Finance Act 2002

• (6) In paragraph (1) (which, subject to paragraphs (2) and (3), defines a large company) for “paragraphs (2) and (3),” substitute “ paragraphs (2) to (3A), ”.

• (7) After paragraph (3) insert—

(3A) Any question whether a company is, or is not, a large company as respects an accounting period beginning on or after 17th April 2002 shall, so far as not falling to be determined by reference to the company’s total liability, be determined as it would have been determined apart from section 501A of the Taxes Act (supplementary charge in respect of ring fence trades).

.

• (8) The amendment by this section of any provision contained in regulations shall not be taken to have prejudiced any power to make further regulations revoking or amending that provision, whether in relation to the same or any other chargeable periods.

• (9) In this section “the Instalment Payment Regulations” means the Corporation Tax (Instalment Payments) Regulations 1998 (S.I. 1998/3175).

Supplementary charge: transitional provisions

93

• (1) In the case of a straddling period, that is to say, an accounting period which begins before 17th April 2002 and ends on or after that date—

• (a) sections 501A and 501B of the Taxes Act 1988 (which are inserted by sections 91 and 92) shall apply as if so much of the straddling period as falls before 17th April 2002, and so much of that period as falls on or after that date, were separate accounting periods; and

• (b) all necessary apportionments between the two separate accounting periods shall be made in proportion to the number of days in those periods.

• (2) In the case of a straddling period, the Instalment Payment Regulations shall apply separately—

• (a) in relation to any tax chargeable on the company under section 501A(1) of the Taxes Act 1988; and

• (b) in relation to any other tax chargeable on the company.

• (3) In their application by virtue of paragraph (a) of subsection (2), the Instalment Payment Regulations shall have effect in relation to the tax mentioned in that paragraph as if—

• (a) the deemed accounting period treated under subsection (1)(a) as beginning on 17th April 2002 were an accounting period for the purposes of those Regulations; and

• (b) that tax were chargeable for that period.

• (4) Any reference in the Instalment Payment Regulations to the total liability of a company shall accordingly be construed—

• (a) in their application by virtue of paragraph (a) of subsection (2), as a reference to the tax mentioned in that paragraph; and

• (b) in their application by virtue of paragraph (b) of that subsection, as a reference to the amount that would be the company’s total liability for the straddling period if the tax mentioned in paragraph (a) of that subsection were left out of account.

• (5) For the purposes of the Instalment Payment Regulations—

• (a) a company shall be regarded as a large company as respects the deemed accounting period under subsection (3)(a) if, and only if, it is a large company for those purposes as respects the straddling period; and

• (b) any question whether a company is a large company as respects the straddling period shall be determined as it would have been determined apart from section 501A of the Taxes Act 1988.

• (6) In this section “the Instalment Payment Regulations” has the same meaning as in section 92.

Deduction of tax

Deduction of tax: payments to exempt bodies etc

94

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

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

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

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

• (5) In section 98 of the Taxes Management Act 1970 (c. 9) (special returns, etc), in subsection (4B)—

• (a) in paragraph (a), after “a company” insert “ or local authority ”,

• (b) in paragraph (b)—

• (i) after “the company” insert “ or authority ”, and

• (ii) for “either”, in each place, substitute “ one ”,

• (c) in paragraph (c), after “the company” insert “ or authority ”, and

• (d) in paragraph (d), for “neither” substitute “ none ”.

• (6) In that section, for subsection (4C) substitute—

(4C) In subsection (4B) above— - “company” includes a partnership of which any member is a company; and - “local authority” includes a partnership of which any member is a local authority.

.

• (7) The amendments made by this section apply for the purposes of payments made on or after 1st October 2002.

Deduction of tax by persons dealing in financial instruments

95

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

Cross-border royalties

96

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

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

• (3) In section 98 of the Taxes Management Act 1970 (c. 9) (special returns etc)—

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

• (b) after subsection (4C) insert—

(4D) A payment is within this subsection if— (a) it is a payment to which section 349(1) of the principal Act (requirement to deduct tax) applies, (b) it is made by a company which, purporting to rely on section 349E(1) of that Act (power for companies to take account of double taxation treaty relief when paying royalties), deducts less tax from the payment than required by section 349(1) of that Act , and (c) at the time the payment is made the payee (within the meaning of section 349E of that Act) is not entitled to relief in respect of the payment under any arrangements under section 788 of that Act (double taxation relief) and the company— (i) does not believe that it is entitled to such relief, or (ii) if it does so believe, cannot reasonably do so.

.

• (4) This section applies in relation to payments made on or after 1st October 2002.

Charitable giving

Gifts of real property to charity

97

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

Gift aid: election to be treated as if gift made in previous tax year

98

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

Films

Restriction of relief to films genuinely intended for theatrical release

...

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

Exclusion of deferments from production expenditure

...

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

Restriction of relief for successive acquisitions of the same film

101

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

Miscellaneous

Distributions: reasonable commercial return for use of principal secured

102

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

References to accounting practice and periods of account

103

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

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

• (3) In section 288(1) of the Taxation of Chargeable Gains Act 1992 (interpretation), at the appropriate place insert—

“period of account” has the meaning given by section 832(1) of the Taxes Act;

.

• (4) In the following provisions for “normal accounting practice” or “normal accountancy practice”, wherever occurring, substitute “ generally accepted accounting practice ”

• (a) in the Taxes Act 1988, sections ......, ..., 798B(1) ..., ...;

• (b) in the Finance Act 1993 (c. 34), sections ... 150(6)(c) and (11)(c), 154(11)(c), (12)(d), (13)(b), (13A)(d) and (13B)(d), 155(7), (11)(d) and (12)(b), 156(2)(e) and (4)(b) and 159(1)(b);

• (c) in the Finance Act 1994 (c. 9), section 156(3)(a) and (4)(a);

• (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (f) in the Finance Act 2000 (c. 17), ... in Schedule 15, paragraph 29(4), ...;

• (g) in the Capital Allowances Act 2001 (c. 2), sections 179(1)(f), 219(1) ...;

• (h) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

• (6) The amendments made by subsections (1) to (3) above have effect for the purposes of provisions of this Act using the expressions mentioned (including provisions inserted by amendment in other enactments) whenever those provisions are expressed to have effect or to come, or to have come, into force.

This is without prejudice to the general effect of those amendments.

Discounted securities etc

104

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

Financial trading stock

105

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

• (2) In Schedule 12 to the Finance Act 1988 (c. 39) (building societies: change of status)—

• (a) in paragraph 1 (which provides that paragraphs 2 to 7 apply where there is a transfer of the whole of a building society’s business to a successor company in accordance with section 97 etc of the Building Societies Act 1986 (c. 53)) for “2” substitute “ 3 ”; and

• (b) omit paragraph 2 (which relates to gilt-edged securities and other financial trading stock and is superseded by Chapter 2 of Part 4 of the Finance Act 1996).

Valuation of trading stock on transfer of trade

106

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

Banks etc in compulsory liquidation

107

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

Manufactured dividends and interest

108

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

Venture capital trusts

109

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

Part 4 — Stamp duty and stamp duty reserve tax

Stamp duty

Land in disadvantaged areas

110

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

Withdrawal of group relief

111

• (1) This section applies where—

• (a) an instrument (“the relevant instrument”) transferring land in the United Kingdom from one company (“the transferor company”) to another (“the transferee company”) has been stamped on the basis that group relief applies,

• (b) before the end of the period of three years beginning with the date on which the instrument was executed the transferee company ceases to be a member of the same group as the transferor company, and

• (c) at the time when the transferee company ceases to be a member of the same group as the transferor company it or a relevant associated company holds an estate or interest in land—

• (i) that was transferred to the transferee company by the relevant instrument, or

• (ii) that is derived from an estate or interest that was so transferred,

and that has not subsequently been transferred at market value by a duly stamped instrument on which ad valorem duty was paid and in respect of which group relief was not claimed.

• (2) In those circumstances—

• (a) group relief in relation to the relevant instrument, or an appropriate proportion of it, is withdrawn, and

• (b) the stamp duty that would have been payable on stamping the relevant instrument but for group relief if the estate or interest in land transferred by that instrument had been transferred at market value, or an appropriate proportion of the duty that would have been so paid, is payable by the transferee company within 30 days after that company ceases to be a member of the same group as the transferor company.

• (3) In subsection (2)(a) and (b) “an appropriate proportion” means an appropriate proportion having regard to what was transferred to the transferee company by the relevant instrument and what is held by that company or, as the case may be, that company and any relevant associated companies, at the time it or they cease to be members of the same group as the transferor company.

• (4) In this section “group relief” means relief under any of the following provisions—

• (a) section 42 of the Finance Act 1930 (c. 28) or section 11 of the Finance Act (Northern Ireland) 1954 (c. 23 (N.I.)) (transfer of property between associated bodies corporate);

• (b) section 151 of the Finance Act 1995 (c. 4) (leases etc between associated bodies corporate).

• (4A) In this section “relevant associated company”, in relation to the transferee company, means a company that—

• (a) is a member of the same group as the transferee company immediately before that company ceases to be a member of the same group as the transferor company, and

• (b) ceases to be a member of the same group as the transferor company in consequence of the transferee company so ceasing.

• (5) In this section—

• (a) references to the transfer of land include the grant or surrender of an estate or interest in or over land;

• (b) “company” includes any body corporate; and

• (c) references to a company being in the same group as another company are to the companies being associated bodies corporate within the meaning of the relevant group relief provision.

• (6) Schedule 34 to this Act contains provisions supplementing this section.

• (7) Where the relevant instrument transfers land in the United Kingdom together with other property, the provisions of this section and of Schedule 34 apply as if there were two separate instruments, one relating to land in the United Kingdom and the other relating to other property.

• (8) This section applies where the relevant instrument is executed after 23rd April 2002.

• (9) But this section does not apply to an instrument giving effect to a contract made on or before 17th April 2002, unless—

• (a) the instrument is made in consequence of the exercise after that date of any option, right of pre-emption or similar right, or

• (b) the instrument transfers the property in question to, or vests it in, a person other than the purchaser under the contract because of an assignment (or, in Scotland, assignation) or further contract made after that date.

• (10) This section shall be deemed to have come into force on 24th April 2002.

Restriction of relief for company acquisitions

112

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

Withdrawal of relief for company acquisitions

113

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

Penalties for late stamping

114

• (1) Section 15B of the Stamp Act 1891 (c. 39) (late stamping: penaties) is amended as follows.

• (2) In subsection (1)—

• (a) in paragraph (a) (penalty where instrument not stamped within 30 days of execution), after “is executed in the United Kingdom” insert “ or relates to land in the United Kingdom ”;

• (b) in paragraph (b) (penalty where instrument not stamped within 30 days of instrument being first received in the United Kingdom), after “is executed outside the United Kingdom” insert “ and does not relate to land in the United Kingdom ”.

• (3) After that subsection insert—

(1A) For the purposes of subsection (1) every instrument that (whether or not it also relates to any other transaction) relates to a transaction which to any extent involves land in the United Kingdom is an instrument relating to land in the United Kingdom.

.

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

Contracts for the sale of an estate or interest in land chargeable as conveyances

115

• (1) This section applies to a contract or agreement for the sale of an estate or interest in land in the United Kingdom where—

• (a) the amount or value of the consideration exceeds £10 million, or

• (b) the instrument forms part of a larger transaction or series of transactions in respect of which the amount or value, or aggregate amount or value, of the consideration exceeds £10 million.

• (2) If, in the case of such a contract or agreement that is not otherwise chargeable to stamp duty, a conveyance or transfer made in conformity with the contract or agreement is not presented to the Commissioners for stamping with the ad valorem duty chargeable on it—

• (a) within the period of 90 days after the execution of the contract or agreement, or

• (b) within such longer period as the Commissioners may think reasonable in the circumstances of the case,

the contract or agreement shall be chargeable with the same ad valorem duty, to be paid by the purchaser, as if it were an actual conveyance on sale of the estate or interest contracted or agreed to be sold.

• (3) The Commissioners—

• (a) may refuse to allow a longer period unless they are provided with a copy of the contract or agreement and such other evidence as they may reasonably require as to the facts and circumstances relevant to their decision,

• (b) may allow a longer period subject to compliance with such conditions as they think fit, and

• (c) shall not allow any longer period if it appears to them that the whole, or substantially the whole, of the intended consideration has been paid or transferred.

• (4) Where an instrument to which this section applies is presented for stamping before the end of the period mentioned in subsection (2)—

• (a) any adjudication to the effect that stamp duty is not chargeable does not affect the operation of this section, and

• (b) the fact that duty may be chargeable under this section may be denoted on the instrument in such manner as the Commissioners think fit.

• (5) Where an instrument is chargeable with duty under this section—

• (a) section 14(4) of the Stamp Act 1891 (c. 39) (inadmissibility of unstamped instruments) does not apply in relation to it until after the end of the period mentioned in subsection (2) above, and

• (b) sections 15A and 15B of that Act (late stamping: interest and penalties), apply in relation to it as if it had been executed at the end of that period.

• (6) The ad valorem duty paid upon a contract or agreement under this section shall be repaid by the Commissioners if the contract or agreement is afterwards rescinded or annulled or is for any other reason not substantially performed or carried into effect.

• (7) Schedule 36 contains provisions supplementing this section.

• (8) This section and that Schedule apply to contracts or agreements executed after the day on which this Act is passed.

Abolition of duty on instruments relating to goodwill

116

• (1) No stamp duty is chargeable on an instrument for the sale, transfer or other disposition of goodwill.

• (2) Schedule 37 to this Act contains provisions supplementing this section.

• (3) This section and that Schedule shall be construed as one with the Stamp Act 1891 (c. 39).

• (4) This section applies to instruments executed on or after 23rd April 2002.

• (5) This section shall be deemed to have come into force on that date.

Stamp duty and stamp duty reserve tax

Power to extend exceptions relating to recognised exchanges

117

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

Part 5 — Other taxes

Inheritance tax

IHT: rate bands

118

• (1) For the Table in Schedule 1 to the Inheritance Tax Act 1984 (c. 51) substitute—

Portion of value	Portion of value	Rate of tax
Lower limit (£)	Upper limit (£)	Per cent.
0	250,000	Nil
250,000		40

• (2) Subsection (1) shall apply to any chargeable transfer made on or after 6th April 2002; and section 8(1) of that Act (indexation of rate bands) shall not have effect as respects any difference between the retail prices index for the month of September 2000 and that for the month of September 2001.

IHT: powers over, or exercisable in relation to, settled property or a settlement

119

• (1) The Inheritance Tax Act 1984 is amended in accordance with the following provisions of this section.

• (2) After section 47 (meaning of “reversionary interest”) insert—

(47A) In this Act “settlement power” means any power over, or exercisable (whether directly or indirectly) in relation to, settled property or a settlement.

.

• (3) After section 55 (reversionary interest acquired by beneficiary) insert—

(55A) (1) Where a person makes a disposition by which he acquires a settlement power for consideration in money or money’s worth— (a) section 10(1) above shall not apply to the disposition; (b) the person shall be taken for the purposes of this Act to make a transfer of value; (c) the value transferred shall be determined without bringing into account the value of anything which the person acquires by the disposition; and (d) sections 18 and 23 to 27 above shall not apply in relation to that transfer of value. (2) For the purposes of this section, a person acquires a settlement power if he becomes entitled— (a) to a settlement power, (b) to exercise, or to secure or prevent the exercise of, a settlement power (whether directly or indirectly), or (c) to restrict, or secure a restriction on, the exercise of a settlement power (whether directly or indirectly), as a result of transactions which include a disposition (whether to him or another) of a settlement power or of any power of a kind described in paragraph (b) or (c) above which is exercisable in relation to a settlement power.

.

• (4) In section 272 (general interpretation)—

• (a) insert the following definition at the appropriate place—

• “settlement power” has the meaning given by section 47A above;

;

and

• (b) in the definition of “property”, at the end insert “ but does not include a settlement power ”.

• (5) In consequence of the amendments made by this section, the title of Chapter 2 of Part 3 of the Inheritance Tax Act 1984 (c. 51) becomes “Interests in possession, reversionary interests and settlement powers”.

• (6) The amendments made by this section have effect in relation to transfers of value on or after 17th April 2002.

• (7) The amendments made by subsections (2) and (4) shall also be deemed always to have had effect (subject to and in accordance with the other provisions of the Inheritance Tax Act 1984) for the purpose of determining the value, immediately before his death, of the estate of any person who died before 17th April 2002, for the purposes of the transfer of value which that person is treated by section 4(1) of that Act as having made immediately before his death.

IHT: variation of dispositions taking effect on death

120

• (1) In section 142 of the Inheritance Tax Act 1984 (alteration of dispositions taking effect on death), for subsection (2) (election to treat subsequent variation of dispositions taking effect on death as if effected by deceased) substitute—

(2) Subsection (1) above shall not apply to a variation unless the instrument contains a statement, made by all the relevant persons, to the effect that they intend the subsection to apply to the variation. (2A) For the purposes of subsection (2) above the relevant persons are— (a) the person or persons making the instrument, and (b) where the variation results in additional tax being payable, the personal representatives. Personal representatives may decline to make a statement under subsection (2) above only if no, or no sufficient, assets are held by them in that capacity for discharging the additional tax.

.

• (2) After section 218 of that Act insert—

(218A) (1) Where— (a) an instrument is made varying any of the dispositions of the property comprised in the estate of a deceased person immediately before his death, (b) the instrument contains a statement under subsection (2) of section 142 above, and (c) the variation results in additional tax being payable, the relevant persons (within the meaning of that subsection) shall, within six months after the day on which the instrument is made, deliver a copy of it to the Board and notify them of the amount of the additional tax. (2) To the extent that any of the relevant persons comply with the requirements of this section, the others are discharged from the duty to comply with them.

.

• (3) In section 245A of that Act (failure to provide information etc)—

• (a) after subsection (1) insert—

(1A) A person who fails to comply with the requirements of section 218A above shall be liable— (a) to a penalty not exceeding £100; and (b) to a further penalty not exceeding £60 for every day after the day on which the failure has been declared by a court or the Special Commissioners and before the day on which the requirements are complied with.

.

• (b) in subsection (4), insert “ (1A)(b), ” after “subsection (1)(b),” and after paragraph (a) insert—

(aa) he complies with the requirements of section 218A above,

.

• (4) This section applies in relation to instruments made on or after 1st August 2002.

Air passenger duty

Air passenger duty: extension of area to which EEA rates apply

121

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

Landfill tax

Landfill tax: rate

122

• (1) In section 42 of the Finance Act 1996 (c. 8) (amount of landfill tax), in subsections (1)(a) and (2) for “£12” substitute “ £13 ”.

• (2) This section has effect in relation to taxable disposals made, or treated as made, on or after 1st April 2002.

Climate change levy

Climate change levy: electricity produced in combined heat and power station

123

• (1) In Schedule 6 to the Finance Act 2000 (c. 17) (climate change levy), after paragraph 20 insert—

(20A) (1) A supply of electricity is exempt from the levy chargeable under paragraph 5(1) if— (a) the supply is not one that is deemed to be made under paragraph 23(3), (b) the supply is made under a contract that contains a CHP declaration given by the supplier, (c) prescribed conditions are fulfilled, and (d) the supplier, and each other person (if any) who is a generator of any CHP electricity allocated by the supplier to supplies under the contract, has in a written notice given to the Commissioners agreed that he will fulfil those conditions so far as they may apply to him. (2) Sub-paragraph (1) does not apply in relation to a supply to a person of electricity produced in a wholly or partly exempt combined heat and power station where the supply is made to that person from the station. (3) In this paragraph “CHP declaration” means a declaration that, in each averaging period, the amount of electricity supplied by exempt CHP supplies made by the supplier in the period will not exceed the difference between— (a) the total amount of CHP electricity that during that period is either acquired or generated by the supplier, and (b) so much of that total amount as is allocated by the supplier otherwise than to exempt CHP supplies made by him in the period. In this sub-paragraph “averaging period” has the same meaning as in paragraph 20B; and “exempt CHP supplies” means supplies made on the basis that they are exempt under this paragraph. (4) For the purposes of this paragraph and paragraph 20B, electricity is “CHP electricity” if— (a) the electricity was— (i) produced in a fully exempt combined heat and power station, or (ii) produced in a partly exempt combined heat and power station and originally supplied from the station without causing the limit referred to in paragraph 16(2) to be exceeded, (b) the electricity is not renewable source electricity (within the meaning of paragraph 19), and (c) prescribed conditions are fulfilled. (5) The conditions that may be prescribed under sub-paragraph (1)(c) include, in particular, conditions in connection with— (a) the giving of effect to CHP declarations; (b) the supply of information; (c) the inspection of records and, for that purpose, the production of records in legible form and entry into premises; (d) monitoring by the Gas and Electricity Markets Authority, or the Director General of Electricity Supply for Northern Ireland, of the application of provisions of, or made under, this paragraph; (e) the doing of things to or by a person authorised by the Authority or the Director General (as well as the doing of things to or by the Authority or the Director General); (f) things being done at times or in ways specified by the Authority, the Director General or such an authorised person. (6) A condition prescribed under sub-paragraph (1)(c) may be one that is required to be fulfilled throughout a period, including a period ending after the time when a supply whose exemption turns on the fulfilment of the condition is treated as being made. (7) The conditions that may be prescribed under sub-paragraph (4)(c) include in particular conditions in connection with any of the matters mentioned in paragraphs (b) to (f) of sub-paragraph (5). (8) Each of— (a) the Gas and Electricity Markets Authority, and (b) the Director General of Electricity Supply for Northern Ireland, shall supply the Commissioners with such information (whether or not obtained under this paragraph), and otherwise give the Commissioners such co-operation, as the Commissioners may require in connection with the application of this paragraph (whether generally or in relation to any particular case). (9) Paragraph 19(10) (disclosure of information) applies in relation to sub-paragraph (8) above as it applies in relation to paragraph 19(8). (20B) (1) This paragraph applies where a person (“the supplier”) makes supplies of electricity on the basis that they are exempt under paragraph 20A (“exempt CHP supplies”). (2) The rules about balancing and averaging periods are— (a) a balancing period is a period of three months; (b) when a balancing period ends, a new one begins; (c) the first balancing period and the first averaging period begin at the same time; (d) unless the supplier specifies an earlier time, that time is the time when he is treated as making the first of the exempt CHP supplies; (e) when an averaging period ends, a new one begins; (f) an averaging period ends once it has run for two years (but may end sooner under paragraph (g) or sub-paragraph (4)(a) or (5)(a)); (g) if the supplier stops making exempt CHP supplies, the end of the balancing period in which he makes the last exempt CHP supply is also the end of the averaging period in which the balancing period falls. (3) At the end of each balancing period calculate— (a) the total of— (i) the quantity of CHP electricity that the supplier acquired or generated in that period, and (ii) any balancing credit carried forward to that balancing period; and (b) the total of— (i) the quantity of electricity supplied by exempt CHP supplies made by him in that period, and (ii) any balancing debit carried forward to that balancing period. (4) If the total mentioned in sub-paragraph (3)(a) exceeds that mentioned in sub-paragraph (3)(b)— (a) the averaging period within which the balancing period fell ends at the end of the balancing period, and (b) a balancing credit equal to the difference between the two totals is carried forward to the next balancing period. (5) If the totals mentioned in paragraphs (a) and (b) of sub-paragraph (3) are the same— (a) the averaging period within which the balancing period fell ends at the end of the balancing period, and (b) no balancing credit or debit is carried forward to the next balancing period. (6) Sub-paragraphs (7) and (8) apply if the total mentioned in sub-paragraph (3)(b) exceeds that mentioned in sub-paragraph (3)(a). (7) Where the end of the balancing period is by virtue of sub-paragraph (2)(g) the end of an averaging period, the supplier is liable to account to the Commissioners for an amount equal to the amount that would be payable by way of levy on a taxable supply that— (a) is made at the end of the balancing period, and (b) is a supply of a quantity of electricity equal to the difference between the two totals. For the purposes of this Schedule, the amount for which the supplier is liable to account shall be treated as an amount of levy for which he is liable to account for an accounting period ending at the end of the balancing period. (8) Where sub-paragraph (7) does not apply, a balancing debit equal to the difference between the two totals is carried forward to the next balancing period.

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• (2) Subsection (1) has effect in relation to supplies of electricity made on or after such day as the Treasury may by order made by statutory instrument appoint.

Climate change levy: certification requirement

124

In Schedule 6 to the Finance Act 2000 (c. 17) (climate change levy), after paragraph 149 insert—

(149A) (1) The Commissioners may by regulations make provision for the Gas and Electricity Markets Authority, or the Director General of Electricity Supply for Northern Ireland, to certify as respects any quantity of electricity that— (a) the electricity has been produced in a fully exempt combined heat and power station; (b) the electricity has been produced in a partly exempt combined heat and power station and supplied from the station without causing the limit referred to in paragraph 16(2) to be exceeded. (2) Regulations under this paragraph may provide that for any purposes of this Schedule (or any regulations made under it)— (a) electricity is not to be regarded as having been produced as specified in sub-paragraph (1)(a) unless it has been certified under that provision; (b) electricity is not to be regarded as having been produced and supplied as specified in sub-paragraph (1)(b) unless it has been certified under that provision. (3) Regulations under this paragraph may in particular provide that the supply of any electricity does not qualify for the exemption under paragraph 16(2) unless the electricity is certified as specified in sub-paragraph (1)(b). (4) Regulations under this paragraph may also make provision for determining whether electricity is produced and supplied as specified in sub-paragraph (1)(b).

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Climate change levy: exemption for renewable sources

125

• (1) In Schedule 6 to the Finance Act 2000 (c. 17) (climate change levy), in paragraph 20(7), (exemption under paragraph 19: liability to account)—

• (a) for the words from “(2)(c)” to “2 years)” substitute “ (2)(g) ”,

• (b) after paragraph (a) insert “and”, and

• (c) omit paragraph (c) and the preceding “and”.

• (2) This section has effect in relation to averaging periods under paragraph 20 of that Schedule which end on or after the day on which this Act is passed.

Climate change levy: electricity produced from coal mine methane

126

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

Climate change levy: incorrect certificates

127

• (1) In Schedule 6 to the Finance Act 2000 (climate change levy), in sub-paragraph (2)(a) of paragraph 101 (civil penalties: incorrect notifications etc)—

• (a) in sub-paragraph (ii) for “18 and 21, or” substitute “ 15, 18 and 21, ”;

• (b) before the word “and” at the end of sub-paragraph (iii) insert—

, or (iv) a reduced-rate supply (or reduced-rate supplies),

.

• (2) This section applies in relation to certificates given in respect of any supplies made on or after 24th April 2002.

Climate change levy: invoices incorrectly showing levy due

128

• (1) In Schedule 6 to the Finance Act 2000 (climate change levy), immediately before paragraph 142 insert—

(141A) (1) This paragraph applies where— (a) a person issues an invoice showing an amount as levy chargeable on a supply, and (b) no levy is chargeable on the supply, or the amount chargeable is less than the amount shown. (2) The person shall be liable to a penalty unless he satisfies the Commissioners or, on appeal, a tribunal that there is a reasonable excuse for the inclusion in the invoice of the false information. (3) The amount of the penalty is £50 or, if more, the following amount— (a) where no levy is chargeable, the amount shown as chargeable; (b) where an amount of levy is chargeable, the difference between that amount and the amount shown as chargeable. (4) It is irrelevant for the purposes of sub-paragraph (1) whether or not the supply shown on the invoice actually takes place or has taken place. (5) A reference in this paragraph to an invoice is a reference to any kind of invoice (and not just a climate change levy accounting document).

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• (2) This section applies only in relation to invoices issued on or after the day on which this Act is passed.

Aggregates levy

Aggregates levy: transitional relief for Northern Ireland

129

• (1) After section 30 of the Finance Act 2001 (c. 9) (credit for aggregates levy) insert—

(30A) (1) The Commissioners may by regulations make provision of the kind described in section 30(2) above (entitlement to tax credit) in relation to cases where aggregate is used in Northern Ireland for a prescribed purpose— (a) on or after the commencement date, and (b) before 1st April 2007. (2) In relation to the use of aggregate in the year ending with a date shown in the first column of the following table, the amount of any tax credit to which a person would otherwise by entitled by virtue of the regulations shall be reduced by the percentage of that amount shown opposite that date in the second column.

Year ending	Reduction in tax credit
31st March 2004	20%
31st March 2005	40%
31st March 2006	60%
31st March 2007	80%

(3) Subsections (3) to (5) of section 30 above apply to regulations under this section as they apply to regulations under that section.

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• (2) In section 17(6) of that Act (certain tax credits to be disregarded in determining whether aggregate has already been charged to levy), in paragraph (a) after “section 30(1)(c)” insert “ or 30A ”.

Aggregates levy: amendments to provisions exempting spoil etc

130

• (1) In section 17(3) of the Finance Act 2001 (c. 9) (aggregate that is exempt)—

• (a) in paragraph (e) (by-products of extracting china clay or ball clay), after “or other by-products” insert “ , not including the overburden, ”;

• (b) after that paragraph insert—

(f) it consists wholly of the spoil from any process by which— (i) coal, lignite, slate or shale, or (ii) a substance listed in section 18(3) below, has been separated from other rock after being extracted or won with that other rock;

.

• (2) Omit section 17(4)(b) of that Act (aggregate exempt if it consists, or is part of anything consisting, wholly or mainly of spoil from the separation of coal from other rock after extraction).

• (3) This section shall be deemed to have come into force on 1st April 2002.

Aggregates levy: crushing and cutting rock

131

• (1) In section 17(3) of the Finance Act 2001 (exempt aggregate), omit paragraph (a) (exemption for rock that has not been subjected to an industrial crushing process).

• (2) In section 18(2)(a) of that Act (exemption for production of dimension stone), for “dimension stone” substitute “ stone with one or more flat surfaces ”.

• (3) The following amendments to that Act are consequential on that made by subsection (1)—

• (a) in section 20(1) (originating sites), omit—

• (i) the words “and is not rock” in paragraphs (a) and (b), and

• (ii) paragraph (c);

• (b) in section 21 (operators of sites), omit subsection (2)(b);

• (c) in section 24 (the register), omit subsections (6)(b) and (8)(a).

• (4) This section shall be deemed to have come into force on 1st April 2002.

Aggregates levy: miscellaneous amendments

132

• (1) Schedule 38 to this Act, which makes amendments to provisions in Part 2 of the Finance Act 2001 (aggregates levy), has effect.

• (2) In section 197(2) of the Finance Act 1996 (c. 8) (enactments for which interest rates are set under section 197), in paragraph (h) (aggregates levy provisions) in sub-paragraph (ii) for “paragraph 8(3)(a)” substitute “ paragraphs 6 and 8(3)(a) ”.

• (3) This section shall be deemed to have come into force on 1st April 2002.

Aggregates levy: amendments to provisions about civil penalties

133

• (1) Part 2 of Schedule 6 to the Finance Act 2001 (c. 9) (aggregates levy: civil penalties) is amended as follows.

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

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

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

• (5) After paragraph 9 insert—

(9A) (1) This paragraph applies where— (a) a claim is made for a tax credit in such a case as is mentioned in— (i) section 30(1)(c) of this Act (aggregate used in a prescribed industrial or agricultural process), or (ii) section 30A of this Act (transitional tax credit in Northern Ireland); (b) a record or other document is provided to the Commissioners as evidence for the claim; and (c) the record or document is incorrect. (2) The person who provided the document to the Commissioners, and any person who provided it to anyone else with a view to its being used as evidence for a claim for a tax credit, shall be liable to a penalty. (3) The amount of the penalty shall be equal to 105 per cent of the difference between— (a) the amount of tax credit that would have been due on the claim if the record or document had been correct, and (b) the amount (if any) of tax credit actually due on the claim. (4) The providing of a record or other document shall not give rise to a penalty under this paragraph if the person who provided it satisfies the Commissioners or, on appeal, an appeal tribunal that there is a reasonable excuse for his having provided it. (5) Where by reason of providing a record or other document— (a) a person is convicted of an offence (whether under this Act or otherwise), or (b) a person is assessed to a penalty under paragraph 7 or 9 above, that person shall not by reason of the providing of the record or document be liable also to a penalty under this paragraph.

.

• (6) This section shall be deemed to have come into force on 1st May 2002.

Part 6 — Miscellaneous and supplementary provisions

Recovery of taxes etc due in other member States

Recovery of taxes etc due in other member States

134

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

Mandatory e-filing

Mandatory e-filing

135

• (1) The Commissioners for Her Majesty’s Revenue and Customs (“the Commissioners”) may make regulations requiring the use of electronic communications for the delivery by specified persons of specified information required or authorised to be delivered by or under legislation relating to a taxation matter.

• (2) Regulations under this section may make provision—

• (a) as to the electronic form to be taken by information delivered to the Revenue and Customs using electronic communications;

• (b) requiring persons to prepare and keep records of information delivered to Revenue and Customs by means of electronic communications;

• (c) for the production of the contents of records kept in accordance with the regulations;

• (d) as to conditions that must be complied with in connection with the use of electronic communications for the delivery of information;

• (e) for treating information as not having been delivered unless conditions imposed by any of the regulations are satisfied;

• (f) for determining the time at which and person by whom information is to be taken to have been delivered;

• (g) for authenticating whatever is delivered.

• (3) Regulations under this section may also make provision (which may include provision for the application of conclusive or other presumptions) as to the manner of proving for any purpose—

• (a) whether any use of electronic communications is to be taken as having resulted in the delivery of information;

• (b) the time of delivery of any information for the delivery of which electronic communications have been used;

• (c) the person by whom information delivered by means of electronic communications was delivered;

• (d) the contents of anything so delivered;

• (e) the contents of any records;

• (f) any other matter for which provision may be made by regulations under this section.

• (4) Regulations under this section may—

• (a) allow any authorisation , requirement or other provision (other than provision under subsection (7)(a) to (ba)) for which the regulations may provide to be given , imposed or made by means of a specific or general direction given by the Commissioners;

• (b) provide that the conditions of any such authorisation or requirement are to be taken to be satisfied only where the Revenue and Customs are satisfied as to specified matters;

• (c) allow a person to refuse to accept delivery of information in an electronic form or by means of electronic communications except in such circumstances as may be specified in or determined under the regulations;

• (d) allow or require use to be made of intermediaries in connection with—

• (i) the delivery of information by means of electronic communications; or

• (ii) the authentication or security of anything transmitted by any such means.

• (5) Regulations under this section may contain provision—

• (a) requiring the Revenue and Customs to notify persons appearing to them to be, or to have become, a person of a specified description and accordingly required to use electronic communications for any purpose in accordance with the regulations,

• (b) enabling a person so notified to have the question whether he is a person of such a description determined in the same way as an appeal.

• (6) Regulations under this section may provide—

• (a) that information delivered by means of electronic communications must meet standards of accuracy and completeness set by specific or general directions given by the Commissioners, and

• (b) that failure to meet those standards may be treated—

• (i) as a failure to deliver the information, or

• (ii) as a failure to comply with the requirements of the regulations.

• (7) The power to make provision by regulations under this section includes power—

• (a) to provide for a contravention of, or any failure to comply with, the regulations to attract a penalty of a specified amount not exceeding £3,000;

• (b) to provide that specified enactments relating to penalties imposed for the purposes of any taxation matter (including enactments relating to assessments, review and appeal) apply, with or without modifications, in relation to penalties under the regulations;

• (ba) to specify other consequences of contravention of, or failure to comply with, the regulations (which may include disregarding a return delivered otherwise than by the use of electronic communications);

• (c) to make different provision for different cases;

• (d) to make such incidental, supplemental, consequential and transitional provision in connection with any provision contained in any of the regulations as the Commissioners think fit.

• (8) References in this section to the delivery of information include references to any of the following (however referred to)—

• (a) the production or furnishing to a person of any information, account, record or document;

• (b) the giving, making, issue or surrender to, or service on, any person of any notice, notification, statement, declaration, certificate or direction;

• (c) the imposition on any person of any requirement or the issue to any person of any request;

• (d) the making of any return, claim, election or application;

• (e) the amendment or withdrawal of anything mentioned in paragraphs (a) to (d) above.

• (9) Regulations under this section shall be made by statutory instrument subject to annulment in pursuance of a resolution of the House of Commons.

• (10) In this section—

• “the Revenue and Customs” means—the Commissioners,any officer of Revenue and Customs, andany other person who for the purposes of electronic communications is acting under the authority of the Commissioners;

• “legislation” means any enactment, EU legislation or subordinate legislation;

• “specified” means specified by or under regulations under this section;

• “subordinate legislation” has the same meaning as in the Interpretation Act 1978 (c. 30);

• “taxation matter” means any matter relating to a tax (or duty) for which the Commissioners are responsible.

Use of electronic communications under other provisions

136

• (1) Any power to make subordinate legislation for or in connection with the delivery of information conferred in relation to a taxation matter on—

• (a) the Commissioners of Inland Revenue, or

• (b) the Treasury,

includes power to make any such provision in relation to the delivery of that information as could be made in exercise of the power conferred by section 135.

• (2) Provision made in exercise of the powers conferred by section 135 or subsection (1) above has effect notwithstanding so much of any enactment or subordinate legislation as would otherwise—

• (a) allow information to be delivered otherwise than by means of electronic communications, or

• (b) preclude the use of an intermediary in connection with its delivery.

• (3) Expressions used in this section and section 135 have the same meaning in this section as in that section.

• (4) Nothing in this section shall be read as restricting the generality of the power conferred by section 135.

Lorry road-user charge

Lorry road-user charge

137

• (1) A tax, to be known as lorry road-user charge, shall be charged in respect of use of roads by lorries.

• (2) The persons by whom lorry road-user charge shall be payable, the rates at which it shall be charged, and the lorries, roads and use in respect of which it shall be charged, shall be such as Parliament may determine.

• (3) The amount of lorry road-user charge charged in respect of use of any roads by a lorry shall be calculated, in such manner as Parliament may determine, by reference to the distance travelled on those roads by the lorry.

• (4) Lorry road-user charge—

• (a) shall be under the care and management of the Commissioners of Customs and Excise, and

• (b) shall be administered and enforced in accordance with such provisions as Parliament may determine.

• (5) All money and securities for money collected or received for or on account of lorry road-user charge shall—

• (a) if collected or received in Great Britain, be placed to the general account of the Commissioners of Customs and Excise kept at the Bank of England under section 17 of the Customs and Excise Management Act 1979;

• (b) if collected or received in Northern Ireland, be paid into the Consolidated Fund of the United Kingdom in such manner as the Treasury may direct.

• (7) A Minister of the Crown or government department may—

• (a) incur expenditure in connection with preparations for lorry road-user charge (including any fuel credit to be paid in respect of fuelling of lorries chargeable in respect of lorry road-user charge);

• (b) enter into contracts in respect of the development or provision of equipment, systems or services to be used in connection with lorry road-user charge (including any fuel credit).

Registers of UK gilts

Authority of Bank of England to discharge functions in place of Bank of Ireland

138

• (1) The Bank of England has authority, in the event of the Bank of Ireland ceasing to perform any of its functions in relation to United Kingdom government stock, to discharge any of the Bank of Ireland’s functions in relation to such stock in place of the Bank of Ireland.

• (2) The enactments relating to United Kingdom government stock have effect in relation to anything done in the circumstances mentioned in subsection (1) for the purposes of discharging any such functions—

• (a) as if any reference to the Bank of Ireland were a reference to the Bank of England, and

• (b) as if any reference to an officer of the Bank of Ireland were a reference to the corresponding officer of the Bank of England.

• (3) In particular, sections 59 and 66 of the National Debt Act 1870 (c. 71) (provisions protecting the Bank and its officers from liability) apply to the Bank of England and to officers of that Bank in relation to anything done in the circumstances mentioned in subsection (1) above for the purposes of discharging any functions of the Bank of Ireland in relation to United Kingdom government stock.

• (4) In this section—

• “enactment” includes an enactment contained in subordinate legislation within the meaning of the Interpretation Act 1978 (c. 30);

• “United Kingdom government stock” means stock or bonds of any of the descriptions included in Part 1 of Schedule 11 to the Finance Act 1942 (c. 21) (whether on or after the passing of this Act).

• (5) This section shall be deemed always to have had effect.

Closure of UK gilts registers kept in Ireland

139

• (1) The Treasury may by order made by statutory instrument provide—

• (a) that no further stock or bonds may be registered in either of the Irish gilts registers on or after such day as the order may appoint (“the appointed day”), and

• (b) for the transfer to the English gilts register of the entries subsisting in each of those registers at the beginning of the appointed day.

• (2) The power conferred by subsection (1)(b) includes power to make provision in relation to stock and bonds which were not registered in either of the Irish gilts registers on the appointed day, but which should have been.

• (3) An order under this section may contain such consequential, incidental, supplementary and transitional provision as appears to the Treasury to be necessary or expedient, including provision amending, repealing or revoking any enactment.

• (4) In subsection (3) “enactment” means any enactment contained in—

• (a) an Act, whenever passed, or

• (b) an instrument, whenever made, under an Act, whenever passed.

• (5) In this section—

• “the English gilts register” is the register required to be kept at the office of the Chief Registrar of the Bank of England under section 47 of the Finance Act 1942 (c. 21) (registration of government stock); and

• “the Irish gilts registers” are—the register required to be kept in Belfast under that section, andthe register required to be kept in Dublin under that section.

• (6) A statutory instrument containing an order under this section is subject to annulment in pursuance of a resolution of the House of Commons.

Administration of UK gilts

140

• (1) In section 47 of the Finance Act 1942 (transfer and registration of government stock)—

• (a) for subsection (1)(b) (power to provide for the keeping of stock and bond registers by the Banks of England and Ireland) substitute—

(b) for the administration of such stock and bonds (including the registration of holders) by such one or more persons as the Treasury may appoint in accordance with the regulations and the closure of any register;

,

and

• (b) after subsection (1E) insert—

(1EA) Persons appointed in accordance with regulations under subsection (1)(b) shall be appointed on such terms (including terms as to the making of payments by the Treasury) as the Treasury consider appropriate, and the persons who may be so appointed include the Bank of England.

.

• (2) The Treasury may by order made by statutory instrument make such consequential, incidental, supplementary and transitional provision as appears to the Treasury to be necessary or expedient in consequence of the amendments made by subsection (1), including provision amending, repealing or revoking any enactment.

• (3) In subsection (2) “enactment” means any enactment contained in—

• (a) an Act, whenever passed, or

• (b) an instrument, whenever made, under an Act, whenever passed.

• (4) A statutory instrument containing an order under subsection (2) is subject to annulment in pursuance of a resolution of the House of Commons.

• (5) Sums payable by the Treasury by virtue of section 47(1EA) of the Finance Act 1942 (c. 21) (as inserted by subsection (1) above) shall be met out of the National Loans Fund with recourse to the Consolidated Fund.

• (6) This section shall come into force on such day as the Treasury may by order made by statutory instrument appoint.

Supplementary

Repeals

141

• (1) The enactments mentioned in Schedule 40 to this Act (which include provisions that are spent or of no practical utility) are repealed to the extent specified.

• (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.

Interpretation

142

In this Act “the Taxes Act 1988” means the Income and Corporation Taxes Act 1988 (c. 1), and “ITA 2007” means the Income Tax Act 2007”.

Short title

143

This Act may be cited as the Finance Act 2002.

SCHEDULE 1

1

• (1) Section 36 of the Alcoholic Liquor Duties Act 1979 (c. 4) (beer: charge of excise duty) is amended as follows.

• (2) In subsection (1), for “at the rate of £11.89 per hectolitre per cent of alcohol in the beer" substitute “ at the rates specified in subsection (1AA) below ”.

• (3) After subsection (1), insert—

(1AA) The rates at which the duty shall be charged are— (a) in the case of beer that is not small brewery beer, £11.89 per hectolitre per cent of alcohol in the beer; (b) in the case of small brewery beer produced in a singleton brewery, the rate per hectolitre per cent of alcohol in the beer that is given by section 36D below; (c) in the case of small brewery beer produced in a co-operated brewery, the rate per hectolitre per cent of alcohol in the beer that is given by section 36F below.

.

2

In that Act, after that section (and before the heading“Reliefs from excise duty") insert—

Reduced rates of excise duty (36A) (1) For the purposes of section 36(1AA) above (but subject to subsection (2) below)— (a) whether beer produced in a singleton brewery is “small brewery beer” is determined in accordance with section 36C below, and (b) whether beer produced in a co-operated brewery is “small brewery beer” is determined in accordance with section 36E below. (2) Beer is not small brewery beer if it is produced by a person on any premises in circumstances in which he is required to be, but is not, registered under section 47 below in respect of those premises. (36B) (1) The following provisions of this section have effect for the purposes of section 36(1AA) above, section 36A above, this section and sections 36C to 36F below. (2) A brewery is a “singleton brewery” at any particular time in a calendar year if it is not a co-operated brewery at that time. (3) A brewery is a “co-operated brewery” at any particular time in a calendar year if— (a) a person who produces beer in the brewery at that time or any earlier time in that year, or (b) a person connected with such a person, also produces beer in any other brewery at that time or any earlier time in that year. (4) “Brewery” means premises (whether or not in the United Kingdom) on which beer is produced and that are situated physically apart from any other premises on which beer is produced. (5) “The standard beer duty rate” means the rate of duty specified by section 36(1AA)(a) above. (6) References to “the grossed-up amount” of an estimate of the amount of a brewery’s production in a calendar year are to the amount given by— $$E(365-N)×365$where—E is the amount of the estimate, andN is the number of days (if any) in the calendar year before the brewery begins to be used as beer-production premises.$ (7) References to a brewery being used as beer-production premises are, in the case of a brewery in the United Kingdom, to there being at least one person who is required to be registered under section 47 below in respect of the brewery. (8) Any question whether a person is connected with another shall be determined in accordance with section 839 of the Income and Corporation Taxes Act 1988. (36C) (1) This section applies to beer produced in a brewery at a time in a calendar year (“the current year”) when the brewery is a singleton brewery. (2) The beer is “small brewery beer” if the following conditions are satisfied; but this is subject to subsections (9) and (10) below. (3) The first condition is that either— (a) no beer was produced in the brewery in the previous calendar year (“the previous year”), or (b) the amount of beer produced in the brewery in the previous year was not more than 30,000 hectolitres. (4) For the purposes of subsection (3)(b) above, where the brewery was in use as beer-production premises during part only of the previous year, the amount of beer produced in the previous year in the brewery shall be taken to have been— $$AD×365$where—A is the amount of beer actually produced in the previous year in the brewery, andD is the number of days in that part of the previous year.$ (5) The second condition is that the amount of the estimate under subsection (9) below of the brewery’s production in the current year is not more than 30,000 hectolitres. (6) The third condition is that if the brewery begins to be used as beer-production premises part-way through the current year, the grossed-up amount of that estimate is not more than 30,000 hectolitres. (7) The fourth condition is that less than half of the beer produced in the brewery in the previous year was produced under licence. (8) The fifth condition is that the beer is not produced under licence. (9) Beer produced in the brewery in the current year before the person who first produces beer in the brewery in that year has made a reasonable estimate of the amount of beer that will be produced in the brewery in that year is not small brewery beer. (10) Beer produced in the brewery in the current year after the amount of beer produced in the brewery in the current year has reached 30,000 hectolitres is not small brewery beer. (11) Subsection (10) above is without prejudice to section 167(4) of the Customs and Excise Management Act 1979 (recovery of duty unpaid by reason of untrue document or statement). (36D) (1) This section applies to small brewery beer produced in a brewery at a time in a calendar year (“the current year”) when the brewery is a singleton brewery. (2) The rate of duty in the case of that beer (“the brewery rate”) is determined in accordance with this section. (3) Subsection (4) below applies if— (a) beer was produced in the brewery in the previous calendar year (“the previous year”) and the amount produced in the brewery in that year was not more than 5,000 hectolitres, or (b) no beer was produced in the brewery in the previous year and the grossed-up amount of the estimate under section 36C(9) above of the brewery’s production in the current year is not more than 5,000 hectolitres. (4) If this subsection applies, “the brewery rate” is 50% of the standard beer duty rate at the time concerned; but this is subject to rounding under subsection (7) below. (5) Subsection (6) below applies if— (a) beer was produced in the brewery in the previous year and the amount produced in the brewery in that year was more than 5,000 hectolitres but not more than 30,000 hectolitres, or (b) no beer was produced in the brewery in the previous year and the grossed-up amount of the estimate under section 36C(9) above of the brewery’s production in the current year is more than 5,000 hectolitres but not more than 30,000 hectolitres. (6) If this subsection applies, “the brewery rate” is, subject to rounding under subsection (7) below, given by— $$P-2,500P×the standard beer duty rate at the time concerned$where—if this subsection applies by reason of subsection (5)(a) above, P is the amount, in hectolitres, of beer produced in the brewery in the previous year, andif this subsection applies by reason of subsection (5)(b) above, P is the grossed-up amount (expressed in hectolitres) mentioned in subsection (5)(b).$ (7) Where a rate given by subsection (4) or (6) above would (apart from this subsection) not be a whole number of pennies, the rate given by that subsection shall be taken to be the rate actually given by that subsection rounded up to the nearest penny. (8) Where the brewery was in use as beer-production premises during part only of the previous year, for the purposes of subsections (3)(a), (5)(a) and (6) above the amount of beer produced in the brewery in the previous year shall be taken to have been— $$AD×365$where—A is the amount of beer actually produced in the previous year in the brewery, andD is the number of days in that part of the previous year.$ (36E) (1) This section applies to beer produced in a brewery at a time in a calendar year (“the current year”) when the brewery is a co-operated brewery. (2) The beer is “small brewery beer” if the following conditions are satisfied; but this is subject to subsections (10) and (11) below. (3) In this section— - “the group” means the group of breweries consisting of— 1. the co-operated brewery, and 2. every brewery (other than the co-operated brewery) in which beer is produced at the time mentioned in subsection (1) above, or at any earlier time in the current year, by— 1. a person who produces beer in the co-operated brewery at the time so mentioned or at any earlier time in the current year, or 2. a person connected with such a person; - “group brewery” means a brewery that is in the group; - “the previous year” means the calendar year immediately preceding the current year. (4) The first condition is that either— (a) no beer was produced in the previous year in the group, or (b) the amount given by PY + GE is not more than 30,000 hectolitres, where— - PY is the amount of beer produced in the previous year in the group, and - GE is the aggregate of the grossed-up amount of each estimate that— - (i) is an estimate for the purposes of subsection (10) below of the amount of the production in the current year in a group brewery in which no beer was produced in the previous year, and - (ii) is made no later than the time mentioned in subsection (1) above. (5) For the purposes of subsection (4)(b) above, where a group brewery was in use as beer-production premises during part only of the previous year, the amount of beer produced in the previous year in that brewery shall be taken to have been— $$AD×365$where—A is the amount of beer actually produced in the previous year in that brewery, andD is the number of days in that part of the previous year.$ (6) The second condition is that the aggregate of each estimate that— (a) is an estimate for the purposes of subsection (10) below of the amount of a group brewery’s production in the current year, and (b) is made no later than the time mentioned in subsection (1) above, is not more than 30,000 hectolitres. (7) The third condition is that if any group brewery begins to be used as beer-production premises part-way through the current year, the aggregate of the grossed-up amount of each estimate that— (a) is an estimate for the purposes of subsection (10) below of the amount of a group brewery’s production in the current year, and (b) is made no later than the time mentioned in subsection (1) above, is not more than 30,000 hectolitres. (8) The fourth condition is that less than half of the beer produced in the previous year in each group brewery was produced under licence. (9) The fifth condition is that the beer is not produced under licence. (10) Beer produced in the co-operated brewery at an unestimated time is not small brewery beer; and here “unestimated time” means a time in the current year when there is a group brewery for which there does not exist a reasonable estimate, made by the person who first produces beer in that brewery in that year, of the amount of beer that will be produced in that brewery in that year. (11) Beer produced in the co-operated brewery in the current year after the amount of beer produced in the group in the current year has reached 30,000 hectolitres is not small brewery beer. (12) Subsection (11) above is without prejudice to section 167(4) of the Customs and Excise Management Act 1979 (recovery of duty unpaid by reason of untrue document or statement). (36F) (1) This section applies to small brewery beer produced in a brewery at a time in a calendar year (“the current year”) when the brewery is a co-operated brewery. (2) The rate of duty in the case of that beer (“the brewery rate”) is determined in accordance with this section. (3) In this section— - “the group” means the group of breweries consisting of— 1. the co-operated brewery, and 2. every brewery (other than the co-operated brewery) in which beer is produced at the time mentioned in subsection (1) above, or at any earlier time in the current year, by— 1. a person who produces beer in the co-operated brewery at the time so mentioned or at any earlier time in the current year, or 2. a person connected with such a person; - “group brewery” means a brewery that is in the group; - “the previous year” means the calendar year immediately preceding the current year; - “the notional previous year’s production” has the meaning given by subsection (4) below. (4) In this section “the notional previous year’s production” means the amount, in hectolitres, given by PY + GE where— - PY is the amount of beer produced in the group in the previous year, and - GE is the aggregate of the grossed-up amount of each estimate that— - (a) is an estimate for the purposes of section 36E(10) above of the amount of the production in the current year in a group brewery in which no beer was produced in the previous year, and - (b) is made no later than the time mentioned in subsection (1) above. (5) Where a group brewery was in use as beer-production premises during part only of the previous year, in calculating PY for the purposes of subsection (4) above the amount of beer produced in that brewery in the previous year shall be taken to have been— $$AD×365$where—A is the amount of beer actually produced in the previous year in that brewery, andD is the number of days in that part of the previous year.$ (6) Subsection (7) below applies if— (a) beer was produced in at least one group brewery in the previous year and the notional previous year’s production is not more than 5,000 hectolitres, or (b) no beer was produced in the group in the previous year and the aggregate of each estimate that— (i) is an estimate for the purposes of section 36E(10) above of the amount of a group brewery’s production in the current year, and (ii) is made no later than the time mentioned in subsection (1) above, is not more than 5,000 hectolitres. (7) If this subsection applies, “the brewery rate” is 50% of the standard rate at the time mentioned in subsection (1) above; but this is subject to rounding under subsection (10) below. (8) Subsection (9) below applies if— (a) beer was produced in at least one group brewery in the previous year and the notional previous year’s production is more than 5,000 hectolitres but not more than 30,000 hectolitres, or (b) no beer was produced in the group in the previous year and the aggregate mentioned in subsection (6)(b) above is more than 5,000 hectolitres but not more than 30,000 hectolitres. (9) If this subsection applies, “the brewery rate” is, subject to rounding under subsection (10) below, given by— $$P-2,500P×the standard rate$where—if this subsection applies by reason of subsection (8)(a) above, P is the previous year’s notional production,if this subsection applies by reason of subsection (8)(b) above, P is the amount, in hectolitres, of the aggregate mentioned in subsection (6)(b) above, and“the standard rate” means the standard beer duty rate at the time mentioned in subsection (1) above.$ (10) Where a rate given by subsection (7) or (9) above would (apart from this subsection) not be a whole number of pennies, the rate given by that subsection shall be taken to be the rate actually given by that subsection rounded up to the nearest penny. (36G) (1) Subsection (3) below applies if— (a) duty is charged by section 36 above on any beer, and (b) it appears at the excise duty point that the beer is small brewery beer for the purposes of section 36(1AA) above, but (c) it turns out that the beer was not small brewery beer for those purposes (because, for example, circumstances were not as they appeared at that point or they subsequently changed). (2) Subsection (3) below also applies if— (a) duty is charged by section 36 above on any beer that is small brewery beer for the purposes of section 36(1AA) above, and (b) the rate of duty that at the excise duty point appeared to be the correct rate turns out to have been lower than the correct rate (because, for example, circumstances were not as they appeared at that point or they subsequently changed). (3) In any such case the Commissioners— (a) may assess the amount that is the difference between— (i) the actual amount of the duty charged on the beer by section 36 above, and (ii) the lower amount that, at the excise duty point, appeared to be the amount charged, as being excise duty due from the person liable to pay the duty charged on the beer by section 36 above, and (b) may notify him or his representative accordingly. (4) Where two or more persons are liable to pay the duty charged on the beer— (a) the reference in subsection (3)(a) above to the person liable to pay the duty is to any one or more of those persons, and (b) the reference in subsection (3)(b) above to notifying the person liable or his representative is to notifying each person assessed or his representative. (36H) (1) The Treasury may by order made by statutory instrument make provision amending this Act for the purpose of causing excise duty to be charged on a description of beer— (a) at a reduced rate instead of at the standard rate; (b) at the standard rate instead of at a reduced rate; (c) at a different reduced rate. (2) In this section— - “reduced rate” means a rate lower than the standard rate, and - “the standard rate” means the rate specified by section 36(1AA)(a) above. (3) An order under subsection (1) above may— (a) make different provision for different cases; (b) make such consequential amendments in this Act and other enactments as appear to the Treasury to be necessary or expedient; (c) make such other consequential provision, and such incidental and transitional provision, as appears to the Treasury to be necessary or expedient. (4) A statutory instrument by which there is made an order under subsection (1) above shall be laid before the House of Commons after being made. Unless the instrument is approved by the House of Commons before the expiration of 28 days beginning with the date on which the instrument was made, the order shall cease to have effect on the expiration of that period. Where the order so ceases to have effect, that does not prejudice— (a) anything previously done under the order, or (b) the making of a new order. In reckoning any such period of 28 days, no account shall be taken of any time during which Parliament is dissolved or prorogued or during which the House of Commons is adjourned for more than 4 days.

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3

In section 49(1) of the Alcoholic Liquor Duties Act 1979 (c. 4) (beer regulations), after paragraph (j) insert—

(k) requiring the production of certificates as to matters relating to beer imported into the United Kingdom and the beer’s production and producer, whether as alternative conditions for charging the duty on the beer at a rate lower than that specified by section 36(1AA)(a) above or as evidence that conditions for charging the duty at such a rate are satisfied.

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4

• (1) The Finance Act 1994 (c. 9) is amended as follows.

• (2) In section 12A(3)(bb) (recovery of amounts assessed under the Alcoholic Liquor Duties Act 1979), for “or 11" substitute “ , 11 or 36G ”.

• (3) In section 12B(2) (meaning of “relevant time" in section 12A), after paragraph (eb) insert—

(ec) in the case of an assessment under section 36G of that Act, the the time at which the requirement to pay the duty took effect (which time, in a case where there was an excise duty point for the beer fixed under section 1 of the Finance (No. 2) Act 1992, is that excise duty point);

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• (4) In section 14(1)(ba) (review of assessments), for “or 11" substitute “ , 11 or 36G ”.

SCHEDULE 2

Introduction

1

The Hydrocarbon Oil Duties Act 1979 (c. 5) is amended as follows.

Biodiesel and bioblend not to be treated as fuel substitute

2

In section 6A(1) (fuel substitutes: charge of duty) after “which is not hydrocarbon oil" insert “ , biodiesel or bioblend ”.

Exclusion of bioblend from rebates on heavy oil

3

In section 11 (rebate on heavy oil), after subsection (5) insert—

(6) No rebate shall be allowed under this section in respect of bioblend.

.

Repayment of duty in case of biodiesel used otherwise than as road fuel

4

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

Mixing biodiesel and rebated heavy oil

5

• (1) In section 20AAA (mixing of rebated oil), after subsection (2A) insert—

(2B) Where a mixture is produced in contravention of Part 2B of Schedule 2A to this Act, a duty of excise shall be charged on the mixture.

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• (2) In section 20AAA(3) (producer of mixture liable to pay duty), for “or (2A)" substitute “ , (2A) or (2B) ”.

• (3) After Part 2A of Schedule 2A (mixing of rebated oil) insert—

(7B) (1) A mixture is produced in contravention of this paragraph if it is produced by mixing— (a) biodiesel or a substance containing biodiesel, and (b) rebated heavy oil. (2) In sub-paragraph (1)(b) above “rebated heavy oil” means heavy oil in respect of which a rebate has been allowed under section 11 of this Act.

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• (4) In paragraph 9(1A) of that Schedule (rates of duty for mixtures of heavy oil), after “subsection (2A)" insert “ or (2B) ”.

• (5) In paragraph 10(1) of that Schedule (credit for duty paid on ingredients of mixture), after “section 6" insert “ , 6AA, 6AB or 6A ”.

• (6) In section 20AAB (mixing of rebated oil: supplementary), in subsection (1)(a) for “or (2A)" substitute “ , (2A) or (2B) ”.

• (7) In section 22 (prohibition on use of petrol substitutes on which duty has not been paid), after subsection (1) insert—

(1AA) Where any person— (a) puts any biodiesel to a chargeable use (within the meaning of section 6AA above), and (b) knows or has reasonable cause to believe that there is duty charged under section 6AA above on that biodiesel which has not been paid and is not lawfully deferred, his putting the biodiesel to that use shall attract a penalty under section 9 of the Finance Act 1994 (civil penalties), and any goods in respect of which any person contravenes this subsection shall be liable to forfeiture.

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• (8) In section 22(1A) (section 10 of the Finance Act 1994 does not apply), after “subsection (1)" insert “ or (1AA) ”.

Interpretation

6

In section 27(1) (interpretation) at the appropriate places insert—

“bioblend” has the meaning given by section 6AB(2) above;

,

Provision in relation to bioblend corresponding to that made by section 6 of the Finance Act 1998 in relation to section 6 of the Hydrocarbon Oil Duties Act 1979

7

• (1) In section 6AB (which charges excise duty on bioblend and is inserted by section 5 of this Act), in subsection (1), omit the words from “and delivered" to the end.

• (2) For subsection (6) of that section substitute—

(6) Where— (a) imported bioblend is removed to relevant premises, (b) the bioblend undergoes a production process at those premises or any other relevant premises, and (c) any duty charged on the importation of the bioblend has not become payable at any time before the production time, the duty charged on importation shall not become payable at any time after the production time. (7) In subsection (6) above— - “the production time” means the time at which the bioblend undergoes the production process; and - “relevant premises” means— 1. a refinery, 2. other premises used for the production of hydrocarbon oil, or 3. premises of such description as may be specified in regulations made by the Commissioners. (8) For the purposes of subsection (6) above, bioblend undergoes a production process if— (a) hydrocarbon oil, or bioblend, of any description, or biodiesel, is obtained from it, or (b) it is subjected to any process of purification or blending.

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SCHEDULE 3

Part 1 — Regulating traders in rebated heavy oil

1

In the Hydrocarbon Oil Duties Act 1979 (c. 5), after section 23 insert—

(23A) (1) If a revenue trader who is not a registered excise dealer and shipper— (a) buys or sells controlled oil in the course of a trade or business, or (b) in the course of a trade or business deals in controlled oil, his buying or selling, or dealing in, the oil shall attract a penalty under section 9 of the Finance Act 1994 (civil penalties). (2) Subsection (1) above does not apply to the buying of oil by a revenue trader if— (a) the oil is for use by the trader, and (b) that use does not involve selling or dealing in hydrocarbon oil. (3) Subsection (1) above does not apply to the selling of oil by a revenue trader if— (a) that oil was for use by the trader, (b) that use did not involve selling or dealing in hydrocarbon oil, (c) that use came to an end before the oil was used, and (d) the oil is sold after the use ends. (4) Where a revenue trader who is not a registered excise dealer and shipper is entitled to the possession of any controlled oil, the oil is liable to forfeiture. (5) Subsection (4) above does not apply to oil if— (a) that oil is for use by the revenue trader, and (b) that use does not involve selling or dealing in hydrocarbon oil. (6) Subsection (4) above does not apply to oil if— (a) the oil was for use by the revenue trader, (b) that use did not involve selling or dealing in hydrocarbon oil, (c) that use has come to an end, (d) that use came to an end before the oil was used, and (e) the oil is being held pending sale or other disposal. (7) Where oil is liable to forfeiture by virtue of subsection (4) above— (a) anything mixed with the oil, (b) any container in which the oil (and anything mixed with it) is kept, and (c) any equipment kept for dispensing the contents of any such container, is liable to forfeiture. (23B) (1) The Commissioners may by regulations make provision for— (a) exceptions to section 23A(1) above in addition to those allowed by section 23A(2) and (3) above; (b) exceptions to section 23A(4) above in addition to those allowed by section 23A(5) and (6) above; (c) exceptions to section 23A(7) above. (2) Regulations under subsection (1) above may provide for exceptions allowed by such regulations to have effect subject to conditions— (a) specified by such regulations; (b) specified by the Commissioners under such regulations.

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2

In section 100H(1) of the Customs and Excise Management Act 1979 (c. 2) (particular provision that may be made by registered excise dealers and shippers regulations), after paragraph (n) insert—

(p) authorised by section 24AA of the Hydrocarbon Oil Duties Act 1979 (regulation of traders in controlled oil).

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3

In the Hydrocarbon Oil Duties Act 1979 (c. 5), after section 24 insert—

(24AA) (1) For the purposes of section 100H(1)(p) of the Management Act (registered excise dealers and shippers regulations may, in particular, make provision authorised by this section), this section authorises provision— (a) requiring traders in controlled oil to notify prescribed information; (b) requiring traders in controlled oil to make prescribed returns; (c) authorising a trader in controlled oil to carry out or arrange for the carrying out of any prescribed activity falling within section 100H(1)(b) of the Management Act in relation to controlled oil, but subject to prescribed conditions or restrictions; (d) requiring a trader in controlled oil to give security by prescribed means for amounts that may become due from him by way of repayment of rebate; (e) for taking into account, in determining whether a trader in controlled oil has— (i) contravened any provision of registered excise dealers and shippers regulations, or (ii) failed to comply with any prescribed condition, restriction or requirement, the extent to which the trader has followed guidance issued by the Commissioners (including guidance issued after the making of provision under this paragraph referring to it). (2) In this section— - “prescribed” has the meaning given by section 100H(3) of the Management Act; - “trader in controlled oil” means a registered excise dealer and shipper carrying on a trade or business that consists of or includes the dealing in, buying or selling of controlled oil.

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4

• (1) Section 27 of the Hydrocarbon Oil Duties Act 1979 (c. 5) (interpretation) is amended as follows.

• (2) In subsection (1) insert (at the appropriate place)—

“controlled oil” means hydrocarbon oil in respect of which a rebate has been allowed under section 11(1)(b), (ba) or (c) or 13AA;

.

• (3) In the Table set out in subsection (3) (expressions used in the Act that have a meaning given by another Act included in the Customs and Excise Acts 1979), under the heading “Management Act" insert (at the appropriate places)—

“registered excise dealer and shipper"

,

and

“revenue trader"

.

Part 2 — Minor amendments relating to rebates

5

The Hydrocarbon Oil Duties Act 1979 is amended as follows.

6