), (4A) and (6) (which refer to corporation tax becoming due and payable as mentioned in subsection (1) of that section) for the words “as mentioned in subsection (1) above" there shall be substituted “ as mentioned in subsection (8) below ”.

• (3) After subsection (7) there shall be inserted—

(8) In subsections (4), (4A) and (6) above, any reference to the date on which corporation tax for an accounting period became, or would have become, due and payable shall be construed on the basis that corporation tax for an accounting period becomes due and payable on the day following the expiry of nine months from the end of the accounting period.

• (4) After subsection (8) there shall be inserted—

(9) The power conferred by section 59E of this Act (alteration of date on which corporation tax becomes due and payable) does not include power to make provision in relation to subsection (4), (4A), (6) or (8) above the effect of which would be to change the meaning of references in subsection (4), (4A) or (6) above to the date on which corporation tax for an accounting period became, or would have become, due and payable (as mentioned in subsection (8) above).

• (5) The amendments made by this paragraph have effect where the accounting period whose due and payable date falls to be determined is an accounting period 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 (corporation tax self-assessment).

• (6) In sub-paragraph (5) above “due and payable date”, in relation to an accounting period, means the date on which corporation tax for that period becomes, or (as the case may be) would become, due and payable.

Interest on overpaid tax where reliefs are carried back

5

• (1) Section 826 of the Taxes Act 1988 (interest on tax overpaid) shall be amended as follows.

• (2) In each of subsections (7), (7A), (7B) and (7C) (which refer to corporation tax becoming due and payable as mentioned in subsection (2) of that section) for the words “as mentioned in subsection (2) above" there shall be substituted “ as mentioned in subsection (7D) below ”.

• (3) After subsection (7CA) there shall be inserted—

(7D) In subsections (7), (7A), (7B) and (7C) above, any reference to the date on which corporation tax for an accounting period became, or would have become, due and payable shall be construed on the basis that corporation tax for an accounting period becomes due and payable on the day following the expiry of nine months from the end of the accounting period.

• (4) After subsection (7D) there shall be inserted—

(7E) The power conferred by section 59E of the Management Act (alteration of date on which corporation tax becomes due and payable) does not include power to make provision in relation to subsection (7), (7A), (7B), (7C) or (7D) above the effect of which would be to change the meaning of references in subsection (7), (7A), (7B) or (7C) above to the date on which corporation tax for an accounting period became, or would have become, due and payable (as mentioned in subsection (7D) above).

• (5) The amendments made by this paragraph have effect where the accounting period whose due and payable date falls to be determined is an accounting period 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 (corporation tax self-assessment).

• (6) In sub-paragraph (5) above “due and payable date”, in relation to an accounting period, means the date on which corporation tax for that period becomes, or (as the case may be) would become, due and payable.

Company liquidations

6

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Loan relationships

7

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SCHEDULE 5

Part I — Main charging provisions

1

In section 15(1) of the Taxes Act 1988 (the Schedule A charge), for Schedule A substitute—

Schedule A (1) (1) Tax is charged under this Schedule on the annual profits arising from a business carried on for the exploitation, as a source of rents or other receipts, of any estate, interest or rights in or over land in the United Kingdom. (2) To the extent that any transaction is entered into for the exploitation, as a source of rents or other receipts, of any estate, interest or rights in or over land in the United Kingdom, it is taken to be entered into in the course of such a business. (3) All businesses and transactions carried on or entered into by a particular person or partnership, so far as they are businesses or transactions the profits of which are chargeable to tax under this Schedule, are treated for the purposes of this Schedule as, or as entered into in the course of carrying on, a single business. There are qualifications to this rule in the case of— (a) companies not resident in the United Kingdom (see subsection (1A) below); and (b) insurance companies (see sections 432AA and 441B(2A)). (4) The receipts referred to in the expression “as a source of rents or other receipts” include— (a) payments in respect of a licence to occupy or otherwise to use land or the exercise of any other right over land, and (b) rentcharges, ground annuals and feu duties and other annual payments reserved in respect of, or charged on or issuing out of, the land. (2) (1) This Schedule does not apply to profits arising from the occupation of land. (2) This Schedule does not apply to— (a) profits charged to tax under Case I of Schedule D under— - section 53(1) (farming and market gardening), or - section 55 (mines, quarries and other concerns); (b) receipts or expenses taken into account as trading receipts or expenses under section 98 (tied premises); (c) rent charged to tax under Schedule D under— - section 119 (rent, etc. payable in connection with mines, quarries and other concerns), or - section 120(1) (certain rent, etc. payable in respect of electric line wayleaves). (3) The profits of a Schedule A business carried on by a company shall be computed without regard to items giving rise to— - credits or debits within Chapter II of Part IV of the Finance Act 1996 (loan relationships), or - exchange gains or losses within Chapter II of Part II of the Finance Act 1993 (foreign exchange gains and losses), or - qualifying payments within Chapter II of Part IV of the Finance Act 1994 (interest rate and currency contracts). This Schedule does not affect the operation of those provisions. (3) (1) For the purposes of this Schedule a right to use a caravan or houseboat, where the use to which the caravan or houseboat may be put in pursuance of the right is confined to use at a single location in the United Kingdom, is treated as a right deriving from an estate or interest in land in the United Kingdom. (2) In sub-paragraph (1)— - “caravan” has the meaning given by section 29(1) of the Caravan Sites and Control of Development Act 1960; and - “houseboat” means a boat or similar structure designed or adapted for use as a place of human habitation. (4) (1) In the case of a furnished letting, any sum payable for the use of furniture shall be taken into account in computing the profits chargeable to tax under this Schedule in the same way as rent. Expenses in connection with the provision of furniture shall similarly be taken into account in the same way as expenses in connection with the premises. (2) A furnished letting means where— (a) a sum is payable in respect of the use of premises, and (b) the tenant or other person entitled to the use of the premises is also entitled, in connection with that use, to the use of furniture. (3) This paragraph does not apply if the receipts and expenses are taken into account in computing the profits of a trade consisting in, or involving, making furniture available for use in premises. (4) In this paragraph— (a) any reference to a sum includes the value of consideration other than money, and references to a sum being payable shall be construed accordingly; and (b) “premises” includes a caravan or houseboat within the meaning of paragraph 3.

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2

In section 15 of the Taxes Act 1988 (the Schedule A charge), after subsection (1) insert—

(1A) In the case of a company which is not resident in the United Kingdom— (a) businesses carried on and transactions entered into by it the profits of which are within the charge to corporation tax under Schedule A, and (b) businesses carried on and transactions entered into by it the profits of which are within the charge to income tax under Schedule A, are treated as separate Schedule A businesses.

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3

For the heading to Part II of the Taxes Act 1988 substitute “ PROVISIONS RELATING TO THE SCHEDULE A CHARGE ”.

4

For section 21 of the Taxes Act 1988 (persons chargeable and computation of amounts chargeable) substitute—

(21) (1) Income tax under Schedule A shall be charged on and paid by the persons receiving or entitled to the income in respect of which the tax is directed by the Income Tax Acts to be charged. (2) Income tax under Schedule A is charged on the full amount of the profits arising in the year of assessment. (3) This section does not apply for the purposes of corporation tax. (21A) (1) Except as otherwise expressly provided, the profits of a Schedule A business are computed in the same way as the profits of a trade are computed for the purposes of Case I of Schedule D. (2) The following provisions apply in accordance with subsection (1)— - section 72 (apportionment); - the provisions of Chapter V of Part IV (computational provisions relating to the Schedule D charge), except as mentioned in subsection (4) below; - section 577 (business entertainment expenses); - section 577A (expenditure involving crime); - sections 579 and 580 (redundancy payments); - sections 588 and 589 (training courses for employees); - sections 589A and 589B (counselling services for employees); - section 73(2) of the Finance Act 1988 (consideration for restrictive undertakings); - section 43 of the Finance Act 1989 (deductions in respect of certain emoluments); - section 76 of that Act (expenses in connection with non-approved retirement benefit schemes); - sections 112 and 113 of that Act (expenditure in connection with provision of security asset or service); - sections 42 and 46(1) and (2) of the Finance Act 1998 (provisions as to computation of profits and losses). (3) Section 74(1)(d) of this Act (disallowance of provisions for future repairs) applies in relation to a Schedule A business as if the reference to premises occupied for the purposes of the trade were to premises held for the purposes of the Schedule A business. (4) The following provisions in Chapter V of Part IV of this Act do not apply, or are excepted from applying, in accordance with subsection (1)— - section 82 (interest paid to non-residents), - section 87 (treatment of premiums taxed as rent), - section 96 (farming and market gardening: relief for fluctuating profits), and - section 98 (tied premises: receipts and expenses treated as those of trade). (21B) The following provisions apply for the purposes of Schedule A in relation to a Schedule A business as they apply for the purposes of Case I of Schedule D in relation to a trade— - sections 103 to 106, 108, 109A and 110 (post-cessation receipts and expenses, etc.); - section 113 (effect for income tax purposes of change in the persons engaged in carrying on trade); - section 337(1) (effect of company beginning or ceasing to carry on trade); - section 401(1) (pre-trading expenditure); - section 44 of and Schedule 6 to the Finance Act 1998 (change of accounting basis).

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5

After section 21B of the Taxes Act 1988 (inserted by paragraph 4 above) insert—

(21C) (1) The following provisions have effect for the purpose of applying the charge to tax under Schedule A in relation to mutual business. (2) The transactions or relationships involved in mutual business are treated as if they were transactions or relationships between persons between whom no relationship of mutuality existed. (3) Any surplus arising from the business is regarded as a profit (and any deficit as a loss) if it would be so regarded if the business were not mutual. (4) The person— (a) to whom the profit arises for corporation tax purposes, or (b) who is regarded as receiving or entitled to the profit for income tax purposes, is the person who would satisfy that description if the business were not mutual business. (5) Nothing in this section affects the operation of section 488 (co-operative housing associations).

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6

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7

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8

In section 27 of the Taxes Act 1988 (maintenance funds for historic buildings), for subsection (3) substitute—

(3) Where by virtue of this section an election has effect in relation to an estate part of which is comprised in a settlement— (a) there may be treated as deductible from the receipts arising from that part— (i) any disbursements or expenses of the trustees of the settlement which relate to the other part of the estate and which would be so deductible if that part were also comprised in the settlement, and (ii) any disbursements or expenses of the owner of the other part of the estate to the extent to which they cannot be deducted by him in the chargeable period in which they are incurred because of an insufficiency of any receipts for that period from which they are deductible apart from this sub-paragraph; (b) any relief available to the trustees by virtue of section 379A(2)(b) shall instead be available to the owner of the other part of the estate. This subsection has effect subject to subsection (2A) of section 26.

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9

Section 28 of the Taxes Act 1988 (deductions from receipts other than rent) shall cease to have effect.

10

Section 29 of the Taxes Act 1988 (sporting rights) shall cease to have effect.

11

In section 30(1) of the Taxes Act 1988 (expenditure on sea walls)—

• (a) for “for the purposes of sections 25, 28 and 31" substitute “ for the purpose of computing the profits of any Schedule A business carried on in relation to those premises ”; and

• (b) for “in respect of dilapidation attributable to the year" substitute “ as an expense of the business for that year ”.

12

Section 31 of the Taxes Act 1988 (provisions supplementary to sections 25 to 30) shall cease to have effect.

13

Section 33 of the Taxes Act 1988 (agricultural land: allowance for excess expenditure on management) shall cease to have effect.

14

Sections 33A and 33B of the Taxes Act 1988 (connected persons) shall cease to have effect.

15

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16

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17

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18

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19

For the heading before section 40 of the Taxes Act 1988 substitute “ Supplementary provisions ”.

20

• (1) Section 40 of the Taxes Act 1988 (tax treatment of receipts and outgoings on sale of land) is amended as follows.

• (2) In subsection (1) for “become receivable or payable on his behalf" substitute “ been received or paid by him ”.

• (3) In subsection (3)(b), for the words from “had become receivable" to the end substitute “ had been received or paid directly by him immediately before the time to which the apportionment is made ”.

• (4) After subsection (4) insert—

(4A) An amount deemed under this section to have been received or paid shall be taken into account in computing the profits of the Schedule A business in question for the period in which it is treated as received or paid.

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• (5) Omit subsection (5).

21

Section 41 of the Taxes Act 1988 (relief for rent not paid, etc.) shall cease to have effect.

22

In section 42A of the Taxes Act 1988 (non-residents and their representatives), omit subsection (8).

23

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24

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25

After section 70 of the Taxes Act 1988 (corporation tax: basis of assessment, etc.) insert—

(70A) (1) This section applies where a company is chargeable to corporation tax under Case V of Schedule D in respect of income which— (a) arises from a business carried on for the exploitation, as a source of rents or other receipts, of any estate, interest or rights in or over land outside the United Kingdom, and (b) is not income to which section 70(2) applies (income from a trade or vocation). (2) The provisions of Schedule A apply to determine whether income falls within subsection (1)(a) above as they would apply to determine whether the income fell within paragraph 1(1) of that Schedule if— (a) the land in question were in the United Kingdom, or (b) a caravan or houseboat which is to be used at a location outside the United Kingdom were to be used at a location in the United Kingdom. (3) Any provision of the Taxes Acts which deems there to be a Schedule A business in the case of land in the United Kingdom applies where the corresponding circumstances arise with respect to land outside the United Kingdom so as to deem there to be a business within subsection (1)(a) above. (4) All businesses and transactions carried on or entered into by a particular company or partnership, so far as they are businesses or transactions the income from which is chargeable to tax under Case V of Schedule D in accordance with this section, are treated for the purposes of the charge to tax under Case V as, or as entered into in the course of carrying on, a single business (an “overseas property business"). (5) The income from an overseas property business shall be computed for the purposes of Case V of Schedule D in accordance with the rules applicable to the computation of the profits of a Schedule A business. Those rules apply separately in relation to— (a) an overseas property business, and (b) any actual Schedule A business of the company chargeable, as if each were the only Schedule A business carried on by that company. (6) Sections 503 and 504 of this Act and section 29 of the 1990 Act (provisions relating to furnished holiday accommodation) do not apply to the profits or losses of an overseas property business. (7) Where under this section rules expressed by reference to domestic concepts of law apply in relation to land outside the United Kingdom, they shall be interpreted so as to produce the result that most closely corresponds with the result produced for Schedule A purposes in relation to land in the United Kingdom.

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Part II — Treatment of losses

26

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27

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28

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29

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30

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31

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32

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Part III — Minor and consequential amendments

Taxes Management Act 1970 (c. 9)

33

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Income and Corporation Taxes Act 1988 (c.1)

34

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35

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36

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37

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38

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39

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40

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41

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42

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43

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44

In section 787(3) of the Taxes Act 1988 (restriction of relief for payments of interest) for “section 403(7)" substitute “ section 83(2)(b) of the Finance Act 1996 (claim to treat non-trading deficit as eligible for group relief) ”.

45

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46

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Capital Allowances Act 1990 (c.1)

47

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48

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49

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50

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51

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52

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53

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54

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55

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56

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57

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58

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59

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60

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61

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Taxation of Chargeable Gains Act 1992 (c.12)

62

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63

• (1) Schedule 8 to the Taxation of Chargeable Gains Act 1992 (leases) is amended as follows.

• (2) In paragraph 5 (exclusion of premiums taxed under Schedule A, etc.)—

• (a) in sub-paragraphs (1) and (2), for “income tax has become chargeable under section 34 of the Taxes Act on any amount" substitute “ any amount is brought into account by virtue of section 34 of the Taxes Act as a receipt of a Schedule A business (within the meaning of that Act) ”; and

• (b) in sub-paragraph (3), for “income tax has become chargeable under section 36 of the Taxes Act (sale of land with right of re-conveyance) on any amount" substitute “ any amount is brought into account by virtue of section 36 of the Taxes Act (sale of land with right of re-conveyance) as a receipt of a Schedule A business (within the meaning of that Act) ”.

• (3) In paragraph 6(2), for the words from “on which tax is paid" onwards substitute “ brought into account by virtue of section 35 of the Taxes Act (charge on assignment of a lease granted at an undervalue) as a receipt of a Schedule A business (within the meaning of that Act) ”.

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

• (5) For paragraph 7A substitute—

(7A) References in paragraphs 5 to 7 above to an amount brought into account as a receipt of a Schedule A business include references to an amount brought into account as a receipt of an overseas property business.

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Finance Act 1996 (c. 8)

64

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Part IV — Transitional provisions for corporation tax

Introduction

65

• (1) This Part of this Schedule makes provision with respect to the application of the provisions of Parts I to III of this Schedule for corporation tax purposes.

• (2) In this Part of this Schedule—

• “before commencement” and “after commencement” mean, respectively, before 1st April 1998 and on or after that date; and

• “the new rules” means the provisions of the Tax Acts relating to Schedule A taxation or, as the case may be, to the taxation under Case V of Schedule D of income from land outside the United Kingdom, as they have effect after commencement.

Receipts and expenses not to be counted twice

66

• (1) To the extent that receipts or expenses have been taken into account before commencement, they shall not be taken into account again under the new rules after commencement.

• (2) Nothing in section 43 of the Finance Act 1989 (computation of profits: effect of delayed payment of emoluments) shall be construed as affecting the rule in sub-paragraph (1) above.

Receipts and expenses not to be left out of account

67

To the extent that receipts or expenses would under the new rules have been brought into account before commencement, and were not so brought into account, they shall be brought into account immediately after commencement.

Expenses not to be carried back to before commencement

68

Expenses which were incurred before commencement but were not taken into account before commencement shall not, by virtue of section 25(3) or 31(3) of the Taxes Act 1988, be carried back and taken into account before commencement.

Effect of transfer of underlying rights

69

If any estate, interest or rights in or over land is or are transferred from one person to another, the references in paragraphs 66 to 68 to receipts or expenses being taken into account shall be construed as references to their being taken into account in relation to either of those persons.

Bad debt relief

70

• (1) Where relief under section 41 of the Taxes Act 1988 (relief for rent, etc. not paid) has been given in respect of an amount before commencement, any receipt after commencement shall be taken into account under the new rules.

• (2) Any writing off of an amount after commencement shall be taken into account under the new rules, even where it relates to a receipt brought into account before commencement.

Meaning of “taken into account"

71

For the purposes of paragraphs 66 to 70 an amount is “taken into account” if—

• (a) it is brought into account for tax purposes, or

• (b) it would have been so brought into account if the person concerned were chargeable to tax.

Unrelieved Case VI losses

72

• (1) A loss to which this paragraph applies which a company would, apart from this Schedule, have been entitled to carry forward under section 396 of the Taxes Act 1988 (Case VI losses) shall be treated after commencement as a loss of an earlier period within section 392A or 392B of that Act and accordingly available to be set off under those provisions.

• (2) This paragraph applies to a loss sustained in a business or transaction of a kind that after commencement would be treated as carried on or entered into in the course of a Schedule A business or overseas property business carried on by the company.

Source ceasing in transitional accounting period

73

• (1) The provisions of Parts I to III of this Schedule do not apply in relation to a source which ceases in the course of a company’s transitional accounting period to be a source within the charge to tax under Schedule A or Case V or VI of Schedule D in relation to that company and any other person.

• (2) This paragraph does not apply if the company acquired the source in that accounting period or in the preceding twelve months.

Superseded provisions relating to finance leasing

74

• (1) In Schedule 12 to the Finance Act 1997 (leasing arrangements: finance leases and loans), the following provisions (which apply concepts from Case I of Schedule D in relation to rent taxed under Schedule A) shall cease to have effect in accordance with this paragraph.

• (2) Paragraphs 3(6), 6(9)(b), 8(1) to (7) and 20(b) do not apply in relation to periods of account beginning on or after 1st April 1998.

A “period of account” means a period for which accounts are made up.

• (3) Paragraph 8(8) does not apply if the time mentioned in that provision is on or after 1st April 1998.

• (4) Paragraph 8(9) does not apply if the time mentioned in paragraph (a) of that provision is on or after 1st April 1998.

Computation of amounts available for surrender as group relief

75

In computing under section 403 of the Taxes Act 1988 the amounts available for surrender as group relief in a company’s transitional accounting period, the amounts referable to the period before commencement shall be computed separately from the amounts referable to the period after commencement.

Meaning of “transitional accounting period"

76

For the purposes of paragraphs 73 and 75 a “transitional accounting period” means an accounting period beginning before, and ending on or after, 1st April 1998.

SCHEDULE 6

Introduction

1

The provisions of this Schedule apply in the circumstances specified in section 44(1) and (2).

Adjustment on change of accounting basis

2

• (1) The amount required by way of adjustment must be calculated (in accordance with paragraph 3) and—

• (a) if the amount is positive, it is chargeable to tax, and

• (b) if it is negative, it is allowable as a deduction in computing profits.

• (2) An amount chargeable to tax under this paragraph—

• (a) is treated as income arising on the first day of the first period of account for which the new basis is adopted, subject to paragraphs 4 and 5 (spreading of adjustment charge in certain cases and election to accelerate payment);

• (b) is chargeable to tax under Case VI of Schedule D;

• (c) in the case of an individual whose income from the trade, profession or vocation in question is—

• (i) relevant earnings within section 623(2)(c) or 644(2)(c) of the Taxes Act 1988, or

• (ii) earned income within section 833(4)(c) of that Act,

is similarly relevant earnings or earned income for the year of assessment in which it is charged to tax; and

• (d) is treated for the purposes of Chapters I and II of Part X of the Taxes Act 1988 (loss relief) as profits of the trade, profession or vocation for the chargeable period for which it is charged to tax.

• (3) An amount allowable under this paragraph as a deduction in computing profits is treated as an expense of the trade, profession or vocation in the first period for which the new basis is adopted.

Calculation of adjustment

3

• (1) The amount of the adjustment is calculated as follows.

First step

Add together any amounts representing the extent to which, comparing the two bases, profits were understated (or losses overstated) on the old basis:

• (1) Receipts which on the new basis would have been brought into account in computing the profits of a period before the change of basis, to the extent that they were not so brought into account.

• (2) Expenses which on the new basis fall to be brought into account in computing the profits of a period after the change, to the extent that they were brought into account in computing the profits of a period of account before the change of basis.

• (3) Deductions in respect of opening trading stock or opening work in progress in the first period of account on the new basis to the extent to which they are not matched by credits in respect of closing trading stock or closing work in progress in the last period of account before the change.

• Second stepThen deduct any amounts representing the extent to which, comparing the two bases, profits were overstated (or losses understated) on the old basis:Receipts which were taken into account in a period before the change, to the extent that they would not have been taken into account for such a period if the profits had been computed on the new basis.Expenses which were not taken into account in computing the profits of a period before the change, to the extent that they would have been taken into account for such a period if the profits had been computed on the new basis.Credits in respect of closing trading stock or closing work in progress in the last period of account before the change of accounting basis to the extent to which they are not matched by deductions in respect of opening trading stock or opening work in progress in the first period of account on the new basis.An amount so deducted may not be deducted again in computing the profits of a period of account.

• Third stepIn the case of a profession or vocation adopting a new accounting basis to comply with section 42 (true and fair view), a further deduction may be made by way of adjustment in respect of any change of accounting basis before 6th April 1999.The amount deductible is calculated as follows—Add together the amounts by which profits were overstated (or losses understated) by reason of the previous change of accounting basis:Receipts to the extent that by reason of the change of accounting basis they were brought into account in more than one period of account.Expenses to the extent that by reason of the change of accounting basis they were not deducted in any period of account.Credits in respect of closing trading stock or closing work in progress in the last period of account before the change of accounting basis to the extent that they were not matched by deductions in respect of opening trading stock or opening work in progress in the first period of account following the change.Then deduct the amounts by which profits were understated (or losses overstated) by reason of that change:Receipts to the extent that by reason of the change of accounting basis they were not brought into account in any period of account.Expenses to the extent that by reason of the change of accounting basis they were deducted in more than one period of account.Deductions in respect of opening trading stock or opening work in progress in the first period of account following the change of accounting basis to the extent that they were not matched by credits in respect of closing trading stock or closing work in progress in the last period of account before the change.An amount may not be so deducted if it has previously been brought into account; and it may not be deducted again on a subsequent change of accounting basis.

• (2) The references in this paragraph to items being brought into account in a period of account before the change of basis are to their being brought into account—

• (a) in computing the profits of the same trade, profession or vocation, and

• (b) in accordance with the law and practice then applicable.

For the purposes of paragraph (a) a trade, profession or vocation is not regarded as the same if section 113(1) or 337(1) of the Taxes Act 1988 applies (deemed discontinuance on change of persons carrying on trade, profession or vocation).

Spreading of adjustment charge in certain cases

4

• (1) This paragraph provides for the spreading of the adjustment charge in certain cases where an individual—

• (a) has been entitled to compute the profits of a profession or vocation on a basis that does not comply with section 42 of this Act (true and fair view), or would not have complied with that section if it had been in force, and

• (b) changes to an accounting basis that does comply with that section.

• (2) The cases in which this paragraph applies are where a change of basis is made to comply with that section—

• (a) on that section coming into effect in relation to periods of account beginning after 6th April 1999, or

• (b) on the exemption given by section 43 of this Act (barristers and advocates in early years of practice) coming to an end or ceasing to apply.

• (3) Where this paragraph applies the adjustment charge is spread over ten years of assessment, as follows.

• (4) In each of the nine years of assessment beginning with that in which the whole amount would otherwise be chargeable to tax, an amount equal to whichever is the less of—

• (a) one-tenth of the amount of the adjustment charge, and

• (b) 10 per cent. of the profits of the profession or vocation for that year of assessment,

is treated as arising and chargeable to tax.

For the purposes of paragraph (b) the profits of the profession or vocation means the profits as computed for the purposes of Case II of Schedule D, leaving out of account any allowances or charges under the the Capital Allowances Act .

• (5) In the tenth year of assessment the balance of the adjustment charge is treated as arising and chargeable to tax.

• (6) If before the whole of the adjustment charge has been charged to tax the profession or vocation—

• (a) is permanently discontinued, or

• (b) is treated as permanently discontinued under section 113(1) of the Taxes Act 1988 (change of persons carrying on profession or vocation),

the preceding provisions of this paragraph continue to apply, but with the omission of the alternative limit in sub-paragraph (4)(b) by reference to profits of the profession or vocation.

• (7) This paragraph has effect subject to any election under paragraph 5.

Election to accelerate payment of adjustment charge

5

• (1) A person who under paragraph 4 is chargeable to tax for a year of assessment on an amount representing part of an adjustment charge may elect that the amount treated as income arising in that year of assessment should be increased.

• (2) The election must be made—

• (a) by notice in writing,

• (b) to an officer of the Board,

• (c) before the 31st January following the year of assessment in question.

• (3) The election must specify the amount to be treated as income arising in the year of assessment, which may be any amount up to the whole of the adjustment charge so far as not previously charged to tax.

• (4) Where an election has been made, paragraph 4 applies in relation to any subsequent year of assessment as if the original amount of the adjustment charge were reduced by the additional amount treated as arising in the year for which the election was made.

Application of provisions to partnerships

6

• (1) In the case of a trade, profession or vocation carried on in partnership, the amount of any adjustment under this Schedule shall be computed—

• (a) for income tax purposes, as if the partnership were an individual resident in the United Kingdom, and

• (b) for corporation tax purposes, as if the partnership were a company resident in the United Kingdom.

• (2) Subject to the following provisions of this paragraph, each partner’s share of any amount chargeable to tax under paragraph 2 shall be determined according to the profit-sharing arrangements for the twelve months ending immediately before the date on which the new accounting basis was adopted.

• (3) If paragraph 4 applies (spreading of adjustment charge in certain cases), then, subject to sub-paragraph (4) below—

• (a) each partner’s share of the amount chargeable in any year of assessment shall be determined—

• (i) for the first year of assessment, according to the profit-sharing arrangements for the twelve months ending immediately before the date on which the new accounting basis was adopted, and

• (ii) for any subsequent year of assessment, according to the profit-sharing arrangements for the twelve months immediately preceding the anniversary in that year of that date; and

• (b) any election under paragraph 5 (election for accelerated payment) in relation to a year of assessment must be made jointly by all the persons who have been members of the partnership in the relevant twelve month period.

• (4) If paragraph 4(6) applies (effect of discontinuance of profession or vocation), then—

• (a) each partner’s share of any amount chargeable on or after the discontinuance is determined as follows—

• (i) if the discontinuance occurs on the date on which the new accounting basis was adopted, according to the profit-sharing arrangements for the twelve months ending immediately before that date;

• (ii) if the discontinuance occurs after that date but before the first anniversary of that date, according to the profit-sharing arrangements for the period between that date and the date of discontinuance;

• (iii) if the discontinuance occurs after the first anniversary of the date on which the new accounting basis was adopted, according to the profit-sharing arrangements for the period between the immediately preceding anniversary of that date and the date of discontinuance; and

• (b) any election under paragraph 5 after the discontinuance must be made by each former partner separately.

• (5) For the purposes of this paragraph—

• (a) “profit-sharing arrangements” means the rights of the partners to share in the profits of the trade, profession or vocation for the period in question; and

• (b) references to the date on which a new accounting basis was adopted are to the first day of the first period of account for which the new basis was adopted.

• (6) The provisions of section 111 of the Taxes Act 1988 (general provisions as to taxation of partnerships), except subsection (1) (partnership not to be treated as separate entity), do not apply to the extent that the preceding provisions of this paragraph apply.

Liability of personal representatives in case of death of person chargeable

7

In the case of the death of a person who, if he had not died, would have been chargeable to tax under paragraph 4 on an amount representing part of an adjustment charge—

• (a) the tax which would have been so chargeable shall be assessed and charged on his personal representatives and shall be a debt due from and payable out of his estate, and

• (b) his personal representatives may make any election under paragraph 5 which he might have made.

Interpretation

8

In this Schedule—

• “adjustment charge” means a charge under paragraph 2 above; and

• “period of account” means any period for which accounts of the trade, profession or vocation are drawn up.

SCHEDULE 7

The following are the provisions of the Taxes Acts in which the amendments specified in section 46(3) are to be made.

1

In the Taxes Act 1988: sections ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... , ... ... ... ... ... ... ... . . . ... . . . 568(1), 570(1), ... ... ... ... ... ... ... Schedule 21, paragraph 6(1)(b) and (3) (twice).

2

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3

In the Finance Act 1989: sections 67(2)(a) ... ... .

4

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5

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6

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7

In the Taxation of Chargeable Gains Act 1992: sections 39(1) (in the first place) and (2) (in both places), 41(4) and (5) and 164L(8) (twice).

8

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9

In the Finance Act 1994: Schedule 24, paragraph 12(2).

10

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11

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12

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SCHEDULE 8

Introductory

1

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Application of deductions to public departments Et ceteralaetc

2

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Conditions for exemption of partnerships

3

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Conditions of exemption for companies

4

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Commencement of paragraphs 3 and 4

5

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Powers to make regulations

6

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Transitional provision for commencement of 1995 Act amendments

7

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SCHEDULE 9

Part I — Schedule 11 to the Taxes Act 1988

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Part II — Consequential amendments

Income and Corporation Taxes Act 1988 (c.1)

1

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2

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3

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4

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Finance Act 1995 (c.4)

5

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SCHEDULE 10

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SCHEDULE 11

Application of Schedule

1

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Rule for determining section 171(4) limit

2

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Meaning of related scheme

3

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Meaning of “relevant anniversary"

4

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General interpretation

5

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SCHEDULE 12

New exclusions for the enterprise investment scheme

1

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Definition of excluded activities for the enterprise investment scheme

2

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New exclusions for VCTs

3

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Definition of excluded activities for VCTs

4

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Commencement

5

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

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

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

SCHEDULE 13

Part I — EIS income tax relief

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1

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2

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3

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4

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5

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6

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7

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8

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9

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10

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11

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12

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13

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14

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15

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16

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17

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18

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19

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20

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21

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22

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23

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Part II — EIS relief against chargeable gains

24

• (1) In subsections (1) and (2) of section 150A of the Taxation of Chargeable Gains Act 1992 (enterprise investment schemes), the word “eligible" shall cease to have effect.

• (2) In subsection (4)(a) of that section, for the words “issued to a person at different times a disposal relates" there shall be substituted the words “ acquired by an individual at different times a disposal relates to ”.

• (3) In subsection (5) of that section, for the words “Sections 104, 105 and 107" there shall be substituted the words “ Sections 104, 105 and 106A ”.

• (4) For subsection (6) of that section there shall be substituted the following subsections—

(6) Where an individual holds shares which form part of the ordinary share capital of a company and include shares of more than one of the following kinds, namely— (a) shares to which relief is attributable and to which subsection (6A) below applies, (b) shares to which relief is attributable and to which that subsection does not apply, and (c) shares to which relief is not attributable, then, if there is within the meaning of section 126 a reorganisation affecting those shares, section 127 shall apply (subject to the following provisions of this section) separately to shares falling within paragraph (a), (b) or (c) above (so that shares of each kind are treated as a separate holding of original shares and identified with a separate new holding). (6A) This subsection applies to any shares if— (a) expenditure on the shares has been set under Schedule 5B to this Act against the whole or part of any gain; and (b) in relation to the shares there has been no chargeable event for the purposes of that Schedule.

• (5) In subsection (8A)(a) of that section, the word “preferential", in the second place where it occurs, shall cease to have effect.

• (6) After subsection (8C) of that section there shall be inserted the following subsection—

(8D) Where shares to which relief is attributable are exchanged for other shares in circumstances such that section 304A of the Taxes Act (acquisition of share capital by new company) applies— (a) subsection (8) above shall not have effect to disapply section 135; and (b) subsections (2)(b), (3) and (4) of section 304A of the Taxes Act, and subsection (5) of that section so far as relating to section 306(2) of that Act, shall apply for the purposes of this section as they apply for the purposes of Chapter III of Part VII of that Act.

• (7) After subsection (10) of that section there shall be inserted the following subsection—

(10A) In this section— - “ordinary share capital” has the same meaning as in the Taxes Act; - “ordinary shares”, in relation to a company, means shares forming part of its ordinary share capital.

• (8) In this paragraph—

• (a) sub-paragraphs (1) to (3) have effect in relation to disposals made on or after 6th April 1998;

• (b) sub-paragraph (4) has effect in relation to reorganisations taking effect on or after that date;

• (c) sub-paragraph (5) has effect in relation to new shares (within the meaning of section 150A(8A) of the Taxation of Chargeable Gains Act 1992) issued on or after that date;

• (d) sub-paragraph (6) has effect in relation to new shares (within the meaning of section 304A of the Taxes Act 1988) issued on or after that date; and

• (e) sub-paragraph (7) has effect in relation to events occurring on or after that date.

25

• (1) In subsection (1) of section 150B of that Act (enterprise investment scheme: reduction of relief), the word “eligible" shall cease to have effect.

• (2) This paragraph has effect in relation to disposals made on or after 6th April 1998.

Part III — EIS deferral of chargeable gains

Preliminary

26

Schedule 5B to the Taxation of Chargeable Gains Act 1992 (enterprise investment scheme: re-investment) shall be amended in accordance with the following provisions of this Part.

Application of Schedule

27

• (1) In sub-paragraph (1)(b) of paragraph 1, after the words “in accordance with" there shall be inserted the words “ section 164F or 164FA, ”.

• (2) For sub-paragraphs (2) and (3) of that paragraph there shall be substituted the following sub-paragraphs—

(2) The investor makes a qualifying investment for the purposes of this Schedule if— (a) eligible shares in a company for which he has subscribed wholly in cash are issued to him at a qualifying time and, where that time is before the accrual time, the shares are still held by the investor at the accrual time, (b) the company is a qualifying company in relation to the shares, (c) at the time when they are issued the shares are fully paid up (disregarding for this purpose any undertaking to pay cash to the company at a future date), (d) the shares are subscribed for, and issued, for bona fide commercial purposes and not as part of arrangements the main purpose or one of the main purposes of which is the avoidance of tax, (e) the requirements of section 289(1A) of the Taxes Act are satisfied in relation to the company, (f) all the shares comprised in the issue are issued in order to raise money for the purpose of a qualifying business activity, and (g) the money raised by the issue is employed not later than the time mentioned in section 289(3) of the Taxes Act wholly for the purpose of that activity, and for the purposes of this Schedule, the condition in paragraph (g) above does not fail to be satisfied by reason only of the fact that an amount of money which is not significant is employed for another purpose. (3) In sub-paragraph (2) above “a qualifying time”, in relation to any shares subscribed for by the investor, means— (a) any time in the period beginning one year before and ending three years after the accrual time, or (b) any such time before the beginning of that period or after it ends as the Board may by notice allow.

Failure of conditions of application

28

After that paragraph there shall be inserted the following paragraph—

(1A) (1) If the condition in sub-paragraph (2)(b) of paragraph 1 above is not satisfied in consequence of an event occurring after the issue of eligible shares, the shares shall be treated for the purposes of this Schedule as ceasing to be eligible shares on the date of the event. (2) If the condition in sub-paragraph (2)(e) of that paragraph is not satisfied in consequence of an event occurring after the issue of eligible shares, the shares shall be treated for the purposes of this Schedule as ceasing to be eligible shares on the date of the event. (3) If the condition in sub-paragraph (2)(f) of that paragraph is not satisfied in relation to an issue of eligible shares, the shares shall be treated for the purposes of this Schedule as never having been eligible shares. (4) If the condition in sub-paragraph (2)(g) of that paragraph is not satisfied in relation to an issue of eligible shares, the shares shall be treated for the purposes of this Schedule— (a) if the claim under this Schedule is made after the time mentioned in section 289(3) of the Taxes Act, as never having been eligible shares; and (b) if that claim is made before that time, as ceasing to be eligible shares at that time. (5) None of the preceding sub-paragraphs applies unless— (a) the company has given notice under paragraph 16(2) or (4) below or section 310(2) of the Taxes Act; or (b) an inspector has given notice to the company stating that, by reason of the matter mentioned in that sub-paragraph, the shares should, in his opinion, be treated for the purposes of this Schedule as never having been or, as the case may be, as ceasing to be eligible shares. (6) The giving of notice by an inspector under sub-paragraph (5) above shall be taken, for the purposes of the provisions of the Management Act relating to appeals against decisions on claims, to be a decision refusing a claim made by the company. (7) Where any issue has been determined on an appeal brought by virtue of section 307(1B) of the Taxes Act (appeal against notice that relief was not due), the determination shall be conclusive for the purposes of any appeal brought by virtue of sub-paragraph (6) above on which that issue arises.

Postponement of original gain

29

In sub-paragraph (3) of paragraph 2, for paragraph (a) there shall be substituted the following paragraph—